Legislature(2011 - 2012)HOUSE FINANCE 519
02/09/2012 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB283 | |
| HB286 | |
| HB285 | |
| HB307 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 283 | TELECONFERENCED | |
| *+ | HB 285 | TELECONFERENCED | |
| *+ | HB 307 | TELECONFERENCED | |
| *+ | HB 286 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 9, 2012
1:36 p.m.
1:36:52 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:36 p.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Reggie Joule
Representative Mark Neuman
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Karen Rehfeld, Director, Office of Management and Budget,
Office of the Governor; Angela Rodell, Deputy Commissioner,
Treasury Division, Department of Revenue; Representative
Alan Austerman.
SUMMARY
HB 283 BUDGET: CAPITAL
HB 283 was HEARD and HELD in Committee for
further consideration.
HB 285 APPROP: MENTAL HEALTH BUDGET
HB 285 was HEARD and HELD in Committee for
further consideration.
HB 286 G.O. BONDS FOR PORTS
HB 286 was HEARD and HELD in Committee for
further consideration.
HB 307 SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS
HB 307 was HEARD and HELD in Committee for
further consideration.
HOUSE BILL NO. 283
"An Act making and amending appropriations, including
capital appropriations and other appropriations;
making appropriations to capitalize funds; and
providing for an effective date."
1:38:56 PM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
(OMB), OFFICE OF THE GOVERNOR, explained that she would
provide a high level overview of the legislation.
Co-Chair Stoltze agreed that a broad and general approach
would be the most helpful.
Ms. Rehfeld informed the committee that the governor's
proposed FY 13 capital budget totaled $1.8 billion, which
excluded duplicated funds. She referred line 24 of the OMB
December 2011 fiscal summary, which included the mental
health capital budget. The total number included $882
million in unrestricted general funds, $81 million of
designated general funds, $20 million of other funds, and
$820.5 million of federal funds. The bill contained 14
sections. The first section was the largest and totaled
$1,766,800,000; it was organized by department and projects
were listed in priority order. Deferred maintenance
appeared at the end of each department's list with the
exception of Department of Transportation and Public
Facilities (DOT) because it had been organized within the
different appropriation levels. Individual project review
listing and backup for each project was included in the
member's capital budget books. She highlighted priority
projects in the Resource and Development (R&D) area
including, Roads to Resources, permitting, strategic
minerals assessments, digital mapping, and responsible
development of natural resources. The budget also included
education funding for two schools off of the Department of
Education and Early Development (DEED) school construction
list that totaled $61 million.
1:42:54 PM
Representative Gara queried the fund source for bulk fuel
upgrades listed on page 4 of the bill. Ms. Rehfeld directed
attention to the appropriation level on page 3, line 24.
She explained that a portion of the $7 million was paid for
with general funds. She would follow up with detail at a
later time.
Ms. Rehfeld continued to highlight the education components
including $24 million for the first 14 projects on DEED's
school major maintenance list. Other items included
disaster preparedness and a search and rescue helicopter
for the Interior under the Department of Public Safety
(DPS); transportation infrastructure such as highways,
aviation, municipal, water, sewer, village safe water, and
other.
Co-Chair Stoltze asked to hear a list of litigation and
settlements items later in the meeting.
Representative Joule discussed a $14 million appropriation
that had been vetoed the prior year related to a school in
Kivalina. He believed that the state did not want to build
the school at the existing location, which was one of the
reasons the appropriation had been vetoed. He wondered
whether the administration had been working with the
community to find a transportation route to the mainland
where a school could be built.
Ms. Rehfeld responded the state had been working with
Kivalina on a relocation site. Work was underway to include
the project on the DEED priority list for the following
fiscal year. She noted that improvements were needed on the
existing building, but a relocation of the school would
represent significantly different costs; therefore steps to
determine the best approach and timing were in progress.
1:46:58 PM
Representative Joule noted that road access to the school
fell under the purview of DOT; therefore, he wondered
whether the department would work with the community on the
issue. Ms. Rehfeld deferred the question to DOT for follow
up at a later time.
Representative Joule communicated that there was a $10
million road to resources in Umiat that people did not
want; the people in Kivalina would be happy to use the road
to find an alternative location for the school site.
Ms. Rehfeld outlined the various sections in the bill:
· Sections 2 and 3 summarized the funding sources in the
numbers section of the bill by department and for all
fund sources respectively.
· Sections 4 through 6 were included for informational
purposes and related to the proposed Government
Obligation (G.O.) Bond package in HB 286.
· Section 7 gave Legislative Budget and Audit the
authority to consider federal and other program
receipts that came in when the legislature was not in
session.
· Section 8 related to fund capitalization and included
$60 million for proposed Alaska Gasline Inducement Act
(AGIA) reimbursements and $1.7 million in federal
funds for the Emerging Energy Technology Fund.
· Section 9 included a $25 million fund transfer to the
Renewable Energy Grant Fund and a $35.5 million fund
transfer to the Regional Educational Attendance Area
School Fund.
1:49:26 PM
Ms. Rehfeld continued to detail the bill sections:
· Section 10 related to the State Insurance Catastrophic
Reserve Fund that allowed insurance claims to be
appropriated to state agencies in order to mitigate
loss.
· Section 11 included an appropriation for National
Petroleum Reserve-Alaska (NPRA) grants estimated at
approximately $5.4 million. A list developed annually
by the Department of Commerce, Community and Economic
Development (DCCED) would be brought to the committee
to include in the budget.
· Section 12 encompassed three pieces for Department of
Fish and Game (DFG) related to amending a previous
appropriation for the Sport Fish hatchery in Anchorage
to include operations. There was a subsection to
reappropriate $5 million from the hatchery to the Fish
and Game Fund that would allow DFG to apply any sale
proceeds from the resolution sale towards the purchase
of equipment for a new vessel.
Ms. Rehfeld detailed several ongoing operating funding
questions related to the Sport Fish Division. She explained
that the division's budget had Fish and Game Fund authority
and that the administration had concerns about the cash in
the fund and future revenue projections. The
reappropriation of the $5 million into the fund would help
ease concerns in the short-term. She furthered that there
were several ways to address the issue and that related
conversations would be continued.
Co-Chair Stoltze wondered whether the surplus of proceeds
was related to bond sales that had occurred in 2007. Ms.
Rehfeld deferred the question to the department.
Co-Chair Stoltze was concerned about ambiguity on the
issue. He welcomed any opportunity to pay off the bonds and
to shorten the commitment the life of the $9 surcharge on
sport fishing licenses. Ms. Rehfeld asked the DFG to follow
up with a response.
Co-Chair Stoltze stressed that the department should
prioritize the retirement of the debt. He believed the
funds should be used for capital and not operating
expenses.
1:53:32 PM
Representative Neuman wondered whether DCCED could choose
how to delegate the proposed $5.4 million in capital
project grants (Section 11, page 52).
Ms. Rehfeld replied that funding for NPRA grants came from
the Bureau of Land Management under the U.S. Department of
the Interior (proceeds were derived from sales, rentals,
bonuses, and royalties on leases issued within the NPRA).
Local entities applied for grants within communities that
were directly impacted by the leases or development of oil
and gas within the NPRA. She elaborated that a certain
number of communities were eligible to apply for grants and
the funds could be used for planning, construction,
maintenance and operation of public facilities, and other
necessary public services.
Representative Neuman asked for verification that the
grants only applied to communities impacted by development
within the NPRA. Ms. Rehfeld responded in the affirmative.
Co-Chair Thomas referred to Section 12(d) related to the
transfer of general funds to sport fish construction and
operations. He discussed the ability to absorb operation
costs within the department. He asked Ms. Rehfeld to
provide an explanation of the change during the operating
budget portion of the meeting.
Ms. Rehfeld replied that DFG would be available to answer
questions. She cited concerns that the cash flow into and
out of the Fish and Game Fund had been low; she did not
believe the issue had been contemplated in the past.
Co-Chair Thomas explained that the operating budgets had
gone up and down for years. He remembered being told that
DFG costs could be absorbed and he wondered why the comment
had been made.
Co-Chair Stoltze noted that the item had been a revenue
bond, but he believed that the obligation to voters was no
less implicit. He believed that letting the public know
that the House Finance Committee was not playing games with
funds would send a positive message. He voiced his tendency
to be critical of revenue bonds.
1:57:31 PM
Representative Gara asked whether sport fishery facility
upgrades had been completed. Ms. Rehfeld believed that the
Anchorage hatchery had been completed.
Representative Gara surmised that the designation of left
over sport fish money to operating expenses meant that
money remained. Ms. Rehfeld responded that there was
approximately $5 million available.
Representative Gara referred to earlier testimony from Co-
Chair Stoltze related fishing license fees.
Co-Chair Stoltze clarified that there was a proposal to
forego an opportunity to shorten the obligation of license
payers.
Ms. Rehfeld continued to explain the bill sections:
· Section 13 provided for lapsed provisions of various
sections. For sections that were identified as capital
projects, appropriations were made for the valid life
of the projects and carried forward from one year to
the next.
· Section 14 included the effective date of the bill:
July 1, 2012.
Representative Doogan wondered whether funds were
transferred from the general fund to a discrete fund for
expenditure (under the fund transfers section of the bill).
Ms. Rehfeld replied in the affirmative.
Representative Doogan asked what happened when the money
was not spent in its entirety. Ms. Rehfeld responded that
the money would remain in the particular fund for use at
another time. The legislature could appropriate as much as
it wanted into a fund and could then choose to make
appropriations when it saw fit.
Representative Doogan wondered whether the legislature was
"banking" a fund for the next year if it was not fully
expended. Ms. Rehfeld answered in the affirmative. She
explained that designated funds were usually expended from
the Renewable Energy Grant Fund on an annual basis. Fiscal
Year 13 was the first year of the formula that required
funds based on the amount paid in municipal debt service
for school projects to go into the Regional Education
Attendance Area School Fund; the proposed budget allocated
the funds to two school projects included in the capital
budget.
Representative Gara referred to the organization Arctic
Power and wondered whether the administration had
considered something similar to advertise that Alaska's
clean natural gas was not harsh on the environment. He
discussed that part of the state's future was related to a
gas pipeline. He noted that one of the impediments was
shale gas in the Lower 48 and forecasts had shown that the
price of shale gas would increase as communities became
more concerned about its impacts.
Ms. Rehfeld believed that Commissioner Sullivan at
Department of Natural Resources (DNR) had been involved in
education and outreach to educate people in the Lower 48 on
Alaska's potential. She added that Arctic Power had
broadened its scope to help with education and outreach in
the Lower 48.
Representative Gara was interested in an ad campaign that
highlighted the cleanliness of Alaska's natural gas
compared to shale gas in the Lower 48. He believed the
campaign would help increase Alaska's chances of finding a
market for its gas.
2:03:31 PM
Representative Edgmon emphasized the need to make Congress
aware of Alaska's broad support for opening the Alaska
National Wildlife Reserve (ANWR) and that the state's
pipeline was only one-third full. He discussed funding for
Arctic Power and the potential need to double or triple the
state's effort in D.C.
Vice-chair Fairclough believed that leg work could be
beneficial and hoped the state would continue working to
open the petroleum reserve. She was hopeful that Congress
would pass an ANWR resolution; the National Conference of
State Legislatures supported the opening of the petroleum
reserve by a three-quarters vote. The legislature would
continue to encourage the U.S. Senate to support the issue
as well.
Co-Chair Stoltze thought the current makeup of the U.S.
Senate and the president could prevent a bill on the issue
from passing.
Representative Costello wondered how many runways in the
state were not up to Federal Aviation Administration
standards. Ms. Rehfeld would have DOT follow up with a
response.
HB 283 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 286
"An Act providing for and relating to the issuance of
general obligation bonds for the purpose of paying the
cost of municipal port projects; and providing for an
effective date."
2:07:47 PM
Co-Chair Stoltze asked for information on the governor's
proposal to use general obligation (G.O.) bonds as a
funding approach.
ANGELA RODELL, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, read from a statement:
This bill would authorize the issuance of $350 million
in general obligation debt. General obligation debt is
backed by the full faith, credit and resources of the
State. We currently have approximately $628 million in
general obligation bonds outstanding. The State has
the resources and capacity to take on the proposed
additional debt.
Currently, interest rates are at historic lows. This
has allowed us to take advantage of the market and
reduce our debt service obligations. In January of
2012, we sold $175.56 million of general obligation
refunding bonds (with more than $26 million of the
2012 bonds sold to Alaskans) and used the proceeds to
refund $191.410 million of bonds that had been issued
in 2003. This transaction has an all-in true interest
cost of 1.24% and saved the state $27 million, net
present value.
This transaction demonstrates the attractiveness of
Alaska's general obligation paper and also the current
low cost of borrowing in the tax exempt market. Any
new debt issued will have the debt service structured
to provide a low cost of funds and a level burden on
future state budgets. As we move forward with this
proposed legislation, we would like to work closely
with you to ensure all of the projects meet the
necessary tests for tax exemption and can take
advantage of the low rates.
In November of 2010, Moody's Investors Service raised
the state's general obligation rating to AAA. This was
followed by S&P raising our rating to AAA this past
December. A triple A rating is the highest investment
grade rating achievable and expresses an opinion of
the rating agency as to the ability of the state to
honor its long-term unsecured financial obligations
and contracts. In reviewing our rating, Fitch, Moody's
and S&P will be looking to the final dollar amount
issued and the overall plan of finance in conjunction
with other State issues such as revenues, expenses and
other commitments such as the PERS/TRS unfunded
liability.
We have provided a fiscal note which assumes the
voters would approve $350 million in general
obligation bonds. We are required by federal tax law
to track all funds to final expenditure and to ensure
that all funds are spent within 3 years of the date of
issuance. In order to comply with these requirements,
we assumed the bonds would be issued in three
tranches, giving an opportunity for funds to be spent
before additional debt is incurred. We assumed the
first issuance would come in February 2013, following
the November 2012 election. Debt repayment would begin
in Fiscal Year 2014.
2:11:39 PM
Ms. Rodell continued reading from a statement:
The costs associated with issuing bonds including
underwriting, ratings, legal counsel, financial
advisors, marketing and disclosure services,
administration and printing, for a $350 million bond
program would total approximately $2,965,000 or $8.50
per bond.
Co-Chair Stoltze asked whether there were projections that
showed how different interest rates would impact the FY 14
operating budget and beyond.
Ms. Rodell replied that interest rates were not expected to
rise in the near-term; the department had made a
conservative estimate of 4 percent if an issuance did not
occur until 2014. She elaborated that DOR had raised rates
slightly with the assumption that they would rise somewhat
because there would be two years before it had the full
issuance. The projected interest rate would add
approximately $19 million per year in debt service.
Representative Wilson asked whether investments would make
more than 4 percent. Ms. Rodell replied that DOR expected
the long-term funds would exceed 4 percent. Representative
Wilson asked what the same funds had made the prior year.
Ms. Rodell replied that the DOR Revenue Sources Book
assumed a 3.2 percent rate for general funds going forward
and a 6.85 percent rate for long-term funds.
Representative Gara asked what the Statutory Budget Reserve
(SBR) was currently earning. Ms. Rodell replied that the
SBR was currently earning approximately 3.5 percent.
Representative Gara asked whether the amount was less than
the bonds would cost. Ms. Rodell answered that DOR assumed
a rate of 3.2 percent at present with the assumption that
rates would rise on the bond issuance; it also assumed that
rates would increase on the SBR if borrowing costs
increased to 4 percent.
2:15:23 PM
Representative Gara surmised that the SBR was invested in
short-term issuances and that it could be used more quickly
than Constitutional Budget Reserve (CBR) funds. Ms. Rodell
responded in the affirmative.
Representative Gara discussed that there was currently $16
billion in savings and the state would have no problem
making long-term bond payments in the next several years.
He was concerned about the possibility of increased annual
payments of $19 million ten years out if state revenues
decreased and costs continued to increase. He thought the
state could be more responsible presently and know what it
could afford to spend.
Ms. Rodell replied that there would be no money to invest
for the future if the $350 million was spent at present;
therefore, there would be no funds to fall back on when
revenues were on the decline. Whereas, the state would only
need to come up with $19 million to pay the debt service if
debt had been issued. She stressed that once cash was spent
it was gone.
Representative Gara believed that the state would be facing
a tighter budget 10 years in the future and that the SBR
could be much smaller if it only earned 3 or 4 percent per
year. He opined that DOR's assumption that the SBR would be
the same size in ten years was unlikely. He believed the
state should work to protect future years from long-term
obligation.
Co-Chair Stoltze commented that bonds had an internal
discipline and they had to be inherently fair for Alaskan
voters to approve. He added that the governor could not
"cherry pick" or veto certain sections. He opined that
perhaps spending would even be restrained less than it
would have been through other spending vehicles.
2:18:47 PM
Representative Doogan asked whether the bond issuance cost
would come out of the general fund. Ms. Rodell replied in
the affirmative.
Representative Doogan wondered whether the issuance cost
was the only cost that tax payers were responsible for. Ms.
Rodell answered that outside of the issuance cost, the only
other cost was associated with principle and interest; the
costs were amortized over the life of the debt.
Representative Doogan queried the total cost of existing
bonds. Ms. Rodell replied that there were $628 million in
outstanding principal. She asked for clarification on the
question.
Co-Chair Stoltze clarified that the question related only
to G.O. bonds.
Representative Doogan verified that he was interested in
the current cost of existing G.O. bonds. Ms. Rodell would
follow up with the information.
Representative Doogan noted that the current $350 million
was likely to increase. He asked for verification that if
the state's total indebtedness was $670 million that 50
percent would have been added to the debt total. Ms. Rodell
responded in the affirmative.
2:21:06 PM
Representative Joule wondered how high the state was
willing to go related to a bond package with the
understanding the legislature would have an interest. He
observed that the governor recognized needs of the state
through legislation and that negotiation would occur with
the state's upper tolerance level in mind.
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, replied that the governor had
indicated there was room for between $50 and $75 million.
She believed there was also sensitivity to what the voters
felt comfortable approving.
Representative Joule referred to talk about "one-third,
one-third, one-third."
Co-Chair Stoltze pointed to the fiscal note that included a
sale schedule.
2:23:00 PM
Representative Edgmon wondered whether the bond package had
been directed at "shovel ready" projects.
Ms. Rehfeld answered that the projects were in various
stages; some were more shovel ready than others. She
explained that the timing of the bond sales would depend on
where the projects' stood. She pointed out that none of the
projects would be fully funded for specific phases and it
would be important for the projects to be able to reach
completion with the help of other financing options. She
restated that the bonds were not designed to fully fund the
projects.
2:24:19 PM
Co-Chair Thomas believed that community projects partially
funded by bonds would need additional funding in the
future. He wondered why the projects would not be fully
funded with bond money, given his belief that it would be
less expensive than using general funds.
Ms. Rehfeld responded that there were different funding
opportunities for each project and some were working with
the Alaska Industrial Development and Export Authority
(AIDEA).
Co-Chair Stoltze remarked that it was not necessary to get
into detail on specific projects during the meeting. He
thought there were pros and cons to fully funding projects
all at once. He noted the issue would be dealt with as a
policy that was presented in the budget and without it the
construction of the capital budget would be different given
that holes would be created. Ms. Rehfeld agreed and
believed the governor had put the bill forward to work with
the legislature on developing infrastructure along Alaska's
coastline.
Vice-chair Fairclough asked how much bond debt the state
typically had relative to the $627 million debt. She
relayed that the legislature had been working to pay down
debt during her time in office. She asked for a historical
five to ten year perspective. Ms. Rodell replied that the
state had a past history of not issuing bond debt.
Co-Chair Stoltze pointed to bonds used in 2002, 2008, and
2011.
Ms. Rodell continued to reply and explained that there was
$197 million in voter approved authorized unissued debt for
education; before the debt was issued the Department of
Education and Early Development would have to show that it
was prepared to spend the money during the three-year time
frame. The $628 million was more than the state had
historically had on its books, given that the state had a
long period of no G.O. debt issuance.
Co-Chair Stoltze explained that there had been securitized
loans and revenue bonds on the books and that the G.O.
bonds had been present during the past three elections; he
noted his preference for the approach, given its inclusion
of voters.
Vice-chair Fairclough noted that Standard and Poor's (S&P)
had recently upgraded the state's credit rating to AAA. She
pointed to the fiscal note that showed an expected blended
rate of 2.35 percent on the $350 million debt. The CBR was
currently yielding 3.4 percent and the CBR subaccount had a
6.85 percent rate of return. She surmised that there would
be a net gain to Alaskans. She discussed that small
communities may not have the ability to come up with
matching funds that the administration may want. She
wondered how the bond market would look at the state's
fiscal structure of $16 billion per year. She referenced
the decline in production that had been offset by the high
production value.
2:33:11 PM
Ms. Rodell answered that rating agencies would primarily be
concerned about the state's plan to repay debt, but they
would not put a cap on the state's debt issuance. She
communicated that the state had traditionally structured
its debt very conservatively and it worked to limit debt to
20 years or less. The state worked to actively manage and
take advantage of current markets and had been able to
frontload a significant portion of the debt, to keep near-
term debt service constant, and offer relief in FY 22
through FY 24 by over $10 million per year. She believed
agencies would look at all of the state's financial
obligations including the unfunded liability for the Public
Employees' Retirement System (PERS) and Teachers'
Retirement System (TRS). Agencies would also look at steps
Alaska was taking to manage the obligations, to increase
revenues, and to hold budgets back in declining revenue
years. She expounded that Alaska had a good history of
showing fiscal restraint when revenues were not meeting
expectations.
Vice-chair Fairclough discussed the PERS and TRS unfunded
liability. She surmised that the state was able to move
within the current range, maintain its AAA rating with
Moody's and S&P, and go forward carrying debt without too
much of a burden on the current operating budget. Ms.
Rodell agreed.
Co-Chair Stoltze believed the governor would communicate
his views on the appropriate debt cap.
HB 286 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 285
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
2:36:20 PM
KAREN REFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, discussed that HB 285 was
incorporated in the budget books and in subcommittee work
for the operating and capital budgets. The bill was a
collaborative effort between the Alaska Mental Health Trust
Authority (AMHTA), AMHTA beneficiary groups, and state
agencies (Department of Administration, Department of
Corrections, Department of Education and Early Development,
Department of Health and Social Services, Department of
Labor and Workforce Development, Department of Natural
Resources, Department of Revenue, University of Alaska, and
the Court system); it provided a comprehensive look at
programs and services for AMHTA beneficiaries. The total
budget was $249,376,500; the operating component was $236.5
million and the capital component was $12.9 million.
Unrestricted general funds made up $212.4 million,
designated general funds were $20.1 million, and other
funds represented $16.8 million.
Ms. Rehfeld relayed that AMHTA settlement income account
funds were zero based. The trust operating funds from the
current year were reversed and built back in dependent upon
the trust's recommendation; the trust budgeted on a two
year cycle. Letters that included AMHTA recommendations and
the governor's budgeted items were included in a letter in
member's packets.
HB 285 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 307
"An Act making supplemental appropriations, capital
appropriations, and other appropriations; amending
appropriations; repealing appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
2:38:47 PM
KAREN REFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, discussed that she would provide an
overview of HB 307 and would highlight supplemental budget
items on a spreadsheet titled "FY 2012 Supplemental
Requests"(copy on file).
Ms. Rehfeld discussed that the FY 12 proposed supplemental
budget totaled $97,236,400. She provided a breakdown of the
total:
Unrestricted General Funds $78,514,700
Designated General Funds ($2,350,600)
Other Funds $4,810,000
Federal Funds $16,271,300
Ms. Rehfeld explained that within the supplemental request
agency operations totaled $38.9 million; $30.4 million was
general fund. The request included:
Fire Suppression $4.9 million
Disaster Relief $3.0 million
Formula - Adult Public Assistance $2.6 million
Ms. Rehfeld relayed that the capital supplemental for
emergency repairs and projects that were ready to go to bid
during the upcoming summer totaled $20.4 million; $10.1
million was general fund. The bill included two significant
settlements: (1) a $20 million settlement was reached with
the Department of Law for the Optional Retirement Program
$20.0 million; and, (2) an $18 million settlement was
reached with the Department of Education and Early
Development for the Moore case. She explained that the bill
had 18 sections.
2:42:34 PM
Ms. Rehfeld pointed to items 4 through 7 related to
Department of Commerce, Community and Economic Development
(DCCED) (page 1 of the spreadsheet). She detailed that
there had been challenges with the Corporations, Business
and Professional Licensing (CBPL) Division fee structure
and how it had charged various programs for indirect and
other activities. The division had been working to capture
what some of the problems had been for the past several
years. Item 6 was the largest item and related to an
adjustment for licensing fees:
Corporations, Business and Professional Licensing:
Adjustment for Licensing Fees - Fund source change
from professional licensing receipts (receipt
supported services) to the general fund to reimburse
the professions for historical indirect cost
overpayments that were associated with the Business
License and Corporations programs. This is a one-time
fund change.
General Fund Receipt Supported Services $0.0
Ms. Rehfeld expounded that the professional licensing fees
were supposed to be self-supporting; however, as the
charges were incorrectly tagged to certain boards the fees
had gone up. The one-time change would allow the fees to
carry forward into the upcoming year, which would help
smooth cost increases over time. Other CBPL items were
related to indirect charges associated with support for
professional licensing boards. She believed legislative
subcommittees would spend a substantial amount of time on
the issues.
Co-Chair Thomas pointed to page 1, item 2 related to the
Public Defender Agency (PDA) under the Department of
Administration. He pointed to the backup materials (Section
1, page 2) and asked about the $125,000 for a new lease
remodel for Kotzebue and an additional $150,000 for "other
anticipated but unbudgeted maintenance." He opined the
items should have been in the FY 12 budget.
Ms. Rehfeld agreed. She explained that the administration
had worked hard in the past several years to avoid not
budgeting and using the supplemental to fall back on. She
detailed that the budgets for the Office of Public Advocacy
(OPA) and the PDA had been among the most difficult budgets
because the administration had not been able to address the
increasing caseloads in a reasonable way. Work was underway
to determine a better way to budget for the two agencies in
the future.
Co-Chair Thomas wondered whether the $45,000 for an
unbudgeted computer upgrade was for more than one computer.
He repeated his concern about unbudgeted items.
2:48:03 PM
Ms. Rehfeld replied that the PDA item would be detailed
further during the subcommittee process.
Representative Gara asked about a $244,000 increase for
support for CBPL boards and commission members (page 1,
item 4 on the spreadsheet). He wondered why the amount had
been increased by 75 to 80 percent from the prior year.
Ms. Rehfeld replied that the professional licensing boards
were supposed to be self-sufficient; however, because of
some business accounting challenges the state had not been
able to track expenses to the right boards. She believed
that the bill and the FY 13 budget tried to correct the
issue through the fees paid by the boards.
Representative Gara remarked that it was fine if the amount
reflected reimbursement to boards that had put the funding
in; however, he was concerned if the money was additional.
Representative Joule referred to page 1, item 9 associated
with Department of Corrections (DOC) community jails. He
wondered how the $600,000 was broken out between the 15
community jails. The administration had brought forward
$190,000 for the Kotzebue community jail the prior year;
money had been moved around within the line item and the
Kotzebue jail had been shorted by approximately $125,000.
He asked whether the item included funds to cover the jail.
Ms. Rehfeld believed there was a specific line item that
covered the Kotzebue jail. She relayed that DOC had
scheduled a meeting with the jail to discuss reopening;
some of the funds in item 9 would help with the reopening.
The item would be considered for the amended budget as
well. Part of the issue related to how community jails were
funded; the department was working to come up with a
blended per bed rate to allocate funding to avoid the
situation that had occurred when the jail had closed.
2:53:42 PM
Vice-chair Fairclough communicated that according to the
backup the Kotzebue jail was scheduled to reopen on
February 1, 2012. She wondered whether the facility had
reopened. Ms. Rehfeld replied in the negative. She restated
that DOC was scheduled to meet with the jail to discuss
reopening.
Vice-chair Fairclough asked about a $75,000 budget item
related to dispatching services for Kotzebue. Ms. Rehfeld
replied that the item was for the Department of Public
Safety (DPS) and was not related to the Kotzebue jail.
Vice-chair Fairclough observed that the dispatch services
had been paid for in matching funds previously, but would
be charged to the state under the proposed budget.
Ms. Rehfeld informed the committee that there was a DPS
request for transportation during the time the Kotzebue
jail was closed.
Ms. Rehfeld pointed to page 2, item 10 for the Department
of Education and Early Development (DEED):
Student and School Achievement:
Comprehensive System of Student Assessments
Contractual Costs: this additional funding is needed
to accommodate the negotiated contract for the
Comprehensive System of Student Assessments. The FY
2013 Governor's budget includes an additional $750.0
for modified contract terms.
General Fund $1,000.0
Ms. Rehfeld elaborated that an increase in the FY 13 budget
had been included for standards based assessments.
Representative Wilson believed that funding had not been
included for the standards-based assessments for a couple
of years and that the item made up for the error. Ms.
Rehfeld believed the funding was for existing contract
increases. She deferred the question to DEED for follow up.
Representative Wilson had received a different response
from DEED. Ms. Rehfeld replied that they would follow up on
the question later.
2:56:23 PM
Ms. Rehfeld highlighted Department of Health and Social
Services (DHSS) items 14 through 16 on page 2:
Item 14
Adult Public Assistance:
Adult Public Assistance Caseload Growth - Increased
program enrollment, particularly in the disabled and
blind category - tied to the dramatic growth in the
Alaska senior population. A $6,075.0 increment is
included in the FY 2013 Governor's budget.
General Fund $2,600.0
Item 15
Energy Assistance Program:
Low Income Home Energy Assistance Program (LIHEAP) and
Alaska Affordable Heating Program for the state based
on projected needs. The impact of this supplemental
request is being considered for a FY 2013 budget
amendment.
General Fund $928.7
Item 16
Energy Assistance Program:
Low Income Home Energy Assistance Program (LIHEAP) and
Alaska Affordable Heating Program for Tribes based on
projected needs. The impact of this supplemental
request is being considered for a FY2013 budget
amendment.
General Fund $1,691.6
Representative Edgmon asked whether the public assistance
item had been included to meet increased caseload demand
and expected federal shortfalls.
Ms. Rehfeld replied that item 14 was based on increased
demand. There was also contingency language that was
dependent on the amount of federal funding that would be
provided. The item was designed to fill the shortfall in
the projection for the remainder of the fiscal year. She
expected to receive updated numbers in the future.
Ms. Rehfeld pointed to page 3, item 23 related to the
Department of Law:
Oil, Gas and Mining:
Oil and Gas Outside Counsel - Increased litigation
costs for oil and gas outside counsel attributable to
three types of cases: tariff proceedings; Trans Alaska
Pipeline System (TAPS) property tax proceedings; and
oil and gas royalty issues. An increment of $6,150.0
is included in the FY2013 Governor's budget and is
based on anticipated caseload.
General Fund $3,116.0
Ms. Rehfeld discussed item 25 for the Department of
Military and Veterans Affairs (page 3):
Office of the Commissioner:
Base Realignment and Closure Commission Impact -
Department of Defense Secretary Leon Panetta has
announced that the plan to cut nearly $500 billion in
the next 10 years from the Department of Defense
budget will impact all 50 states and a Base
Realignment and Closure Commission (BRAC) will be
requested of Congress to address facility reductions
as soon as possible. The U.S. military's presence in
Alaska represents 10% of the state's economy. The
Alaska Military Force Advocacy and Structure Team
(AMFAST) recommends the State of Alaska hire an
experienced consulting group to address ideas proposed
by the next BRAC. This request will promote and
sustain Alaska's current military facilities and force
structure. The impact of this request is being
considered for a FY2013 budget amendment.
General Fund $300.0
Co-Chair Thomas remarked that a resolution passed by the
Senate discouraging the closure of military bases in Alaska
had left out Coast Guard bases. He stressed that Coast
Guard bases were very important to rural and Southeast
Alaska and would be included in the House resolution.
3:00:17 PM
Representative Gara referred to the $3 million outside
counsel appropriation (page 3, item 23). He opined that it
was less expensive to hire in-house counsel for research
memos, briefings, and other. He wondered why the state
should pay more money for outside counsel when the work
could be done in-state.
Ms. Rehfeld replied that there were excellent attorneys
doing great work in the areas that needed assistance on
some of the important larger ongoing cases. She relayed
that it was possible for some of the work to be done by a
line attorney if the state was willing to bring on
additional employees; however, that was not the approach
that had currently been taken. The item had been on the
administrations list to include in the operating budget
each year, but a supplemental request was usually required.
Representative Gara noted that he had worked on the Exxon
Valdez oil spill case and the state had hired outside
counsel at that time as well. He explained outside counsel
had done work that should have been done in-house. He
believed that administrations had used outside counsel to
keep the state employee count down, but it actually cost
the state more money.
Co-Chair Thomas commented that sometimes the state needed
to hire former state attorneys who had done significant
work on specific cases in order to gain their expertise.
3:03:55 PM
Ms. Rehfeld flagged Department of Natural Resources item 35
(page 4):
Fire Suppression Activity:
FY2012 Fire Suppression Activity - This is a
preliminary estimate of supplemental needs for spring
firefighting and costs of initial attack of wildland
fires through June 30, 2012.
General Fund $4,892.5
Ms. Rehfeld directed attention to page 5, item 38 for DPS
Alaska State Trooper detachments:
Replace Federal Pass through Funds from Alaska Highway
Safety Office - The Alaska Bureau of Highway Patrol
will no longer receive federal funds for non-DUI
related traffic enforcement. In order to maintain
traffic enforcement to include non-DUI specific
activity, such as impaired driving, youth drivers,
aggressive driving and speeding, and seat belt
enforcement, supplemental funding is necessary as the
current budget cannot absorb these costs. Additional
federal funding reductions are anticipated for DUI-
related traffic enforcement starting in FY 2014. The
impact of this supplemental request is being
considered for a FY 2013 budget amendment.
General Fund $1,900.0
Ms. Rehfeld expounded that the Department of Transportation
and Public Facilities (DOT) would continue to receive
federal highway safety funds, but the amount of funds
related to driving under the influence (DUI) would be less.
She noted that the issue would continue to be monitored,
given the importance of ongoing DUI and non-DUI related
enforcement on the highway safety corridors.
Representative Doogan surmised that the federal government
had discontinued funds and the state had become responsible
for funding items with general fund money. Ms. Rehfeld
responded in the affirmative. She clarified that continued
work would not be funded through the specific highway
safety grant.
Representative Doogan wondered whether an evaluation had
been made to determine whether the items should be
continued or lapsed. Ms. Rehfeld replied that the governor
considered the issues and had brought forward items that
warranted ongoing work.
3:07:52 PM
Representative Joule pointed to item 37 on page 5 in the
amount of $106,000 for DPS jails and prisoner
transportation. He did not know what time period had been
used or whether there had been earlier expenses. He pointed
to a $75,000 expenditure (item 36) and wondered how much
the items would end up costing the state; he thought costs
could have been saved. He discussed the difficulties
related to transportation of prisoners from rural areas,
many of which did not have holding facilities. He believed
the state was beginning to realize that it had had a good
deal. He hoped that a deal between Kotzebue and the
administration could be settled.
Ms. Rehfeld agreed. She understood that progress had been
made and the administration hoped for a positive outcome.
Co-Chair Thomas remarked that the seatbelt law had been
implemented because the federal government would pay for
the enforcement. He wondered whether the law would be
repealed if the federal funding was taken away. Ms. Rehfeld
answered that item 38 did not relate to seatbelt
enforcement, which was attached to a different federal
highway safety funding stream.
Vice-chair Fairclough referred to bad weather conditions in
Eagle River and Anchorage that had resulted in road
closures and stranded drivers. She wondered whether
substantial funds had been included for highway safety. She
was concerned that residents would have been unreachable in
emergency situations. She understood that DOT was working
to stay on top of the issue. She pointed to two
appropriations for $100,000 apiece for sanding and snow
removal and wondered whether the amount was enough.
Ms. Rehfeld responded that DOT would do what was needed to
protect the safety of citizens. She expected the numbers
would be refined during session to account for disaster
relief.
3:14:00 PM
Representative Neuman was concerned that the long-term
programs (e.g. item 38) that had been funded by the federal
government in the past almost became embedded in the
operating budget. He wondered whether there was a way to
identify federal funds that were not coming or if the state
was backfilling them with general funds.
Ms. Rehfeld replied that the administration worked with the
departments to identify what they knew looking forward;
typically the reductions and timing were not known very far
in advance. She explained that the co-chair had requested a
look-back on federal funds that could be identified as
going away. The issue also involved funds that had gone
directly to institutions, organizations, or communities;
there would be pressure for the state to look at the items
to determine whether it should continue them. She pointed
to the DPS DUI enforcement federal grant change that
specified allowable and unallowable costs as an example of
an issue the state would need to address.
Representative Neuman was interested in a ten-year forward
plan that showed which federal funds the state would not
receive. He believed there were many important non-state
items that the state could become overloaded with when
funding was lost.
Ms. Rehfeld moved to DOT item 50 on page 6:
AIA Field and Equipment Maintenance:
Purchase De-icing Chemicals - In FY2011, the cost per
ton of urea increased from $342 per ton to $719 per
ton. Also, the airport has commissioned a third new
tank for potassium acetate in order to mitigate
continuing supply shortages. An increment of $1,634.5
has been included in FY 2013 Governor's budget.
International Airport Revenue Fund $1,634.5
Ms. Rehfeld looked at item 52, page 6 related to the
University of Alaska:
Anchorage Campus:
Federal Receipt Authority for Pell Grants - Additional
federal receipt authority is needed to accommodate the
increases in Pell grant activity. A related FY 2013
budget amendment is also being considered.
Federal Receipts $5,000.0
Ms. Rehfeld directed attention to capital items; there were
several items that were emergency in nature or could go to
bid during the upcoming summer if the funding authority was
moved up. She highlighted a DOC Yukon-Kuskokwim
Correctional Center Dorm Renovation Project for Bethel
(item 55, page 7):
This project is necessary to replace capital funding
that was redirected from other projects to address an
emergency with overcrowding at Yukon-Kuskokwim
Correctional Center (YKCC). The YKCC Dorm Renovation
Project adds 28 additional bunks, increasing the
offender housing capacity to 193.
General Fund $1,284.5
Ms. Rehfeld furthered that DOC had used deferred
maintenance funds that had been slated for other projects
in order to complete the work; therefore, item 55 would
provide the department with replacement funds. She looked
at item 57 on page 7 that funded $1.1 million for a Kenai
River parcel purchase from the Exxon Valdez Oil Spill
Settlement (EVOSS) trustee council. The purchase would
provide public access to the river.
Co-Chair Thomas thought EVOSS funds were only designated
for oil damaged properties. Ms. Rehfeld explained that the
EVOSS council had recommended the fund source for the Kenai
land purchase. She could not speak to the requirements of
the EVOSS funding.
Co-Chair Thomas thought follow up on the item was
necessary.
Ms. Rehfeld pointed to DOT items 59 and 60 on page 7:
Item 59
Alaska Marine Highway System - Cordova Dock Emergency
Repairs - The existing float system of the Cordova
Dock needed emergency repairs in the fall of 2011.
General Fund $1,200.0
Item 60
Alaska Marine Highway System - Vessel and Terminal
Overhaul and Rehabilitation - Vessel and terminal
overhaul and rehabilitation is primarily used to meet
and maintain United States Coast Guard requirements
and obtain Certificates of Inspection (COI) necessary
to operate the vessels. Total spending this year is
slightly higher than previous years due to the one-
time $1.2M propeller shaft strut replacement work
required by the Malaspina in order to clear a pending
CG-835 No-Sail order which was about to expire.
General Fund $5,455.0
Ms. Rehfeld relayed that in the past several years $7
million to $8 million had been included annually in the
budget for overhaul work on state ferries.
3:20:59 PM
Vice-chair Fairclough wondered which project had excess
funds that had been redirected to fund the Bethel Yukon-
Kuskokwim correctional facility (item 55, page 7).
Ms. Rehfeld replied that the deferred maintenance money had
been diverted from other projects in order to address
immediate emergency overcrowding in the correctional
facility; the funding would allow DOC to complete the
projects that had been shorted funds.
Vice-chair Fairclough asked why the Kenai River parcel
purchase (item 57) had not been included in the FY 13
capital budget.
Ms. Rehfeld answered that there were a number of items that
Department of Natural Resources (DNR) needed to complete in
order to purchase the property and prepare the boat launch;
DNR felt that more work could be done on the boat launch if
the funds were allocated sooner.
Ms. Rehfeld explained that several items on page 8 had been
moved to the supplemental budget in order to allow projects
to go out to bid during the current spring. She highlighted
several capital items:
Item 68
Nome - Runway 10-28 Rehabilitation - This project will
rehabilitate, repave and repaint the settled area on
the main runway of the Nome Airport. Repair of the
settled area has become a high priority safety
concern. The project will advertise for construction
bids in April 2012 with a schedule for completion by
fall of 2012.
Federal Receipts $3,900.0
Item 69
Unalaska - Runway Safety Area and Pavement
Rehabilitation - This project will construct a runway
safety area, runway extension, airport lighting and
drainage improvements, other minor repairs, and
address poor pavement conditions at the Unalaska
Airport. In order to utilize the upcoming construction
season and not have to wait another 12 months,
authorization is needed before July 1.
Federal Receipts $3,000.0
Item 71
Anchorage Metropolitan Area Transportation Solutions
(AMATS) - Glenn Highway Trail Rehabilitation - This
project will resurface the existing Glenn Highway
trail between Muldoon Road and North Birchwood Loop,
construct a wayside at milepost (MP) 8.6, pave
existing parking area at the westbound weigh station,
replace the existing pedestrian bridge over Ship Creek
(bridge #1402), construct minor realignment of the
pathway at the Muldoon Interchange, and upgrade any
curb ramps not meeting ADA guidelines. In order to
utilize the upcoming construction season and not have
to wait another 12 months, authorization is needed
before July 1.
Federal Receipts $2,340.0
Ms. Rehfeld directed attention to page 9 that included
Department of Law (DOL) judgments and settlements. She
provided detail on the Moore settlement that focused on
helping low performing districts to achieve success (item
79). The $18 million would be used over a five-year period
and a committee would be appointed (that would include
DEED) to design how the funds would be used.
Co-Chair Thomas wondered whether funds for non-performing
schools could be removed from the operating budget, given
the $18 million allocation in the supplemental budget.
Ms. Rehfeld replied that the funds in the supplemental were
specific to a legal settlement. She deferred the question
to DOL for follow up.
3:25:10 PM
Representative Wilson relayed that they [Education
Subcommittee] were meeting with the attorney general to
determine what the state could and could not do. She
wondered why the Moore settlement funds had been allocated
all at once if they were to be spent over a five-year
period.
Ms. Rehfeld replied that the decision may have been part of
the settlement negotiation.
Representative Wilson would follow up on the issue.
Ms. Rehfeld referred to page 9, item 80. She detailed that
the backup materials included a complete list of judgments
and claims. Item 80 was the largest and related to the
optional retirement system for university professors and a
change in the Teachers' Retirement System (TRS) employer
contribution rate:
Judgments and Settlements - Actual judgment and
settlement costs received as of January 30, 2012
General Fund $20,770.8
Ms. Rehfeld discussed the supplemental request for disaster
relief; it was hard to predict the level of funding needed
(item 87). The item factored in expectations based on fall
and winter storms and potential spring flooding and other:
Supplemental Disaster Funding - Current disasters are
expected to exhaust the available general funds in the
Disaster Relief Fund. In addition to fall and winter
storms, traditionally there are springs floods that
have been eligible for expenditures from the Disaster
Relief Fund. The impact of this supplemental request
is being considered for a FY2013 budget amendment.
General Fund $3,000.0
3:27:32 PM
Ms. Rehfeld pointed to ratifications on page 10. Items 97
through 99 reflected precise dollar amounts; funds for fire
suppression activity (item 97) were $36,388.
Representative Costello looked at a DNR item related to the
gas pipeline project (page 9, item 85) that included zero
funding. She asked for an explanation on the item that
appeared to be a statute related change.
Ms. Rehfeld explained that the item related to ongoing
Alaska Gasline Inducement Act (AGIA) efforts under DNR and
extended the lapse date on a previous appropriation. She
would follow up with the estimated amount.
Representative Neuman wondered whether the item 85 was a
reappropriation of a prior supplemental. Ms. Rehfeld
responded that some of the AGIA appropriations were
classified as a "multi-year operating"; the administration
followed up to provide an estimate of available funds that
would allow items to continue into the next fiscal year.
She would follow up with more detail.
Vice-chair Fairclough commended DOL for resolving multiple
legal cases that had been ongoing.
ADJOURNMENT
3:31:46 PM
The meeting was adjourned at 3:31 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 307-Supplemental_Spreadsheet_1-31-12.pdf |
HFIN 2/9/2012 1:30:00 PM |
HB 307 |
| HB286-DOR-TRS-NEW FN 01-31-12.pdf |
HFIN 2/9/2012 1:30:00 PM |
HB 286 |
| HB 286 Testimony.pdf |
HFIN 2/9/2012 1:30:00 PM |
HB 286 |
| HB 283-Response to HFC Questions Capital Budget letter dated 2.21.2012.pdf |
HFIN 2/9/2012 1:30:00 PM |
HB 283 |