Legislature(2013 - 2014)HOUSE FINANCE 519
01/17/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Overview of the Governor's Fy 14 Budget: Office of Management and Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
January 17, 2013
1:31 p.m.
1:31:21 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:31 p.m.
MEMBERS PRESENT
Representative Alan Austerman, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Mark Neuman, Vice-Chair
Representative Mia Costello
Representative Bryce Edgmon
Representative Les Gara
Representative Lindsey Holmes
Representative Scott Kawasaki, Alternate
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
Representative David Guttenberg
ALSO PRESENT
Helen Phillips, Committee Assistant, House Finance
Committee, Legislative Finance Division; Karen Rehfeld,
Director, Office of Management and Budget, Office of the
Governor; John Boucher, Senior Economist, Office of
Management and Budget, Office of the Governor.
SUMMARY
COMMITTEE INTRODUCTIONS
OVERVIEW OF THE GOVERNOR'S FY 2014 BUDGET:
Office of Management and Budget
1:31:21 PM
Co-Chair Stoltze turned the gavel over to Co-Chair
Austerman.
Co-Chair Austerman asked House Finance Committee Assistant
Helen Phillips to provide staff introductions and discuss
information pertaining to the committee room.
HELEN PHILLIPS, COMMITTEE ASSISTANT, HOUSE FINANCE
COMMITTEE, LEGISLATIVE FINANCE DIVISION (LFD), provided
introductions and functions of LFD committee support staff.
She had referenced a memo she had provided to committee
members pertaining to supplies, meeting recording, room
resources, bill files, weekly schedules, room use, and
other (copy on file).
1:38:47 PM
Co-Chair Austerman discussed that alternates had been
assigned to the committee. Representative Guttenberg had
been excused for one to two weeks. He asked Representative
Kawasaki to join the committee at the table as an alternate
in Representative Guttenberg's absence.
Co-Chair Austerman introduced his staff.
1:41:20 PM
Co-Chair Stoltze introduced his staff and provided a
description of their responsibilities.
Vice-Chair Neuman discussed that his staff was working hard
to prepare for the Department of Health and Social Services
budget subcommittee meetings.
Representative Thompson introduced his staff
Representative Edgmon introduced his staff.
Representative Wilson introduced her staff.
Representative Costello introduced herself and her staff.
Representative Gara introduced his staff.
Representative Kawasaki introduced himself and his staff.
Representative Holmes introduced herself and her staff.
1:46:11 PM
Representative Munoz introduced her staff.
Co-Chair Austerman provided information about committee
rules (memo on file). He shared that the committee would
meet at 1:30 going forward and asked committee members to
be on time. He communicated that members would need to be
present to vote and could not vote via teleconference. He
relayed that committee reports for reported out legislation
needed to be signed in the committee room. He discussed
that the committee would be meeting on a daily basis in
order to address the governor's proposed FY 14 budget. He
mentioned that March 1, 2013 would be the subcommittee
closeout deadline.
1:50:07 PM
^OVERVIEW OF THE GOVERNOR'S FY 14 BUDGET: OFFICE OF
MANAGEMENT and BUDGET
1:50:26 PM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced her senior economist
John Boucher. She introduced additional staff and provided
descriptions of the areas they worked in. She appreciated
the opportunity to present to the committee.
1:54:08 PM
Ms. Rehfeld provided a Power Point presentation titled "FY
2014 Budget Overview." She emphasized that approving a
budget on an annual basis was one of the most important
items addressed by the legislature. She discussed her
intent to provide a high level overview of the capital,
operating, and mental health budgets (HB 64, HB 65, and HB
66 respectively). She shared that the governor had talked
about weighing priorities and constraints when he had
released the budget in December 2012; he had also talked
about the state's solid position and results. She shared
that the state's AAA bond rating was largely due its budget
reserves, the permanent fund, the legislature's budget
discipline, and the opportunity to develop the state's
resources. She applauded the committee's efforts to work
with state agencies on their missions, their core services,
and the delivery of services. She stated that government
needed to be accountable for its expenditures. She shared
that the administration had worked for months with state
agencies to review their requests and challenges in order
to bring forward the most pressing needs while practicing
fiscal constraint.
Ms. Rehfeld communicated that the performance framework
needed to be a meaningful tool for state agencies and
program managers. She shared that Governor Parnell had
maintained a vision of economic growth and strengthening
families. She stated that Alaska's future depended on
responsibly developing its resources and on job creation.
She believed the budget supported the governor's vision in
several key areas (slide 3):
Budget Priorities
· Resources and Energy
· Education
· Public Safety
· Transportation/Infrastructure
· Military Support
Ms. Rehfeld elaborated on each of the bullet points listed
on slide 3. In relation to resources and energy the
administration was focusing on creating an investment
climate designed to grow Alaska's economy and create
private sector jobs. The education focus was to prepare
students for success in job training or college. The
primary focus in public safety was to provide safe homes
and strong families. Attention was given to building
Alaska's infrastructure and transportation corridors and to
supporting military missions and families.
Ms. Rehfeld turned to slide 4 titled "Fall 2012 Revenue
Forecast." She stated that there were significant decreases
in the revenue forecast from the spring of 2012 to the fall
of 2012. She relayed that declining oil production and
price had a profound impact on the funding available for
the current and next fiscal years. The chart showed that in
the spring of 2012 the administration was anticipating
$8.44 billion in revenue; the numbers had been revised in
the fall 2012 forecast to $7.5 billion largely due to a
drop in oil price and production, representing a decrease
of approximately $928 million. The FY 14 forecast had been
revised from $7.68 billion to just over $7 billion,
representing a decline of $678 million. The total decline
was $1.6 billion. She remarked that the changes provided
the context that was used in developing the FY 14 budget.
1:58:53 PM
Ms. Rehfeld moved to slide 5 "FY 2013/FY 2014 Budgets: Big
Picture." She communicated that the state was looking at a
deficit of $410 million instead of the expected surplus of
$514 million. She referenced an appropriation of $250
million that had been approved the prior spring for
transfer into the Statutory Budget Reserve (SBR); the net
deficit would be approximately $160 million. She stated
that less revenue meant spending less; therefore, the
administration had asked departments to evaluate their
current employees and resources used to carry out core
services without increases in the FY 14 budget. The
administration was working to decrease overhead costs, to
increase efficiency, and to focus on priorities.
Co-Chair Austerman pointed out that the figures used in the
presentation came from the Department of Revenue and
Department of Natural Resources projections. He noted that
the departments would present to the committee the
following week.
Representative Gara referenced the $410 million deficit
projection for the end of the current fiscal year. He asked
what the projected price was and what the actual price had
been for the current fiscal year to date. Ms. Rehfeld
responded that the price included in the spring forecast
for FY 13 was $110.44; the 2012 fall forecast was $108.67.
Production in the spring had been 563,000 barrels per day
and $553,000 barrels per day in the fall.
Representative Gara asked what the actual price per barrel
had been in the current fiscal year.
JOHN BOUCHER, SENIOR ECONOMIST, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, responded that the figure
was running slightly below the forecast. He believed the
actual price was within $1 to $2 from the projected price.
He communicated that he would follow up with the exact
figure.
2:02:28 PM
Ms. Rehfeld pointed to slide 6 titled "Alaska's Reserve
Accounts." The chart provided a visual of the growth in the
state's savings accounts from 2002 to 2012. She relayed
that there was nearly $16 billion in savings at the end of
FY 12. She elaborated that the state had used "windfalls"
from high oil prices to repay past Constitutional Budget
Reserve (CBR) draws and to maintain money put into reserve
accounts; the element was important to consider because it
was the reason for the state's AAA bond rating and was a
key factor in the long-range fiscal plan. She detailed that
managing the use of reserves in times of declining
production was key and would help provide for essential
services (e.g. public safety, education, transportation,
and other).
Co-Chair Austerman acknowledged the presence of
Representatives Andrew Josephson and Shelley Hughes in the
committee room.
Ms. Rehfeld discussed spending controls on slide 7. She
stated that over the past three years the administration
had asked state agencies to absorb increases in their
budgets including merit increases for staff, and increases
in central support services rates, contractual costs and
lease costs. She furthered that the Department of
Administration (DOA) had been closely examining what it was
charging agencies for core services and how the costs could
be reduced. Agencies had been directed to manage their
budgets, not plan on supplemental funding, and to provide
services to Alaskans without disrupting services.
Ms. Rehfeld referenced the governor's FY 13 budget that had
deleted over 280 positions; departments had been asked to
make adjustments in their budgets to minimize impact on
service delivery. The administration had employed a number
of strategies to help manage costs with existing resources
including (slide 7):
· Improve/Streamline business processes
· Enhance technology
· Lower cost of purchasing
· Reduce footprint/cost of office space
· Share services
2:06:38 PM
Ms. Rehfeld continued to discuss slide 7. She noted that
DOA had recently issued new space guidelines that were
consistent with private and public sector changes
nationwide; the shift would help the state reduce the
footprint and the cost of office space.
Ms. Rehfeld communicated that the FY 14 state budget
totaled $12.8 billion. She moved to slide 8, which showed
the makeup of the FY 14 budget by fund source:
Unrestricted General Funds $6.49 billion - 51%
Federal Funds $2.94 billion - 23%
Permanent Funds DGF $1.92 billion - 15%
Designated General Fund $866.6 million - 7%
Other Funds $559.3 million - 4%
Ms. Rehfeld elaborated that Designated General Funds (DGF)
included items such as University of Alaska receipts ($377
million) and general fund program receipts ($133.3
million). Other funds included items such as Alaska
Permanent Fund Corporation (APFC) receipts (including
management fees and fund operation at approximately $133.3
million), International Airport Funds ($146 million), and
Statutory Designated Receipts ($70.5 million).
Co-Chair Austerman asked for the top three items that made
up the $1.92 billion for APFC. Ms. Rehfeld shared that
inflation proofing (a total of $943 million; $22 million of
the amount was for the Alaska Capital Income appropriation)
and the Permanent Fund Dividend ($958 million) made up the
lion share of the cost. She noted that the administration
received a monthly financial statement from APFC; OMB's
December 2012 fiscal summary reflected data from the end of
October. She shared that the most current information would
be used in the budget amendment package in February 2013.
2:09:58 PM
Ms. Rehfeld addressed budget priorities on slide 9. The
budget contained a $14.8 million request to fund the fourth
year of the governor's Choose Respect initiative aimed at
preventing domestic violence and sexual assault; $3 million
of the total was an annual request designated for
prevention. She discussed different elements of the
initiative including prevention and intervention in the
amount of $5.25 million for public education and awareness,
community level prevention projects, and rural pilot
projects; $2.6 million in survivor support for shelters,
services for children exposed to violence, trauma services,
and housing; and $6.9 million in law enforcement for 15
Village Public Safety Officers (VPSO) and 1 trooper,
additional prosecutors for child abuse cases (in Juneau,
Fairbanks, and Bethel), and 3 investigators for child
protection and sex trafficking.
Ms. Rehfeld relayed that more than 120 communities held
Choose Respect events in 2012 and additional communities
were expected to participate in March 2013; the events sent
a strong message of support to victims and survivors. The
governor's proposed budget also included $2.8 million for
15 additional state troopers in the Mat-Su, Kenai, and
Fairbanks region; the request was to account for escalating
population growth. Additionally, the budget included
$823,700 for a new trooper post (2 troopers) in Hooper Bay.
She noted a similar request for Selawik had been approved
two years earlier and had been very effective.
2:12:50 PM
Vice-Chair Neuman acknowledged that the programs were
important to the state's communities; however, he believed
the state was starting out at a $920 million deficit not
including any FY 12 supplemental budget requests. He
wondered whether the administration had considered what the
state could afford and the cost-benefit of programs.
Ms. Rehfeld replied that the administration had considered
the issue prior to submitting the budget. The budget
focused on areas that the administration believed were key
priorities and services that Alaskans expected from the
state. She detailed that the state had a $410 million
deficit in the current year and it would be necessary to
draw from the SBR to pay for current services. The FY 14
budget would be funded by $6.49 billion of state general
funds, which was approximately $500 million below projected
revenue. The administration believed the budget was
responsible and would help in the long-term with public
safety and to reduce problems that could occur without a
law enforcement presence.
Vice-Chair Neuman communicated that he had asked the
Departments of Health and Social Services and
Transportation and Public Facilities to cut 10 percent off
their proposed budgets. He wondered whether there were
specific areas where spending could be reduced if
necessary.
Ms. Rehfeld answered that she could address the question
later in the presentation.
Representative Gara acknowledged the importance of being
fiscally responsible. He observed that $250 million of the
$410 deficit in the current year had been put into savings.
He surmised that excluding the money put into savings the
deficit would be closer to $160 million.
Ms. Rehfeld replied that the $250 million was technically
considered a transfer and not savings. Representative Gara
asked for verification that the state had the money. Ms.
Rehfeld responded in the affirmative.
2:17:18 PM
Ms. Rehfeld moved to slide 10 titled "FY 2014 Budget
Priorities," which focused on the governor's comprehensive
energy strategy. Strategy components included $95 million
for Susitna-Watana hydro (continued engineering feasibility
studies, design, environmental work, and license
application to be submitted in September 2015); $125
million for the capitalization of the Sustainable Energy
Transmission and Supply Development Fund to provide low
cost financing for energy projects (a technical correction
would be included in the budget amendments); $31.5 million
for weatherization to help low-income families with energy
improvements; $20 million for home energy rebates to
homeowners for energy efficiency improvements; and $67
million for the Low Income Home Energy Assistance Program
(LIHEAP) and the Power Cost Equalization (PCE) program.
Co-Chair Stoltze asked how the $67 million would be split
between LIHEAP and PCE. Ms. Rehfeld answered that the
LIHEAP request was for just under $27 million and the PCE
request was $40 million.
Ms. Rehfeld discussed a $25 million request for the
Renewable Energy Grant Fund (slide 10). She shared that
during the past several years over $200 million had been
appropriated for the grants to address high-cost areas. The
program had been extended to 2023 the prior year (the
proposed budget included funding for "round 6" of the grant
fund).
Ms. Rehfeld turned to slide 11 pertaining to education
funding. She highlighted the governor's initiative to
prepare Alaska students for success and to increase the
high school graduation rate to 90 percent by 2020. She
discussed the Alaska Performance Scholarships (APS) that
were aimed at increasing the number of students taking
higher academic rigor and rewarding them for success; more
than 4,600 students had qualified for the performance
scholarships under the program. The budget also included $4
million for needs based grants that were also part of the
APS package. She emphasized that the graduation rate was
moving in the right direction, but it was currently just
under 70 percent. She relayed that the governor's budget
included $800,000 for the Jobs for Alaska's Graduates (JAG)
initiative; JAG was mirrored after a program operating in
33 states that had seen a 93 percent graduation rate for
at-risk students. She elaborated that the initiative would
be a partnership between businesses, United Way, and the
Department of Education and Early Development (DEED); it
targeted at-risk students and would assist them with skills
and job training opportunities to keep them in school and
engaged.
Ms. Rehfeld continued to discuss slide 11. She pointed to a
request for $5.9 million for the Digital Learning
Initiative. She explained that the first piece of the
initiative was a partnership with the Association of Alaska
School Boards (AASB) (the association had been operating a
similar project over the past couple of years). The
initiative would last for a period of four years to provide
digital devices to teachers and students. The economies of
scale that would be created by joint purchasing of the
devices to help deliver educational content and curriculum
had been very effective.
2:22:18 PM
Ms. Rehfeld communicated that another portion of the
initiative was its support of the Alaska Learning Network
distance delivered courses that would help students receive
higher level curriculum that may not be available in their
communities. Additionally, the initiative would provide
live homework help through an online homework assistance
program.
Ms. Rehfeld shared that the budget also included $320,000
for a K-3 literacy project; it would help provide pre and
post screening assessments for students in kindergarten
through 3rd grade to identify any reading deficiencies and
to target efforts needed to help students succeed. She
noted that deficiency in reading was predictive of a
student's success.
Representative Wilson asked for verification that broadband
support to libraries was a significant piece of the Digital
Learning Initiative. She wondered why the support would be
provided to the libraries instead of schools or a
combination of the two.
Ms. Rehfeld replied that the online homework assistance had
been a cooperative with libraries and in many communities
libraries had broadband access. She elaborated that the
initiative worked with libraries in order to provide the
service. She believed the cost included in the budget was
approximately $800,000 for broadband support.
Representative Wilson believed that in addition to the
online homework support there was a portion of the
initiative that worked with providing broadband access in
an increased number of communities. She believed that while
libraries were a reasonable place to expand broadband,
there were schools in the areas that did not have broadband
access.
Ms. Rehfeld believed that a portion of the funding was
directly for library broadband. She clarified that digital
learning devices provided through the partnership with AASB
did not necessarily need to have internet access. She
detailed that an important part of the program was district
readiness assessments to determine their ability to deliver
education through technology; some districts would be able
to do more in the area of broadband connections, but there
would still be valuable technology tools without it.
2:25:34 PM
Representative Costello wondered whether there was research
showing increased student results related to digital
learning opportunities. She wondered whether money would be
better spent on vocational education with hands-on
opportunities that would prepare students for jobs.
Ms. Rehfeld replied that there were some very effective
digital learning programs in different grade levels that
currently existed; the Kuspuk, Kodiak, Denali school
districts had pilot programs and could share information
about results. She noted that AASB could provide the
information.
Representative Holmes referenced the K-3 Literacy
Initiative and wondered about the amount of funding that
went to pre and post screening versus intervention.
Ms. Rehfeld answered that she did not have the breakout
available. She believed the majority of the proposed
funding would go to preliminary assessment work in
determining where students' reading deficiencies lay. She
opined that the only additional requirement may be targeted
attention and not an additional resource.
2:27:50 PM
Ms. Rehfeld addressed transportation and infrastructure on
slide 12. She noted that the funding requests were
primarily regular requests that were included in the
governor's annual capital budget. The proposed budget
included $1 billion in funding for statewide infrastructure
projects including $971 million for highways and aviation,
$56 million for the Village Safe Water program, and $34
million for municipal water and sewer projects (with local
matching funding). Additionally, the budget contained $46.2
million for school construction including the Nightmute
school renovation at $33 million (the next Kasayulie
school) and $13.2 million for the Quinhagak renovation (in
addition to funds provided in the past). She relayed that
DEED prepared the list annually; school districts apply for
grants; the current list totaled $284 million for 24
projects. She noted that the next Kasayulie school would be
in the FY 15 budget for the community of Kwethluk and was
estimated at approximately $56 million.
Ms. Rehfeld continued with slide 12; the budget included
$22.3 million for the first 12 major maintenance projects
on DEED's list; the list totaled $253 million and contained
111 projects.
Co-Chair Austerman asked whether a portion of the $56.5
million for the Village Safe Water program had a federal
funds match. Ms. Rehfeld replied in the affirmative. She
believed the figure was approximately $8.5 million. She
furthered that the budget included a $5 million request for
new technologies to help provide communities with safe
drinking water. The $5 million would also available to the
Department of Environmental Conservation (DEC) for
emergencies (e.g. the failure of older water systems).
Co-Chair Austerman recommended that DEC should present a
plan on how it would obtain needed information and how it
would operate in the future. He believed the DEC project
list was approximately $700 million; he did not believe $5
million would go very far in addressing the overall plan.
Ms. Rehfeld agreed.
2:31:47 PM
Co-Chair Stoltze surmised that the project list would grow
significantly if communities believed they would receive
any of the money.
Ms. Rehfeld shared that the budget included $100 million
for year four of the administration's five-year deferred
maintenance effort. She highlighted that the administration
had learned that absence of a capital asset management
system had limited the state's ability to manage the
deferred maintenance backlog. She furthered that the annual
increment helped communities to plan and complete the
projects. She detailed that the administration had carved
out a $2 million piece of the $100 million total to apply
towards a capital asset management system for statewide
use.
Ms. Rehfeld discussed slide 13: "Resources and Permitting."
She referred to the governor's plan for an all-Alaska
gasline project. The budget included $50 million for
gasline development: $25 million for the Alaska Gasline
Inducement Act (AGIA) reimbursement fund and $25 million
for the Alaska Gasline Development Corporation (AGDC)
project. The proposed budget included a $15 million
increment for the Geologic Materials Center. She expounded
that the state had a wealth of materials currently stored
in container vans that hindered research by explorers; the
funding would go towards the purchase and renovation of an
existing facility to house the materials.
Vice-Chair Neuman asked how much had been spent on AGIA
reimbursement to date. Ms. Rehfeld responded that $223
million had been spent on AGIA reimbursement; with the
current request the total appropriation would be $330
million.
2:34:50 PM
Ms. Rehfeld pointed to the administration's effort to
streamline permitting and to a $4 million increment for
statewide digital mapping that would allow for the
completion of mapping the Arctic region. She highlighted an
$18 million request for Roads to Resources including $8.5
million for the Ambler Mining district and other. The
budget also contained $10 million in funding for the first
year of the five-year Chinook Salmon Research Initiative.
The initiative would enable the state to take a
comprehensive look at Chinook salmon stocks and to increase
their abundance and sustainability. She added that the
Department of Fish and Game was preparing the research plan
with a number of stakeholders.
Representative Gara asked for clarification on the total
AGIA reimbursement including the current proposed
increment.
2:36:29 PM
Ms. Rehfeld answered that $305 million had been
appropriated for AGIA reimbursement to date. The proposed
$25 million would bring the total to $330 million. She
added that at present approximately $223 million had been
reimbursed from the fund.
Representative Costello referenced a significant permitting
backlog that had existed in the past. She queried how the
$7.3 million designated for permitting and statewide
digital mapping (slide 13) would be divided.
Ms. Rehfeld replied that $3.3 million was designated for
the unified permitting project and $4 million would go to
statewide digital mapping.
Ms. Rehfeld turned to slide 14 titled "FY 2014 Operating
Budget Highlights." She remarked that the administration
believed the proposed budget was very lean. Full funding
was included for the current K-12 education funding formula
and pupil transportation (the K-12 funding formula was
based on the current Base Student Allocation of $5,680) for
approximately 129,000 students statewide. Also included was
a request for a direct deposit of $633.8 million to the
retirement system unfunded liability; the figure included
$4.5 million for the Judicial Retirement System (JRS). She
elaborated that the prior valuation on June 30, 2011 showed
the unfunded liability at slightly over $11 billion; $7
billion for the Public Employees' Retirement System (PERS)
(estimated to be funded at approximately 61.5 percent) and
$4.1 billion for Teachers' Retirement System (TRS) (funded
at approximately 53.6 percent). Actuaries were expected to
provide the Alaska Retirement Management Board with an
updated valuation in the near future.
2:39:28 PM
Co-Chair Stoltze asked about the breakout related to the
$633.8 million designated for the unfunded retirement
liability. Ms. Rehfeld believed approximately half of the
$629.3 million (designated for PERS and TRS) would go to
PERS and about $300 million would go to TRS. She reiterated
that $4.5 million would go to JRS. She would get back to
the committee with the exact figures.
Representative Munoz asked whether the change to the
Defined Contribution (DC) system [from the Defined Benefit
system] positively impacted the growth of the unfunded
liability. Ms. Rehfeld replied that the change to the DC
system had helped close the system. She elaborated that the
system had helped with the determination of the annual
rates. She stated that a pertinent issue was related to
fund earnings and how the valuations were done. She
believed the liability would continue to increase in the
short-term until a greater market recovery took place.
2:41:32 PM
Ms. Rehfeld relayed that the budget included a $60 million
increment for revenue sharing (slide 14). She pointed to a
pie chart showing FY 14 expenditures by category (slide
15). The left portion of the chart totaled $6.6 billion
(approximately 52 percent of the total budget request) and
included formula programs, statewide appropriations, and
the permanent fund dividend. She elaborated that the items
were considered nondiscretionary (items that were not
typically targeted when looking for areas to reduce
spending). The right portion of the chart contained the
agency nonformula portion of the operating budget; the
checkered piece of the pie represented the general fund
portion of the agency nonformula budget in the amount of
$2.3 billion. Other funds (e.g. federal and other) were
included at $2.5 billion, and the capital budget portion
was included at $1.82 billion. She expounded that the right
portion of the chart encompassed areas that could be looked
at in order to reduce or restrain government growth; state
salaries made up a large portion of the nonformula general
fund expenditures. She stressed that it was important to
take a hard look when adding positions for the governor's
specific priorities because the salary area was a place
where costs could be managed over time. She reiterated that
the administration's effort had been to focus on the
constitutionally and statutorily required priorities and
what it believed Alaskans expected from government.
2:44:54 PM
Ms. Rehfeld concluded with a pie chart on slide 16 titled
"FY 2014 Budget - Another Perspective." She addressed how
important it was to spend so much time on the budget; 60
percent of the budget benefited Alaska's communities,
organizations, and individuals with items such as Medicaid,
Permanent Fund Dividends, revenue sharing, school funding,
unfunded liability, capital projects, and other. Purchased
services accounted for 21 percent (shown in dark blue) and
included items such as travel, contractual, supplies, fuel,
professional services, and other. She expounded that some
of the funding was internal to state agencies, but a
significant amount was for services purchased from Alaska's
private sector. Salaries and benefits for state employees
accounted for 19 percent or $2.54 billion. She estimated
that approximately 53 percent of the $2.54 billion would be
paid for with general funds. She noted that departments had
different funding sources for their personal services.
Ms. Rehfeld communicated that the governor had consistently
used guiding principles including, fiscal restraint,
strategic investments, carefully managing cash reserves as
oil production declines, and to focus on core services and
agency missions. She shared that many people had worked on
preparing the budget; she thanked departments, their staff,
and the Legislative Finance Division. She offered OMB's
help going forward.
Co-Chair Austerman asked for the cost difference between
the FY 13 and FY 14 budgets. He noted that at one point the
growth was expected to be less than 1 percent. Ms. Rehfeld
pointed to slide 5 that showed that the total authorized
budget for FY 13 at $7,977.5; a $40 million placeholder had
been included for supplemental budget items. She emphasized
that the administration was taking a hard look at any
supplemental requests and had asked departments to only
bring forward requests for items that they did not have the
ability to fix in the current year. The proposed FY 14
budget totaled $6,493.8. She relayed that the total
increase in the operating budget was approximately 0.8
percent.
Co-Chair Austerman noted that there was a difference
between the total $12.8 billion budget versus the general
fund numbers. He asked about the total budget difference.
Ms. Rehfeld replied that the total budget was $12.8 billion
and proposed budget general funds was $6.49 billion.
Co-Chair Austerman asked about the FY 13 budget amount. Ms.
Rehfeld replied that the total budget was $13.2 billion and
$7,977.5 in general funds.
2:50:57 PM
Co-Chair Austerman was interested in how the FY 13 and FY
14 budgets would differ. Ms. Rehfeld expressed her
understanding and stated that slide 5 showed the general
fund difference.
Representative Costello referred to 33 positions that had
been housed under DOA that were being "parceled out" to
other departments with the expectation that the positions
would be paid for by divisions through interagency receipts
at a total cost of approximately $12 million. She observed
that there only appeared to be $4 million in the governor's
proposed budget. She wondered whether savings in
departments would make up for the $8 million difference or
if there had been discussions on how divisions would
accommodate the interagency receipts.
Ms. Rehfeld replied that there were various rates charged
by DOA (e.g. mail room, information technology, Division of
Finance, Division of Personnel, and other); all of the
costs were charged back to departments. She explained that
DOA had been going through a rigorous review of rates to
determine what the rates were and its own costs in order to
minimize charges to departments. There were a whole set of
rates that needed to be built into the budget on an annual
basis. She furthered that DOA had identified approximately
$12 million in increased costs to departments; departments
had been asked to absorb the increases for many years. The
administration had looked at the issue to determine where
some relief could be provided because at a certain point
agencies would not have the financial resources to support
the increases. The administration believed $4 million would
assist departments in managing budget increases. She
communicated that the human resource position transfers
were a different situation; departments were going to pay
for the positions whether they remained in DOA or moved to
departments. She explained that DOA's Human Resource
Division had found an error in its process for determining
its rates (the costs would have to be picked up in the
rates going forward). The department also found that
dealing with a pool of individuals made handling vacancies
and other items much easier than when the positions were
divided amongst individual departments. She furthered that
positions transferred out were in response to departments
wanting their own human resource manager/workforce
development/recruitment staff onsite.
2:55:33 PM
Ms. Rehfeld continued to explain that when the positions
were moved to departments, the departments were able to
keep the money that would have been paid to DOA through
chargeback; however, some of the costs were going up. She
reiterated that the administration believed the $4 million
figure would help departments to accommodate for some of
the increases.
Representative Edgmon pointed to fund sources on slide 5
and observed that federal funds were at 23 percent. He
asked whether the number had been getting smaller or
staying steady over recent years.
Ms. Rehfeld replied that the federal funds authorization
request had not changed as dramatically as one might
expect. She detailed that the largest change had occurred
when American Recovery and Reinvestment Act (ARRA) funding
had been discontinued. She furthered that the large ticket
items in the budget for federal funds were highway,
aviation, transportation, Medicaid, Department of Labor and
Workforce Development, Department of Education and Early
Development, the University of Alaska, and other. She
stated that there had not been many changes in the amounts
requested currently; the proposed budget did not try to
anticipate what may occur at the federal level because
there were too many unknowns. She noted that an entirely
different conversation would pertain to federal funds that
went directly to programs and not through the state budget.
She believed the administration would know more in upcoming
months about what federal funds would look like in the
future.
2:58:32 PM
Co-Chair Austerman discussed the schedule for the following
day. He shared that the committee would begin meeting as a
Committee of the Whole for the Health and Social Services
Subcommittee.
ADJOURNMENT
2:59:48 PM
The meeting was adjourned at 2:59 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| OMB Budget Overview HFC 01.17.2013 Final.pdf |
HFIN 1/17/2013 1:30:00 PM |
Overview OMB |