Legislature(2015 - 2016)Anch LIO BUILDING
05/27/2015 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB2001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB2001 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
SECOND SPECIAL SESSION
May 27, 2015
10:01 a.m.
[NOTE: Meeting took place in Anchorage, Alaska at the
Legislative Information Office]
10:01:59 AM
CALL TO ORDER
Co-Chair Neuman called the House Finance Committee meeting
to order at 10:01 a.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Pete Ecklund, Staff, Representative Mark Neuman; David
Teal, Director, Legislative Finance Division; Pat Pitney,
Director, Office of Management and Budget, Office of the
Governor.
SUMMARY
HB 2001 APPROP: OPERATING BUDGET/LOANS/FUNDS
CSHB 2001(FIN) was REPORTED out of committee with
a "do pass" recommendation.
HOUSE BILL NO. 2001
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs and capitalizing funds; repealing
appropriations; making appropriations under art. IX,
sec. 17(c), Constitution of the State of Alaska, from
the constitutional budget reserve fund; and providing
for an effective date."
10:02:08 AM
Co-Chair Neuman acknowledged Representative Lora Rienbold's
presence in the audience.
Co-Chair Thompson MOVED to ADOPT the proposed committee
substitute for HB 2001, Work Draft 29-LS0960\P (Wallace,
5/26/15). There being NO OBJECTION, it was so ordered.
Co-Chair Neuman noted that it had been a long process
leading up to the current point. He detailed items that had
been addressed including education and state employees'
contracts (union and non-union). He noted that the changes
included other items that were vetoed from HB 72 by
Governor Bill Walker. He read from a summary of changes
(copy on file):
1. The K-12 foundation formula is funded at the
statutory BSA (Base Student Allocation) of $5,880.
2. All bargaining agreements are accepted and are
fully funded (contingent on the Governor's veto of HB
176, which removes COLAs for non-covered employees).
($17.9 million UGF)
3. COLA increases for non-covered employees are
fully funded (contingent on the Governor's veto of HB
176, which provides COLAs for non-covered employees).
($11.8 million UGF)
4. There is an (executive) branch-wide unallocated
reduction of $29.8 million (with no sideboards).
Co-Chair Neuman noted that the BSA funding reflected what
had passed in HB 278 the prior session. He added that the
administration would be asked to spread the unallocated
reduction of $29.8 million across departments. He asked
staff to address changes in the committee substitute.
10:06:41 AM
AT EASE
10:06:58 AM
RECONVENED
PETE ECKLUND, STAFF, REPRESENTATIVE MARK NEUMAN, relayed
that the previous draft of the bill, when combined with the
portions of HB 72 [operating budget] that had not been
vetoed by Governor Walker, would bring the bill back to the
conference committee version of the operating budget passed
by the legislature. He read from the summary of changes:
If a supermajority (30 votes in the House, 15 votes in
the Senate) access to the Constitutional Budget
Reserve Fund (CBRF) is obtained:
1. The K-12 foundation formula is funded at the
statutory BSA (Base Student Allocation) of $5,880.
($16.5 million UGF more than the CC HB 72)-Sec 9, Page
63; total K-12 foundation formula and pupil
transportation funding = $1.247 billion
2. All bargaining agreements are accepted and are
fully funded (contingent on the Governor's veto of HB
176, which removes COLAs for non-covered employees).
($17.9 million UGF)-Sec 11, Page 64 approval language,
Sec 4-6, pages 29-62 funding; $35.367 all funds
Mr. Ecklund detailed that in order for bargaining units for
state employees to receive the COLA a three-quarter vote
was required. Additionally, for non-covered employees to
receive the COLA, the governor would need to veto HB 176.
The intent of the bill was to either approve COLAs for both
union and non-union or to not approve the COLAs for either.
He continued to read from the summary of changes:
3. COLA increases for non-covered employees are
fully funded (contingent on the Governor's veto of HB
176, which provides COLAs for non-covered employees).
($11.8 million UGF)-Sec 4-6, pages 29-62 is the
funding, $21 million all funds; Sec 18 (b), page 67 is
contingency language
4. There is an (executive) branch-wide unallocated
reduction of $29.8 million (with no sideboards). (-
$29.8 million)-page 25, line 25
10:10:45 AM
Mr. Ecklund continued to address the summary of changes:
If a supermajority (30 votes in the House, 15 votes in
the Senate) access to the Constitutional Budget
Reserve Fund (CBRF) is not obtained:
1. The K-12 foundation formula remains prorated at
98.6 percent.
2. All bargaining agreements are rejected and COLA
increases are not funded.
3. COLA increases for non-covered employees are not
funded and will not be paid unless HB 176 is vetoed.
4. There is an (executive) branch-wide unallocated
reduction of $29.8 million (with no sideboards). (-
$29.8 million)
Co-Chair Neuman asked Mr. Teal to add any comments.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
commented on a technicality on point 2 related to COLA and
non-covered employees. He clarified that HB 176 removed the
pay raises for non-covered employees.
Co-Chair Neuman agreed. He remarked that the majority felt
that if union employees were covered that non-covered
employees should receive the increase as well. He clarified
that it did not mean there had not been a conversation with
the administration about future contracts and increases. He
stated that under the current fiscal circumstances it was
difficult to provide pay increases, but contracts had
already been determined. He added that the issue had been
part of the negotiation process on reaching a budget and
avoiding a stop in state government.
10:13:38 AM
Representative Gara felt leveraged by the budget. He
remarked that if the Minority gave its vote one thing would
happen, but if it did not give its vote something else
would happen. He asked for verification that if the
Majority accessed the CBR without the Democrats' vote, the
education funding would not be provided; however, if the
Majority accessed the CBR with the Democrats' vote, $16
million of the $48 million in cuts would be added back.
Co-Chair Neuman stated that the Representative Gara's
scenario was hypothetical and did not do what the bill
proposed.
Representative Gara stated that the way the draft was
written if the Majority went into the CBR without the
Minority vote, $16 million would not be restored to the
education budget. He asked for verification that the $16
million would only be restored if the Majority accessed the
CBR with the Minority's vote.
Mr. Ecklund replied in the negative. He stated that HB 2001
had nothing to do with the earnings reserve vote. He
clarified that if the three-quarter vote to access the CBR
was obtained, the K-12 formula would be $5,880. He
reiterated that the bill did not included language related
to the earnings reserve account.
Representative Gara discussed that the $32 million in grant
funding promised in HB 278 (the previous session) had been
deleted. He surmised that the only thing that the bill
offered to return was the additional $16 million cut made
in the conference committee report [on HB 72].
Mr. Ecklund replied in the affirmative. He elaborated that
the bill would return to the statutory BSA of $5,880, which
represented a $16.5 million addition to the conference
committee budget; the bill was silent on the other one-time
item the governor had proposed to delete.
10:15:59 AM
Co-Chair Neuman reminded committee members that the one-
time funding outside of the funding formula had not been
accepted in Governor Walker's budget.
Representative Gara communicated that he was allowed to
disagree with the Majority and the governor. He believed
the funding increment [from HB 278] should be honored. He
could not ignore that another bill sitting before him [HB
2002; not introduced] that would enable the Majority to
access the CBR without the Minority vote if it used the
Alaska Permanent Fund. He believed that if the situation
were to take place, the current bill would mean the
Majority would not provide the education funding.
Co-Chair Neuman countered that HB 2002 was a separate bill
that did not use the Permanent Fund. He stated that HB 2002
included a provision that looked at transferring money from
the earnings fund reserve to the corpus of the Permanent
Fund. He clarified that currently the committee was
addressing HB 2001.
Representative Gara stated that he would focus on HB 2001.
He spoke to the labor contract portion of the bill. He
remarked that the bill would grant the 2.5 percent salary
increase for state employees, but did not provide the
funding. He observed that the bill asked the administration
to cut $30 million from the budget in order to find the
funding for the salary increases. He stated that so far $92
million had been cut from the Department of Health and
Social Services budget, $30 million had been cut from the
University of Alaska, $10 million from the Alaska Marine
Highway System (AMSH), and almost all funding for Pre-K had
been eliminated. He wondered where the administration was
going to find an additional $30 million to cut. He believed
that departments would be faced with laying off employees
if the additional cuts could not be located.
Mr. Ecklund stated that there had been discussions with the
administration about the potential cuts. The administration
had provided multiple scenarios where potential cuts could
be made. He deferred the question to the administration.
Representative Gara believed the $30 million unallocated
cut, which may result in laying off employees, was a
terrible deal. He opined that the legislature should fund
the wage increases if it added the 2.5 percent increases in
the bill.
Co-Chair Neuman stated that the bill would fund 2.2 percent
increases for union employees and also funded COLAs for
non-union employees.
10:19:24 AM
Representative Gara asserted that the funding was
contingent on a $30 million [unallocated] cut, which would
mean cutting employees throughout the state.
Mr. Ecklund clarified that Sections 4 through 6 of the bill
(pages 29 through 62) specifically funded the COLA
increases if the three-quarter vote was obtained and if HB
176 was vetoed. He added that there was an unallocated
reduction that was not dollar-for-dollar and was not tied
directly to the funding of the contracts.
Vice-Chair Saddler observed that any budget was a
compromise. He acknowledged that there were unlimited needs
and desires of state government. He remarked that the state
was in the unfortunate situation where it could not fund
everything. He believed there had to be reductions
somewhere.
Representative Munoz provided a brief history of the
education funding component for the public's information.
She relayed that the budget received from the governor had
deleted one-time funding from the prior year. She
elaborated that the House had approved BSA funding of
approximately $47 million, which the Senate later deleted.
The legislature was now in a process of building support
from legislators; the bill represented a compromise between
the parties involved. She believed restoring $47 million to
the BSA was a very positive point in the process. She hoped
to gain the Minority's support to move forward.
Representative Guttenberg stated that usually a compromise
meant sitting down with the other party. From the
Minority's perspective that had not occurred. He
facetiously wondered if the budget should include funds to
fix all of the deficiencies in the Anchorage LIO such as
the microphones. He liked the building, but believed there
were many things remaining to be completed. He believed any
compromise on the budget had been one-sided.
Co-Chair Neuman believed there had been multiple
conversations between the House Minority Leader and the
Speaker of the House on the issues. He stated that the bill
recognized the public's desire for funding of education and
state employee increases. He thought it was inappropriate
to say there had been no discussions.
Representative Gattis stated that there were two sides of
the conversation. Her challenge had been agreeing to put
money back into a budget and signaling that state employees
would receive pay raises. From her perspective the bill did
not represent her ideal budget, but it did represent a
compromise.
10:23:52 AM
Representative Gara asked where state paid oil tax credits
were located in the bill. He asked if the figure was still
$700 million. Mr. Ecklund replied in the affirmative and
relayed that the credits were included in the fund
transfers section of the bill.
Co-Chair Neuman referred to page 63, Section 8. Mr. Ecklund
added that it was page 63, Section 8(b).
Representative Gara asked if committee members were aware
that the $700 million payment to oil companies in tax
credits was $609 million above the statutorily required
amount. He explained that the statute set a cap in years of
low oil production revenue.
Mr. Ecklund replied that the $700 million had come from the
Office of Management and Budget (OMB) and the executive
branch as what was needed.
Vice-Chair Saddler noted that the tax credits helped keep
oil flowing, which went to funding the state. He stated
that in addition to production taxes, the industry paid
royalties of 12 to 16 percent, property taxes on the
pipeline and production facilities, and corporate income
taxes.
Co-Chair Neuman added that he did not intend to go into a
discussion about how to adjust separate pieces of
legislation.
Representative Guttenberg stated that the oil tax credits
had been discussed at length in the Minority caucus. He had
proposed an amendment in the House Finance Committee and on
the House floor to reduce the tax credits from $700 million
to $500 million. He stated that if the amendment had passed
the oil companies would receive the $200 million the
following fiscal year (beginning on July 1, 2015). He
stated that the amendment would not eliminate the need or
dispute that many of the credits were worthwhile. He
detailed that the statutory formula for the current year
was approximately $91 million; anything over the amount was
discretionary and was subject to appropriation. He
emphasized that the amendment would not remove the
obligation of the state to pay the credits. He reasoned
that there were many contracts and programs on the table
that the state should honor. He believed the relevant
question was whether the state could afford to pay an open-
ended appropriation that could go significantly higher than
$700 million. He detailed that the state would be obligated
to pay above the $700 million. For example, the state would
be obligated to pay if the industry came in with an
additional $300 million. He opined that the topic was an
appropriate conversation to have given the state's deficit.
10:30:06 AM
Representative Guttenberg continued to explain that he was
interested in having a conversation about rolling a portion
of the payment forward to the next fiscal year. He stressed
that he was not proposing to not pay the amount owed.
Co-Chair Neuman was not prepared to bring in an analysis by
oil economists. He stated that the bill would accept the
$700 million proposed in the governor's budget.
Representative Gattis stated that rolling bills over to the
coming fiscal year would not change the amount owed by the
state. She believed the consequences should be faced head
on. She reasoned that the budgetary situation would
continue to get tougher. She opined that the legislature
needed to pay the state's bills and move forward.
10:31:34 AM
Co-Chair Neuman relayed that an offer had been suggested to
try to resolve the current stalemate on the budget. He
asked the administration to address the proposed $29
million [unallocated] reduction.
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, relayed that the concept of the
unallocated reduction was proposed out of a desire to honor
the legal contracts for union state employees. She
elaborated that the legislature's proposal to not honor the
legal contracts was not acceptable to the governor. The
administration believed that not honoring the contracts
opened the door to the possibility that other state
contracts may not be honored. She stated that the
unallocated reduction would translate to [the loss of]
people to some degree. The administration and its
departments would have to determine how to deal with an
additional $30 million reduction on top of the $389 million
operating reduction. She relayed that the cut was going to
be difficult. The administration hoped to locate the
savings in inefficiencies, but increased efficiencies meant
fewer employees. She suggested the possibility of finding
savings in procurement. She asked the committee to
understand that the proposed unallocated reduction would be
on top of several other unallocated reductions imposed in
the budget. She reiterated that the cut was better than not
honoring legal contracts.
Representative Wilson asked why the administration believed
it was acceptable to cut the one-time funding for
education, but unacceptable to not fund employee contracts.
She stated that educators reasoned that the one-time funds
had been promised. Ms. Pitney replied that it came down to
a legal contract.
Representative Wilson wanted to understand the difference
between a legal contract and a statute passed by the
legislature for one-time funding. She believed the argument
could go in either direction.
Representative Gara stated he had heard the argument that
the legislature had to fund something because the governor
had proposed it. He asked if the governor proposed not
funding the union contracts. Ms. Pitney replied that the
governor's budget proposed fully funding the union
contracts.
Representative Gara asked for verification that the
governor's budget did not propose locating $30 million in
additional cuts on top of the $389 million cuts in the
budget. Ms. Pitney agreed that the governor's budget did
not propose the $30 million in additional cuts. She
elaborated that the administration was not pleased with the
proposal, but the concept had been presented as a way to
move the process forward.
Representative Gara asked if it was the governor's proposal
to honor the union contracts, honor the statute that
provided for wage increases (1.5 percent for the past two
years and 2.5 percent for the coming fiscal year), and to
not jeopardize jobs with an additional $30 million cut.
Ms. Pitney replied that it was in the governor's interest
to honor the contracts.
Co-Chair Neuman did not appreciate that Representative Gara
put words in other people's mouths. He did not like
comments that the legislature had to do things because the
governor proposed them. He stated that the legislature
could chose to accept, reject, or amend the governor's
proposal.
10:37:10 AM
Representative Gara agreed, but he had heard other comments
[from committee members] that the legislature had to do
things because the governor proposed them. He asked whether
the additional $29.8 million in statewide reductions would
mean employee layoffs.
Ms. Pitney answered that the state budget was 50 percent
personnel related. She communicated that it was very likely
that the cut would impose additional employee layoffs, in
the range of 200 or more (on top of the anticipated 500
plus position losses).
Representative Gara hoped the committee would consider not
adding to the stress of state employees by imposing
additional likely layoffs. He supported funding the
contracts without the additional cut.
Co-Chair Neuman asked if the dramatic reductions to the
current budget had resulted from the drop in the price of
oil that reduced state revenue. Ms. Pitney responded that
the price of oil did require action. The governor had
submitted a budget that reduced state spending at the
agency level by nearly 6 percent. The approach would create
prudent reductions and maintain services. She expounded
that the cuts proposed in the CS were substantially higher
and would damage some services. The administration would do
the best it could to provide as many services as possible.
She relayed that the governor had proposed somewhat less
reductions and the administration believed the cuts had
gone too deep.
Co-Chair Neuman relayed that the legislature had followed a
very public process. He believed the budget before the
committee represented the feelings of many legislators. He
did not believe there was a single legislator who believed
the current proposal was perfect. He remarked that
committee members all had varying opinions about where the
budget needed to go, but it was part of the public process.
10:41:20 AM
Vice-Chair Saddler appreciated that OMB had worked with the
legislature to locate reductions, albeit the proposal did
not reflect the governor's promise of 15 percent
reductions. He observed that neither the governor nor the
legislature wanted to be in the current fiscal situation.
He asked what percentage of the general fund budget an
unallocated reduction of $29 million represented. He
wondered how challenging it would be for the administration
to locate the cuts in a $5 billion budget.
Ms. Pitney replied that it would be very challenging
because the amount could not be spread across the $5
billion budget. She stated that the budget would accept pay
increases for the legislature, courts, and other, on the
back of the executive branch. She explained that the cut
would be spread across a much smaller number of agencies.
Co-Chair Neuman clarified that the bill did not add
increases for legislators.
Vice-Chair Saddler recalled that Ms. Pitney had told him
the governor's top priority was education and that there
should be other reductions in other parts of state
government in order to provide the funding. He wondered if
the current bill accomplished the goal.
Ms. Pitney replied that the draft brought education funding
to the governor's proposed level.
Representative Gattis asked about the current statewide
employee vacancy factor. Ms. Pitney replied that it usually
ranged between 4 and 6 percent depending on the agency.
Representative Gattis questioned whether Ms. Pitney had
said that 500 or 300 employees would have to be laid off.
She was trying to determine where the attrition was and
what the numbers were. She chaired the Department of
Administration (DOA) finance subcommittee and had been told
by the department that it was looking at efficiencies. She
was impressed by the commissioner [Sheldon Fisher] and she
believed he could help find the efficiencies. She did not
believe locating the efficiencies would be as tough as many
people thought. She could see the commissioner looking at
contracts, leases, and other items. She was comfortable
that the agencies would locate the savings.
10:44:44 AM
Co-Chair Neuman noted that Commissioner Sheldon Fisher had
worked with the House Finance Committee to locate further
reductions in the DOA budget and to determine reductions
that could be made over time.
Ms. Pitney commented that the administration was working
hard to find efficiencies and savings. She elaborated that
efficiencies in business resulted in fewer employees. She
restated her earlier testimony that the administration
expected 500 position losses and at least 200 actual
layoffs. She detailed that the difference between the two
figures represented taking advantage of retirements and
attritions. She added that the administration would do the
best it could to take advantage of retirements and
attritions. However, she reiterated that business
efficiencies would result in fewer employees. She informed
the committee that the administration was working to
increase efficiencies; it was currently working on 13
initiatives. The administration knew that it was not the
last year of reductions. She acknowledged that business
needed to be conducted differently; however, "getting there
tomorrow is very difficult." The goal was to make the
changes without major disruptions to important services.
Representative Gara asked whether the administration
believed that future labor contracts would be much more
modest if the budget honored the [union contract]
agreements and did not add the additional $30 million in
cuts.
Ms. Pitney replied in the affirmative. Another reason the
administration wanted to honor the contracts was to
preserve its ability to negotiate in good faith. She
communicated that the administration expected upcoming
contract negotiations, which represented more than half of
the state's employees, to be very modest. She added that
the state needed to maintain competitiveness in order to
attract good employees.
Representative Gara asked for verification that the state
would run out of savings in approximately three years
(under the CS or the governor's budget) if oil prices
remained at the current level.
Ms. Pitney agreed. She elaborated that expenditures
incurred by either budget would mean the state would run
out of money within approximately three years; the state
may have funds to operate for 7 to 10 more days under one
budget versus the other. She estimated that reserves could
potentially run out between November 10, 2017 and December
1, 2017. She relayed that the administration intended to
bring the public into the conversation starting in June.
The goal was to have an open and public dialogue on the
state's finances, how the money was spent, opportunities
for savings, and how to pay for services knowing that it
was not possible to cut to the price of oil.
10:50:00 AM
Representative Gara stated that according to the Department
of Revenue that there was a statutory cap on state paid oil
tax credits. He explained that the statute aimed at
protecting the state's fiscal health in years of low oil
revenue. He asked for Ms. Pitney's analysis of the
statutory cap.
Ms. Pitney answered that the statute provided the Oil Tax
Credit Fund should be funded at 10 percent of the expected
production tax, which was estimated at roughly $91 million
for FY 16. She elaborated that the legislature had the
ability to fund the oil tax at whatever level it chose;
however, the oil tax credits were owed whether or not the
funding was provided. She explained that every tax credit
that a company was eligible for would be paid by the state,
but the timing could be determined. She stressed that
honoring the contracts was an important principle. Funding
included in the budget was based on a tradition of the
anticipated amount of tax credits that would be submitted
($700 million); the figure could end up anywhere from $90
million to $700 million. Regardless of the amount funded in
FY 16, all tax credits eligible in FY 16 would be paid.
Representative Gara provided a scenario where credits would
be limited to $500 million for two years in order to allow
the state to get its fiscal house in order (credits were
paid to companies on a first come, first serve basis). He
stated that $500 million may last for the first nine months
of a fiscal year. He asked for verification that under the
scenario companies who had not been paid would have to wait
another three months to the beginning of the following
fiscal year in order to receive payment.
Ms. Pitney answered in the affirmative.
10:53:07 AM
Co-Chair Neuman added that the state would still owe the
debt. He equated the scenario to paying a credit card bill
with the credit card. He emphasized that the debt would
still have to be paid.
Representative Munoz agreed with the administration that
the state needed to honor its contracts. She appreciated
that the administration was working with the legislature to
achieve the goal. She referred to Ms. Pitney's testimony
that approximately 50 percent of the cost of government was
not employee related. She wondered if OMB had analyzed
potential savings related to lease costs and commodities in
the FY 16 budget.
Ms. Pitney answered that a process had been set in place;
there had been a cross-departmental meeting and every
department was working on savings. She detailed that the
state spent $50 million on contracts and services; a 1
percent savings would be $500,000. She relayed that [a cut
of] $30 million was a big number. Maybe certain contract
pieces could account for $10 million, while the remainder
would come from personnel savings. She elaborated that much
of the money spent by the state was direct grants; for
instance $700 million went directly to oil companies for
tax credits. She noted that a tremendous amount of funding
from the Department of Health and Social Services (DHSS)
were grants to nonprofit providers including shelters; the
areas could not be used to make up the savings. She
explained that because there were areas savings could not
be achieved, it limited the locations the savings could be
applied. The administration was actively looking at how to
address the decreases with the understanding that locating
savings the following year would be harder.
Co-Chair Neuman agreed that locating savings would be more
difficult the following year.
Co-Chair Thompson addressed oil tax credits. He surmised
that if the state deferred $200 million to the next year,
the funds would be spent on something else in the current
year. He believed the state would then owe $400 million
after the two-year period. He was not comfortable with the
idea.
10:57:37 AM
Representative Guttenberg asked whether the oil industry
was aware of the maximum amount the state was statutorily
required to pay. Ms. Pitney believed companies were aware
of the requirement, but it had not been addressed.
Representative Guttenberg referred to the budget for the
following year and discussions on programs that saved the
state money. He specifically referenced actions the state
could take to prevent the need for new prisons by
implementing programs and minimizing jail time. He noted
that other programs had been proven to be cost-effective
and to minimize costs to the state. He wondered if the
administration had a strategy to study programs that could
bring savings to the state. He wondered if, in the
following year, the administration would have savings
estimates on programs in the human services field, K-12, or
senior services.
Ms. Pitney responded that there were several things in
progress. She pointed to the Results First on recidivism
reduction. She agreed that prisons were a huge, fixed cost
to the state; a cost that would continue to grow unless
changes were made to the criminal justice system.
Additionally, the administration had proposed Medicaid
expansion, which would bring savings to other programs. She
noted that the proposal had been rejected [by the
legislature], which was disappointing. She detailed that
expansion could save $4 million on healthcare in the
state's correctional system alone. She added that it would
have provided the ability to reduce recidivism because
former inmates would have access to healthcare. She
summarized that the administration was addressing ways to
bring cost savings to the state on a daily basis.
11:00:46 AM
Vice-Chair Saddler was uncomfortable with hearing about
hypothetical situations. He believed an amendment should be
in front of the committee if it was going to have a debate
on tax credits.
Co-Chair Neuman wanted to allow members to voice their
thoughts on the budget. He believed the process was fair.
Representative Gara relayed his intention to offer an
amendment on the tax credits. He responded to an earlier
question by Co-Chair Thompson related to the proposal to
save $200 million in credits during the current fiscal
year. He stressed that there was no proposal to spend the
$200 million if it was reduced from the tax credit
expenditures in the current fiscal year. He addressed the
fiscal crisis facing the state; under any version of any
budget the state would be out of savings in three years. He
explained that the Minority proposed that when there was a
fiscal crisis money should be saved to get the fiscal house
in order. With that in mind, he proposed limiting oil tax
credits to something like $500 million for a couple of
years. He explained that under the scenario oil companies
would have to wait two to three months for their payment in
the first year, and potentially four or five months in the
second year. He stressed that the burden was not as large
as the one facing kids, seniors, and other. He encouraged
members to approach the issue in a nonpartisan way.
Co-Chair Neuman relayed that the committee would recess to
the call of the chair until 12:30 p.m. He asked members to
have amendments to his office by 12:00 p.m.
11:04:27 AM
RECESSED
2:24:02 PM
RECONVENED
Co-Chair Neuman noted that the committee would begin
hearing amendments; beginning with Amendments 10 and 11.
Representative Guttenberg MOVED to ADOPT Amendment 10 (copy
on file):
DOR Oil and Gas Tax Credit -200,000.0 UGF 1004
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Reps. Guttenberg, Gara, Kawasaki
DEPARTMENT: Revenue
APPROPRIATION: Language Section
ALLOCATION: Fund Capitalization
ADD: $500,000.0 UGF 1004
Add text: "not to exceed $500,000,000"
DELETE: $700,000.0 UGF 1004
Delete text: "estimated to be $700,000,000"
POSITIONS: 0
EXPLANATION: Amend language HB 2001, page 63, lines 9-
14 as follows:
(b) If the balance of the oil and gas tax credit
fund (AS 43.55.028) is insufficient to purchase
transfer tax credit certificates issued under AS
43.55.023 and production tax credit certificates
issued under AS 43.55.025 that are presented for
purchase, the amount by which the tax credit
certificates presented for purchase exceeds the
balance of the fund, not to exceed $500,000,000
[estimated to be $700,000,000] is appropriated
from the general fund to the oil and gas tax
credit fund (AS 43.55.028).
Co-Chair Neuman OBJECTED.
Representative Guttenberg explained that the amendment
related to oil and gas tax credits. He detailed that the
explanation included in the amendment reflected HB 2001
language, but replaced "estimated to be $700,000,000" with
"not to exceed $500,000,000." He noted that backup
documents to the amendment (copy on file) showed that in
the past the legislature had passed legislation that sought
to limit the amount of tax credits in a given year when oil
prices were low. He pointed to page 3 of the backup that
showed the figure for the current year was estimated to be
$91 million. He addressed that the proposed budget would
pay $700 million, which was significantly over what was
statutorily required. He did not have a problem paying the
credits because the state was obligated to pay them, but
the credits were subject to appropriation. He reasoned that
if a credit card had a zero interest rate, it was not
necessary to pay it off immediately. The industry
understood that the credits were in statute and subject to
appropriation; however, the state was in a fiscal crunch.
He discussed that members of the Majority had communicated
that everything was on the table including education,
seniors, kids, and other. He was not suggesting to not pay
the credits and to use the money somewhere else. He
elaborated that under the amendment the amount owed would
be rolled forward until the fiscal situation improved. He
noted that it was only a matter of months that the state
would hold onto the funds. He believed rolling the credits
forward one year was prudent financially. He believed the
oil industry had to be aware that something like what was
proposed in the amendment was coming down the road. He
believed that the burden needed to be spread around. He
reiterated that the state would pay the $200 million in the
future. He emphasized that statutorily the state was only
required to pay $91 million. He opined that it was
important to show the people of Alaska that the legislature
was willing to put everything on the table.
Co-Chair Thompson was opposed to the amendment. He detailed
that most of the tax credits went to small producers who
were making things happen and were coming close to putting
more oil and gas into the system. He elaborated that the
companies depended on the money to provide the work they
were doing. He reasoned that without the money the
producers would be unable to invest more and to continue
with exploration and production. He emphasized that small
companies such as Repsol, Armstrong, and Cook Inlet
Petroleum depended on the cash flow. He explained that some
of the companies had to sell their credits to a company
making a profit. For example, one company may sell a $100
certificate to another company for $85 to $90 for use
against their tax liability. He stated that the delay would
cause the amount a producer could sell the credit for to
decline significantly.
2:31:40 PM
Representative Gara spoke in favor of the amendment. He
discussed that the legislators had all been searching for a
way to come out of the building with a budget everyone
could agree on. He believed legislators should keep
searching. He asked the administration if there was
anything the legislature had missed in dealing with the
budget. He expounded that the administration had pointed
out the tax credits. He discussed that the law had a cap on
oil tax credits; recognizing that there were years the
state could afford to pay large amount and years that it
could not. He pointed to the backup from the Department of
Revenue (DOR) showing that the cap in the current year was
$91 million. He did not believe there was another area in
the budget where the legislature was funding $600 million
more than what it had to. The amendment proposed saving
$200 million in the current fiscal year. He surmised that
it may be necessary to do the same thing the following year
until the state had its fiscal house in order. He detailed
that the credits were paid on a first application basis. He
elaborated that $500 million would last through nine or ten
months of the coming fiscal year; any company that did not
get paid within that time period would be paid at the
beginning of the next fiscal year. He did not believe the
burden for oil companies was large. He remarked that others
(seniors and other) were carrying cuts that were too heavy
to handle. He did not believe asking a small or large oil
company to wait a couple of months for a payment was
unreasonable.
Representative Gara discussed that the amendment would help
to create some breathing room in the budget. He remarked
that Democrats were not asking for anything that equaled a
$200 million cut. He believed the amendment would enable
the legislature to add some smaller items back into the
budget and would allow it to pass a budget without touching
the Permanent Fund earnings. The purpose of the amendment
was to try to find a way to bridge the gap between the two
caucuses and to acknowledge that the state did not have the
money. He did not believe it was prudent to pay $600
million more than the statute specified. He reiterated that
companies would only have to wait two to six months for
their payments. He stated that under any circumstances, if
the state had no fiscal plan by the third year, the state
would be in a world of hurt. Additionally, oil tax credits
would be much lower three years from the present day. He
remarked that the state would be able to afford the
payments in three years. He added that the state had better
be able to afford the funds if it was going to have an
economy. He reiterated the purpose of the amendment.
2:37:27 PM
Representative Munoz understood that the credits were
attributed to Cook Inlet and Prudhoe Bay and that education
tax credits were also included. She stated that the
Alaska's Clear and Equitable Share (ACES) credits
attributed to the former tax regime were under an
accelerated one-year payoff in order to pay off the older
obligations. She wondered if a company could use tax
credits as a corporate income tax deduction even if it
could not access the credit due to insufficient state
funds. She reasoned that under the circumstance the state
would pay the credit, whether it was direct or an exemption
on a company's corporate income tax.
Co-Chair Neuman explained that the proposal had originally
been transmitted to the legislature by the administration.
He detailed that the proposal had been related to small
producer credits. He believed many of the tax credits were
sold by smaller companies to larger companies that did pay
corporate state taxes (the three larger oil companies). He
elaborated that the cashed in certificates were submitted
to DOR for payment.
Representative Munoz asked for verification that many of
the credits were directed at companies without a tax
liability.
Representative Gara replied that all of the credits under
discussion had no deductibility.
Representative Edgmon thought the credits were levied
against the production tax. Representative Gara replied
that the credits under discussion were only state
purchasable credits; the ones that companies did not
receive a profit to deduct from.
Representative Edgmon referred Representative Munoz's
comment on the inclusion of education tax credits. He
believed the education tax credits were applicable to the
corporate income tax. He asked for clarification.
Co-Chair Neuman asked Ms. Pitney to explain the specific
tax credits that the administration had originally proposed
for payment.
2:41:11 PM
Ms. Pitney explained that there were two types of tax
credits. One credit showed up as expenditure or payout to a
company that had no production tax liability. There were
also tax credits for companies that had a production tax
liability; the credit offset the amount of revenue received
by the state. The credits under discussion were for
situations when credits exceeded the amount of tax revenue
on production that a company paid. She elaborated that
there was actually a check out the door versus an offset to
the amount of revenue paid by a company.
Co-Chair Neuman surmised that it was money owed by the
state to people who turned in their [credit] certificates.
Ms. Pitney agreed.
Representative Edgmon asked for verification that the
credits under discussion did not involve corporate income
tax. Ms. Pitney replied that the credits were separate from
corporate income tax. She explained that there were
separate taxes including corporate, production, and royalty
taxes.
Representative Edgmon referred to testimony applying
education tax credits to the credits under discussion,
which did not comport with his understanding of the way the
credits worked. Ms. Pitney addressed the education tax
credit and explained that if a company made a donation to
an eligible institution it would reduce the company's tax
liability. Some companies had a production tax credit, but
if they paid production taxes it showed up as a reduction
to those taxes (which was more similar to the education tax
credit process).
2:43:37 PM
Representative Guttenberg noted that the amendment changed
language in addition to changing the number. The bill read
that the tax credit certificates were "estimated to be
$700,000,000." He pointed to page 3 of the backup materials
that showed credits had exceeded the estimate by $270
million [in FY 11], had been below the estimate for two
years [FY 12 and FY 13], and had exceeded the estimate
again by $193 million and $175 million [in FY 14 and FY 15
respectively]. He stressed that the legislation's existing
language represented an open-ended check. He reasoned that
the amount could end up being between $800 million and $1
billion. The amendment would cap the amount at $500
million. He asked Ms. Pitney if his assessment was
accurate.
Ms. Pitney replied in the affirmative.
Representative Kawasaki asked what had transpired in years
where estimates were larger than the actuals. He wondered
what happened to the cash in those years. Ms. Pitney
replied that she believed the items had been funded by
supplemental appropriations later in the year.
Representative Kawasaki clarified that he was interested in
the years where the credit estimate was higher than the
actual amount spent. He noted that there had been cash
remaining on the table in some years. Ms. Pitney replied
that in the past the statutory language had read "estimated
to be" as well. She explained that in years when claims
exceeded the estimate a supplemental amount was added to
cover the full amount.
Representative Gara he wondered if the administration could
live with action taken by the amendment if it passed. Ms.
Pitney replied that the administration would respect the
legislature's decision.
Representative Munoz asked about a timeframe for the credit
eligibility process that would be due in FY 16. She
wondered if the applications came at the beginning of the
year or if there was an ongoing estimate available for the
fiscal year. Ms. Pitney replied there was currently at
least $400 million to be paid on July 1, 2015.
Representative Kawasaki supported the amendment. He
recalled that when he had become a legislator there had
been no refundable tax credits. There had been a handful of
credits for the North Slope under the prior qualified
capital expenditure and zero for Cook Inlet. There had been
many policy changes and the state was currently spending
$625 million in FY 15 and $700 million in FY 16 (for Cook
Inlet and North Slope). He recognized the regions were
valuable for oil production; however, $700 million in the
budget's growth was due to oil and gas tax credits. He
reasoned that there had not been an increase in production.
Additionally, there had been job losses on the North Slope
over the past year. He stated that it was hard to justify
cutting the school district budgets without making a
reduction to tax credits. According to DOR, with the
inclusion of credits used against tax liability, the
increase in statewide production tax credits would increase
from just under $1 billion from the prior year to $1.8
billion in a few years. He did not believe the state could
afford the costs in a fiscally prudent time.
2:49:33 PM
Co-Chair Neuman MAINTAINED his OBJECTION. He stated that
the credits were due by the state. He detailed that many of
recipients were small companies who used the liquid capital
to reinvest in the state. He remarked that people had been
losing jobs in Prudhoe Bay due to the low price of oil; it
had significantly impacted the state and the amount of oil
flowing in the pipeline.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Munoz, Edgmon, Gara
OPPOSED: Pruitt, Saddler, Wilson, Gattis, Thompson, Neuman
The MOTION to ADOPT Amendment 10 FAILED (5/6).
2:51:08 PM
Co-Chair Neuman recognized the presence of Representatives
Kurt Olson, Neil Foster, Gabrielle LeDoux, Bob Herron, Andy
Josephson, and Louise Stutes.
Representative Gara MOVED to ADOPT Amendment 11 (copy on
file):
DOR Oil and Gas Tax Credit; DEED K-12 Aid to School
Districts: -167,756.3 UGF 1004
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Reps. Guttenberg, Gara, Kawasaki
DEPARTMENT: Revenue
APPROPRIATION: Language Section
ALLOCATION: Fund Capitalization
ADD: $500,000.0 UGF 1004
Add text: "not to exceed $500,000,000"
DELETE: $700,000.0 UGF 1004
Delete text: "estimated to be $700,000,000"
POSITIONS: 0
EXPLANATION: Amend language HB 2001, page 63, lines 9-
14 as follows:
(b) If the balance of the oil and gas tax credit
fund (AS 43.55.028) is insufficient to purchase
transfer tax credit certificates issued under AS
43.55.023 and production tax credit certificates
issued under AS 43.55.025 that are presented for
purchase, the amount by which the tax credit
certificates presented for purchase exceeds the
balance of the fund, not to exceed $500,000,000
[estimated to be $700,000,000] is appropriated
from the general fund to the oil and gas tax
credit fund (AS 43.55.028).
DEPARTMENT: Education and Early Development
APPROPRIATION: K-12 Aid to School Districts
ALLOCATION: Additional Foundation Funding
ADD: $32,243.7 UGF (1004)
ADD: Language: "Sec 42(b) of SB 26 (2015) is
repealed."
EXPLANATION: This section of the amendment restores
the one-time funding from HB278, passed in 2014, that
the schools were counting on when they made their
budgets.
Co-Chair Neuman OBJECTED.
Representative Gara explained that the amendment would fund
$32 million that had been promised the previous session in
HB 278. He detailed that a portion of the $200 million
savings that would come from Amendment 10 (savings in oil
and gas tax credits) would go towards the $32 million. The
amendment presumed that $16 million that had been cut from
the conference committee version of the budget would be
reinstated; conceptually the amendment would be $48 million
if the $16 million was not restored. He elaborated that HB
278 included annual grant funding that was reduced by $10
million to $11 million each year; additionally, the BSA
increased annually by $12 million. He explained that years
two and three were essentially flat-funded. The bill had
designated $32 million in grant funding in year two, which
was $11 million less than grant funding the previous year.
There had been a $50 BSA increase to account for the $11
million reduction, which was $1 million more than the
reduction in the grant increase. He communicated the
concern that flat funding in years two and three would
cause schools to fall behind inflation, which could result
in layoffs, curriculum cuts, or other. He pointed to school
district budget shortfalls in Mat-Su, Juneau, and other
locations. He stated that the removal of $32 million meant
schools would receive $31 million less than they received
the previous year, which would mean schools would fall
significantly behind inflation. He remarked that at the
current price of oil the state would run out of savings in
three years' time under either budget. He believed the
state should give children the chance at academic
opportunity they deserved. He stressed that the increment
would not be an increase from the prior year. He did not
believe the state could keep cutting public education
without harming the schools. He credited the finance co-
chairs with locating hundreds of millions of dollars in
cuts in the overall budget. He emphasized that leaving
schools flat funded was a modest proposal. He believed the
proposal represented a pretty meager compromise. He opined
that it was odd to give oil companies more money than
statutorily required ($600 million more) and to give public
schools less money than they were statutorily required ($32
million less).
2:57:55 PM
Co-Chair Thompson spoke in opposition to the amendment. He
stated that the amendment would short-fund tax credits to
small producers who were doing work to provide the state
revenue, which meant the companies would not have funds to
reinvest. He asserted that the amendment would spend part
of the money to fund schools, but the state would still owe
the $200 million the following year. He disputed that
education had been flat funded. He referred to statistics
from 2004 to 2014 indicating that education funding had
increased by 75 percent, whereas inflation had increased 36
percent. He relayed that his children had and were
attending public school; he wanted them to have the best
education possible. He discussed that the budget did
include money for the BSA, which would total $47.5 million.
He believed the budget was fiscally responsible.
Representative Gattis addressed that she had helped carry
HB 278 the previous session. She had supporting funding
outside of the BSA because the state could afford it at the
time. She stressed that the loss of 60 percent in oil
revenues meant the state was in fiscal circumstances than
the previous year. She agreed with the governor's removal
of the $32 million from his proposed budget. She opposed
the amendment.
Representative Kawasaki spoke in support of the amendment.
He understood that the state was in a deficit. He stated
"that it's not that we don't have the money, it's that we
have the wrong priorities." The amendment addressed that
the oil and gas tax credit fund was funded at 100 percent,
while the school districts were treated differently. He
discussed that his school district recognized that the year
would be challenging. He relayed that his district budgeted
for multiple years; it had only accepted federal American
Recovery and Reinvestment Act (ARRA) funding that it could
use in a prudent manner. He furthered that the district had
made 11 cuts in 2010, 5 cuts in 2011, 14 cuts in 2012, 25
cuts in 2013, 65 cuts in 2014, and was set to cut over 100
staff and teachers in the current year. He believed
custodial staff had been cut completely in some of the
district schools. He stated that the amendment was a modest
effort to reprioritize things he and his colleagues
believed in.
3:03:11 PM
Representative Guttenberg relayed that in response to the
recent budget, the Fairbanks North Star Borough Assembly
had increased the mill rate increase in the borough (the
increase was approximately $100 per $100,000). He pointed
out that there were and would be more consequences for the
legislature's actions statewide.
Representative Gara clarified that oil companies would be
able to reinvest; they would just have to wait two or three
months for the payment. He addressed that between 2004 and
2010 there had been annual BSA increases, but education had
been flat funded in the past four years, which had been a
struggle for schools. He agreed that there had been
substantial funding, but much of it had gone towards the
large pension debt and school debt reimbursement. He
relayed that classroom funding was starting to lag behind
inflation almost on an annual basis.
Representative Edgmon observed that the issue was
difficult. He explained why he could not support the
amendment. First, the committee had voted against a prior
amendment that pertained to part of the current amendment.
He communicated his desire to learn more about the oil and
gas tax credit issue; however, he believed the committee
had spoken on the issue. He relayed that he would like to
see all of the funding possible for education; he
represented a rural district where public education was
paramount. He highlighted that the current bill increased
BSA funding to $47.5 million. He reasoned that compromise
was in the eye of the beholder; he believed the current
bill represented a compromise.
3:08:44 PM
Co-Chair Neuman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Kawasaki, Gara, Guttenberg
OPPOSED: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Neuman, Thompson
The MOTION to ADOPT Amendment 11 FAILED (3/8).
3:09:41 PM
Co-Chair Thompson MOVED to ADOPT Amendment 1 (copy on
file):
OFFERED IN THE HOUSE BY REPRESENTATIVE NEUMAN
TO: CSHB 2001(FIN), Draft Version "P"
Page 63, following line 28:
Insert a new bill section to read:
"* Sec. 10. PUBLIC EDUCATION FUND. (a) If, and only
if, the appropriation made in sec. 13(b) of this Act
fails to pass upon an affirmative vote of three-
fourths of the members of each house of the Twenty-
Ninth Alaska State Legislature in the Second Special
Session,
(1) the sum of $157,000,000 is appropriated from
the in-state natural gas pipeline fund (AS
31.25.100) to the public education fund (AS
14.17.300);
(2) the amount necessary, after the
appropriations made in (1) of this subsection and
in sec. 31, ch. 23, SLA 2015, when added to the
balance of the public education fund (AS
14.17.300) on June 30, 2015, to fund the total
amount for the fiscal year ending June 30, 2016,
of state aid calculated under the public school
funding formula under AS 14.17.410(b), multiplied
by 0.9859, estimated to be $950,555,700, is
appropriated from the general fund to the public
education fund (AS 14.17.300).
(b) If the amount of the appropriation made in (a)(1)
of this section is less than $157,000,000, the
appropriation made in (a)(2) of this section shall be
reduced on a dollar-for-dollar basis, equal to the
amount of the reduction in (a)(1) of this section."
Renumber the following bill sections accordingly.
Page 66, line 5:
Delete "sec. 12(a)"
Insert "sec. 13(a)"
Page 66, line II:
Delete "sees. 8 - 10"
Insert "sees. 8 - 11"
Page 66, line 13:
Delete "Sections 26(d), 26(e), and 28"
Insert "Section 28"
Page 66, line 15:
Delete "Sections 33 and 36"
Insert "Sections 26(d), 26(e), 33, and 36"
Page 66, line 21:
Delete "sec. 12(a)"
Insert "sec. 13(a)"
Page 66, line 23:
Delete "sec. 13"
Insert "sec. 14"
Page 66, line 24:
Delete "sec. 13"
Insert "sec. 14"
Page 66, line 25:
Delete "sees. 12(a) and (b)"
Insert "sees. 13(a) and (b)"
Page 66, line 27:
Delete "sees. 12(a) and 15"
Insert "sees. 13(a) and 16"
Page 66, line 28:
Delete "sees. 12(a) and 15"
Insert "sees. 13(a) and 16"
Page 66, line 29:
Delete "sec. 16" in both places
Insert "sec. 17" in both places
Page 67, line 1:
Delete "sec. 13"
Insert "sec. 14"
Page 67, line 2:
Delete "sec. 12(a)"
Insert "sec. 13(a)"
Page 67, line 5:
Delete "11"
Insert "12"
Page 67, line 7:
Delete "11, and 15"
Insert "12, and 16"
Page 67, line 8:
Delete "sec. 12(b)"
Insert "sec. 13(b)"
Page 67, following line 10:
Insert a new subsection to read:
"(d) The appropriations made in sec. 10 of this
Act are contingent on the failure of the
appropriation made in sec. 13(b) of this Act to
pass upon an affirmative vote of three-fourths of
the members of each house of the Twenty-Ninth
Alaska State Legislature in the Second Special
Session."
Page 67, line 11:
Delete "Sections 12(a), 13, 17, and 18(a)"
Insert "Sections 13(a), 14, 18, and 19(a)"
Page 67, line 12:
Delete "Sections 15 and 16"
Insert "Sections 16 and 17"
Page 67, line 13:
Delete "sees. 19 and 20"
Insert "sees. 20 and 21"
Co-Chair Neuman OBJECTED for discussion.
Mr. Ecklund noted that the bill had been drafted with many
moving parts. Currently the bill reflected that if a three-
quarter vote was obtained, K-12 foundation formula would be
funded at $5,880 (the statutory BSA adopted the prior year
under HB 278); however, if a three-quarter vote was not
obtained, the only funding left for education would be what
was enacted in HB 72 (roughly 28 percent of education
funding). Under Amendment 1, if the three-quarter vote was
obtained, education would be funded at $5,880; however, if
the vote was not obtained, education would be funded at the
conference committee level (a proration of 98.59 percent).
The remainder of the amendment included conforming and
technical components.
Co-Chair Neuman noted that the amendment would fix a
technical error to ensure that funding was up to the
correct level.
Representative Gattis asked what the 98.5 percent figure
equaled. Mr. Ecklund replied with 100 percent of the BSA at
$5,880 the foundation program and pupil transportation
would equal $1.247 billion; whereas, the proration would be
$16.5 million less.
Representative Guttenberg pointed to line 6 of the
amendment that would appropriate $157 million from the in-
state natural gas pipeline fund to the public education
fund. He wondered if the amendment would drain the in-state
natural gas pipeline fund. Mr. Ecklund replied that the
$157 million appropriation would not empty the fund.
Mr. Teal noted that $38 million would remain.
Mr. Ecklund elaborated that roughly $38 million would
remain (after appropriations for FY 16) for the Alaska
Gasline Development Corporation (AGDC) and the Department
of Natural Resources.
Representative Guttenberg asked how the amendment would
impact proceeding on the in-state natural gas pipeline
project. He wondered how much the reduction would hinder
the project.
Co-Chair Neuman replied that he had learned from
discussions with AGDC that the $157 million was available
to be used towards funding for the budget. In an effort to
reduce funds appropriated from the General Fund, the money
would be used to assist with funding the total budget.
3:15:09 PM
Representative Guttenberg was trying to understand how the
withdrawal of the funds would impact the gasline project.
Mr. Ecklund answered that funding needed for the current
gasline plan would be funded in the FY 16 budget. A
withdrawal of $157 million from the gas pipeline fund would
leave about $28 million that could be used by AGDC for some
purpose; if the agency needed additional funds it would
have to make the request to the legislature.
Co-Chair Neuman recognized Representative Paul Seaton's
presence in the audience.
Representative Gara referred to page 1, line 6 of the
amendment. He stated that the Public Education Fund had
previously contained over $1.2 billion to forward fund the
BSA; however, the funds had been drained earlier in the
year under a different section of the bill. He did not
believe a $157 million deposit into the fund would make the
BSA whole (the fund could only be prorated to fund the
BSA).
Mr. Teal replied that the Public Education Fund had been
reduced by HB 72; the reduction should leave approximately
$123 million in the fund at the end of FY 15. He explained
that the $123 million plus the $157 million (appropriated
by the amendment) plus $950 million (or the amount required
to prorate to 98.59 percent), would fund education at 98.6
percent and leave the fund with a zero balance.
Representative Gara asked for verification that all three
amounts were for FY 16. Mr. Teal replied in the
affirmative.
Co-Chair Neuman WITHDREW his OBJECTION.
Representative Guttenberg OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Thompson, Neuman
OPPOSED: Gara, Guttenberg, Kawasaki
The MOTION to ADOPT Amendment 1 PASSED (8/3). There being
NO further OBJECTION, it was so ordered.
3:19:32 PM
Representative Gara MOVED to ADOPT Amendment 2 (copy on
file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Gara, Guttenberg, Kawasaki
DELETE: $4,200.0 UGF (1004)
ADD: $556.3 UGF (1004) (recurring)
$3,400 UGF (1004) (one-time build-out)
TOTAL: -$240.0 UGF (1004) (this year)
-$3,640.0 UGF (1004) (future years)
EXPLANATION: The current rent on the Anchorage LIO is
$4.2 million per year. The Atwood building is capable
of hosting the LIO at a fraction of this cost. For a
one-time moving cost of$3.4 million, the annual rent
on the LIO could be reduced by roughly 87 percent.
Co-Chair Neuman OBJECTED.
Representative Gara explained that the legislature had
received an offer to move to the Atwood Building in
Anchorage, which had a much lower rent than its current
location [Anchorage Legislative Information Office Building
(LIO)]. He detailed that the lease in LIO building was
subject to legislative appropriation. He believed the
legislature should save the money and move to the Atwood
Building; the rent would be roughly $550,000 annually,
whereas rent for the LIO was roughly $4.2 million. He
believed there were legislators on both sides of the aisle
who believed the LIO [renovation] had not been the best
investment for the state. The amendment included an
estimated one-time moving cost of roughly $3.4 million. The
move would save approximately $240,000 in the first year
and $3.6 million each year thereafter. He hoped the
committee would consider the cost savings.
Co-Chair Neuman stated that Legislative Council had looked
at the issue fairly extensively. He remarked that there
were currently several law suits. He understood that
Legislative Council had considered the idea, but the lease
for the LIO had been extended for the current year due to
law suits and other unknowns.
Representative Kawasaki spoke in support of the amendment.
He stated that after renovations the LIO building lease had
increased from $700,000 to $4.2 million. He believed it was
problematic to hear talk that the state could not afford
things, while simultaneously the legislature was renting
the most expensive and lavish office building in downtown
Anchorage. He spoke to the building's lack of parking for
the public. He stated that the amendment would give
direction to Legislative Council to transition the
legislature to the Atwood Building. He relayed that the
amendment was not confining, but offered the option if the
legislature so chose. He reasoned that it seemed
unjustifiable to remain in the LIO when the price tag on
the Atwood Building could not be beat. He did not believe
the building was worth seven times the cost of another
building.
Co-Chair Neuman asked members to keep personal comments to
themselves.
Representative Guttenberg supported the amendment. He
relayed that the amendment would provide a clear economic
savings. He believed the committee should communicate the
importance of the issue to Legislative Council.
3:25:50 PM
A roll call vote was taken on the motion to adopt Amendment
2.
IN FAVOR: Gara, Guttenberg, Kawasaki, Munoz
OPPOSED: Pruitt, Saddler, Wilson, Edgmon, Gattis, Neuman,
Thompson
The MOTION to ADOPT Amendment 2 FAILED (4/7).
3:26:50 PM
Representative Kawasaki MOVED to ADOPT Amendment 3 (copy on
file):
OFFERED IN: Finance Committee
TO: HB 2001
OFFERED BY: Representatives Kawasaki, Guttenberg and
Gara
DEPARTMENT: Health and Social Services
APPROPRIATION: Public Assistance
ALLOCATION: Senior Benefits Payment Program
ADD: $5,091.6 UGF (1004)
EXPLANATION: The budget currently cuts benefits to
seniors earning as little as $11,040 per year. The
Senior Benefits Payment Program provides vital
supplemental funding to low-income seniors that allow
them to stay in their homes, and afford medicine and
basic life necessities. The current budget cuts Senior
Benefit payments by 20 percent to seniors making
between $11,040 and $25,760 per year.
Co-Chair Neuman OBJECTED.
Representative Kawasaki explained that Amendment 3 would
restore a cut by the governor to the Senior Benefits
Payment Program. He spoke to growth in the senior
population. Currently the budget cut benefits to eligible
individuals making less than $11,000 per year. He detailed
that recipients generally were living at home. He furthered
that recipients helped build the state and deserved
respect. He noted that in the past he had supported
restoring the Senior Longevity Program, which had provided
benefit payments of $125 to $250 per month based on a
person's individual income. He had heard members of the
committee say that there were individuals who were probably
taking advantage of the system. He severely doubted that
was the case. He relayed that people in his Fairbanks
district were eating Saltine crackers and were volunteering
in the community in their old age. He believed the
legislature needed to respect the senior benefits payment
as was implemented two years earlier. He reiterated that
the state's senior population was growing; benefits would
be smaller due to the larger recipient pool. He did not
believe a cut to the program made sense when other items
had been added to the budget.
Vice-Chair Saddler opposed the amendment. He stated that
the governor proposed to reduce the item by 20 percent to
include two of three benefit levels. He elaborated that
seniors earning 75 percent of the federal poverty level
were protected from cuts and would still receive $250 per
month. He explained that individuals who earned 75 to 100
percent of the federal poverty level had received a 20
percent cut; they would receive $100 per month instead of
$125. Others would receive $140 instead of $175. He
believed the current budget showed compassion and reflected
the reality of the state's reduced income. He added that
the program was income-based as opposed to asset-based. He
reasoned that seniors utilizing the program could have
homes, stock investment portfolios, and savings that were
not factored into an individual's eligibility. He believed
cost containment was a good idea in light of the increasing
senior population. He opined that the reduction was
responsible.
Representative Gara supported the amendment. He had never
heard of a senior who had cheated to get into the program.
The amendment aimed to protect people who were 25 percent
below the poverty level. He relayed that the budget
currently cut benefits to seniors making $11,040 per year.
He stressed that the budget cut benefits to a population
with increasing needs for healthcare. He expounded that the
individuals often could not afford medicine, could only buy
limited groceries, and had difficulty affording clothing
and rent. He stated that a nursing home cost somewhere
around $30,000 per year; the individuals under discussion
could not afford the cost. He had a difficult time cutting
the budget on the backs of seniors. He remarked that the
Longevity Bonus Program had already been eliminated in the
past; the Senior Benefits Payment Program had been
implemented as a replacement. He believed it was possible
to make smart cuts, but did not believe the senior benefit
program should be one of them. He reasoned that the
reduction was a significant burden for someone making 25
percent less than poverty level.
3:34:44 PM
Co-Chair Neuman noted that there had been many very
difficult cuts to make. He spoke to the need to maintain
essential services such as corrections, safety, and other.
He stated that the bottom line was that the price of oil
had fallen dramatically. He MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Gara, Munoz, Gara
OPPOSED: Gattis, Pruitt, Saddler, Wilson, Edgmon, Neuman,
Thompson
The MOTION to ADOPT Amendment 3 FAILED (4/7).
3:36:33 PM
Representative Gara MOVED to ADOPT Amendment 4 (copy on
file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Gara, Guttenberg, Kawasaki
DEPARTMENT: Education and Early Development
APPROPRIATION: Teaching and Learning Support
ALLOCATION: Early Learning Coordination
ADD: $750.0 UGF (1004)
EXPLANATION: Parents as Teachers was passed as a bill
by the Legislature because it is the most cost-
effective way to provide Pre-K to young children, and
is proven to save states money by graduating more
students, reducing social service and criminal costs,
and increasing a student's future earning potential
and educational attainment.
DEPARTMENT: Education and Early Development
APPROPRIATION: Teaching and Learning Support
ALLOCATION: Pre-Kindergarten Grants
ADD: $2,000.0 UGF (1004)
EXPLANATION: Retains FY 15 Pre-K Grants funding level.
Alaska is one of the few states without a statewide
Pre-K. In 2007 the state started a pilot $2 million
Pre-K program, intending to reach more children as its
success was proven. That has occurred.
Co-Chair Neuman OBJECTED for discussion.
Representative Kawasaki discussed that the amendment had
been offered in the past. He spoke to the success of early
education; children who receive a high-quality early
education system graduated in higher numbers (44 percent
higher), had reduced teen pregnancy rates (50 percent
lower), were less likely to serve jail time, and were 33
percent less likely to commit a violent crime. He relayed
that a pilot Pre-K program had been introduced a few years
earlier, which made Alaska the 42nd state to implement a
Pre-K pilot program. He communicated that the program had
been successful, especially for children living in rural
areas. He spoke to increased performance outcomes; 18
percent moved from the bottom two quartiles to the top two.
He felt that with the budget issue expansion of the program
was unlikely, but he believed the mission of early
education should be continued. Secondly, the amendment
restored funding for the Parents as Teachers program. He
relayed that the program was one of the highlights under
the former Governor Sarah Palin's administration. He
communicated that Missouri had pioneered the program in
1981 with the goal of getting parents more involved in
children's lives.
3:39:29 PM
Representative Gattis spoke in opposition to the amendment.
She remarked that the amendments had been offered
previously in the House Finance Committee and on the House
floor. She relayed that the programs were included in the
finance subcommittee she chaired (Department of Education
and Early Development). She stated that during a time of
cuts it was necessary to look at extra programs. She
believed the Parents as Teachers program was positive, but
that the state could not afford it. The subcommittee had
determined whether programs were constitutionally mandated.
She stated that the Pre-K programs were pilot programs. She
disputed the fact that data showing the program's success
was available. She added that the federally mandated Head
Start program was still in place. She remarked that there
were many great programs, but the state did not have the
money.
Co-Chair Neuman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Saddler, Wilson, Edgmon, Gattis, Munoz, Thompson,
Neuman
Representative Pruitt was absent from the vote.
The MOTION to ADOPT Amendment 4 FAILED (3/7).
3:42:38 PM
Representative Gara MOVED to ADOPT Amendment 5:
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Gara, Guttenberg, Kawasaki
DEPARTMENT: Health and Social Services
APPROPRIATION: Office of Children's Services
ALLOCATION: Front Line Social Workers
ADD: $2,726.7 UGF (1004); $681.7 Fed (1002)
POSITIONS: ADD: 23 PFT positions
EXPLANATION: The Office of Children's Services was
able to discover a source of previously unused Federal
TANF funds for Child Advocacy Centers. The Office
suggested using the freed-up GF money to address the
crisis-level short staffing in front line caseworkers,
for no net state budget increase. The Office of
Children's Services suffers from a severe shortage of
Front Line Caseworkers, and ILP staff who help youth
succeed as adults with job training and education. The
caseload in Anchorage and the Matsu is 70 percent
higher than the national standard. A caseworker was
recently assigned 79 foster youth in 45 different
rural Alaskan villages. The director of Children's
Services has testified that under the current level of
funding, "children will, in fact, die." Adding these
positions will get us part of the way to the
recommendations in the 2012 study that recommended 45
new positions at OCS. Since that 2012 study, we have
seen an increase of 600 foster youth, meaning that our
front line social workers are now even further behind.
The additional federal receipt authority is due to a
20% federal match on the $2,726.7 devoted to front
line social workers.
DEPARTMENT: Health and Social Services
APPROPRIATION: Office of Children's Services
ALLOCATION: Family Preservation
ADD: $211.3 UGF (1004)
EXPLANATION: This adds $211.3 GF to Employment
Training Vouchers. The funds are going to assist youth
aging out of foster care in attending job training
programs, continued education and postsecondary
education, so that they can successfully transition
into being independent adults who do not need to rely
on expensive state services.
Co-Chair Neuman OBJECTED.
Representative Gara explained that Amendment 5 was cost
neutral to the previous year. The amendment would use $2.9
million of General Fund money that had been freed up in the
Department of Health and Social Services (DHSS). He
detailed that the department had qualified for previously
unused federal Temporary Assistance for Needy Families
(TANF) funds for child advocacy centers. The centers
provided help to children who were victims of sexual abuse.
He relayed that DHSS had brought the savings to his
attention. He believed the funds offered the one chance at
no additional cost from the prior year to make substantial
progress towards protecting children without families or
who were victims of sexual abuse. He shared that a study
had been published in 2012; at the time there had been 780
foster youth. The study had determined the state was
roughly 45 to 50 staff short to do the work needed to get
children into permanent loving homes, and to conduct
investigations to see if a child was in an abusive or
dangerous situation. He relayed that since the time of the
study the problem had only worsened; 10 support staff had
been added the previous year, but the number of foster
youth had increased to 2,500.
Representative Gara highlighted that a caseworker in
Fairbanks had 30 cases; the recommended national standard
was 12 families. He explained that the main goal in the
foster care system was to reunite a child with their family
if appropriate or into a permanent home. However, due to
such large caseloads, social workers were not able to work
through cases to find children permanent families. He
stressed that subsequently, children who were already
damaged from being separated from their family were further
damaged every time they were moved to another unfamiliar
home. He emphasized that many of the children lived in as
many as 20 different homes, which was no way to raise a
child. He asked members to consider whether they would want
their own child to live in 10 or 20 homes. He stated that
"...these are our children. We are the legal guardians of
children once we take them out of their homes. When we take
them out of their homes, it's our job to make sure they
earn the chance at a fair shake in life to succeed."
Representative Gara stressed that Amendment 5 offered the
one chance at no additional General Fund cost over the
prior year to make a good inroads towards fixing a system
that was badly understaffed. He pointed out that the head
of the Office of Children's Services (OCS) had recently
received a national award in recognition for her work. He
discussed that the office had been 50 staff short, but with
the rise in foster youth, the number was higher. He
detailed that when caseloads were high, social workers were
unable to make their visits once every 30 days, detect
signs of abuse or neglect, and get children into permanent
homes. The national standard to get a child into a
permanent home was 12 to 24 months; however, many children
in Alaska spent 5 to 15 years in the foster care system. He
emphasized that the length of time was almost inhumane. He
believed the amendment would make significant progress
towards making 2,500 lives better. The amendment had a high
impact with no additional cost over the previous year. He
pointed to recent testimony from the OCS director that
under current staffing levels the worst outcome was that
kids would die due to unmet needs and the state's inability
to reach them quickly enough. He relayed that the children
suffered from very high Adverse Childhood Experiences
scores, which worsened every time they were moved into
another home. He added that mental illness worsened with
every move as well. He reasoned that children may lose
their lives later on if depression rose to a level they
could not handle. He knew a child in the system who had
been suicidal; with the department's assistance the child
had received the needed help. The money to hire 80 social
workers was not available; additionally, the department
would be unable to absorb the number in one year. The
amendment would allow for the hire of 28 social workers. He
spoke to the high social worker burnout rate caused by high
caseloads. He remarked that it was not possible to make a
baseball team better if it only had 5 or 6 players;
currently OCS had no one in the "outfield." He wondered how
the agency could win a game under the circumstances. The
amendment would help foster youth succeed and would reduce
the 40 percent homelessness rate (the figure included 20
percent who "couch surf"). He noted that the federal
definition of homelessness no longer included couch
surfing. Additionally, 27 percent of the youths ended up in
jail costing the state money. He added that if children
were placed in permanent homes the state would not have to
pay the $30 daily fee to a foster family ($12,000 per
year). The current lack in staff was costing the state
money and doing damage to children. He stressed that the
amendment would save money by providing better outcomes for
the youths; youths would go to jail in lower numbers,
graduate high school in higher numbers, and other. He did
not know how a price tag could be put on the consequences
of not being able to detect child abuse.
3:52:38 PM
Representative Gara continued discussing the amendment. He
underscored that the amendment would make a difference in
children's lives. He stressed that it would protect
children who do not have a chance in the world. He
communicated that he would not have brought the amendment
forward if the department had not come to him with $2.9
million in freed up general funds (the figure was $2.7
million with $681,000 in federal matching money). The
amendment would also designate $211,000 to Employment
Training Vouchers, which would allow OCS to assist youths
aging out of the foster care system (aged 16 to 23) in
attending job training programs, continued education, and
other. The foster youth number had increased, which had
increased the need for the employment training vouchers.
Representative Munoz wondered if the federal money had
already been freed up and applied to advocacy centers.
Representative Gara replied that the federal government had
agreed to let DHSS use the money for child advocacy
centers, which was currently underway.
Co-Chair Neuman stated that the TANF money received by OCS
was for child advocacy centers. The agency had received
one-time bonus funds. He believed it was interesting that
the director of OCS had not approached him with the
information. He stated that child advocacy centers would
still need funding, but instead the department had decided
to move the funds over to OCS. He did not know why. He how
using one-time funds for OCS was the right solution. He
stated that in the future the department should go to the
chair if it wanted to move freed up funds around. He stated
that the situation resulted in his effort to look for
funding for the advocacy centers.
Representative Munoz remarked that when the committee had
looked at the DHSS budget she recalled there had been
approximately 65 vacant frontline service positions due to
difficulty in recruitment and retention.
Representative Gara replied that the vacancy number was
down to 15; however, there would continue to be unfilled
positions as long as high caseloads caused worker burnout.
He relayed that the TANF funds came in on an annual basis.
Representative Wilson was opposed to the amendment. She was
concerned the OCS director had testified that children
would die without the funds. She remarked that the
department had not subsequently been able to provide any
information to support the statement. She discussed that
DHSS did rate incoming calls with the most serious calls
taking first priority. She found it surprising that the
division had reduced its vacancies from 60 to 15 in a few
weeks' time. She remarked on the state's process related to
foster youths; many children were sent out of state and did
not go to in-state relatives. She was concerned by the
issue. She stated that money did not solve everything. She
opined that the system contained numerous problems the
state needed to face. She believed the state was taking
kids it should not. She elaborated that every parent was
not perfect. She continued that if the state was more
supportive of parents and keeping children at home there
would be fewer in the foster care system. Additionally, she
believed the state needed to treat foster parents better.
She stressed that it was not only about the money. She
remarked "we all care about kids, but we want them to stay
with the parents first." She reasoned that the state needed
to do better with parents as well. She reiterated her
concern about the department's statement without any backup
data.
4:01:17 PM
Co-Chair Thompson spoke to the $2.9 million in TANF funds
that would enable DHSS to hire 23 additional positions,
which was only about 50 percent of the number needed. He
referred to a similar amendment Representative Gara had
offered during the normal budget process. He communicated
that he had later agreed with Representative Gara that the
funds would be well spent on increasing the number of
positions. He had committed to work hard to try to fund the
positions. He had worked with the Senate, which had put the
positions back into the budget; however, the funding had
been removed during the conference committee process. He
did not want to see funds added to the budget, but he had
committed to Representative Gara that he would work on the
issue. He communicated that he would vote in support of the
amendment.
Vice-Chair Saddler remarked that the amendment had been
offered multiple times in the past. He addressed the $2.9
million in TANF funds and stated that through the committee
and House floor process the legislature had decided that
any savings should be banked. He reasoned that the funds
may not represent an increase from the prior year, but it
was real money in the time of a deficit. He elaborated that
the state spent nearly $53 million on OCS frontline social
workers, which represented a significant investment going
towards strengthening families and preventing the
mistreatment of children. He shared that the budget had
included $250,000 for three additional frontline social
workers given the state's limited financial resources. He
questioned whether there would be enough people to fill the
numerous positions if the amendment passed. He believed
that the department's ability to locate almost $3 million
in savings after the budget subcommittee process was an
indicator that there may be more savings in departments
that the legislature did not know about; it gave him hope
that unallocated reductions would be backfilled. He
addressed the statement that some kids may die without the
additional funding. He asserted that people may die if
other areas were not funded such as the Alaska State
Troopers, road maintenance, suicide prevention,
correctional officers, and behavioral health services and
drug treatment. He did not take the issue lightly and
remarked that to imply that opposition to the amendment
represented support of a child dying was a terrible thing.
He shared that he had lost one of his own children. He
concluded that no matter what was spent, it was not
possible to keep everybody safe.
4:05:18 PM
Co-Chair Neuman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Edgmon, Gara, Guttenberg, Kawasaki, Munoz,
Thompson
OPPOSED: Wilson, Gattis, Pruitt, Saddler, Neuman
The MOTION to ADOPT Amendment 5 PASSED (6/5). There being
NO further OBJECTION, it was so ordered. [Note: action on
the amendment was rescinded later in the meeting and a
subsequent vote to adopt the amendment failed. See 6:45
p.m. for detail.]
4:06:17 PM
AT EASE
4:14:08 PM
RECONVENED
Representative Guttenberg MOVED to ADOPT Amendment 6 (copy
on file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Kawasaki, Guttenberg and
Gara
DEPARTMENT: University of Alaska
APPROPRIATION: University of Alaska
ALLOCATION: Various
ADD: $7,000.0 UGF (1004)
EXPLANATION:
The current budget proposal includes roughly $30
million in cuts already. We need a University that can
train a vibrant workforce, diversify the economy, and
give people opportunity.
Co-Chair Neuman OBJECTED.
Representative Guttenberg explained the amendment that
sought to restore $7 million to the University of Alaska
budget. He detailed that the budget was allocated to the
university system by its Board of Regents. He relayed that
the university had termed the total cuts as devastating
[the current budget included roughly $30 million in cuts to
the university]. He remarked that it would be the
engineers, architects, biologists, and other who would
contribute to maintaining the university's vibrant
community. He stressed that the amendment would enable the
university to move forward and remain functional.
Representative Kawasaki supported the amendment, which
represented a compromise. He relayed that according to the
University of Alaska the amount reflected roughly 100
direct jobs within the university system (300 indirect
jobs). He addressed the cost and relayed that the
university was more than a training school; it provided a
full education, vocational technology training, career
advancement, and was a higher education institution. He
stated that the university was world renowned for its
academics. He elaborated that the National Science
Foundation looked particularly to the University of Alaska
Fairbanks (UAF) for research on the Arctic. He believed
that at a time when research in the Arctic was at an all-
time high the state needed an institution that was able to
advance the issues. He reiterated that the amendment
offered a compromise to add back a small portion of the
budget. He stated that it was written into the state
constitution that the legislature should fund the
university. He noted that the university had made
compromises within its own budget process including
increased tuition rates, book rates, and housing costs. He
remarked that the increases had impacted the number of
students who could attend. He believed further cuts would
be bad for the university as a whole.
4:19:17 PM
Representative Wilson spoke against the amendment. She
shared that she had chaired the university budget
subcommittee. She detailed that the university had over 400
buildings to maintain. She agreed that it was in the
constitution, but the constitution did not specify that the
legislature had to fund over $300 million. She relayed that
the university brought in over $900 million in revenue. She
was disappointed to learn that education accounted for the
smallest portion of the university's costs. She stressed
that over 50 university employees earned more than the
governor; she believed the number was high. She noted that
the university had three systems, which she believed was
unnecessary based on Alaska's population. She believed the
university brought students through the door but did not
bring them out the other side. She believed if more
students graduated the university would recoup some of the
funds. She remarked that the university had spent $9.1
million on a locker room. She contested that the university
should have the ability to locate $7 million in savings if
it could spent $9.1 million on a locker room. She believed
the university was great, but that it needed to learn to
fly on its own. She spoke to slimming down costs and
utilizing resources such as internet learning. She
supported working with the university to keep more kids in
school. She added that the state also funded scholarships
for students.
4:21:34 PM
Co-Chair Neuman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Edgmon, Gattis, Munoz, Pruitt, Saddler, Wilson,
Neuman, Thompson
The MOTION FAILED (3/8).
Co-Chair Neuman acknowledged Representative Jim Colver in
the room.
4:22:36 PM
Representative Gara MOVED to ADOPT Amendment 7 (copy on
file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Gara, Guttenberg, Kawasaki
Insert a new section to read:
"(c) $6 million of the unexpended and unobligated
balances, estimated to be a total of $6,681,700, of
the appropriations made in sec. 4, ch. 16 SLA 2013,
page 105, lines 20-24, and sec. 4, ch. 18, SLA 2014,
page 87, lines 10-11, and without elimination of any
department positions, lapses to the general fund on
June 30, 2015."
EXPLANATION: This causes the available general fund
balance appropriated to Susitna-Watana Hydroelectric
projects to lapse into the general fund. The Susitna
Dam would serve the same customers as the two gasline
projects being considered by the State at this time,
and all three projects will bring excess power to the
railbelt. This amendment withdraws the remaining
unobligated funds with appropriated to the Susitna Dam
in a time of budget shortfalls. This lapse does not
affect any positions at DCCED.
Co-Chair Neuman OBJECTED.
Representative Gara explained that the amendment would put
$6 million of a $6.6 million increment appropriated to the
Susitna-Watana Hydroelectric project back into the general
fund. He relayed that the amendment would not result in any
cuts to Alaska Energy Authority (AEA) staff managing the
project. He did not believe the state would have the money
for the project any time soon; the state's priority was the
gasline and to determine how to get low and stable cost
power to Alaskans. He believed there was no reason to pay
for two projects that would serve the same people. He
believed it was a smart savings.
Representative Pruitt spoke against the amendment. He
stated that the project was a pay now or pay later
scenario. He reasoned that if it had been completed when
the project had been initially discussed in the 1980s
Fairbanks would not have needed additional help in the
current year. He did not think it made sense to pull the
money away because he anticipated that the state would be
looking at the project again in the future. He stated that
much money had been invested in the project over time and
every time the state pulled back it ended up increasing the
cost. He noted that the project was progressing towards the
permitting phase.
Representative Kawasaki supported the amendment. He stated
that according to AEA's response to Administrative Order
271 that would stop work, it would still require an
additional $102 million in an integrative licensing process
to get to the point of obtaining a project permit. He
believed the project may be a good idea if the legislature
could locate $102 million immediately. He had supported the
project, but in the budget deficit situation, it was
difficult to say that the state could justify spending even
$6 million more (essentially the same cost as the senior
benefits program). He reasoned that the project would cost
approximately $5 billion to $6 billion to construct. He
believed the project was too large. He equated the
situation to a legislator planning their 14 bedroom mansion
even though it was not affordable. He believed it was
prudent to pull the money back before spending another $102
million to reach the permitting process.
4:27:00 PM
Vice-Chair Saddler opposed the amendment. He received his
electricity from a hydroelectric dam at Eklutna Lake and
natural gas from Cook Inlet through Enstar. He believed
that in Alaska it could make sense to have a multitude of
energy sources. He advised areas that relied on a single
energy source (e.g. Fairbanks' reliance on fuel oil) to
keep the idea in mind. He noted that the new UAF power
plant had located $260 million to produce energy.
Co-Chair Neuman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Gattis, Munoz, Pruitt, Saddler, Wilson, Edgmon,
Thompson, Neuman
The MOTION FAILED (3/8).
4:28:24 PM
Representative Gara MOVED to ADOPT Amendment 8 (copy on
file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Gara, Guttenberg, Kawasaki
DEPARTMENT: Unallocated
ADD: $29,800.0 UGF (1004)
LANGUAGE: Delete Page 25, lines 24-25
EXPLANATION: This amendment removes the unallocated
statewide cut that will result in the loss of jobs and
important state services.
Co-Chair Neuman OBJECTED.
Representative Gara explained that the amendment would
remove the $29.8 million unallocated cut to state agencies
proposed in the committee substitute. He agreed with
honoring the state's agreements to state employee wage
contracts, but he did not agree that it should be done with
the condition of a $29.8 million unallocated cut (in
addition to the $389 million budget cuts). He pointed out
that the administration had not identified where the cuts
would come from. He stated that the cut would result in the
loss of jobs and important state services. He remarked that
the current budget would already result in the loss of over
500 jobs. He reasoned that it would cost $15 million to $17
million to honor the wage agreements. He agreed with
honoring the commitments and believed that future wage
contracts would be much more conservative. He stressed that
the unallocated cut would create significant uncertainty.
He believed it would be like giving a partial pink slip to
all state employees because no one knew which jobs would
disappear. He did not believe the cut was necessary. He
would gladly accept savings resulting from cheaper office
space.
Co-Chair Neuman understood that the $30 million would have
to be absorbed by the departments. He also understood that
the following year would be much more difficult. He
remarked that it would be harder to look at the DHSS and
DEED budgets. He underscored that the state was still at a
$3.1 billion deficit. He pointed out that budget costs
added up. He spoke to the difficult decision he had made
related to cuts to items like OCS, Pre-K, the university,
and other. He noted that the decisions had not been easy
for anyone. He knew the cut was something that had to be
done. He stressed that the legislature could not continue
to dip into funds that were much needed across the state
for items like troopers and other. He MAINTAINED his
OBJECTION.
4:34:49 PM
Representative Guttenberg spoke in support of the
amendment. He opposed the unallocated nature of the cut. He
elaborated that it was the responsibility of the
legislature to target and understand which programs it cut.
He emphasized that the cuts could go anywhere to any
program. He stressed that the cut was not the only
unallocated cut the legislature had given the
administration. He would prefer to know and argue about
what exactly the legislature was doing and where money was
being taken from (e.g. from oil and gas permitting, the
marine highway, the university, or other). His primary
objection was that unallocated cuts abdicated the
legislature's direct responsibility.
Co-Chair Neuman acknowledged that there were huge
reductions in the budget. The unallocated cut reflected an
effort to give the administration some room to absorb the
cuts.
Representative Kawasaki spoke in support of the amendment.
He pointed out that the budget item issue was one that was
supported by the House. He cited earlier testimony from OMB
that an additional $30 million added to the existing $300
million cut would include layoffs and a decrease in
services. Additionally, OMB had testified that it did not
know how the cuts would be handled.
4:38:04 PM
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Gara
OPPOSED: Gattis, Munoz, Pruitt, Saddler, Wilson, Edgmon,
Neuman, Thompson
The MOTION to ADOPT Amendment 8 FAILED (3/8).
4:39:05 PM
Representative Gara MOVED to ADOPT Amendment 9 (copy on
file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Kawasaki, Guttenberg and
Gara
DEPARTMENT: Transportation and Public Facilities
APPROPRIATION: Marine Highway System
ALLOCATION: Various
ADD: $5,000.0 UGF (1004)
EXPLANATION: Under the existing budget, communities
this winter may be reduced to bi-monthly service.
There will be limited vessels available due to lay-
ups, which means that if vessels go in for unexpected
repairs, there could be severe service interruptions.
Two trips to the Aleutian chain to transport gear and
supplies for fisheries in the spring could be lost. A
slower step-down will allow the Marine Highway System
to better-analyze possible commercial and passenger
fare increases.
Co-Chair Neuman OBJECTED.
Representative Gara explained the amendment that would
partially reinstate funds to the Alaska Marine Highway
System (AMHS). He remarked that Governor Walker planned to
comb through the AMHS budget to locate where gradual cuts
could be made. He believed cuts were too deep in the
current budget. He detailed that under the existing budget
some communities may be reduced from monthly down to bi-
monthly service during the winter months. He elaborated
that some service could be canceled if vessels had to go in
for unexpected repairs. Additionally, trips to the Aleutian
chain may be lost in the beginning of fishing season. He
expressed concern that the cuts could negatively impact
business such as crab and other fisheries in the Aleutians.
He supported a slower step-down of funds that would allow
the administration to analyze whether fare increases may
help. The administration had expressed concern that another
fare increase may reduce ridership. He indicated that a
more gradual decent in funding was preferred. He understood
the need to gain control of the budget, but the amendment
would still result in a cut to AMHS.
4:41:27 PM
Co-Chair Thompson spoke in opposition to the amendment. He
indicated he was the chairman of the Department of
Transportation and Public Facilities (DOT) budget. He
discussed that much work had gone into determining how to
reduce state spending. He reported that ridership and
passenger vehicles only brought in about 30 percent of the
cost of running the system. He detailed that the
subcommittee had looked at everything within the
department, including funds for state highways, airports,
and the ferry system. He elaborated that the subcommittee
had tried to come up with funding from the fuel trigger to
offset some of the reductions. He had communicated to DOT
that it would have to work hard with the subcommittee over
the summer to figure out how to streamline and change how
the ferry system operated. He stressed that with the
state's $3.2 billion deficit it could not afford the
current system. He stressed that the state was in desperate
times and it had to come up with ways to keep costs down.
Representative Munoz supported the amendment. She relayed
that she had recently met with the head of the ferry system
and had learned that Taku sailings would be drastically cut
back beginning on July 1, 2015. She had been under the
impression that summer sailings would not be impacted by
the budget; however, that was not the case. She
communicated that the decrease impacted Southeast Alaska's
communities. She detailed that Angoon, Tenekee, Pelican,
Hoonah, and Gustavus all relied on ferry service.
Representative Guttenberg noted that there were no ferries
to Fox or Ester, but he reasoned that communities in other
areas relied on ferries for economic needs. He stressed
that Alaska had more coastline than the entire the U.S. He
discussed the importance of the delivery of goods to
communities on the ferry system. Additionally, schools
relied on the ferry for transportation of sports teams. He
emphasized that commerce relied on the schedule that had
been set for the current year. He stated that the loss of
$5 million would hurt business and the economy
significantly. He believed the AMHS should have the ability
to live up to its contract for the year. He remarked that
the schedule for the following year would need to be
significantly curtailed. He opined that the state was
obligated to live up to the schedule for the current year
for businesses, communities, residents, and tourists.
4:47:36 PM
Co-Chair Neuman added that there had been excess fuel
trigger funds leftover in the current year. He explained
that fuel costs had decreased due to the drop in oil price,
which had resulted in excess fuel trigger funds. He had
worked with DOA and OMB to put the extra funds back into
the ferry system. He relayed that DOT had testified that $7
million was needed due to prior obligations; the fuel
trigger funds had provided $5.5 million and an additional
$2.3 million in undesignated general funds had been added.
He noted that the funds had exceeded the $7 million figure.
Additionally, money from the head tax collected in port
communities had been utilized. He had recently spoken with
the DOT commissioner, who had communicated that they could
work with the current budget. He remarked that there had
been a delay in the ferry system because one of the
Southeast ferries was receiving standard repair in
Ketchikan. He had asked the DOT commissioner if routes
would be impacted and if the system could get by. He
reported that the commissioner had told him he thought the
ferry system would get by.
Representative Munoz clarified that a delayed
rehabilitation schedule for one of the smaller vessels was
causing the ferry to be laid up for another month, but that
was not the Taku she had referred to earlier. She
elaborated that the Taku was scheduled to sail north from
Bellingham, WA, but the service would be drastically cut as
of July 1.
4:51:49 PM
Co-Chair Neuman MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Guttenberg, Kawasaki, Munoz, Gara, Edgmon
OPPOSED: Pruitt, Saddler, Wilson, Gattis, Thompson, Neuman
The MOTION FAILED (5/6).
4:52:56 PM
Representative Kawasaki MOVED to ADOPT Amendment 12 (copy
on file):
OFFERED IN: Finance Committee
TO: HB2001
OFFERED BY: Representatives Kawasaki, Guttenberg and
Gara
DEPARTMENT: Health and Social Services/Unallocated
APPROPRIATION: Unallocated
ADD: $2,000.0 UGF (1004), contingent
DELETE: $2,000.0 UGF (1004)
EXPLANATION: The administration should seek to
identify up to $2 million in cuts across departments.
This will give the administration more flexibility to
make cuts in other departments, should the
administration decide that they will be less harmful
than unallocated cuts to HSS. The administration is
still free to place the unallocated cut entirely on
HSS, so this is a revenue-neutral amendment that only
adds flexibility.
Co-Chair Neuman OBJECTED.
Representative Gara stated that Amendment 12 was a no-cost
amendment. He planned to withdraw the amendment if there
was not support. He discussed that there had been deep
unallocated cuts to DHSS. He explained that the department
had a choice of five or six areas it could apply the cuts
to; he believed the amount was roughly $5 million to $6
million (identified divisions included the Office of
Children's Services, the Division of Behavioral Health
Services, and other). He noted that the legislature had
been unable to identify where the department should cut and
had asked the department to make the cuts. He remarked that
all divisions within behavioral health helped people who
were down on their luck, chances in life, or health. The
department had communicated that the cuts made to the
specific division were too deep for it to absorb without
harm. He detailed that the amendment specified that the
administration should seek to identify up to $2 million in
cuts across departments. The administration would still be
free to place the unallocated cut entirely on DHSS. He
elaborated that the amendment would give the administration
more flexibility to make cuts in other departments, should
the administration decide that they should be less harmful
than unallocated cuts to DHSS.
Co-Chair Neuman was confused by the amendment. He stated
that the unallocated reductions were $29.8 million that the
administration could chose to make them anywhere. He stated
that there was no direction specifying that any specific
amount had to go to a particular department. He wondered if
the amendment pertained to a $2 million cut in addition to
the $29.8 million. He believed the amendment was
duplicative because departments could already spread cuts
how they chose. He noted that Representative Guttenberg had
brought up that maybe departments should not be able to do
so. He remarked that the goal had been to allow some
discretion to departments to deal with some large cuts.
Representative Gara MOVED a conceptual amendment that would
allow the administration to elect to take $2 million of the
unallocated cuts to DHSS anywhere in the executive branch.
He explained that the figure was not an additional cut; it
pertained to $2 million of an existing unallocated cut to
DHSS. The amendment would give the administration the
flexibility to elect to apply the cut outside of the
department.
Co-Chair Neuman asked if the amount was $2.9 the department
had been given back.
Representative Gara answered in the negative. He explained
that the amendment was cost-neutral. He detailed that for
$2 million of the unallocated cuts applied to DHSS, the
administration would have the power to decide where in the
executive branch to apply the cut.
4:58:55 PM
Co-Chair Neuman countered that the cuts were not mandated
to come from DHSS.
Representative Gara stated that the amendment was not
related to the $30 million in unallocated cuts discussed
earlier in the meeting. He explained that there were
roughly $5 million to $6 million in unallocated cuts to
DHSS in the budget before the committee. He stressed that
the department had communicated it was unable to absorb the
cuts without harming people. The amendment would enable the
administration to allocate $2 million of the cuts to
another department. The purpose of the amendment was to
enable the administration to apply the cuts in the least
harmful place.
Co-Chair Neuman MAINTAINED his OBJECTION.
Vice-Chair Saddler thought the amendment was contrary to
Amendment 8 that had been put forward by the same sponsors.
He remarked that Amendment 8 stated that unallocated cuts
resulted in lost jobs and reduced state services. He asked
for clarity.
Representative Guttenberg answered that the Amendment 12
specified that cuts could be taken from someplace else.
Representative Gara clarified that he did not like
unallocated cuts and that the amendment did not propose to
add that any unallocated cuts. The amendment's goal would
enable the administration to decrease unallocated cuts to
DHSS and to apply them wherever it chose.
Co-Chair Neuman MAINTAINED his OBJECTION.
Representative Gara WITHDREW Amendment 12.
5:02:05 PM
Representative Gara MOVED to ADOPT Amendment 13 (copy on
file):
OFFERED IN: The House Finance Committee
TO: HB 2001
OFFERED BY: Representatives Gara, Guttenberg, Kawasaki
DEPARTMENT: Health and Social Services, Corrections
APPROPRIATION: Various
DEPARTMENT: Corrections
APPROPRIATION: Health and Rehabilitation Services
ALLOCATION: Physical Health Care
DELETE: $4,108.2 Gen Fund (1004)
EXPLANATION: This portion of the amendment reinstates
the budget savings of $4,108.2 UGF that will no longer
be required to be spent if the Governor's proposal to
expand Medicaid is reinstated in the Operating Budget.
DEPARTMENT: Health and Social Services
APPROPRIATION: Behavioral Health
ALLOCATION: Behavioral Health Treatment and Recovery
Grants
DELETE: $1,558.7 GF/MH (1037)
EXPLANATION: This portion of the amendment reinstates
the budget savings of $1,558.7 UGF that will no longer
be required to be spent if the Governor's proposal to
expand Medicaid is reinstated in the Operating Budget.
DEPARTMENT: Health and Social Services
APPROPRIATION: Health Care Services
ALLOCATION: Catastrophic and Chronic Illness
Assistance
DELETE: $1,000.0 Gen Fund (1004)
EXPLANATION: This portion of the amendment reinstates
the budget savings of $1,000.0 UGF that will no longer
be required to be spent if the Governor's proposal to
expand Medicaid is reinstated in the Operating Budget.
DEPARTMENT: Health and Social Services
APPROPRIATION: Health Care Services
ALLOCATION: Medical Assistance Administration
ADD: $410.0 ($205.0 Fed [1002], $205.0 MHTAAR [1092])
POSITIONS: ADD: 3 PFT positions
EXPLANATION: This portion of the amendment allows the
state to accept Federal and Mental Health Trust funds
for three positions associated with Medicaid
expansion.
DEPARTMENT: Health and Social Services
APPROPRIATION: Public Assistance
ALLOCATION: Public Assistance Field Services
ADD: $2,777.3 ($1,385.6 Fed [1002], $1,385.7 MHTAAR
[1092])
POSITIONS: ADD: 23 PFT positions
EXPLANATION: This amendment allows the state to accept
Federal and Mental Health Trust funds for 23 positions
associated with the expansion of Medicaid.
DEPARTMENT: Health and Social Services
APPROPRIATION: Departmental Support Services
ALLOCATION: Commissioner's Office
ADD: $0.0
POSITIONS: Establish a project manager to manage
Medicaid expansion team.
EXPLANATION: This amendment adds a temporary position
to manage the Medicaid expansion team- not money or
PFTs.
DEPARTMENT: Health and Social Services
APPROPRIATION: Medicaid Services
ALLOCATION: Behavioral Health Medicaid Services
ADD: $4,799.5 Fed (1002)
EXPLANATION: This portion of the amendment allows the
department to accept $4,799.5 in Federal funds that
will benefit Behavioral Health.
DEPARTMENT: Health and Social Services
APPROPRIATION: Medicaid Services
ALLOCATION: Adult Preventative Dental Medicaid
Services
ADD: $5,381.2 Fed (1002)
EXPLANATION: This portion of the amendment allows the
department to accept $5,381.2 in Federal funds that
will benefit Adult Preventative Dental services.
DEPARTMENT: Health and Social Services
APPROPRIATION: Medicaid Services
ALLOCATION: Senior and Disabilities Medicaid Services
ADD: $2,908.8 Fed (1 002)
EXPLANATION: This portion of the amendment allows the
department to accept $2,908.8 in Federal funds that
will benefit Senior and Disability Medicaid services.
DEPARTMENT: Health and Social Services
APPROPRIATION: Medicaid Services
ALLOCATION: Health Care Medicaid Services
ADD: $132,348.9 Fed (1002)
EXPLANATION: This portion of the amendment allows the
department to accept $132,348.9 in Federal funds that
will provide the opportunity for healthcare to the
over 40,000 individuals without it in Alaska, create
4,000 jobs, and inject money into the state's economy.
DEPARTMENT: Health and Social Services
APPROPRIATION: Medicaid Services
ALLOCATION: Health Care Medicaid Services
DELETE WORDAGE: No money appropriated in this
appropriation may be expended for services to persons
who are eligible pursuant to 42 United States Code
section 1396a(a)(10)A)(i)(VIII) and whose household
modified adjusted gross income is less than or equal
to one hundred thirty-three percent of the federal
poverty guidelines.
EXPLANATION: This portion of the amendment deletes
wordage that prohibits the expenditure of Medicaid
funding on the expansion population.
Co-Chair Neuman OBJECTED.
Representative Gara explained that the amendment would
enable the state to accept Medicaid expansion from the
federal government. He highlighted that expansion would
provide roughly $6.6 million in state savings; savings were
reflected in the amendment. The amendment specified areas
the federal funds would cover costs the state was currently
paying. He discussed that it would cover single individuals
without children (who did not currently qualify for
Medicaid) for a certain amount of services at the
Department of Corrections and the DHSS Division of
Behavioral Health. Additionally, the amendment included
federal receipt authority for various areas of up to $145
million. He noted that the amendment would take advantage
of one of the last years of 100 percent federal
reimbursement.
Co-Chair Thompson spoke in opposition to the amendment. He
stated that there had been many meetings on Medicaid
expansion and had the committee had heard much testimony.
He noted that the committee had read significant testimony
from Margaret Brodie's [Director, Division of Health Care
Services, Department of Health and Social Services]
testimony to the courts regarding the state's lawsuit
against Xerox. He addressed that when existing Medicaid
recipients had been loaded into the state's system, the
system had crashed. He elaborated that consequently the
state had paid out $165 million to providers in state funds
because it could not get the funds billed to the federal
government. He continued that Ms. Brodie had recently
testified that the state had collected back $70 million of
the total funds; she did not know if the state would ever
be able to collect the balance. He stated that Medicaid
expansion would add up to 40,000 new recipients. He noted
that 70,000 new medical codes would be loaded into the
system in the coming fall. He emphasized that the state did
not know if the system could handle the influx of
information. He added that the system could not handle the
information in the past. He stressed that if it crashed the
system again it would cost the state $200 million in
advance payments to providers, with no reassurance that it
would recoup the funds.
Co-Chair Thompson had heard from doctors in his community
who were having a real problem receiving payment in a
timely manner. He recognized that the administration had
caught up with the large providers and hospitals and was
doing a good job in that area; however, it had not caught
up with small providers. He shared that it had taken five
months for a doctor in his community to receive an $8,000
payment, which had subsequently been retracted for
investigation. Due to the problems, the state was in the
process of doing a Request for Proposal (RFP) to collect
data and unbiased opinions on Medicaid expansion. He stated
that Arkansas had recently unfunded Medicaid expansion and
Rhode Island had voted against it. He communicated his
desire to understand why. He believed steps were being
taken that could really hurt Alaska. He relayed that the
administration had also submitted an RFP that would provide
direction on how to implement Medicaid expansion. He
stressed that the information would not be available until
2016. He wanted to ensure the state approached the issue
correctly. He was concerned that the state could be
bankrupted. He wanted people to be insured and wanted to
take care of Alaskans, but he wanted to take care of Alaska
at the same time.
5:08:10 PM
Representative Guttenberg testified in favor of the
amendment. He addressed a Margaret Brodie affidavit that
had provided a historical view on the Xerox situation. He
did not know how the system compared with other states, but
he did not imagine it was as good. He remarked that the
cost of engaging Xerox had been expensive, but he
acknowledged that the state's system had been very old. He
discussed that the committee had been informed that all
billings within the first month were better than 90
percent, after a three-month period billings reached 100
percent. He stressed that the information represented a
significant improvement from his experience two years
earlier. He stressed that Medicaid expansion was not a
process that could be stopped to make changes; people were
going to the doctor, kids got sick, bones broke, and other.
He reasoned that it was an ongoing process and that it was
about people's lives. Expansion would bring a cost savings
to the state. He pointed out that costs had been about $190
million in the past two years. He stressed that if the
state waited another year the state would have missed out
on $360 million in federal funds. He noted that most of the
funds would trade federal dollars for state general fund
dollars. He continued that expansion would provide
healthcare to the people who were the most expensive to
treat. He underscored that private, community owned, and
nonprofit hospitals had all come before the committee in
support of expansion, which was advantageous to them. He
underscored that expansion provided an economic opportunity
for the state to decrease costs and provide healthcare for
Alaskans. He believed the state needed to transition from
an expensive process to a system that created efficiencies.
Representative Kawasaki spoke in support of the amendment.
He stated that in the last legislative cycle there had been
some iteration of a bill dealing with Medicaid expansion or
reform almost 30 times. He stated that as a matter of
policy the House Health and Social Services Committee had
passed a bill that was similar to the amendment. He
asserted that the savings were clear; the state would see
savings of up to $330 million over a six-year period. He
noted the savings estimate was conservative. He relayed
that up to 30 other states had accepted Medicaid reform and
expansion. The Pew Charitable Trust that had reviewed
states that had accepted expansion and had determined there
had been savings in each circumstance. He stated that the
current discussion was not about policy, but about money.
He stated it was clear that there would be savings from
Medicaid expansion, which would have an impact of $40
million in general fund savings over six years. He stressed
that over the past three months there had been huge results
in the improvement of the Medicaid Management Information
System (MMIS). He contended that the results exceeded
anything done on the issue by the past administration. He
served on the board of a small clinic that would benefit
from Medicaid expansion and relayed that payments had not
been made clearly several years earlier. He remarked that
currently payments were basically seamless. He believed it
showed what the current administration had done to prove
that Medicaid expansion and reform could work.
5:15:21 PM
Vice-Chair Saddler spoke in opposition to the amendment. He
stated that Medicaid expansion had been included as an item
in the appropriations bill and the legislature had
requested that the governor submit separate legislation on
the topic. He elaborated that the governor had submitted a
bill, but it had not passed. He noted that the issue had
been addressed again during special session. He stated that
Medicaid currently provided healthcare services for 150,000
Alaskans including people with disabilities, pregnant
women, and other; the program cost approximately $1.6
billion per year. He emphasized that the current governor
and DHSS commissioner acknowledged that the system was
broken (the prior administration also called the system
broken). He stressed that the committee had asked questions
of the administration during multiple hearings on Medicaid.
He stated that the answers had raised additional questions
for him. He detailed that there were problems with the
Enterprise system, which was far less accurate than the
prior system. He had spoken to physicians in his district
who were still owed $1 million over a year after providing
service. He spoke to problems with reconciling and
correcting past billing statements. He stated that because
Alaska had a higher Medicaid reimbursement rate than
Medicare, people covered under expansion would receive care
ahead of seniors and veterans. He pointed to the risk that
expanded enrollment would exceed projections. He remarked
that many states that had accepted expansion had seen the
numbers vastly outnumber the original projections. He
believed the state needed to be concerned about an open-
ended commitment to providing 10 percent more going
forward. He commented that the administration had
recognized the need to find solutions based on the
experiences of other states in order to craft the best
system for Medicaid in Alaska. He noted the RFP and project
would take one year. Additionally, the legislature had put
out an RFP seeking expertise through the Legislative Budget
and Audit Committee. He believed that accepting Medicaid
expansion before receiving the information would be
subjecting the state to a "ready, fire, aim" philosophy. He
believed it was prudent to wait.
5:18:09 PM
Co-Chair Neuman MAINTAINED his OBJECTION. He discussed that
over 21,000 Alaskans would fall into a "donut hole." He
elaborated that due to federal regulations many people who
were self-employed or had no insurance were required to buy
into the federal premium. He believed there was currently a
federal lawsuit in Texas related to the issue. He remarked
that other states had applied for some funds to try to fix
an existing problem. He furthered that the 21,000 Alaskans
would lose the assistance they received on premiums from
the federal government. For example, if a person's costs
were $800 per month, they would lose their credits of up to
$500 per month. He believed many Alaskans would be hit hard
and would find themselves in a predicament where they had
to pay a penalty because they did not sign up on the
federal insurance premium. He commented that the issue was
one of many that continued to confuse people. He thought
there were numerous people who were unsure where and how
the state would move forward.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Munoz, Pruitt, Saddler, Wilson, Edgmon, Gattis,
Thompson, Neuman
The MOTION FAILED (3/8).
5:21:47 PM
AT EASE
6:35:33 PM
RECONVENED
Vice-Chair Saddler MOVED that the committee RESCIND its
previous action of adopting Amendment 5.
Representative Gara OBJECTED. He requested an "at ease."
Co-Chair Neuman asked Representative Gara to speak to his
objection. He reconsidered and asked for a vote on the
motion.
A roll call vote was taken on the motion.
IN FAVOR: Pruitt, Saddler, Wilson, Edgmon, Gattis, Munoz,
Neuman
OPPOSED: Gara, Kawasaki, Thompson
Representative Guttenberg was absent from the vote.
The MOTION PASSED (7/3). There being NO further OBJECTION,
the adoption of Amendment 5 was RESCINDED.
Representative Gara asked for an "at ease."
6:38:26 PM
AT EASE
6:40:31 PM
RECONVENED
Co-Chair Neuman gave Representative Gara the option to re-
offer Amendment 5.
Representative Gara was uncertain why he would reoffer the
amendment. He was curious about what had happened in the
time since the amendment had passed. He observed that an
hour had gone by and votes had changed. He wondered why
votes had changed.
Co-Chair Neuman asked if Representative Gara wanted to re-
offer the amendment.
Representative Gara MOVED to ADOPT Amendment 5.
Co-Chair Neuman OBJECTED.
Representative Gara spoke to the amendment. He addressed
several points made by other committee members earlier in
the meeting. He relayed that the $2.9 million in federal
TANF funding for child advocacy centers was recurring.
Co-Chair Neuman asked for verification that the funding was
for child advocacy centers.
Representative Gara replied in the affirmative. He
continued that the $2.9 million had freed up funding, which
the amendment would transfer to OCS in an effort to fix the
foster care system. He stated that in the original vote the
committee had made real progress towards fixing the system
and giving foster children a fair chance in life. He
stressed that at no additional cost from the previous year,
the amendment would improve lives, increase success for
foster youth, increase the number of youth in permanent and
loving homes, and would increase the state's ability to
detect child abuse and remove children from abusive homes.
He hoped the committee could pass the amendment again.
Co-Chair Neuman understood that child advocacy centers were
in the budget, but he believed the $2.9 million was bonus
funding. He MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki, Thompson
OPPOSED: Saddler, Wilson, Edgmon, Gattis, Munoz, Pruitt,
Neuman
The MOTION to ADOPT Amendment 5 FAILED (4/7).
6:44:48 PM
Co-Chair Neuman asked for any final comments from the
committee on the bill.
Representative Gara was "pissed off" at the change of
events that took place in the past hour. He stood by his
words. He thought a little progress had been made on the
budget; however, he surmised that he would not learn what
had happened in the past hour that took away the progress.
He stressed that he was not personally hurt by the change,
but it did hurt the 2,500 children who had been positively
impacted by the amendment. He stated that none of the
children were in his family, but they were children that
all members should care about. He underscored that the
change did not represent a shot at him.
Co-Chair Neuman did not believe anyone was taking a shot at
Representative Gara.
Representative Gara disagreed.
Vice-Chair Saddler remarked that it was against Mason's
Rules to disparage the motives of another legislator.
Representative Gara disputed the comment and replied that
he had not mentioned any specific members. He believed the
House Majority had the votes to do whatever it wanted. He
stated that he could not stop the Majority if it wanted to
move the bill forward with the anticipation that it would
drain the Permanent Fund earnings reserve. He contested
that the Majority could tell him to vote for a budget (that
he believed was worse than the one voted on during regular
session), but he would not agree. He stressed that the
Majority could put conditional language in a bill
specifying that the Minority had to do something, or a
compromise could be worked out. He underscored that the
budget before the committee did not work for him. He
elaborated that the budget cut $48 million in education
funds that were promised the prior year. He remarked that
there was an offer to cut only $32 million of the funds
from the prior year. He observed that it was the same
budget item that had been on the House floor, but a bit
worse. He furthered that when the committee had voted on
the original bill it done what it normally did and had
approved valid wage agreements. He discussed that the
current bill would only approve wage agreements on the
condition that the state layoff more people by way of $30
million in additional budget cuts. He emphasized that the
administration had testified that the cuts would result in
layoffs and cause damage to services. He could not vote for
that scenario. He felt that the budget was worse in some
ways than the budget addressed by the legislature during
the regular session. He had elected to take on the foster
care issue a number of years earlier because he thought it
would have bipartisan support. He wondered how people could
not want to improve a system for child victims of sexual
abuse who through no fault of their own did not live in
loving homes. He believed there had been bipartisan support
on the topic earlier in the meeting, but it did not exist
any longer. He remarked that the discussion had been held
outside of committee and he was not privy to it. He stated
there were a multitude of people in the hallways claiming
they could work out a budget deal in an hour's time;
however, it was not happening in the committee. He hoped
that the legislators who wanted to work together would work
on a budget that worked for everyone; a budget that
involved compromise.
6:51:17 PM
Representative Gara relayed that he could not vote for a
bill that was worse to him than the original operating
budget. He thought the current bill was worse for education
and wage agreements. He believed in continuing to talk and
work together, but the current budget would not have his
support.
Representative Kawasaki stated that the current budget had
been seen for the first time at 9:30 a.m. that morning. He
had been told it reflected a compromise; however, he
reasoned that a compromise was settling two differences to
end an argument or dispute. He thought the legislature
should be compromising on the budget; however, he believed
the budget was largely worse than the budget passed by the
committee in March. He disputed that the budget represented
a compromise. He did not support the bill.
Representative Guttenberg did not consider the current
committee process a negotiation. He stated that nothing had
changed, the legislature had spent one month to get to the
current point and nothing had moved an inch. He asserted
that the legislature was not one iota closer to moving
forward. He stated that actions spoke louder than words. He
was amazed throughout the process because no movement had
been made. He underscored that the people's time and money
had been wasted. He did not know what the expectation was
about how the legislature would move forward, but he
observed that the committee clearly was not moving forward.
Co-Chair Thompson MOVED to REPORT CSHB 2001(FIN) out of
committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CSHB 2001(FIN) was REPORTED out of committee with a "do
pass" recommendation.
ADJOURNMENT
6:56:01 PM
The meeting was adjourned at 6:56 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 2001 CS WORKDRAFT P version.pdf |
HFIN 5/27/2015 9:00:00 AM |
HB2001 |
| HB 2001 Summary of Changes - CS HB 2001(FIN) version 29-LS0960 P.pdf |
HFIN 5/27/2015 9:00:00 AM |
HB2001 |
| HB 2001 Amendment Package for CSHB2001 FIN 29-LS0960 P.pdf |
HFIN 5/27/2015 9:00:00 AM |
HB2001 |