Legislature(2017 - 2018)HOUSE FINANCE 519
01/31/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Fy 18 Budget Overview: Department of Military and Veterans Affairs | |
| Fy 18 Budget Overview: University of Alaska | |
| Fy 18 Budget Overview: Department of Commerce, Community, and Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 31, 2017
1:31 p.m.
1:31:19 PM
CALL TO ORDER
Co-Chair Seaton called the House Finance Committee meeting
to order at 1:31 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Colonel Robert Doehl, Deputy Commissioner, Department of
Military and Veterans Affairs; Brian Duffy, Director,
Administrative Services, Department of Military and
Veterans Affairs; Jim Johnson, President, University of
Alaska; Fred Parady, Deputy Commissioner, Department of
Commerce, Community, and Economic Development; Catherine
Reardon, Director, Division of Administrative Services,
Department of Commerce, Community and Economic Development.
SUMMARY
FY 18 BUDGET OVERVIEWS:
DEPARTMENT OF MILITARY AND VETERANS AFFAIRS
UNIVERSITY OF ALASKA
DEPARTMENT OF COMMERCE, COMMUNITY, AND ECONOMIC
DEVELOPMENT
Co-Chair Seaton discussed the meeting agenda.
^FY 18 BUDGET OVERVIEW: DEPARTMENT OF MILITARY AND VETERANS
AFFAIRS
1:32:44 PM
Co-Chair Seaton spoke to items the committee would like to
hear about during the presentation.
COLONEL ROBERT DOEHL, DEPUTY COMMISSIONER, DEPARTMENT OF
MILITARY AND VETERANS AFFAIRS (DMVA), provided a PowerPoint
presentation titled "FY2018 Department Overview, House
Finance Committee" dated January 31, 2017 (copy on file).
He detailed that DMVA included the Air National Guard, Army
National Guard, the Alaska State Defense Force, the Alaska
Naval Militia, the Division of Homeland Security and
Emergency Management (responsible for coordinating
emergency services and recovery to communities in times of
disaster), the Alaska Military Youth Academy, the Youth
Intervention Program, administrative oversight of the
Alaska Aerospace Corporation, and a Division of
Administrative Services. The department had 270 state
employees and 4,000 uniform employees (guardsman or Alaska
State Defense Force members). The department heavily
leveraged federal dollars to accomplish its mission.
1:34:53 PM
BRIAN DUFFY, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT
OF MILITARY AND VETERANS AFFAIRS, began on slide 2 and
addressed the department's mission:
Founded in Alaska Statute 44.35.020, the Department's
mission is two-fold. First, to provide military forces
to accomplish tasks in support of the State or, when
mobilized, in support of our National Command
Authorities. Additionally, our team provides programs
and services associated with homeland security and
defense; emergency preparedness, response, and
recovery; veteran services; and youth military-style
training and education. Further details on our
mission, vision, core values, and performance are
available at the links shown on this slide.
As a reminder, the Department oversees activities of
eight main divisions: The Alaska National Guard, both
Air and Army Components; the Division of Homeland
Security and Emergency Management, the Office of
Veterans Affairs, the Alaska Military Youth Academy,
Alaska State Defense Force, Alaska Naval Militia, and
our Division of Administrative Services. Additionally,
the Department provides administrative oversight of
the Alaska Aerospace Corporation.
Mr. Duffy turned to slide 3 and addressed a GF funding
profile history for the department:
By way of orientation, all funding amounts shown on
this slide are included in the totals at the bottom,
with the exception of the yellow bars which normalize
the annual amounts to FY 16 constant year dollars.
Using that approach, and also discounting the amounts
shown in green, representing GF formerly allocated to
support the Alaska Aerospace Corporation, the
Department's overall spending power declined by
approximately 10 percent over the past 11 years.
Mr. Duffy addressed the department's share of total agency
operations on slide 4:
With a submitted amount for Fiscal Year 2018 at just
over $16.5 million, the Department's share of total
State GF remains at less than one half of one percent.
Significant budget changes over time include the
removal of all GF supporting the Alaska Aerospace
Association effective in Fiscal Year 16, after several
years of increases to support on-going operations and
maintenance activities.
Additionally, in FY 15, $4.8 million in UGF was
transferred from the Department of Education and Early
Development to support the Alaska Military Youth
Academy. Furthermore, please note this slide also
reflects lower amounts of GF in each year, as compared
to previous years' charts, as the National Guard and
Naval Militia Retirement System transferred from DMVA
to the State Retirement Payments line in FY 17, and as
such, was removed from all years shown. Finally, not
shown on this slide, but certainly worth noting, is
our ability to garner significant Federal
reimbursement for a relatively small investment...to
levels of 27:1 in Fiscal Year 2015 and 38:1 in Fiscal
Year 2016, a 24 percent gain in Federal funding.
1:37:33 PM
Mr. Duffy moved to slide 5 and addressed line items for all
funds:
Broken out by line item and looking across all fund
sources, we've seen reductions in most categories over
time. In general, our approach to the current fiscal
environment consists of reducing cost and reducing
services. For costs, we've restructured our Alaska
Military Youth Academy's shift schedules, shrinking
overtime by 40 percent; we've turned off utilities at
vacant armories; adopted regional disaster
preparedness conferences to reduce travel costs; and
instituted furloughs on our top executives. For
services, we eliminated production of our award-
winning "Warriors" magazine, held constant our current
number of Veterans Service Officers and reduced their
travel statewide, despite a growing population to
serve; and also reduced preventive maintenance at
National Guard facilities.
Mr. Duffy addressed appropriations for GF only on slide 6:
Looking further at our Components, this slide again
highlights the elimination of GF support to the Alaska
Aerospace Corporation, the transfer of National Guard
benefits out of DMVA's portfolio, and the increase to
AMYA's UGF line based on the transfer from the
Department of Education and Early Development.
Mr. Duffy turned to slides 7 and spoke to appropriations
for all funds:
Similar effects are shown on this slide, looking at
the combination of all fund sources over time.
Mr. Duffy moved to slide 8 and addressed total the total
funding comparison by fund group for all funds:
Broken out by fund group, the increase in years prior
to 2013, in large part, supported the 176th Wing's
relocation to Joint Base Elmendorf-Richardson; again,
the decrement in 2013 is attributed to removal of
federal receipt authority, and further decrement in
2016 to removal all GF support, from Alaska Aerospace
Corporation.
1:39:13 PM
Mr. Duffy spoke to slide 9 titled "Budgeted Position
History":
We wanted to remind the members of the committee that
we've seen an almost 20 percent net reduction in end
strength over the last decade, with the majority of
that effect in only the last three years. However, not
all reductions resulted in decreases in personal
services costs as some were simply clearing unfunded
positions off the books.
Mr. Duffy moved to slides 10 and 11 and discussed
allocation/program summary:
The next series of slides provide additional details
on our allocations or major programs, including
funding levels and types, the number of staff we have
executing, the basis for their existence, be they
driven by the State's Constitution, the Federal
Government, or by State Statute; and also assessments
of their importance to mission and effectiveness. Our
Department's Mission Statement and Key Performance
Indicators are the main basis for these ratings and
assessments. For example, for our Homeland Security
and Emergency Management team, we assessed 100 percent
of organized boroughs responding effectively to events
without State Assistance, while also responding to 100
percent of the requests for emergency assistance we
did receive.
Similarly, our National Guard end strength remained
steady over time and supportive of their mission
needs, we responded to all search and rescue efforts
across the state within three hours and maintained
compliance with inspection requirements. Our Alaska
Military Youth Academy's graduation rate continues to
grow, exceeding 80 percent for both fall and spring
classes over the last three years; and 100 percent of
graduates successfully transitioned to in employment,
follow-on education, or military service over the last
5 years.
1:40:53 PM
Mr. Duffy continued to address allocation/program summary
on slide 12:
Additionally, our Office of Veterans Services provided
assistance to more than 61,000 veterans, active duty,
reserve component members, and family members,
successfully returning more than $105 million in
single one-time payments owed…besting the last two
years combined. The ratings of "important" on
importance to mission for the Local Emergency Planning
Committee (on slide 10) and Alaska Aerospace
Corporation elements, as shown here, are worth
clarification as well. The Local Emergency Planning
Committee line provides funding and technical
assistance to 21 entities across the state for all-
hazard response emergency operations planning,
training, exercise, and outreach preparedness
education.
While it's certainly plausible to consider a
centralized approach to this type of emergency
response, the key question is, in time of emergency,
often with little to no notice, can you get there in
time with a trained and ready workforce, to organize a
community in crisis as they work to react and recover;
whereas, a trained and ready force distributed across
the State, can certainly simplify matters greatly.
Similarly, while the Alaska Aerospace Corporation is
aligned with the DMVA for administrative purposes only
and not necessarily in direct support of our core
mission set, it can and will provide opportunity to be
revenue generator for the State as their operations
continue.
1:42:30 PM
Co-Chair Seaton referred to slide 12 and asked about the
role related to the Alaska Aerospace Corporation. He asked
if it would be better served under the Department of
Commerce, Community and Economic Development (DCCED) or
other. He observed that the department had given the
corporation an "important" rating and that it contained no
undesignated general funds (UGF) funding.
Mr. Doehl replied that the Alaska Aerospace Corporation's
statutory mission was to create aerospace development and
activity in commerce and economic diversification in
Alaska. The department assessed the corporation as being
important to the mission of economic diversification and
growth for Alaska. He noted it was not one of the
department's core missions. Originally the corporation had
been under DCCED prior to being transferred to DMVA for
administrative oversight purposes only. From an economic
development standpoint, the corporation appeared to be
clearly in the DCCED wheelhouse. Conversely, 80 percent of
the corporation's clientele were military launches who
appreciated working with a military entity with similar
understandings of some of their requirements. He remarked
that he could see both sides of the issue and he believed
in the long-term as commercial took more of the
corporation's portfolio, a transfer of the corporation to
another agency was appropriate. He did not believe that
point had been reached yet. He detailed that the
corporation's director Craig Campbell or the vice president
would speak to the finance subcommittee about the issue. He
noted that during the current week there had been another
signing of a launch for the coming fiscal year. He
concluded that the subject was a moving target.
Co-Chair Seaton asked the subcommittee to consider the
issue related to costs. He asked if the corporation
reimbursed the department for administrative costs.
Alternatively, he wondered if the costs were absorbed in
the DMVA budget.
1:45:20 PM
Mr. Doehl answered that the corporation did RSA
[Reimbursable Service Agreement] a small amount for
administrative costs incurred by DMVA; however, the
corporation did the bulk of its finance, budgeting, and
personnel functions directly. He specified that by in large
the public corporation was distinct from DMVA. The
corporation had about $8.8 million in contracts for the
current year, which covered its overhead and extensive
construction and ramp up of activity in Kodiak.
Representative Ortiz pointed to slide 11 and asked about
the Alaska Military Youth Academy (AMYA). He asked if the
academy used half of the department's funding. He asked for
detail about how AMYA worked. Additionally, he wondered if
the academy was the only source of youth military training
in Alaska.
Mr. Doehl replied that AMYA was funded 60 percent GF and 40
percent federal receipt authority from the Federal National
Guard Bureau. He confirmed that the academy was the largest
portion of the department's budget. The department operated
a youth intervention program within DMVA. He elaborated
that the program was the last credible hope for high school
dropouts - there was not an alternative program for kids
who were not finding success in the mainstream.
Representative Ortiz observed there were 450 cadets in the
program. He surmised that students did not necessarily get
into the program by choice, but that it sounded like the
academy was one of the last stops of opportunity.
Mr. Doehl replied that a cadet could not be ordered to
participate in the program by a judge in lieu of going
McLaughlin [Youth Center in Anchorage] or into the Juvenile
Justice Program. The individual had to be willing to attend
the program on their own. He detailed that the program
consisted of a five-month in residence program in a
military style setting (the first two weeks were like
military boot camp) followed by a strict regimen of
academic study, community service, and physical training.
Subsequently, there was a one-year follow up of monthly
check ins with a mentor to confirm they were staying on
track.
1:48:47 PM
Representative Ortiz referred to Mr. Doehl's testimony
about that AMYA graduates had a good job placement rate.
Mr. Doehl answered that during the one-year follow up
academy mentors checked to ensure the graduates were
staying on the track they had committed to. Prior to
leaving the resident program, there was a post-resident
plan in place for each student. A student could return to
their resident high school to earn enough credits to
graduate or go straight into union apprenticeship programs.
The students committed to following through on a set
program, which was part of the resident phase wind down.
The plan discussions were currently underway for students
set to graduate from the program on February 24 [2017].
Representative Thompson remarked that DMVA was responsible
for providing emergency services to communities. He stated
that with the possible deployment of the helicopter brigade
out of Fort Wainwright, there would be a shortfall in the
number of military helicopters available for rescue
missions. He asked if there were functions that crossed
with DMVA and the military. He was concerned about what
would happen when the brigade was deployed in the next
year.
Mr. Doehl answered that the Rescue Coordination Center
responsible for deciding which asset would perform a rescue
mission requiring military aircraft or aviation related
rescues was operated by the Alaska Air National Guard, not
by the military. Most rescues done in Alaska (including by
Fairbanks and south of the range) were done by the Alaska
Air National Guard and some by the Army National Guard and
Coast Guard. The Air National Guard and Army National Guard
would continue to be on hand to execute those missions 365
days per year. The presence at Eielson Air Force Base would
continue to be manned; the HH60 helicopter was located at
Eielson and was available for refueling support and
additional guardian angel pararescuemen for the foreseeable
future.
Representative Thompson thanked the department and was
appeased by the information.
Representative Wilson asked if the department was still
able to get the dropouts from all the school districts. She
knew it had been an issue several years back and wondered
if the issue persisted.
Mr. Doehl responded that [AMYA] Director Bob Roses was
working with the Department of Education and Early
Development (DEED) to reach out to districts. School
districts passed along a list of high school dropouts who
AMYA may be appropriate for.
1:52:15 PM
Representative Grenn shared that he could speak to the
success of AMYA - he had a family member graduate from the
program 19 years back. He thanked the department for the
program. He observed that 16 positions had been eliminated
from AMYA in FY 17. He elaborated that a total of 62
positions had been cut from the department in the past
three years. He asked if another program had seen numerous
positions eliminated or whether the remaining cuts were
spread across the division.
Mr. Doehl answered the department would welcome
Representative Grenn's family member to speak at one of the
upcoming AMYA graduations. He detailed that AMYA was the
department's largest program, budget, and number of
positions, and had taken the brunt of the lost positions
(including occupied positions). He noted that the Alaska
Aerospace Corporation had been substantially downsized at a
rate that was probably greater than AMYA. Due to the
current budget deficit facing the state, the department had
gone to the National Guard Bureau to learn how many
positions it needed to retain eligibility for federal
reimbursement funding. The answer had been 66 positions and
1 spare. The department had gone down to that number and he
shared that Director Roses had done a commendable job in
shift reform and other practices to make it work. He stated
that when the flu went around there were numerous
individuals putting in overtime, but they were making it
work. The program was currently 10 percent above its
enrollment over the preceding year with the addition of the
pre-apprenticeship program.
1:54:12 PM
Representative Kawasaki spoke to the capacity at the youth
academy. He asked if the program capacity was driven by the
number of UGF funds, space, or teachers.
Mr. Doehl replied there were different tiers or sizes of
programs they could go to. The infrastructure was available
to increase the program size; however, the need for
additional staff would be the biggest limitation. He
relayed that Director Roses could follow up on the question
during a subcommittee meeting later in the week. He
believed it was 16 to 20 additional cadets. The department
believed the current program size was a nice sustainable
size.
Co-Chair Seaton thanked the department for its
presentation.
1:55:45 PM
AT EASE
1:58:10 PM
RECONVENED
^FY 18 BUDGET OVERVIEW: UNIVERSITY OF ALASKA
1:58:19 PM
JIM JOHNSON, PRESIDENT, UNIVERSITY OF ALASKA, provided a
PowerPoint presentation titled "FY18 Budget Overview, House
Finance Committee" dated January 31, 2017 (copy on file).
He planned to share contextual remarks about the change the
University was undergoing and leading. He addressed the
university's mission on slide 2:
The University of Alaska inspires learning, and
advances and disseminates knowledge through teaching,
research, and public service, emphasizing the North
and its diverse peoples.
Mr. Johnson explained the university's mission had roots in
the Morrill Act of 1862. He detailed that the University
was a land, sea, and space grant university - missions the
University was very proud of. He explained that the
teaching, research, and public service mission had deep
roots in American public higher education. He elaborated
that there was commonness with all other land grant
universities in the country, but uniqueness reflected in
the University's focus on the north and on the state's
diverse peoples. He believed it was critical that a
university respect the diversity of its people and to hold
high the diversity viewpoints.
Mr. Johnson turned to slide 3 and addressed the
constitution and statutes pertaining to the university. The
University was specifically identified and charged in the
Alaska Constitution. He noted that 100 years ago in May,
the territorial legislature had established the Alaska
Agricultural College and the School of Mines. The
University of Alaska had been established in 1935. He
acknowledged the foresight of the state's founders as they
began creating a university as a way to build the state.
The University took that foresight seriously every day. He
pointed out that under the Alaska Constitution Article
7(3), the Board of Regents "shall, in accordance with law,
formulate policy and appoint the president of the
university."
2:01:39 PM
Mr. Johnson advanced to slide 4 and informed the committee
that the university's mission was to serve the entire
state, including Ketchikan, Kotzebue and everywhere in
between. He shared that when he traveled outside Alaska for
meetings with other university presidents he explained that
the University touched the Atlantic and Pacific; it had a
broad geographic distribution, which included campuses in
South Carolina, Iowa, South Dakota, and Oklahoma. The chart
did not reflect all locations where research was underway
across the state. Additionally, there were students across
the state participating in distance education and e-
learning technology degree programs from the major
campuses.
Mr. Johnson spoke to an organization chart on slide 5. The
Board of Regents appeared at the top of the chart followed
by the University president. He reminded the committee the
university's mission was twofold. The first was to ensure
the state's needs for higher education were at the top of
everything the University did. The second was to provide
centralized, cost-effective services to its campuses (the
three main campuses were represented at the bottom of the
slide). The mission at the campuses was to provide for
regional, workforce, and other educational needs. He noted
that each of the universities also had statewide
responsibilities. He cited nursing at the University of
Alaska Anchorage (UAA), research at the University of
Alaska Fairbanks (UAF), and teacher education at the
University of Alaska Southeast (UAS) as examples.
Mr. Johnson spoke briefly to the University's three-part
mission on slide 6, which included student instruction,
research, and service. He moved to program areas on slide
7. He pointed to the student instruction row and
highlighted the $635 million total, which was 71 percent of
the department's total budget. He noted the $1.00 UGF to
$2.45 non-UGF ratio. He moved to the research program area,
which accounted for 21 percent of the total budget. He
remarked on the $1.00 UGF to $5.40 non-UGF ratio. The
service program area made up 8 percent of the total budget.
The ratio was $1.00 UGF to $2.42 non-UGF. The $325 million
UGF allocation from the legislature turned into $899
million total. He did not plan to go into detail on the
number of students served, publications, high-demand
degrees produced, and Alaskans touched by the services
provided by the University.
2:04:45 PM
Mr. Johnson spoke to the university's target on slide 8.
The University was looking out into the future. He shared
that by 2025, 65 percent (25 percent baccalaureate and
above and 40 percent career technical degree or training)
of Alaska jobs were expected to require some postsecondary
education degree certificate or license. The Alaska
Commission on Postsecondary Education (ACPE) had adopted
the goal, as had the University Board of Regents. The goal
was very similar to one in other states - they realized
that to be economically competitive in the U.S. and
nationally it was important to step up the production of
top-quality talent. The University's current attainment was
37 percent. There was quite a gap the university was
striving to meet.
Mr. Johnson spoke to developing a stronger culture of
education in Alaska, which was critically important for the
state's future. He shared that the University was working
to partner with K-12 and employers to create an aligned
system of education and employment, which fed back into
education and student success going forward. He noted the
very high correlation between education and income, health
status, and civic participation. There was an inverse
relationship with health cost and corrections experience.
2:06:51 PM
Mr. Johnson addressed measurable goals on slide 9. The
University sought to broaden access to higher education for
Alaskans by looking at high school graduates enrolling at
the University. He stressed that the much larger need was
among Alaskans who did not graduate from high school. The
University also considered the large group of Alaskans who
chose not to pursue higher education. The state ranked
number one in the country in the percentage of population
with some college and no degree. He explained that it had
been possible in the economy over the past 40 years, but it
would be a difficult condition for the state looking
forward. The goal was to reach out to the large market
segment to help individuals advance through higher
education.
Mr. Johnson continued to address slide 9. He relayed that
the University would continue to lead in research, not only
in research federal agencies found it interesting to invest
in. The University placed a strong emphasis on research
relevant to Alaska (e.g. the Alaska Center for Energy and
Power, Institute of Social and Economic Research (ISER),
the Center for Alaska Native Health Research, the Institute
of Northern Engineering, and the Institute of Arctic
Biology). The University continued an emphasis on workforce
development. He elaborated that the University continued to
produce nurses, particularly in rural Alaska. He relayed
that the state imported 70 percent of the new teachers
hired annually in Alaska - producing only 30 percent of the
state's teachers was not sustainable for the long-term
educational system in Alaska. He mentioned fisheries
technicians, process technicians, and individuals in the
maritime trades. Looking forward to the creation of a
knowledge economy in Alaska included continued efforts
towards IT jobs in the STEM [science, technology,
engineering, and math] fields and other.
Mr. Johnson spoke to the commitment to alignment between
the state's K-12 system and the university made by the
University Board of Regents and the State Board of
Education (the two boards had founded a subcommittee). He
shared that he and the commissioner met regularly to ensure
alignment - it would take time, but there was a strong
commitment. The commissioner's top priority was readiness
for work or postsecondary education, and the University's
top priority was teacher preparation for high-quality
teachers in the numbers the state needed. The last
measurable goal on slide 9 was to diversify revenues and
moderate reliance on state general funds. The University
relied heavily on the legislature, but he believed given
the state's fiscal situation, its reliance on the
legislature was too heavy. The University had developed a
long-term financial framework approved by the Board of
Regents, allowing the University to moderate its ask of the
legislature. The plan involved increasing tuition gradually
over time and relied on increasing enrollment over time.
2:10:24 PM
Mr. Johnson spoke to strategic pathways on slide 10. He
detailed that one year earlier the Board of Regents had
approved the structure (shown on slide 10) as the process
it would undergo to restructure the University to meet the
state's needs for higher education long-term with a
shrinking budget. The structure included the University's
mission, objective, core principles, and its strategy. The
structure also included the three campuses and their unique
strengths to the University as a whole. The bottom of the
structure showed the common foundation for the entire
university, including general education requirements (e.g.
teacher education, nursing education, and Alaska Native
studies). The individual campuses showed specialty areas
based on strengths of the universities where redundancy
could not be afforded.
Mr. Johnson spoke to initial outcomes/directions of Phase 1
of the strategic pathways process (slide 11):
· Consolidation of 3 research administration offices
into 1;
· Consolidation of 3 procurement offices into 1;
· Consolidation of information technology (IT) functions
at each of the universities, with governance at
Statewide;
· Collaboration and efficiencies between the two schools
of engineering;
· Collaboration between the UAA and UAF management and
business programs;
· Consolidation of the UAS management programs into the
School of Arts and Sciences;
· Consolidation of three schools of education into one
at UAS, serving all of UA
Mr. Johnson elaborated on slide 11. He detailed that 20
organizational units had been involved in Phase 1 and had
been reduced to 14 (one-third reduction in the number of
units). Phase 3 had been kicked off the previous day in
Anchorage - over 250 faculty, staff, and community members
had been involved in the process (thousands of comments had
been submitted by the public and members of the academic
community to the Board of Regents in the process). He
relayed it was a major step forward and was difficult. He
explained that the University's cycle was generally seven
years. The process was moving very quickly - there was a
sense of urgency given the state's fiscal situation, but
they were trying to balance involvement, inclusiveness, and
transparency with the various stakeholders who gave
themselves to the university and who relied on the
university for education.
2:13:31 PM
Mr. Johnson turned to a 10-year glide path framework on
slide 12. He explained that the framework began in FY 16 at
the GF allocation of $350 and asked where the University
should be ten years out in terms of a reasonable ask from
the state. The glide path benchmarked the University to the
national average GF allocation per student plus additional
funds given for Alaska's geography and a cost of living
factor. He pointed to the total of $312 million in 2025,
which represented a gradual glidepath from current funding
levels to the 2025 funding level. It would require a
gradual increase in tuition. The University's current
tuition was 0.84 of the western states' average; the goal
was to increase it to 1 by 2025. He stressed that
enrollment was key.
Mr. Johnson explained that business as usual in terms of
recruitment, retention, and attainment of students would
not make the framework work. He stressed the importance of
doing new things in terms of recruiting and retaining
students, including the 115,000 he had mentioned earlier.
He underscored making it convenient for the individuals to
benefit from educational programs provided by the
University. He mentioned philanthropy and research as well.
He pointed to the red line on slide 12, which represented
the "hard landing" the University had experienced the
previous year and the continuation of the hard landing at
$325 million. The governor's proposal was to continue at
$325 million; the Board of Regent's proposal was to move up
to the $341 million figure to get back on the glide path.
2:15:35 PM
Mr. Johnson spoke to slide 13 and addressed FY 18
governor's budget highlights. The governor's request was
$325 million UGF, a reduction in receipt authority, and a
tuition increase. He complemented students who had
supported a 5 percent tuition increase for two years in a
row. Additionally, students in engineering and management
at UAF and UAA had voluntarily agreed to tuition surcharges
in order to ensure high-quality education. The governor's
proposal also included a reduction of 225 unfilled
positions.
Mr. Johnson spoke to FY 15 to FY 18 state budget reductions
on slide 14. The budget had been $375 million in FY 15,
$351 million in FY 16, and $325 million in FY 17 and FY 18.
The Board of Regent's proposal at $341 million would still
represent a 10 percent reduction from FY 15. He addressed
budget reduction impacts. The University had cut over 900
faculty and staff positions since FY 15. Numerous faculty
and staff had seen schedules reduced from full-time to
part-time and faculty workloads had increased. When he had
started at the University there had been 478 degree and
certificate programs; at present over 50 of those programs
had been suspended (with a likelihood of elimination) or
eliminated. The University did not believe it was
responsible to admit additional students if it looked like
a program would be eliminated. He stated that the Board of
Regents was supportive of the effort. Additionally, there
were fewer sections and larger class sizes.
Mr. Johnson discussed administrative function consolidation
on slide 15. He detailed that 14 percent of the
University's overall GF had been reduced and 29 percent of
the positions statewide had been reduced. Some learning
centers had been closed throughout the state and there had
been a dramatic reduction in faculty travel. He noted that
some of the travel was done with restricted research funds.
He detailed that while faculty and staff were careful about
the travel they took on restricted funds, it was often
required by grants and contracts. However, UGF travel funds
had been seriously constrained.
Mr. Johnson relayed that there had been a reduction in
research faculty start-up/seed money availability - money
the University used to recruit faculty (including setting
up a lab and possibly securing them with some graduate
students. He explained that the economy frequently operated
in a counter cyclical way to the rest of the country. As
the University of Alaska was losing funding, other
universities across the country were increasing funding.
Additionally, the University was the world leader in Arctic
research, but the subject had become popular at other
universities, which was increasing the level of
competition. The University's ability to compete in that
competitive market was constrained by reduced startup
funds. The University had negotiated a $1 million per year
reduction in its telecommunication contract - it would
continue to push on that contract. The University had over
400 buildings across the state and it was in the process of
consolidating onto its campuses, getting out of leases,
selling buildings, and entering discussions with private
partners on renovation, facility maintenance, and other
initiatives.
2:20:13 PM
Mr. Johnson shared that the Board of Regents had
reallocated funds to invest in strategic priorities (slide
16) in order to be positioned strong for the state's future
when emerging from the current financial challenges facing
the state. The categories on slide 16 reflected initiatives
in the board's budget request, in addition to areas the
board had reallocated to the previous year. Categories
included the recruitment of students (especially students
with some college and no degree) and expanding localized
programs and retaining students. He highlighted "intrusive
advising," which had been successful nationwide - it used
predictive data analytics and intrusive advising. He used a
hypothetical example, where data pointed to that if someone
showed up late three times, it was likely they would drop
out. Under intrusive advising, the second time the person
showed up late, the school would get on them to make sure
they got to class.
Co-Chair Seaton remarked facetiously that he may use the
method in committee.
Mr. Johnson continued addressing slide 16. The University
was committed to excellence; therefore, it wanted to
continue investing in scholarship opportunities and honors
college and to bring top students in. The board was working
to expand programs to meet the state workforce goal of 65
percent by 2025. He spoke about facility maintenance - the
regents had reallocated an additional $10 million the
previous year. He specified that the University had not
received any money in the capital budget, which was
typically the vehicle used to support facility maintenance.
Mr. Johnson spoke to research and stressed the importance
of continuing to lead in Arctic research - the area
represented a major workforce in Alaska and a key part of
the state's knowledge economy. He relayed that it enhanced
the quality of learning in classrooms and in labs across
the state. The research contributed to problem solving -
work at ISER [Institute of Social and Economic Research]
and ASAP [Alaska Stand Alone Pipeline] was practical and
relevant to Alaska. He mentioned economic development and
diversification. He noted that Silicon Valley and tech
companies were located in the California Bay Area because
of the close proximity to Berkley, Stanford, and higher
other higher education institutions. The University was
happy about increases in disclosures and patents - its
budget request included funds to partner with the private
sector to create incubators at UAF, UAA, and UAS. He
stressed the importance of a partnership with K-12. He
elaborated that the preceding year the regents had
reallocated money to support ANSEP [Alaska Native Science
and Engineering Program], teacher education, the mentorship
program (a key criterion for teacher success), and dual
enrollment.
2:24:16 PM
Mr. Johnson spoke to slides generated by the Legislative
Finance Division (LFD) beginning with slide 17. He noted
the chart indicated that the University's share of total
agency operations had tailed off a bit in recent years. He
moved to a bar chart on slide 18 and pointed out that
personal services and services made up 84 percent of the
University budget. The largest expenditure year had been FY
14, which had decreased substantially in future years. The
largest single area of reduction was in personal services.
He noted that the miscellaneous line item had gone up due
to an increase in debt service had increased; the
university had the ability to bond and had done so to
finish the engineering building in Fairbanks. The facility
would be completed and operational by the beginning of the
coming year.
2:25:55 PM
Mr. Johnson turned to slide 19 showing the GF appropriation
over time. He believed they were close to a long-term goal
of the legislature, which was a 50/50 split between UGF and
DGF. Slide 20 reflected all funds - the highest funding
year had been FY 15 and it had decreased to $887 million in
FY 18. He moved to a total funding comparison by fund group
on slide 21, which included federal, other state funds,
DGF, and UGF.
Co-Chair Foster liked the comments about a community being
strengthened by a university because it attracted quality
businesses like Stanford in Palo Alto. He referenced Mr.
Johnson's testimony about the average per student cost in
western states. He asked if it was adjusted for Alaska's
higher costs. For example, maybe the number was $100 in
Oregon, but Alaska's costs were higher.
Mr. Johnson corrected that the information he had discussed
was the tuition rate, not cost per student. The information
was not adjusted by inflation. He confirmed that some
states in the western region had a relatively low cost of
living, whereas others had a high cost of living.
Co-Chair Foster pointed to slide 15 and asked about the
elimination of 900 jobs. He asked if there had been people
in the eliminated positions.
Mr. Johnson replied that most of the positions had been
filled. He would follow up with the data.
Representative Wilson stated there had been legislative
intent language in the budget the previous year. She asked
if any of the concerns had been addressed, such as a report
on the cost of athletics and the amount charged to students
for the programs even when they did not participate.
Mr. Johnson answered in the affirmative. One of the seven
areas in phase one of strategic pathways was
intercollegiate athletics. He believed the University was
still in the process of replying to the formal request from
the committee. He elaborated that $13 million GF (tuition,
etcetera) went into the two intercollegiate athletic
programs and roughly $3 million from sponsorships, ticket
sales, etcetera. The Board of Regents was concerned about
the issue, but at the same time, it wanted to maintain the
value of the athletic programs at the two campuses. He
remarked that the issue was difficult and controversial.
The regents decided to seek a waiver from the NCAA
[National Collegiate Athletic Association] - one team
required ten; the University had asked the NCAA for a
waiver of the ten-team minimum rule. He elaborated that
there were 13 teams in Anchorage and 10 teams in Fairbanks.
The request had been for 9 teams in Anchorage and 8 teams
in Fairbanks. He noted that had been the old minimum rule.
The NCAA had declined to consider the University's request
and had told the it to do what it wanted and then ask the
organization for forgiveness. The challenge with that
method was the risk of sanctions against the entire
program; the regents had decided not to incur the risk.
Alternatively, the University was going out to boosters and
supporters of athletic programs who had made their voices
loud and clear. The goal was to increase those donors share
of financial support to the programs.
2:30:50 PM
Representative Wilson did not see graduation rates in the
presentation. She wondered if there had been an increase
from utilization of the Alaska Performance Scholarship
(APS). The previous year there had been concern that
numerous students were eligible, but were not attending
[the University].
Mr. Johnson answered the APS and the Alaska Scholars
Program had improved the university's graduation rate.
There was currently a six-year completion rate of about 30
percent at UAA and UAS and about 45 percent at UAF. Much of
the increase, at UAF in particular, resulted from the
scholarships.
Representative Wilson commended UAS for its program that
looked at why people dropped out to try to get them back
in. She was glad to see an increase in e-learning. She
asked how competitive the e-learning program was. She
referenced Arizona and New Hampshire as states competing
with Alaska for e-learning services.
Mr. Johnson answered he would follow up.
Representative Kawasaki spoke to the key indicators from
the University source book. He observed that graduation
rates had increased about 16 percent from FY 10 to FY 14.
The same Office of Management and Budget indicators showed
an increase of 13 percent when including the past year. He
asked why the numbers had fallen from 32.2 percent to 29.4
percent in the past year.
Mr. Johnson replied that he would follow up.
Representative Kawasaki stated that anyone taking in
college classes who did not take a prerequisite class in
the fall in their second or third year became out of
sequence. He pointed to slide 15 and asked if graduation
rates were impacted when fewer sections were taught.
Mr. Johnson answered that it could. He noted that the
University was stepping up its e-learning programs to make
sure there was access [to courses]. He shared that around
90 percent of the University's graduates took an e-learning
course at some point. He elaborated that half of the credit
hours at UAS came from e-learning. As classroom sections
were decreased, the University was trying its best to
provide sections online at present and going forward.
2:34:23 PM
Representative Kawasaki pointed to slide 12 and remarked
that the 10-year glide path looked steep. He mentioned
adjusting for inflation. He wanted to see the plan for the
University's level (not just state support). He shared that
he had attended the University and he remarked that the cut
in state support appeared to be radical. He wanted to
ensure the funds were being made up in other ways. He knew
students had been doing a good job paying their way, but he
feared the costs to attend the University at some point
became too high for most students.
Mr. Johnson responded that the information was in the
University's financial framework; it assumed that business
as usual would not suffice in terms of recruitment,
retention, and attainment of students. He stressed the
importance of driving enrollment, which would benefit the
University financially and to meet the state's workforce
goals.
Representative Pruitt commended the University as the
legislature had been pushing aggressively in recent years.
He understood the situation had not been without challenges
and internal pressure. He remarked that there had been no
other instance of a department telling the legislature that
it was planning for less state money on a gradual scale. He
believed there were only two universities receiving general
funds (including the University of Alaska). He asked if the
university had the mechanisms and ability to start to
supplant general funds with a donor base, alumni base, or
other. Alternatively, he wondered if the legislature should
anticipate substantial state support beyond 2015 despite
ways (i.e. a land grant) the state has attempted to have a
self-sustaining university.
2:37:36 PM
Mr. Johnson agreed it had been a tough time. He shared that
the University team had done a tremendous job doing things
it had not had to do in many years. In terms of the
university's capacity to make the model work, philanthropy
needed to be part of the solution. He detailed there was
tremendous opportunity to increase alumni support. There
was a new president of the University's foundation; the
foundation was in the early stages of a long-term campaign
to build up support from alumni and other supporters.
Research was another area that was critically important -
he noted it had restricted funding. He characterized the
University as a land grant university without the land -
only Delaware had received a smaller land grant.
Mr. Johnson relayed that he had considered where the
University would be at present if it had obtained the
360,000 acres it should have received under the Morrill Act
as opposed to the 110,000 it had received. He questioned
whether the University would be more self-sustaining as
other state universities had been able to do. The
University would be talking about the issue as a priority
during the current legislative session. He noted there was
a constitutional issue about the legislature's ability to
appropriate land to the University; however, the University
had found a path it believed could succeed and it would be
working at the federal level to create a federal framework
the state could contribute land to. He knew that a number
of the committee members had been in the legislature in
2005 when the state had granted land to the University, but
the supreme court had determined it unconstitutional in
2009.
Mr. Johnson noted the federal framework would not show
immediate results, but it would be part of the solution 10
to 20 years out. The real driver would be enrollment. He
stated that Arizona State University was advertising
constantly in Alaska because there was a market. He was
tired of hearing the ads. He hoped committee members were
hearing some of the University of Alaska ads that were
airing. The foundation had provided private funding to
support a public awareness campaign to drive interest in
higher education in Alaska, in addition to targeted
approaches to individuals with some college.
2:40:41 PM
Representative Pruitt believed one of the ways to encourage
enrollment was to ensure the ease of utilization of the
University. Specifically, the University had studied the
accreditation of the entire University was possible. He
remarked there had been a feeling that perhaps it may not
be the direction at the current time, although it appeared
it may be possible in some cases such as with education at
UAS. He asked if there was an effort to utilize the method
with some of the main programs. He used a person pursuing
an engineering degree in Juneau as an example - there was
an ability for a student to begin the degree in Juneau and
complete it at UAF. He asked if it was something the
university was able to do and encourage.
Mr. Johnson answered that the University had done an
accreditation study and it had been considered seriously by
the Board of Regents. The issue had been shelved at the
present time. There was a view that much of the benefits of
consolidation could be achieved without going after the
separate accreditations. There were very few systems in the
country operating under a single institutional
accreditation. He assured the committee that the University
stayed in touch with accreditors. He highlighted that even
in phase one of the pathways process, the University had
been able to consolidate research, administration,
procurement, education, and other areas (all were
consistent with three institutional accreditations). He
believed the University had sufficient freedom within
three, but the regents had been clear that the study
remained an option at some point. The University was
working hard within the three accreditations to get the
benefits of specialization of its campuses, to reduce
redundancy, and increase consistency of processes and
general education requirements (e.g. calendars and forms).
2:43:37 PM
Representative Ortiz asked about the consolidation efforts
in the University's education program. He shared that he
had been a school teacher for 32 years prior to becoming a
legislator. He had worked with different students coming
out of the University's education program. He relayed it
had been a positive experience. He referenced the
consolidation move. He referred to Mr. Johnson's testimony
on the goal of increasing the number of teachers trained in
Alaska (currently the number was approximately 30 percent
trained in Alaska). He wondered if there was a danger of
decreasing the availability of the education training for
much of the state if the subject was consolidated to UAS.
Consequently, he wondered if the number of teachers trained
in Alaska would be reduced.
Mr. Johnson replied that the plan was not to move any
faculty from UAA or UAF; it was simply to have the
administrative leadership of a new college of education
based at UAS. There would be one dean instead of three and
one school of education bureaucracy. The goal was access in
addition to cost effectiveness and quality. The same goal
existed for the UAA nursing program that had faculty and
students across the state. There were many details to work
out in terms of tuition sharing and what programs would be
offered.
Mr. Johnson reported there were currently 25 education
degree programs across the system. He questioned whether 25
programs were necessary and surmised the answer was likely
no. The University was developing a process, with
substantial faculty involvement, to review the issues.
There were issues of accreditation as well. He mentioned
graduate degree programs, research, and etcetera. The idea
was to make the University's programs available no matter
where students were located. There was a successful
distance delivery program where students came to Southeast
to do short residencies (three weeks for a certificate and
six weeks for a master's in teaching) with the rest of the
year involving student teaching and taking online courses.
He stressed that access was key.
Representative Thompson pointed to slide 13 and asked for
information on the reduction of $17 million in receipt
authority.
Mr. Johnson did not believe it had an impact on the
University. He relayed that the University had some excess
receipt authority. He continued that if the University
ended up with a large research grant that may exceed its
receipt authority there were provisions to address the
issue with the legislature.
Representative Grenn moved to slide 16 related to strategic
investment priorities. He pointed to words like "extend
recruitment," "extend programs," "grow," and "sustain" all
in the face of GF reductions in recent years. He turned to
the University's 10-year plan on slide 12 that included a
$16 million increase over the governor's proposed budget.
He asked if it was a springboard to set the University up
for the decrease. He asked for detail.
2:48:01 PM
Mr. Johnson answered that the details were at a high level
on slide 16. He believed about $4.4 million of the $16
million was in recruiting and retaining students and needs-
based aid. He emphasized driving outreach to students -
much less waiting for students to show up on the
University's threshold. He continued that it did not
necessarily mean students moving into dorms and parking at
campuses, but taking programs online. He stressed the
distinction between courses and programs - the goal was
enrolling students in programs of value to students in the
workplace.
Co-Chair Seaton highlighted areas for the subcommittee to
address including indirect expenditures. The University had
a senior free tuition program, which accounted for over 10
percent of all courses in some campuses. He was interested
to see where the tuition load was offset. He had heard that
seniors attending courses for free were more likely to drop
classes which ran down course completion rates. He
mentioned education tax credits of 100 percent for the
second $200,000. He believed it was probably unacceptable
to go forward with redirection of money. He wanted to know
the implication for the University. Additionally, the prior
year the legislature had identified that cuts should be
made to non-core items. He referenced the University's
mission and surmised that if cuts were made, it did not
appear that intercollegiate sports were included in the
mission. He asked if students had been made aware of the
amount of mandatory fees they were paying and whether
students had voted on their willingness to pay the fees and
$13 million directed to the program.
Vice-Chair Gara remarked that some high-profile professors
had left the University who had said they did not see a
commitment to the University. He referenced Professor
[Frank] von Hippel who had written an op ed. He asked if it
was a significant issue for the University and whether it
was impacting Alaska student interest.
Mr. Johnson knew of a few cases, but he had not seen a fast
rush to the doors. There may be personal circumstances
involved as well as professional circumstances. He was not
aware of any of that. He relayed that morale was currently
challenged within the university, which impacted public
support. He elaborated that it took seven positive messages
to overcome one negative message. He believed that
continuing to focus positively on the future and growing
the University would get it through the rough patch. He was
confident that individuals who were committed to Alaska and
it success would stick it out.
2:52:54 PM
AT EASE
2:58:15 PM
RECONVENED
^FY 18 BUDGET OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY,
AND ECONOMIC DEVELOPMENT
2:58:15 PM
Co-Chair Seaton welcomed the commissioner.
FRED PARADY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT (DCCED), relayed that
Commissioner Hladick was in Washington, D.C. attending
hearings on the Affordable Care Act (ACA) and working with
Senator Lisa Murkowski in the Health, Education, and Labor
Pension Committee. He introduced department staff. He
provided a PowerPoint presentation titled "Department of
Commerce, Community and Economic Development, Department
Overview to the House Finance Committee" dated January 31,
2017 (copy on file). He reviewed the department's mission
to promote a healthy economy, strong communities, and
protect consumers across Alaska.
Mr. Parady remarked on the diversity of the department's
work. For example, DCCED licensed a gamut of professions
including doctors, pawn brokers, acupuncturists,
veterinarians, midwives, and morticians. The department
trained rural residents to maintain their local utility
systems; financed a wide range of infrastructure projects
through Alaska Industrial Development and Export Authority
(AIDEA) or the grant program in the Division of Community
and Regional Affairs (DCRA); loaned fishermen money to buy
boats; and worked to hold down the cost of health
insurance. The department had a broad ranging mission, but
together the activities created a framework for a strong
economy. The department accomplished its mission through
its agencies and focused on consumer protection, economic
growth, affordable energy, and strong communities.
Mr. Parady addressed an organizational chart on slide 3.
The blue boxes represented the department's key divisions
including the Division of Administrative Services; the
Division of Banking and Securities; the Division of
Community and Regional Affairs; the Division of
Corporations, Business and Professional Licensing
responsible for licensing approximately 210,000 entities
(one-third business, one-third corporate, and one-third
professions); the Division of Economic Development; and the
Division of Insurance. The bottom of the slide included the
department's six corporate entities.
3:01:05 PM
Mr. Parady continued to address an organization chart on
slide 3. The corporate entities included the Alaska Energy
Authority (AEA); AIDEA; the Alaska Gasline Development
Corporation (AGDC); the Alaska Seafood Marketing Institute
(ASMI); the Alcohol and Marijuana Control Office; and the
Regulatory Commission of Alaska (RCA). He noted the
entities were represented with a dotted line on the chart
because they were each controlled by a board appointed by
the governor and confirmed by the legislature.
Mr. Parady turned to a LFD chart on slide 4 and directed
attention to the language in a red textbox. He explained
that DCCED operations were slightly below 2008 levels if
the following programs were excluded: $55 million
appropriation to the Reinsurance Program the past June
[2016] in Alaska Comprehensive Health Insurance Association
(ACHIA) and a Power Cost Equalization (PCE) increase
estimated at $12.5 million since FY 08. He explained that
the ACHIA appropriation had occurred the past session to
stabilize the individual Alaskan insurance market. He
detailed there were 23,000 Alaskans insured in the
individual market and roughly two-thirds were subsidized
under ACA. The one-third not covered by the ACA had
insurance rates exceeding their mortgages. The
appropriation successfully stabilized the individual
market, which was down to one carrier, and the rate
increases were 7.3 percent instead of the anticipated 42
percent. He acknowledged that it would be an ongoing
subject of discussion during the current session.
CATHERINE REARDON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, addressed slide 4. The chart showed the
department's total GF (UGF and DGF) over a ten-year period.
She detailed that DGF included license fees, which entirely
fund most of the department's regulatory agencies. She
continued that PCE payments, revolving loan funds, and the
Reinsurance Program were among other sources. The
department had seen the most dramatic UGF reductions of any
department with a drop of 71 percent since FY 15, from
$40.5 million to $11 million in the current budget request.
The far right two columns reflected almost entirely DGF.
Representative Wilson pointed to a note on the left of the
slide pertaining to $4 million for QTA contracts. She asked
what a QTA contract was.
Ms. Reardon answered that it stood for Qualified Trade
Association; the $4 million was for the Alaska Travel
Industry Association (ATIA) tourism contract. She moved to
a breakout of the department's budget by line item on slide
5, which showed where significant changes had occurred over
the past decade. While there was some personal services
growth, most was attributable to inflation and the cost of
doing business. The department had been assigned a
significant number of new duties since FY 08, including the
addition of AGDC, which accounted for 26 of the positions
in the FY 18 budget; the Alcoholic Beverage Control (ABC)
Board, which had become the Alcohol and Marijuana Control
Office (AMCO), came to DCCED in 2013 and accounted for 21
positions at present; the department had five new licensing
programs and new licensing responsibilities as well. Growth
in the new program areas had been offset by reductions in
PCNs in other areas; therefore, the department had been
able to hold to a net decrease of one position since 2008,
despite the new programs it had taken on.
Ms. Reardon relayed that the grants line was the largest
item in the FY 18, which primarily consisted of three
areas: $55 million for the Reinsurance Program that started
in FY 17, $37.8 million for PCE in FY 18 (the number had
been $26.7 million in FY 08), and $14.1 million in revenue
sharing through the national forest receipts payment in
lieu of taxes and fisheries taxes programs. The community
assistance program was administered by DCCED, but not
reflected in the budget because it was funded through
statutory language.
3:06:47 PM
Ms. Reardon turned to slide 6 and continued to address LFD
charts. The chart illustrated that DCCED had seen numerous
program changes and special projects over the past decade.
The agency was dynamic with many different areas of
expertise. She highlighted the green line representing PCE
estimate, which was currently $37.8 million for FY 18. The
black line reflected the Division of Insurance's budget,
which was consistent until FY 17 when the Reinsurance
Program had been added. The spike in the red line was
reflective of the AGDC implementation. She relayed that a
one-time UGF appropriation had been made for AGDC startup
[in FY 11]. She detailed that initially AGDC had been
housed under the Alaska Housing Finance Corporation (AHFC)
and had been transferred to DCCED in FY 14.
Ms. Reardon continued to address slide 6. The orange line
represented ASMI; in FY 15 ASMI's fish tax receipts had
been reclassified from GF to "other" funds to reflect that
they were collected for a specific purpose and did not
intermingle with GF. Since FY 15, ASMI's UGF had declined
significantly. The organization only had $1 million in the
FY 18 budget, which it would use to match a competitive
federal grant application for international marketing. The
purple line for the Division of Economic Development and
the teal line for Tourism Marketing were related. She
expounded in 2016 tourism funds had been moved from the
Division of Economic Development budget to their own
appropriation for easier tracking. There were no tourism
marketing funds in the proposed FY 18 operating budget;
however, there were $3 million in one-time capital funds
($1.650 million in vehicle rental taxes and $1.350 UGF).
3:09:32 PM
Ms. Reardon moved to a chart on slide 7 showing
appropriations within DCCED (all funds). The bulk of the
department's programs were small and steady along the
bottom of the chart, with outliers she had spoken to
appearing in the middle and top of the chart.
Representative Guttenberg observed that LFD must have had
fun developing the slides for DCCED.
3:10:07 PM
Ms. Reardon moved to slide 8. She pointed out the
department had a large number of statutes - too many to fit
by number in the right column. The statute numbers were
available online as part of each division's budget packet.
Slide 8 included the Commissioner's Office, the Division of
Administrative Services, and the state facility rent
components. The state facility rent component paid for
department office space in state-owned buildings. The
number did not reflect the department's total cost of
office space, but it was where lease costs were billed
first.
Ms. Reardon communicated that the department had been
making concerted effort to contract and consolidate its
space to reduce costs and allow agencies to better manage
budget reductions. The department was contracting in Juneau
onto the 9th floor of the State Office Building (SOB),
which had been DCCED for the past 25 years; the department
was trying to move back into that footprint. In FY 15,
DCCED had saved 7,000 square feet by moving the Division of
Banking, the Division of Community and Regional Affairs,
and alcohol licensing from external space to the SOB. In FY
17, the Division of Economic Development was moving from an
8,000 square foot leased space in the valley to the SOB.
The department was also working to consolidate into its
existing space in Anchorage. She detailed that when the
department had taken on the ABC Board/AMCO it had brought
the agency from offsite into the existing footprint in the
Atwood Building.
Ms. Reardon spoke about the Banking and Securities Division
on slide 9. The division was part of the department's focus
on consumer protection. In addition to ensuring that
financial services were secure and fair, the department's
consumer protection agencies helped set the level playing
field required for a successful Alaska economy. The
division was completely funded by fees and it contributed
$12.6 million to GF. She pointed to an asterisk at the
bottom of the slide and relayed that most DCCED agencies
were a single RDU [Results Delivery Unit] and had a single
component. She explained that the slides provided a
breakdown of division subprograms; however, the department
was not budgeted in that way. Therefore, the funding
provided on the slides was an estimate.
3:13:27 PM
Ms. Reardon moved to slide 10 and addressed the Division of
Community and Regional Affairs. The division had two RDUs
and offered extensive and varied services. The division was
a constitutionally required function. Article 10, Section
14 of the constitution identified that there would be an
agency to advise and assist local governments.
Additionally, the Local Boundary Commission was created in
Article 10, Section 12. She turned to the Division of
Corporations, Business, and Professional Licensing (CBPL)
Division had been highlighted by Mr. Parady. The division
had three primary functions including business licensing,
registering corporations, and professional licensing. The
slide included a list of the 43 professional licensing
programs responsible for licensing 70,000 individuals
(primarily Alaskans). She noted that professional licensing
paid for itself and carried forward revenue collected from
regulated professions year-to-year. Business, Licensing and
Corporations was also self-sufficient and contributed $7
million to GF above and beyond the costs of regulation.
Ms. Reardon moved to slide 12 and relayed that the Division
of Economic Development had two RDUs reflecting two
distinct activities. The first was economic development,
responsible for economic growth. The component had lost 64
percent of its UGF over the past two years and had shrunk
from 13 employees to 5. The staff was focused in areas
where it could have a meaningful impact and spur economic
growth. There was a comprehensive economic development
strategy being developed with regions, local communities,
and the private sector. The division used funds to leverage
federal funds for state trade expansion programs and timber
development and focusing on developing value added export
industries (products manufactured in and exported from
Alaska). The second was investments, which encompassed the
department's revolving loan funds listed on the slide. She
noted that the administrative costs were funded entirely by
the loan funds.
3:17:01 PM
Ms. Reardon highlighted the Division of Insurance on slide
13. The division was entirely fee funded. Additionally, it
contributed $5.696 million to GF in FY 16 and provided $55
million in insurance premium taxes for the Health Care
Reinsurance Program. The division had issued 35,000
licenses and admitted 10 new insurers in FY 16; however,
none of the new insurers were in the healthcare market -
there was currently only one insurer in healthcare.
Ms. Reardon discussed AMCO on slide 14. The office had a
single RDU responsible for licensing and enforcement. The
slide showed detailed information on funding and
expenditures broken out by alcohol and marijuana. There
were nearly 2,000 active liquor licenses; at present there
were 48 operational marijuana licenses and 700 permits had
been issued. Beginning in FY 17 the office had a new local
government specialist position responsible for developing
educational materials to aid local governments in
understanding their rights and obligations when an alcohol
or marijuana application was made. The marijuana portion of
the agency was on track to be financially self-sufficient
by 2020, which had been the department's plan since
marijuana regulation occurred through the initiative. The
department had been replacing GF support (approximately
one-third each year); therefore, in FY 18 there was a
decrease of about $500,000 from the original $1.5 million
allocation. The department anticipated another $500,000
decrease in UGF in FY 19 and self-sufficiency in FY 20. She
qualified that the department was only forecasting what
would happen in the new industry. She added that DCCED took
the intent that AMCO would pay its own costs seriously.
Mr. Parady provided an updated number of marijuana taxes
received reported by DOR: $10,400 in October, $81,000 in
November, and $145,800 in December. The taxes were trending
in a positive revenue direction.
Ms. Reardon added that the [tax] funds were collected by
DOR versus fees collected by DCCED. The legislature had
designated how the tax funds would be used. She turned to
slide 15 pertaining to Allied Corporations (in addition to
AMCO). There was very little UGF funding apart from $1
million for ASMI and funds for AEA for its work maintaining
power to rural Alaska and other communities.
3:21:21 PM
Mr. Parady communicated the department's priorities for the
coming year. The department's priorities for FY 17 and FY
18 were to sustain services to communities. He underscored
that it was essential to sustain the operations in the
Division of Community and Regional Affairs and AEA to
support Alaska's rural communities. He believed it was
evident to the department and legislators that rural and
urban Alaska needed to be healthy to support each other.
The department sought to maintain revenue generating and
self-funded programs at current levels of service to
provide services to the users paying for them. The
department ensured consistent and safe regulation of
Alaska's industries; DCCED had contributed over $26 million
to the GF in FY 16. The department also sought to provide
stability to the insurance market that was continuing to
succeed with the Alaska Reinsurance Program.
Mr. Parady relayed that DCCED had submitted a Section 1332
waiver under the Affordable Care Act. The legislature had
directed and given the department the authority to do so
when it made the $55 million reinsurance appropriation the
past June. He elaborated that it was a 200-page application
backed by a set of actuarial studies. The department had
told the federal government that Alaska had moved a $55
million appropriation to stabilize the individual insurance
market. Two-thirds or 23,000 of the individuals were
federally subsidized and one-third were not. He relayed
that holding the rate increase to 7.2 percent (instead of
42 percent) for the two-thirds who were subsidized kept
federal costs down. The department was asking the federal
government to return the money to Alaska to offset the cost
of the program. The application had been deemed complete on
January 17 [2017] and was in a 30-day federal comment
period and 180-day federal decision period. With the
transition in the federal administration and questions
surrounding the Affordable Care Act, the outcome was
unclear. The department had been in contact with transition
officials who had indicated the concept was viewed
favorably and that it was a key idea for moving forward
nationwide in terms of stabilizing insurance and dealing
with some unintended consequences of the Affordable Care
Act.
Mr. Parady relayed that the department's last priority for
the coming fiscal year was to continue to ensure that
marijuana was safely and effectively regulated in Alaska.
He detailed that marijuana licensing was ongoing and was
generating revenue. He noted that the state had gone from a
citizen-backed initiative to legalize marijuana to a
functioning regulatory framework in the past 18 months. The
department had provided the first licenses and opened the
doors to new businesses with efficiency and alacrity.
3:24:35 PM
Co-Chair Seaton stated that one of the responsibilities of
the budget subcommittee was to look at indirect
expenditures. He asked the department to present
suggestions for things like statutory fees that were not
adequate to collect from businesses. He asked to hear about
a potential move to allow a business owner to have multiple
businesses under one business licenses and what the
department was anticipating as a loss in associated
business license fees. He also wanted to hear whether a fee
change was needed per license. The subcommittee would be
working with the policy committee. He asked the department
to provide potential options to the subcommittee.
Representative Kawasaki referred to slide 10 and asked the
department to follow up with a breakout of the fund sources
(i.e. UGF, DGF, other, and federal).
Co-Chair Seaton asked for clarification.
Representative Kawasaki noted that slide 11 provided a more
detailed breakout of the funding source. He could not
determine the funding split on slide 10.
Ms. Reardon pointed to the top row of slide 10 under the
"Constitutionally Required" column. She explained that the
department did not actually fund by program - there were
not components or allocations under the individual
programs. She explained that they could give a general
idea.
3:27:46 PM
Representative Kawasaki understood. Separately, he noted
that DMVA had presented to the committee earlier in the
day. He asked about the transfer of the Alaska Aerospace
Corporation to DMVA from DCCED in 2011. He asked if the
department had an opinion on the issue.
Mr. Parady answered that the department's coordinating
relationship with DMVA was good; the departments
coordinated closely on emergency response and disaster
preparation primarily through the Division of Community and
Regional Affairs. The department's held regular
coordinating meetings and he was not aware of a significant
operational problem.
Representative Kawasaki noted that the previous March the
governor had instructed AEA, AIDEA, and AHFC to work
towards a consolidating effort. He asked for an update.
Mr. Parady replied that the work was ongoing. The
administrative order study was complete and under internal
review. The recommendations were anticipated in a matter of
weeks.
Vice-Chair Gara noted the marijuana initiative had been
projected to produce $12 million annually in tax revenue
for the state. He observed that the revenue was currently
far below that number. He asked if AMCO had a role in
licensing applicants in larger communities.
Mr. Parady answered that it was premature to characterize
the tax revenue as falling short. The program had only been
in operation for three months. He believed the revenue
figure he had provided earlier in the meeting was generated
on somewhere around 85 pounds of sales. He thought the
"rest of the picture remains to reveal itself." There was a
state component of licensing in addition to municipal
licensing. For example, Anchorage had its own office
addressing municipal perspectives on licensing. He believed
that was where the question about usage and public space
fell. He would follow up with more detail.
3:30:32 PM
Representative Wilson referred to slide 10. She did not
understand why the chart did not show a breakdown. She
pointed to the $6 million in UGF compared to $10,000 DGF.
She observed that most of the costs were going to
municipalities for assistance they may need. She asked why
the state was not charging back to bring the number down.
Mr. Parady answered that the GF appropriation of $6,547,300
supported a range of activities in local governments across
the state. For example, the department ran the Office of
State Assessor, the Local Boundary Commission, the Alaska
Native Language and Preservation Council, the Bulk Fuel
Revolving Loan Program, and the Rural Utility Business
Advisor Program (federally funded). The department had a
constitutional duty to support local governments and the
Division of Community and Regional Affairs was the home for
those activities that had been historically state
supported. He stated he would leave it to the legislature's
judgement as to the continuation of the support.
Representative Wilson believed the legislature should
support local government, but she also believed fees should
be charged when possible. A breakdown of funds was the only
way the legislature could understand where the state may be
able to get some of the fees back for services rendered.
She referenced indirect expenditures. She added that
sometimes when services were free everyone would take them,
which was not necessarily the case when there was a cost.
Co-Chair Seaton noted the subcommittee would work with the
department to identify any shared expenditures.
Co-Chair Seaton addressed the agenda for the following day.
ADJOURNMENT
3:33:27 PM
The meeting was adjourned at 3:33 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| FY18 (H) FIN DMVA Overview FINAL.pdf |
HFIN 1/31/2017 1:30:00 PM |
DMVA Budget Overview HFIN |
| 01.31.2017 DCCED - HFIN Department Overview.pdf |
HFIN 1/31/2017 1:30:00 PM |
DCCED Budget Overview HFIN |
| FY18 House Finance - Final.pdf |
HFIN 1/31/2017 1:30:00 PM |
UA Budget Overview HFIN |