Legislature(2017 - 2018)HOUSE FINANCE 519
02/28/2017 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB59 | |
| Department of Education and Early Development Finance Subcommittee Amendments | |
| Department of Labor and Workforce Development Finance Subcommittee Amendments | |
| Department of Natural Resources Finance Subcommittee Amendments | |
| Non-agency: Debt Service Amendments | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 57 | TELECONFERENCED | |
| += | HB 59 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 28, 2017
9:02 a.m.
9:02:03 AM
CALL TO ORDER
Co-Chair Seaton called the House Finance Committee meeting
to order at 9:02 a.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
Representative Mark Neuman (Alternate)
[Note: Representative Pruitt left during the meeting and
Representative Neuman filled in as alternate for the
remainder of the meeting.]
MEMBERS ABSENT
None
ALSO PRESENT
Heidi Teshner, Director, Administrative Services,
Department of Education and Early Development; Alexei
Painter, Analyst, Legislative Finance Division; Paloma
Harbour, Director, Administrative Services, Department of
Labor and Workforce Development; Pat Pitney, Director,
Office of Management and Budget, Office of the Governor;
David Teal, Director, Legislative Finance Division;
Representative Justin Parish.
SUMMARY
HB 57 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 57 was HEARD and HELD in committee for further
consideration.
HB 59 APPROP: MENTAL HEALTH BUDGET
HB 59 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton addressed the meeting agenda.
HOUSE BILL NO. 57
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; repealing appropriations; making
supplemental appropriations and reappropriations, and
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."
HOUSE BILL NO. 59
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
9:03:11 AM
^DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT FINANCE
SUBCOMMITTEE AMENDMENTS
9:03:47 AM
Representative Ortiz addressed the subcommittee
recommendations for the Department of Education and Early
Development (DEED) with a prepared statement:
The subcommittee on the Department of Education and
Early Development budget held 12 meetings for a total
of 15.5 hours. Included in that was some public
testimony - the subcommittee took one hour of
testimony hearing from 16 individuals from 6
communities. In addition, we received written
testimony, emails, and letters from approximately 50
individuals. Some of the topics of interest were early
learning programs, Online With Libraries - in total 42
individuals testified in opposition to the reductions
to early learning programs, 16 were opposed to
reductions to Online With Libraries.
As a part of our presentation or report, the
subcommittee is forwarding six amendments to this
committee for our consideration. This includes three
amendments from the governor, one amendment from the
subcommittee, and two intent language statements. If
these amendments are adopted today, the budget figures
will include unrestricted general funds rounded off at
$48 million, designated general funds at $26 million,
other funds at $57 million, and federal funds at
$251.3 million, for a total of $383.1 million. If
these amendments are adopted the unrestricted general
fund difference between the FY 15 management plan to
the FY 18 management plan is a reduction of
$21,203,000 for a decrease of 30.7 percent.
It was important for members of the committee to
remember that 98 percent of this general fund (GF)
budget is grants. This includes the foundation
formula, pupil transportation, and smaller grants that
go to school districts. Personal services make up only
1 percent of the general fund DEED budget. With
respect to personnel, staff who work with K-12
schools, administer federal programs, and administer
the $1.3 billion in GF grants to school districts
total fewer than 100 folks (97 full-time positions).
With that in mind, I'd like to move on to our
recommendations. Before we actually move the first
amendment it's also important to note that a statutory
recommendation is coming forward from our
subcommittee. The subcommittee reviewed the Public
School Trust Fund, which is currently a revenue source
for the foundation program. There was general
consensus that the trust is not maximizing its full
earnings potential and a review of restructuring
options is warranted, with the goal of increasing
revenues for public education. No specific option is
recommended, but instead a review of the options
should be initiated.
Representative Ortiz elaborated that the idea of a review
had been discussed by the subcommittee - the subcommittee
believed the topic needed further review to maximize the
potential returns for education funding.
9:07:31 AM
Co-Chair Seaton asked if the recommendation was to the
[House] Education Committee.
Representative Ortiz replied in the affirmative.
Co-Chair Seaton asked for verification that Representative
Ortiz would transmit the recommendation to the [House
Education] Committee.
Representative Ortiz responded in the affirmative.
Representative Ortiz MOVED to ADOPT Amendment H DOE 1 (copy
on file):
K-12 Support
Boarding Home Grants
H DOE 1 - Reduce Boarding Home Stipend Program by
Underspent Amount
Offered by Representative Ortiz
Reduces General Fund authority to reflect declining
use of the Stipend portion of the Boarding Home Grants
program. The Boarding Home budget funds two programs:
1) the Secondary Boarding Home Stipend Program; and 2)
the larger School District Operated Residential School
Program. This amendment does not impact School
District Operated Residential Schools. It reduces UGF
authorization for the Stipend program to more closely
align with actual costs.
Co-Chair Foster OBJECTED for discussion.
Co-Chair Seaton reminded members to view the transaction
detail sheets to follow the amendments (copy on file).
Representative Ortiz explained would reduce $70,000 in GF
authority, which reflected declining use of the stipend
portion of the boarding home grant allocation. He read from
a statement:
The Boarding Home budget funds two programs: 1) the
Secondary Boarding Home Stipend Program; and 2) the
larger School District Operated Residential Schools.
The district operated boarding schools included six
across the state in Galena, Nenana, Chugach, Lower
Kuskokwim, and Bering Straits districts. This
amendment only reduces undesignated general fund (UGF)
authorization for the stipend portion of the budget,
it does not impact the school district operated
residential boarding schools. By reducing it by
$70,000 there are ample funds that remain to cover
what demand we expect to happen on that part of the
budget.
Co-Chair Foster WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment H DOE 1 was ADOPTED.
9:09:30 AM
Representative Ortiz MOVED to ADOPT Amendment H DOE 2 (copy
on file):
Education Support Services
Executive Administration
H DOE 2 - School District Internet Access &
Educational Opportunities
Offered by Representative Ortiz
It is the intent of the legislature that the State
Board of Education report to the Alaska Legislature
with findings and recommendations to ensure equity and
affordable access to high speed internet, broadband
services, and connectivity to all School Districts in
Alaska. Further, it is the intent of the legislature
that the State Board of Education address this in
context of its Best Practices Initiative.
Co-Chair Foster OBJECTED for discussion.
Representative Ortiz read from a prepared statement:
Amendment 2 is intent language that addresses equity
and access to broadband services and internet activity
for schools across the state.
Representative Ortiz read the intent language from the
amendment explanation [see above for detail]. He continued
to read from a prepared statement:
The House and Senate Education Committees have
dedicated a significant amount of time in evaluating
the value of broadband and internet access to the
educational opportunities they offer. This intent
language focuses on the issue of affordable, equitable
access to internet-based educational opportunities.
Co-Chair Seaton noted Representative Pruitt had joined the
meeting.
Representative Wilson asked how the report differed from an
amendment offered by Representative Guttenberg several days
earlier, which directed the Regulatory Commission of Alaska
(RCA) to do a report on broadband.
Representative Ortiz answered the report addressed by
Amendment 2 would come from the State Board of Education as
opposed to the RCA.
9:11:22 AM
Representative Wilson replied, "that's the whole point."
She explained that the committee had voted to have the RCA
look into broadband. She hoped it would include schools,
the University, public buildings, and private residents.
She believed Amendment 2 was a duplication. She asked if
the subcommittee thought the State Board of Education
needed to do a report because it did not believe the RCA
would provide an in-depth report. She was trying to
determine the difference between the two. She believed what
the committee had previously directed the RCA to do would
cover what Amendment 2 was aiming to address.
Co-Chair Seaton explained the two amendments came from
different subcommittees. He detailed that items could be
consolidated during a later amendment process.
Representative Wilson appreciated the comment, but she did
not believe it necessarily required consolidation. She
thought the two amendments may cover the same thing. She
asked if the DEED subcommittee was looking for something
different in a broadband report. Alternatively, she
wondered if the amendments covered the same thing.
Vice-Chair Gara believed the amendment passed previously
addressed broadband for communities and did not identify
equal access for schools. He asked for the accuracy of his
statement.
Representative Guttenberg answered that the broadband
intent language for the RCA was meant to compare the ATA
[Alaska Telephone Association] of the Alaska Plan versus
needs for the state. Whereas, the current amendment was
specifically for schools.
Vice-Chair Gara asked if part the intent was to have
someone with expertise identify other fund sources (e.g. e-
rate, private, and public).
Representative Ortiz answered in the affirmative. In
response to Representative Wilson's question, he explained
that the amendment asked the State Board of Education to
address broadband from an education perspective, whereas
the RCA was looking at infrastructure needs.
9:14:35 AM
Representative Guttenberg explained e-rate for school
libraries was a unique fund source, which operated as a
subsidy and drove the cost down. He noted that sometimes
public libraries were included as well. He believed every
department had a unique focus on their individual needs. He
reasoned that it would be plausible to do a report for
every department. He used telemedicine as an example
pertaining to the Department of Health and Social Services.
He believed it was appropriate for schools to evaluate
their needs.
Co-Chair Foster WITHDREW his OBJECTION.
Representative Wilson OBJECTED. She did not have a problem
with the amendment, but she was concerned the legislature
was doing things in silos. She stated that broadband had
been a huge problem. She continued that the University was
using broadband, but it did not necessarily go into high
schools. Additionally, they were addressing broadband for
schools. She continued that some agencies had vocalized
they were not able to do work in some rural areas because
there was insufficient broadband and another group would
not share their access. She did not want to continue to
splinter out broadband - a topic she viewed as one major
issue that would have a big impact on the state's ability
to move forward. She WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment H DOE 2 was
ADOPTED.
9:16:48 AM
Representative Ortiz MOVED to ADOPT Amendment GA 4 (copy on
file):
Teaching and Learning Support
Student and School Achievement
GA 4 2/15 Alaska Technical and Vocational Education
Formula Funding
The Alaska Technical and Vocational Education Program
(TVEP), is funded by 0.16 percent of employee
contributions to the unemployment insurance trust
fund. The taxable wages collected have declined more
rapidly than originally anticipated. A reduction in
TVEP authority is required in order to not overspend
the fund. This is a new item for FY2018. It was not
included in the FY2018 Governor's Budget due to timing
of updated revenue collection projections.
TVEP, established under AS 23.15.830, provides non-
competitive grants to institutions that are part of a
statewide vocational training system. Institutions
provide technical and vocational training programs
that align with workforce regional demands.
The Department of Labor and Workforce Development
(DOLWD) manages the TVEP administration, including
projecting available revenue for distribution. DOLWD's
proposal for the TVEP distribution in the FY2018
Governor's Budget assumed flat TVEP revenue FY2016
through FY2018. There was a carryforward balance from
unspent prior year TVEP distributions at the end of
FY2016 that was anticipated to be sufficient to cover
reduced revenues in FY2017 and FY2018. Actual revenue
collections through the first two quarters of FY2017
indicate taxable wages are declining faster than what
was anticipated prior to the start of the fiscal year.
An overall adjustment of $1,319.2 is needed, bringing
the total available for distribution to $11,970.1.
The Galena Interior Learning Academy's distribution is
set by AS 23.15.835(d), and will receive $478.8, or
four percent, of total receipts available. This
decreases the Galena Interior Learning Academy's
authority by $52.8 from the FY2017 distribution level.
Co-Chair Foster OBJECTED for discussion.
Representative Ortiz read from a prepared statement:
This amendment reduces Alaska Technical and Vocational
Education Program (TVEP) funding by $52,800 to align
budget authorization with revenue collection. The
revenue source was 0.16 percent of the employee
contributions to the Unemployment Insurance Trust
Fund. The Department of Labor and Workforce
Development manages this program and makes awards to
the vocational training program as specified by AS
23.15.830 with TVEP funds. This one grantee who
receives TVEP funds is in the DEED budget and is the
Galena Interior Learning Academy. This amendment
reduces their grant by $52,800 to align with
anticipated revenues. This amendment was adopted by
the subcommittee with no objection.
Co-Chair Foster pointed out that the only reason that the
Galena Interior Learning Academy was listed was because out
of a number of recipients receiving funds from the program,
it was the only one that fell within the education budget.
The other vocational schools fell underneath the Department
of Labor and Workforce Development (DLWD). He stated the
amendment was not singling out on entity. He clarified that
the decrease had been proposed given that the fund was
depleting caused by fewer people paying into the fund.
Co-Chair Foster WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment GA 4 was
ADOPTED.
Representative Ortiz MOVED to ADOPT Amendment GA 5 (copy on
file):
Teaching and Learning Support
Child Nutrition
GA 5 2/15 Additional Child Nutrition Grants from the
US Department of Agriculture
Due to increased growth in the National School Lunch
Program, School Breakfast Program, and Summer Food
Service Program additional federal receipt
authorization is needed for acceptance of the increase
in United States Department of Agriculture (USDA)
grant funds. These are 100% USDA funds and do not
require an increase in state general funds or
additional staff. This is a new request for FY2018. It
was not included in the FY2018 Governor request
because at the time of budget development it was
unknown whether an amendment request would be
necessary due to pending information from the
U.S. Department of Education.
The Child Nutrition Programs (CNP) has experienced
significant program growth in the National School
Lunch Program, School Breakfast Program, and Summer
Food Service Program, as well as continued growth in
remaining programs. The programs have been impacted by
an overall shift in economic status of children
served, with an increase of children meeting the
Alaska adjusted poverty guidelines, resulting in a
substantial increase in the federal reimbursement
rate. It is anticipated that CNP will continue to
receive these same grants, as well as a technology
grant, which will increase the need for additional
federal authority. Additional federal receipt
authorization is needed for acceptance of the increase
in United States Department of Agriculture (USDA)
grant funds.
CNP growth is expected to continue beyond 2017. The
funds are from a block grant, which provides claim
reimbursement money to schools, child care facilities,
etc. The department receives incremental receipts
throughout the year based on USDA estimates on the
department's CNP actuals. The federal receipts are
received by weekly draws. These are 100% USDA funds
and do not require an increase in state general funds.
The department has existing, 100% federally-funded
positions, which provide oversight and management for
the various food programs; no additional staff will be
required.
Without this additional authority, the department will
not be able to accept the grant or provide
reimbursements to Alaska school districts and other
agencies for food and nutrition programs. Affected
services and recipients include statewide food service
programs that provide meals to economically
disadvantaged Alaskans.
Co-Chair Foster OBJECTED for discussion.
9:19:27 AM
Representative Ortiz read from a prepared statement:
This amendment increases federal authorization for the
Child Nutrition Programs by approximately $10.2
million. These are 100 percent USDA funds that do not
require an increase in state general funds or
additional staff. Staff that administer these funds
are 100 percent federally funded. Child Nutrition
Programs include the National School Lunch Program,
School Breakfast Program, and Summer Food Service
Program. These federally funded Child Nutrition
Programs have been impacted by an overall shift in
economic status of children served - with an increase
in numbers of children meeting the Alaska Adjusted
Poverty Guidelines, resulting in a substantial
increase in the federal reimbursement rate. Without
this additional authority the department would not be
able to accept the federal grant or provide
reimbursement to Alaska school districts and other
agencies for food and nutrition programs. This
amendment was adopted by the subcommittee with no
objection.
Representative Wilson asked to hear from the department.
She stated that a few years earlier the legislature had
heard from numerous school districts because the funds had
not been sufficient to cover the cost for breakfast or
lunch; therefore, districts had needed to use operating
funds to supplement the costs (especially for breakfast).
She asked if districts were still using operating funds to
supplement costs. Alternatively, she wondered if funds
available for breakfast or lunch had increased over time.
HEIDI TESHNER, DIRECTOR, ADMINISTRATIVE SERVICES,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, answered
that the districts did subsidize with their GF money for
the breakfast and lunch programs. She did not have the
precise data on hand. The department had an annual report
that included the data.
Representative Wilson addressed the breakfast program and
remarked that it had become a big issue in Fairbanks
because the buses often arrived just before classes began.
She asked whether taking the funds meant districts (Title 1
schools) were required to offer the programs if there was
no time for students to utilize the service.
Ms. Teshner answered it was up to the school district to
choose to participate in the programs.
Co-Chair Foster WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment GA 5 was
ADOPTED.
9:22:41 AM
Representative Ortiz MOVED to ADOPT Amendment H DOE 3 (copy
on file):
Early Learning Coordination
H DOE 3 - Early Childhood Programs
Offered by Representative Ortiz
It is the intent of the legislature that the State
Board of Education evaluate and make recommendations
on strategies to secure access to quality early
educational opportunities for all Alaskan children.
Further, it is the intent of the legislature that
early learning be prioritized by the Department and
State Board of Education as they set long term
strategies to address Alaska's educational challenges.
Co-Chair Foster OBJECTED for discussion.
Representative Ortiz read from a prepared statement:
The intent of this amendment directs the State Board
of Education to consider and address the issue of
early learning programs as the board considers long-
term strategies to improve education.
Representative Ortiz read the intent language from the
amendment explanation [see above for detail]. He continued
to read from a prepared statement:
Research shows that a high-quality preschool
experience makes a significant difference in the
outcomes for children. Alaska has been strategic in
its investment of limited pre-K dollars. Nationally,
Alaska scored 10 on a rating scale of 1 to 10, with 10
the highest rating, on the quality of its pre-K
programs. According to a study done by Rutgers
University in 2016. However, Alaska ranks 39th out of
50 states in access to pre-K programs. The intent of
this language encourages the state board to consider
and make recommendations on early learning programs as
they examine long-term strategies to improve the
state's educational system.
Representative Wilson stated that she hoped the amendment
language addressed public and private pre-K programs. She
had concern with prioritizing one program over all other
programs. Currently the state's constitution mandated
providing K-12 education. Although she had no problem with
looking at early learning, she was also concerned about the
state's dropout rate and ensuring that children were
reading at a certain grade level. She wondered if
prioritizing meant raising pre-K over and above the mandate
the board had for K-12. She noted the discussion had
occurred the previous day when the committee had addressed
athletics and the University. She stressed that the state
board was not mandated to do early learning, but it was
mandated to do K-12.
9:25:38 AM
Representative Ortiz did not look at the intent as
prioritizing early learning over K-12, but as a sound
investment in the education for children. For example,
statistics showed that when children had access to early
learning opportunities, the dropout rate and likelihood of
further educational remediation expenses were reduced.
Vice-Chair Gara appreciated the amendment and liked that it
would encourage the department to explore leveraging
federal funds 3 to 1 or 6 to 1 to expand pre-K. He believed
there was a competitive federal grant. He asked if the
committee or the department had further detail.
9:27:34 AM
Co-Chair Seaton pointed to the last sentence of the
amendment that read "prioritized...as they set long term
strategies to address." The intent language did not mandate
anything but asked the department to address pre-K as one
of its long-term strategies.
Representative Guttenberg expressed appreciation for the
amendment. He noted that most of the studies he had seen
pertaining to the success rate of pre-K had been national.
He wanted to see the department prioritize the success. He
noted that nothing in the intent language specified whether
the pre-K was private or public or other. He was interested
in strategies on what had been successful in the past.
Co-Chair Foster WITHDREW his OBJECTION.
There being NO further OBJECTION, H DOE 3 was ADOPTED.
9:29:05 AM
Representative Ortiz MOVED to ADOPT Amendment GA 6 (copy on
file):
Alaska Student Loan Corporation
Loan Servicing
GA 6 2/15 FY2018 Health Insurance Rate Increase
Alaska Student Loan Corporation (ASLC) contracts with
the Alaska Commission on Postsecondary Education
(ACPE) for loan servicing and pays for these services
with ASLC receipts. The health insurance increase was
added to ACPE's interagency receipt funding line
within the appropriation but not within the ASLC's
appropriation, which funds ACPE. This amendment
provides FY2018 funding based on an FY2017
supplemental request of $115.1.
Vice-Chair Gara OBJECTED for discussion.
Representative Ortiz read from a prepared statement:
GA 6 relates to the Alaska Student Loan Corporation;
it contracts with the Alaska Commission on
Postsecondary Education for loan servicing and pays
for these services with student loan receipts. Health
insurance increases were added to the commission's
interagency receipt authority without a concurrent
adjustment to the Student Loan Corporation. This
amendment makes that adjustment.
Representative Wilson disagreed that the amendment only
aligned. She believed it would mean individuals with loans
would have to pay more. She reasoned that the money came
from Alaskans who had loans with the corporation. She
wondered if all the funds were utilized annually. She
wondered how it would impact students with high interest
loans. She asked how much more the state would need to get
from the students to cover costs.
9:30:53 AM
ALEXEI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION,
replied that the Alaska Student Loan Corporation had
funding in one appropriation, which was transferred to ACPE
in another appropriation. The salary adjustments had been
made in the ACPE appropriation, but not in the ASLC
appropriation. The amendment was a technical adjustment -
the money was already in the budget on the ACPE side. He
relayed that the corporation paid out a dividend to the
state in the current year, which was the first payout since
around FY 09.
Representative Wilson asked for verification that the
corporation had paid out a dividend to the state, but could
not lower the interest on its loans to students.
Mr. Painter answered that his understanding was that the
corporation had set its rates to not make a profit, but
costs had been reduced because of operational efficiencies.
Consequently, the corporation had made a profit and had
returned a portion to the state as statutorily required.
Representative Wilson did not want to see the state profit
from the interest rate the state was charging students. She
considered that a statute change may be necessary that
would return money to students paying on loans. She noted
that the specific portion of the DEED budget was not
scrutinized as closely by the legislature because it was
not general fund dollars. She underscored there was a real
problem if the state was profiting off students with loans.
Vice-Chair Gara WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment GA 6 was
ADOPTED.
Representative Ortiz provided concluding remarks. He
believed it was important to remember that the funding
reductions to the department had not been inconsequential
to DEED. He spoke to loss to the department and overall
education system because of budget cuts. For example, it
was important to recognize the loss of the Teacher
Mentoring Program. He furthered that the department was
trying to improve teacher retention, particularly in rural
areas - the Teacher Mentoring Program had helped new
teachers with curriculum and adjustments to living in rural
Alaska. The department was trying to improve the delivery
of services and education to the state's children, but
funding reductions resulted in the loss of programs working
to deliver education to the children. He noted that the
Alaska Learning Network program had also been lost. He
recognized the fiscal situation, but it was important to
remember there was an opportunity cost of addressing the
issue.
Representative Ortiz relayed that the subcommittee had
discussed potential amendments in early learning that would
have reduced or eliminated early learning programs.
Proposals had included the elimination of funding for pre-K
competitive grants by 25 percent and a reduction in Parents
as Teachers by 20 percent. Members had discussed the merits
of early learning programs and its importance to the
comprehensive educational system. He continued that members
who had spoken in support of reducing the program had
talked about the need for state budget reductions in the
face of the state's fiscal situation and saw pre-K as a
lower priority. The subcommittee had also looked at an
amendment that would have impacted funding for Bree's and
Erin's Law. The amendment would have eliminated funding for
the implementation of Chapter II SLA 15. He recalled loud
and clear support for the laws; however, districts had
vocalized the difficulty of adding the items to the list of
unfunded mandates facing state districts. He explained
there was very little funding in the budget to implement
the laws, which the amendment would have eliminated and
would have resulted in a greater unfunded mandate to
districts; therefore, he had been opposed.
Vice-Chair Gara to hear from the department about a federal
competitive grant program for pre-K. He wondered if the
department had taken any action.
Ms. Teshner replied that she was aware of the federal grant
Vice-Chair Gara was referring to, but the department had
not submitted anything for the grant.
Vice-Chair Gara discussed that many committee members were
looking at ways to expand pre-K, but the state was facing a
fiscal crisis. He asked if Ms. Teshner would follow up with
information on the specific grant program and why the
department had not applied. He recalled former DEED
Commissioner Mike Hanley had relayed that a successful
applicant could leverage either 3 to 1 or 6 to 1 federal
matching dollars. He asked the department to follow up with
a description of the program and why DEED had not applied.
Ms. Teshner agreed.
^DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT FINANCE
SUBCOMMITTEE AMENDMENTS
9:39:29 AM
Co-Chair Foster provided a subcommittee report. He read
from a prepared statement:
The finance subcommittee for the Department of Labor
and Workforce Development had six meetings and
recommends the House Finance Committee budget for the
Department of Labor and Workforce Development include
the following funding: $20,982,000 in undesignated
general funds, $36,292,400 in designated general
funds, $20,410,100 in other funds, $84,337,900 in
federal funds, for a total of $162,022,400 for FY 18.
This is a decrease from the FY 17 management plan
unrestricted general fund of $1,515,400, a 6.7 percent
decrease. The subcommittee had no statutory change
proposals. There are two governor's amendments and two
subcommittee amendments.
Co-Chair Foster MOVED to ADOPT Amendment H DOL 1:
Labor Standards and Safety
Occupational Safety and Health
H DOL 1 - Maintain Workers' Safety Programs
Offered by Representative Foster
There is a sufficient Workers' Safety and Compensation
Administration Account (WSCAA) fund balance to support
more of the state's workers' safety program expenses.
WSCAA is a designated general fund revenue established
via statute (AS 23.05.067) for the administrative
expenses of the state's workers' safety programs under
AS 18.80.
Vice-Chair Gara OBJECTED for discussion.
Co-Chair Foster explained the amendment with a prepared
statement:
This amendment is a fund source change, reducing the
department's UGF by $600,000 and increasing spending
from the Workers' Compensation Administration Account
Fund by $600,000. The funds will be used for
administrative expenses of the state's workers safety
programs and the fund balance can support this change.
Co-Chair Foster added that a department representative was
available for any questions.
9:41:26 AM
Representative Pruitt referenced the H DOL 2 amendment. He
relayed that the DLWD subcommittee had heard the amendment
and he objected. He agreed the amendment would simply
transferring money from GF to the Workers' Compensation
Administration Account, which looked like a simple fund
source switch. However, H DOL 2 increased the cost by
$600,000. He did not believe the explanation was a good
representation of exactly what would take place. He spoke
to some challenges he had with changing fund sources. He
understood that the worker's safety account may have
sufficient funds, but changing fund sources so the
legislature could then use the GF funding on other things
did not result in the needed savings. Additionally, there
was intent by the legislature on how to manage the
reduction. He believed the amendment would go back on the
legislature's intent. He objected to the increase in the
budget resulting from the two combined amendments. He asked
to stick only with H DOL 1, although he believed it was a
false savings.
Co-Chair Foster agreed that H DOL 1 and H DOL 2 were
connected. He explained that with an increase in
unemployment rates, fewer people were paying into the
unemployment insurance program. He detailed that vocational
schools, Alaska Construction Academy, and regional training
centers around the state received TVEP [Technical
Vocational Education Program] funds; with fewer people
paying into the unemployment insurance program (0.16
percent of payments went into TVEP funding), fewer funds
were available for the training programs. The training
programs helped to keep people employed by acquiring new
skills in the event of job loss. The goal was to find other
funds to backfill.
9:45:25 AM
Representative Wilson stated the construction academy did
not receive TVEP funds. She asked for the current balance
in the Workers' Compensation Administration Account.
PALOMA HARBOUR, DIRECTOR, ADMINISTRATIVE SERVICES,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, answered
that the department was projecting a fund balance for the
Workers' Compensation Administration Account of $4.1
million at the end of FY 18. The amendment would bring the
number down by $600,000.
Representative Wilson asked what money went into the fund
and what was paid out of the fund.
Ms. Harbour answered that the fund source had been
established in statute to support the administrative costs
of the state's Workers' Safety and Compensation programs.
Currently the account supported the Worker's Compensation
component, the Worker's Compensation and Appeals
Commission, and occupational safety and health programs.
Representative Wilson asked if it was money going into or
out of the account. She asked for the incoming and outgoing
funds for the last year.
Ms. Harbour answered that in FY 16, $7.2 million in revenue
had been collected and $7.9 million had been expended.
Representative Wilson observed that the account had been in
the negative in FY 16. Ms. Harbour agreed, but there had
been a remaining balance in the account of $5.7 million.
Representative Wilson agreed with Representative Pruitt
that the amendment would mean a switch in fund sources. She
asked how many years the fund had brought in less than it
had spent. She asked if taking money from the account would
cause problems in the future. She was concerned about the
ability to fulfill obligations in the future.
Ms. Harbour answered that currently the account was
expending more than it was bringing in, but the department
had worked with the governor to introduce legislation to
reduce the draw on the fund. There were currently two bills
under consideration - HB 69 and HB 79 - that would help
improve the health of the fund. There were several years to
get the bills through the process before there would be any
fund sufficiency problems.
Representative Wilson asked why the department had
initially chosen to use $600,000 in UGF match instead of
funds from the Workers' Compensation Administration
Account.
Ms. Harbour answered that the governor's budget had
included a fund source change for the Occupational Safety
and Health programs of $191,000. The issue had been
reevaluated during the subcommittee process. When working
through the subcommittee process the department had looked
at what it could accommodate in the next several fiscal
years to have time to get the legislation through.
9:49:43 AM
Vice-Chair Gara appreciated the amendment and believed it
would create a benefit for people seeking work. He stated
that the last year and in years prior, the committee had
"cannibalized" the Higher Education Fund for things that
had nothing to do with education. He believed the current
amendment seemed like a much more reasonable use of funds
than funds that had been used from the education fund.
Representative Wilson asked if she could expect to always
have comments made based on questions committee members
asked. She believed it was the committee's responsibility
to understand and help the public understand details on
account balances and what funds were meant to do to prevent
harming the balances. She agreed with Vice-Chair Gara that
the Higher Education Fund was being used for things that it
should not be. She pointed out that at the end of the day,
the funds were all GF. She still believed it was the
committee's responsibility to make sure the accounts
remained healthy enough to fulfill their purpose. She
questioned whether the department would have to go after
general funds to pay for items that were supposed to be
taken care of by the other accounts.
Co-Chair Seaton replied that the department had already
commented that it had proposed taking some of the funds.
Representative Wilson countered that Vice-Chair Gara had
brought the issue up. She believed Vice-Chair Gara was
making it sound like other committee members were trying to
do something, which she did not believe they were trying to
do. She agreed that the department had brought the issue
forward because everyone was looking for other non-GF fund
sources. She wondered whether the legislature would be
required to use UGF to pay for items typically funded by an
account if the account was depleted to a certain level. She
reasoned that committee members sat on the House Finance
Committee for a purpose.
9:52:44 AM
Ms. Harbour replied that at present there was a sufficient
fund balance to cover expenses proposed in the budget. She
agreed that if the department was unsuccessful getting
additional legislation through the process there would be a
fund sufficiency problem in the future. However, the
department had identified ways to save costs to prevent the
problem. She explained that it would be up to the
legislature in three fiscal years to determine if it wanted
to make cuts to the programs if the administration's
proposed legislation had not passed.
Co-Chair Foster believed it was the legislature's job to
make the best guess possible. He detailed that the
subcommittee had worked with the department to assess the
risk; it had been determined there were sufficient funds
available. Additionally, plans were underway to try to
minimize any risk in the future. He observed it was
necessary to make the best guess and he believed the action
proposed in the amendment was prudent.
Vice-Chair Gara WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment H DOL 1 was
ADOPTED.
9:54:28 AM
Co-Chair Foster MOVED to ADOPT Amendment GA 10 and
Amendment GA 11 (copy on file):
Employment and Training Services
Workforce Development
GA 10 2/15 Alaska Technical and Vocational Education
Formula Funding
The Alaska Technical and Vocational Education Program
(TVEP), is funded by 0.16 percent of employee
contributions to the unemployment insurance trust
fund. The taxable wages collected have declined more
rapidly than originally anticipated. A reduction in
TVEP authority is required in order to not overspend
the fund. This is a new item for FY2018. It was not
included in the FY2018 Governor's Budget due to timing
of updated revenue collection projections.
The Alaska Technical and Vocational Education Program
(TVEP), established under AS 23.15.830, provides non-
competitive grants to institutions that are part of a
statewide vocational training system. Institutions
provide technical and vocational training programs
that align with workforce regional demands.
The Department of Labor and Workforce Development's
proposal for the TVEP distribution in the FY2018
Governor's Budget assumed flat TVEP revenue FY2016
through FY2018. There was a carryforward balance from
unspent prior year TVEP distributions at the end of
FY2016 that was anticipated to be sufficient to cover
reduced revenues in FY2017 and FY2018. Actual revenue
collections through the first two quarters of FY2017
indicate taxable wages are declining faster than what
was anticipated prior to the start of the fiscal year.
An overall adjustment of $1,319.2 is needed, bringing
the total available for distribution to $11,970.1.
The Workforce Development component grants TVEP
funding to select institutions prescribed in AS
23.15.835(d). They are as follows:
Alaska Technical Center will receive $1,077.3, or nine
percent, of total receipts available. This decreases
the component's authority $118.7 from the FY2017
distribution level.
Amundsen Educational Center will receive $239.4, or
two percent, of total receipts available. This
decreases the component's authority $26.4 from the
FY2017 distribution level.
Ilisagvik College will receive $598.5, or five
percent, of total receipts available. This decreases
the component's authority $66.0 from the FY2017
distribution level.
Northwestern Alaska Career and Technical Center will
receive $359.1, or three percent, of total receipts
available. This decreases the component's authority
$39.6 from the FY2017 distribution level.
Partners for Progress in Delta, Inc., will receive
$359.1, or three percent, of total receipts available.
This decreases the component's authority $39.6 from
the FY2017 distribution level.
Southwest Alaska Vocational and Education Center will
receive $359.1, or three percent, of total receipts
available. This decreases the component's authority
$39.6 from the FY2017 distribution level.
Yuut Elitnaurviat, Inc. People's Learning Center will
receive $1,077.3, or nine percent, of total receipts
available. This decreases the component's authority
$118.7 from the FY2017 distribution level.
Alaska Vocational Technical Center
GA 11 2/15 Alaska Technical and Vocational Education
Formula Funding
The Alaska Technical and Vocational Education Program
(TVEP), is funded by 0.16 percent of employee
contributions to the unemployment insurance trust
fund. The taxable wages collected have declined more
rapidly than originally anticipated. A reduction in
TVEP authority is required in order to not overspend
the fund. This is a new item for FY2018. It was not
included in the FY2018 Governor's Budget due to timing
of updated revenue collection projections.
The Alaska Technical and Vocational Education Program
(TVEP), established under AS 23.15.830, provides non-
competitive grants to institutions that are part of a
statewide vocational training system. Institutions
provide technical and vocational training programs
that align with workforce regional demands.
The Department of Labor and Workforce Development's
proposal for the TVEP distribution in the FY2018
Governor's Budget assumed flat TVEP revenue FY2016
through FY2018. There was a carryforward balance from
unspent prior year TVEP distributions at the end of
FY2016 that was anticipated to be sufficient to cover
reduced revenues in FY2017 and FY2018. Actual revenue
collections through the first two quarters of FY2017
indicate taxable wages are declining faster than what
was anticipated prior to the start of the fiscal year.
An overall adjustment of $1,319.2 is needed, bringing
the total available for distribution to $11,970.1.
The Alaska Vocational Technical Center's (AVTEC)
distribution is set by AS 23.15.835(d), and will
receive $2,034.9, or seventeen percent, of total
receipts available. This decreases the component's
authority $224.3 from the FY2017 distribution level.
Vice-Chair Gara OBJECTED for discussion.
Co-Chair Foster explained the amendments with a prepared
statement:
These amendments reduce the Alaska Technical and
Vocational Education program (TVEP) funding to
grantees and Alaska Vocational Technical Center
(AVTEC). The TVEP revenues collected have declined
faster than expected and the adjustments reflected are
required so that we do not overspend from the fund.
The decrement is divided up to all grantees in AVTEC
using TVEP funds.
Vice-Chair Gara WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment GA 10 and
Amendment GA 11 were ADOPTED.
9:55:27 AM
Co-Chair Foster MOVED to ADOPT Amendment H DOL 2:
H DOL 2 - Restore Alaska Construction Academy Funding
Offered by Representative Foster
In accordance with legislative intent, the Governor's
budget reduced the unrestricted general funds
supporting the Construction Academy Training by
$600.0. This is shortsighted given there are already
not enough trained Alaskans to meet workforce needs as
evidenced by the high nonresident hire rate in these
occupations. Restoring this funding is necessary to
meet demand for a trained Alaskan workforce. Along
with current Construction Academies, this funding
still supports construction training at:
· Alaska Technical Center in Kotzebue $150.0
· Northwestern Alaska Career and Technical Center in
Nome $150.0
· Southwest Alaska Vocational & Education Center in
King Salmon $50.0
Vice-Chair Gara OBJECTED for discussion.
Co-Chair Foster explained the amendment with a prepared
statement:
This amendment restores funding to the Alaska
Construction Academy and the regional training centers
cut in recent years so they can continue to meet the
demand for a trained Alaska workforce throughout all
of Alaska. The restoration is $600,000 in UGF, which
had been noted in the prior amendment [H DOL 1].
Representative Kawasaki did not have a problem with the
increment, but he took issue with a comment that there were
not enough trained Alaskans to meet the workforce and the
evidence cited of high nonresident hire rates. He relayed
that in Fairbanks, it was clearly not the case. He
furthered that individuals who used to work on the North
Slope were being replaced by out-of-state workers rather
than in-state workers. He appreciated the Construction
Academy providing opportunities for new, young individuals
to get into the industry. He remarked that it was also
necessary to have industry partners willing to hire
residents.
9:56:49 AM
Representative Wilson referred to the construction academy
and stated that "when this was put in and it was a wrap
down of five years," which was to be based private matching
funds. She asked if any private funding had come in to the
program.
Co-Chair Foster deferred to the department. He noted that
the administration had voiced strong support for the Alaska
Construction Academies.
Ms. Harbour answered that the academies had been
administered by the Construction Education Foundation as a
passthrough grant. She furthered that the department did
not have all the information on funding for each academy.
The grants to school districts for construction academies
had been eliminated from the budget - as cuts had been made
there was not sufficient funding for the programs. There
were still construction academies occurring in school
districts, which were now 100 percent supported by other
funds. There had been successes, but she did not have the
specifics because funds generated from private donors was
up to each school district.
Representative Wilson was replied that the answer "tells me
that we don't know." She remarked that it was a grant given
by the state and it had been made clear several years ago
that they [private donors] needed to be more of a
participant. Based on Ms. Harbour's answer, she believed
the state did not know who the partners were. She owned the
Southwest Alaska Vocational Educational Center (SAVEC)
located in King Salmon.
Ms. Harbour answered that SAVEC is a nonprofit
organization.
Representative Wilson did not believe SAVEC owned the
school. She believed a private corporation had built the
facility, but it was not a school. She stated that the
Alaska Technical Center was a school offering year-round
classes. She continued that the Northwest Alaska Career and
Technical Center in Nome was a great program that brought
kids in year-round. She believed SAVEC was a facility that
could be rented for training, but that it was not a school.
She asked if her understanding was accurate.
Ms. Harbour answered that SAVEC owned the center and
partnered with program training providers. She relayed that
the center was rented out for all sorts of training. She
did not have the Technical and Vocational Education Program
Report on hand, but it outlined all the training occurring
in the center.
Representative Wilson had issues with the amendment because
she believed it involved picking winners and losers. She
understood the decline in TVEP funds, but there was a long
list of other schools losing funds as well (e.g. the
University and AVTEC). She believed two of the three
schools listed were more traditional "school type"
facilities and not places that were rented to hold courses.
She was disappointed that the legislature had made it clear
in the past that it wanted more [private] participation and
to understand more where the other grant money was coming
from. She recognized the money was being utilized, but she
wondered where the partnerships were. Additionally, she
questioned why only construction had been selected. She
reasoned there were out-of-state workers on the North Slope
and in the mining industry as well. She wondered why the
construction industry rose to the top and deserved $600,000
in GF. She continued that the academies could ask for funds
from the participants. She stressed that the academy was
free; the same education at the University or in AVTEC
would cost a participant money. She believed the academy
was focused on helping individuals determine whether they
wanted to get into the construction field versus going into
a union. She stressed that the program did not provide the
same training as was offered in other places. She
emphasized that the amendment picked a winner for $600,000
- a program that had not shown whether it had gone out in
the past three years to find alternative funding. She
stated it had been a $2 million appropriation in the past.
She determined that the program had not raised the funds
because it was not doing the things it had in the past.
10:02:58 AM
Co-Chair Foster relayed that the three regional centers
included in the amendment were the only ones that had lost
UGF. The centers had received a small amount of TVEP money
and GF over the years; over the past few years, the centers
were the only ones that had lost all or most of the UGF
component, which was the reason they had been selected for
the amendment.
Vice-Chair Gara WITHDREW his OBJECTION.
Representative Wilson OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg, Kawasaki, Grenn, Ortiz, Foster,
Seaton
OPPOSED: Thompson, Tilton, Wilson
Representative Pruitt was absent from the vote.
The MOTION PASSED (7/3). There being NO further OBJECTION,
H DOL 2 was ADOPTED.
10:04:57 AM
AT EASE
10:27:31 AM
RECONVENED
Co-Chair Seaton noted that Representative Pruitt was ill
and had left for the day. Representative Neuman would fill
in as an alternate for the day.
^DEPARTMENT OF NATURAL RESOURCES FINANCE SUBCOMMITTEE
AMENDMENTS
10:28:17 AM
Representative Guttenberg provided a subcommittee report.
He relayed that the House Finance Budget Subcommittee for
the Department of Natural Resources held 11 meetings with
the department during the budget overview. He requested
that the committee adopt the recommended numbers. He
pointed an incorrect number had been used during the
subcommittee process - it had included the language
section. The following numbers had been corrected to
exclude the language section and the total was about 8.75
percent lower than the numbers provided in subcommittee.
Without budget amendments the unrestricted general funds
were $59,200,000, designated general funds were
$30,694,000, other funds were $38,259,000, federal funds
were $15,820,000. The UGF difference between the FY 15
[management plan] and the FY 18 [governor amended budget]
was a reduction of $27.4 million (a decrease of 31.7
percent).
Representative Guttenberg communicated that four statutory
changes were recommended including the repeal of AS 27.30
to eliminate the mining Exploration Incentive Credit, which
had not been used since FY 11; repeal AS 38.05.160 or
require legislative approval of any shale oil rent or
royalty waiver the commissioner recommended - because the
department had never used the waiver, the waiver had not
met its legislative intent; repeal AS 38.05.180(f)(6) to
eliminate royalty relief for Cook Inlet platforms, which
benefits six producers, and between FY 11 and FY 16 cost
the state $69.1 million in foregone revenue - it was
unclear how the state benefitted from oil and gas
production for which it received no royalties or taxes;
and, repeal AS 38.05.180(f)(5) to eliminate royalty relief
for Cook Inlet small discoveries - the provision had not
been used since FY 12, and appeared to have served its
purpose in restarting production from Cook Inlet leases -
it was unclear how the state benefitted from oil production
for which it received no royalties or taxes.
Representative Guttenberg continued that there were five
proposals, which had not been advanced by the subcommittee.
He had offered two of the proposals, which had been taken
off the agenda due to opposition. One dealt with a forester
in Haines, two related to parks, one related to the Public
Access Defense Fund, and one pertained to the land banks.
He noted the detailed information was available.
10:32:26 AM
Representative Neuman referenced the recommendations for
repealing statute. He asked what the subcommittee chair's
intent had been and observed that the changes were
substantive. He wondered if Representative Guttenberg's
intent was for bills to be introduced to repeal the
statutes. Alternatively, he wondered if the recommendations
only pertained to the funding sources for the items.
Co-Chair Seaton explained that he had set the parameters
for the subcommittees; one of the things subcommittees had
been asked to look at was indirect expenditures. The
subcommittee was asked to submit recommendations for
statutory amendments to the House Resources Committee. The
House Resources Committee would have to determine if it
agreed with the recommendations and would then have to
submit either personal or committee bills.
Co-Chair Neuman explained that he had wanted clarification
about whether the recommendations went to the full finance
committee for the elimination of funds. He reasoned that
the committee approved or disapproved the funds.
Co-Chair Seaton appreciated the clarification. He detailed
that the items were statutory recommendations and did not
currently change budgetary items.
10:34:41 AM
Representative Guttenberg MOVED to ADOPT Amendment H DNR 1
(copy on file):
Administration & Support Services
Mental Health Trust Lands Administration
H DNR 1 - Eliminate funding for public relations
contracting.
Offered by Representative Guttenberg
The Trust Land Office published a request for
proposals from public relations contractors, with a
contract ceiling of $250.0 per year. The TLO should
not contract with any public relations firm. This
amendment eliminates funding for TLO PR outsourcing.
Co-Chair Foster OBJECTED for discussion.
Representative Guttenberg explained that the amendment was
a reduction to the Alaska Mental Health Trust Authority
(AMHTA) Mental Health Land Office. The land office had put
out a request for proposal (RFP) for $250,000 per year for
the next five years; the RFP had been canceled by the
office. However, when the subcommittee had looked at the
budget it had determined the land office had excess funds
exceeding at least "twice $250,000 in the last five years,"
with similar numbers going back ten years. The subcommittee
did not recommend cutting any GF, but it would decrease the
authorization for the land office. He explained that the
Mental Health Trust Authority Authorized Receipts (MHTAAR)
would go back into the AMHTA fund for use on their clients,
which was its primary purpose.
10:36:00 AM
Representative Wilson asked if AMHTA would have the ability
to take the money and use it for something else if the
amendment was approved.
Co-Chair Seaton answered that it could come in as an
additional amendment in round two of amendments after
public testimony.
Representative Wilson asked for clarification that AMHTA
could use the funds for anything if they found a committee
member to carry an amendment.
Co-Chair Seaton answered in the affirmative.
Representative Guttenberg clarified it was MHTAAR money;
therefore, the funds could only be used for purposes
established for the trust.
Representative Wilson clarified that she was speaking about
the AMHTA making a request to a finance committee member
for the offering of an amendment to use the funds in
another location. She believed committee members could
offer an amendment on their own, but she did not believe it
should be the intent.
10:38:04 AM
Representative Kawasaki asked for verification the money
was specifically for public relations, not advertising
expenses.
Representative Guttenberg replied that the canceled RFP had
been for a public relations campaign. The amendment
proposed to decrease the Trust Land Office authorization,
which would mean the funds would not leave the trust. The
agency could still manage its office as it wished with a
decreased authorization. He added that going back ten
years, the agency had always had excess funds.
Co-Chair Foster WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment H DNR 1 was ADOPTED.
^NON-AGENCY: DEBT SERVICE AMENDMENTS
10:39:40 AM
AT EASE
10:40:15 AM
RECONVENED
Co-Chair Seaton provided a report.
Co-Chair Seaton MOVED to ADOPT Amendment H DBT 1:
Debt Service
General Obligation Bonds
L H DBT 1 - Delete Sec. 19(m) re 2012 State
Transportation Project Fund Lapse Extension
Offered by Representative Seaton
See 30-GH1855J.10, Wallace, 1-31-17 [copy on file].
Section 19(m) attempted to use lapsed money and is
ineffective. The Governor submitted a supplemental
request to accomplish the same purpose--to use the
remaining balance of the 2012 State Transportation
Project Fund.
Representative Wilson OBJECTED.
Co-Chair Seaton explained the amendment with a prepared
statement:
This amendment deletes a subsection in the debt and
other obligation sections - Section 19(i) page 65,
lines 1 through 7 - in the governor's original budget
this subsection was 19(m). In version J of the bill it
is 19(i). The subsection attempted to use lapsed money
and is ineffective. This amendment deletes subsection
(i). The governor also submitted an amendment to
accomplish the same purpose and proposed supplemental
request to replace this provision.
10:41:26 AM
Representative Neuman asked if the debt service had
performed better than expected. He asked for verification
the amendment made the debt service payment lower.
Co-Chair Seaton answered that there had been a
transportation project fund lapse extension, which the
amendment pertained to. Section 19(m) had attempted to use
the lapse money and was ineffective. Supplemental money had
replaced the funds and the old language.
Representative Neuman asked for verification the lapsed
money was money that had been proposed for bonds but not
used.
Co-Chair Seaton agreed and detailed that it was to use the
remaining balance of the 2012 State Transportation Project
Fund.
Representative Wilson WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment H DBT 1 was
ADOPTED.
10:42:51 AM
Co-Chair Seaton MOVED to ADOPT Amendments H DBT 2, H DBT 3,
H DBT 4, and H DBT 5 (copy on file):
International Airport Revenue Bonds
L H DBT 2 - Reduce funding for debt service and
trustee fees for outstanding international airports
revenue bonds
Offered by Representative Seaton
See 30-GH1855J53, Wallace, 2-18-17 [copy on file].
This amends sec. 19(j)(3) and was a Governor's
amendment request to reduce the estimate of funding
necessary for debt service and trustee fees on
outstanding international airports revenue bonds from
$39.8 million to $34.4 million.
L H DBT 3 - Funding for the early redemption of
international airports revenue bonds
Offered by Representative Seaton
See 30-GH1855J57, Wallace, 2-20-17 [copy on file].
This amends section 19(j) by adding a new paragraph to
appropriate funding required for the early redemption
of international airports revenue bonds from the
International Airports Revenue Fund.
It rewords an amendment submitted by the Governor
H DBT 4 - Allow general fund cash flow borrowing for
International Airports Revenue Fund projects
Offered by Representative Seaton
See 30-GH1855J54, Wallace, 2-20-17 [copy on file].
This amends rewords a Governor's amendment.
L H DBT 5 - Federal funds in International Airports
Revenue Fund to repay general fund
Offered by Representative Seaton
See 30-GH1855J58, Wallace, 2-20-17 [copy on file].
The Governor submitted an amendment for this purpose,
but Legislative Legal has revised it. This amendment
allows for cash flow borrowing repayment from the
International Airports Revenue Fund.
Representative Wilson OBJECTED for discussion.
Co-Chair Seaton explained the amendments with a prepared
statement:
These amendments affect Section 19(j), debt and other
obligations, on page 65 - they were governor's
amendments but have been reworded.
Amendment 2 amends Section 19(j)(3) and was a
governor's amendment request to reduce the estimate of
the funding necessary for debt service and trustee
fees on outstanding international airport revenue
bonds by $5.4 million (from $39.8 million to $34.4
million).
Amendment 3 amends 19(j) by adding a new paragraph to
appropriate $31.1 million required for the early
redemption of international airport revenue bonds from
the international airport's revenue fund.
Amendments 4 and 5 add a new paragraph to 19(j) - over
$40 million of Alaska International Airport System
projects are annually funded by the Federal Aviation
Administration reimbursement grants. Although the
projects are ultimately paid by the federal government
they require cash flow to accomplish this cash flow as
historically been provided by the state's General Fund
without any appropriation or any cost to the Alaska
International Airport System. This implementation of
the state's new accounting system, the past practice
was determined to lack transparency in structure.
Options reviewed to solve this issue were to increase
landing fees at the airports, obtain a commercial line
of credit from the capital markets, or formalize a
relationship with in use of the General Fund.
Amendment 4 allows the General Fund borrowing and
Amendment 5 is the federal fund's repayment language.
10:45:18 AM
Co-Chair Neuman asked if the amendments were eliminating
matching state funds associated with federal funding.
Co-Chair Seaton replied that the amendments would provide
cash flow with state GF until the federal money from the
airport system came in. The amendments offered a
transparent and formalized process.
Representative Wilson asked for verification the amendments
were changing language related to the funding mechanism,
but the amount owed did not change.
Co-Chair Seaton answered that Amendment H DBT 2 would
reduce the estimated funding necessary for the debt and
trustee fees by $5.4 million (a decrease from $39.8 million
to $34.4 million). He expounded that Amendment H DBT 3
would add a new paragraph to appropriate $31.1 [million]
required for early the redemption of airport funds. He
summarized that one section involved early redemption of
funds to save money and the other included a reduction in
debt service and trustee fees.
10:47:19 AM
Representative Wilson asked for a definition of trustee
fees.
Co-Chair Seaton deferred the question to the
administration.
Representative Wilson asked for the current fund balance
and what would remain if the amendments passed.
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, answered that when a bond was
issued there were trustee fees associated with the
financial consultants for the bonds. She did not have the
balance of the fund at present. She offered to follow up.
Representative Wilson assumed there was a surplus in the
fund. She remarked that the money had to be paid into the
international airport and could not be utilized for other
things. She wanted to know how much was going into the fund
annually to determine whether there was potential to pay
debt off earlier.
10:49:09 AM
Representative Neuman remarked that it seemed there was $5
million less in appropriation bonds needed. He noted that
Co-Chair Seaton had mentioned the amendments allowed for
spending authority if there were future federal funds
coming in.
Co-Chair Seaton replied that Amendments H DBT 4 and H DBT 5
formalized the procedure that did not show up under the new
accounting system. The amendments would mean that the cash
flow used while waiting for federal receipts would appear
on the books. He expounded that the method of using the
General Fund as cash flow until federal receipts were
received had been used in the past. He was trying to ensure
there was a clear and transparent process.
Co-Chair Neuman elucidated that he wanted to ensure the
amendments did not mean the legislature would be approving
future federal funds coming into the program that the
legislature was unaware of.
Representative Wilson WITHDREW her OBJECTION. There being
NO further OBJECTION, Amendments H DBT 2, H DBT 3, H DBT 4,
and H DBT 5 were ADOPTED.
10:51:08 AM
Co-Chair Seaton MOVED to ADOPT Amendment H DBT 6 (copy on
file):
School Debt Reimbursement
L H DBT 6 - Reduce Unrestricted General Fund
Appropriation by 50 percent
Offered by Representative Seaton
See 30-GH1855J.26, Wallace, 1-31-17 [copy on file].
This amends section 19(l) of HB 57, version J.
This amendment revises a general fund appropriation
for municipal school debt service reimbursement from
an estimated amount of $116 million to a fixed amount
of $67,278,294, a reduction of 50 percent.
Representative Wilson OBJECTED.
Co-Chair Seaton explained the amendment with a prepared
statement:
This amendment reduces a General Fund appropriation in
19(l)(2) for school debt reimbursement by 50 percent, from
an estimated $97,356,587 to a fixed amount of $48,478,294
from the General Fund. That change results in a change to
the lead in language from the amount necessary, estimated
to be $115,956,587 to a fixed amount of $67,278,294 being
appropriated for school debt reimbursement.
Representative Wilson asked if the amendment would change
the funding from 70 percent state/30 percent districts to
65 percent state/35 percent districts.
Co-Chair Seaton replied in the negative. He clarified that
the amendment would reduce the bond debt from UGF by 50
percent, which was approximately 42 percent of the bond
debt reimbursement because there were school trust funds in
the bond debt reimbursement section as well. He furthered
that the amendment would cut the UGF by 50 percent used for
the 70/30 or 60/40 bond debt reimbursement - the amount
would depend on the bond mix.
10:53:16 AM
Representative Wilson asked what 70/30 bonds would look
like (e.g. 50/50, 40/60, or other) if the numbers were kept
separate. She wondered how the 60/40 would change the
percentages. She remarked that legislators had made it
clear to their districts that the 70/30 was not always
possible and was only available as long as it was funded by
the state. She thought it would be helpful to know the
different percentages.
Co-Chair Seaton answered there would be a general reduction
of 42 percent because the bond debt reimbursement came from
two different sources - UGF and school trust funds. He
furthered that a 50/50 reduction in the UGF portion would
reduce the number from $97,356,000 to $48,478,000 - the
change represented half of the UGF portion.
Representative Wilson asked for the calculation. She
surmised the 42 percent could not be taken directly from
the 70 percent to make the change.
Co-Chair Seaton answered that the calculations were based
on the bond debt amounts and depended on the mix. He
referred to 60/40 and 70/30 for a municipality that had
incurred bond debt. He did not have specific percentages,
but of the $119 million, $97 million was UGF and the UGF
was being reduced by 50 percent.
Representative Wilson noted that in the past someone had
produced a chart showing what the state was paying in each
district and what impact the change would have. She agreed
that the impact of the change depended on whether the
reimbursement was 60/40 or 70/30 and how much debt an
entity had. She asked to receive the detail before public
testimony.
10:56:15 AM
Co-Chair Seaton replied he would follow up with the
calculations.
Representative Thompson surmised the amendment shifted
$48,678,300 of debt payments on bonds back to communities.
He explained the communities had voted on bonding knowing
the state would pay a certain portion (30 or 40 percent).
He did not support putting the payments back onto
communities. He spoke to voter imposed restrictions and
caps on budget items such as property tax. He stated there
had been a reduction the previous year and communities had
already suffered when trying to determine how to deal with
the consequences. He believed the amendment hit communities
again. He stated that the issue had been addressed by
stopping school bonding until the budget had been
stabilized. He had communities wondering what they were
supposed to do, with no way of raising additional money.
Communities were wondering if they were going to have to
default on their bonds.
10:58:20 AM
Co-Chair Seaton answered there was a $2.7 billion hole in
the state's budget. He believed everyone had been talked to
and understood that K-12 education was one of the biggest
components of the state's budget. He continued that
reductions to education could occur in the following ways:
through a base student allocation decrease; with a change
to the Public Employees' Retirement System (PERS)/Teachers'
Retirement System (TRS) formula, which would directly
impact schools by taking money from their budgets; with a
raise in the local contribution mill rate back to 4 mills,
which would require a statutory change; or by reducing bond
debt reimbursement, which had been done by the governor the
previous year. He continued that unfortunately when the
governor had reduced the bond debt reimbursement [the
previous year] it had been as a veto and the school
districts and municipalities had no time to react because
budgets had already been passed. The amendment would give
municipalities lead time and school budgets had not yet
been adopted. The cut did not go directly to the classroom,
which the other options generally did. He furthered that
when municipalities had voted on the bonds there had been
an expectation, but an understanding that the bonds were
subject to appropriation and that they may not receive the
reimbursement at the same rates. He continued that two
years ago the legislature had specified that any bonds
issued in the next five years would receive zero debt
reimbursement. He reiterated that the last cut by governor
veto had been very challenging for people to handle. He
reasoned that providing school districts and municipalities
with more lead time to handle the reduction in their
budgetary process was appropriate (instead of making a cut
at the end of session via conference committee or by way of
governor's veto). He reasoned that if a comprehensive and
sustainable budget was not passed, all the things would
"roll downhill" at the end of session after budgets were
in. He agreed the reduction was to $48 million. He believed
schools should know where their options were long before
their budgets were passed.
11:01:26 AM
Representative Thompson would like to see something showing
how much the amendment would impact each community. He
believed legislators would receive significant pushback
from their constituents. He believed constituents would
vocalize their inability to make up the differences that
would occur.
Representative Neuman agreed with Representative Thompson.
He spoke to the state's obligation to municipalities when
entering into a debt service agreement. Additionally,
municipalities also paid into their own education costs
because they were in organized areas of the state. He
stated, "we're upwards of 80 percent of what I pay in
property taxes"; his personal payment was at least $2,500
going directly to schools (his residence was in an
organized area). He emphasized that the amendment would not
treat people equally. He stated the amendment hit people in
municipalities with a bigger hit from government. He
thought Co-Chair Seaton had explained that the amendment
reduced education funding; however, he did not believe that
was the amendment's result. He explained that the amendment
reduced debt service in the statewide portion of the
budget, but did not reduce education funding and was not
tied to the education funding formula. He stressed that the
amendment placed further debt on municipal governments, not
school districts. He stated that the issue was similar to
tax credits. He explained that the state had made an
obligation or commitment to the municipalities for their
school districts and he believed reneging on the commitment
was a bad precedent for the state to set.
Co-Chair Neuman continued that the legislature had voted to
implement a five-year moratorium on all debt service
starting the preceding year. Additionally, the debt had
been reduced to 60/40 only. He was concerned the amendment
would take money away from municipalities that the state
was obligated to pay. He reiterated his belief that the
amendment did not reduce the education funding. He referred
to $18,600,000 from the school debt bond (line 6). He asked
if the bond had been overperforming to result in extra
additional funding in the School Trust Fund for education.
11:05:23 AM
Co-Chair Seaton answered that historically the mixture of
funds used to fund bond debt reimbursement came from the
School Trust Fund and UGF. He detailed that the $18.6
million from the school fund was the normal mix of
appropriation that had been used historically. The
amendment did not reduce the amount of school funds - it
had been separated out. Only the UGF portion of the bond
debt reimbursement would be reduced by the amendment. He
added that DEED would be able to provide the numbers
related to municipalities.
Co-Chair Neuman explained that he wanted an explanation of
debt and the fund source.
Representative Ortiz noted that how the amendment would
impact the various districts was included in a document he
was referring to ["School Construction Debt Retirement AS
14.11.100 - FY2018 Estimated State Aid for October 15
Reporting" (copy on file)]. The sheet included the amounts
funded at the current rate. He reasoned that the amendment
would reduce the figures by half.
Co-Chair Seaton agreed, but the amendment would only reduce
50 percent of the UGF portion; it was about 20 percent
school fund, which was not being reduced. He explained it
was about 42 percent, but the impact depended on the mix of
bonds (60/40 or 70/30) a municipality had.
11:07:41 AM
Vice-Chair Gara did not understand the math related to the
amendment. He referred to the amendment and observed that
of $116 million that would have been due in school debt
reimbursement, $67.2 million would be paid, which the
amendment called a reduction of 50 percent. He remarked
that the reduction looked smaller than 50 percent. He
pointed to the transaction detail for reference.
Co-Chair Seaton answered there was approximately $18.6
million of school fund money included in the $116 million.
To get to the final number it was necessary to reduce it
and take 50 percent of the remaining portion, which was
UGF, and add back the school fund amount. The result was
$48,478,294.
11:09:59 AM
AT EASE
11:13:57 AM
RECONVENED
Representative Wilson pointed to the school construction
debt retirement document the committee had just received.
She used the North Slope as an example, which had only one
bond at the 60/40 level and compared it to Unalaska, which
had one bond at 70/30. She reasoned the example would be
straightforward because it did not involve a district with
a blended amount. She thought the example would help
committee members calculate the totals for their own
districts.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, asked
for clarification on the question.
Representative Wilson explained the committee was trying to
ascertain how the amendment would impact each district. She
used the North Slope as an example that had current bonding
of $75,272. She cited Unalaska as an example of a district
with one 70/30 bond at $672,831. The committee was trying
to determine the new amount the municipalities would be
responsible for if the amendment passed.
Mr. Teal believed Co-Chair Seaton had already explained it
would all be prorated; it would not matter what the
reimbursement rate was. The amount would be half; however,
the confusion was it was not exactly half. He explained the
calculation would involve starting with the $115 million
total debt service and subtract approximately $18 million
of school funds, which left about $97 million in general
funds. That end amount would be cut in half; $48.6 million
would be cut from the General Fund portion only, which left
$48 million and the $18 million in school funds would be
added back in. Everyone would have a reduction of
approximately 42 percent regardless of their bond debt mix
(e.g. 70/30, 80/20, 90/10, or other). It was possible to
determine the impact on each community by taking 42 percent
of the numbers in the right column on the sheet provided.
11:17:06 AM
Representative Kawasaki appreciated the amendment, but
commented that there were valid concerns from different
districts. For example, Fairbanks had ten projects that had
about $40 million that qualified for reimbursement at the
70 percent rate [from the state]. Kenai had about the same,
with three projects at the 70 percent rate. He pointed to a
community like Mat-Su that had over $250 million in
qualifying projects at the 70 percent rate. He noted that
the impact would differ by community based on whether
school boards recently acquired new schools or other. He
felt cautious about moving forward with the amendment.
Vice-Chair Gara remarked there was no proposal in the
budget to cut classroom funding, Base Student Allocation
(BSA) funding, or other school funding - funding remained
flat. The amendment's proposal related to money going to
municipalities to pay their debt. He thought it seemed to
be less than the Senate's proposal to cut $65 million from
school funding. He believed the amendment was an attempt to
cut the budget while not directly cutting from schools. He
had concerns about the amendment, but asked for
verification that the intent was to avoid a school funding
cut. He did not support the Senate's approach.
11:20:26 AM
Co-Chair Seaton answered in the affirmative. The goal was
to look at a large portion of the state's budget expense:
education, without damaging the education system. He
continued that reductions to education could occur in the
following ways: through a BSA decrease; with a change to
the Public Employees' Retirement System (PERS)/Teachers'
Retirement System (TRS) formula, which would directly
impact schools by taking money from their budgets; with a
raise in the local contribution mill rate back to 4 mills
from 2.65 mills, which would require a statutory change; or
by reducing bond debt reimbursement, which did not directly
impact school budgets. There could be ancillary impacts,
municipalities could make decisions, but it would provide
them with time to make decisions on options such as taxes
or using money from reserve funds on a temporary basis. He
reasoned that at least the communities would have the
information in time to factor the cut into their budgetary
process. He noted that the previous year funding had been
vetoed at the last minute after school budgets had been
set. He stated that if cuts were made during conference
committee, it would put schools in the same situation as
the previous year. The amendment was an attempt to avoid
directly impacting the school system. The amendment would
reduce school bond debt reimbursement to municipalities.
The other purpose was to get the amendment into the
upcoming committee substitute so the public could weigh in.
He furthered that if the public decided it would prefer a
BSA cut or PERS/TRS option, he hoped the committee would
hear about it. The state was facing a $2.7 billion deficit
and the goal was to determine how to have some savings and
lower expenses with the least impact on the most
vulnerable.
11:23:49 AM
AT EASE
11:42:27 AM
RECONVENED
Co-Chair Foster recapped that the committee was considering
H DBT 6 related to school bond debt reimbursement.
Representative Wilson believed the amendment should be
considered later in the day. She noted there were many
unknown components. She addressed options such as using
PERS and TRS or using the BSA, and the impacts the options
would have. She stated that the committee members kept
hearing about how things were supposed to be fair. She
supposed the amendment was fair in one sense - she had told
her constituents that the 70/30 reimbursement could go away
at any time. She stated that the Fairbanks North Star
Borough had passed a bond the previous year and its debt
obligation would be 100 percent. She pointed to the list of
communities and remarked that Mat-Su was $22 million and
Anchorage was $43 million, mostly because some of the areas
grew faster than other areas or had not gotten on the list
as early as others. She wondered about trying to keep
things equal between districts. She remarked on frustration
vocalized by committee members on areas that paid property
taxes and those that did not. She noted that caps were also
a factor, but she believed debt fell under a separate area.
She did not know what the TRS obligation would be for her
district if it was changed. She continued that in the past
there had been significant concern from school districts
when TRS legislation was considered - the concern had been
that it would do more damage than flat funding the BSA (not
adding a $50 increase). She was uncomfortable moving
forward at present because she did not have all the
information. She thought it was prudent for the finance
committee to know all the financial impacts. She wanted
time to talk to members of her district and she wanted to
ensure the amendment was accurate.
11:46:21 AM
Representative Neuman remarked that the Mat-Su Borough
School District was one of the fastest growing districts.
He added that the district had great schools. He stated
that the borough had needed to build a new school annually
- the burden had been voted on and accepted by residents.
He would prefer to see a reduction in the education funding
formula. Committee members had been told by Co-Chair Seaton
that there would be an opportunity when the committee
looked at the full budget. He was concerned the amendment
went back to Mat-Su taxpayers. He noted that the governor
had cut $7 million or more to the Mat-Su School District
the previous year. He explained that the cut had depleted
the district's reserve fund. He stressed that the
amendments cut of $11 million to $12 million would hit
taxpayers. The state had already made the obligation to
communities. He had asked the Legislative Finance Division
about reducing other debt service. He relayed that other
debt service was just over $200 million; however, they were
general obligation bonds providing the full commitment of
the state and had to be paid statutorily - therefore, it
was not an option. He supported a reduction to education
funding because everything else had been hit; however, he
was uncertain the amendment was the appropriate action.
11:48:35 AM
Representative Guttenberg surmised that the situation was
perhaps like a quote by Winston Churchill about democracy:
"it's terrible, except for everything else." He considered
which of the options on the table (a reduction to debt
service, PERS/TRS funding, and K-12 funding) hurt the
least. He was leaning towards supporting the amendment to
get something on the table. He stressed that doing nothing
did not equate to dodging a bullet. He stated it would be a
requirement and not an option in the future if the
legislature did not come up with a fiscal plan. He added
that other draconian measures would be needed as well. He
believed managing the situation was occurring because the
legislature had been unable to put the state on sound
fiscal footing. He stressed that the situation would worsen
if nothing was done. He supported moving the amendment
forward to put something on the table for comparison to
other options; it was better than no proposal. He wanted to
determine if the proposal was better or worse than some of
the options proposed by the Senate, which he believed were
more draconian.
Vice-Chair Gara remarked that if the state had a fiscal
plan the committee would not be considering the amendments
at present. Currently no plan had been adopted by both
houses. He remarked that he had supported school funding
his entire legislative tenure. He understood the comments
from Co-Chair Neuman, which he stated were the same as
those coming from the Senate. He did not support cutting
the BSA - he believed it would be the hardest cut for
schools to handle. He recognized that the amendment would
hit Mat-Su harder than some other areas. He stated that a
cut proposed by the Senate would be $65 million from the
BSA, which represented a $200 BSA cut. He stressed that it
would be massively damaging to schools. He stated the
amendment would mean a transfer [of debt] to
municipalities, which was not comfortable either. He
reasoned that a $2.9 billion deficit and no fiscal plan was
also uncomfortable. He remarked that if he got to run
things by himself there would be a fiscal plan. He
understood if it was the will of the chair to have the
amendment included so the public could comment. He believed
the option was the least harmful on schools, but it did not
come without cost to municipalities. He leaned in favor of
supporting the amendment, but made no commitment to support
it throughout the legislative process. He wanted to hear
from people and wanted to avoid a BSA cut.
11:53:14 AM
Representative Wilson WITHDREW her OBJECTION.
There being NO further OBJECTION, Amendment H DBT 6 was
ADOPTED.
11:53:39 AM
AT EASE
11:53:47 AM
RECONVENED
Co-Chair Seaton MOVED to ADOPT Amendment H DBT 7 (copy on
file):
Sport Fish Hatchery Bonds
L H DBT 7 - Technical wording correction
Offered by Representative Seaton
See 30-GH1855J.5, Wallace, 1-30-17 [copy on file].
This amendment just adds the word "and" before the
last phrase in section 19(m)in HB 57, version J, so
that it reads " . . ., and for early redemption of
those bonds."
Vice-Chair Gara OBJECTED for discussion.
Co-Chair Seaton explained the amendment. The amendment
added the word "and" before the last phrase in Section
19(m) regarding sport fish hatchery bond debt (page 66,
line 3 of the legislation, version J) to read "and for
early redemption" of those bonds.
Co-Chair Neuman asked for verification the amendment was to
ensure that any additional funds out of the fish and game
fund or other funds received went towards reducing the bond
debt for the fish hatcheries.
Co-Chair Seaton answered the amendment would allow early
redemption of the bonds at a lower interest rate.
Vice-Chair Gara WITHDREW his OBJECTION.
There being NO further OBJECTION, Amendment H DBT 7 was
ADOPTED.
HB 57 was HEARD and HELD in committee for further
consideration.
HB 59 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
11:55:55 AM
The meeting was adjourned at 11:55 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DNR-Subcommittee Packet HFIN.pdf |
HFIN 2/28/2017 9:00:00 AM |
HB 57 |
| DEED-Subcommittee Packet HFIN.pdf |
HFIN 2/28/2017 9:00:00 AM |
HB 57 |
| DOL- Subcommittee Packet HFIN.pdf |
HFIN 2/28/2017 9:00:00 AM |
HB 57 |
| Debt Service Supporting Doc DOE School Constr Debt.pdf |
HFIN 2/28/2017 9:00:00 AM |
HB 57 |