Legislature(2017 - 2018)HOUSE FINANCE 519
01/31/2018 01:30 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB285 || HB286 | |
| Fy 19 Budget Overview: Department of Fish and Game | |
| Fy 19 Budget Overview: Department of Commerce, Community and Economic Development | |
| Fy 19 Budget Overview: Department of Law | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 286 | TELECONFERENCED | |
| += | HB 285 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
January 31, 2018
3:02 p.m.
3:02:37 PM
CALL TO ORDER
Co-Chair Seaton called the House Finance Committee meeting
to order at 3:02 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
MEMBERS ABSENT
Representative Tammie Wilson
ALSO PRESENT
Sam Cotten, Commissioner, Department of Fish and Game;
Carol Petraborg, Director, Administrative Services,
Department of Fish and Game; Mike Navarre, Commissioner,
Department of Commerce, Community, and Economic
Development; Catherine Reardon, Director, Division of
Administrative Services, Department of Commerce, Community
and Economic Development; Jahna Lindemuth, Attorney
General, Department of Law; Dan Spencer, Director,
Administrative Services, Department of Law.
SUMMARY
HB 285 APPROP: MENTAL HEALTH BUDGET
HB 285 was HEARD and HELD in committee for
further consideration.
HB 286 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 286 was HEARD and HELD in committee for
further consideration.
FY 19 BUDGET OVERVIEWS:
DEPARTMENT OF FISH AND GAME
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT
DEPARTMENT OF LAW
Co-Chair Seaton reviewed the meeting agenda.
HOUSE BILL NO. 285
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
HOUSE BILL NO. 286
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
3:03:30 PM
^FY 19 BUDGET OVERVIEW: DEPARTMENT OF FISH AND GAME
3:03:34 PM
SAM COTTEN, COMMISSIONER, DEPARTMENT OF FISH AND GAME,
provided a PowerPoint presentation titled "Alaska
Department of Fish and Game House Finance Committee: FY
2019 Budget Overview" dated January 31, 2018 (copy on
file). He relayed that he would keep careful to take note
of any questions that arose during the meeting.
Commissioner Cotten began with the department's mission on
slide 2. He noted that Article 8 of the state's
constitution provided guidance to the department and gave
the legislature direction on how to manage fish and game
resources in Alaska. Section 1, Article 8 dealt with policy
including developing resources consistent with the public
interest. One of the components of public interest had to
do with conservation. Section 2 described the legislature's
requirements in terms of resource development for the
maximum benefit of the people. Section 4 pertained to
sustained yield. He remarked that it had often been
mistakenly referred to as maximum sustained yield; however,
the word "maximum" did not actually appear in the
constitution pertaining to sustained yield. He detailed
sustained yield meant a resource should not be harvested
beyond what could be regenerated in following years.
Commissioner Cotten turned to slide 3 and discussed core
services including management; stock assessment and
research; and customer service and public involvement. He
reported that the Department of Fish and Game (DFG) was
probably the largest science organization in Alaska; it
took significant pride in its professional staff - many
people stayed for 30 more years and included scientists,
wildlife managers, biologists, geneticists, and others.
3:07:23 PM
Co-Chair Seaton noted that Representative Thompson and
Representative Pruitt had joined the meeting.
Commissioner Cotten addressed the public involvement the
legislature and DFG had set up with the Board of Fish and
Board of Game. He had been told Alaska was unlike any other
state in terms of the regulatory process involving the
public. He shared that he had recently been in Sitka for a
two week [board] meeting where members of the public had
the opportunity to take ample chance of participating. The
board and department enjoyed myriad benefits from local
knowledge and public input. He moved to a Legislative
Finance Division (LFD) chart showing the department's
portion of the total General Fund (GF) budget beginning in
FY 09 on slide 4. The department's GF budget accounted for
1.4 percent of the overall GF expenditures. He remarked
that he had to leave the meeting and would turn the
presentation over to department staff.
Co-Chair Seaton noted that Representative Guttenberg had
joined the meeting.
3:08:59 PM
Representative Ortiz spoke to the department's concern
about the protection of fish habitat and asked if the state
was involved in discussions on transboundary mining between
the Alaskan and British Columbia governments.
Commissioner Cotten replied in the affirmative. He had
personally participated in many of the meetings and the
department's director of the Division of Habitat, David
Rogers, attended all of the meetings. He highlighted field
trips the department had taken including one up the Taku
River with the British Columbia minister of mines to
examine the Tulsequah Chief Mine. He detailed the minster
of mines had been surprised to see a pipe from the old mine
shaft spewing dirty water. He reiterated that the
department was directly involved in the discussions. He
excused himself from the meeting.
Co-Chair Seaton noted that Representative Tilton had joined
the meeting.
3:10:56 PM
CAROL PETRABORG, DIRECTOR, ADMINISTRATIVE SERVICES,
DEPARTMENT OF FISH AND GAME, moved to an LFD chart on slide
5 and discussed the department's budget (all funds) by line
item. The department's largest line item was personal
services at 61 percent, followed by contractual at 31
percent. Over 91 percent of the DFG budget was made up of
personal services and contractual. She detailed that half
of the contractual was for core services to other state
agencies. Slide 6 showed the department's budget by
appropriation (GF only). The top line reflected the
Commercial Fisheries Division and the bottom three lines
reflected Wildlife Conservation, Sport Fish, and Statewide
Support Services. The budget for the bottom three divisions
trended down and flattened between FY 18 and FY 19.
Commercial Fisheries had an increase in FY 18 due to
amendments offered by Representative Ortiz. Additionally,
in the past the department had a component for facilities'
rents within the Statewide Support Services that had been
allocated out to the division in order for expenditures to
be reflected in the proper appropriation.
Ms. Petraborg moved to an LFD chart on slide 7 reflecting
all funds. She reported the department's all funds budget
was trending down slightly. Over the past several years DFG
had reduced "empty" or uncollectible fund sources, which
accounted for most of the downward trend.
3:12:52 PM
Ms. Petraborg turned briefly to a map of Alaska reflecting
DFG office locations on slide 8. She relayed the following
slides showed divisions broken out by program. Slides 9 and
10 pertained to the Division of Commercial Fisheries. She
reported DFG typically did not budget by program due to the
department's regional structure. The information on slides
9 and 10 had been broken out by fish species. The Division
of Sport Fish was reflected on slides 11 and 12, which had
been broken out by functional areas. The Division of
Wildlife Conservation was shown on slides 13 and 14 and had
been broken out by function. She noted some of the items
were program specific such as the threatened, endangered,
and diversity program; and the education and outreach
program.
3:14:17 PM
Ms. Petraborg moved to the Division of Subsistence on slide
15. The division had two programs - one for research and
analysis and another for applied research.
Co-Chair Seaton referenced Ms. Petraborg's statement that
DFG was eliminating hollow receipt authority.
Ms. Petraborg confirmed the department was getting down to
truth in budget. She moved to slides 16 and 17 pertaining
to the Division of Administrative Services. She reported
there were two sections in the division that were not
typically found under administrative services divisions
including the Licensing Section (the division was
responsible for licensing for sport fishing and hunting)
and the administration for all small divisions (including
Administrative Services, Habitat, Subsistence, boards, and
the Office of the Commissioner). Slide 18 showed the
Division of Habitat, which included permitting and
compliance, project review and monitoring, and a small
federal state wildlife grant.
Ms. Petraborg addressed the Commercial Fisheries Entry
Commission (CFEC) on slide 19. She detailed that CFEC was
administratively attached to DFG - its allocation was
within the Commercial Fisheries component, but it had been
separated out for the presentation. The Boards Support
Section broken out by component was on slide 20 and the
Office of Commissioner was shown on slide 21. She noted the
slides included links for additional information related to
the rating of effectiveness; the links were directed to
performance measures on the Office of Management and Budget
(OMB) website and provided guidance to other information.
She pointed to healthcare costs on slide 22 and relayed DFG
was working with the Department of Health and Social
Services on efforts to get the word out. According to the
budgeted numbers on the chart, the percentage of total
personal services had not changed significantly since FY
14. She noted she would have preferred to have the data
based on actuals by fund source, but she could not get the
information to break out. She noted that there could be a
substantial difference between the budgeted numbers and
what actually took place.
3:17:33 PM
Co-Chair Seaton remarked that the DGF healthcare costs were
higher than those in other departments. He wanted the
department to address the issue during the budget
subcommittee process.
Ms. Petraborg agreed.
Co-Chair Seaton clarified the focus was on avoiding
preventable costs to decrease the healthcare cost curve.
Representative Ortiz remarked on the funding reductions
across state agencies in recent years. He asked how DFG had
been reduced since FY 15. Ms. Petraborg answered that DFG's
unrestricted general fund (UGF) budget had been reduced by
almost 37 percent.
Representative Ortiz asked if DFG believed the reductions
were hindering its ability to fulfill its mission.
Ms. Petraborg answered that the department had been able to
do fund source changes for much of the reduced UGF. The
department had increased general fund program receipts to
Commercial Fisheries - test fish receipts, which was not
popular. The department had worked with industry to provide
additional funding to cover some GF reductions. She
clarified that the funds were not guaranteed, but they had
been available thus far. As long as the department could
continue to get the funds it could provide its mission
critical services. She added that the department was a
research agency and the more research it could do the more
information it could gather, which resulted in more precise
management.
3:20:41 PM
Co-Chair Seaton asked about slide 4 and remarked that the
department's total GF was lower than it had been in FY 09
and FY 10; it was something the committee had not seen in
many departments. He believed the subcommittee would
consider the effectiveness of managing on a sustainable
level that was not too conservative or resulting in
foregone harvests.
Representative Kawasaki referenced slide 6, which showed
the Division of Wildlife Conservation had lost almost 73
percent of its GF. He observed that the trend appeared to
be up on slide 7 showing an increase of 31 percent. He
questioned the difference between slides 6 and 7. He asked
for more detail on receipts used by the department.
Ms. Petraborg answered that regarding the Division of
Wildlife Conservation, the department had been able to
offset GF reductions with an increase to fish and game
funds. The passage of HB 137 had increased license fees,
which had helped tremendously. The department received
federal Pittman-Robertson funds (from the sales of guns and
ammunition), which were matched by the department. The
state's apportionment was at the highest level from the
federal government, meaning the department was matching
more federal dollars.
Representative Kawasaki asked if the department was
receiving the maximum Pittman-Robertson funding available
or whether an increase in state matching funds would
capture more federal funds.
Ms. Petraborg answered that for the first time, almost $1.9
million in federal funding had lapsed because DFG did not
have the state matching funds.
Representative Kawasaki asked if the match was one to one.
Ms. Petraborg responded that the match was a three to one
(federal to state respectively).
Co-Chair Seaton asked the subcommittee to consider the
issue.
3:24:04 PM
Representative Pruitt stated there was an existing
initiative that would impact DFG and fell within the fiscal
year. He asked if the department had been able to quantify
how the initiative would impact its budget if passed.
Ms. Petraborg replied she did not know what Representative
Pruitt was referring to.
Representative Pruitt answered he was referring to the
anadromous fish initiative that would potentially be on the
ballot [in the fall].
Representative Ortiz believed it was called the salmon
initiative.
Ms. Petraborg asked if he was referring to HB 199 [fish and
wildlife habitat protection legislation].
Representative Pruitt answered that he was referencing an
initiative that was very similar to HB 199.
Ms. Petraborg answered that it would increase the Habitat
Division's budget and workload. She would have to follow up
with more detail.
Co-Chair Seaton suggested reviewing the fiscal note for HB
199.
Representative Pruitt believed there were some slight
differences between the initiative and the bill. He
requested follow up. Additionally, he had been told there
were people in DFG that had worked on the initiative. He
asked if it was the case and thought it was outside the
scope of what state employees should be doing.
Ms. Petraborg did not know anything about the issue.
Representative Pruitt asked if DFG discovered the that
someone did or was assisting with the initiative process,
whether it was allowable or would result in disciplinary
action.
Ms. Petraborg answered that the question was outside her
realm of expertise. She reported that if an issue occurred
it would be handled by human resources.
Co-Chair Seaton stated it would be an appropriate question
for the commissioner.
Representative Pruitt agreed.
3:27:29 PM
AT EASE
3:28:20 PM
RECONVENED
^FY 19 BUDGET OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY
AND ECONOMIC DEVELOPMENT
3:28:24 PM
MIKE NAVARRE, COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT (DCCED), introduced
other department staff. He provided a PowerPoint
presentation titled "Alaska Department of Commerce,
Community and Economic Development Department Overview:
House Finance Committee " dated January 31, 2018 (copy on
file). He addressed the department's mission on slide 1,
which was to promote a healthy economy, strong communities
and protect consumers in Alaska. He spoke to the
department's diverse responsibilities including the
licensing of doctors, pawn brokers, midwives, and
morticians. The department trained rural residents to
maintain local utility systems and finance infrastructure
projects (often large projects) through its corporate
quasi-government agencies. Additionally, DCCED loaned
fishermen money to purchase boats and permits and it worked
to hold down the cost of health insurance.
Commissioner Navarre relayed the department activities
created the framework for a strong economy - the foundation
necessary for economic growth. He explained the items could
present obstacles to economic growth if not properly
addressed. For example, healthcare costs in Alaska were
extraordinarily high and unsustainable and impacted public
and private sector budgets. He reported the issue was
something DCCED was working to address in conjunction with
other departments as part of a healthcare authority review
and to determine other ways to combine and gain a better
handle on healthcare costs.
Commissioner Navarre shared that he was working on a
detailed presentation on fiscal policy that he hoped to
present to the committee. He listed the department's four
core services listed on slide 2 including consumer
protection, economic growth, strong communities, and
affordable energy. The slide included web links to
department program and budget information for additional
detail.
3:31:01 PM
Commissioner Navarre addressed an organizational chart on
slide 3, which included six core divisions (shown in blue)
and six corporate entities (shown in yellow). The corporate
entities were aligned with the department's mission and
appeared in its budget - DCCED provided the entities with a
variety of services varying by entity. Services included
information technology, human resources, and personnel
services. The entities were governed by boards appointed by
the governor and confirmed by the legislature rather than
by the commissioner of the department. The Alaska Railroad
was also part of the department's corporate entities but
was exempt from the Budget Act and did not appear on the
chart. The department had office locations in Juneau,
Anchorage, Fairbanks, Dillingham, Kotzebue, Nome, and
Bethel (Community and Regional Affairs held responsibility
for the last four). He elaborated that Kodiak had a one-
person office staffed by an Alaska Seafood Marketing
Institute (ASMI) employee. He reported that ASMI's Seattle
office was scheduled to close by the end of FY 18. The
positions had been relocated to Juneau, which had been
initiated by the legislature.
Commissioner Navarre moved to slide 4 and spoke about the
department's FY 19 budget of $166.781 million. The slide
provided a picture of the department's overall budget and
gave context to proposed changes. The chart depicted a
response to the drop in oil revenue that began in calendar
year 2014. The first column showed FY 15 with a budget
total of $215 million and 585 positions. Since FY 15
federal funds had remained fairly steady, there had been a
$2.7 million drop in tourism marketing funding, a $3
million in revised cost estimates for Alaska Gasline
Development Corporation (AGDC), $1 million in Alaska Energy
Authority (AEA) energy receipts, and $2 million in Alaska
Industrial Development and Export Authority (AIDEA)
receipts. Designated general funds (DGF) were shown in
yellow and had been fairly level with the exception of the
additional $55 million for the reinsurance program in FY
17. He noted the success of the reinsurance program. He
expounded that DGF funding was stable because it consisted
of licensing fees, Power Cost Equalization (PCE), and the
Revolving Loan Fund. He highlighted the 75 percent
reduction in UGF over the past several years from slightly
over $40 million down to $10 million. He noted that if
tourism funding of $50.2 million and ASMI funding of $7.4
million, the department's UGF budget had dropped from $17.9
million to $10 million (a 44 percent decrease).
Commissioner Navarre reported the total department budget
had decreased from $250 million to $166.8 million in FY 19
(a $48.5 million reduction), while the number of employed
positions had declined by 80 (from 585 to 505). Slide 5
showed deleted positions and positions that had been
included as part of the department's responsibility. The
department was requesting one position in the Banking and
Securities Division because Alaska Native Claims Settlement
Act (ANCSA) corporations were not governed and did not have
oversight by the Securities Exchange Commission. The
department needed to do a superior job at oversight because
more and more proxy issues were arising in the
corporations, which was taking up time from the
department's other responsibilities in banking and
securities. The department was also requesting an
additional seven positions for the Division of
Corporations, Business and Professional Licensing (CBPL)
and eight positions for the Alcohol and Marijuana Control
Office (AMCO).
3:35:25 PM
Commissioner Navarre turned to slide 6 and pointed out that
in FY 17 and FY 18 the legislature had appropriated $110
million to the Alaska Reinsurance Program to stabilize
Alaskan's health insurance rate (reflected in green in FY
17 and blue and yellow in FY 18. The yellow bar represented
funds that had been appropriated but not spent in the
previous year (the funds had rolled over from FY 17).
Deducting the yellow portion of the bar showed a decline
within the department.
3:36:33 PM
CATHERINE REARDON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, addressed the Legislative Finance Division
(LFD) chart on slide 6 showing all GF funds. She reported
that UGF had become a small portion of the department's
budget at 6 percent (one-seventh of the bar shown for FY
19). Most of the bar represented DGF, including license
fees, PCE payments (approximately $32 million in FY 19 and
previous numbers) to utilities. The department's UGF had
decreased substantially since FY 15. Generally special
projects and initiatives accounted for the ups and downs
over the ten-year period shown on slide 6. The green,
yellow, and blue shading had been added to the FY 17 and FY
18 bars to reflect the reinsurance program. If the
reinsurance funds were excluded from the chart there was a
fairly straight line decline from the FY 14 management plan
to FY 19.
3:38:47 PM
Vice-Chair Gara asked if the decrease in UGF was included
on the chart on slide 6.
Ms. Reardon answered that the chart combined UGF and DGF -
the numbers were not broken out separately on slide 6. She
noted that most of the funds on slide 6 were DGF. She
pointed to slide 4 that showed the breakdown.
Ms. Reardon turned to an LFD chart showing all funds on
slide 7 by line item. There had been some personal services
growth, but most was due to cost of living increases for
employees. The department's overall position count was down
from 516 full-time positions in FY 08 to 500 plus 5 non-
permanent positions in 2019. The growth had been in fee
supported areas (license fees supported the cost). Changes
in contractual line (shown in pink) and the grants line
(shown in light yellow) reflected changing duties assigned
to the department. The largest item in the 2019 budget was
PCE payments ($26.7 million in FY 09 and $32.4 million in
FY 19). Revenue sharing represented another significant
item in the grants line, which included national forest
receipts, payment in lieu of taxes (PILT), and fisheries
tax programs (money distributed by the department from
those sources). The slide also included the reinsurance
program.
Commissioner Navarre underscored the distinction between
UGF and DGF and the changes that had occurred since FY 08.
He explained that entities had asked the legislature to be
regulated and the entities had agreed to pay for regulation
via license fees. He expounded the money was DGF, but the
public did not make a distinction when looking at positions
and jobs in state government. The department had looked at
areas where it could find efficiencies even though they
were DGF funded. The department was also required by the
Division of Legislative Audit to cover the costs.
3:42:42 PM
Ms. Reardon moved to slide 8 showing appropriations within
DCCED (GF only). She noted the chart could appear
overwhelming due to the diversity of the department's work
and initiatives that come and go. The chart illustrated
that the agency was dynamic with many different areas of
expertise. Slide 9 illustrated the same information but
included all funds.
Ms. Reardon provided detail requested by the committee by
division on slides 10 through 17. She reported the takeaway
from the information on the slides was that UGF was a very
small portion of the agency's budget. She pointed out that
the column labeled "percent cost through fees" showed a
substantial number of the department's programs were 98 or
100 percent fee or fund supported. Another takeaway was
that almost every Alaskan household was touched in some way
by DCCED. She relayed the department had spend $10 million
UGF and had deposited $27 million UGF into the General
Fund. The agency was a revenue generator. She noted that
was without the inclusion of the insurance premium taxes,
which was a $55 million to $60 million item likely in FY
19.
Ms. Reardon began with the executive administration on
slide 10, which included the Office of the Commissioner and
Administrative Services. The two entities had been reduced
by 14 positions since FY 15 as described on slide 5
(including the deletion of a deputy commissioner position
and all administrative support in the Anchorage
commissioner's office). The department had been making a
concerted effort to reduce back office costs in order to
focus remaining funds on services - ideally in ways that
were invisible to the public. She reported that
consolidating space and reducing space costs had been an
effort by the current administration. The department had
moved two agencies into its footprint on the 9th floor of
the Juneau State Office Building (SOB) out of the Community
Building in 2015, which had eliminated 7,000 square feet of
space DCCED had used for the Division of Banking and
Securities, Division of Community and Regional Affairs, and
the Alcohol and Marijuana Control Office (AMCO). In 2018
department had moved the Division of Economic Development
to the 9th floor of the SOB, which had eliminated an annual
lease costing about $250,000 and reduced the department's
footprint by 8,000 square feet.
Ms. Reardon expounded that DCCED had reduced 15,000 square
feet in Juneau since FY 15. The department had moved the
Anchorage AMCO office to the existing DCCED space in the
Atwood Building. Additionally, the Fairbanks office was in
a much smaller lease than it had been in FY 14. She relayed
the space reduction was one of the department's efforts to
use its money well.
3:47:32 PM
Ms. Reardon highlighted the Banking and Securities Division
on slide 11, which was funded entirely with fees. She
referenced the significant, but not widely known banking
function of regulating proxy related filings (and
shareholder inquires) from ANCSA corporations. She detailed
the filing reports, proxy solicitations, and statements
were significant because they could impact the outcome of
board elections, management direction, and ultimately the
financial profitability of the corporations. The division
had established a fee from ANCSA corporations and the
department was asking permission in FY 19 to spend the
revenue on a position to help meet the statutory and civic
responsibility.
Ms. Reardon addressed the Community and Regional Affairs
Division on slide 12. The department had aimed to use the
slides as a way to show the agency functions. The division
had about $6.5 million UGF - it was not possible to have
user fees for many of the services provided by the
division. She elaborated that the division was responsible
for DCCED's constitutionally mandated functions. Article 10
required the state to have an agency providing services and
support to local government and communities. Additionally,
the Local Boundary Commission was a constitutionally
mandated function.
Co-Chair Seaton asked if the RDU revenue sharing on slide
12 was the community assistance program.
Ms. Reardon answered that in the budget system revenue
sharing pertained to the three items shown at the bottom of
slide 12 including PILT, national forest receipts, and
fisheries taxes. The corresponding amounts were $10.4
million, $600,000, and $3.1 million respectively. She added
that community assistance payments were issued by the
department and appropriated by statute; therefore, the
money was not actually seen in the DCCED budget.
Ms. Reardon turned to slide 13 and addressed CBPL. The
professional licensing side of the division was supposed to
be a breakeven by statute. Fees were raised and lowered by
regulation with the goal of each of the licensing programs
breaking even over time, without any excess spilling over
into the General Fund (per AS 08.01.065).
Co-Chair Seaton asked for verification the program support
line item (on slide 13) was not funded by fees. He noted
there was no cost allocation included for the component.
Ms. Reardon answered that DCCED did not actually budget in
most of the program units, but at the RDU level. For the
presentation, the department had approximated how much
staff worked on the functions. All of the costs of the RDU
on slide 13 were covered by fees. Investigations was a
subset of professional licensing and program support
included the division director, accountants, and front
counter staff. She explained that once professional
licensing and investigations had been broken out under the
division, the remaining costs were referred to as program
support.
Co-Chair Seaton asked for verification program support was
100 percent covered [by fees].
Ms. Reardon agreed. She noted a distinction in the specific
RDU. Professional licensing programs (shown at the bottom
of slide 13), investigations included, were statutorily
mandated to try to break even (lower fees if revenue
exceeded costs and raise fees if costs exceeded revenue).
However, the business licensing and corporations line item
did not have the breakeven mandate. The business license
fee was set by statute and it resulted in money for the
general fund. In FY 17, the profit was almost $8 million.
Commissioner Navarre added that the department had
instituted a streamlining process for professional
licensing in order to reduce the turnaround time. He
detailed it was initially applicable to medical and nursing
licenses, but information technology (IT) staff was helping
put together an online process in order to process the
information faster and apply it to other professional
licensing areas as well.
Ms. Reardon remarked that it was not only for increased
efficiency, but part of working to facilitate private
sector economic development. The faster licenses went
through for new hires, the better for everyone.
3:54:34 PM
Representative Ortiz addressed the department's efforts to
increase the speed in licensing. He asked if the effort
applied to licensing of doctors as well as nurses.
Commissioner Navarre answered in the affirmative; the
initial focus was on medical and nursing, with the goal of
applying efficiencies across all licensing programs.
Representative Ortiz asked what was being done to make
licensing move faster.
Commissioner Navarre replied the department was doing
online applications and getting to uniform information. The
processing time had already been cut significantly from six
months to under 30 days or less. The initial effort
[focused on medical and nursing licenses] included the
formation of a steering committee (including IT, department
personnel, and the commissioner's office) to further
streamline the process and apply it across all licensing
programs. He believed the process would be undergoing
testing in the following week to ensure any glitches were
worked out.
Representative Kawasaki referenced the division's 98 total
positions, 78 of which were filled. He asked if there was
foregone revenue because the positions were vacant.
Ms. Reardon replied in the negative. She detailed that
because the division was supposed to break even (not
produce a profit) there was no foregone revenue to the
General Fund. For example, if the division spent less due
to vacancies it meant nurses would be charged less than
they otherwise would be, to have their program cover its
costs. If it was in the business corporations and licensing
side, less would be spent and more profit would spill into
the General Fund. The vacancies were not ideal because of
the division's high work volume - keeping the licenses
moving was of utmost importance to many Alaskans. She added
that the positions and vacancies shown on slide 13 were as
of December 15.
3:57:55 PM
Ms. Reardon highlighted the Economic Development Division
on slide 14 that included two RDUS: economic investment and
investments (the revolving loan funds). She noted the
economic development component had seen substantial
reductions since FY 15 and had decreased from 13 positions
to 5. The component had lost 64 percent of its UGF budget
and more than half its staff but was holding steady in the
FY 19 budget. The component had been focusing on where it
could make a difference, part of which was included in its
comprehensive economic development strategy. She relayed
the investments component was funded entirely with the
revolving loan funds.
Representative Grenn asked for verification there was no
user fee (for farmers or other users) associated with the
"Made in Alaska" brand.
Ms. Reardon clarified that farmers typically used the
"Alaskan Grown" brand, which was operated by the Division
of Agriculture. She explained that DCCED was responsible
for the "Made in Alaska" program and it charged a fee for
the stickers that people put on their products.
Additionally, there was a relatively small fee to
participate in the program. She noted there were
qualifications.
Ms. Reardon briefly highlighted the Division of Insurance,
which was 100 percent fee funded (slide 15). She added that
the line items were not separate programs but had been
broken out to show the types of division functions.
Ms. Reardon reviewed AMCO on slide 16. She noted the slide
broke out revenue from alcohol versus marijuana. Alcohol
was entirely fee supported. She reported that marijuana was
on a three-year trajectory to get off UGF. She elaborated
that initially there had been expenses but no license fees.
There were now licensees who had begun renewing licenses.
The fund source had gone from 100 percent UGF to
approximately $532,000 in FY 19. She reported that by FY 20
there should be no UGF funds required.
Commissioner Navarre added that AMCO was housed under DCCED
for administrative purposes. He explained that in the past
the office had been under the Department of Revenue
followed by the Department of Public Safety. The director
had been hired by the administration but worked under the
direction and answered to the Alcoholic Beverage Control
Board and the Marijuana Control Board. He clarified the
position did not answer to the DCCED commissioner.
4:01:35 PM
Ms. Reardon reported that slide 17 showed all of the allied
corporations except AMCO, which had its own slide. Fee
support for each of the corporations ranged. For example,
the Regulatory Commission of Alaska (RCA) was almost 100
percent funded by fees (2 percent came from interagency
receipts). She highlighted that ASMI received no UGF funds
(it was 78 percent fee funded with the remainder coming
from federal funds). She indicated that AEA had no
positions of its own even though it used positions - all
positions were housed within AIDEA. She noted that in the
budget PCE showed an "estimated to be" number. She relayed
the figure was about $5 million lower than in FY 18. The
actual formula dictated how much would be paid out.
4:02:55 PM
Representative Ortiz asked if the Alaska tourism marketing
component was included in the presentation.
Ms. Reardon indicated that DCCED no longer provided funds
to the Alaska Travel Industry Association (ATIA) in the
operating budget.
Ms. Reardon reviewed the five-year health care cost trends
on slide 18. She noted that the department's percent of
healthcare was relatively small compared to some other
departments. The reason was because DCCED had some
significant expenditures that had no personal services or
workers involved. For example, if the department gave out
$32 million of PCE, there would be no associated healthcare
costs except for two or three employees. The department's
percent was impacted by its large non-employee related
expenditures. She added the cost was governed by the cost
in worker contracts.
Co-Chair Seaton pointed to the 5.6 percent healthcare for
FY 19 on slide 18, which he surmised was all UGF. He
believed that on slide 6 the department had stated the
total percent of the budget was 6 percent UGF. He asked if
it meant almost all the department's UGF went to
healthcare.
Ms. Reardon replied in the negative. She explained that the
health insurance portion of an employee cost was billed to
their funding source just like their salary. For example,
if a person worked for Professional Licensing, professional
licensing fees paid their health insurance. She added that
the number should match the department's funding sources;
the federal government was billed for federally funded
positions.
Co-Chair Seaton asked if DCCED had business licenses. Ms.
Reardon answered in the affirmative and referenced the
Division of Corporations, Business and Professional
Licensing.
Co-Chair Seaton asked the subcommittee to address a change
made by the legislature that allowed a person with several
businesses to have one business license. He wanted to see
an analysis by the department showing how much money the
state was losing due to the change.
4:05:54 PM
Representative Guttenberg looked at the RCA on slide 17. He
had been approached earlier in the day by Alaska Power
Authority groups with a request to fund the RCA at a higher
level. He had responded that the power authority could
increase fees if it wanted to fund the RCA at a higher
level. The response he had received was the RCA budget went
through DCCED for review and they could not add personnel
or increase the budget without the department's approval.
He believed it was all reimbursable service agreement (RSA)
funds. He asked if DCCED reviewed the RCA's budget.
Alternatively, he wondered if the Office of Management and
Budget (OMB) could tell the RCA it could not expand
services. He asked if it was something he needed to
address.
Ms. Reardon responded that in the budget process the
legislature told RCA and the department how much it could
spend. She elaborated that even though the cash came from
fees, like the department's other fee-funded divisions, the
legislature decided on spending authority. For example, the
RCA may have plenty of cash on hand, but could only spend
$9 million. She explained that the legislature would have
to increase funding authority if the commission wanted to
spend $10 million.
Commissioner Navarre added that the RCA funding increment
went through the DCCED budget, but it was OMB driven.
Representative Guttenberg noted that he would take the
issue up with the subcommittee.
4:08:39 PM
AT EASE
4:09:37 PM
RECONVENED
^FY 19 BUDGET OVERVIEW: DEPARTMENT OF LAW
4:09:43 PM
JAHNA LINDEMUTH, ATTORNEY GENERAL, DEPARTMENT OF LAW,
introduced department staff. She provided a PowerPoint
presentation titled "Department of Law Department Overview:
House Finance Committee" (copy on file). She addressed the
department's three core services funded with general funds
including the prosecution of crimes, protecting children,
and statehood defense and revenue protection. She had
communicated to the committee the previous year that cuts
to the Department of Law (DOL) had gone too far. She
reviewed that the committee had authorized two additional
prosecutors at the end of the past session. She shared that
at the time it had not been known that crime had risen in
the past several years. The Uniform Crime Report had come
out in the summer of 2017, which showed crime was on a
significant uptick, while at the same time the department's
budget had seen cuts beginning in FY 14. The increase in
crime was also impacting the department's child protection
cases. The opioid epidemic was a primary driver and was
impacting DOL's core services.
Attorney General Lindemuth moved to slide 2 and addressed
the department's core mission:
The Alaska Department of Law prosecutes crime and
provides legal services to state government for the
protection and benefit of Alaska's citizens.
Attorney General Lindemuth detailed that DOL represented
all departments and agencies statewide except for the
University of Alaska and the Alaska Railroad Corporation.
The department had an Administrative Services Division and
two operating divisions including the Criminal Division and
Civil Division.
4:12:17 PM
Attorney General Lindemuth addressed the Civil Division on
slide 3. All of the divisions 13 sections fell into four
core services: protecting Alaskans' safety and financial
well-being; fostering conditions for responsible
development of our natural resources; protecting the fiscal
integrity of the state; and promoting good governance. She
relayed that much of protecting Alaskans' safety and
financial well-being included child and adult protection.
The Commercial, Fair Business and Child Support section
housed the department's Consumer Protection Unit. Fostering
conditions for responsible development of the state's
natural resources included the Transportation,
Environmental, and Natural Resources sections. The
department's core service to protect the state's fiscal
integrity included the following sections: Natural
Resources, Labor and State Affairs, Regulatory Affairs and
Public Advocacy, and Torts and Worker's Compensation.
Promoting good governance included the following sections:
Opinions, Appeals and Ethics (focused on child protection
appeals); Special Litigation; Labor and State Affairs;
Legislation and Regulations; and Information and Project
Support.
Attorney General Lindemuth stated that when representing
state agencies, the department's work fell into two
categories. The first was litigation, which involved going
to trial. She elaborated that if the state got sued the
department defended claims and if the state had claims, the
department pursued them. The second, was transactional and
advice oriented. The department represented all other
departments in making good decisions for the state. She
reported the Civil Division was half funded by general
funds and half funded by interagency receipts from other
departments. The division's capacity had been cut to the
bone [due to a decrease in funding]. Since FY 14, the
division's budget was down 32 percent. She detailed that
further cuts to the division would impact child protection,
statehood defense, revenue protection cases. All of the
cases in the upper left and lower right corners of slide 3
accounted for about 75 percent of the departments general
fund budget.
Attorney General Lindemuth addressed the Criminal Division
on slide 4. Unlike other states, Alaska did not have
counties with elected district attorneys; therefore, DOL
had primary responsibility for prosecuting cases statewide.
Anchorage and Juneau had municipal prosecutors to prosecute
misdemeanors and DOL was responsible for prosecuting all
other misdemeanors and felonies statewide. The department
had 12 district attorney offices along with the Office of
Special Prosecution and the Appeals Section responsible for
statewide matters. The division was 85.6 percent GF funded;
the remainder of the budget was funded with federal dollars
for specific federal programs such as Medicaid fraud.
4:15:45 PM
Attorney General Lindemuth turned to a Legislative Finance
Division (LFD) chart reflecting the department's share of
total agency operations (GF only) on slide 5. Since FY 14
the department was down 20 percent or $12.6 million (it was
down 26 percent since FY 12). The bulk of the department's
GF funding went to criminal prosecutions and civil and
child protection cases. She reiterated her earlier
statement that while the department's budget had been
decreasing, there had been an uptick in the demand for
those types of cases in criminal prosecutions and child
protection. For example, child protection cases were up 48
percent since FY 14; the department was down the added
staff to cover the work and was without two assistant
attorney generals to handle the cases (caseloads had
skyrocketed).
Attorney General Lindemuth moved to an allocation of
resources chart showing all funds on slide 6. The chart
illustrated that the bulk of the department's funding went
to personal services (i.e. attorneys and staff providing
legal services to the state in civil and criminal matters).
The purple portion of each bar represented services
(contractual relationships held by the department), which
accounted for slightly over 20 percent of the department's
budget. The bulk of the contracts included outside counsel
and experts, but the component also covered leases and
DOL's contracts with other departments. She noted there had
been a 48 percent reduction to the component since FY 12.
In order to reduce costs, the department had focused on
bringing legal work in-house that had previously been done
by outside counsel. The department's attorneys charged $165
per hour, which was much cheaper than outside counsel
costing $250 to over $500 (depending on expertise). She
noted the department still had to use outside counsel
occasionally when expertise DOL did not have in-house was
required (especially for one-off cases).
4:18:31 PM
Attorney General Lindemuth advanced to a chart on slide 7
showing appropriations within DOL (GF only), broken out by
civil, criminal, and administrative services divisions.
The red line representing the Civil Division had the
steepest decline at 32 percent since FY 14. The criminal
Division was down 10.5 percent since FY 14. Compared to
other public safety agencies including the Office of Public
Advocacy, the Public Defender Office, and Department of
Public Safety, DOL had suffered far greater cuts since FY
14. She explained the difference accounted for the increase
in funds for DOL in the governor's proposed budget.
Attorney General Lindemuth briefly highlighted slide 8
showing appropriations within DOL (all funds), broken out
by civil, criminal, and administrative services divisions
over the past ten years. She turned to slide 9 reflecting
the total funding comparison by fund group. The light blue
portion of the bar reflected GF, which was the primary
component of the department's budget. The red portion of
the bar represented interagency receipts received from
other departments, primarily for the Civil Division, which
was funded with half interagency receipts and half general
fund dollars. The dark purple portion of the bar
represented designated general funds and the green portion
represented federal receipts, both of which accounted for a
small portion of the department's overall budget.
4:20:50 PM
DAN SPENCER, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT
OF LAW, spoke to five-year health care trends on slide 10.
He relayed the budgeted healthcare cost was made up of 60
percent UGF and 40 percent other funds. In FY 18 the
department's healthcare costs accounted for 10.4 percent of
the overall budget. He briefly highlighted slides 11
through 14 showing a matrix of the department's funds and
divisions.
Representative Guttenberg remarked that the
telecommunications definition of the Regulatory Commission
of Alaska (RCA) clearly included broadband. If DOL
supported the RCA with its legal opinions, he wondered why
the RCA did not think the definition included broadband.
Attorney General Lindemuth answered that she did not have
the answer and directed the question to Deputy Attorney
General Ed Sniffen for follow up.
Representative Pruitt referenced the department's testimony
regarding personnel levels. He surmised the department
believed personnel levels had been reduced substantially in
the area of environmental law. He asked if his statement
was accurate.
Attorney General Lindemuth answered that the environmental
law section had been reduced. She detailed the section was
primarily funded through interagency receipts from the
Department of Environmental Conservation (DEC). She
elaborated that DEC would have to determine the amount it
wanted to spend on legal dollars, which would impact the
amount of work done by DOL. She pointed out that a
significant portion of the work DOL did for DEC brought
revenue to the state.
4:24:14 PM
Representative Pruitt asked about HB 199 and a current
initiative. He remarked there was a fiscal note from a
similar bill the previous year of about $450,000. He
believed the bill was different than the initiative. He
asked if DOL had an estimate of additional cost or
personnel it may need if the bill or initiative moved
forward.
Attorney General Lindemuth asked for more information.
Representative Pruitt replied the bill and initiative
pertained to anadromous fish.
Attorney General Lindemuth replied she would follow up on
the question.
Representative Pruitt clarified there was a fiscal note
associated with the legislation. He remarked that the bill
was different than the initiative and he was trying to
understand the impacts the initiative would have on DOL.
Co-Chair Seaton remarked on the difficulty of estimating
the impact of an initiative because it would not go through
the committee process.
4:25:50 PM
Representative Guttenberg asked about a recent settlement
on a Trans-Alaska Pipeline System (TAPS) tariff case. He
was always concerned when the industry could write its
costs off against the tariffs. He asked if a paper had been
written on the settlement's benefit to the state.
Attorney General Lindemuth responded the department had
published a press release on the subject. She explained
there were a number of benefits. First, litigation was
expensive, and the state had been litigating the subject
for many years. She noted the industry had been
incentivized to fight everything because it could roll the
litigation dollars into rates going forward. The primary
fight had been about whether industry could include their
reconfiguration costs in the rates. The settlement
specified that none of the reconfiguration costs would be
included in the rates going forward; therefore, rates would
be significantly lower, resulting in additional tax and
royalty dollars to the state. The department saw the issue
as a win-win. She continued DOL was estimating $165 million
more in addition to the $200 million the state had already
collected over the prior years. Second, the settlement
provided certainty to the industry about what the future
tariff rates would be because a methodology had been
established (actuals could be audited). The side benefit
was the state would not have to litigate annually, meaning
litigation costs would be reduced. The state would have
audit rights and would not have to go into litigation to
audit the rates.
Representative Guttenberg stated that in the past his
concern was that people working on the project did not know
the definitions or the physical parameters of what they
were defining. He recalled working on the pipeline and
commented on the ease of manipulating configurations to
circumvent anything a company was doing. He had always been
concerned about the issue.
Co-Chair Seaton referenced slide 10 showing five-year
health care trends. He noted that the department's
healthcare costs had been 9.1 percent of its budget in FY
17. The FY 18 cost had been 1.3 percent more at an increase
of 14 percent. He acknowledged that some of the increase
was in relationship to total budget. He spoke to concern
about healthcare costs taking away from the department's
core services. He remarked on the need to avoid healthcare
costs by avoiding health conditions. He hoped to move
towards a healthier Alaska in order to reduce costs. He
could not see getting there by reducing payment schedules
only. He mentioned changing the healthcare authority to get
$30 million across all of the insurance pools including the
school districts, municipalities, which would wash out as a
smaller number compared to total healthcare dollars.
HB 285 was HEARD and HELD in committee for further
consideration.
HB 286 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton reviewed the schedule for the following
day.
ADJOURNMENT
4:31:37 PM
The meeting was adjourned at 4:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| LAW_FY19_HFIN-Full-Committee_Overview_1-31-18.pdf |
HFIN 1/31/2018 1:30:00 PM |
HFIN - LAW Budget Overview |
| DEED HFIN Overview 1.25.18 FINAL.pdf |
HFIN 1/31/2018 1:30:00 PM |
HFIN - DCCED Budget Overview |
| DCCED 01.31.2018 HFIN Overview - FINAL c.pdf |
HFIN 1/31/2018 1:30:00 PM |
HFIN - DCCED Budget Overview |
| 01.31.2018 HFC - DCCED Followup.pdf |
HFIN 1/31/2018 1:30:00 PM |
DCCED Response Qs HFIN overview |