Legislature(2019 - 2020)ADAMS ROOM 519
02/26/2019 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Overview of the Governor's Fy 20 Budget - Round 2 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 26, 2019
1:35 p.m.
1:35:36 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Tammie Wilson, Co-Chair
Representative Jennifer Johnston, Vice-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Andy Josephson
Representative Gary Knopp
Representative Bart LeBon
Representative Kelly Merrick
Representative Colleen Sullivan-Leonard
Representative Cathy Tilton
MEMBERS ABSENT
None
ALSO PRESENT
David Teal, Director, Legislative Finance Division;
Representative Steve Thompson; Representative Sharon
Jackson.
SUMMARY
PRESENTATION: OVERVIEW OF THE GOVERNOR'S FY 20 BUDGET -
ROUND 2
1:36:08 PM
Co-Chair Foster reviewed the meeting agenda.
^PRESENTATION: OVERVIEW OF THE GOVERNOR'S FY 20 BUDGET -
ROUND 2
1:36:34 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
provided a PowerPoint presentation titled "Overview of The
Governor's FY 20 Budget - Round 2," dated February 26, 2019
(copy on file). He noted that the governor had made it
clear that the December 15 [2018] budget had been a place
holder. The amended budget had been released recently by
the governor. He could not tell the legislature what
actions to take on the budget, but he could discuss whether
something met the budgetary principles outlined by the
governor. He noted there was a fine line when talking about
proposals - he clarified that any criticism he would make
was not ideological or personal, but reflected a discussion
of the process.
1:38:37 PM
Mr. Teal turned to slide 2 and addressed the governor's
five guiding budget principles:
1. expenditures cannot exceed existing revenue;
2. the budget is built on core functions that impact a
3. majority of Alaskans;
4. maintaining and protecting our reserves;
5. the budget does not take additional funds from
Alaskans
6. through taxes or the PFD;
7. it must be sustainable, predictable and affordable.
Mr. Teal addressed the first item on slide 2 and confirmed
that expenditures could not exceed revenues in the long-
term. He moved to slide 3 showing real per capita revenues
and expenditures by the state and he noted that the
governor's policy for expenditures to equal revenues was a
mathematical relationship with policy implications. He did
not believe there was any question that expenditures
exceeded revenues in recent years [shown on slide 3]. Even
with the addition of percent of market value (POMV) in FY
19 (shown in black), revenue was still substantially below
expenditures. With the reductions proposed by the governor,
the budget was essentially balanced. In FY 19 and earlier,
the prudent question was whether expenditures exceeded
revenues because expenditures were too high or because
revenues were historically low. He stated it was for the
legislature to judge. The expenditures operating budget in
real per capita terms had been fairly steady, while revenue
had sometimes been very high and in recent years it had
fallen with oil prices.
Mr. Teal pointed out that the mathematical relationship was
easy, while the policy implications were not. He noted that
the Office of Management and Budget (OMB) director reasoned
that expenditures were too high because they exceeded
revenue. He pointed out that it could also be argued that
revenue was too low. He reiterated it was for the
legislature to judge. He believed the answer would only
come when the legislature reviewed the budget and decided
what it wanted to spend, where the funds would be spent,
and how much would be spent and then compared the
expenditures to existing revenue. At that point, the
legislature could decide what to do to fix the deficit if
there was one.
1:42:15 PM
Co-Chair Wilson turned to slide 3 and referred to FY 19
when the state had the POMV for the first time. She
presented a scenario where the state had the same concept
and lived within its means. She asked how much the
legislature would have needed to reduce the budget to
remain at that spot.
Mr. Teal answered that when the legislature had gone home
the previous year, a deficit of about $700 million had been
expected. He detailed that because revenue had been higher
than anticipated, the deficit was closer to $300 million.
Co-Chair Wilson asked for verification that if the
legislature would have used the forecasted revenue and a
POMV, there would have been a surplus versus a deficit.
Mr. Teal replied in the affirmative. He explained that the
same was true for the current year; if Permanent Fund
Dividends (PFD) were not paid there would be a surplus of
about $300 million. He elaborated that the dividends cost
about $1.9 billion and the deficit was about $1.6 billion.
Co-Chair Wilson noted that the legislature had paid a
dividend the previous year. She did not believe it was
about a zero dividend. She elaborated it was about how much
government needed to be able to meet the requirement
portion and having that discussion. She stated that in past
years the legislature had not had the discussion because
the money had always come from a savings account.
Mr. Teal agreed. He elaborated that the argument could be
made that if FY 20 dividends were paid at the FY 19 level,
the state would have an additional $900 million in the
General Fund, which would have reduced the projected
deficit to roughly $700 million.
Co-Chair Foster acknowledged Representative Steve Thompson
in the room.
1:44:54 PM
Vice-Chair Ortiz asked if the year-to-year government
expenditures on slide 3 included the PFD.
Mr. Teal replied that the PFD was not included in the
chart. He explained that in past years dividends had been
put at the bottom of the fiscal summary and had been "off
budget" in a sense. He believed LFD, OMB, and the finance
committee chairs had at some point said that dividends were
not a zero expense and should be shown as a state
expenditure. He explained that historically LFD had not
gone back to include dividends. There was some confusion
because it would require showing the revenue as well. He
elaborated that each of the bars on slide 3 would increase
with the inclusion of the PFD and revenue would also
increase by that same amount each year.
Mr. Teal continued that the chart showed about half the
revenue in FY 19 from POMV compared to FY 20. In FY 19
there was roughly the same $3 billion payout from the
Earnings Reserve Account (ERA), but $1 billion went to
dividends and $2 billion went to the General Fund. In FY 20
there was closer to $2 billion going out, which left $1
billion in net revenue to the General Fund. The chart
showed the extra revenue, but not the portion going to
dividends. He reiterated his earlier statement that
dividends were not included in the chart.
1:47:18 PM
Vice-Chair Ortiz asked if the "20GovA" bar [to the right of
the chart on slide 3] would increase by $900 million if the
PFD was included.
Mr. Teal replied that the FY 20 bar would increase by $1.9
billion - the entire amount of the dividend. He added that
expenditures would also increase by $1.9 billion.
Representative Merrick asked how much each recipient would
receive if there was an expenditure of $1.9 million
[billion] for PFDs.
Mr. Teal replied roughly $3,000.
1:48:14 PM
Mr. Teal returned to slide 2 and addressed the second of
the governor's five guiding principles pertaining to the
budget: the budget is built on core functions that impact a
majority of Alaskans. He highlighted that the Donna Arduin
the director of OMB had stated that the budget had been
built from the ground up. He believed many people
interpreted that to be zero-based budgeting, which was not
correct. He explained that if the method utilized had been
zero-based budgeting, the legislature would have received
an analysis on the impacts of the cuts. He elaborated that
the analysis would have been required to develop the
budget. He noted that Ms. Arduin had later clarified that
the process was really core-based budgeting. He expounded
that OMB had prioritized things but did not necessarily
have a position paper or any type of vetting of their
ideas.
Mr. Teal discussed that Senator Lisa Murkowski had spoken
to the legislature in a joint session and had specified
that core services include education, healthcare, and
access to transportation. Senator Murkowski had noted that
the governor's budget had major reductions in all three of
those areas. Whatever the budgeting process was called, he
believed it was apparent that many legislators shared his
frustration with the lack of analysis, evaluation, and
vetting of the governor's proposal. He thought the proposal
seemed to be ideas without the defense one may expect. He
did not see budgeting as merely a math problem. He pointed
out that expenditures equal revenue was an equation, but it
did not tell the legislature what needed to be done; the
calculation merely conveyed that there was a problem if the
two were not balanced. He believed making good policy
decisions required good information, which he did not
believe had been provided yet.
Vice-Chair Johnston believed the other part of the core-
based budgeting received from Ms. Arduin was the core
programs including public safety, management of natural
resources, and preserving maintenance of the state's
transportation infrastructure. She asked Mr. Teal if he
intended to address how the core programs fit into core-
based budgeting.
Mr. Teal replied that he could address the agency budgets,
but he did not tie it back to core because LFD did not yet
have the priorities from the administration. The
administration had stated that the budget was developed by
setting the priorities. He thought that the Department of
Health and Social Services (DHSS) may have released its
priorities to the Senate Finance Committee. He was
uncertain the House subcommittee on education had met yet.
He had not yet seen the priorities from the governor and
assumed the legislature had not yet seen them. He also
assumed the information would be provided to budget
subcommittees at some point. He believed the subcommittees
would discuss how to stack up core programs and spending.
1:52:02 PM
Vice-Chair Johnston highlighted that the administration had
its guiding principles and the budget included core
programs, which she believed was prudent to keep in mind.
Representative Josephson referenced slide 3 of the
presentation. He asked for verification the chart included
inflation and reflected relative values year-to-year.
Mr. Teal answered in the affirmative. He explained the
information was adjusted for population growth and
inflation.
Representative Josephson asked for confirmation that the
data reflected the administration's proposal to spend less
in the coming fiscal year than the legislature spent before
first oil flowed out of the Trans-Alaska Pipeline System
(TAPS) in August 1977. He noted the chart included FY 75.
Mr. Teal replied that per capita spending for FY 20 was
lower than in FY 04 and the 1980s and put the state back on
par with the late 1970s. Spending on a per capita basis was
as low as it had ever been.
1:53:58 PM
Representative Josephson stated that the chart reflected
that before production from TAPS - he imagined there had
been a small amount of revenue for the Kenai Peninsula -
that the budget included more in relative dollars for
government based on a state income tax and other small
sources of revenue relative to the population and
inflation.
Mr. Teal agreed. He believed the state income tax had been
in place through 1981 or the early 1980s. He explained that
the chart began with 1975 because that was as far back as
the system went reliably. Records prior to 1975 were paper
budgets.
1:55:11 PM
Mr. Teal returned to slide 2 and addressed the third of the
governor's five guiding principles pertaining to the
budget: maintaining and protecting our reserves. He pointed
out that the budget pulled $436 million from the Statutory
Budget Reserve (SBR) and Alaska Industrial Development and
Export Authority (AIDEA) reserves. He elucidated that in FY
19 the budget used less than $300 million in reserves. The
proposed budget pulled more from reserves in FY 20 than in
the previous year.
Representative LeBon asked about the use of AIDEA funds as
a fund source in the budget. He wondered if the amount was
too high or just right and whether it was sustainable.
Mr. Teal believed Representative LeBon had addressed the
point well the previous week when he had expressed his
concern from the perspective of a banker. He recalled that
Representative LeBon had shared that he had made loans for
economic development projects, often with the participation
of AIDEA. He stated that even the reduction to AIDEA
reserves would limit its ability to finance economic
development projects. He reported it was a policy call. He
pointed out the proposal was a one-time drain of reserves
and would take over half of AIDEA's reserves, which could
not be continued for very long.
1:57:14 PM
Co-Chair Foster summarized Mr. Teal's statement that the
proposed budget would take about $437 million from
reserves. He surmised that almost a quarter of the $1.6
billion the public believed the proposed budget would cut,
was actually coming from savings.
Mr. Teal responded that he would address the point later in
the presentation. He moved to the fourth of the governor's
five guiding principles pertaining to the budget (slide 2):
the budget does not take additional funds from Alaskans
through taxes or the PFD. He highlighted that the proposed
budget did not really rely on existing state revenue to
balance the budget - it would push costs onto
municipalities, removed tax revenue from municipalities,
and past some to all of those costs onto citizens. He
recommended that the legislature consider whether it
believed the administration was satisfactorily following
the outlined guiding principles.
Mr. Teal addressed the fifth of the governor's five guiding
principles pertaining to the budget (slide 2): it must be
sustainable, predictable and affordable. If expenditures
were set to equal revenues annually (revenue fluctuated due
to the reliance on oil), the equation would specify that
expenditures would be cut when [oil] prices fell, and
expenditures would increase when [oil] prices rose. He
explained it was not a good way to operate government;
government worked better with stable funding. For example,
hiring teachers and other employees back would be difficult
once they were laid off. He acknowledged the same would be
true for private business. Government operated a bit
differently and stability was significant to government
services.
Mr. Teal recommended considering what would happen if oil
prices fell to $50. He questioned how the budget could ever
be cut to match that price while trying to remain
sustainable, predictable, and affordable. He pointed out
that reserves would be used if spending was straightened
out and stabilized. He thought it seemed that by setting
out the principles the governor was taking two of the three
traditional budget balancing tools off the table: 1) add
revenue, and 2) pull money from reserves (slide 4). He
thought many people believed the governor balanced the
budget by cutting $1.6 billion from state expenditures. He
clarified that it was not the case. Especially after
hearing about the cuts to Medicaid, the University, and the
Alaska Marine Highway System (AMHS), he believed people
thought the cuts were much deeper than they were. He
underscored that the cuts were nowhere near $1.6 billion.
2:01:33 PM
Representative Sullivan-Leonard returned to point 4 on
slide 2. She referenced Mr. Teal's testimony about the
governor's statement that the budget did not take
additional funds from Alaskans through taxes or the PFD.
She clarified that the governor had stated he did not want
an income or sales tax or the use of the PFD to fund
government operations. She believed it was something that
needed to be said as opposed to just stating that municipal
government would have an increase in taxes. She stated that
was not yet known. She thought they needed to stick to the
state budget and not the municipal budget.
Mr. Teal noted the point but recalled statements made by
members of the committee that perhaps the governor's budget
put too much focus on the treasury as opposed to the state.
He explained that if the treasury was looked at by itself,
the economic and local government impacts were missed. He
stated it was the legislature's job to consider the impacts
to the state as a whole.
Representative Sullivan-Leonard did not dispute the point,
but she clarified that point 4 on slide 3 communicated that
the governor did not want to impose an income tax, sales
tax, or the use of the PFD.
2:03:44 PM
Mr. Teal turned to slide 5 and addressed an abbreviated
fiscal summary showing undesignated general fund (UGF)
only. He noted it was perhaps all the committee needed at
present. He explained that LFD did not disagree with any of
the numbers in OMB's fiscal summary; LFD only disagreed
with some of the way the budget was presented. Therefore,
it was possible to eliminate all of the other funds and
federal funds and focus on the UGF only because it was the
only type of fund that could have a deficit. The simple
comparison showed that revenue was $200 million higher in
FY 19 than the projection for FY 20. The difference was an
oil price of $68 in FY 19 compared to a projected price of
$64 for FY 20. He continued that appropriations were down
$73 million (from roughly $5.772 billion in FY 19 to $5.699
billion in FY 20). In FY 19 there was a projected deficit
of $262 million; the governor was proposing a deficit of
$428 million in FY 20 (before new revenue came in). The new
revenue of $448.8 million, comprised of $420 million of
petroleum property tax (currently local revenue that the
governor would turn into state revenue) and $20 million in
shared taxes (currently shared with local governments that
the governor would turn into state revenue). The new
revenue resulted in a surplus.
Mr. Teal noted that in the overview publication he
specified that the governor would find it difficult to cut
money from agency operations and that he may find himself
having to cut where the money was (i.e. Medicaid, K-12
education, PFDs, DHSS, and the University) or costs would
end up shifting to local governments. He did not believe
his statement went very far out on a limb. He turned to
slide 6 that showed cuts the governor was proposing to
state agencies (excluding Medicaid and K-12 - the large
formula programs under DEED and DHSS). The table showed a
$2 billion expenditure. He highlighted the difficulty of
cutting $1.6 billion from a $2 billion portion of the
budget.
Co-Chair Wilson appreciated that Medicaid and K-12 was not
included in the table; however, she wondered why the
University was included if the goal was to look at whether
government had gotten smaller. She explained that although
the table showed a decrement, the state gave a grant to the
University and she did not view it as agency operations
(unlike the Department of Environmental Conservation or
DHSS). She asked how to make the determination about
exactly how much came out of agency operations that the
state was responsible for versus those that went to
municipalities (e.g. K-12 or grants through DHSS). She did
not believe the cut to the University should be reflected
in state government operations.
2:08:29 PM
Mr. Teal knew the University liked to consider itself as a
fourth branch of government, but it was not. He clarified
that the University was an executive branch agency. The
University was named in the constitution, but for budgetary
purposes it was still considered as an agency and state
funding was used for operations (like any other agency). He
added that the legislature did not budget the University
the same way it budgeted other agencies.
Co-Chair Wilson understood that the University [was part of
state government]. She reasoned that Medicaid and K-12 were
also part of government. She relayed the desire to be able
to explain to constituents the reductions in areas directly
impacting the public such as DPS, DHSS, and DEC (areas that
had substantial regulation and impact). She noted that the
table excluded the other two [Medicaid and K-12]. She was
trying to ascertain whether there was a better way to
specify what came out of the budget that would be for
municipalities to cover and the everyday budget items. She
reasoned that $1.6 billion had been taken out of the
budget, but it was from areas that citizens would not all
consider to be state operations.
Mr. Teal replied there were many ways to break the budget
apart to make it digestible. The table was simply a way of
showing the day-to-day operations of state government,
without the large formula programs. The University was not
a formula program - funds went to operate the University in
the same way state funds went to the Department of Natural
Resources (DNR) to operate. He stated whether Co-Chair
Wilson considered the services to be a function of
government was up to her. He elaborated that LFD viewed the
University as a function of government and he did not know
how LFD would treat it differently; LFD would continue to
include the University in reporting because it was part of
the budget process. To LFD, the University was simply
another agency; it had been included in the table because
it was a nonformula as were most of the other agencies in
the table. The large formula funds were Medicaid and K-12
and had been excluded from the table.
Representative Sullivan-Leonard asked why the Department of
Commerce, Community and Economic Development (DCCED) showed
a 297 percent increase (slide 6).
Mr. Teal replied that the increase was due to Power Cost
Equalization (PCE) that had previously been funded by the
designated PCE Fund. The governor planned to eliminate the
designated PCE Fund and not the program; the funding source
would be transferred to UGF. The amount was $33 million,
which accounted for the huge increase.
2:12:28 PM
Mr. Teal continued to review the FY 19 management plan to
FY 20 governor's amended budget on slide 6 and reported the
total cut was 13 percent or approximately $260 million. He
remarked that despite campaign statements made by the
governor that he believed $200 million could be cut from
state agencies with no impact (part of that was due to
efficiencies and the governor's belief that there were a
couple thousand positions that were funded but unfilled),
he believed it was a myth. He believed cutting $200 million
from the specific portion of the budget was a stretch. The
governor had exceeded Mr. Teal's expectations in his
ability to cut from the area, but he had not foreseen a 41
percent ($134 million) cut to the University or the cuts to
the Alaska Marine Highway System (AMHS) that would result
in the end of the system as the residents of coastal
communities knew it. He summarized that cuts of $260
million were more than he expected but were far less than
$1.6 billion.
Representative Merrick asked for an explanation of the
positive figures for DEED, Judiciary, the legislature
(slide 6).
Mr. Teal replied that the agencies listed by Representative
Merrick had received increases; they received additional
grants in some cases. He highlighted that they had been
expecting to see a large reduction to DEED; however, K-12
funding had been removed from the data shown on slide 6.
The DEED figures on slide 6 only included funding for the
department itself. There was an increase, but he could not
specify exactly what had been increased. He knew some early
education cuts had been made, so it seemed strange there
was an increase. He believed the increase for DNR was
related to the governor's addition of funding for fire
suppression. He explained that fire suppression had been
underfunded for years; the governor had decided to fund it
at a more reasonable level, which was several million
dollars higher than in the past.
Representative Merrick reminded Mr. Teal she had asked
about Judiciary.
Mr. Teal explained that the increase to Judiciary was
primarily due to an effort to end the Friday afternoon
Judiciary office closures, which was part of the governor's
criminal justice initiative. He remarked that because the
governor wanted to be tough on crime, he would expect there
to be increases in the Department of Public Safety (DPS),
Department of Law (DOL), the Department of Corrections
(DOC), and the Court System; however, that was not the
case. He highlighted the proposed $30 million reduction to
DOC as an example. He detailed it was a combination of
replacing UGF with Permanent Fund criminal funds (the state
garnished felons' PFDs and deposited them in the Crime
Victims Compensation Fund to fund healthcare costs within
DOC). He explained that a bigger dividend the previous year
meant more dollars that were not paid to criminals and more
money to DOC. He elaborated that it resulted in a reduction
of general funds; most of the reduction was due to a
decision to move prisoners out of state. Despite the fact
the governor wanted to be tough on crime there was a $30
million reduction to DOC.
2:17:51 PM
Mr. Teal continued to answer the question. He pointed to
the DHSS line on slide 6 and reminded the committee the
reduction did not include Medicaid. The increment included
the Pioneer Homes, which may appear to be untouched because
there was a loss of $18 million UGF that was replaced with
the authority to increase rates. The data only reflected
the UGF, not the potential for rate increases. He returned
to DOC and relayed that LFD believed the numbers may be
erroneous; based on a quick analysis, LFD anticipated a
supplemental of $7 million or more. Similarly, a
supplemental for DHSS may be required, but he did not know
because LFD did not have the data (i.e. what assumptions
had been used - the number of residents receiving what
level of care, how much money they make, etcetera). He was
uncertain the administration had such an analysis. He could
not envision how the subcommittees could make decisions on
the items without more information about who was served,
the chances of recovering money through rate increases, the
number of people living in homes that would be moved out of
homes. He reiterated that LFD did not have a set of
assumptions showing how the administration got its numbers.
Representative Merrick asked about the 1 percent increase
to the legislature's budget on slide 6.
Mr. Teal stated that the increase was due primarily to two
things. First, the Senate Finance Committee had added two
members and funding their staff. Second, the House Finance
Committee was a larger share of the increase because it had
curtailed its own funding substantially; it had left 18
positions with only 11 or 12 to be filled according to the
money in the committee's budget. At the request of the
Legislative Budget and Audit Committee chair (Senator Bert
Stedman) they had included the money to fully fund the
House Finance Committee. He pointed out that the
subcommittee may determine the money was unnecessary. He
would not be surprised if the subcommittee decided the
money was not needed since the positions had not been
filled.
2:21:30 PM
Representative LeBon asked what the cost would be for the
governor's proposal to close a correctional facility and
transfer prisoners out of state.
Mr. Teal replied he could not answer the questions yet. His
assumption on moving prisoners out of state would mean the
legislature would have received an explanation outlining
the criteria used to select who would be transferred out of
state, the costs of the psychological and health
examinations, the transportation cost, and the institutions
the individuals were currently in. He explained that if the
500 individuals came fairly evenly spread from institutions
across the state, it was not a very efficient way to run a
prison. He elaborated that under the scenario perhaps
individuals in-state would be transferred around in order
to close to of the buildings at the Wildwood Correctional
Complex. He questioned what the cost would be to internally
rearrange prisoners. He emphasized that LFD did not have
any information on how the governor's office had come up
with the numbers or how much would be saved by moving
prisoners out of state. He stated it was a budget proposal
and should be included in the budget - a fiscal note should
not be needed. He believed the information should have
already been provided to the legislature [by the
administration] for its review.
2:24:14 PM
Representative LeBon asked if the $29 million in savings to
DOC [shown on slide 6] may not include the details
highlighted by Mr. Teal.
Mr. Teal answered that the information was not known. He
added that LFD estimated the administration's budget
understated the DOC cost by at least $7 million.
Consequently, he would expect a supplemental request. He
noted that LFD had not done what he would consider to be an
acceptable analysis either.
Co-Chair Wilson asked for verification that DOC could issue
an RFP and move prisoners out of state without the
legislature's permission.
Mr. Teal agreed.
Co-Chair Wilson clarified the legislature did not know
where the administration was in the process. She understood
it would be nice for the legislature to understand whether
a supplemental would be needed before the proposed
decrement was made. However, she wanted the committee to
understand that the decision was in the administration's
purview and not necessarily in budgeting. Separately, she
asked for verification that the decrements of 32 percent
and 41 percent to the Department of Transportation and
Public Facilities (DOT) and the University respectively
represented general funds only and not a cut to the
agencies' entire budget.
Mr. Teal agreed, the chart only included UGF. He detailed
that the cut [to DOT] was almost all to the AMHS; it did
not include the reduction in marine highway system funds
because they were DGF program receipts.
Co-Chair Wilson noted the figures did not include the DOT
capital budget either.
Mr. Teal responded affirmatively.
Co-Chair Wilson asked what the decrements would be to the
entire University and DOT budgets.
Mr. Teal did not know, but the reports were on the LFD
website.
Co-Chair Wilson stated that she found it interesting the
table only included UGF funds. She pointed out there were
other fund sources including DGF and federal funding. She
noted the University received a substantial amount of DGF
funds; both entities received federal funding as well. She
wanted to ensure everyone understood the entire fund source
picture. For example, perhaps federal funding had
increased.
2:26:55 PM
Mr. Teal used the $134 million in cuts to the University an
example. He explained that if a person looked at total
funds or total general funds, the University was up by 1.4
percent. However, as the University president Jim Johnson
had testified in the Senate Finance Committee, the $134
million cut to UGF was real money. He elaborated that
adding $134 million in tuition receipts was fantasy money.
He furthered that Mr. Johnson had no doubt that he could
not come anywhere close to replace the UGF with tuition
increases.
Co-Chair Wilson agreed, but wanted to look at the bigger
picture. She used Pioneer Homes as an example where it
appeared there was not really a reduction because it was
receipts - she reasoned that the Pioneer Homes could likely
not collect the money [from residents]. She elaborated that
at that point most of a person's assets had been turned
over to the Pioneer Home for care. She spoke to the
importance of looking at the entire funding source picture
including DGF and federal funds. She noted it appeared that
DOT had been cut by 32 percent; however, there were many
other funds that came from other fund sources. She stated
that sometimes people did not realize how many different
funds came in to make up the whole picture. She did not
want to make it look worse than it was.
Mr. Teal answered that for AMHS the federal funds were not
an issue; there were general funds and program receipts
from ticket sales. He detailed that federal funds, like
highways, helped with construction of ferries and
terminals, but could not be used for operating. In that
case it was not a big issue. For the University, to the
extent the loss in general funds caused a loss in faculty
and research grants, there was potentially a significant
loss of federal funds that general funds attract. He did
not have details on the amounts.
Co-Chair Wilson stated her point was that the situation was
not as simple as one worksheet. She noted there were many
moving parts. She added that DOT could use federal funds
for design. She remarked it would offset some operations
but not all.
2:30:01 PM
Mr. Teal asked Co-Chair Foster if his memorandum on
subcommittees had been disseminated to committee members.
Co-Chair Foster believed the memo would go out to members
that afternoon.
Mr. Teal addressed that Co-Chair Wilson was highlighting a
need to see some facts and justification from the agencies.
The memo from Co-Chair Foster mentioned a request that had
gone out asking agencies to provide an impact statement for
each of the proposed changes. There was concern that if the
subcommittee process started and agencies had to follow up
on requests to learn how numbers had been derived, it would
delay the process another week or two. Therefore, letters
had gone out to agencies asking for impact statements in
order for subcommittees to already have information on
impacts of proposed cuts to programs.
Co-Chair Wilson thought it was important to be careful in
subcommittees to keep in mind that all fiscal notes in the
governor's crime bills and others were not included in the
percentages, and yet subcommittees generally did not
consider pending legislation.
Mr. Teal agreed. He detailed they did not know what the
fiscal notes were and had not seen a number of the bills.
He had first heard the governor would submit 30 or more
bills that would affect the budget; that number had dropped
to 25 because the bills had been consolidated. The number
was down to 16 bills, but LFD had not seen them or any
associated fiscal notes and analyses.
2:32:37 PM
Representative Josephson stated that his sense of Mr.
Johnson's statement on behalf of the University was that
the match the University received brought in about $250
million to $300 million in the research component, which
was as much as $4 to $1 and without the grant much of that
funding would disappear. He asked if the conclusion was
reasonable - that the reduction could result in a ripple
effect.
Mr. Teal replied that it was reasonable. He did not believe
the legislature should trust what appeared to be
reasonable. He wanted to see the analysis and the
University's statements showing what it would lose.
Specifically, how a cut in general funds would impact
programs and what federal funds would be lost as a result.
He did not believe the request was unreasonable.
Representative Josephson calculated that if the proposed
cuts to the University came to fruition, the overall cut to
agency operations would be about 11 percent. He thought the
reduction would be in addition to cuts of around 24 percent
since 2014. He combined the two figures for a cut of
approximately 35 percent to University operations.
Mr. Teal was not certain Representative Josephson was
referring to the University or the totals. He explained if
the $134 million for the University (on slide 6) was
removed it would cut the total figure [of $260 million for
all agencies] in half and would result in a 6.5 percent
reduction [in total agency operations for FY 20].
2:35:19 PM
Representative Josephson clarified he was removing the
University altogether, not only the reduction. He thought
the total cut to the University would be around 35 percent
from FY 15 to FY 20.
Mr. Teal answered that the subject was best left to the
budget subcommittee. He elaborated that subcommittees would
receive detailed binders that would include a 10-year
lookback and reports comparing FY 15 to FY 19 and FY 15 to
FY 20. Subcommittees would review agencies' past cuts and
additional cuts.
Representative Josephson referenced Mr. Teal's discussion
about the need for the legislature to ask [the
administration] for impacts. He wondered whether the Senate
had made the requests.
Mr. Teal replied he did not think the House needed to worry
about duplicating work. The House and Senate were going
through the same process and were considering the same
budget. The departments would respond with the same
information for both bodies.
Representative Josephson asked if the Senate had asked the
same impact questions.
Mr. Teal believed the Senate was in the same place the
House was. He thought questions had been drafted but may
not have been submitted [to departments or the
administration] yet.
2:37:38 PM
Mr. Teal continued with slide 6 and addressed proposed $87
million in cuts to DHSS. He reported that Adult Public
Assistance was down $15 million, Temporary Assistance was
down $2.5 [million], $17 million for Tribal Assistance had
been eliminated, and $20 million for Senior Benefits had
been eliminated. He remarked that the committee had not yet
started its budget overviews and he doubted the full
committee would get into the detail that the Senate had. He
noted the Senate [Finance Committee] had held nearly two
weeks of three-hour per day meetings on agency impacts.
There was information available and he suggested watching
the Senate overviews. He suggested moving on to other areas
of the budget since of the $1.6 billion in cuts, the agency
operating portion was the $260 million shown on slide 6. He
speculated that slide 6 likely left members wondering what
the means of balancing the budget was (if the means was not
agency operations).
Mr. Teal turned to a table on slide 7, "Filling a $1.6
Billion Deficit." The top portion of the table showed
reductions in agency operations of $650 million. He
explained that the table split agency operations in a way
that made sense to him. He agreed that the data could be
looked at in a number of ways. The nonformula line showed
reductions of $249 million; the number was different from
the $259 million on slide 6 because there were some formula
programs (included on slide 6) other than K-12 and
Medicaid. The table showed a cut of $302 million to DEED,
which reflected only the cut to the K-12 formula state
funded portion. He elaborated there were also local
contributions. He underscored that if there was an
implication that local governments could make up the cuts,
it was not necessarily how things worked.
Mr. Teal explained that local funding had two pieces
mandatory contributions and voluntary contributions.
Mandatory contributions were based on property tax rates
and 2.65 mills went to schools. He explained that under
voluntary contributions schools could contribute up to 23
percent of basic need (another way of saying 23 percent of
what the state gave schools through the formula). He
pointed out that a 25 percent reduction to the formula
would also mean a 25 percent reduction in the voluntary
contribution cap. For example, Juneau and Anchorage funded
to the cap, meaning voluntary contributions in those
districts would decrease by 25 percent; it was not possible
to give above the cap. Whereas, in places like Mat-Su that
did not fund to the cap, local contributions could remain
the same. Funding also depended on some other things, like
how much state money went to the communities. For instance,
the governor had proposed a reduction to school debt
reimbursement. He used Mat-Su as an example and explained
that if school debt reimbursement was reduced, the borough
would have less money from the state. He noted that there
was no way to know what communities would do, but it was
extremely unlikely that local contributions would increase.
2:43:45 PM
Mr. Teal continued to discuss reductions in agency
operations on slide 7. He stated there were indirect
impacts, which tended to shy away from when discussing the
cuts. He recommended hearing from Institute of Social and
Economic Research (ISER), Ed King from the Office of
Management and Budget, and/or Neal Fried from the
Department of Labor and Workforce Development about what
effects the cuts may have on the economy.
Mr. Teal highlighted cuts of $132 million to DHSS, but
noted it was tricky because the category at the bottom of
the table included a line item labeled "SBR for Medicaid"
for a total of $172 million. He explained that the issue
was more complicated than just using reserves. The $172
million would drain the SBR; the funds were available for
Medicaid in FY 19 with a carry forward specifying that the
funds could be used in FY 20 if they were not spent in FY
19. The department's supplemental request for FY 19 was $15
million. He explained that the $172 million was not needed
in FY 19 and was essentially an FY 20 appropriation. He
believed using reserves in FY 19 was a way to make the FY
20 budget look smaller than it was. He elucidated that the
$172 million cut appearing in FY 20 did not happen.
Mr. Teal reviewed a $33 million line item for PCE the
governor had proposed to fund with UGF instead of DGF. The
total reductions to agency operations on slide 7 was $650
million. He turned to the category of "cost shifts from
state government" on slide 7. The first item was $420
million in petroleum property tax. The shift would require
legislation and would take money from various communities,
primarily the North Slope, and would shift tax revenue from
communities to state government. The second item was $28
million in shared taxes that would be new money to the
Treasury. Third, $68 million in school debt reimbursement
would take money from communities and shift it to state
government. The same was true for the $3 million in debt
service. The section totaled $520 million in costs shifted
from local governments to state government.
Mr. Teal addressed the using reserves category on slide 7.
The first line showed $180 million in AIDEA funds to pay
for oil and gas tax credits and capital. He did not really
care what the reserves were called, but he emphasized that
the cash reserves of a state corporation were reserves. He
detailed that UGF built the capital to establish AIDEA;
while the state may have the right to take the reserves
back, they were simply another form of reserves. He did not
want to focus on the legalities of taking the money back,
or how it may impact credit ratings or economic development
in the state.
Mr. Teal shared that his focus was on the transparency of
the operation. He shared that LFD thought if money was
going to be pulled from a state corporation or other
reserve accounts, it should show. The more transparent
method would be to show the proposed use of $180 million in
AIDEA funds in FY 20 and $84 million for FY 19; that $264
million would be deposited into the General Fund and would
be spent as general funds. He explained that transparency
would show where the money came from and count it as an
expenditure. Under the current budget process, AIDEA
receipts were not general funds and the money would be
spent as invisible revenue and expenditures. He did not
view the method as transparent.
2:50:03 PM
Mr. Teal pointed to $107 million at the bottom of slide 7
under "eliminating December 15 increments." He explained
that the administration had used the December 15 budget,
referred to by some as the Walker budget, which was $107
million higher than the FY 19 budget. The legislature's
starting point was the FY 19 budget. Less than half of the
deficit was actually filled with budget reductions - the
remainder was filled by shifts and reserves. He found the
shifts and use of reserves to be unexpected given the five
principles outlined by the administration. He questioned
whether adhering to the principles mattered or transparency
mattered. The legislature could ask for another bill from
the governor - one that did not cross fiscal years, use
reserves, shift costs to local governments, and one that
did not include cuts the legislature found unacceptable.
However, he had zero expectation another amended budget
would be received.
Mr. Teal noted that when OMB had been asked about analysis
for the budget proposal, the answer had frequently been
that the budget was merely a proposal. A statement by Mike
Barnhill [OMB Policy Director] to the Senate Finance
Committee was that the legislature would have to find
alternative reductions to balance the budget if it did not
like the proposal by the governor. He stated the situation
put the legislature in a box. He asked how the legislature
was going to balance the budget if it did not like the
governor's proposals. The list of tools available was
unchanged - reserves could be used but it was not
sustainable, new revenue (broad-based tax) may not get
through the legislature and may not survive a governor's
veto, further cuts to agency expenditures would be
difficult, cuts could be made to statewide items, some
changes could be made to retirement amortization but not by
shifting costs onto municipalities, and there may be some
room in tax credits but not enough to balance the budget.
The remaining option was cutting the PFD, which had its
tradeoffs. He elaborated that dividends competed with other
government expenditures, which did not make the decision
about reducing the PFD to eliminate the deficit any easier.
2:54:06 PM
Mr. Teal continued that for the governor and some
legislators, a PFD of less than $3,000 was not an option.
He stated that options were very limited if that was the
case. He pointed out that at the other end of the spectrum,
some people would note there would be a surplus if
dividends were not paid. He explained the situation left
people to conclude there was not a fiscal problem, but a
political problem. He noted that however the problem was
defined, there were tough decisions facing the legislature.
He believed decisions required strong supporting
justification. He hoped the legislature received the
justification for the [administration's] proposals soon. He
shared that his first reaction to the proposed budget was
to question where the supporting documentation was and what
the purpose of all of the proposals was. He asked if it was
just a design to throw the legislature into chaos due to
the vast number of proposals. He questioned if the
administration's goal was to present the legislature with
so many proposals that it would not have time to analyze
them all and it would accept the governor's budget. He did
not know. He continued that it could also be looked at as a
clever way of forcing a public conversation that was
necessary to move forward. He questioned whether people
would look at the budget proposals and plead with the
governor and legislature to reduce the PFD in order to
avoid the proposed cuts. He did not know what the
governor's intentions were or how people felt about it.
2:56:18 PM
Mr. Teal turned to slide 8 and noted that he did not know
how much people knew about the state's fiscal situation and
budget. He questioned whether people knew that dividends
consumed 37 percent of the revenue and expenditures. He
wondered if people knew that the FY 20 UGF budget was only
$123 million (2 percent) less than the FY 19 UGF budget. He
thought people believed there were much bigger cuts than
there were. He asked if people understood the reductions to
agency operating budgets only addressed $650 million of the
$1.6 billion deficit. He considered whether people knew the
remainder of the deficit was filled by shifting costs to
local government or draining reserves. He asked if people
understood that reductions to agency operating budgets
addressed only $650 million of the $1.6 billion deficit.
Mr. Teal wondered if people knew the impact of the proposed
cuts to the operating budget was greater than the 350
positions shown in the OMB overview. He explained that the
number did not include the AMHS positions because the
shutdown would not occur until October. He elaborated the
cuts to positions should include 600 AMHS jobs, 1,300
University jobs, and 3,000 school district employees (that
would result if $300 million was cut for schools). The
total job loss would be 5,000 positions or more. He noted
that the job losses were not all state jobs - school
district jobs were not state jobs, but they were state-
supported and the reduction in positions would be due to
the loss of state support. He was not pretending to know
what the citizens or the legislature wanted - his point was
he did not know what people knew.
Mr. Teal did not know how flexible the governor was going
to be on the $3,000 PFD. He noted the governor appeared to
be pretty flexible on maintaining reserves and on the tax
issue. He asked if the governor was also flexible on
dividends. He noted that there were at least 16 bills
coming from the governor - he wondered if a priority was
known. He remarked that the bills' content was not yet
known. He stated it was a big workload for the finance
committees to consider and get through during regular
session. He reported that LFD still had a weak
understanding of the governor's plan and intent. He hoped
the understanding improved in coming weeks.
3:00:45 PM
Vice-Chair Johnston thought her question may pertain more
to the Alaska Retirement Management Board (ARMB) but noted
it was still part of the budget discussion, especially when
considering some of the job loss. She elaborated that the
University and school districts would likely face some
rather large termination studies. Additionally, there would
be a decline in state employees. She considered how the
situation would impact "our payment and how it affects
actually the tail for the municipal governments at the
end." She detailed that municipal governments would take
the lion's share with the extra amortization. She had not
seen the issue addressed anywhere.
Mr. Teal stated it was an excellent point. He stated it was
another example of "what would the impact be?" There would
be costs, which would appear as increased retirement rates
(contribution and employer rates). He used Anchorage as an
example and explained there would be fewer employees to pay
contributions on, yet the unfunded liability of the
retirement systems was a dollar amount that was required to
be paid annually. He detailed that if the amount was spread
over 12,000 employees versus 15,000 the rate would be
higher. He explained that the Municipality of Anchorage's
contribution rate was capped at 22 percent; if the rate
increased, the state would absorb all costs for retirement
for all municipalities and school districts. Retirement
cost rates would go up and the state would be responsible
for the payments above 22 percent or 12.56 percent [to
Public Employees' Retirement System (PERS) and Teachers'
Retirement System (TRS) respectively]. The only way to
figure out the amount would be to determine positions lost
and provide the information to the actuaries for
projections. He concluded the cost would not be
insignificant.
Representative LeBon addressed item 4 on slide 8: The
remainder of the deficit is filled by shifting costs to
local government or draining reserves. He pointed out that
diverting property tax collected from TAPS going through
Fairbanks to the state would be an annual event. He added
that it would not be possible to continue using reserves
from AIDEA or the SBR on an annual basis.
3:04:15 PM
Mr. Teal agreed. He thought the administration's proposal
would take a substantial amount from AIDEA. He noted that
AIDEA had additional funds, but it was a policy call that
would affect future development. The SBR had a balance of
$172 million, which would be used in its entirety under the
governor's proposal. The proposal represented another one-
time fix.
Representative Tilton asked Mr. Teal to define what the
reserves were.
Mr. Teal reviewed the state's reserve accounts. The
Constitutional Budget Reserve (CBR) currently had about $2
billion remaining and required a supermajority to access
(the fund used to contain about $15 billion); the CBR had
been the source (up to $3 billion per year) used by the
legislature to balance the budget. He elaborated that the
CBR was no longer an option to balance the budget - perhaps
it could be used for one more year before being depleted.
The SBR currently contained $172 million and could be spent
by a simple majority; the account was designed to be a
shock absorber. He explained that the account provided the
legislature with a funding source to balance the budget in
the event oil prices were lower than projected, meaning the
legislature did not have to reconvene to rewrite the
budget.
Mr. Teal continued to review state reserves. Other reserves
that were often not counted as reserves were those of state
corporations including AIDEA and the Alaska Housing Finance
Corporation (AHFC). Additionally, there were endowment
reserves such as the PCE that had a balance of over $1
billion. He noted that some people would argue that PCE was
not a reserve fund. He elaborated that PCE was a deal that
had been devised years earlier due to power inequity
between rural and urban regions. He explained that urban
areas of the state were provided with hydropower and
subsidized gas production from Cook Inlet. He furthered
there was no good subsidy option for rural regions;
therefore, PCE had been implemented to subsidize their
rates. He reasoned that someone could argue the fund
generated more money than it needed. Additionally, someone
could choose to ignore the previous deal and use the PCE
funds for something else. The Higher Education Fund was
another endowment fund with a balance of $330 million
intended for scholarships and grants. He detailed that
those funds could be taken as well.
Mr. Teal explained the remaining reserves were in small
pools of money. He highlighted the loan funds. In addition
to the governor's proposal to eliminate the PCE Fund and
the Higher Education Fund, he was proposing to close the
loan programs (totaling about $31 million) and transferring
assets to the General Fund. If the governor's proposal went
through it would deplete reserves other than the CBR, which
required a supermajority [vote to access].
3:09:50 PM
Representative Josephson referenced the supermajority and
the CBR. He asked for verification that the budget did not
reverse sweep funds back into the accounts as had been done
in recent years. He believed the budget captured the funds
and restored the other accounts to the CBR, which would
require the legislature to recast a supermajority vote.
Mr. Teal noted that the term reverse sweep was a term used
by the legislature that applied to the CBR. He elaborated
that the constitution required the legislature to pay the
money back to the CBR when it was used as a fund source.
The money was paid back via the "sweep." He detailed that
on June 30 of every year, the balance of the General Fund
and all sub-funds were swept into the CBR. The reverse
sweep referred to traditional budget language specifying
that the money swept from subaccounts of the General Fund
all went back where it came from. Subaccount funds included
[but were not limited to] the Worker's Safety Fund and
funds created with alcohol and cigarette taxes. He
explained that if the sweep was not reversed, all of the
money would go to the CBR and remain there. He expounded
that a nightmare of accounting problems would occur if the
reverse sweep did not take place.
Mr. Teal reported there had been one year since the
creation of the CBR without a reverse sweep. The situation
had caused "crazy" accounting problems because agencies did
not have cash to do what they were supposed to do; agencies
ended up booking things at different times and correcting
books. He characterized the situation as an unnecessary
mess. The reverse sweep had historically been a fairly
noncontroversial supermajority vote; it did not cost any
more money, but not doing it made agency accounting more
difficult.
Mr. Teal highlighted that the CBR language was missing the
reference to access to the CBR in case of a deficit. He
noted that someone may argue that the language was not
needed for the proposed budget because there was no
deficit. He considered that there was a $20 million
surplus, but if oil prices fell by $0.50 the state would be
in a deficit. At that point the legislature would be faced
with determining what to cut. He underscored the importance
of some type of automatic deficit filler due to the
volatility of the state's revenue. It was not possible to
know whether a revenue forecast would be $0.50 high or low
or $5.00 high or low. He recommended including language in
the budget because the governor did not include any
automatic deficit filler language.
3:14:18 PM
Representative Josephson thought it sounded like Mr. Teal
was talking about two different things - the reverse sweep
to the various accounts and the right for the executive
branch to access some number above the amount in the CBR
without the legislature being required to reconvene.
Mr. Teal replied in the affirmative. He explained the two
pieces of access to the CBR. The language in recent years
had been that anytime revenue was less than what was
appropriated, the gap could be filled by drawing from
reserves. He questioned where the incentive was to reduce
the budget from the perspective of a fiscal conservative.
He elaborated under the scenario a person could reason that
it did not matter how much revenue there was, and they
could spend whatever they wanted and the difference would
be made up from reserves without anyone really knowing. He
stated it did not matter what the oil forecast was. He
continued that the public, for years, has had a deficit. He
wondered how anyone in the public would know the
consequences of a deficit were when they never saw it;
every year the deficit was filled with reserves, which the
public did not see and did not know about. He stated it was
a dangerous way to budget. In recent years the legislature
had changed the method to some extent because the second
part of access to the CBR had been drawing what was needed
to fill the deficit with the understanding there may be
supplemental needs for something like fire suppression or
Medicaid and that draw was limited to $100 million (or
whatever amount the legislature set). There were a number
of triggers and ways to handle the situation. He thought
the legislature wanted to include some sort of automatic
deficit fill, but with a cap.
3:17:12 PM
Mr. Teal concluded with a table on slide 9 that showed a
comparison of the FY 19 budget with the governor's amended
FY 20 budget request (UGF only). The total reduction was
$123 million or 2 percent. He pointed out that even though
about $1 billion of the deficit was filled with reserves or
new revenue, there was still $650 million in cuts. The
slide showed where the proposed cuts fell. He referenced
his statement from a fiscal overview that the governor
would have a difficult time finding cuts in agencies. He
noted that if the governor was going to make big cuts they
would be achieved in K-12 and the dividend.
Mr. Teal explained that the majority of agencies did not
have large cuts. He would expect to get bigger dollar
amounts from the larger dollar programs, but he did not
expect to see bigger percentage cuts as well. He pointed to
a 25 percent cut to K-12 with a 90 percent increase in
dividends. He highlighted other large cuts including 38
percent to Medicaid, 33 percent in statewide funds
(primarily due to school debt reimbursement), 18 percent to
DHSS (outside of Medicaid), 41 percent to the University.
He emphasized there were much bigger hits in the bigger
programs. He noted it could be argued that the big money
programs were the state's core programs if they were
defined as programs impacting the majority of Alaskans.
3:20:04 PM
Co-Chair Foster returned to slide 7 and referenced Mr.
Teal's point that many people were under the impression the
budget had been cut by $1.6 billion, but that was not
necessarily true. He continued that the budget included
cost shifting of state services, the use of $350 million in
reserves, and the elimination of some December 15
increments. He furthered the chart table showed that $650
million was the major part of the $1.6 billion cut. He
turned to item 2 on slide 8: the proposed FY 20 UGF budget
is $123 million (2 percent) below the FY 19 budget. He
asked for verification that the difference was due to
spending more on PFDs.
Mr. Teal replied in the affirmative; the increased PFD
resulted in a $1.9 billion expenditure. He looked at slide
7 and elaborated that property taxes resulted in revenue,
but school debt reimbursement was a reduced expenditure
(paid by the state). He had included the items under the
cost shift from state government category, but he noted
that someone else may think the reduction in school debt
reimbursement belonged in the reductions in agency
operations section of the table. He moved back to item 2 on
slide 8 and explained it did not pertain to the operating
budget, but pertained to the capital budget, statewide
items, fund transfers, and fund capitalizations (the entire
budget).
3:22:59 PM
Co-Chair Foster stated that of the $1.6 billion there were
$650 million in operation cuts, but when considering the
entire budget, it was really only $123 million less than
the prior year.
Mr. Teal agreed. He stated that Co-Chair Foster was on
track when he had asked "how can that possibly be?" He
explained there were cuts, shifts, and other things. He
elaborated the budget was only $123 million less than the
FY 19 budget that because it spent $900 million more on the
PFD.
Co-Chair Foster recognized Representative Sharon Jackson in
the audience.
Vice-Chair Ortiz asked about school debt reimbursement. He
imagined the financial impact of the cut varied greatly
across the state's 54 school districts. He noted that some
districts had more bond debt than others and were
reimbursed more.
Mr. Teal replied in the affirmative. He reminded the
committee that all Regional Educational Attendance Areas
(REAA) had no school debt reimbursement because the state
paid for their construction cost directly. The school debt
varied greatly across all non-REAA districts. For example,
Mat-Su had built more schools than Juneau due to population
growth. He reported there was a sheet showing the impact of
the change in school debt reimbursement by community.
3:25:11 PM
Vice-Chair Ortiz asked if it was reasonable to say that
every $1 a school district did not receive in school debt
reimbursement meant schools had to look for ways to
compensate for the 23 percent reduction to the Base Student
Allocation (BSA) and overcome the lack of reimbursement for
school bond debt.
Mr. Teal agreed but clarified that schools and school
districts did not owe the debt. Municipalities had issued
the debt to build the schools. If the state did not
reimburse the schools' debt service costs, the district had
less money available and may or may not reduce school
funding because of that reduction.
Co-Chair Foster thanked Mr. Teal for his presentation. He
reviewed the schedule for the following day.
ADJOURNMENT
3:26:56 PM
The meeting was adjourned at 3:26 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2 26 19 HFC FY20 Overview round 2.pdf |
HFIN 2/26/2019 1:30:00 PM |
HFIN LFD Fiscal Overview |