Legislature(2021 - 2022)ADAMS 519
03/01/2021 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB69 || HB71 | |
| Overview: Governor's Fy 22 Budget and 10-year Plan | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 69 | TELECONFERENCED | |
| *+ | HB 71 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 1, 2021
9:03 a.m.
9:03:55 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:03 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
Representative Ben Carpenter
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor
SUMMARY
HB 69 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 69 was HEARD and HELD in committee for further
consideration.
HB 71 APPROP: MENTAL HEALTH BUDGET
HB 71 was HEARD and HELD in committee for further
consideration.
OVERVIEW: GOVERNOR'S FY 22 BUDGET and 10-YEAR PLAN
9:04:47 AM
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 69
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making reappropriations; 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."
HOUSE BILL NO. 71
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; making
supplemental appropriations; and providing for an
effective date."
9:04:55 AM
^OVERVIEW: GOVERNOR'S FY 22 BUDGET and 10-YEAR PLAN
9:04:59 AM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced himself and resumed a
PowerPoint presentation he had presented the previous week
titled "State of Alaska Office of Management and Budget,"
dated February 24, 2021 (copy on file). He had concluded
with the Department of Corrections the previous week (slide
12).
Representative Wool noted the governor's proposal to add
six medical positions at approximately $791,000 for the
reopening of the Palmer Correctional Center. He stated his
understanding that all other positions needed to open the
facility, most notably correctional officers, had been
funded the previous year; however, the funding had not been
used because there had been no correctional officers at the
time. He asked for verification that the funding was still
included in the budget.
Mr. Steininger confirmed that the positions had been added
into the budget. He explained that the money added into the
budget "in those years" had been necessary for the
construction and maintenance work done on the Palmer
Correctional Center. There were some appropriations to fund
the work necessary to reopen the facility. He noted that
the facility had been vacant for some time; therefore, the
funding had been necessary. Going forward the funding would
be used to hire correctional officers added to the budget;
the position control numbers (PCNs) had been added but not
filled at the time the decision had been made to reopen the
facility.
9:06:49 AM
Representative Johnson noted that she had previously asked
Mr. Steininger when the Palmer Correctional Center would be
open. She asked if he had an answer.
Mr. Steininger replied that he had not yet received the
information from the department and would follow up with
the information shortly.
Representative Rasmussen wondered why operating funds had
been used for deferred maintenance and work required to get
the facility ready for inmates. She asked why capital
budget funding had not been used.
Mr. Steininger answered that when the item had been added
to the budget, part of the idea was to phase in the cost of
reopening the facility into the operating budget in order
to avoid a significant shock to the budget in the year it
was added. He stated that knowing the operating cost and
that the money needed to be spent once the facility was
reopened, the administration believed it was appropriate to
add the funding "in this manner." He stated that the item
could equally have been funded as a capital project, but
the chosen funding mechanism had been an effective way to
fund the work necessary to open the facility.
9:08:39 AM
Mr. Steininger relayed that slides 13 and 14 pertained to
the Department of Education and Early Development (DEED)
budget. Slide 13 showed the department's non-formula
budget. He highlighted that the budget had been relatively
flat over the past decade in terms of all funds. There had
been some declines in unrestricted general funds (UGF)
followed by an increase in the past couple of years (shown
in the upper left graph in dark blue). He pointed to a
large spike in federal funds (shown in light blue)
representing Coronavirus Aid, Relief, and Economic Security
(CARES) Act funding that DEED had distributed out to school
districts. He reported that the CARES Act had provided a
substantial amount of money that had been distributed based
on the allocation through the department's federal title
programs.
Mr. Steininger spoke to significant FY 22 budget changes in
the DEED non-formula items. He reported a slight reduction
in the number of support staff needed, travel, and some
redundant expenditures, which would save just over $100,000
in UGF and eliminate one PCN. Additionally, there were
several positions within Alaska State Libraries, Archives,
and Museums that had been vacant for quite some time that
DEED did not intend to fill. He elaborated that eliminating
the one full-time position and two part-time positions
would save about $180,000. The department had also
discovered it had a redundant data assessment contract. He
expounded that as the department had looked at data it
received from school districts on student achievement, DEED
determined the work could be done in-house. He relayed that
the elimination of the contract would save approximately
$230,000 with no reduction in the actual data analysis.
There were other savings of about $121,000 related to
travel reductions and increases in virtual work. He stated
that DEED had done a lot to increase its technological
communications presence to work with school districts.
9:11:09 AM
Vice-Chair Ortiz stated that the governor had requested
increased funds in FY 21 to enable to the State School
Board to meet more frequently in person. He asked if the
travel reductions included the board. He wondered whether
the board had moved away from the plan to meet more
frequently in person.
Mr. Steininger deferred specifics to the department. Given
that the board had met remotely during COVID, it had found
it may be able to increase the number of meetings, but the
additional meetings would be virtual. He stated that some
board members lived in remote areas without good access to
broadband; therefore, there was still a need for travel for
in person meetings. He noted the board could meet more
frequently as it embraced videoconferencing.
Vice-Chair Ortiz asked for verification that Mr. Steininger
did not believe the school board was returning to the
proposal (from the previous year) to meet more frequently
in person.
Mr. Steininger replied in the affirmative. He clarified
that the proposal to meet more frequently in person was no
longer in effect. He explained that travel had been
reduced, but the board was expanding the number of meetings
virtually.
Vice-Chair Ortiz asked about the elimination of vacant
positions within the Division of Libraries, Archives, and
Museums. He asked if the positions had not been filled due
to the absence of a tour season. He asked if the decision
to reduce the staff was for the long-term or related to
COVID.
Mr. Steininger answered that change was for the long-term.
He relayed there were additional vacant positions the
governor's budget did not reduce because post-COVID-19,
when tourism increased, the department would need to be
able to fully staff the museum. He remarked that the museum
received a significant number of visitors in a normal
summer. He explained that the proposed staff reductions had
been identified as unnecessary in a "post-COVID world."
9:14:17 AM
Representative Josephson looked at slide 13 and referenced
the triangular shaped bump in the graph reflecting the
CARES Act funding. He stated that a couple of years back,
the legislature had concluded school districts needed $30
million in FY 19 and $30 million beyond the formula in FY
20. He remarked that the $30 million in FY 19 had been
litigated and had ultimately been funded. He recalled that
the FY 20 [FY 21] funding had been vetoed on April 7, 2020.
He asked how he could know the extra CARES Act funding had
backfilled the needs of the districts in place of the $30
million as had been concluded by the legislature.
Mr. Steininger clarified that the funding vetoed in April
[2020] had been for FY 21. He explained that when the
governor had vetoed the funding, the administration knew
there would be $38 million in CARES Act funds that would be
available for distribution to districts. At the time, the
administration had believed it could distribute the money
based on the K-12 formula calculation (the same way the $30
million legislative appropriation would have been
distributed); however, they had subsequently learned the
money needed to be distributed based on federal title
programs, which had a slightly different distribution
formula.
Mr. Steininger elaborated that part of the funding that
went to DEED had much more discretion than the larger chunk
that went out based on the title distribution. When the
administration had lined out who would receive the title
funds and who would have received the $30 million there had
been some gaps - there had been some districts that
received less and some that received more. As a result, the
administration had utilized a portion of the more
discretionary funds in order to backfill some of the gaps
to ensure no district received less than it would have
under the legislative appropriation that had been made
prior to knowing the funds from the CARES Act would come.
9:16:50 AM
Representative Josephson considered a scenario where a
district's needs for the funds were COVID-19 related and
therefore did not truly backfill as the legislature had
concluded was necessary. He asked for verification that it
would be incredibly complicated and nuanced to know.
Mr. Steininger answered that he could not speak to the
specific finances of individual districts as there was
significant variability between districts. He explained
that generally districts received a large amount of money
through the K-12 formula program that contained significant
discretion in the way districts could spend the funding. He
put himself in the shoes of a district finance officer and
stated that he would use the slightly more restrictive
federal title money before using the K-12 foundation
funding. He communicated that any given district likely had
enough COVID related expenditures in the past year to apply
to the federal dollars; therefore, the additional
restrictions on the federal dollars were not material
because districts could use the most restrictive spending
first and would have additional money from the K-12
distribution. The administration had changed the amount
districts were allowed to carryover from prior years, which
increased the amount of discretionary assets districts had
available. The administration believed districts had access
to the same amount of funding compared to what had been
imagined prior to the CARES Act and appropriated by the
legislature.
9:19:01 AM
Representative Josephson highlighted that the U.S. House of
Representatives had recently passed a $1.9 trillion aid
package that the U.S. Senate was likely to take action on
in the near-term. He remarked that the state could receive
$800 million to $900 million [in federal funds]. He asked
for verification that the federal funds would postpone the
cliff wall where there would be no more backfilling. He
asked if Mr. Steininger had any comment on the topic. For
example, he wondered how the deficit would be dealt with
when the day of reckoning came.
Mr. Steininger stated his understanding of the question. He
believed Representative Josephson was asking how the state
would manage through once additional federal funds
(available for both specific and general purposes) coming
to the state were expended. He looked back at how the state
had dealt with backfilling some of the American Recovery
and Reinvestment Act (ARRA) funding that had expired in the
2009/2010 timeframe. Some of the funds that needed
backfilling were predictable - much of it was additional
money for new programs that were not necessarily needed
post-COVID. He remarked that ideally the state would not
need additional money in things like unemployment insurance
or social services activities. He noted that hopefully
people needing those services would have the ability to go
back to work after the end of the pandemic.
Mr. Steininger continued that the federal funding was a
fairly large injection into the education system including
$38 million through the CARES Act and between $130 million
and $160 million through the Coronavirus Response and
Relief Supplemental Appropriations Act (CRRSAA). He
highlighted that the state could not pick up a $130 million
increase without cause or need. He elaborated that much of
the federal funding was because additional investments
needed to be made due to shortfalls in various areas and
programs. He furthered that care needed to be taken to not
generate an expectation that the state would backfill all
of the federal funding [in the future]. He stated that as
decisions were made it was important to recognize that the
increased funding was short-term in response to a crisis.
9:22:17 AM
Representative Wool assumed the reference to Libraries,
Archives, and Museums was the SLAM (State Library,
Archives, and Museum) located in Juneau. He asked if it was
the one museum facility under DEED. He had not known the
facility fell under DEED. He referenced Mr. Steininger's
testimony about federal funding based on a title system. He
asked if Title One schools received the first batch of
funding. He asked for an explanation of the title system.
He referred to the separate slides showing the DEED non-
formula versus formula budget items. He asked if Mr.
Steininger would explain what the labels meant. He stated
he had not done the education budget in the past. He shared
that his school district would have a revenue shortfall due
to lack of enrollment and the associated lack in state and
federal funding. He assumed it was a formula funding. He
asked if future federal funding could help fill the hole.
He ventured that every school district had a lack of
enrollment in the current year.
Mr. Steininger agreed that Libraries, Archives, and Museums
was commonly called SLAM and was located in Juneau; the
facility was officially the APK [Andrew P. Kashevaroff]. He
noted that DEED also managed the Sheldon Jackson Museum in
Sitka. He deferred the question regarding federal title
programs to the department for additional detail on how
funds were distributed to districts. He intended to review
numbers on slide 14 regarding reduced student counts
physically in schools versus an increase in correspondence
students. He noted the situation impacted different
districts differently. He informed the committee that DEED
had some good tables showing the impact district-by-
district based on student demographic and count changes as
well as how it compared to money coming in through the
CARES Act and CRRSSA and the ability for districts to carry
forward money from prior years. He would provide the data
to the committee.
Co-Chair Foster added that the Department of Education and
Early Development would present to the committee on
Thursday.
9:25:41 AM
Mr. Steininger reviewed the K-12 foundation formula in the
DEED budget (including pupil transportation) on slide 14.
He explained that the K-12 formula had been fully funded at
the Base Student Allocation (BSA); however, there had been
changes in the student count and the way students received
education. He pointed to the table on the bottom right of
the slide showing a high level summary of the formula
calculation. He detailed that regular Average Daily
Membership (ADM) represented traditional in classroom
students and correspondence reflected students receiving
distance education. He highlighted a small but significant
decrease in the total number of students in the state from
FY 21 to FY 22 in addition to a significant shift from
classroom education to correspondence. He elaborated that a
correspondence student received less funding in the formula
than a classroom student because there were fewer costs
associated with educating a correspondence student.
Mr. Steininger explained that the changes in student count
and demographics had drove the reduction of close to $20
million in the overall formula. He reported that the
reduction would hit different districts differently. He
elaborated that districts running some of the
correspondence programs had picked up students, while other
districts saw a reduction in the number of kids living in
their community or attending school in person. He noted
that DEED would go into more detail on the differences
district by district.
Mr. Steininger highlighted the last change on slide 14. He
referenced a residential school formula program that
enabled individual residential schools to be authorized to
receive funding. There was a residential school in
Anchorage that had been authorized to receive funding
several years back, but the school had never opened, and
the district no longer planned to move forward on the
school. Consequently, the governor's budget removed funding
associated with the Anchorage school. He explained that the
money had been in the budget for several years, but it had
never been used because the school never opened.
Co-Chair Foster asked if the reduction was associated with
a school in the Lower Yukon that was working with the
Anchorage School District.
Mr. Steininger answered that the funding reduction was
associated with a school intended to be in Anchorage. He
was uncertain what population the school would have
targeted. He stated that he did not know the precise answer
to the question. He reiterated that the residential school
would have been in Anchorage, but it had never opened.
Co-Chair Foster asked if the residential site had been
planned for the old Long House [Alaskan] Hotel.
Mr. Steininger replied that the location sounded familiar,
but he did not know exactly where the site was. He deferred
the question to DEED.
9:28:57 AM
Representative Wool considered the ADM reduction of 2,000
for a total of $20 million. He shared that his school
district was reporting a loss of 2,000 [students] and up to
$27 million in other funds. He speculated that perhaps some
of the students had gone to correspondence outside the
district, so the district did not know exactly where they
were. He remarked that the state tracked the entire
correspondence system and he imagined it would share some
of the data with the local districts. He reiterated that
there was a deficit of 2,000 students in Fairbanks alone.
He was interested in speaking with DEED about the
statistics.
Mr. Steininger continued to slide 15 which showed the
budget for the Department of Environmental Conservation
(DEC). He highlighted slight reductions in overall funding
over the past 10 years with fairly significant UGF
reductions. He relayed there was a slight increase in UGF
primarily due to a change the administration was proposing
for FY 22 to correct a fund source for shellfish testing.
He explained that previously shellfish testing had been
funded with the Commercial Passenger Vessel Environmental
Compliance Fund, which came from head taxes from cruise
ship passengers; however, review with the Department of Law
had determined that there may be some legal issues with
utilizing the fund source for shellfish testing. As a
result, the governor's budget changed the fund source to
UGF in order to continue shellfish testing.
Mr. Steininger highlighted a reduction in spill prevention
and response activity. He detailed that the account
responsible for funding the activity had been in deficit
spending for several years and only contained funding for a
couple of years. He explained that in order to prevent
depleting available resources for the program, the budget
included a smaller reduction at present in order to make
the account more sustainable going forward. There were also
numerous small savings resulting from efficiencies in the
Division of Administrative Services within the department.
The department had determined it could centralize some
things within the division and save approximately $140,000
UGF and $120,000 DGF, in addition to some matching funds
from federal programs.
Representative Josephson asked why the administration did
not fight for more funding for the Division of Spill
Prevention and Response (SPAR). He recalled hearing from
the administration the previous year that the large tank
storage facilities were fine and no longer needed to be
monitored. He highlighted the further reductions in the
governor's proposed budget. He stressed it was well known
that the division was suffering. He asked if the
administration cared about the issue.
Mr. Steininger answered that the administration cared about
the ability to get the work done. He deferred to the DEC
commissioner to talk about how the solution had been
determined. He explained that it was necessary to address
the issue because there was not an ability to continue the
program into the future if something was not done. He
detailed that a piece of the solution was to reduce some of
the activity done in the division. He deferred to DEC to
comment on any of the other proposed solutions that could
be pursued.
Vice-Chair Ortiz asked if there would be an opportunity
later in the week to hear from DEC on the topic.
9:34:09 AM
AT EASE
9:34:38 AM
RECONVENED
Vice-Chair Ortiz asked about the fund source change to UGF
for shellfish testing. He asked about the status of the
Cruise Ship Passenger Vessel Environmental Compliance
Account.
Mr. Steininger answered that the balances were very low in
the Cruise Ship Passenger Vessel Environmental Compliance
Account and other accounts associated with cruise ship
activity and head tax. He detailed that without the fund
change and corresponding fund change in the supplemental
budget proposal for FY 21, the account would be near or
below zero. He reported that a similar analysis applied to
the Ocean Ranger Account, which was also funded with head
tax and the normal Commercial Passenger Vessel (CPV)
account. He noted the acronyms for the accounts could be
confusing because they were very similar. He explained that
the accounts were very near or at zero because there had
been no cruise ship season in 2020. When appropriations had
been made from the accounts for FY 21, projections had
assumed half of a cruise ship season; therefore, some of
the appropriations had brought the funds much lower than
otherwise would be comfortable. He informed the committee
there was a sufficient balance in the accounts to meet
immediate needs but going forward any appropriations from
the accounts for FY 22 needed to be looked at closely,
given the uncertainty of cruise ship revenues in 2021.
9:36:52 AM
Vice-Chair Ortiz pointed out that there should not have
been any draws on the ocean ranger subaccount because the
program had not been in operation. He asked if funds had
been used from the account for another reason.
Mr. Steininger answered that two appropriations had been
made in FY 21, one of which had been vetoed. The
appropriations had been made to address similar concerns
for passive water quality testing for the traditional
onboard ocean ranger activity. He reported that the onboard
ocean ranger activity had been vetoed, but there had been a
$2 million appropriation for passive water quality testing
that DEC was currently working on. He summarized that two
appropriations had been made from the account to achieve
the same general mission, but not through the program
itself.
Vice-Chair Ortiz stated his understanding that the $2
million appropriation had not gone directly to the ocean
rangers. He asked if the funds had gone to water quality
testing in various communities. He wondered how the
appropriation had been distributed.
Mr. Steininger replied that he would follow up with the
exact details. He relayed that the passive water quality
testing had been an add by the legislature the previous
session to address the concern over water quality.
9:38:43 AM
Mr. Steininger moved to the Department of Fish and Game
(DFG) budget on slide 16. He remarked that all departments
had seen significant reductions over the past decade and
DFG was no exception. He pointed to an uptick in federal
receipts (shown in light blue) in FY 22. He explained the
increase reflected a change in budgeting. He expounded that
fisheries and wildlife programs had traditionally been in
the capital budget. He continued that many of the sportfish
and wildlife projects funded numerous operating activities;
therefore, the FY 22 budget represented the operating side
of the programs in the operating budget, while keeping the
capital portions of the programs in the capital budget. The
administration believed it gave better clarity to the way
DFG operations were funded. The uptick in the blue did not
reflect a true increase, but a correction in how the
expenditures were reflected.
Mr. Steininger highlighted other significant changes within
the DGF budget. The budget replaced some UGF in the
Commercial Fisheries Division with program receipts. He
detailed that over the past several years the department
identified that it collected sufficient receipts to reduce
some other UGF spend and replace it with program receipts.
The change allowed the department to offset a bit of the
general fund need within the program. Additionally, there
the budget included a consolidation of budgetary components
within the Commercial Fisheries Division. Previously, the
division had been budgeted based on distinct divisions
within the state; however, staff members worked across the
regions. Consequently, there had been significant
complexity associated with billing staff member time across
the regions and ensuring money was in the budget where
needed to pay employee salaries. He added that employees
would continue to record their time spent on individual
fisheries projects and the data on the amount of money
spent in each region would still be available. The
technical change would save some backend work for DFG staff
responsible for tracking where the money went and making
budget transactions mid-year to ensure payroll could be
met.
Mr. Steininger continued to address changes in the DFG
budget. He referenced a piece of 2018 legislation impacting
the Commercial Fisheries Entry Commission (CFEC)
commissioners' salaries, which resulted in a reduction of
about $42,000. The budget increased authority related to
federal grants. Additionally, some money had been added for
fisheries disaster funding.
9:42:02 AM
Vice-Chair Ortiz referenced the first bullet point on slide
16 related to replacing UGF with commercial fisheries
program receipts. He asked if the money would be generated
through hatchery cost recovery fisheries activities.
Mr. Steininger replied the funds came from fees paid by
fishermen. He elaborated that previously the department had
collected greater than the amount budgeted to spend and had
lapsed the money into the General Fund. The proposed budget
reflected directly spending the receipts and offsetting the
UGF cost. He did not believe it was related to the
hatcheries, but he would confirm with the department.
9:43:18 AM
Mr. Steininger turned to slide 17: "Office of the
Governor." He highlighted the transfer of the Alaska
Development Team from the Department of Commerce, Community
and Economic Development (DCCED), which had been discussed
on an earlier slide the previous Wednesday. Additionally,
the budget would eliminate the OMB analyst chargeback rate.
He detailed that the chargeback rate had been implemented a
couple of years back and over time it had been found that
the chargeback was not generating the savings from the
ability to bill back to the federal government. The budget
added $200,000 UGF and removed $410,000 in chargebacks
because within the past year, some cost saving reductions
had been implemented within OMB in order to minimize the
impact of the chargeback on agencies and the UGF cost.
Mr. Steininger continued to review the budget for the
Office of the Governor on slide 17. The administration was
undergoing an initiative to adjust the way central services
rates were charged. He explained that central services
rates were charged by agencies like the Department of
Administration or the Department of Transportation and
Public Facilities for services they provided on behalf of
other departments. The administration was making the
adjustment to create some certainty for departments
regarding future rates. He detailed that currently rates
were calculated at the beginning of each fiscal year, which
was significantly after the department had a chance to
determine its budget request for the fiscal year. The
proposal would set the rates one year in advance so the
departments would know what they would pay for things like
human resources (HR) or information technology (IT).
However, setting the rates one year in advance created some
uncertainty for IT and HR related to how they would pay for
any unanticipated cost or if the rate calculation slightly
missed the mark. In order to create certainty for agencies,
the administration was looking to use prior year lapsing
general fund dollars to create a fund that would allow the
smoothing of rates and ensure that any decline in the rates
collected (compared to the projection) did not harm the
ability to provide IT or HR services.
Representative Josephson noted that slide 17 reflected a
change during the current administration of -$3.3 million
and 15 more staff. He asked for detail.
Mr. Steininger answered that the 15 new staff were
primarily the Administrative Services Directors that were
transferred from the departments to the Office of
Management and Budget in December 2019.
Co-Chair Foster asked where the Alaska Development Team
currently under DCCED was being transferred.
Mr. Steininger replied that the transfer was from DCCED to
the governor's office.
9:47:00 AM
Representative Wool thought the transfer had been denied in
the subcommittee process. He speculated that perhaps there
had been a request to move more people into the governor's
office. He asked for detail.
Mr. Steininger answered that he was not as familiar with
the request from the prior year. The current request would
move two positions within the Division of Economic
Development to the governor's office to raise the work to
cabinet level activity. He stated there may be some overlap
with the proposal from the previous year, but generally
speaking it was a new proposal to elevate the activity.
Representative Wool asked for verification that the item
was a request that had not yet taken place.
Mr. Steininger answered that the proposal would implement
the change within the FY 22 budget.
9:48:19 AM
Mr. Steininger reviewed the non-Medicaid portion of the
Department of Health and Social Services (DHSS) budget on
slide 18 (slide 19 reflected Medicaid spending). He
highlighted a significant spike in federal receipts
reflected in light blue in the upper left graph. The
increase represented substantial money from the CARES Act
as well as in emergency programs. He detailed that the
funding included anything related to the mitigation of
COVID or response to COVID. He noted that much of the
COVID-19 related relief funding had been distributed from
DHSS (apart from grant programs within DCCED).
Mr. Steininger spoke to changes in the non-Medicaid portion
of the DHSS budget going into FY 22. He relayed that the
Division of Public Assistance (DPA) was the "poster child"
for efficiencies and savings discovered as a result of
telework. He elaborated that when the division sent its
staff off to telework, their processes within public
assistance and public assistance eligibility were very
paper-heavy. He explained that the workflow did not work
when employees were all working from home. He shared that
the solution had come in the form of an electronic system
that allowed the division to scan and catalogue data in a
way that enabled lining out data on a document and loading
it into IT systems. The change had significantly reduced
the time spent by staff on reading documents, typing in
names, and moving fields from documents into the digital
system. The change would allow the division to reduce 121
positions including 20 positions hired temporarily to
address the backlog. He detailed that the positions would
be reduced through attrition over the next 1.5 years. The
division had already begun by not filling vacated positions
where a need did not exist. He clarified that there was no
intention to lay anyone off, but there was enough turnover
within the unit that the division believed it would be able
to eliminate the positions by the end of FY 22. The savings
equaled almost $3.5 million UGF and a corresponding amount
in federal receipts, in addition to the expiration of a
temporary initiative addressing the backlog. He summarized
that the division had worked through its backlog and
generated significant efficiencies going forward.
9:51:36 AM
Mr. Steininger continued to review slide 18. The Division
of Public Assistance would see a reduced postage cost from
moving to online renewal. The Office of Children's Services
(OCS) was looking to replace a Circle of Support grant with
direct case work. He explained that the grant included
activities involving working with families in the home to
try to prevent people from needing the more significant
services performed by OCS. The division was looking to move
towards using direct casework, which would be a more hands
on approach rather than granting out funding for the work.
The change would enable OCS to collect federal receipts to
pay for the work.
Mr. Steininger addressed the last bullet point on slide 18
related to an increase of $2.4 million in federal receipts
for subsidized adoption and guardianship. He noted there
was a corresponding supplemental request as well. He
reported that OCS had seen an increase in the number of
children being placed in permanent care. He characterized
the increase as successful because children were going into
permanent care.
Representative Johnson stated that the most recent audit of
OCS and Medicaid reported there was about $130 million in
benefits going to people who no longer qualified. She asked
what was happening with the information. She wondered if
the needed changes were reflected in the budget.
Mr. Steininger answered that he was not familiar with the
specific audit, but he expressed interest in reading it.
One of the issues the state had been facing with Medicaid
in the past year was that the enhancement to the money
coming in through the CARES Act - a 6.2 percent increase in
federal reimbursement received by the state - came with
some strings attached. During the pandemic, the state was
not allowed to make any changes to benefits or enrollment
in Medicaid. Consequently, addressing concerns like the one
mentioned by Representative Johnson had been hampered in
the past year. He clarified it did not mean the department
had ceased all activity in trying to review or think about
what it would be able to do once the restrictions were
lifted. He added that the state was still able to address
direct fraud that occurred. He deferred to the department
on any specific fraud prevention efforts.
9:55:12 AM
Representative Johnson stated her understanding that Alaska
had been selected as one of the states to be audited for
the CARES Act funding. She asked if CARES Act money could
be used to finance work related to the audit.
Alternatively, she wondered whether the budget addressed
the issue.
Mr. Steininger clarified that the state had been randomly
selected for a desk review, not an audit. He remarked that
the review could potentially become an audit. He explained
that the desk review would look at the processes behind the
state's reporting of CARES Act expenditures. He relayed
that costs associated with the work were generally borne
through the state's normal operating costs. For example,
some activities looked at in the desk review happened
within OMB and the division would accommodate for the work
with existing staff time with no need for additional
resources.
Co-Chair Merrick asked what year Medicaid expansion had
been implemented.
Mr. Steininger responded that Medicaid expansion had
occurred in 2016.
9:57:11 AM
Mr. Steininger detailed the Medicaid portion of DHSS budget
on slide 19. He pointed to a graph in the upper left of the
slide and highlighted the budget increase reflecting
Medicaid expansion. He noted a slight decline, fairly flat
spend in UGF over the time period. He reported that a lot
of effort over the past several years had focused on
stemming some of the increases to Medicaid and keeping
downward pressure on the UGF portion of the cost.
Additionally, several Division of Juvenile Justice
positions were eliminated that were associated with
Anchorage School District Step-Up Program. He explained
that the activity had been transferred to the school
district and would no longer appear in the state budget.
The budget would eliminate a couple of vacant Division of
Juvenile Justice positions that had been eliminated. He
clarified that the positions were for office support and
did not work directly with children served by the division.
Mr. Steininger highlighted a Medicaid program reduction of
about $35 million from FY 21 to FY 22. The administration
was looking to utilize some of the money saved through the
enhanced federal participation over the past several
quarters in order to phase-in cost reductions in the
program. He referenced his earlier statement the state was
not allowed to make any changes to benefits or enrollment
in Medicaid [during the pandemic]. He noted that the
restriction did not allow the state to look at people on
the eligibility rolls that did not meet current
requirements. The state could not make any immediate
changes to the program.
Mr. Steininger highlighted that even in the best possible
world, it was not possible to make quick changes to
Medicaid; making changes required substantial interaction
with federal partners and the medical industry within the
state in order to come to an agreement on how the program
should look. Additionally, changing eligibility standards
required legislation. The budget used the excess money to
effectively buy the state a year with a target amount at
which to budget FY 23. He explained that while the proposed
reduction for FY 22 was backfilled with savings from the
prior year, it set a standard and objective for partners to
work towards for FY 23.
10:00:30 AM
Representative Josephson stated that [DHSS] Commissioner
[Adam] Crum had testified before a Senate committee that
because of the 6.2 percent enhanced match, $35 million had
lapsed to the General Fund. He believed the commissioner
had stated there would be an enhanced match for the first
two quarters of FY 22. He asked if the commissioner was
correct that because of COVID and federal funding, the
general fund should have around $60 million lapsed to it
spanning two years.
Mr. Steininger answered in the affirmative. He added that
the information reflected the budget the administration had
put forward in December [2020], prior to knowing the
enhanced Federal Medical Assistance Percentage (FMAP) would
reach into FY 22; therefore, the numbers in the budget did
not really account for the situation. He explained that at
the time the budget had been released, the administration
expected the enhanced FMAP to expire in the first quarter
of 2021. He informed the committee that it changed what was
necessary for the Medicaid program going into FY 22 and how
much of the lapsing funding from FY 21 would be needed in
order to ensure DHSS could meet its obligations in FY 22.
Mr. Steininger reported there was significant uncertainty
about whether there would be another extension of the
enhanced FMAP. He noted an extension seemed unlikely
because it was so far out; however, he would have said the
same thing a year earlier. He stated that it would be
necessary to keep an eye on the General Fund need. He
pointed out that if money was not spent on the Medicaid
program, it lapsed to the General Fund. A significant
amount of funding had lapsed in FY 20 as a result of the
enhanced FMAP. He predicted that a fairly significant
amount, more than was necessary for the phase-in, would be
lapsed in FY 21.
10:03:29 AM
Vice-Chair Ortiz looked at the graph on slide 19 depicting
how increased federal revenue began coming into the state
with Medicaid expansion. He asked if it was clear that
Medicaid expansion did not cost the state any additional
money when implemented. He believed an additional 60,000
residents had gained insurance under Medicaid expansion. He
asked for verification that expansion had financially been
a good deal for Alaska.
Mr. Steininger answered that through a great deal of effort
by DHSS, the General Fund spending on Medicaid had remained
fairly flat. He reported that there was General Fund
spending associated with Medicaid expansion. There had been
100 percent [federal] match in the first year, going
towards a 90/10 [federal/state] match. He elaborated that
expansion had also allowed access to federal funds through
things like tribal reclaiming. He reported there had been
numerous efforts in terms of reforms in eligibility and
optional services the department engaged in with the goal
of keeping General Fund costs flat. He confirmed that
Medicaid expansion had increased the number of people
served by the Medicaid program in Alaska. He could follow
up with the precise statistics.
Vice-Chair Ortiz asked for verification that the flat line
in dark blue [in the graph on slide 19] indicated that from
2015 to 2022 the total [UGF] expenditures had not increased
and had decreased slightly.
Mr. Steininger agreed. He explained that there was a
General Fund cost associated with expansion. The cost in
addition to other cost pressures (e.g., the rising cost of
medical services in Alaska) had been challenges the
department had confronted in order to keep the budget flat.
He stated it had been substantial effort put in by DHSS
staff to keep the line flat. He noted the information was
necessary context to have regarding whether the line could
remain flat for much longer.
10:06:43 AM
Mr. Steininger discussed the budget for the Department of
Labor and Workforce Development (DLWD) on slide 20. He
highlighted a gradual decline in General Fund spending over
the past decade. The FY 22 budget included a reduction in
General Fund match for the Basic Support Federal Grant (the
change reflected less UGF spend and increased federal
funding for the program at the same level of service).
There were some small reductions throughout the department
to commodities, travel, and office space for a total
savings of about $214,000. He explained that the savings
had been identified as employees had gone to telework and
the department found areas where savings could be sustained
in the long-term. The department was deleting three vacant
positions that it had no need to fill.
10:08:10 AM
Mr. Steininger reviewed the Department of Law (DOL) budget
on slide 21. He highlighted a decrease in funding from FY
16 to FY 17 followed by a gradual increase in UGF as
investments had been made in public protection agencies
including the Criminal Division. The proposed budget would
add 19 positions and $3 million to ensure timely processing
and prosecution of sexual assault and abuse cases. The
budget sought partnership with home rule communities to
support the prosecution of misdemeanors. He elaborated that
the proposal would allow UGF savings of about $1.3 million
with collection of $1.3 million to support the activities
performed on behalf of the communities.
Representative Wool surmised that the proposal would mean
local communities would pay $1.3 million for the
prosecution of misdemeanors, which would save DOL $1.3
million. He asked if that was the partnership the
administration was seeking.
Mr. Steininger replied that currently the home rule
communities had the legal authority to prosecute local
misdemeanors. He explained that DOL had been picking up the
cost for a number of years without any [financial]
participation from the communities. The administration was
looking to expand the partnership to include compensation
from communities for the services rendered on their behalf.
The budget item asked communities to assist with the cost
incurred on their behalf.
Representative Wool surmised there was currently a
partnership where the state was paying for the prosecution
and the administration wanted to reduce the partnership by
passing the costs to the communities. He remarked that
municipalities were not doing well financially. He
referenced a past statement by Representative Thompson that
Fairbanks did not prosecute driving under the influence
(DUI) cases because they did not have a law against it, yet
the state did. He did not know if the situation existed in
other municipalities. He asked if there would be a
reduction in the prosecution of misdemeanors if local
communities could not afford the expense. He asked if DOL
had contemplated that communities would not be able to do
the work because they did not have the funds.
Mr. Steininger answered that the budget item was specific
to misdemeanors under a community's misdemeanor code. He
clarified that if an offence fell under a state law, it was
a state obligation to prosecute. He explained that money
paid by a community for the purpose of prosecuting local
misdemeanors could only be used for the specific purpose in
the specific community. He stated that at the end of the
day, there was other money within DOL to support general
activities. He relayed that communities that did not
contribute would be dealt with within the resources
remaining at DOL. He elaborated that if DOL had the
capacity to prosecute a misdemeanor, it would assist.
Communities that contributed would have paid for the
service and would receive the service, while other
communities would not be prioritized as much as communities
that had paid.
Mr. Steininger elaborated that there were several home rule
communities within the state that prosecuted their own
misdemeanors. He was aware of at least one community that
had entered into a partnership with DOL to ensure
prosecution presence. He noted that the proposal was not
necessarily a new concept, but the administration was
looking to expand it to all communities with the legal
authority and responsibility to prosecute their own
misdemeanors to ensure the service provided was funded. He
clarified there was not a desire to reduce the prosecution
of misdemeanors. The desire was to cost-share an activity
that was the responsibility of home rule communities. The
administration saw the value of having the service take
place within DOL, yet the state was also experiencing
difficult fiscal times and when something was not directly
the state's responsibility, looking for partnership was
important.
10:13:51 AM
Representative Rasmussen asked how many home rule
communities existed in Alaska.
Mr. Steininger answered that he would follow up with the
number.
Representative Rasmussen asked how many communities would
be impacted by the proposed partnership.
Mr. Steininger answered that all [home rule communities]
would be impacted with the exception of two communities
that did their own prosecution and one community that had
an existing agreement with the state. He noted there may be
others, but he only knew of the three.
Representative Rasmussen referenced a note listing
Fairbanks, Kenai, Cordova, Ketchikan, Kodiak, Nenana, North
Pole, Palmer, Seward, and Valdez. She asked if the list
sounded accurate in terms of communities that would be
impacted by the budget change.
Mr. Steininger believed there were more communities in
addition to the ones listed by Representative Rasmussen and
he would follow up with the information.
Representative LeBon noted that Representative Rasmussen's
list of home rule communities was not all encompassing, but
it provided a good idea of which communities fell into the
category. He remarked that the budget item pertained to
local misdemeanors in home rule communities that DOL had
been prosecuting on behalf of the communities. He stated
his understanding that the budget shift was to put the
responsibility where it lay with the home rule communities.
Mr. Steininger replied in the affirmative.
10:16:08 AM
Representative LeBon asked if part of the problem involved
home rule communities not paying for trooper service.
Mr. Steininger replied that the proposal did not address
trooper service; the state was continuing to directly fund
trooper service.
Representative Johnson highlighted that the situation was
larger than the one line appearing on slide 21. She shared
that in the past, she had been the mayor of a home rule
city for six years. She detailed that Palmer had police
department and courthouse. She explained one of the things
that happened when people were waiting for trial on an
ankle monitor. She detailed that a person could not
necessarily have an ankle monitor tracked if they were
outside a certain radius of the monitoring station;
therefore, those individuals often ended up waiting inside
the city limits. She remarked that it was not a situation
that was organic to the city, but it was something the
state had brought in. She highlighted that home rule cities
often had their own police departments, but part of the
issue was the state bringing people to live inside the city
limits for a period of time who had a history of criminal
behavior.
10:18:10 AM
Vice-Chair Ortiz asked for the definition of a home rule
community.
Mr. Steininger answered that home rule communities had the
authority to set their own misdemeanor code and prosecute
misdemeanors. He noted that DCCED could speak to the
specific definition of a home rule community.
Vice-Chair Ortiz asked if Anchorage was a home rule
community. If not, he asked what distinguished Anchorage
from a home rule community.
Mr. Steininger answered that Anchorage was one of the
communities that provided its own misdemeanor prosecution.
Vice-Chair Ortiz surmised that Anchorage was not a home
rule community.
Mr. Steininger replied that Anchorage was already
performing the service itself.
Representative Josephson stated that in some respects the
powers home rule communities chose were "a la carte." He
believed home rule communities did not have to choose the
prosecution of misdemeanors if they did not want to. He
believed that part of what the budget proposal did was
require communities to pay for a service that local
governments had elected not to invest in.
Mr. Steininger answered that at issue was the decision
being made not to fund the necessary activity. He
elaborated that the state took up the prosecution of
misdemeanors when the community elected not to because it
was a necessary service in public protection. The
administration was asking communities to help support a
cost of an obligation necessary for the communities. He
confirmed that communities had the ability to choose not to
prosecute misdemeanors and the state had been picking up
the cost. The state was asking the communities to pick up
the cost, not the activity itself. He reiterated that the
administration was looking for communities to help pitch in
on the cost the state was incurring on their behalf through
the decisions made by the communities.
10:21:38 AM
Representative Josephson stated it begged the larger
question that had recently been raised about costs
associated with law enforcement outside the cities of
Wasilla and Palmer for example. He noted that the costs
were borne by all of the citizens but benefitted by people
living outside of the organized communities. He thought
following the budget proposal meant the state would also
have to charge for Alaska State Trooper service outside the
cities in the Mat-Su Borough.
Mr. Steininger answered that the administration was not
proposing to do that. He clarified that the proposal looked
only at activities specific to DOL. The administration did
not have a proposal to change the way troopers interacted
in the state and was continuing to prioritize investment in
troopers within the state's means.
10:22:58 AM
HB 69 was HEARD and HELD in committee for further
consideration.
HB 71 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster noted that the meeting would adjourn due to
House floor session. He discussed the schedule for the
afternoon meeting.
ADJOURNMENT
10:23:42 AM
The meeting was adjourned at 10:23 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HFIN OMB Budget Overview 2.24.21.pdf |
HFIN 3/1/2021 9:00:00 AM |
|
| FY22 Governor Amend Operating Spreadsheet OMB 2.16.21.pdf |
HFIN 3/1/2021 9:00:00 AM |