Legislature(1995 - 1996)
02/22/1995 09:07 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
February 22, 1995
9:07 a.m.
TAPES
SFC-95, # 4, Side 1 (395-575)
SFC-95, # 4, Side 2 (575-end)
SFC-95, # 6, Side 1 (000-575)
CALL TO ORDER
Senator Steve Frank, Co-chair, convened the meeting at
approximately 9:07 a.m.
PRESENT
In addition to Co-chairs Frank and Halford, Senators Donley,
Phillips, Sharp and Zharoff were in attendance. Senator
Rieger arrived shortly after the meeting began.
ALSO ATTENDING: Jim Baldwin, Assistant Attorney General of
Oil, Gas & Mining Section, Department of Law; Margaret Pugh,
Commissioner of Corrections, Annalee McConnell, Director,
Office of Management and Budget; Nancy Slagle, Director of
Budget Review, Office of Management and Budget; Mike Greany,
Director, Legislative Finance Division, Art Snowden,
Administrative Director, Alaska Court System; Robert Cole,
Director of Administrative Services, Department of
Corrections; Sharon Barton, Director, Division of
Administrative Services, Department of Administration;
Barbara Richie, Assistant Attorney General, Governmental
Affairs, Department of Law; Dick Pegues, Director,
Administrative Services Division, Department of Law; Bob
Baratko, Director, Administrative Services, Department of
Revenue; Mike McMullen, Acting Director for Division of
Personnel, Department of Administration.
SUMMARY INFORMATION:
SB 57 FY 95 SUPPLEMENTAL REQUEST - OFFICE OF
MANAGEMENT AND BUDGET
Discussion was had with Nancy Slagle, OMB, and
depart- ment representatives. Ms. Slagle spoke to
the Fast
Track Supplementals, reviewing sections 1-17 in
HB 178.
SB 47 APUC EXTENSION AND REGULATORY COST CHARGE
Discussion was had regarding a need for an
amendment
to reflect that this is a sunset bill. Co-chair
Halford recommended taking the bill up after the
supplements.
SENATE BILL NO. 57
"An Act making supplemental appropriations for
operating expenses of state government for fiscal
year 1995; and providing for an effective date."
Co-chair Frank invited Nancy Slagle, Director of Budget
Review, Office of Management and Budget, to join the
committee and proceed with the Department of
Administration's FY95 Supplemental Appropriation
presentation.
Ms. Slagle based her presentation on the fast track
supplementals provided to the committee. She outlined the
Department of Law's need for an additional $18,000.0 for oil
and gas litigation, pointing out a $2.8 million reduction of
the department's original request with the completion of the
BP Case.
Co-chair Frank inquired as to the long-range expectations
regarding costs and the potential for prospective
settlements versus previous settlements. Jim Baldwin,
Assistant Attorney General, Department of Law, responded
that cases tend to change between groupings of audit
periods. Co-chair Frank asked if the negotiations could be
established for future settlements? Mr. Baldwin said that
in the past there have been settlements for which there were
no assessments formerly issued. He warned that there are
risks in terms of paying out money unnecessarily. He noted
a $5 million reduction from the Knowles budget. Co-chair
Frank requested information regarding the costs in the
Hickel budget for this particular component. Ms. Slagle
responded that the identified need in the Hickel budget was
$36 million, reduced by $5 million. The total Knowles budget
is $31 million. Co-chair Frank asked how that compared with
the FY94 budget. Ms. Slagle responded that it was $28.8
million. Mr. Baldwin stated an expectation for further
reduction in the budget by another $5 million.
Ms. Slagle explained the need of $313.3 for the Department
of Revenue to be allocated for the Mental Health Trust
Authority. Trustees are to be appointed and an executive
officer hired. The funding is to come from the earnings of
the trust settlement account. Senator Rieger inquired as to
the transference of money from the permanent fund for
management which is the cash trust component. Ms. Slagle
said the transfer has not yet taken place. She noted that
the trustees must be appointed and the Trust Authority
established prior to the transfer. The trustees will
negotiate a contract with the Permanent Fund Corporation for
the management of the cash trust. Ms. Slagle said that the
cash trust is within the Department of Revenue. It earned
over $500.0 the first month. Co-chair Frank and Senator
Rieger asked for a further breakdown of costs.
Ms. Slagle presented the need of $44,600.0 for the
Department of Military and Veteran Affairs, to be directed
to the disaster relief associated with the Koyukuk flooding.
She pointed out the request has been reduced by $900.0 based
on a contribution by the federal government. Recently, a
letter was sent to Governor Knowles from President Clinton,
stating that the federal government has approved the
contribution rate of 85% for the public assistance portion
of the disaster costs. The implication by the department's
calculation is a reduction in need from the general fund by
$5.8 million. Needed is a corresponding increase in federal
receipts plus another $1.1 in federal receipts to cover the
change in contribution from the federal government. Co-
chair Halford inquired as to the government's intention
regarding payment in all the other areas? Ms. Slagle stated
that they will stay as they are. Mitigation portion is
75%/25%, and FEMA remains at 100% coverage. Public
Assistance includes: emergency work, area-wide projects,
specific projects, and other anticipated needs, for a total
of over $60 million. She stressed the federal government
will be reimburing at 85%. Co-chair Halford questioned
"anticipated needs"? Ms. Slagle noted that the Department
is still performing work on the flood.
End: SFC-95, #4, Side 1
Begin: SFC-95, #4, Side 2
Senator Rieger asked if there were dollar limits on the
statutes that govern the disaster relief fund? Ms. Slagle
responded that the limit was over a million dollars. She
went on to explain that letters were sent to the senate
president and to the speaker of the house informing them of
the need to exceed the dollar amounts and asked if a special
session was necessary. In both cases, the department was
given the go ahead, that a special session would not be
called.
Ms. Slagle took up the supplemental request for the
Department of Corrections. Senator Donley questioned the
high costs associated with the court appointed monitor.
Margaret Pugh, Commissioner for Department of Corrections,
explained that the fee was partially paid by the Department
of Corrections. Art Snowden, Director of the Courts, agreed
to research the shared cost and report back to the
committee. Co-chair Frank requested detailed information
regarding the court appointed monitor duties: How many hours
a year it takes for compliance, and who pays for the
position. Ms. Pugh responded that in September,'94, the
court determined that the Department of Corrections had not
come into compliance with the population caps. A fine for
contempt has cost $67,000. An oversight was appointed and
is required to report to the court on a regular basis.
Senator Rieger requested a copy of the contract.
Senator Rieger asked for explanation regarding the $2.5
million in the budget "to be discussed". Ms. Pugh stated
the department is close to receiving $2.5 million from the
U.S. Marshal Service for the service of reserving, for
federal prisoners, fifty beds. The amount is to pay for
future or past costs associated with housing federal
prisoners. This amount is in addition to a per diem amount
per prisoner.
Senator Rieger inquired if federal prisoners were subject to
the provisions of the Cleary Settlement? Ms. Pugh responded
that the institutions themselves are subject to the
settlement.
Co-chair Frank asked: 1) What are the per diem reimbursement
costs? 2) Are there other contingencies to housing federal
prisoners? 3) Is it at the State's option to house
prisoners? Ms. Pugh stated that she would respond with
specific answers to the questions at a later time. She
noted that once the contract is signed, the state is obliged
to provide 50 beds. The state is not required to take
prisoners. This is a courtesy that all states provide the
federal government.
Co-chair Halford asked why Alaska would consider signing a
contract to guarantee 50 beds to the federal government when
it is over the population caps and sending prisoners to
another state? Ms. Pugh answered that the federal
government does not have many prisoners for Alaska, and when
they do, they do not tend to stay long. This is a
convenience contract for the government. The government has
much larger contracts with other states, and it would be to
their benefit to utilize their services before coming to
Alaska.
Senator Zharoff questioned the out-of-state costs for
Alaskan prisoners. Ms. Pugh responded that the cost of
$2,392.4 million is a 6-month charge for 207 prisoners. She
noted that they would be shipped back to Alaska if the state
does not fund the program.
Co-chair Halford requested from the Department of
Corrections, the final orders on those personnel legal
actions which the state lost, to analyze the mistakes made,
in an effort to correct the problem.
Senator Rieger questioned the logic in paying recruits at
the Correctional Academy a salary. Ms. Pugh responded that
it is a 6-week program at a range 8 salary. They are not
guaranteed a job. She expressed her concern in attracting
people into the program if they had to bear the cost of the
training.
Senator Rieger asked if Ms. Pugh favored the bill concerning
the terminal leave parole provisions for prisoners? He noted
that the costs associated with not passing the bill have
cost the state $2.1 million. Ms. Pugh said she would
support the bill. She stated that six inmates alone have
cost over a million dollars in health care. Senator Rieger
asked if there is a plan for the administration to
reintroduce the bill? Ms. Pugh stated that it was a good
question.
Discussion regarding Rural Alaska Television Network/RATNET
was taken up. It was brought out that RATNET has been down
due to a cable break. Co-chair Halford questioned if the
state is actually at a cost savings with the RATNET outage?
Sharon Barton, Department of Administration responded that
the calculations would be done once the outage is over. She
felt that most, if not all, the monies requested will be
withdrawn on this supplemental. Ms. Barton noted that RATNET
costs $25.0 a week to run the entire program.
Co-chair Frank asked what the experience has been with the
collection of permanent fund dividends with regard to
offsetting the costs of the Office of Public Advocacy (OPA)?
Ms. Barton responded that with authority from LB&A, the
department will receive $120.0 in receipts for OPA. Co-
chair Frank questioned why OPA was not entirely funded by
the permanent fund since the Public Defender (PD) and the
OPA's operating costs per client was $500. Ms. Barton
stated that there are other calls on permanent fund
dividends ahead of OPA and PD. In addition, she noted that
not all clients of OPA and PD receive permanent fund
dividends. Co-chair Frank asked for specific analysis to be
provided.
Ms. Slagle noted the change for the Defender Agency. The
department asked LB&A for $89.0 in receipt authority for the
portion that would come from the permanent fund. That was
not approved.
Ms. Slagle moved through the supplemental to the Alaska
Public Offices Commission (APOC). Discussion was had on the
hearing officer costs associated with the Gravo hearing. Co-
chair Frank asked for a breakdown of costs.
Ms. Slagle continued with the supplemental to the Personnel
EEO section of the supplemental, specifically to labor
arbitration costs. Co-chair Frank questioned how many
backlog arbitration cases are in existence. Ms. Barton
responded that 260 cases are in backlog after receiving
supplemental funding last year. She mentioned that employees
do not share in the associated costs. Mike McMullen, Acting
Director for the Division of Personnel, Department of
Administration, said that the arbitrator assesses his costs
to the loser, or as he determines equitable. The formula
for costs is at the arbitrator's discretion. Co-chair Frank
asked what is typical. Mr. McMullen responded that if there
is a win, the loser will pay all. In disciplinary cases, in
a contract interpretation case, the cost will be split. The
split can be 60%/40% or 50%/50%. He emphasized that the
loser is the union, not the employee. Co-chair Halford
asked if the money to fund the positions desired, within the
arbitration process, should be considered in the operating
budget or the supplemental? Ms. Barton responded that it
has been added into an FY96 increment. Co-chair Halford
stated that with the approval of the supplemental, there is
an acceptance for the increment to continue. She
acknowledged in agreement.
End: SFC-95, #4, Side 2
Begin: SFC-95, #6, Side 1
Ms. Slagle spoke to the Department of Law and the legal
services provided for Mental Health Lands. The monies
involved are for settling the plaintiff's attorney's, as
well as costs in the Department of Law. Co-chair Frank
asked for a monthly breakdown of costs. Barbara Richie,
Assistant Attorney General for Governmental Affairs within
the Department of Law responded that she would obtain the
information and get back to the committee. Co-chair Frank
noted that the case has been settled, with an appeal by two
of the non-settling attorney's. He questioned the cost of
$1 million in attorney fees from November to the end of the
fiscal year, and asked for an additional breakdown of costs.
Senator Rieger questioned the rationale used by the court in
awarding attorney's fees. Ms. Richie responded that it was
more often public interest rationale which would result in
such an award. Co-chair Frank asked for detailed
information determining actual money allocated to specific
attorney's.
Senator Sharp questioned the Department of Law's expenses
for the Mental Health Lands' judgements and claims. Ms.
Richie noted that there is more than one, full-time, in-
house, lawyer working on the Mental Health Lands issue.
This will be continued throughout the appeal and
implementation process. In addition, there are two
contractual lawyers providing additional services. Senator
Sharp asked why appropriate more money for salaries if the
lawyers are full time and budgeted. Dick Peques, Director
of Administrative Services within the Department of Law
responded that the money for the department pertains to the
use of outside counsel used extensively in early summer to
put the final settlement before the court. Other costs
involved public awareness and comment for preparation for
the court. There was no money for additional salaries. Two
people worked full-time. The appeal itself consisted of 169
points on appeal. It is going to be extensive work to be
accomplished quickly.
Ms. Slagle continued outlining the Department of Law's
supplemental. She noted the $500.0 charge for repayment to
the federal government for inappropriate cost allocation.
Co-chair Frank asked why this would show up in the
Department of Law's budget. Ms. Slagle stated that it had
to do with legal costs. Co-chair Frank asked for the history
behind it. Ms. Richie responded that this appropriation
would resolve the federal claims on charges against the
State of Alaska made by the Department of Law during FY93
and FY94 both directly and indirectly to federal programs.
With regard to timekeeping and cost allocation,
methodologies that were used during those two years were not
in compliance with federal requirements. During that time,
the department was revising and implementing new policies
and procedures related to its cost recovery allocation
methodologies. The procedures were in compliance with the
state regulation, but in some instances they were not in
accordance with federal regulations for recovering costs on
federally funded programs. There were two principal areas
that were not properly documented that had to do with staff
time and support costs. Co-chair Halford asked if that was
within the Department of Law or Department of Health and
Social Services? Ms. Richie stated that it was in the
Department of Law. Senator Zharoff asked if the state was at
a higher liability? Mr. Pegues answered that the $500.0 was
negotiated down from $1000.0.
Ms. Slagle discussed the Legal Services and Operations
supplemental request of $494.8. Co-chair Halford inquired
as to the interest rate on unpaid costs. Ms. Richie
responded that it is 10-1/2% by statutory law. Senator
Rieger asked for an explanation of charges. Mr. Pegues
answered that the amount is an overcharge dispute between
the utilities and the AEA. Ms. Richie interjected that
there will be additional settlements that come in between
now and the end of the session which will be presented as
amendments.
Co-chair Frank asked for a breakdown of the $50.0 for the
gubernatorial election lawsuit. Ms. Slagle noted that a
portion of the cost related to expert witnesses for the
gubernatorial election. Co-chair Frank requested a
breakdown of costs for expert witnesses including outside
counsel, outside experts, and the change in funding source.
Ms. Richie stated that the difference was $12.5.
Ms. Slagle continued with the Department of Revenue's
supplemental for the Alcohol Beverage Control Board (ABCB)
covering costs associated with a license denial appeal in
Egegik. Bob Baratko, Director, Administrative Services,
Department of Revenue, testified to the background of this
particular case. Co-chair Halford questioned the costs
associated with the hearing officer.
Ms. Slagle continued with the Department of Revenue's
supplementals. Specifically, she addressed the Permanent
Fund Dividend/PFD and the need for $91.1 to fund additional
data processing costs. Senator Rieger questioned the data
processing costs. Mr. Bartko gave discussion surrounding the
additional request for $91.1.
Ms. Slagle spoke on the costs associated with the creation
of the Alaska Mental Health Trust Authority. She stressed
that the amount of $283.1 is needed to establish the
Authority. Senator Rieger questioned the office space
allocation. Ms. Slagle explained that the trustees have not
yet been appointed and they will be the ones to decide where
the location will be.
Co-chair Frank thanked Ms. Slagle for her participation and
recessed on the supplemental, beginning with the Department
of Education, at 8:30 a.m. Thursday, February 23, 1995.
SENATE BILL NO. 47
"An Act relating to the extent to which the Alaska
Public Utilities Commission may exercise its powers
when regulating utilities; establishing a regulatory
cost charge on public utilities and pipeline carriers;
relating to the allocation of costs in hearings before
the Alaska Public Utilities Commission; relating to the
method by which utilities are exempted from and made
subject to regulation by the Alaska Public Utilities
Commission; relating to the monetary threshold for
regulation of certain kinds of utilities by the Alaska
Public Utilities Commission; extending the Alaska
Public Utilities Commission; relating to staggered
terms for members of the Alaska Public Utilities
Commission; and providing for an effective date."
Co-chair Halford asked to take up SB 47. Co-chair Sharp
moved to pass out of committee SB 47 with zero fiscal notes.
Senator Donley objected, stating the fiscal notes are
inaccurate, that the notes do not reflect a fee assessment
by the Department of Revenue which was sunset in December.
Discussion was had on the attached fiscal notes. Senator
Donley stated a need for an amendment to reflect that this
is a sunset bill. Senator Rieger stated that the value of a
sunset bill is that it allows various agencies to bring
concerns before the legislature. He stated he supported the
bill but would also support a shorter extension. Senator
Donley presented an amendment indicating a one-year
extension. Senator Sharp noted that this bill represents a
balanced testimony including what the needs are of the APUC.
Co-chair Halford recommended a recess on this issue to be
taken up after the supplements. He recommended at this time
reviewing Senator Donley's amendment to SB 47.
Co-chair Halford recessed the meeting at 11:05 a.m.
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