Legislature(2001 - 2002)
01/10/2001 09:10 AM Senate FIN
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GENERAL SUBJECT(S):
Budget Overview: David Teal, Director,
Division of Legislative Finance
The following overview was taken in log note format. Tapes and
handouts will be on file with the Senate Finance Committee through the
21st Legislative Session, contact 465-4935. After the 22nd
Legislative session they will be available through the Legislative
Library at 465-3808.
Time Meeting Convened: Approximately 9:10 AM
Tape(s): SFC-01 # 1, Side A
PRESENT:
x Senator Donley
x Senator Kelly
x Senator Austerman
x Senator Green
x Senator Hoffman
x Senator Leman
x Senator Olson
x Senator Ward
x Senator Wilken
ALSO PRESENT:
DAVID TEAL; Director, Division Of Legislative Finance
GINGER BLAISDELL, Fiscal Analyst, Division Of Legislative Finance
LOG SPEAKER DISCUSSION
0 CO-CHAIR DONLEY Introduction
Welcome new Committee members: Senator
Austerman, Senator Hoffman, Senator Olson
and Senator Ward.
17 Budget subcommittee assignments are being
determined and will be announced later.
Invite requests from other senators who are
interested in serving on a subcommittee.
30 We have been meeting with the House Finance
Committee co-chairs to consider options for
beginning the subcommittee process. We
might hold joint meetings.
Note subcommittees meet at different times,
but will try to hold joint subcommittee
meetings together
48 CO-CHAIR KELLY Will schedule guests to give presentations
including the State of the University of
Alaska address by President Mark Hamilton,
and the Denali Commission.
59 CO-CHAIR DONLEY Welcome returning Committee members.
SENATOR LEMAN Greetings and welcome to new members
72 SENATOR WILKEN We have a lot of work to do and I'm ready
to start
77 SENATOR GREEN Found the Committee interesting and an
opportunity to learn
82 SENATOR WARD We will take many challenges and turn them
into opportunities. I look forward to it.
91 CO-CHAIR DONLEY Introduce presenter
97 DAVID TEAL, This presentation is strictly highlights of
DIRECTOR, DIVISION the fiscal condition and the governor's FY
OF LEGISLATIVE 02 budget. This will not bring you up to
FINANCE "subcommittee speed" but will help you be
better listeners to the governor's State of
the State and State of the Budget speeches.
104 FY 01 is the final year of the Majority's
5-year budget plan to eliminate the fiscal
gap. The fiscal gap is the difference
between general fund revenues and general
fund expenditures.
One year ago there was a $1.1 billion
fiscal gap, equaling approximately 50-
percent of the budget.
According to Department of Revenue's Fall
2000 forecast, this gap is gone and there
is a projected $120 million surplus. But
that's assuming oil prices are $30 per
barrel. Prices are actually lower, in the
low $20 and there will not be a surplus.
There is a gap of $528 million shown in the
governor's fiscal summary.
125 For every dollar change in the price of oil
there is a $65 million impact on state
revenue. In FY 01 the price of oil was
approximately $30 per barrel, the average
projected price for FY 02 is approximately
$24, a decline of $6 resulting in a revenue
drop close to $400 million. The remainder
of that gap is on the expenditure side.
135 The governor's budget increases $145
million in general fund spending over last
year. Of that amount, $86 million is in the
operating budget, $28 million in the
capital budget and $31 million for debt
service.
This does not reflect several things. One
is reappropriations and other non-
repeatable fund sources used last year.
$30 in reappropriations, $4 million
investment loss trust funds, $4 million in
debt service that would have taken from the
debt retirement fund, a special Alaska
Industrial Development and Export Authority
(AIDEA) dividend of another $4 million
149 Relative to FY 01, $200 million is the
actual amount of money needed to spend to
meet the governor's request
155 This is not everything. The governor has
promised some bills on school construction
and major maintenance and a potential
increase in K-12 education funding. There
is nothing in the budget for gas line
promotion and there will be other bills as
well.
162 The fiscal gap remains the most significant
long-term issue. That deficit is made up by
withdrawing money from the Constitutional
Budget Reserve Fund (CBR). The balance of
that fund projected at the end of FY 01, is
$3.1 billion and includes the $120 million
projected surplus.
170 Will probably end the year near zero.
173 Budget deficit of $500 million won't break
the CBR this year. The Department of
Revenue is projecting it will last around
five years.
178 Not here to address long-term financial
planning
181 Encourage reading the Swiss Army Knife of
Budget Handbooks
183 Agency books give descriptions of the
transactions and summaries agency by agency
188 The covers will be gray (blue) for this
year's materials, don't confuse with last
year's pink covers
194 We haven't yet compiled all the agency
information in the overview publication. We
expect to finish sometime next week. That
and other reports will be available on our
website. If you want other information, ask
200 Governors request includes 904 new
permanent full-time positions, 41 part time
and 82 temporaries. Management plan adds
substantial number of new positions since
the Conference Committee met last year.
207 Conclude. We are available to help when we
can.
213 CO-CHAIR KELLY Where are the major increases in the new
positions? Prior years, with projects such
as the new ferries, we could identify where
most of those positions would appear.
221 MR. TEAL Department of Administration adding 170
positions mostly for the change from the
Pioneer's Homes to Pioneer's and Veteran's
Homes
112 additional positions to the Department
of Corrections for the new jail in
Anchorage.
188 for Department of Health and Social
Services, mostly social workers and
juvenile detention
229 123 new positions for the University of
Alaska
230 Some of the remaining departments are down
slightly, most are adding 20-40 positions.
SENATOR WILKEN Does the $3 billion CBR balance include the
$400 million set aside from debt service on
school construction?
240 MR. TEAL No. This is strictly cash balance. It
doesn't include $100 million Power Cost
Equalization (PCE) endowment, which was
removed last year. Much of debt service
rolls through the Alaska Housing Finance
Corporation AHFC. The school construction
bonds were actually funded by diverting
tobacco settlement money and has nothing to
do with the CBR. It actually reduces the
AHFC dividend for non-school debt. For
school debt, it diverts tobacco settlement
money, which has been replaced with
straight general funds for the Department
of Health and Social Services.
252 SENATOR WILKEN Last year, didn't we take $400 million and
draw a circle around it, leaving it in the
CBR and asked the Department of Revenue to
manage that money aggressively? We expect
to earn about $35 million from that defined
fund. Has that happened and do we know what
it has produced?
258 MR. TEAL No. The $400 million is still a part of the
principle and is part of the $3 billion. It
just set aside as something that they can
invest with a more long-term horizon.
Because of that, in theory get higher
returns. I don't know what the returns are
on that portion of the portfolio versus the
entire portfolio.
260 SENATOR WILKEN I'd like to know how that's doing.
You said the $528 million deficit
projection is based on $24 per barrel for
oil. At what production level?
MR. TEAL Roughly, one million barrels per day.
258 CO-CHAIR DONLEY There is an estimate from the Department of
Revenue that they are anticipating
production increases next year that would
increase the amount that each dollar per
barrel is worth.
271 SENATOR LEMAN Concern with governor's proposal, we loose
almost all the progress made in the last
five years. Wouldn't also be true there
will be other cost increases other that
what has been identified, because of one-
time funding sources used last year.
281 MR. TEAL Yes. For example PCE was short-funded
approximately $8 million and doesn't appear
in the operating budget this year. The way
the endowment works, will fund more in
future years than in the first year,
because the money didn't get into the fund
soon enough, plus other timing issues. That
$7.8 million is in the capital budget.
There are a number of non-repeatable fund
sources, some I already mentioned.
Also, the AHFC dividend is stated at $103
million, but approximately $52 million of
that goes to capital projects and much of
the rest goes to their own debt service.
The amount of money that is flexible for
the legislature is down from $17-30 million
in past years, to only $6 million of un-
earmarked AHFC money and that is put into
the debt retirement fund this year.
Like last year, but last year there was $15
million.
Some of these items are included in that
$200 million figure I gave you.
We haven't rolled everything together yet,
so I can't tell you exactly where we are
yet. Will take another week or so to come
up with a fiscal summary that gives firmer
figures.
207 SENATOR LEMAN Looking forward to seeing that.
309 CO-CHAIR KELLY My question was answered.
310 CO-CHAIR DONLEY Thank Mr. Teal. Look forward to detail
report as well to see what actually is
contained in the governor's budget.
318 Adjourn 9:26 AM
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