Legislature(2001 - 2002)
02/01/2001 09:02 AM Senate FIN
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MINUTES
SENATE FINANCE COMMITTEE
February 01, 2001
9:02 AM
TAPES
SFC-01 # 6, SIDE A
CALL TO ORDER
Co-Chair Dave Donley convened the meeting at approximately 9:02 AM.
PRESENT
Senator Dave Donley, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Loren Leman
Senator Gary Wilken
Senator Lyman Hoffman
Senator Donald Olson
Senator Lyda Green
Senator Jerry Ward
Also Attending: ANNALEE MCCONNELL, Director, Office of Management
and Budget, Office of the Governor; JOAN BROWN, Chief Budget
Analyst, Office of Management and Budget, Office of the Governor.
SUMMARY INFORMATION
SB 27-APPROP: GOVERNOR'S OPERATING BUDGET
SB 28-APPROP:MENTAL HEALTH BUDGET
SB 29-APPROP: GOVERNOR'S CAPITAL BUDGET
The Committee heard an overview on the Governor's proposed FY 02
budget from the Office of Management and Budget.
SENATE BILL NO. 27
"An Act making appropriations for the operating and loan
program expenses of state government, for certain programs,
and to capitalize funds; 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."
SENATE BILL NO. 28
"An Act making appropriations for the operating and capital
expenses of the state's integrated comprehensive mental health
program; and providing for an effective date."
SENATE BILL NO. 29
"An Act making capital appropriations and capitalizing funds;
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."
ANNALEE MCCONNELL, Director, Office of Management and Budget,
Office of the Governor, expressed that she looked forward to
working on the budget with the legislature during the current
legislative session.
Ms. McConnell noted handouts she provided the Committee. [Copies on
file.]
Ms. McConnell introduced several budget analysts from the Office of
Management and Budget, Karen Elliott, Connie Nesgoda, Dawn Mach,
Mary Sutton and Steve Hildebrand, and offered their services to the
Committee.
Ms. McConnell began her presentation stating that the governor's
proposed FY 02 budget meets four primary goals. The first, she
said, is to maintain at least the existing level of services and
the progress achieved in key areas such as child protection,
quality education, etc. "Strategic investments" in the areas of
education, early development, public health and public protection,
she listed as the second goal. The third goal, she continued, is to
restore the level of permitting and other services to businesses
and industry that have "fallen below the level that they feel is
acceptable" and what is "necessary to adequately support the
economic development activities in the state." This includes the
proposed natural gas pipeline, which is the newest major economic
activity, she noted. She concluded with the fourth goal being to
ensure that all state dollars spent, whether on existing services
or the proposed strategic investments, are spent in the most cost-
effective manner possible. She stressed that the concept of budget
discipline has not been abandoned.
Ms. McConnell indicated that the total budget for the State of
Alaska has reached $7.2 billion. However, she pointed out that a
third of that amount consists of investment revenues, principally
the permanent fund, and to a lesser extent, interest earnings from
the Constitutional Budget Reserve fund (CBR). She stated that $1.9
billion, the largest expenditure, is the permanent fund dividends
and inflation proofing. She noted that this amount is $52 million
more than the current year. She commented that while this is an
area of the budget that continues to grow, there are generally no
complaints.
Ms. McConnell addressed the general fund increases, emphasizing
that fully $80 million in the governor's proposed budget increase
is necessary to maintain the existing level of services. She
stressed that it would be helpful to have the public understand
this situation. She stated that the largest percentage of this
increase is $28 million for debt services. She used furniture
advertisements as an analogy to debt service, in that they offer
"no payment for 12 months." She said after the 12 months have
passed and the customer has been using the furniture, it is time to
begin making payments. The state is in the same situation, she
stated, because important infrastructure investments over the last
several years have been made using deferred payment plans, through
bonds and other methods.
Ms. McConnell highlighted public protection and the $3.5 million
appropriation in the proposed budget to fight an increasing
caseload of tuberculosis and hepatitis C and food-born illness. She
stressed that such cases are a problem in Anchorage as well as in
the villages.
Ms. McConnell next spoke to the $14 million investment proposed for
other areas of public safety, including criminal justice, child
protection, senior protection, emergency services and alcohol-
related programs. She noted senior protection as an area of growing
concern with the increasing number of older people who are unable
to fend for themselves. She stated that the Committee would learn
more about the alcohol-related programs during budget subcommittee
meetings and as it hears related legislation such as those
addressing drunken driving.
Ms. McConnell continued by detailing the requested $14 million
general fund increase for quality education from early education up
through the University of Alaska. She pointed out that the governor
chose to support the Board of Regents' request for $16.9 million to
rebuild and strengthen the university system.
Ms. McConnell referenced separate legislation introduced at the
governor's request that would provide additional staff to increase
the number of beds that could be used at the Pioneers Homes and
expand the use of the facilities to include a preference for
veterans. She stated that more information on this proposal would
be given later in the week.
Ms. McConnell stated that the governor transmitted the request for
a $1.5 million increase for the Alaska Court System.
Ms. McConnell next addressed the FY 02 capital budget noting that
Alaska Housing Finance Corporation (AHFC) bonds and tobacco
settlement bonds were used to fund projects during the previous
legislative session. Because of this, she stressed, there was an
unusually low level of general funds included in the capital
budget, down to $73 million in FY 01. She said it was understood
that this method could not be used to maintain, or rebuild where
necessary, the state's infrastructure. This was the reason the
budget request proposed an additional $30 million in general funds,
she explained.
Ms. McConnell qualified that the general fund per person spending
contained in the FY 02 proposed budget, adjusted for inflation, is
$1700 less than what it was in 1979, the final year before the
pipeline boom brought increased revenues to the state.
Ms. McConnell drew the member's attention to documents she provided
showing the Administration's Internet sites and explaining the
budget. [Copy on file] She stressed that this has been a resource
to legislators and also constituents. She noted that the
information is written from a layperson's perspective including
details on capital projects. She added that the budget information
is listed both by departments and by affected communities. She
elaborated on the layout and presentation of information contained
on the web pages.
Ms. McConnell then refocused on the addition of $80 million needed
to maintain the current level of state services. She told of
meetings where she spoke to interested parties across the state on
the matter. She stressed that people do understand this necessity
once it has been explained, and are actually appreciative. Part of
the explanation, she said is pointing out that some actions taken
in recent years have deferred costs rather than eliminated them.
Ms. McConnell continued noting new facilities, including juvenile
detention facilities in Mat-Su, Anchorage and Ketchikan, the
Anchorage Public Health Lab, the new jail in Anchorage, are
complete or nearly so. Operating costs for the new facilities, she
stressed, add almost $7 million to the proposed budget. She noted
that statutory and contract obligations, which include leases with
the public sector, public employees contracts and formula funding
programs are other items that require additional funding. She
emphasized that departments were making efforts to bring and keep
costs down wherever possible, although these obligations remain.
Ms. McConnell stated that $15 million is needed to maintain
existing services that have been funded in the current fiscal year
using one-time monies that will not be available again. She gave
the $4.4 million special Alaska Industrial and Export Authority
(AIDEA) dividend as an example. She did not give specifics of the
affected programs or departments.
Ms. McConnell listed another $1.6 million requirement for increased
costs for emergency broadcasts due to the installment of a new
satellite system by AT&T.
Ms. McConnell stated that $4 million was included in the budget
request to address backlogs in existing programs. She explained
that these were not new services but areas where service delivery
had eroded to the point that it created problems for the private
sector. She pointed out that not all of these services were
entirely fee-supported, but still necessary in order to ensure a
healthy economy. Water use permitting, habitat permitting were
some examples she offered.
Ms. McConnell addressed the significant events, including the fire
aboard the MV Columbia, affecting the revenue generated by the
Alaska Marine Highway System. She argued that this need for
additional financial support would not be an issue with roads,
although road maintenance is essentially a subsidy.
Ms. McConnell referenced the Summary of Debt Obligations included
in the members' files, which lists the increased obligations and
notes the fewer revenues available to support the debt. [Copy on
file]
Ms. McConnell then referenced the analysis of the changes in
positions in state government. [Copy on file.] She stated that this
issue received attention during the Division of Legislative Finance
overview presented to the Committee earlier in the session. She
stressed that not all of the increases have an impact on the
state's fiscal gap; 24 positions are in enterprises that are fully
self-supporting, such as the Ted Stevens International Airport in
Anchorage, and AHFC. She continued that fee-supported programs fund
another 26 positions. Other positions, she stressed, are the result
of capital project decisions made by previous legislatures. She
emphasized that a significant number of new positions are for major
program efforts, including 123 positions for the University of
Alaska, 126 positions are required to fully implement the Veteran's
and Pioneers Homes proposal, and 59 positions are for Alaska State
Trooper and Village Public Safety Officer programs. She continued
that 105 positions are needed to staff the new correctional
facility in Anchorage and the new juvenile detention facilities.
Senator Ward shared that during a recent Department of Corrections
budget subcommittee meeting, Commissioner Margaret Pugh stated that
137 new full-time positions would be needed for the new Anchorage
jail.
Ms. McConnell thought Ms. Pugh's figure included the part-time
positions, but stated that she would verify.
Senator Ward asked if the state and the Municipality of Anchorage
could issue a request for proposals to contract-out the operation
of the new jail.
Ms. McConnell replied that she would research the matter.
Ms. McConnell turned her direction to the FY 02 Capital Budget,
noting a summary of projects. [Copy on file.]
Ms. McConnell pointed out the proposed $7 million general funds and
$80 million total funds. She stressed that the majority of the
capital budget is supported with federal funds, AHFC funds and
other revenue sources.
Ms. McConnell stated that $830 million total funds are proposed for
Department of Transportation and Public Facilities projects and
that only $62 million of that amount is general funds. She spoke to
the emphasis on maximizing federal funds for transportation
projects.
Ms. McConnell shared that the Administration would offer additional
proposals in the upcoming weeks to address school construction and
transportation.
Ms. McConnell emphasized the "great success" in determining the
best financing mechanism for the capital budget.
ADJOURNMENT
Co-Chair Donley adjourned the meeting at 9:24 AM.
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