Legislature(1993 - 1994)
01/31/1994 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE January 31, 1994 9:10 a.m. TAPES SFC-94, #10, Side 1 (000-end) SFC-94, #10, Side 2 (000-end) SFC-94, #12, Side 1 (000-444) CALL TO ORDER Co-chairman Steve Frank convened the meeting at approximately 9:10 a.m. PRESENT In addition to Co-chairman Frank, Senator Kelly was present. Co-chair Pearce and Senators Kerttula, Jacko, and Sharp arrived soon after the meeting convened. Senator Rieger did not attend. ALSO ATTENDING: Senator Randy Phillips; Randy Welker, Legislative Auditor; Shelby Stastny, Director, Office of Management and Budget; Joe Swanson, Director, Division of Elections, Office of the Lieutenant Governor; Mike Nizich, Director, Division of Administrative Services, Office of the Governor; Bruce Geraghty, Deputy Commissioner, Dept. of Community and Regional Affairs; Remond Henderson, Director, Division of Administrative Services, Dept. of Community and Regional Affairs; Pam Stoops, Executive Director, Legislative Affairs Agency; Mike Greany, Director, Legislative Finance Division; Virginia Stonkus, fiscal analyst, Legislative Finance Division; and aides to committee members and other members of the legislature. ALSO ATTENDING VIA TELECONFERENCE FROM ANCHORAGE: Edgar Blatchford, Commissioner, Dept. of Community and Regional Affairs; and Robert Harris, Director, Division of Energy, Dept. of Community and Regional Affairs. SUMMARY INFORMATION SB 243 - FOUR DAM POOL TRANSFER FUND Discussion was had with Randy Welker, Mike Greany, and Bruce Geraghty. The bill was subsequently HELD in committee for possible amendment. SB 247 - STATE LEASES & LEASE-PURCHASE FINANCING No discussion. Need for technical amendment was noted. The bill was HELD in committee for action at the next meeting. HB 370 - APPROP: FY 95 OPERATING AND LOAN BUDGET FY 95 operating budget overviews were presented by staff from the following agencies: Dept. of Community and Regional Affairs Governor's Office Legislature HB 370 APPROP: FY 95 OPERATING AND LOAN BUDGET BUDGET OVERVIEW - DEPT. OF COMMUNITY & REGIONAL AFFAIRS EDGAR BLATCHFORD, Commissioner, Dept. of Community and Regional Affairs, presented his opening comments via teleconference from Anchorage. He then asked that department staff in Juneau proceed with the overview. BRUCE GERAGHTY, Deputy Commissioner, Dept. of Community and Regional Affairs, directed attention to a handout (copy on file in the committee minute book) identifying changes within the department. Major operational changes result from legislative action that brought rural programs from the Alaska Energy Authority to the department. Major budget decrements were derived from reductions in municipal assistance and revenue sharing, senior citizens and disabled veterans property tax exemption and renter rebate programs, and non-funding of line-item designated grants. Comments followed regarding the department position count and impact of the Governor's hiring freeze. REMOND HENDERSON, Director, Administrative Services, Dept. of Community and Regional Affairs, said that only 3 positions are presently frozen. Savings from the positions would total $74.0 over a six-month period. Only $45.0 is general fund. Discussion followed concerning how the above-mentioned decrements were derived. Mr. Geraghty explained that initial instructions to the department were for a status quo budget. That budget was presented to the Office of Management and budget last fall. Due to declining revenues and further discussions, the department "came up with the additional reductions." Co-chair Frank voiced his understanding that the department made no internal cuts in costs such as travel or other areas prior to proposing the 50% cut in municipal assistance, total elimination of designated grants, etc. Mr. Geraghty said that the department budget had been reduced over past years to a point where further reduction would mean elimination of programs. Discussion followed regarding lack of elimination of administrative costs associated with designated grants and other decrements. Mr. Geraghty said that if proposed reductions are enacted by the legislature "There may be minor savings in personal services lines." Senator Kerttula noted that reduction of municipal assistance and revenue sharing at the state level merely increases taxes at the local level. He then voiced his displeasure over reductions in the senior citizen and disabled veteran property tax exemption and renter rebate. In response to a request from Senator Phillips, Mr. Geraghty advised of the following revenue sharing and municipal assistance funding for FY 92 through 94: Revenue Sharing Municipal Assistance FY 92 $38,347.0 $46,648.0 FY 93 35,279.2 42,916.2 FY 94 32,809.7 39,912.1 Senator Phillips raised questions regarding the rationale and the advocates behind the proposed 50% reduction in the upcoming budget. Mr. Geraghty said that discussion of reductions originated at the economic summit in November, 1992. Virtually all groups at the summit recommended that revenue sharing and municipal assistance be eliminated. The department thus moved in that direction. Senator Phillips concurred in concerns expressed by Senator Kerttula and suggested that other areas should be reduced prior to the proposed cut. Senator Kerttula provided historical background on municipal assistance. Mr. Henderson noted that 70% of department funds involve municipal assistance, revenue sharing, and senior programs. There are thus not many other areas in which to effect a $40 million reduction. Elimination of all administrative and technical personnel would yield only $8 million in general fund savings. Discussion next reverted to discussion of the new Division of Energy. ROBERT HARRIS, Director of the division, spoke via teleconference from Anchorage. He explained that he assumed his position the middle of November when transfer of rural energy programs from the Alaska Power Authority to the new Division of Energy within the Dept. of Community and Regional Affairs was underway. The purpose of the Division of Energy, created by the legislature in 1993, is to assist in development of safe, reliable, energy efficient systems throughout Alaska. Mr. Harris highlighted the following efforts: Rural operational technical and emergency assistance program. Bulk Fuel Circuit Rider Program Alternate and Applied Energy Rural Power Systems Upgrade Compilation of Alaska Electric Power Statistics Waste Heat Projects Speaking to system upgrades, Mr. Harris advised of 19 projects for FY 94, totaling $2 million. Priority is given to communities willing to contribute 25% of the cost of the project. The division seeks to avoid continued operation and maintenance costs for the projects. Mr. Harris next noted that the division is developing a feasibility study for the Copper Valley Intertie between Sutton and Glennallen. It is also actively pursuing rural utility consolidation and regionalization as well as assisting rural utilities with business management requirements. Approximately 80 rural utilities have fewer than 200 customers. The power cost equalization project is presently funded at approximately $17.5 million annually. Mr. Harris next explained that the division administers loans from the power project fund (the four dam pool transfer fund). It also administers power cost equalization and the rural electrification capitalization fund (also from the four dam pool transfer fund). Loans have not been made from the rural electric revolving loan fund for a number of years, mostly because of the electric service extension grant fund. Most utilities would rather receive a grant than borrow money. The bulk fuel revolving loan fund allows communities with good financial histories to borrow up to $100.0 and pay it back over a nine-month period. This program has been extremely successful. Last year over 50 communities were involved, and that number is expected to increase to 60 or 65. The division of energy is now consolidated with the Dept. of Community and Regional Affairs. The division has been working on strategic energy plans, internal work plans, and the transition as it relates to AIDEA. Mr. Harris said he had also spent considerable time meeting with constituents in rural Alaska. He stressed need for on-site knowledge of utility systems. In response to a question from Senator Jacko concerning the number of energy authority positions before and after consolidation, Mr. Harris said the division has roughly half. The division of energy has the bulk of the staff transferred from the former energy authority. Some administrative positions have been placed under the division of administrative services, three or four positions associated with specific projects such as Bradley Lake moved to AIDEA, and positions associated with operation of specific hydroelectric projects (Bradley Lake was again cited) have been picked up by utility companies (Homer Electric was noted). Senator Jacko new inquired concerning staff for the circuit rider program. Mr. Harris said that three positions from rural construction maintenance were eliminated. Contracts were then entered with Kotzebue Electric, Alaska Power and Telephone, and Alaska Power Systems. The function remains and more individuals, statewide, are now involved in the program than before. Lengthy Discussion followed regarding the twelve positions transferred to administrative services from the thirty-two administrative positions in the Alaska Energy Authority. Bruce Geraghty attested to concerns relating to technical expertise within the division of energy and ability to provide the same level of service to which utilities in small communities are accustomed. Identified procedural process problems have consumed a good amount of the new director's time. The transfer resulted in a reduction from the nearly 80 positions in the Alaska Energy Authority "down to just over 40." Senator Sharp raised a question concerning the $525.0 general fund increment and administrative costs of power cost equalization and other projects. Remond Henderson explained that, in past years, operational funding came from a combination of sources. End, SFC-94, #16, Side 1 Begin, SFC-94, #16, Side 2 This year the operating budget is based on operational funding from general funds. The $3.9 million appropriated for FY 94 was used as a base. Funds for operations will not be deducted from the revenue flow prior to distribution to various programs. Approximately $4 million in general funds is requested for operations. Further discussion followed between Senator Sharp and Mr. Henderson regarding past use of CIP moneys for operational funding. Co-chair Frank raised both budgetary and policy concerns regarding proposed use of general funds for operations. Senator Sharp voiced his recollection that power cost equalization was capped at $18 million. The proposed budget, however, seeks $18.6 million. Co-chair Frank called for additional questions or comments regarding the proposed budget for the Dept. of Community and Regional Affairs. None were forthcoming. SB 243 FOUR DAM POOL TRANSFER FUND Co-chair Frank directed that SB 243 be brought on for discussion. MIKE GREANY, Director, Legislative Finance Division, came before committee. He explained that SB 243, sponsored by the Legislative Budget and Audit Committee, contains specific, remedial legislation to respond to a concern that arose in November. One of the elements of energy legislation passed last year abolished the power development revolving loan fund and moved the money to a newly created four-dam-pool transfer fund. The intent was that money from the transfer fund would flow to three receiving funds: 1. Power cost equalization 2. Southeast energy fund 3. Statewide power projects Additional legislation contained a capital appropriation from the Southeast energy fund for a specific intertie. The substantive legislation spoke to flow of money from the four-dam-pool transfer fund to the three receiving funds, "subject to appropriation." No appropriation was subsequently made to get the moneys to the three receiving funds. Legislative Budget and Audit then introduced legislation that deleted "subject to appropriation" language so that the money would automatically flow through a transfer process from the four-dam-pool transfer fund to the receiving funds. Mr. Greany next spoke to the funding of administrative costs from transfer fund moneys. He explained that moneys from the former power development revolving loan fund paid for certain administrative costs in the past. Current legislation does not provide for that. If the desire is to fund a portion of the administrative costs from the four- dam-pool transfer fund or the three receiving funds, legislation so specifying would be needed. Mr. Greany noted an open question, concerning the legislature's power of appropriation, absent specific statutory authority. The clearest approach would be through statute designating how administrative costs will be addressed. RANDY WELKER, Legislative Auditor, added that SB 243 would not preclude the legislature from appropriating operating costs from the subject funds. Senator Sharp directed attention to page 1, line 4, of the bill and noted language allowing for appropriation of administrative costs prior to effecting the 40/40/20 transfer. Mr. Welker concurred and added that there is nothing that would preclude the legislature from making appropriations "out of those receiving funds either." Co-chair Frank voiced a preference for specific language clarifying that administrative costs are to flow from the transfer or receiving funds rather than leaving that issue to the budget process. He then requested that staff work on a proposed amendment to the bill to accomplish that end. Bruce Geraghty said the department views SB 243 as technical in nature. He cautioned against narrowing the approach to funding energy operations. Co-chair Frank asked how the department would respond should the legislature disallow general fund increases. Mr. Geraghty noted that the Alaska Energy Authority budget for FY 94 totaled $8.4 million. That has been reduced to $3.9. The division is making an effort to return several million dollars to the general fund. He next spoke to continuing transfer of moneys and functions from the Dept. of Commerce and Economic Development to Dept. of Community and Regional Affairs. Mr. Greany explained that the legislature has the ability to appropriate at any of the steps along the way. It would be clearer to specify at which point in the process administrative costs should be addressed: 1. Before distribution to receiving funds. 2. As part of the receiving funds on a prorated percentage. Co-chair Frank advised that the issue would be further considered and brought back for discussion at a later time. He then directed that SB 243 be HELD in committee. SB 247 STATE LEASES & LEASE-PURCHASE FINANCING Co-chair Frank announced that SB 247 would be HELD in committee pending preparation of technical amendments. HB 370 APPROP: FY 95 OPERATING AND LOAN BUDGET BUDGET OVERVIEW - OFFICE OF THE GOVERNOR MIKE NIZICH, Director, Division of Administrative Services, Office of the Governor, came before committee. He said that the FY 95 budget for the Governor's Office totals $20,723.3 and is comprised of: federal receipts $2.9 million general fund match 1.5 million general fund 16.0 million general fund program receipts 4.9 thousand interagency receipts 121.0 thousand The foregoing represents a $2,544.5 increase over the FY 94 adjusted base ($423.9 in federal funding and $2,120.6 in general funds). Co-chair Frank noted that the overview from the Division of Legislative Finance shows different numbers. Mr. Nizich said he would look into the differences. He noted that general fund increases relate predominantly to the Division of Elections. The position count for FY 95 is 174 full-time (an increase of 3 permanent full-time positions). The request also includes 4 permanent part-time and 48 temporary (an increase of 29). The budget includes three general fund increments totaling $2,135.8 for the Division of Elections. The first consists of $110.0 for a precinct map feasibility study. An RSA with the Dept. of Labor is presently budgeted. The Office of the Governor has since changed that request and will provide a budget amendment indicating that other state agency or private sector assistance will be sought for the study. The project is intended to ensure greater efficiency in reapportionment activities and provide district and precinct maps to candidates. The second incremental request relates to partially closed primary costs. It totals $309.6 and reflects the cost of the split ballot primary election. A total of $1,716.2 is also requested for the on-year election increment to operate primary and general elections. An additional 29 temporary positions is also being requested. The Human Rights Commission requests federal receipt authority for $33.9 thousand. The Commission receives EEOC funding in support of efforts in resolving cases involving employment and housing discrimination. Funding is based on a flat fee of $500.00 for processing and resolving each case. Mr. Nizich pointed to recent LBA approval of an RPL which increased FY 94 funding by $42.0, bringing the total to $90.0. The Executive Office is requesting federal receipts of $25.0 for the client assistance program. This is the third year the office has administered this program which was taken over from the Dept. of Education. It is authorized under Title I of the Rehabilitation Act of 1973 and is funded through the U.S. Dept. of Education. The program was authorized to receive $75.0 in FY 94. LBA recently approved a request for an additional $25.0. The EPA pollution prevention program is in its third and final year. In 1991 the state was awarded $270.0 from the U.S. Environmental Protection Agency for a three-year program entitled, "Building Sustainable Communities in Alaska." The state has been notified that an additional $30.0 is available for this green star program. In response to a question from Senator Kerttula, Mr. Nizich advised that the program is conducted through agreements with entities in various communities and assistance from the Dept. of Environmental Conservation. Senator Kerttula inquired regarding radiation leaks at Amchitka. Mr. Nizich said he would check into the matter and report back. Mr. Nizich next spoke to the success of the media support center in both its printed efforts and video production. The center anticipates receipt of an additional $121.0 through RSAs with various agencies. In response to Senator Kerttula's concern regarding controls over the center, Mr. Nizich said that the center works in conjunction with departments to put out information to assist the general public. The media center is not commingled with the Governor's press office. Co-chair Frank noted that last year the legislature reduced the request for the center to $247.0. Mr. Nizich spoke to intent to utilize RSA funds from video productions for media center support. Senator Sharp asked if, in the past, agencies contracted with private firms for media work. Mr. Nizich spoke to media center hire of technical staff with video expertise. He acknowledged occasional private sector contract for graphics or animation. Use of video is relatively new for most state agencies. Co-chair Pearce requested a chart of staff at the Office of Governmental Coordination and funding associated with each position. Mr. Nizich agreed to provide the information. He explained that positions remain as long as federal funding is forthcoming. When it is discontinued, the positions are eliminated. Mr. Nizich advised that the Office of Governmental Coordination anticipates receiving a $234.0 increase in the coastal management program. That involves two positions, one of which is federally funded, and the other is funded from state match. The other federally funded position relates to a request to receive $101.0 for non-point source pollution control funds. Mr. Nizich said that two, technical budget amendments are anticipated. The first relates to a $15.2 transfer from the executive office for leasing, and the other to the Division of Elections for the geographic information system. A supplemental funding request for FY 94 is not anticipated. SHELBY STASTNY, Director, Office of Management and Budget, came before committee in response to a question from Senator Kerttula. Mr. Stastny said that conversion of short-term contractual staff to full time occurred prior to his tenure. Five, temporary, one-year positions for the efficiency review team are gone. End, SFC-94, #10, Side 2 Begin, SFC-94, #12, Side 1 BUDGET OVERVIEW - LEGISLATURE MIKE GREANY, Director, Legislative Finance Division, directed attention to a three-page handout (copy on file in the committee minute book) and explained that it contains a summary of FY 94 and 95 budgets. A second handout (copy of file) contains a history and description of legislative agencies. Amounts set forth on the first handout reflect funds appropriated by the conference committee for FY 94, plus carry-forward amounts included in the reappropriation bill. The FY 95 budget is at the same level as 94. Co-chair Frank directed attention to the shortform for the legislature and noted expenditure of $30,661.5 in FY 93. He then referenced FY 94 and proposed FY 95 funding of $41,471.3 and noted that in excess of $10 million over actual expenditure appears to be budgeted. Excess funding is shown as the FY 93 carry- forward. Senator Kerttula noted that portions of the carry-forward might reflect an accumulation over a number of years. Mr. Greany next directed attention to transfer of funding from Senate Finance to Council and Subcommittees for the Ethics Committee as well as transfer within the Legislative Council component to Public Services. RANDY WELKER Legislative Auditor, came before committee to speak to the budget for the Legislative Audit Division. He referenced conference committee funding of $2,743.1 and said that it is consistent with the maintenance level budget of the past several years. Actual expenditure has ranged between $2.5 and $2.6 million. That produced a cumulative carry-forward of $221.3. Mr. Welker explained that the carry-forward is not considered when the basic budget is developed each year. The request for the coming fiscal year supports the existing 36 positions. In response to a question from Senator Kerttula, Mr. Welker attested to sufficient work to keep 20 additional auditors busy. In response to an additional question, he referenced a flex- time policy reviewed, modified, and approved by the Legislative Budget and Audit Committee. Mr. Greany, Director, Legislative Finance Division, again came before committee. He referenced three, major components within the division: 1. House Finance Committee 2. Senate Finance Committee 3. The division administrative office Co-chair Frank asked if House and Senate Finance Committees are budgeted for the same amount. Mr. Greany attested to past budgeting of like amounts. However, in most recent conference committee action, a greater reduction was taken to the Senate Finance Committee. In response to a request from Co-chair Frank, Mr. Greany said that he would provide the exact amount to committee. Amounts shown for committee expenses reflect costs of the Legislative Budget and Audit Committee, including staff to the chairman, authorized travel for committee meetings, and contractual work. Co-chair Frank noted that the committee spent $144.0. The conference committee authorized $300.0. With the reappropriated carry-forward, funding totaled $767.0. Mr. Greany concurred in those numbers. Senator Kelly raised questions concerning administrative staff. Mr. Greany listed himself, six fiscal analysts, two administrative positions, and two data processing positions. Senator Kerttula raised questions regarding the substantial turnover in the division and voiced concern that new staff, experiencing a learning curve, might not be able to provide the needed checks and balances between the legislature and the administration. Mr. Greany responded that the division enjoyed low turnover for a number of years. During the past interim, five of the six analysts moved on to advanced positions. Two moved from range 22 to range 26. A third moved to range 23. A fourth made a lateral move to the Office of Management and Budget, and the fifth took a cut in pay to fill an administrative officer position in the Dept. of Health and Social Services. Senator Kerttula suggested that such a substantial turnover evidences management problems. Senator Kelly noted that most of those leaving the division took promotions. He further noted that word was out that the legislature intended to cut the division, and he suggested that that may have motivated turnover. The problem may be political rather than managerial. Co-chair Frank referenced information furnished by staff indicating funding of House Finance at $1.5 million and Senate Finance at $1.2 million. PAM STOOPS, Executive Director, Legislative Affairs Agency, next came before committee to speak to the ten components in the agency budget. She explained that carry-forwards in salaries and allowances would be utilized to fund the increase in the annual allowance. The budget for executive administration will not be presented to the Legislative Council until February. FY 94 was the first year components were allowed to retain their individual carry-forwards. Past carry-forward funding was reappropriated to the legislative operating budget. Carry-forward increases for salary expenses and the legislative operating budget are due to decreased staff positions in the House and Senate. The FY 94 budget was maintenance level. Ms. Stoops next provided the following component analysis: Salaries and allowances funds salaries, per diem, and the annual office allowance for the sixty legislators. Executive administration funds data processing and the office of the executive director, including data processing chargeback for the entire legislature as well as the Ombudsman. Public services funds the 20 legislative information offices throughout the state and long-distance teleconference costs. Administrative services funds accounting personnel, summer tour guides for the capitol building, and the print shop. Legal services funds attorneys and support staff for bill drafting, the legislative reference library, the code revision commission, and uniform law commissioners. Session expenses pays for operation of the 120-day session and interim operation of the Chief Clerk's and the Senate Secretary's offices. Approximately 212 positions are budgeted in this component. In response to a question from Co-chair Frank concerning funding for session and full-time aides, Mrs. Stoops said that positions are budgeted under session expenses for four months and under the legislative operating budget or legislative finance or audit division budgets for the remaining eight months. Council and subcommittees funds the chair of the Legislative Council, the Ethics Committee, Administrative Regulation Review, and special committees and task forces. Senator Kerttula noted that the Ethics Committee was supported by Senate Finance rather than the Legislative Council. General services funds legislative leases and salaries and expenses of maintenance and supply staff. The Legislative Research Agency provides research services to both the House and Senate. The Legislative Operating Budget component funds interim operations, staff, travel, and contracts. It also contains leadership accounts authorized at $8.4 million. The initial appropriation provided $2.5 million each for House and Senate leadership. The carry-forward on the Senate side was considerably higher than the House. Mrs. Stoops said she would provide actual figures. No one was present to speak to the budget for the Ombudsman. In response to questions from Senator Kelly, Mrs. Stoops advised that the office does its own administrative work with assistance from Legislative Affairs. One staff position within the Ombudsman's office handles both accounting and personnel functions. Speaking to the overall Legislative Affairs Agency budget, Senator Kerttula inquired concerning areas that might be reduced. Mrs. Stoops said that the agency, with assistance from the Division of Personnel within the Dept. of Administration, would be conducting a salary review for all positions to see how they compare with other exempt positions in the executive branch. She acknowledged that areas could be cut, but not without impact. ADJOURNMENT The meeting was adjourned at approximately 11:30 a.m.