Legislature(1995 - 1996)
02/22/1995 09:07 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.