Legislature(1995 - 1996)
04/20/1995 03:30 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 20, 1995 3:30 p.m. TAPES SFC-95, #49, Side 1 (426-end) SFC-95, #49, Side 2 (575-end) SFC-95, #51, Side 1 (000-238) CALL TO ORDER Senator Steve Frank, Co-chairman, convened the meeting at approximately 3:30 p.m. PRESENT All committee members (Co-chairmen Frank and Halford and Senators Donley, Phillips, Rieger, Sharp, and Zharoff) were present. ALSO ATTENDING: Senator Adams; Senator Duncan; Senator Hoffman; Senator Taylor; Former Senator Pat Pourchot, Legislative Director, Office of the Governor; Annalee McConnell, Director, Office of Management and Budget; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Alison Elgee, Deputy Commissioner, Dept. of Administration; Dan Fauske, Executive Director, Alaska Housing Finance Corporation; Gary Hayden, System Director, Marine Highway System, Dept. of Transportation and Public Facilities; Mike Greany, Director, Legislative Finance Division; Kathryn Daughhetee, Fred Fisher, Dana LaTour, Susan Taylor, Virginia Stonkus, and Jetta Whittaker, fiscal analysts, Legislative Finance Division; and aides to committee members and other members of the legislature. SUMMARY INFORMATION HB 100 - APPROP: FY 96 OPERATING & LOAN BUDGET Amendments 17, 46, 50, 68, 69, 70 (Revised), 71, 95 (2nd Revision), 98, 99, and 100 (conforming amendment, front and back sections of the budget) were reviewed, discussed, and acted upon. SCSCSHB 100 (Fin) was subsequently REPORTED OUT of committee with a majority "do pass" recommendation. HOUSE BILL NO. 100 An Act making appropriations for the operating and loan program expenses of state government 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. Upon convening the meeting, Co-chairman Frank advised that the committee would continue review of budget amendments. AMENDMENT NO. 46 Co-chairman Frank noted need to effect a technical amendment to the general fund appropriation in the enforcement component within the fish and wildlife protection BRU for the Dept. of Public Safety budget. The $555.0 appropriation should be amended to $555.5. Co-chairman Frank called for objections to the change. No objection having been raised, the $555.5 figure was ADOPTED. AMENDMENT NO. 50 Co-chairman Frank directed attention to the following intent language proposed for incorporation in the front section of the budget: It is the intent of the legislature that funding necessary to meet the Department's disaster relief responsibilities will continue to be made available through the disaster declaration process outlined in the current funding agreement. During the 1996 legislative session, the department shall submit a supplemental appropriation request for fiscal year 1996 disaster relief costs. Senator Zharoff MOVED for adoption of Amendment No. 50. No objection having been raised, the amendment was ADOPTED. AMENDMENT NO. 68 Senator Zharoff MOVED for adoption of Amendment No. 68. OBJECTION was raised. Senator Zharoff requested that the first of five proposed new front sections contained in the amendment be removed since it was dealt with previously. He then asked that the administration speak to remaining sections relating to collective bargaining agreements with the Inlandboatmen's Union; Labor, Trades and Crafts Unit; and the Supervisory Unit. ANNALEE McCONNELL, Director, Office of Management and Budget, came before committee. She reiterated support for both the collective bargaining process and negotiated contracts. Co-chairman Frank called for a show of hands on adoption of Amendment No. 68. The motion FAILED on a vote of 1 to 5. (Senator Donley did not appear to vote.) AMENDMENT NO. 69 Senator Zharoff MOVED for adoption of Amendment No. 69. OBJECTION was raised. The Senator explained that the amendment would delete Sec. 38 of the front section and remove House language which would not allow funding of monetary terms for employee contracts without a specific appropriation. He noted that Sec. 38 language nullifies agreements between bargaining units and the administration. ANNALEE McCONNELL stressed that the administration does not want to "end up in limbo." It does not want to be in a situation where it is unclear whether or not contracts are approved. She reiterated support for full funding of the contracts, saying that without clarifying language the administration would "go ahead and pay for the additional contract costs." That would equate to an unallocated cut of $8.4 million. Co-chairman Frank called for a show of hands on adoption of Amendment No. 69. The motion FAILED on a vote of 2 to 5. AMENDMENT NO. 70 Senator Zharoff directed attention to Revised Amendment No. 70 and MOVED for adoption. OBJECTION was raised. Senator Zharoff explained that the amendment would appropriate $715.8 in interest earnings attributable to the Alaska Marine Highway System Fund from the general fund to the Alaska Marine Highway System Fund. The additional funding would be used to bring the ferry system up to FY 94 actuals. GARY HAYDEN, Director, Alaska Marking Highway System, Dept. of Transportation and Public Facilities, came before committee. He voiced his understanding that the amendment would meet the intent of both the subcommittee and full Senate Finance Committee in setting the cap at FY 94 actual totals. Co-chairman Frank voiced his intent to hold the department budget, including the ferry system, at the FY 94 level. Senator Rieger explained that the subcommittee allocated the reduction between the two major components: highways/maintenance and the marine highway system. The original cap was $126 million. The FY 95 authorized was $129 million. The subcommittee report called for a prorata reduction on the marine side and the land side by exactly the same percentage, from FY 95. Brief discussion followed regarding front section (Sec. 32) funding for the marine highway system. Senator Zharoff voiced his understanding that Sec. 32 funding leaves the system $715.8 short of the FY 94 level and would not provide stable service. Mr. Hayden concurred. He explained that the impact of Sec. 32 funding is that the system will have to reduce service to both Southeast and Southwest Alaska by approximately 10 weeks. In Southwest that would mean the TUSTUMENA and the BARTLETT would be out of service for an additional month. In Southeast it would mean that winter panhandle deployment would extend for approximately six weeks. During that time period, there would be a 30% loss in the number of port calls each week. That level of service is comparable to FY 91. Senator Zharoff stressed that the $715.8 appropriation would flow from interest earned by the Alaska Marine Highway System Fund during FY 95. He urged consideration of the request, asking that services not be reduced for the coming season. Senator Rieger voiced support for service but noted that the proposed FY 96 budget will require a $400 million draw from the Constitutional Budget Reserve. End: SFC-95, #49, Side 1 Begin: SFC-95, #49, Side 2 Senator Rieger stressed that the intent is not to reduce service but to "make a budget that works." Discussion of recent supplemental funding for the system followed. In response to a question from Senator Zharoff regarding operation under reduced funding, Mr. Hayden reiterated that at the $28,006.0 level there would be a reduction in service next winter. Service would approximate that provided in FY 91. A schedule has not yet been printed, and no bookings have been made. Senator Zharoff expressed concern that reduced service during the winter impacts Alaska residents. Mr. Hayden concurred. He noted that summer service responds to demand. Winter reductions would be made in areas where vessel expenses are the highest and revenues are low. Senator Rieger advised that of the amount of reduction from FY 95, 78% of the cut came from road maintenance. All districts will be impacted. The intent was to be "exactly prorata" so that there was no favoritism for one district over another. In response to a question from Co-chairman Frank, Mr. Hayden explained that revenues generated by the fund have been stable over the last four years at approximately $40.5 million. The projection for next year is $41.2, based on 312 weeks of service. If service is reduced, less revenue will be collected. Discussion continued regarding service projections. Co-chairman Frank called for a show of hands on adoption of Revised Amendment No. 70. The motion FAILED on a vote of 1 to 6. AMENDMENT NO. 71 Senator Zharoff MOVED for adoption of Amendment No. 71. Co- chairman Frank OBJECTED. Senator Zharoff explained that the amendment would add $551.221 to the budget for the University of Alaska to pay the cost of the collective bargaining agreement with the University of Alaska Classified Employees Association. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, came before committee. She explained that the agreement is retroactive to January 1, 1995. The amount set forth in the amendment is the portion relating to FY 96. ALISON ELGEE, Deputy Commissioner, Dept. of Administration, next came before committee. She explained that the classified employees' association is a new unit within the University. Employees elected to form a union late in 1993. This is the first contract between the employees and the University. The group is comprised of physical plant workers throughout the system. Monetary terms include a 3% pay increase. These employees have no other mechanism for adjustment. Senator Donley voiced his understanding that the University gave non-union employees a 3% raise but held it back until the contract with classified employees was signed. Ms. Elgee concurred. Senator Donley then voiced his understanding that if the legislature fails to fund the agreement, the University will continue to pay employees not represented by a union more than those who are represented. Ms. Elgee acknowledged that if the agreement is not funded, classified employees would be frozen at existing pay. Comments followed by Senator Donley concerning the inequity between those who received the increase and those who did not. Co-chairman Frank called for a show of hands on adoption of Amendment No. 71. The motion FAILED on a vote of 2 to 4. (Senator Sharp was temporarily absent from the meeting.) When Senator Donley questioned the rationale behind denial of the amendment, Co-chairman Frank explained that he set a level of funding for the University and did not wish to go above that level. Senator Donley then asked if the committee would support a 3% pay reduction for non- represented university employees. Co-chairman Frank advised that he did not wish to intervene in University business. Senator Donley MOVED for adoption of intent language specifying that everyone within the University take a 3% pay cut because the legislature refused to approve a contractual 3% raise for classified employees. Co-chairman Frank called for a show of hands on adoption of Senator Donley's amendment for a 3% pay cut. The motion FAILED on a vote of 2 to 5. (Senator Donley and Senator Phillips supported the motion.) Senator Donley again questioned lack of consistency in University pay and discrimination against a particular group of employees. Senator Phillips concurred in that concern. AMENDMENT NO. 95 Co-chairman Frank directed attention to Amendment No. 95, second revision, and explained that it provides a contingent $110 million appropriation from Alaska Housing Finance Corporation in the event the necessary three-quarter vote is not achieved in the Sec. 41 appropriation from the Constitutional Budget Reserve Fund. Senator Zharoff OBJECTED to the amendment and expressed need to review a budgetary spending plan. A spending plan was then distributed by staff from the Legislative Finance Division. Senator Donley requested a brief recess. RECESS - 4:05 P.M. RECONVENE - 4:15 P.M. Upon reconvening the meeting, Co-chairman Frank asked that committee members not engage in debate on the spending plan at this time but instead deal with proposed Amendment No. 95, as revised. Senator Zharoff asked how much could be withdrawn from the CBR with a majority vote. ANNALEE McCONNELL voiced support for a three-quarter vote. She said that the fiscal environment is not such that it makes sense to utilize "accounting tricks" to "get to a majority vote." The present situation is the type Alaskan voters anticipated would require a "super majority." A second concern relates to the $110 million appropriation from AHFC. Mrs. McConnell noted that Standard & Poors put AHFC on credit watch because of previous legislative withdraws and potential for future draws. DAN FAUSKE, CEO and Executive Director, Alaska Housing Finance Corporation, came before committee and referenced a recent press release (copy appended to these minutes) from Standard & Poors. He further referenced pending legislation (SB 143 and HB 281) encompassing the Governor's proposed transfer of $70 million from the corporation, this fiscal year, and subsequent $50 million annual transfers for the next four years for a total of $270 million. The press release indicates that if the agreed-to $270 million transfer is made over the indicated time period, AHFC will be taken off credit watch with negative implications and placed on "developing." That means Standard & Poors will withhold, pending further developments, any more action. Rating agencies all concur that the proposed plan is more appropriate and prudent and will maintain the stability and integrity of the corporation's rating. A $110 million transfer at this time far exceeds "what the corporation is able to do." That action would spark a very negative response "from those that we need to do business with on the East Coast, when it comes to accessing capital markets." Mr. Fauske urged that the committee stick to the $70 million transfer or enactment of pending legislation. Discussion followed regarding capital expenditures proposed by AHFC and possible offset of those moneys by the $110 transfer. Mr. Fauske cautioned that while the math works, of concern to rating agencies would be future withdrawals and lack of stability. Further discussion followed regarding stability provided by long-term fiscal planning. Additional lengthy discussion followed regarding meetings with rating agencies and AHFC spread sheet scenarios for withdrawals. In response to a question from Senator Phillips, Mr. Fauske noted that movement from AA to A rating represents approximately $13.7 million. Over the life of the bonds, it is close to $30 million. That factors into the pockets of Alaskans in terms of higher mortgage rates. Further discussion followed concerning what would be lost should AHFC's capital budget be reduced. Mr. Fauske noted that AHFC would "lose access to a great deal of federal money." Much of what AHFC spends is used to match HUD moneys. Between $35 and $37 million would be needed to cover the match. The proposed $54 million capital budget would access $120 million. Discussion followed regarding past AHFC capital budgets. Co-chairman Frank stressed that if the three-quarter vote on the Constitutional Budget Reserve Fund is achieved, the proposed $110 million transfer from AHFC, embodied in Amendment No. 95 (2nd Revision) would not occur. Senator Zharoff suggested that reductions in AHFC capital expenditures involving HUD moneys are most likely to impact rural areas. He stressed need to look at the overall impact. Co-chairman Frank called for a show of hands on adoption of Amendment No. 95 (2nd Revision) The motion CARRIED on a vote of 4 to 3, and the amendment was ADOPTED. (Senators Donley, Phillips, and Zharoff were opposed.) AMENDMENT NO. 17 Co-chairman Frank advised of need to effect a technical amendment to Amendment No. 17. Referencing language relating to the Community Jails Task Force and contracts, the Co-chairman noted need to change "shall" to "may" at lines 5 and 7. Co-chairman Halford MOVED for adoption. No objection having been raised, the amendment was ADOPTED. AMENDMENT NO. 98 Co-chairman Halford MOVED for adoption of Amendment No. 98. He explained that it contains a technical amendment to ensure that agencies do not utilize budget appropriations to fund monetary agreements which have not been approved or funded by the legislature. No objection having been raised, Amendment No. 98 was ADOPTED. CONFORMING MOTION (Amendment No. 100) MIKE GREANY, Director, Legislative Finance Division, referenced need to conform action taken in the front section of the budget to department funding in back sections. He distributed a proposed conforming amendment (copy attached to these minutes) which he explained would impact five departments: Dept. of Administration - Information Services Dept. of Law - Oil and Gas Litigation Dept. of Military and - Federal Funds Veterans Affairs Dept. of Transportation - Marine Highway Stabilization & Public Fac. Dept. of Corrections - PFD funds (SB 135) Co-chairman Halford MOVED for adoption of the conforming amendment and requested unanimous consent. Co-chairman Frank subsequently asked that action be held in abeyance pending discussion of Amendment No. 99. [See below for approval of the conforming amendment.] End: SFC-95, #49, Side 2 Begin: SFC-95, #51, Side 1 AMENDMENT NO. 99 Co-chairman Frank explained that Amendment No. 99 combines Secs. 39 and 41 so that sweep language and budget balancing language is within a single section. Co-chairman Halford MOVED for adoption of Amendment No. 99. Senator Randy Phillips OBJECTED. Co-chairman Frank called for a show of hands. The motion CARRIED on a vote of 4 to 3, and the amendment was ADOPTED. (Senators Donley, Phillips, and Zharoff were opposed.) CONFORMING MOTION (Amendment No. 100) MR. GREANY again explained that the purpose of the conforming amendment is to prevent the doubling of appropriations in both front and back sections of the budget. Funding for the listed department areas will appear in front sections. Co-chairman Halford restated his MOTION for adoption. Discussion followed regarding front section funding of a portion of the Dept. of Corrections budget from PFD funds upon passage of SB 135. General funds for the department remain in the back section while the $2,703.7 PFD offset will be shown in Sec. 13. In response to a question from Nancy Slagle, Co-chairman Frank explained that if SB 135 passes, the $2.7 million in PFD funding is available. If it does not pass, the money is not available. Ms. Slagle voiced her understanding that if the bill does not pass, the Dept. of Corrections would be minus the $2.7 million, under the Senate scenario. Co-chairman Frank called for objections to the motion. Senator Zharoff OBJECTED. The Co-chairman called for a show of hands on adoption of the conforming amendment. The motion CARRIED on a vote of 5 to 2, and the conforming motion was ADOPTED. Co-chairman Frank directed that the meeting be briefly recessed. RECESS - 4:40 P.M. RECONVENE - 4:50 P.M. Upon reconvening the meeting, Co-chairman Frank acknowledged ongoing conjecture over Dept. of Corrections funding involving SB 135. He advised that if funding is not found to be correct as presently incorporated within the Senate budget, a floor amendment would be offered to effect a correction. Senator Zharoff noted that funding for the Dept. of Education had not yet been provided. He then asked if education would be fully funded. Co-chairman Frank told members that the spending plan has sufficient flexibility to accommodate an amount between flat and full funding. That decision has not yet been made. Co-chairman Halford MOVED to pass SCS CSHB 100 (Fin) from committee with individual recommendations. Senator Donley OBJECTED. He continued to voice concern regarding safety in the work place and the fact that the budget contains no general funds for enforcement of state safety laws while issues of much lower priority have been funded. He raised further concern over lack of legislative approval and funding of collective bargaining contracts for state and university employees. There has been no debate as to what might be wrong with the contracts. If the legislature rejects the agreements, it should indicate why it is doing so. Firm directive and guidance should be provided. The Senator spoke specifically against the manner in which funding for classified university employees was handled by committee. He further questioned lack of funding for education so that it could be considered within the context of the overall budget. Co-chairman Frank called for a show of hands on passage of SCS CSHB 100 (Fin). The motion CARRIED on a vote of 5 to 2, and SCS CSHB 100 (Fin) was REPORTED OUT of committee. Co- chairmen Frank and Halford and Senators Rieger and Sharp signed the committee report with a "do pass" recommendation. Senator Phillips signed "do pass if amended." Senators Donley and Zharoff signed "no recommendation." ADJOURNMENT The meeting was adjourned at approximately 5:00 p.m.