Legislature(2003 - 2004)
04/14/2003 04:01 PM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 14, 2003 4:01 PM TAPES SFC-03 # 48, Side A SFC 03 # 48, Side B CALL TO ORDER Co-Chair Lyda Green convened the meeting at approximately 4:01 PM. PRESENT Senator Lyda Green, Co-Chair Senator Gary Wilken, Co-Chair Senator Con Bunde, Vice Chair Senator Robin Taylor Senator Lyman Hoffman Senator Ben Stevens Senator Donny Olson Also Attending: JOHN CRAMER, Director, Division of Administrative Services, Department of Military and Veterans Affairs; SUSAN TAYLOR, Director, Division of Administrative Services, Department of Revenue; DAN SPENCER, Director, Division of Administrative Services, Department of Administration; WENDY REDMAN, Vice President for University Relations, University of Alaska Attending via Teleconference: There were no teleconference participants. SUMMARY INFORMATION SB 35-APPROP: OPERATING BUDGET/LOANS/FUNDS HB 75-APPROP: OPERATING BUDGET/LOANS/FUNDS SB 36-APPROP: MENTAL HEALTH BUDGET HB 76-APPROP: MENTAL HEALTH BUDGET The Committee heard budget subcommittee reports for the Department of Revenue, the Department of Military and Veterans Affairs, and the Department of Administration. A Committee-of-the-Whole meeting was conducted regarding the University of Alaska subcommittee budget report. All budget subcommittee reports were adopted, and the bills were held in Committee. SPONSOR SUBSTITUTE FOR SENATE BILL NO. 35 "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." CS FOR SS FOR HOUSE BILL NO. 75(FIN) am(brf sup maj fld) "An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; and providing for an effective date." SPONSOR SUBSTITUTE FOR SENATE BILL NO. 36 "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." CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 76(FIN) "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." This was the second hearing for these bills in the Senate Finance Committee. Department of Military and Veterans Affairs Senator Robin Taylor, Chair Senator Fred Dyson Senator Scott Ogan Senator Donny Ellis Senator Taylor stated that the Finance Committee subcommittee for the Department of Military and Veterans Affairs has accepted the Governor's proposed budget for the Department. Co-Chair Green affirmed that the subcommittee has accepted the Governor's budget proposal, and she asked whether any component of the budget would require further explanation or discussion. Senator Taylor replied no, as the budget is self-explanatory. He acknowledged the cooperation provided by the Department's Adjutant General/Commissioner Colonel Craig Campbell in the development of the budget. He communicated that in order to streamline the budget and reflect personnel changes and other responsibilities for which the Department is accountable, Colonel Campbell has modified and shifted various components within the Department's budget. JOHN CRAMER, Director, Division of Administrative Services, Department of Military and Veterans Affairs stated that accommodating the responsibilities of the Office of Homeland Security created the major changes in the Department's budget. He noted that another change, as directed by the Legislature, is that a general fund appropriation would now be the funding source for the Department's Disaster Relief Fund that addresses emergency operation activities. Department of Revenue Senator Robin Taylor, Chair Senator John Cowdery Senator Donny Olson Senator Taylor communicated that the Finance Committee subcommittee for the Department of Revenue has approved the Governor's budget proposal. He commented that it is difficult to reduce the budget of the Department that "makes money" for the State. He informed that, while the Department's overall budget has been relatively consistent from year to year, a few changes would occur in the Department during the next few years. Senator Taylor noted that the Department's FY 04 budget includes monetary reductions in travel, contractual, commodities, and equipment. Co-Chair Green asked for confirmation that the subcommittee has adopted the Governor's budget recommendation for the Department. SUSAN TAYLOR, Director, Division of Administrative Services, Department of Revenue, concurred. Senator Taylor announced that, other than the [unspecified] reductions that are recommended in the Governor's proposed budget, the subcommittee could not identify any further reductions that could occur without harming the Department. He noted that the Department "has pledged " to conduct further evaluations during FY 04 to determine whether additional savings might be identified for FY 05. At ease 4:08 PM / 4:08 PM Department of Administration Senator Con Bunde, Chair Senator Fred Dyson Senator Gene Therriault Senator Georgianna Lincoln Senator Bunde presented an overview of the subcommittee report as follows. The Senate Finance Subcommittee has adopted the following FY 04 budget for the Department of Administration. The changes contained in this budget reflect changes to the Governor's amended budget. This budget contains $64,913,000 in General Funds, $1,056,300 in Federal Funds, and $127,065,900 in Other Funds. It does not contain the funding for the Anchorage Jail Lease. The $5,264,500 for that lease will be taken up in the Language Section with the full Finance Committee. There is a reduction resulting from a request from the Alaska Mental Health Trust Authority for a reduction in MHTAAR receipt authority. These reductions appear in the Office of Public Advocacy and the Public Defender Agency components. The subcommittee concurs with the administration's effort to increase efficiency throughout state government and the Executive Orders introduced by the Governor are reflected in this budget. The Subcommittee adopted the following Conditional Language. Information Services Fund Conditional Language This appropriation to the Information Services Fund capitalizes a fund and does not lapse. AK Oil & Gas Conservation Commission Conditional Language The amount appropriated by this appropriation includes the unexpended and unobligated balance on June 30, 2003, of the receipts of the Department of Administration, Alaska Oil & Gas Conservation Commission receipts account for regulatory cost charges under AS 31.05.093 and permit fees under AS 31.05.090. Senator Bunde noted that the full Senate Finance Committee would further address the funding of the Anchorage Jail Lease. He also stated that a forthcoming amendment would address and correct the amount of Alaska Mental Health Trust Authority authorized receipts (MHTAAR), with the intention to fully fund the Office of Public Advocacy and Public Defender Agency components in the Mental Health Court. Senator Bunde stated that the Division of Senior Services, which is responsible for the operation of the Pioneer Homes, the Longevity Bonus Grant Program, the Commission on Aging, and the licensing and regulating of the Assisted Living Homes Program, has been transferred to the Department of Health and Social Services. He communicated that, as the result of separate legislation concerning the Alaska Public Offices Commission (APOC), the Department's responsibility for APOC's disclosure functions would be transferred to the Division of Elections and that associated violations enforcement would be transferred to the Department of Law. He stated that this change would save the Department $500,000. Furthermore, he noted that the Department of Administration rather than the Department of Public Safety would now be responsible for the Violent Crimes Compensation Board. In addition, he noted that the Elected Public Officials Retirement System (EPORS) has been increased approximately $400,000 as the result of an increase in retirees, and that the Public Broadcasting's budget would remain constant at the FY 03 level. He stated that efficiencies within the Division of Motor Vehicles would result in an additional $500,000 savings. Senator Hoffman asked for further information regarding the subcommittee's recommendation to reduce the Labor Relations general fund budget component by 29-percent as specified on page one of the "Component Summary-FY 04 Operating Budget-Senate Structure" [copy on file]. Senator Bunde responded that this reduction occurred at the request of the Department. DAN SPENCER, Director, Division of Administrative Services, Department of Administration explained that this reduction is the result of a one-time funding allocation for labor contract negotiations that "was split" over the previous two fiscal years. He stated that a request to conduct on-going labor negotiations would be reflected in the capital budget legislation. Senator Hoffman surmised, therefore, that there would be "no significant change" in the Labor Relations component other than a funding source change to the capital budget. Mr. Spencer concurred; however, he communicated that a $50,000 general fund reduction would result in the elimination of "one currently vacant Labor Relations analyst position." AT EASE 4:13 PM / 4:20 PM University of Alaska Senator Ben Stevens, Chair Senator Lyda Green Senator Gary Wilken Senator Con Bunde Senator Robin Taylor Senator Lyman Hoffman Senator Donny Olson Co-Chair Green announced that the Senate Finance Committee Committee-of-the-Whole "would act" on the University of Alaska's subcommittee's operating budget recommendation. Senator B. Stevens presented the subcommittee's budget recommendation as follows. University of Alaska Senate Finance Subcommittee April 14, 2003 The Senate Finance Subcommittee for the University of Alaska made the following budget recommendations for FY 04 University budget: o The subcommittee approves a 1.2% general fund increment of $2,315.0, to replace the FY03 one-time Alaska Science and Technology Endowment fund source. o The subcommittee approves an increment of $136.8 general fund to replace MHTAAR funding. o The subcommittee increases University Receipt Authority by $11,244.0 for a total of $249,207.8. The recommendations for FY04 as compared to the FY03 Management Plan are as follows: o Increase Federal Funds by $4,077.4 for a total Federal Fund level of $113,056.4 o Increase Other Funds by $26,833.6 for a total $323,800.7 The total University of Alaska Funds for FY04 has increased by $33,097.0 for a total budget of $645,123.9. Senator B. Stevens requested that the Committee focus on the "Agency Totals" amount rather than the "Objects of Expenditure" information as reflected in the spreadsheets that accompany the report, as he opined, that information is confusing. He noted that, "in reality," the proposed budget amount would allow the University Board of Regents to utilize funds as necessary. Senator B. Stevens communicated that, as depicted in the Totals for Agencies and Objects of Expenditures detail on the spreadsheet titled "Agency Totals - FY 04 Operating Budget - Senate Structure," the subcommittee's budget report exceeds the Governor's amended budget proposal by $3,391,800 and exceeds the House of Representatives' budget proposal by $13.6 million. Continuing, he stated that the difference between the Senate and House's budget proposal is the Senate's recommendation of a general fund increase of $2,451,000 comprised of the aforementioned Alaska Science and Technology Endowment (ASTF) fund source and the MHTAAR fund combined with an increase of $11,244,000 in University receipts. Senator B. Stevens referred the Committee to the report's accompanying spreadsheet titled "10-year Operating Budget lapse analysis" that reflects the Management Plan Final budget approval, Actual Expenditures, and the Lapsed Amounts for the years FY 93 through FY 02. He stated that the "Major Sources of Lapse" column on the right side of that page identifies whether the source of the lapsed amounts are federal dollars or University receipts. He noted that the averages of the Final budget, Actual Expenditures, and Lapsed Amounts are included at the bottom of the spreadsheet. Senator B. Stevens pointed out that the University's FY 04 request includes $18 million in "various" University receipts as well as an increase of $4 million in federal receipts as identified on the "Transaction 1-Way Comparison - FY 04 Budget- Senate Structure" spreadsheet. Senator B. Stevens pointed out that the Receipt and Lapsed Authorities, that are comprised of "a lot of different funding programs that lapse from one year into the next…that multiple year funding cycle" could be "tied in" with the last sentence of the Governor's language request as specified on page 37, lines 15 - 17 of Subsection (a) of Sec. 17. Federal and Other Program Receipts, of Sponsor Substitute for SB 35, Version 23-GS1002\D that reads as follows. … and that exceed the amounts appropriated by this Act, are appropriated conditioned on compliance with the program review provisions of AS 37.07.080(h). Senator B. Stevens communicated that the aforementioned review, which was conducted by Legislative Budget & Audit (LB&A), "essentially" asks that additional receipt authority be provided to the University, "in the instance where they may need additional receipt authority." He specified that this section was eliminated in the House of Representatives budget proposal bill; however, he communicated that the Senate subcommittee increased receipt authority; removed "the need to go to LB&A;" and continued the FY 03 Lapsed Authority level of $29,285,000. Senator B. Stevens concluded, therefore, that the subcommittee did three things: retained prior cash funding levels "by backfilling the ASTF and MTAAR;" excluded language that specified that the request for additional authority must be authorized by LB&A; and included the same level of last year's Receipt Authority "in terms of the amount of Lapsed cushion." He acknowledged that the subcommittee's funding recommendation, which exceeds that of the Governor, should not "be perceived as solving the problem" regarding "the amount of cash" that would be requested, but he continued it does maintain last year's receipt authority level as well as last year's "level of actual cash that they've gotten." Co-Chair Green clarified that the Report's accompanying spreadsheets are for information only and should not be considered as part of the subcommittee's document. Senator B. Stevens concurred. He stated that the spreadsheets have been provided to provide further information regarding the increase in receipt authority. Senator Taylor asked whether the receipt authority would include State general funds. Senator B. Stevens responded, no, it would consist of other funds. He referred the Committee to the general funds requested amount, as specified in item 1004, and the University Receipts requested amount, as specified in item 1048, under the "Funding Sources" heading on the spreadsheet titled "Agency Totals - FY 04 Operating Budget - Senate Structure." Senator Taylor clarified that his question referred to the Federal and University lapsed funding on the aforementioned "10-year" chart. Senator B. Stevens responded that the general fund monies that were allocated to the University never lapsed, as they were expended every year. Senator Taylor acknowledged, therefore, that the only money that lapsed was University and federal receipt money. Senator B. Stevens confirmed. Co-Chair Wilken, referring to the spreadsheet titled "Agency Totals - FY 04 Operating Budget - Senate Structure," stated that the Senate's proposed budget exceeds that of the Governor by $3,391,800. He stated that this difference appears to be comprised of a reduction of $7,852,200 in general funds and an increase of $11,244,000 in University receipts. He asked Senator B. Stevens whether this funding proposal aligns with the FY 03 management plan for the University. Senator B. Stevens responded that the General Purpose Funding Summary located on page two of the spreadsheet, denotes that the FY 03 Management Plan total was $206,080,800 and that the FY 04 Senate subcommittee total for General Purpose Funding is $208,266,800. He continued that the $2.1 million increase in general funds results from the $2,451,000 total of ASTF and MHTAAR funding less the $136,800 MHTAAR funding. Co-Chair Wilken stated, therefore, that were $7,852,000 in general funds added to this amount, it would equal the Governor's general funds component recommendation. Senator B. Stevens affirmed. He stated that the $7,852,000 combined with the $208,266,800 would equal the Governor's proposed budget general funds recommendation of $216,119,000. Co-Chair Wilken asked for further information regarding what comprises University receipts. WENDY REDMAN, Vice President for University Relations, University of Alaska explained that University receipts are recognized as all the revenue the University receives in addition to general funds. She noted that although it is not required, the University chooses to identify federal funds as a separate entity. She continued that in the FY 04 budget, "for the first time," all University receipts, with the exception of general funds and federal funding, would be identified as University receipts as opposed to previous years in which some receipts, such as tuition, were identified as separate budget line items. Therefore, she summarized that, except for state appropriations and federal funding, everything else including auxiliary funding, tuition, and private donations would be accounted for as University receipts. Co-Chair Wilken stated, therefore, that under the Funding Summary totals on page two of the "Agency Totals - FY 04 Operating Budget - Senate Structure," there are three categories: General Purpose which is general funds; Federal Restricted; and University Receipts. He understood that although they are depicted as a separate budgetary item, the federal funding could be identified as University receipts. Ms. Redman conferred with David Teal, the Legislative Fiscal Analyst in the Legislative Finance Division, and responded that according to State law, federal receipts are recognized as University receipts. However, she stated that, at the request of the Legislature, federal receipts are recognized separately. Co-Chair Wilken clarified that tuition is included in University receipts. He asked whether a tuition increase would be expected in FY 04, in addition to the tuition increase experienced in FY 03. Ms. Redman responded that a ten percent tuition increase would be implemented in FY 04. Furthermore, she stated that the University would be requesting that an additional ten percent tuition increase be approved for FY 05. Co-Chair Wilken asked how much revenue would be generated by the tuition increase. Ms. Redman estimated that, dependent on student enrollment, an increase of between two and three million dollars in additional revenue would be generated in FY 04. Senator Hoffman pointed out that the total agency-funding amount, as depicted in the spreadsheet titled "Agency Totals - FY 04 Operating Budget - Senate Structure," is $13,695,800, which he noted, is the total of the three bulleted items on the Subcommittee report. He asked for further information regarding the Senate subcommittee's recommendation to exceed the Governor's Amended Budget Proposal by $3.5 million. Senator B. Stevens responded that the difference between the Governor's budget general funds component of $7,852,000 and the Senate's proposed general funds component of $11,244,000 is in University receipts. He clarified that the Senate amount resulted "by backing out" the lapsed University receipt number of "$29,285,000 minus their request of $18,410,000." Senator Hoffman surmised therefore that when comparing the Senate's $249 million budget component to the Governor's amended budget $237.9 million component, the general fund component must be included when determining the overall $3 million net difference. Senator B. Stevens concurred. Senator Hoffman observed that the Governor's Amended Budget Proposal, when compared to the FY 03 Management Plan, calls for an FY 04 increase of 95 full-time and 23 part-time positions. He noted that this recommendation is mirrored in the subcommittee's request. Senator B. Stevens confirmed. Co-Chair Wilken communicated that the House of Representatives budget proposal includes labor contract intent language that essentially would require the University to honor those contracts. Senator B. Stevens expressed that the subcommittee did not address this issue as it was expected that the full Committee would discuss it. He noted that the House amended the bill to add that language. Co-Chair Wilken stated, therefore, that the intent is for the full Committee to address the issue. Senator B. Stevens concurred. Ms. Redman pointed out that, "University receipts are generated with the support of the general fund." Continuing, she stressed that were the level of general funds proposed in the Governor's budget not forthcoming, there would be "absolutely no possibility" to generate the specified level of University receipts. She continued that of the $22 million requested by the University, $20 million was attached to general funds that are not included in the current budget proposal. Senator Hoffman asked for confirmation that as the budget is proposed, the specified level of University receipts would not be obtainable due to the fact the supporting general funds are not included. Ms. Redman replied, "that is absolutely correct." Senator B. Stevens reiterated his earlier statement that this budget proposal "is not to be construed as replacing general funds." He questioned Ms. Redman's comment regarding how University receipts are tied to general funds. In addition, he asked for further information regarding the $22 million general funds request by the University. Ms. Redman responded that the University requested $22 million in receipt authority for FY 04. Senator B. Stevens understood that the $22 million was comprised of $4 million from the federal government and an $18 million increase over the "almost zero" FY 03 lapsed receipt authority from the State. Ms. Redman concurred. However, she stated that the lapsed FY 03 receipt authority data is, as of yet, unavailable. She stated that, in reality, the University was approximately $3 million under what had been approved in FY 02 "'Actuals' verses the comparison." Senator B. Stevens stated that in FY 02, the University's lapsed receipt amount, as denoted on the "10-year Operating Budget lapse analysis" spreadsheet was at $29 million. He stressed that the basis for the subcommittee's receipt authority increase was derived from the level of lapsed money. He asked how it could be stated that the receipt authority money is tied to general fund appropriations when, historically, the University has had up to $40 million in lapsed funds when general funds expenditure budget levels have been met. Ms. Redman responded that the University has been able to leverage the general funds that it has received during the past several years to generate "a considerable amount of money." She exampled that in FY 04, there is a request to use $1.5 million in University receipts as match money to a State Hospital Association nursing program. She expressed, however, that the corresponding $500,000 in general fund match money to that $1.5 University receipt money is not currently included in the budget. Senator B. Stevens asked whether the general funds that are appropriated to the University's Board of Regents "are itemized, line item by line item." Ms. Redman responded they are not; however, she clarified that the University treats them as if they were. Senator B. Stevens concluded that the University's Board of Regents could designate "at their discretion." Ms. Redman agreed. Senator Taylor understood therefore, that because the University has received "additional" levels of general funds each year, it has not been required to expend University receipt funds which, in turn, he stated, allowed the receipt money to lapse. Ms. Redman responded that this comment would be "too general," as she explained that each new funding request submitted by the University specifically denotes the level of "general fund or receipt authority that would be spent." Continuing, she noted that, for the past four years, while the Board of Regents "has the authority to juggle those around if they choose," the specific amounts, as defined in each request, have been spent. Ms. Redman exampled that, were the University to be flat-funded in FY 04, $500,000 in general funds might be taken from another program to provide the match for the aforementioned nursing program as it "is a high priority in the State." Senator Taylor asked whether the University must receive Legislative authority to expend receipts. Ms. Redman responded no, as the general funds are allocated as a single appropriation to the University. Senator Taylor concluded therefore, that the information accompanying each receipt authority request "is merely" to provide the Committee with information regarding the funding that would be available. Ms. Redman clarified that, in order to acquire that funding, the University must receive the "right authority level." She stated that were the University to receive a lower authority level than requested, it would be required to return to the Legislature to request the authority to receive it. Senator Taylor stated therefore, that by appropriating the requested funding levels; the University would be able to receive the projected funding without being required to request further receipt authority. Ms. Redman responded, yes, as it would provide the University with "a cushion" with which the University could investigate new ways to generate additional monies. Senator Taylor stated, therefore, that the subcommittee's budget recommendation would provide the University with the authority and the "flexibility" to accomplish that goal. Ms. Redman concurred. Senator Hoffman understood the testimony to be that, in the Governor's amended budget, $113.1 million of general funds would be required to leverage University receipts in order to receive $237.9 million. Continuing, he stated that to accomplish the University's goal, the Senate's recommended general fund allocation "is short" that requested by the University by $7.8 million. Therefore, he asked which University receipt level would be requested: $249.2 million or the original request of $237.9 million. Ms. Redman responded that, while the University would support the Senate subcommittee report's request for additional University receipts, it must be understood that these receipts would not replace general funds. Senator Hoffman asked how confident the University would be that it could achieve the $249.7 million in receipts, were the Legislature to approve a $213.1 million general fund level. Ms. Redman stated that the University's confidence level would be "very high." In response to a question from Co-Chair Green, Senator Hoffman clarified that the Governor's amended budget general fund level and the Senate subcommittee's University receipt number would be preferred. Ms. Redman asked Senator B. Stevens to clarify that the recommendation to remove the University from the LB&A review language in Sec. 37 of the Governor's bill, Version "D" was because of the subcommittee's recommendation to increase receipt authority. Senator B. Stevens confirmed. He stated that this language would have provided the University the ability to request additional receipts through LB&A. He noted that this language was removed from the House of Representatives budget proposal. Continuing, he clarified that while the subcommittee also omitted the language, it increased receipt authority. Co-Chair Wilken echoed an earlier comment spoken by Senator Taylor during his Department of Revenue budget presentation, in which he expressed that, "you don't cut the programs that are making you money." He avowed that the University is a program that is making money. He stated that "from simply a dollar standard," more than $40 million in general fund money has been provided to the University during the previous five years, and that the University's budget has increased from $400 million to $600 million. Therefore, he contended that the general fund allocation has returned $200 million in new money to the State. He characterized this to being better than building an oil well. Co-Chair Wilken stated that the response to the Governor's budget proposal was one of "wow, the University got treated well." He expressed that the Governor's election campaign focused on economic development in the State, and he contended that this is economic development as five new dollars have been introduced to the State for every one-dollar the State has invested. He urged the Committee to remember both this "vision" and the people's desire to have education supported in the State, as the budget process continues, as he asserted, this budget is $7.852 million short of what is required to fund the University. Senator Bunde asked how much of that $200 million monetary return was deposited into the general fund. Ms. Redman responded that, according to surveys, the University generates hundreds of millions of dollars and, she asserted that several thousand jobs are directly attributable to the additional money that is brought in from such things as research and student spending. Senator Bunde reiterated that his question is how has the State's general fund benefited. Ms. Redman responded that this is money that is flowing into the economy of the State. Senator Bunde agreed that this benefits the economy; however he declared that because the University does not return money to the general fund, it could be recognized as "a subsidy for individuals." Senator B. Stevens concluded that the subcommittee report "backfills" the funding voids of ASTF and MATAAR and addresses the issue of receipt authority. Senator Taylor moved to adopt the University Budget recommendation. There being no objection, the budget report was adopted. Co-Chair Green stated that this concludes the subcommittee budget reports. Co-Chair Wilken moved to adopt the balance of the subcommittee reports with the intent to incorporate them into a committee substitute. There being no objection, the subcommittee reports were adopted. Co-Chair Green announced that a committee substitute would be developed and presented to the Committee at the next operating budget legislation hearing. AT EASE 4:56 PM / 4:56 PM SFC 03 # 48, Side B 04:56 PM ADJOURNMENT Co-Chair Lyda Green adjourned the meeting at 04:57 PM.