Legislature(2015 - 2016)SENATE FINANCE 532

02/12/2015 09:00 AM FINANCE

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Audio Topic
09:07:55 AM Start
09:10:24 AM SB27
11:29:58 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 27 Presentation: Overview FY17 Operating Budget TELECONFERENCED
Departments: Environmental Conservation and
Bills Previously Heard/Scheduled
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 12, 2015                                                                                          
                         9:07 a.m.                                                                                              
9:07:55 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Kelly  called the Senate Finance  Committee meeting                                                                    
to order at 9:07 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator Lyman Hoffman                                                                                                           
ALSO PRESENT                                                                                                                  
Pat  Pitney,  Director,  Office of  Management  and  Budget,                                                                    
Office  of   the  Governor;  Cheryl   Lowenstein,  Director,                                                                    
Division   of   Administrative   Services,   Department   of                                                                    
Administration;  Gary  Folger, Commissioner,  Department  of                                                                    
Public  Safety;  Mark  Luiken, Commissioner,  Department  of                                                                    
Transportation   and   Public   Facilities;   Mary   Siroky,                                                                    
Director,  Division of  Administrative Services,  Department                                                                    
of  Transportation  and  Public Facilities;  Michelle  Rizk,                                                                    
Associate  Vice President,  Statewide  Planning and  Budget,                                                                    
University  of   Alaska;  Valerie   Davidson,  Commissioner,                                                                    
Department of Health and Social Services.                                                                                       
SB 27     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          SB 27 was HEARD and HELD in committee for further                                                                     
SENATE BILL NO. 27                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations, and 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."                                                                                          
Co-Chair  Kelly  introduced  a   visitor  in  the  audience,                                                                    
Cheyane Masey,  Miss Alaska. She  was visiting  from Wasilla                                                                    
and planned to attend law school in the future.                                                                                 
9:10:24 AM                                                                                                                    
Co-Chair  Kelly   asked  the  presenter  to   just  hit  the                                                                    
highlights  in  her  presentation and  encouraged  committee                                                                    
members to ask questions.                                                                                                       
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE  OF  THE  GOVERNOR,  recognized the  gravity  of  the                                                                    
state's revenue  issue as well  as the  proposed reductions.                                                                    
The  reductions,  although  small  relative  to  the  budget                                                                    
deficit,   were   significant.    She   relayed   that   the                                                                    
commissioners  or  administrative  services  directors  were                                                                    
present  at the  meeting and  that she  might be  calling on                                                                    
anyone of  them for assistance with  specific questions. She                                                                    
explained  the  documents  provided to  the  committee.  She                                                                    
referred  to  a  summary  sheet  that  she  favored  [FY2016                                                                    
Governor Endorsed Budget Summary  by Department, Prepared by                                                                    
the Office  of Management  and Budget (OMB),  dated February                                                                    
5, 2015]. She  also mentioned that two  other summary sheets                                                                    
had  been  distributed   to  committee  members  [Department                                                                    
Summary - Operating  Budget by UGF and  Department Summary -                                                                    
Operating  Budget  by All  Funds].  She  indicated that  she                                                                    
would be  discussing the changes from  the original overview                                                                    
provided  about three  weeks prior  to OMB's  summary sheet.                                                                    
The  top  portion  of the  summary  showed  the  non-formula                                                                    
components for  each department. There  was a change  in the                                                                    
Department  of Health  and  Social  Services (DHSS)  budget,                                                                    
moving  additional funding  from  formula  programs to  non-                                                                    
formula  programs  to  make   up  the  department's  overall                                                                    
target.  Between  the  management plan  and  the  amendments                                                                    
found on  the summary sheet  there was an  overall reduction                                                                    
for  all  departments  of  $134   million,  a  6.12  percent                                                                    
reduction from FY 15. The  legislature had its own line item                                                                    
apart from  the agencies due  to being a separate  branch of                                                                    
Ms. Pitney  pointed to the  formula items. There was  a $200                                                                    
million  decrease overall,  a 5  percent  decrease from  the                                                                    
previous year.  She furthered that the  formula decreased by                                                                    
about  $106  million,  a 4.8  percent  decrease.  In  adding                                                                    
formula and  non-formula reductions  together there was  a 5                                                                    
percent total decrease.                                                                                                         
Co-Chair Kelly asked  for Ms. Pitney to point  where she was                                                                    
reading from on the slide. She  pointed to the middle of the                                                                    
page where it read,  "Total Agency Operations", and directed                                                                    
Co-Chair Kelly's  attention to the  far right of the  row to                                                                    
5.3 percent decrease from FY 15.                                                                                                
Co-Chair  Kelly  asked for  the  dollar  amount. Ms.  Pitney                                                                    
responded that the decrement totaled $239 million.                                                                              
Ms. Pitney  discussed the  statewide components  that served                                                                    
as  tax  credits  and  fund   transfers  increased  by  $129                                                                    
million. Tax credits and  retirement payments contributed to                                                                    
the increase. Adding in the  all of the statewide components                                                                    
there  was a  total  decrease in  operations  of about  $100                                                                    
million from the previous year, a 2 percent decrease.                                                                           
9:16:36 AM                                                                                                                    
Ms.  Pitney  reported  that agency  operations  and  formula                                                                    
funding decreased  by $240 million and  statewide components                                                                    
increased by $129 million resulting  in an overall operating                                                                    
cost reduction of $109 million.                                                                                                 
9:16:52 AM                                                                                                                    
AT EASE                                                                                                                         
9:17:18 AM                                                                                                                    
Ms.  Pitney moved  on to  the  document titled:  "Department                                                                    
Summary -  Operating Budget (6)  - All Funds."  She directed                                                                    
members' attention  to the far  right side at the  bottom of                                                                    
the  page where  it shows  1.9 percent.  She noted  that the                                                                    
summary depicted "All Funds"  sources which included federal                                                                    
funds,  designated  general  funds (DGF),  and  other  state                                                                    
funds. The difference in the  operating budget from FY 15 to                                                                    
FY 16 was 1.9 percent,  driven primarily by the $145 million                                                                    
increase from Medicaid expansion.                                                                                               
Ms.  Pitney  turned  to  the  document  titled:  "Department                                                                    
Summary  -  Operating  Budget  (6)  -  Unrestricted  General                                                                    
Funds."  She  noted  the  total  percentage  decrease  of  2                                                                    
percent. She reported an 8.2  percent decrease from FY 15 in                                                                    
the  budget  for  the Department  of  Administration  (DOA).                                                                    
Public radio and television  and some administrative changes                                                                    
within the department contributed to DOA's decrease.                                                                            
Co-Chair MacKinnon  had questions regarding the  DOA budget.                                                                    
She  mentioned  that the  Alaska  Land  Mobile Radio  (ALMR)                                                                    
payments  were significantly  decreased by  68 percent.  She                                                                    
referred to a 29.4 percent  cut to the Enterprise Technology                                                                    
Services, 68 percent  of which appeared to  be ALMR payments                                                                    
from  municipalities  and  another  13.4  percent  for  ALMR                                                                    
directly. She asked  Ms. Pitney to discuss  the specific cut                                                                    
to ALMR.                                                                                                                        
Ms. Pitney  responded that in  her discussions with  DOA she                                                                    
asked about the impacts of  the reduction. The Department of                                                                    
Administration   reported   that   in  making   changes   to                                                                    
contractual  services   the  department  could   reduce  its                                                                    
expenditures  for  the  ALMR program  and  it  could  remain                                                                    
intact. However, it  was not DOA's intention to  pass on the                                                                    
savings  to municipalities.  She invited  DOA staff  to make                                                                    
any additional comments.                                                                                                        
9:21:50 AM                                                                                                                    
Co-Chair  MacKinnon asked  if the  state  believed it  could                                                                    
make   changes   that   would  reduce   payments   made   to                                                                    
municipalities.  She wondered  if it  was shifting  costs to                                                                    
the   municipalities.   She   considered  her   local   fire                                                                    
department and  the fees it  was asked  to pay to  provide a                                                                    
beneficial  service  to  the  community.  Fire  service  was                                                                    
otherwise not  available without  volunteers. She  wanted to                                                                    
be  clear as  to whether  it  was a  transfer of  additional                                                                    
costs to municipalities.                                                                                                        
CHERYL  LOWENSTEIN,  DIRECTOR,  DIVISION  OF  ADMINISTRATIVE                                                                    
SERVICES, DEPARTMENT  OF ADMINISTRATION, responded  that the                                                                    
department   would    not   be   passing   the    costs   to                                                                    
Ms. Pitney  highlighted reductions in travel  and also noted                                                                    
cuts  within   the  Enterprise  Technology   Services  (ETS)                                                                    
division.  The  division's  general   fund  (GF)  was  small                                                                    
relative  to  its  total operations.  Enterprise  Technology                                                                    
Services  was run  largely through  recharging for  services                                                                    
rendered. Although  it was a large  decrease in unrestricted                                                                    
general  funds overall  it  was a  smaller  decrease in  the                                                                    
total  operation  but removed  money  from  the GF.  In  the                                                                    
finance  area  there  was  a   decrease  in  positions.  The                                                                    
Department of  Administration decreased in positions  in the                                                                    
areas of supply and purchasing.  She thought ALMR and public                                                                    
broadcasting would have the largest number of advocates.                                                                        
Co-Chair  Kelly directed  Ms. Pitney  to  continue down  the                                                                    
list of the  departments focusing on the  high points. There                                                                    
would be the opportunity to delve into their details later.                                                                     
Ms.  Pitney  reported  that   the  Department  of  Commerce,                                                                    
Community  and Economic  Development (DCCED)  saw reductions                                                                    
in   tourism  and   marketing,   Alaska  Seafood   Marketing                                                                    
Institute (ASMI),  and other administrative  reductions. The                                                                    
most  publically impactful  decrease  in  the Department  of                                                                    
Corrections (DOC) was the reduction  in community jails. She                                                                    
mentioned that within the Department  of Education and Early                                                                    
Development (DEED)  some grant  programs on  the non-formula                                                                    
side  were  reduced.  For  example  the  bandwidth  program,                                                                    
originally  $5  million,  was being  reduced.  There  was  a                                                                    
learning  network that  was  being cut  out  and there  were                                                                    
reductions  to some  of the  early  childhood programs.  The                                                                    
largest   non-formula  component   within  early   childhood                                                                    
development   was   the   Mount  Edgecombe   School.   Other                                                                    
reductions had to  do with the administration  of the grants                                                                    
she mentioned.                                                                                                                  
9:26:13 AM                                                                                                                    
Ms.  Pitney explained  the decreases  in  the Department  of                                                                    
Environmental Conservation (DEC).  The reductions fell under                                                                    
spill  response   and  general  administrative   costs.  The                                                                    
largest piece  was the reduction of  inspection services and                                                                    
water and food services within DEC.                                                                                             
Ms. Pitney reported that the  significant changes within the                                                                    
Department of  Fish and Game  (DFG) were fund  source shifts                                                                    
from UGF  to designated general  funds and receipts.  In the                                                                    
governor's  office   there  were   cutbacks  in   staff  and                                                                    
reductions  of one-time  items dealing  with elections.  She                                                                    
emphasized  that  the  vast majority  of  ongoing  operating                                                                    
decreases  were personnel  reductions within  the governor's                                                                    
Ms. Pitney reported  that within the DHSS  budget there were                                                                    
reductions  in   the  senior   program  that   replaced  the                                                                    
longevity bonus. There  were three tiers of  income in which                                                                    
seniors receive  payments. There was a  20 percent reduction                                                                    
in monthly  payments for seniors  falling in the  two higher                                                                    
income  levels. The  reduction equated  to approximately  $5                                                                    
million.  She   reported  that  there   were  administrative                                                                    
decreases and other program reductions within DHSS.                                                                             
Ms. Pitney continued to discuss  the department summary. One                                                                    
of  The  Department  of Labor  and  Workforce  Development's                                                                    
(DLWD) largest  decrements entailed  a restructuring  of its                                                                    
Division of Business Partnerships.  There were two divisions                                                                    
within   the   department   that  were   reorganizing.   The                                                                    
Department  of  Labor  and Workforce  Development  was  also                                                                    
facing the  federal reductions  in the  job centers.  In the                                                                    
prior  year  there had  been  some  consternation about  the                                                                    
closing of a job center.  However, federal funding was being                                                                    
stepped-down and would end by  2017. The state would need to                                                                    
determine how  it would provide  job center services  in the                                                                    
Ms. Pitney reported  that the cuts to the  Department of Law                                                                    
(DOL)  were  mainly  staff  reductions  including  dedicated                                                                    
lawyers.  There  was  also  some  reduction  in  contractual                                                                    
services,  travel,   and  commodities.  The   Department  of                                                                    
Military and  Veterans Affairs  (DMVA) would  see reductions                                                                    
in  two  areas.  The  first  was  in  the  Alaska  Aerospace                                                                    
Corporation, which was  on a glide path of  stepping down by                                                                    
$2 million per  year. The proposed budget did  not set aside                                                                    
any UGF for the  aerospace corporation, leaving only federal                                                                    
receipts and aerospace receipts  in place. A more privatized                                                                    
approach  to the  aerospace industry  was being  encouraged.                                                                    
There were smaller reductions within  DMVA where the primary                                                                    
fund source were federal dollars.                                                                                               
9:31:53 AM                                                                                                                    
Ms.  Pitney   reported  that   the  Department   of  Natural                                                                    
Resources (DNR)  had a few  stand-alone offices such  as the                                                                    
areas  of  right-of-way  and permitting  that,  rather  than                                                                    
having designated  resources, would be combined  with larger                                                                    
offices.  It  was  also suggested  reductions  to  the  fire                                                                    
academy  and   fire  services  in  the   McGrath  area.  She                                                                    
commented  that   she  was  presenting  a   very  high-level                                                                    
Ms. Pitney continued  that the largest change  to the budget                                                                    
for the Department of Public  Safety (DPS) was the reduction                                                                    
in  the  number of  staff  and  troopers  and not  having  a                                                                    
dedicated  highway patrol  unit. As  there were  fewer staff                                                                    
they would  be asked  to be more  generalist in  nature. The                                                                    
dedicated swat  teams and dedicated highway  patrol would be                                                                    
asked to take on a  broader range of trooper services rather                                                                    
than,  for  example,  highway   patrol  duties  or  strictly                                                                    
investigations. It  was a holistic change  being proposed in                                                                    
Senator  Dunleavy asked  the commissioner  of DOL  about the                                                                    
reductions  in   his  department.   He  asked   whether  the                                                                    
reductions were  primarily in the areas  of civil, criminal,                                                                    
appellate law.  He mentioned having ongoing  issues with the                                                                    
federal government  regarding overreach.  He wanted  to know                                                                    
which areas the reductions affected.                                                                                            
Co-Chair  Kelly  relayed that  he  had  a breakdown  of  the                                                                    
reductions to  each division. The  criminal division  had an                                                                    
unallocated reduction  of $1.8  million, the  civil division                                                                    
encompassing oil, gas,  and mining took a  $3.5 million hit.                                                                    
He would provide the hand-out  to the subcommittee chair. He                                                                    
encouraged Ms.  Pitney to wait to  answer Senator Dunleavy's                                                                    
question more specifically after she finished.                                                                                  
9:35:28 AM                                                                                                                    
Ms. Pitney  discussed the  reductions within  the Department                                                                    
of Revenue  (DOR). The department's reductions  were largely                                                                    
found   within   its   administrative   positions.   Another                                                                    
reduction was the proposal to  eliminate the Film Tax Credit                                                                    
Office.  There were  a few  positions  in several  different                                                                    
departments   [divisions].  For   instance  there   were  10                                                                    
positions slated to  be cut from the  Tax Division inclusive                                                                    
of the 3 positions in the film office.                                                                                          
Ms.  Pitney  moved  on  to  discuss  reductions  within  the                                                                    
Department  of Transportation  and Public  Facilities (DOT).                                                                    
There  was a  significant reduction  in highway  and airport                                                                    
surface  maintenance and  a decrease  in  the Alaska  Marine                                                                    
Highway System  (AMHS) operations. There were  smaller areas                                                                    
in  which  there  would   be  reductions  including  analyst                                                                    
programmers and other IT functions.  She noted a replacement                                                                    
of  fees in  some  areas. She  suggested  that the  proposed                                                                    
reductions   within  DOT   were   $115   million  for   road                                                                    
maintenance  and $115  million in  UGF for  AMHS operations.                                                                    
There was a  decrease of about $3 million in  both areas and                                                                    
there were  smaller decreases  for travel,  commodities, and                                                                    
other administrative areas where expenses could be reduced.                                                                     
Ms. Pitney reported  a decrease in the  University of Alaska                                                                    
budget  of  2.5  percent  similar to  the  one-time  funding                                                                    
reduction  in  education  that resulted  in  a  2.5  percent                                                                    
decrease.   The   university's   reduction   was   currently                                                                    
Ms.  Pitney   mentioned  a   $3  million   reduction  within                                                                    
Judiciary  and   noted  that  the  decrease   was  currently                                                                    
unallocated. She skipped the  overview for the Legislature's                                                                    
Ms. Pitney noted that the  largest piece of the state's debt                                                                    
service   under   the   work-in-progress  budget   was   the                                                                    
consideration of  a pension obligation  bond. Alternatively,                                                                    
the choice had been made to make a full retirement payment.                                                                     
9:40:08 AM                                                                                                                    
Co-Chair  Kelly asked  about a  gap amount  of approximately                                                                    
$10 million.  Ms. Pitney responded affirmatively.  She added                                                                    
it was a statewide UGF increment.                                                                                               
Co-Chair  Kelly  asked where  the  increment  was held.  Ms.                                                                    
Pitney  responded   that  her  conceptual   expectation  was                                                                    
similar  to how  the fuel  trigger mechanism  was held.  The                                                                    
money  would be  held at  OMB with  sideboards defining  the                                                                    
circumstances  in  which the  funding  could  be moved.  She                                                                    
provided a  hypothetical scenario  where the state  found it                                                                    
necessary  to reopen  a community  jail  after closing  them                                                                    
down statewide. Gap funds could  be used temporarily until a                                                                    
more permanent plan was put into  place in order to reopen a                                                                    
jail  if  it  was   found  absolutely  necessary,  at  lease                                                                    
offering a  reduced amount  of service.  The money  could be                                                                    
used to  fill the  gap. She  provided another  example where                                                                    
the  state  reduced  a particular  service  within  the  ETS                                                                    
division and later realized that  a department was unable to                                                                    
perform a  particular piece of  business because.  The state                                                                    
could then  utilize the gap  monies until a  better solution                                                                    
was determined.                                                                                                                 
Co-Chair  Kelly  remarked that  he  wanted  to confirm  that                                                                    
there was  $10 million available  as gap funding  that could                                                                    
be used  under certain circumstances. In  the current fiscal                                                                    
climate the money might be necessary.                                                                                           
9:42:10 AM                                                                                                                    
AT EASE                                                                                                                         
9:47:09 AM                                                                                                                    
Co-Chair  Kelly  asked   Ms.  Pitney  if  DPS   had  a  time                                                                    
constraint. Ms. Pitney  responded, "Correct." Co-Chair Kelly                                                                    
asked that questions for DPS be asked first.                                                                                    
Senator  Bishop asked  how many  aircraft DPS  owned and  of                                                                    
those how  many were fixed  wing aircraft and how  many were                                                                    
rotor  aircraft.  His  questions stem  from  the  governor's                                                                    
comments in  the State  of the  Budget Address  about public                                                                    
and private  partnerships. He had  not heard much  detail on                                                                    
the subject and  thought it was an area  to further explore.                                                                    
Co-Chair   Kelly  asked   if  Senator   Bishop  wanted   the                                                                    
commissioner of DPS to comment on the topic.                                                                                    
Vice-Chair  Micciche   asked  Ms.   Pitney  to   remind  the                                                                    
committee about  guiding principles. He wondered  if OMB had                                                                    
reached  its  goal with  the  budget.  He wanted  to  better                                                                    
understand why reductions stopped at 2 percent.                                                                                 
Ms.   Pitney   responded   that  OMB   used   the   previous                                                                    
administration's management  plan as  a starting  place. All                                                                    
of  the commissioners  were  asked  to look  at  a range  of                                                                    
additional  reductions  from  5  to  8  percent.  They  were                                                                    
directed  to maximize  service  delivery  while focusing  on                                                                    
administrative    reductions   and    to   determine    what                                                                    
partnerships  could   be  formed  with  various   local  and                                                                    
community counterparts.  They were also asked  to recognized                                                                    
potential  impacts   on  other  departments.  There   was  a                                                                    
significant  interplay between  a change  in one  department                                                                    
and  an  impact  in  another  department.  She  provided  an                                                                    
example  of interplay  between DOC  and DPS  considering the                                                                    
potential  impact  on  public safety  by  closing  community                                                                    
jails.  The Office  of  Budget and  Management  was able  to                                                                    
reduce  the  component parts  in  the  agency budgets  by  5                                                                    
percent from  the previous year. However,  the reduction was                                                                    
offset  by  having  to  pay  tax  credits,  and  making  the                                                                    
retirement  payments netting  a 2  percent reduction  in the                                                                    
state's   overall  budget.   It  was   the  desire   of  the                                                                    
administration to  arrive at a  large reduction.  She stated                                                                    
it  was a  matter of  balancing between  downsizing and  the                                                                    
impacts in maintaining a stable economy.                                                                                        
9:52:46 AM                                                                                                                    
Senator Dunleavy  referred to  the supplemental  budget that                                                                    
was reviewed  in the previous  week. At the time  there were                                                                    
requests to  shift money for  a number of  reasons including                                                                    
purchasing land  in Kodiak, and purchasing  another place in                                                                    
Southeast  Alaska  for $75  thousand.  He  wanted to  better                                                                    
understand the philosophy being  used by the administration.                                                                    
He understood  that the new administration  had inherited an                                                                    
unprecedented set  of circumstances.  He did  not understand                                                                    
why  money would  be reappropriated  rather than  placing it                                                                    
back into  GF. He opined  that the percentage  would exhaust                                                                    
the state's  savings quickly. He wondered  if the governor's                                                                    
proposal  would  reflect  a much  larger  reduction  in  the                                                                    
following year. He wondered if  the state would be proposing                                                                    
new  taxes and  whether there  would be  requests to  change                                                                    
legislation to  reduce cost drivers.  He indicated  he would                                                                    
not be  discussing Medicaid expansion,  as it would  take up                                                                    
too much  time. He  wanted to  understand the  philosophy of                                                                    
the  administration to  reduce the  budget in  order to  get                                                                    
through the current period.                                                                                                     
Co-Chair  Kelly asked  if  Vice-Chair  Micciche had  further                                                                    
questions or comments before Ms. Pitney responded.                                                                              
Vice-Chair  Micciche   compared  the  budget  cuts   to  the                                                                    
advertisements on free  yard sticks at a home  show. He felt                                                                    
the administration  had not arrived  at the place  where the                                                                    
logo on  the yard  stick began.  He was  well aware  of each                                                                    
agency  trying to  protect its  people, but  he did  not see                                                                    
anything in the  budget reductions "outside of  the box." He                                                                    
wanted to see  some ideas on combining  and streamlining the                                                                    
administration  rather  than  losing  grader  operators.  He                                                                    
asked if  it was possible to  combine administration between                                                                    
like   departments.   He   understood  the   separation   of                                                                    
departments but prior to  getting any appreciable reductions                                                                    
the  commissioners would  need  to looking  at  new ways  of                                                                    
reducing  costs  without  reducing services.  He  emphasized                                                                    
that there would  be an impact on services but  he wanted to                                                                    
be assured that the state was looking at sustentative cuts.                                                                     
9:57:03 AM                                                                                                                    
Co-Chair Kelly  summarized Vice-Chair  Micciche's questions.                                                                    
He asked  about what the administration  was doing regarding                                                                    
future ways to reduce the  budget other than simple math. In                                                                    
other  words there  was nothing  remarkable being  done that                                                                    
was creative. He asked Ms. Pitney to respond.                                                                                   
Ms.  Pitney  agreed  that  the   remedy  was  not  a  1-year                                                                    
application.  The  administration  anticipated  implementing                                                                    
reductions  over a  3-year or  4-year period,  to right-size                                                                    
government.  She  directed  commissioners from  all  of  the                                                                    
agencies to  picture operating at  75 percent of  what their                                                                    
departments ran at  presently. She wanted to  know from them                                                                    
what services the state would  be able to provide. She posed                                                                    
the  question of  how to  address the  issues together.  She                                                                    
mentioned that  information technology  (IT), administrative                                                                    
services, and procurement were all  areas of focus. Medicaid                                                                    
expansion and  reform provided an opportunity  for the state                                                                    
to  review  healthcare  across the  board.  Alaska  was  the                                                                    
primary  funding   entity  for  over  250   thousand  health                                                                    
insurance   plans  including   Medicaid,  retirees,   active                                                                    
employees,  K-12 employees,  and  university employees.  She                                                                    
opined that  reform could  have a  tremendous impact  on the                                                                    
budget, but it  was a longer solution. The  short answer was                                                                    
that what she  was providing in the current  meeting was the                                                                    
first step in  the time the administration has  had. Some of                                                                    
the  creative   solutions  included  the   consolidation  of                                                                    
administrative  services, streamlining  internet technology,                                                                    
and  addressing statutes  that caused  increased costs  (she                                                                    
referred  to  $75 thousand  having  to  do with  Etna  Bay).                                                                    
Reviewing and  addressing certain  laws were  at the  top of                                                                    
the  administration's agenda.  The administration  wanted to                                                                    
wait  to have  a discussion  about  revenue until  it had  a                                                                    
spending   discussion.   Based   on   the   optimistic   oil                                                                    
projections the state  might be able to  weather the current                                                                    
storm  with overall  reductions in  place. She  recalled her                                                                    
first overview before the committee.  She posed the question                                                                    
then  about how  Alaska  state government  spending look  in                                                                    
comparison to  other states spending. Alaska  was higher but                                                                    
not remarkably  different. She posed the  question about the                                                                    
right size of government and what the size might be.                                                                            
10:01:19 AM                                                                                                                   
Co-Chair  MacKinnon  directed  a  question  to  Commissioner                                                                    
Folger of  DPS. She referred  to language pertaining  to the                                                                    
Alaska  State  Troopers  as  follows:  "a  Wildlife  Trooper                                                                    
aircraft selection  with an  increase of  69 percent  and an                                                                    
addition to the budget of  $2.3 million." She suggested that                                                                    
it appeared the state  was replacing something or purchasing                                                                    
something. She requested further detail on the increase.                                                                        
GARY  FOLGER,  COMMISSIONER,  DEPARTMENT OF  PUBLIC  SAFETY,                                                                    
responded  that the  increment  increase  was for  personnel                                                                    
steaming   from  Helicopter   One's   crash.  The   National                                                                    
Transportation  Safety  Board  (NTSB) came  back  with  some                                                                    
recommendations. The  department also had an  external audit                                                                    
that  encompassed three  areas;  maintenance, training,  and                                                                    
operations.  The  Department  of   Public  Safety  took  the                                                                    
resulting  recommendations  very  seriously to  improve  its                                                                    
safety  culture. The  proposed personnel  would assist  with                                                                    
this goal.                                                                                                                      
Co-Chair  MacKinnon wanted  to better  understand where  the                                                                    
recommendation came  from. She furthered that  she wanted to                                                                    
know why the  specific positions were a  high priority while                                                                    
positions were being  lost in other areas. She  asked why it                                                                    
was a  priority for  the legislature to  take notice  of and                                                                    
fund. Commissioner Folger  answered that the recommendations                                                                    
were suggested  by NTSB. He explained  that safety personnel                                                                    
would  divide  the  aircraft section  into  two  parts;  the                                                                    
maintenance part and the operations part.                                                                                       
10:03:43 AM                                                                                                                   
Senator  Bishop commented  about  the  deletion of  domestic                                                                    
violence and sexual assault  follow-up trooper positions. He                                                                    
made mention  of the governor discussing  the public/private                                                                    
partnership in the State of  the Budget speech. He wonder if                                                                    
there   was  an   opportunity  to   have  a   public/private                                                                    
partnership with  the aircraft  section in  order to  find a                                                                    
savings  and  back-fill  the domestic  violence  and  sexual                                                                    
assault  follow-up   trooper  positions.  He   believed  the                                                                    
positions were sorely needed in  Alaska, especially in rural                                                                    
Alaska. He was  trying to set a tone rather  than picking on                                                                    
Commissioner  Folger. He  wanted an  honest conversation  to                                                                    
promote accuracy.                                                                                                               
Co-Chair Kelly  commented that whenever  he talked  with DPS                                                                    
he  got  into the  conversation  about  comparing Alaska  to                                                                    
other  states. It  seemed like  Alaska spent  way too  much.                                                                    
However, he argued that a  comparison could not be made with                                                                    
other  states.  Co-Chair  Kelly compared  the  size  of  the                                                                    
borough which  he lived in  to the size of  Connecticut. The                                                                    
city had a police department.  The State of Alaska relied on                                                                    
the state  troopers to do  all other policing, as  there was                                                                    
no  county sheriff.  There  were also  no  county jails,  no                                                                    
county  prosecutors, and  no county  judges. Nor  did Alaska                                                                    
have  a community  college that  it paid  for and  the state                                                                    
paid less  for education. State responsibilities  counted as                                                                    
state spending.  Almost anywhere  else in the  United States                                                                    
the same expenses  were paid for by  the communities. Public                                                                    
safety was  a good example of  the State of Alaska  paid for                                                                    
the  costs  rather than  communities  footing  the bill.  He                                                                    
opined that DPS would not be  able to cover all of the areas                                                                    
around  Alaska   even  if   the  department   was  increased                                                                    
Commissioner Folger  indicated that the state  had about 563                                                                    
thousand  square miles  to cover  not including  the fishery                                                                    
patrol areas  such as the  Bering Sea. There were  about 400                                                                    
troopers in  the state.  He had often  heard that  for every                                                                    
front soldier on  the line there were 7 behind  them. He was                                                                    
barely at a one-to-one ratio.                                                                                                   
10:07:07 AM                                                                                                                   
Senator   Olson  asked   about   the   overall  budget   and                                                                    
specifically personnel.  He remarked  that he would  hate to                                                                    
see any of  the 400 troopers lost.  However, the legislature                                                                    
was  looking at  cuts. He  commented  that he  came from  an                                                                    
aviation  background and  he had  heard from  people in  the                                                                    
aviation  industry  about  all  of the  state's  assets.  In                                                                    
looking  at  the  history  of  aviation  and  of  the  state                                                                    
troopers 20 years or 30 years  ago there was a Cessna 180 or                                                                    
a Piper  Super Cub, equal  to $10 thousand to  $20 thousand,                                                                    
in  the rural  areas. The  state's aviation  fleet was  more                                                                    
sophisticated  and included  larger aircraft.  He relayed  a                                                                    
list  of listed  specific aircraft  types. He  mentioned the                                                                    
ancillary  expenses   that  went  along  with   an  aircraft                                                                    
including  the   hangers,  the  required   maintenance,  the                                                                    
inventory,  and   the  ongoing   training  for   pilots  and                                                                    
mechanics.  He  suggested  cutting  costs  by  reducing  the                                                                    
department's inventory  of 47 aircraft  including fixed-wing                                                                    
and rotary.  By liquidating some  of the state's  assets not                                                                    
only would  the state reduce  the price of the  aircraft but                                                                    
it  would also  reduce operating  costs. As  a previous  air                                                                    
taxi operator he  understood real savings in  hard times. He                                                                    
thought  the  state  had  a   big  problem  to  address  and                                                                    
suggested addressing  part of it  by liquidating  assets, an                                                                    
option  he previously  exercised in  the private  sector. He                                                                    
asked  about  DPS's general  plan  regarding  the issues  he                                                                    
brought up.                                                                                                                     
Co-Chair Kelly  thought Senator  Olson spoke  with authority                                                                    
on the issue.                                                                                                                   
Senator Olson  mentioned that the  more aircrafts  the state                                                                    
had, the more  chance to have an accident  occur. Within the                                                                    
prior  two weeks  the state  came  very close  to the  state                                                                    
having to pay  out for a fatality with one  of the troopers.                                                                    
He asked  what ideas had  been discussed to ensure  that DPS                                                                    
and the State of Alaska would survive.                                                                                          
Commissioner Folger  responded that there was  no doubt that                                                                    
over time  Federal Aviation Administration and  the NTSB had                                                                    
clamped down on  the public sector aircraft  and the private                                                                    
aircraft.  He believed  it was  in the  interest of  safety.                                                                    
Alaska  was a  huge state,  mostly road-less.  The trooper's                                                                    
aircraft were the patrol  vehicles. The department partnered                                                                    
with  the private  sector in  charting  flights. There  were                                                                    
some  core  missions that  private  air  charters would  not                                                                    
participate in.  He provided the  example of flying  into an                                                                    
airport  with   a  madman   in  possession   of  a   gun  or                                                                    
transporting a person with an emergency order of detention.                                                                     
Co-Chair Kelly commented that he  had listened to University                                                                    
of  Alaska  President,  Patrick  Gamble,  speaking  for  the                                                                    
university  and then  went  to  a lunch-and-learn  regarding                                                                    
unmanned aerial vehicles (UAV). He  wondered how much of the                                                                    
public  safety   aviation  mission   was  getting   eyes  on                                                                    
something and  could the  state possibly  trade some  of its                                                                    
inventory for a less expensive UAV.                                                                                             
10:12:08 AM                                                                                                                   
Commissioner  Folger spoke  of  complaints  about closing  a                                                                    
highway  for five  to six  hours  when there  was a  serious                                                                    
accident. He envisioned a day  in which a trooper could pull                                                                    
up  to an  accident, deploy  a UAV,  and within  ten minutes                                                                    
could survey an entire accident  scene. He supposed it would                                                                    
be  the  wave  of  the  future  but  added  that  rules  and                                                                    
regulations would apply.                                                                                                        
Co-Chair Kelly shared that he  was shocked to hear about the                                                                    
price  and  availability  of UAV's  being  impacted  by  the                                                                    
following Christmas.                                                                                                            
Senator Olson  restated his question about  liquidating some                                                                    
of  the  state's assets.  He  asked  if  DPS had  looked  at                                                                    
selling off some of its inventory.                                                                                              
Commissioner Folger  responded that  those were  options DPS                                                                    
would look at.                                                                                                                  
Senator  Olson  reiterated   that  Commissioner  Folger  had                                                                    
talked  about the  NTSB's recommendations  after the  A-Star                                                                    
accident in  which people died, including  ongoing training.                                                                    
In the  senator's discussions with the  Medallion Foundation                                                                    
the troopers  had been  involved with  training. It  was his                                                                    
understanding   that   participation    in   the   Medallion                                                                    
Foundation  and  the  star program  had  been  cancelled  or                                                                    
reduced significantly. He conveyed  that over the past three                                                                    
years only  three of the  troopers stationed in  rural areas                                                                    
had taken  the Medallion  Foundation training. He  asked the                                                                    
commissioner  if he  was  correct.  Commissioner Folger  was                                                                    
unaware  of the  numbers but  indicated that  the department                                                                    
was still  in partnership with the  Medallion Foundation. He                                                                    
added that the department's  aircraft section supervisor was                                                                    
a flight  simulator instructor. The  last few  flight safety                                                                    
seminar were held  at the state's safety  seminar along with                                                                    
the simulator.                                                                                                                  
Senator Olson asked  that he be provided with  the number of                                                                    
people  that had  participated in  the medallion  Foundation                                                                    
program over the prior year.                                                                                                    
Senator  Dunleavy asked  Ms.  Pitney about  a  target of  25                                                                    
percent  in  reductions over  the  next  so many  years.  He                                                                    
suggested targeting an 8.33 percent  for the current year as                                                                    
opposed to what  was being proposed currently.  He wanted to                                                                    
better  understand   why  OMB  did  not   propose  a  deeper                                                                    
reduction for the following year.                                                                                               
Co-Chair Kelly asked if there  were additional questions for                                                                    
Senator Olson  asked about the  reductions to the  number of                                                                    
village  public safety  officers (VPSO).  He asked  how many                                                                    
positions would  be left  after the  reductions were  put in                                                                    
place.  Commissioner   Folger  replied   that  one   of  the                                                                    
priorities  was  to  make  up  the  indirect  costs  to  the                                                                    
grantees and to roll  the department's coordinators into the                                                                    
overseers of  the VPSO's  from the grantees.  In the  end he                                                                    
hoped that there would be about 90 positions.                                                                                   
Senator Olson  asked if  indirect costs  had been  funded at                                                                    
$1.5  million and  if  the department  went  ahead with  the                                                                    
increased direct rates  for certain areas what  would be the                                                                    
reduction   in   positions  allowed.   Commissioner   Folger                                                                    
answered that currently the positions  were at 121. With the                                                                    
reduction  the department  had always  maintained  80 to  90                                                                    
positions on average.  In the long run he  believed the VPSO                                                                    
program would still those personnel employee numbers.                                                                           
He asked for  the highest number of filled  positions in the                                                                    
VPSO  program  in the  previous  year  and for  the  current                                                                    
numbers.  Commissioner  Folger   reported  that  there  were                                                                    
approximately 101  position filled in the  previous year and                                                                    
80 currently.                                                                                                                   
Senator  Olson concluded  there was  a 20  percent decrease.                                                                    
Commissioner  Folger responded  that the  turnover rate  for                                                                    
the VPSO program was approximately 33 percent.                                                                                  
10:18:00 AM                                                                                                                   
Co-Chair  MacKinnon addressed  that the  budget reflected  a                                                                    
15.5 percent  cut equal to  $2.7 million related  to VPSO's.                                                                    
The committee  wanted to  ensure that  communities expecting                                                                    
to  receive public  safety assistance  continued to  see the                                                                    
state's support with an understanding  of the state's fiscal                                                                    
constraints. She  commented that  she did not  see a  cut to                                                                    
prisoner transportation  or judicial services.  She reported                                                                    
$4.2 million  allocated to judicial services  and a separate                                                                    
allocation  of $2.8  million under  prisoner transportation.                                                                    
She  asked  if any  policy  decisions  about delivering  the                                                                    
services differently  to reduce costs either  in the current                                                                    
year or  for the  FY 16  budget. Commissioner  Folger agreed                                                                    
that transporting  prisoners was  a challenge.  He indicated                                                                    
that  the  department  was internally  struggling  with  not                                                                    
having enough  people to move prisoners.  Prisoner transport                                                                    
was  primarily dictated  by  the court  system.  He told  of                                                                    
reviewing internal  policies about  when to  physically make                                                                    
an  arrest; however,  some procedures  were mandated  by law                                                                    
such as those centered around domestic violence.                                                                                
Co-Chair MacKinnon  mentioned the use of  video conferencing                                                                    
to try  to reduce DPS  expenditures. She suggested  that the                                                                    
administration work  with the  courts, the  judicial branch,                                                                    
and  DPS  to see  if  it  would  be  feasible to  use  video                                                                    
conferencing  for arraignments  and  to look  at making  the                                                                    
necessary  statutory  changes.  She   cited  an  example  in                                                                    
Anchorage  where vehicles  were parked  on the  side of  the                                                                    
road. A uniformed police officer  was required to physically                                                                    
deliver  the citations  rather than  having a  contractor to                                                                    
mark all  of the  cars. She  thought there  would be  a cost                                                                    
savings  in contracting  the job  to a  private organization                                                                    
but would require a statutory  change. At the time the issue                                                                    
came up it was a big photo radar discussion in Anchorage.                                                                       
Commissioner Folger  affirmed that  DPS would be  looking at                                                                    
suggestions  such as  the senator's  as a  result of  budget                                                                    
reductions. He conveyed that he  sat on the Criminal Justice                                                                    
Working  Group that  worked with  the judicial  system, DOL,                                                                    
and with DOC.                                                                                                                   
10:22:36 AM                                                                                                                   
Vice-Chair  Micciche remarked  that he  had been  subject to                                                                    
across-the-board  cuts.  He  did  not  believe  they  worked                                                                    
because often  the highest  priorities were  hit as  hard as                                                                    
the lowest  priorities. He asked  if the  administration had                                                                    
prioritized  departments  such  that  DPS rose  to  the  top                                                                    
leaving some departments at a lower priority.                                                                                   
Ms. Pitney  indicated that every department  was directed to                                                                    
look at  a 5 percent and  an 8 percent reduction.  They were                                                                    
prioritized   based  on   the  responses,   previous  years'                                                                    
increases  or  decreases,  and   other  known  impacts.  For                                                                    
instance, DEED, DNR,  DPS, and one other that  she could not                                                                    
recall were impacted less than others.                                                                                          
Vice-Chair  Micciche asked  if  DPS had  looked at  creative                                                                    
solutions  to  reduce the  budget.  He  opined that  it  was                                                                    
difficult to  change how people  look at things.  He thought                                                                    
the state's  trooper academies  were expensive.  He wondered                                                                    
if DPS  had looked at  partnering with the  Anchorage Police                                                                    
Department (APD) or another  equally sophisticated agency in                                                                    
closing the academies and the amount of potential savings.                                                                      
Commissioner  Folger   reported  that  the   department  was                                                                    
currently  in the  process  of looking  at  the concept.  He                                                                    
relayed  that  there  were  3  academies  across  the  state                                                                    
located in  Fairbanks, Anchorage, and Sitka.  The department                                                                    
wondered if one academy would suffice.                                                                                          
Vice-Chair  Micciche  surmised  that   one  of  the  biggest                                                                    
challenges  to the  department  was to  fill  both VPSO  and                                                                    
state  trooper  positions.  Some   of  the  difficulties  in                                                                    
recruiting had to  do with police standards.  He wondered if                                                                    
someone with lower authority could  carry out certain things                                                                    
that  currently require  the  authority at  the  level of  a                                                                    
trooper.  He  asked  if  the  legislature  could  assist  in                                                                    
bringing  the costs  down for  certain responsibilities  the                                                                    
troopers  carried out.  He asked  about  the possibility  of                                                                    
contracting out certain responsibilities.                                                                                       
Commissioner Folger replied that  the department was looking                                                                    
at such items. In terms  of recruitment, within the upcoming                                                                    
2-year block  102 troopers would  become eligible  to retire                                                                    
which he  was concerned about.  He thought that  there might                                                                    
be certain  duties that could  be contracted out  and others                                                                    
that could not be hired out.                                                                                                    
Senator Olson asked  about the cost of  flying people around                                                                    
the state  because of community jails  being decommissioned.                                                                    
He commented that  any law enforcement officer  in the rural                                                                    
areas might  be reluctant  to charge a  person if  there was                                                                    
not a community jail available to hold a person.                                                                                
Co-Chair Kelly asked to reconvene at 10:35 AM.                                                                                  
10:28:05 AM                                                                                                                   
AT EASE                                                                                                                         
10:40:34 AM                                                                                                                   
Co-Chair  Kelly indicated  that questions  would begin  with                                                                    
DOA but first he returned to Senator Dunleavy.                                                                                  
Senator  Dunleavy asked  Ms. Pitney  about her  reference to                                                                    
the  25 percent  reduction equal  to 8.33  percent over  the                                                                    
following  three  years. He  commented  that  it would  take                                                                    
several  years before  the state  budget was  sustainable at                                                                    
the rate  of reductions proposed  in the current  budget. He                                                                    
surmised  that   all  of  the  state's   reserves  would  be                                                                    
exhausted  by  that time.  The  state  would be  faced  with                                                                    
accessing the  Permanent Fund or  imposing taxes.  He wanted                                                                    
to better  understand the thinking of  the administration in                                                                    
being able  to make  sound decisions  quickly. He  asked Ms.                                                                    
Pitney  to  elaborate  about  how  the  administration  sees                                                                    
filling  the budget  gap and  getting the  state on  a sound                                                                    
financial footing for the future.                                                                                               
Ms.  Pitney  stated  that  from a  30  thousand  foot  level                                                                    
people,  services, and  geography  would  dictate the  right                                                                    
size  of   government  for  Alaska.  There   was  a  general                                                                    
consensus  that there  was room  in the  budget for  further                                                                    
reductions.  She  suggested that  looking  at  a 25  percent                                                                    
reduction was  simply a starting  point for  discussion. She                                                                    
relayed  that   the  administration  understood   that  some                                                                    
operations would  not be able  to be reduced by  25 percent.                                                                    
Some  operations might  be  reduced by  30  percent. The  25                                                                    
percent figure  was a target  indicating that the  state had                                                                    
to  think differently  about how  it conducted  its business                                                                    
such as  changing the  way it  worked with  partner agencies                                                                    
and  partner communities.  If  the  reductions were  applied                                                                    
over  4 years  the yearly  reduction  would be  just over  6                                                                    
percent. If  the reductions  were applied  over 3  years the                                                                    
yearly reduction would  be over 8 percent. The  5 percent to                                                                    
8  percent target  was for  the first  year. It  would be  a                                                                    
multi-year  exercise but  the 5  to 8  percent target  would                                                                    
allow  for  putting the  pieces  into  place to  make  smart                                                                    
reductions. It  was a balancing  act and was the  first step                                                                    
in  setting the  stage for  the following  2 to  3 years  of                                                                    
reductions and kept the economy on a stable footing.                                                                            
Senator Dunleavy asked about reducing  staff in DOL when the                                                                    
state was  trying to address disagreements  with the federal                                                                    
government   regarding  overreach.   He  wondered   how  the                                                                    
reduction  played into  Alaska  asserting  its rights  under                                                                    
statehood.  He  also  asked  about  the  philosophy  of  the                                                                    
administration concerning the reduction  and would the state                                                                    
still  have  the resources  to  deal  with issues  with  the                                                                    
federal government.                                                                                                             
Ms. Pitney  replied that the administration  was not backing                                                                    
off from its  policy. She commented that  rather than having                                                                    
stand-alone, single-purpose offices,  the resources could be                                                                    
consolidated.   The  people   that  would   remain  in   the                                                                    
department would  be experts for certain  cases. There would                                                                    
also be  the option to  contract law services  for expertise                                                                    
in  other  specific  areas.  She   reiterated  that  it  was                                                                    
changing   from   a    stand-alone,   specific   office   to                                                                    
consolidating resources  the state  had and  contracting for                                                                    
additional resources when needed.                                                                                               
10:48:54 AM                                                                                                                   
Senator Dunleavy asked about the  money placed in the budget                                                                    
for  Medicaid expansion.  He asserted  that the  legislature                                                                    
was trying to reduce the  budget. He wondered how Ms. Pitney                                                                    
saw  the increase  in  the area  of  Medicaid affecting  the                                                                    
overall attempts to reduce the budget.                                                                                          
Ms. Pitney  reported that  the increase  was on  the federal                                                                    
side.  There were  three primary  decreases on  the GF  side                                                                    
that came about because of  the expansion. There was a small                                                                    
amount  in  the  behavioral  health program  grants  in  the                                                                    
current  year. Over  the  course of  five  years the  number                                                                    
would  grow  to over  a  $10  million  decrease in  GF.  She                                                                    
relayed  that   there  was  a  Chronic   and  Acute  Medical                                                                    
Assistance  program  for  expanded  eligibility  group  that                                                                    
addressed significant emergency  health care bills. Patients                                                                    
would be covered for services  under Medicaid at 100 percent                                                                    
for short-term care and 90 percent for long-term care.                                                                          
Ms. Pitney reported the second  decrement was in the area of                                                                    
healthcare within  corrections. For  example, if  a prisoner                                                                    
was  in a  healthcare  facility  for 24  hours  or more  the                                                                    
person  would be  eligible in  the expanded  population. The                                                                    
first  two  decreased  were direct  decreases  in  the  UGF.                                                                    
Through reform efforts there  would be additional reductions                                                                    
in  the  original  population  and   would  be  a  topic  of                                                                    
discussion around the Medicaid implementation.                                                                                  
Senator  Dunleavy briefed  the committee  that DOA  affected                                                                    
other departments. He  wanted to know what  cost drivers the                                                                    
department was looking at to  bring to the committee to slow                                                                    
down or  eliminate the growth  in some  of the areas  of the                                                                    
overall  budget.   He  also  inquired  about   functions  or                                                                    
divisions that could be privatized.                                                                                             
10:52:14 AM                                                                                                                   
Ms. Lowenstein responded that the  department was looking in                                                                    
all areas. She concurred  that the department affected every                                                                    
agency  through  its  rates  and  the  activities  that  are                                                                    
consolidated. She indicated that  the department was working                                                                    
on  and  had   not  completed  a  five-year   IT  plan.  The                                                                    
department  was meeting  with each  director and  evaluating                                                                    
the cost drivers for  facilities, for enterprise technology,                                                                    
and  for  personnel.  The   department  has  been  gathering                                                                    
information  on   places  that  it  could   consolidate  and                                                                    
streamline, and  contracts that could be  reduced. All areas                                                                    
were being  looked at by  the department. She  reported that                                                                    
the department  expected that its revenues  would be reduced                                                                    
from other  agencies. As  soon as  the department  knew what                                                                    
might be shrinking in services  requested, it could focus in                                                                    
on specific reductions.                                                                                                         
Senator  Dunleavy commented  that  more  questions would  be                                                                    
asked of the department in the finance subcommittee.                                                                            
Co-Chair thanked Ms. Lowenstein for her testimony.                                                                              
Senator Bishop  addressed DLWD indicating that  he wanted to                                                                    
have  a discussion  about the  privatization model  that the                                                                    
governor had talked  about. He wanted to  talk further about                                                                    
job center closures such as the  one in the Muldoon area. He                                                                    
let  Commissioner  Taylor know  that  he  wanted to  have  a                                                                    
robust discussion  about community jails and  health care in                                                                    
the correctional  facilities. He  expressed his  concerns to                                                                    
DNR  about  some  of  the   decrements  in  its  budget.  He                                                                    
mentioned   some  position   cuts  and   defending  Alaska's                                                                    
resources. Lastly,  he voiced his concerns  about a position                                                                    
cut within DFG.                                                                                                                 
Co-Chair  Kelly  clarified  that  DOC,  DOL,  and  DNR  were                                                                    
Senator Bishop's  purview in the subcommittees.  He asked if                                                                    
there were any other questions for those departments.                                                                           
10:56:49 AM                                                                                                                   
Vice-Chair  Micciche asked  about  the income  level of  the                                                                    
senior  group   impacted  by  the  senior   benefit  program                                                                    
reductions. He wanted to know  who the people were that were                                                                    
affected and  was the state  essentially just  shifting them                                                                    
from  the services  of  one state  agency  to another  state                                                                    
agency.  Once the  senior benefit  payments were  reduced he                                                                    
asked if  seniors qualified for  other assistance.  In other                                                                    
words, he  wondered if the  state was realizing  a reduction                                                                    
or if it was shifting services between agencies.                                                                                
VALERIE  DAVIDSON, COMMISSIONER,  DEPARTMENT  OF HEALTH  AND                                                                    
SOCIAL  SERVICES, responded  that approximately  10 thousand                                                                    
seniors would  be impacted by  the reductions to  the senior                                                                    
benefits  program.  The reduction  was  applied  to the  two                                                                    
highest  income  level  beneficiaries.  Individuals  in  the                                                                    
highest categories with incomes  between 100 and 175 percent                                                                    
of the  federal poverty level would  experience a transition                                                                    
in  their  monthly benefit  from  $125  to $100  per  month.                                                                    
Individuals  in the  second  highest  category with  incomes                                                                    
between  75 to  100  percent of  the  federal poverty  level                                                                    
would see a reduction from $175  to $140 per month. She also                                                                    
relayed that other benefits would  possibly be available for                                                                    
senior benefactors.  She would  provide more  information at                                                                    
the upcoming subcommittee meeting.                                                                                              
Vice-Chair  Micciche  suggested  that he  would  have  other                                                                    
questions in the subcommittee and  reasoned that the current                                                                    
venue was probably not the best setting to bring them up.                                                                       
Co-Chair  MacKinnon asked  for clarification  about what  it                                                                    
really meant to  be at 100 to 175 percent  of poverty level.                                                                    
She wondered  if it meant  a person making $14  thousand per                                                                    
year  or was  it  a  person making  $50  thousand in  annual                                                                    
income.  She  opined  that the  percentages  were  sometimes                                                                    
deceiving. She  asked the subcommittee chairman  to see what                                                                    
the actual income level was  in order to know what magnitude                                                                    
the  reduction  would  have  on  the  actual  benefit  being                                                                    
Co-Chair Kelly  wondered about stacking  income. Previously,                                                                    
when  the Healthy  Families program  was being  discussed he                                                                    
received  information that  a  CIRI  shareholder could  have                                                                    
made  $103  thousand  and  qualified  for  Denali  Kid  Care                                                                    
because the dividend that was paid  in the same year did not                                                                    
factor into  income. He asked  the subcommittee  chairman to                                                                    
find out  more about  stacking income  and what  counted and                                                                    
what did not count.                                                                                                             
Senator Olson asked Commissioner  Davidson about the housing                                                                    
funds that were removed from  the budget. He asked about the                                                                    
department's  plans  to  remedy   the  removal  of  what  he                                                                    
believed was a basic necessity.                                                                                                 
Commissioner  Davidson asked  if  Senator  Olson was  asking                                                                    
about the AHFC reductions in the capital budget.                                                                                
Senator Olson responded affirmatively.                                                                                          
Commissioner  Davidson  responded  that the  department  was                                                                    
hearing concerns  from stakeholder groups about  the impacts                                                                    
of not having adequate  housing. She thought Governor Walker                                                                    
was  revisiting the  issue. She  indicated that  one of  the                                                                    
challenges the  department faced was that  most often people                                                                    
who  experienced  homelessness  or  who  were  part  of  the                                                                    
transient  population  had  significant substance  abuse  or                                                                    
mental  health issues.  The department  was  ramping up  its                                                                    
efforts  to  be  able  to   address  the  concerns.  Another                                                                    
challenge  of  the  department  was  the  way  in  which  it                                                                    
reimbursed for  behavioral health  services. It  had evolved                                                                    
over  time. She  compared it  not to  a patchwork  quilt but                                                                    
rather a  moth-eaten blanket that  did not make  much sense.                                                                    
The  department   had  asked  Jared  Kosin,   the  executive                                                                    
director of  the Office of Rate  Review, to look at  the way                                                                    
DHSS  reimbursed  for  behavioral health  services.  He  was                                                                    
instructed  to find  a  way  to do  billing  that made  more                                                                    
logical sense  and which valued  things like  treatment. The                                                                    
idea was to  be able to provide services  more logically and                                                                    
in a  way that served and  benefited outcomes. Additionally,                                                                    
because  the  reimbursement methodologies  through  Medicaid                                                                    
did  not  necessarily make  sense,  many  of the  behavioral                                                                    
health  grants that  the state  provided  to providers  were                                                                    
shoring up  losses. If the department  looked at redesigning                                                                    
how the  state did  the reimbursement it  could have  a huge                                                                    
impact on the reduction of behavioral health grants.                                                                            
Senator Olson  asked if the redesign  analysis would include                                                                    
housing. Commissioner Davison responded positively.                                                                             
Senator Dunleavy asked about the length of the meeting.                                                                         
Co-Chair Kelly responded  that although he had  a meeting to                                                                    
go to  he would  move in order  to continue.  He appreciated                                                                    
having  all  of  the  people from  the  various  departments                                                                    
Senator Dunleavy  suggested having two or  three departments                                                                    
per meeting in order to help  dig deeper to help with budget                                                                    
11:06:50 AM                                                                                                                   
Vice-Chair  Micciche  wanted  Alaskans   to  know  that  the                                                                    
legislature  was focused  on the  households  that would  be                                                                    
impacted  by reductions.  Some of  the jobs  being discussed                                                                    
belonged  to  mothers and  fathers  and  the topic  was  not                                                                    
taking it lightly.  He reported that many  positions were on                                                                    
the  books  but  not  currently   filled.  He  wondered  why                                                                    
departments did not just zero  out any vacancies and make do                                                                    
with the positions already filled by moms and dads.                                                                             
MARY SIROKY, DIRECTOR,  DIVISION OF ADMINISTRATIVE SERVICES,                                                                    
DEPARTMENT   OF   TRANSPORTATION   AND   PUBLIC   FACILITIES                                                                    
responded  that  the  departments had  historically  used  a                                                                    
vacancy  factor to  pay for  those  cost that  had not  been                                                                    
funded over  time for things  such as personal  services and                                                                    
merit increases.  For the most  part all vacancies  were not                                                                    
filed  at  any  one  time.  She  added  that  while  certain                                                                    
positions might be  vacant at a certain point  in time, they                                                                    
might not be  the same positions vacant at  another point in                                                                    
Vice-Chair Micciche understood her  point and thought it was                                                                    
a "shell  game" and  suggested lowering the  vacancy number.                                                                    
He addressed Mr.  Luiken about the AMHS  budget. He remarked                                                                    
that the system  only served one-third of  Alaskans and felt                                                                    
that it  was time  to look at  drastic reductions.  He asked                                                                    
Mr. Luiken if he had  a vision for dramatically reducing the                                                                    
cost of AMHS. He asked the  commissioner if he had looked at                                                                    
the possibility of private companies  coming to the table to                                                                    
either   operate  or   replace  the   state  services   with                                                                    
privatized services. He further  asked if the department had                                                                    
considered  mothballing a  couple of  vessels and  providing                                                                    
on-demand service rather than empty schedule service.                                                                           
MARK LUIKEN, COMMISSIONER,  DEPARTMENT OF TRANSPORTATION AND                                                                    
PUBLIC FACILITIES stated  that there was nothing  off of the                                                                    
table. The department was looking  into several options that                                                                    
would  be brought  forward once  they have  been vetted  for                                                                    
potential impacts.  He had  tasked Deputy  Commissioner Mike                                                                    
Neussl to start working the  ideas and committed to bringing                                                                    
them to the legislature before the end of the session.                                                                          
Vice-Chair Micciche  requested prioritizing a list  prior to                                                                    
starting  or as  the subcommittee  process occurred.  He had                                                                    
suggested of his  own and would like to be  working with the                                                                    
department.  He  respected  the  commissioner's  experience;                                                                    
however, the state was in  a tough place. He elaborated that                                                                    
the legislature  would have to  make significant  impacts in                                                                    
the current  year. He made it  clear that he was  not at the                                                                    
legislature to  be reelected,  rather he  was present  to do                                                                    
the right thing for Alaskans.  He suggested that some people                                                                    
responded differently  during an election year.  The present                                                                    
time  was   the  ultimate  opportunity  to   make  the  most                                                                    
substantive reductions in services and spending.                                                                                
Mr. Luiken commented  that his task to the AMHS  was to look                                                                    
at how  to maximize service  to Alaskans with  while finding                                                                    
ways to be  more efficient and to have  a significant impact                                                                    
on the department's budget.                                                                                                     
11:12:23 AM                                                                                                                   
Vice-Chair Micciche  closed by stressing that  half of DOT's                                                                    
budget was serving about 5  percent of the people of Alaska.                                                                    
At some point  the legislature would have  to reevaluate the                                                                    
mix [of funding].                                                                                                               
Senator  Olson understood  that about  half of  DOT's budget                                                                    
was appropriated to AMHS. However,  he believed it served 15                                                                    
to  18  percent of  the  population  rather 5  percent.  His                                                                    
district was  not concerned with  AMHS therefore he  did not                                                                    
typically  delve  into  that   portion  of  the  budget.  He                                                                    
continued by  revisiting a point  brought up earlier  in the                                                                    
meeting  by Ms.  Pitney  that approximately  $3 million  had                                                                    
been reduced for  AMHS and highways. He asked  about how the                                                                    
proposed   cuts  affected   airports.  The   state  received                                                                    
significant  federal  funds  for airports.  He  wondered  if                                                                    
there were any substantial cuts to Alaska's airport system.                                                                     
Ms.  Siroky  reported that  three  positions  at the  Bethel                                                                    
airport  were being  eliminated.  The  department was  given                                                                    
funding  and  positions  a  few   years  prior  to  increase                                                                    
staffing to  24/7 at the  Bethel airport. The state  had not                                                                    
been able  to fill the  positions but had  been successfully                                                                    
keeping the airport open about  18 hours per day meeting the                                                                    
needs of the airlines flying  in first thing in the morning.                                                                    
The department  was officially getting rid  of the positions                                                                    
and  their associated  funding.  Other  impacts to  aviation                                                                    
included landing fees  at the Deadhorse airport  in order to                                                                    
increase services there.  Half of the landing  fees would be                                                                    
implemented  in  the  current  year and  the  full  cost  of                                                                    
providing service  24/7 would  be put into  place in  FY 17.                                                                    
She  reported  significant  reductions to  the  department's                                                                    
highways and  aviation components which would  likely result                                                                    
in delays in airport repairs in rural areas.                                                                                    
Senator  Olson mentioned  a study  done years  previously on                                                                    
high  landing fees.  He found  it  interesting that  landing                                                                    
fees were being  assessed at the airport  in Deadhorse which                                                                    
served Prudhoe Bay. It was the  only airport in the state of                                                                    
Alaska  that had  landing  fees. The  study  showed that  it                                                                    
would cost more money to have  an office open to collect the                                                                    
fees. His  concern was about  who would be paying  the fees.                                                                    
For example,  he wondered if  someone flying a Super  Cub or                                                                    
an operator  of a  Cessna 207  carrying mail  and passengers                                                                    
would be charged.  He opined that it was unfair  to the poor                                                                    
person  flying in  from Kaktovik  to have  to pay  a landing                                                                    
fee.  While in  other  parts  of Alaska  such  as Juneau  or                                                                    
Sitka, pilots were not burdened with increased fees.                                                                            
Commissioner   Luiken  indicated   that   landing  fees   at                                                                    
Deadhorse  started  at  6000 lbs.  In  his  estimation  that                                                                    
aircrafts such  as Cubs  and 207's would  not fall  into the                                                                    
applicable category.  He mentioned  that the  Juneau Airport                                                                    
did charge landing fees because  it was a self-run facility.                                                                    
The  request came  from companies  that  used the  Deadhorse                                                                    
airfield  most and  needed  24/7  service. The  department's                                                                    
solution to  provide the increased service  was to implement                                                                    
landing fees paid for primarily  by the larger aircraft that                                                                    
would be landing there.                                                                                                         
11:17:30 AM                                                                                                                   
Senator  Olson commented  that he  had  observed that  there                                                                    
were not  many Super Cubs  or 207's but Caravans  and 1900's                                                                    
carry passengers  and bypass mail and  weighed over 6000lbs.                                                                    
He felt  that it was unfair  for some of the  rural areas to                                                                    
be targeted in  such a way. He added that  it was unfair for                                                                    
135 operators  who were trying  to make  a living in  one of                                                                    
the harshest areas to be penalized.                                                                                             
Commissioner  Luiken  indicated  he  would  provide  Senator                                                                    
Olson with the impact numbers on the smaller carriers.                                                                          
Senator Olson wondered if a King  Air or Lear jet flying for                                                                    
search  and rescue  purposes would  be  charged the  landing                                                                    
Ms. Siroky testified  that the department would  not be able                                                                    
to  implement anything  without having  put the  regulations                                                                    
together, which  the department had  not done.  Landing fees                                                                    
would  not be  charged for  a full  year. In  that time  the                                                                    
department  would go  through the  public regulation-setting                                                                    
process  prior  to  implementation.   It  would  provide  an                                                                    
opportunity  to reflect  about the  things  the senator  had                                                                    
brought up.                                                                                                                     
Senator Olson responded that he  would have to answer to his                                                                    
constituents about why only one  airport in Alaska was being                                                                    
considered to  incur increased landing fees.  He stated that                                                                    
it did not seem fair.                                                                                                           
Co-Chair MacKinnon  indicated that she was  the subcommittee                                                                    
chairman for  DOR and was  putting its staff on  notice that                                                                    
the issue would  become part of the  revenue discussions. It                                                                    
directly affected fuel. She asked  about those carriers that                                                                    
were  currently exempted  under  the AMHS  and the  aviation                                                                    
system that  were receiving a  tax exemption or  an indirect                                                                    
credit on fuel.  She relayed that the  subcommittee had gone                                                                    
through  a  process  over the  previous  session  where  the                                                                    
subcommittee  asked  DOR  in  combination  with  Legislative                                                                    
Finance  Division   (LFD)  to  look  at   where  Alaska  was                                                                    
foregoing revenue  opportunities. There was a  book produced                                                                    
called, "Indirect  Expenditures." As  she was  reviewing the                                                                    
book  she saw  two areas  that  raised interest  to her  for                                                                    
consideration.  The  first  was   that  the  state  was  not                                                                    
collecting its  statewide tax on  foreign aviation  fuel and                                                                    
foreign marine fuel.  She was uncertain how DOR  or LFD came                                                                    
up with  their numbers and would  need to find out  how they                                                                    
estimated the numbers. She wondered  if DOT knew of a reason                                                                    
why  the state  was not  collecting  the two  fees. She  was                                                                    
trying to  figure out the  estimation of the  credit because                                                                    
the  two combined  equaled about  $20  million in  estimated                                                                    
foregone revenue. It  did not mean the loss  of revenue, but                                                                    
what  had  been identified  with  the  information that  was                                                                    
available.  She  wondered  what  foreign  ships  were  using                                                                    
Alaska  hydrocarbons  in some  way  and  why they  were  not                                                                    
contributing.  She believed  it  was because  they were  not                                                                    
traveling on  Alaska's roads, which  was the reason  for the                                                                    
original exemptions.                                                                                                            
Ms.  Siroky  did  not  know but  would  look  into  Co-Chair                                                                    
MacKinnon's question.                                                                                                           
Co-Chair Kelly asked  Ms. Pitney for an update  on the Ocean                                                                    
Ranger Program,  the number of Alaskans  that were impacted,                                                                    
and  the cost  of the  program. He  also wondered  about the                                                                    
Spill Prevention  and Response  fund (SPAR) and  whether the                                                                    
administration or  department was planning on  proposing any                                                                    
statutory changes applicable to the program.                                                                                    
Ms. Pitney  responded that  based on  the discussion  of the                                                                    
supplemental budget  about a  week previously  the direction                                                                    
was to have something like  a subcommittee or a workgroup of                                                                    
the interested  parties including  DEC and someone  from OMB                                                                    
to determine  a good direction moving  forward. She believed                                                                    
if the parties  came to a comfortable  starting position the                                                                    
administration would submit legislation.                                                                                        
Vice-Chair Micciche  told about a meeting  held the previous                                                                    
day at which  suggestions had been provided  and things were                                                                    
moving in  a positive direction.  He hoped to  get something                                                                    
into place before the end of session.                                                                                           
Co-Chair Kelly relayed that his  staff had informed him that                                                                    
Vice-Chair  Micciche had  contacted his  office. He  thanked                                                                    
the senator.                                                                                                                    
11:24:09 AM                                                                                                                   
Co-Chair  Kelly indicated  he  was trying  to  get a  better                                                                    
understanding  of the  FY  14  versus FY  15  budget. As  he                                                                    
looked  on  the   sheet  provided  by  OMB  in   FY  14  the                                                                    
university's  actuals  were  $377  [million]  UGF  and  $370                                                                    
[million] was  authorized in the  management plan.  He asked                                                                    
if  the fuel  trigger money  was part  of the  university GF                                                                    
spending when determining the amount between years.                                                                             
Ms. Pitney responded  that the $370 was inclusive  of the $7                                                                    
million that  came through  language on  the heat  and power                                                                    
plant.  She  did  not  believe   it  was  the  fuel  trigger                                                                    
Co-Chair Kelly  asked if  bonded indebtedness  was included.                                                                    
Ms. Pitney responded, "Yes."                                                                                                    
Co-Chair Kelly stated that there  had not been any expenses.                                                                    
Ms. Pitney  explained that $7  million was  an appropriation                                                                    
that hit the  operating budget for the  bond indebtedness as                                                                    
part of the financing plan approved the prior year.                                                                             
Co-Chair  Kelly  asked if  it  was  a capital  project.  Ms.                                                                    
Pitney confirmed that it was a capital project.                                                                                 
Co-Chair  Kelly  stated that  for  the  UGF year-to-year  he                                                                    
thought it would  be more appropriate to  say the university                                                                    
was at $377 [million] in FY  14 and $363 [million] in FY 15.                                                                    
Ms. Pitney replied, "Correct".                                                                                                  
Co-Chair Kelly asked if Ms. Rizk agreed.                                                                                        
MICHELLE RIZK, ASSOCIATE  VICE PRESIDENT, STATEWIDE PLANNING                                                                    
AND BUDGET, UNIVERSITY OF ALASKA agreed.                                                                                        
Co-Chair MacKinnon  commented that as the  university budget                                                                    
went forward  she hoped that the  subcommittees talked about                                                                    
the cost overrun and the projections on the coal plant.                                                                         
Co-Chair Kelly suggested that it  was not a cost overrun, it                                                                    
was a redesign.                                                                                                                 
Vice-Chair Micciche  mentioned that  it was  essentially the                                                                    
administrative budget. The legislature  would be leading the                                                                    
way with  an assumed  budget. He asked  for an  outline some                                                                    
basic plans without putting anyone  on the spot. He remarked                                                                    
that  the legislature  intended to  get aggressive  with its                                                                    
own budget.  Currently it appeared that  the legislature had                                                                    
a  1.8  percent  increase  but  it  was  certainly  not  the                                                                    
legislature's plan going forward.                                                                                               
Co-Chair Kelly  agreed and  added that  one of  the problems                                                                    
the  legislature had  at the  current stage  that ultimately                                                                    
any  budgetary  recommendations  were  going  to  come  from                                                                    
Legislative  Council. The  legislature was  looking at  a 10                                                                    
percent reduction  to the budget  as well as  other measures                                                                    
that  would  be   taken.  There  was  a   reduction  to  the                                                                    
legislative  budget  which  was  required  to  come  through                                                                    
Legislative Council.  Even when it came  through Legislative                                                                    
Council  it had  to  be vetted  through  the Senate  Finance                                                                    
Committee, and through the legislative process.                                                                                 
Senator Olson remarked that the  governor had 30 days to add                                                                    
amendments  to the  budget which  was due  on February  18th                                                                    
[2015] He  asked if  there were  plans to  submit amendments                                                                    
that would  address some  of the  issues brought  forward by                                                                    
the committee.                                                                                                                  
Ms.  Pitney  offered  that  there   would  be  a  few  minor                                                                    
additional  amendments. She  explained that  because of  the                                                                    
timing  using the  work-in-progress budget  to come  forward                                                                    
everything  on  the  list were  technically  amendments  but                                                                    
there  would  be  a  few more  that  would  address  certain                                                                    
unintended issues.                                                                                                              
Co-Chair  Kelly  thanked  the presenters.  He  would  likely                                                                    
follow  Senator Dunleavy's  recommendation to  choose a  few                                                                    
agencies per week to drill down on their budgets.                                                                               
SB  27  was   HEARD  and  HELD  in   committee  for  further                                                                    
11:29:58 AM                                                                                                                   
The meeting was adjourned at 11:29 a.m.                                                                                         

Document Name Date/Time Subjects
16amd_deptsummary_2-5-15.pdf SFIN 2/12/2015 9:00:00 AM
SB 27
16amd_deptsummary_ugf_2-5-15.pdf SFIN 2/12/2015 9:00:00 AM
SB 27
ABS Worldview 2-11-15.pdf SFIN 2/12/2015 9:00:00 AM
SB 27
Final_FY2016_Gov_Amended_Budget_Summary_2-5-15.pdf SFIN 2/12/2015 9:00:00 AM
SB 27