Legislature(2015 - 2016)SENATE FINANCE 532

02/20/2015 09:00 AM FINANCE

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Audio Topic
09:08:40 AM Start
09:10:07 AM SB27
09:10:10 AM Presentation: Fy 16 Budget Amendments
09:51:33 AM SB40
09:59:06 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Overview FY17 Operating Budget TELECONFERENCED
Departments: Environmental Conservation and
Bills Previously Heard/Scheduled
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 20, 2015                                                                                          
                         9:08 a.m.                                                                                              
9:08:40 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Kelly called the Senate Finance Committee meeting                                                                      
to order at 9:08 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 Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Pat Pitney, Director, Office of Management and Budget,                                                                          
Office of the Governor.                                                                                                         
SB 27     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          SB 27 was HEARD and HELD in committee for further                                                                     
SB 40     SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS                                                                             
          SB 40 was HEARD and HELD in committee for further                                                                     
PRESENTATION: FY 16 BUDGET AMENDMENTS                                                                                           
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."                                                                                          
9:10:07 AM                                                                                                                    
^PRESENTATION: FY 16 BUDGET AMENDMENTS                                                                                        
9:10:10 AM                                                                                                                    
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF THE GOVERNOR, looked  at the spreadsheet of the FY                                                                    
2016 Operating Budget Amendments  (copy on file). She shared                                                                    
that  keeping with  the governor's  overall targets  was the                                                                    
guiding principle behind drafting  the operating budget. She                                                                    
remarked that there were additions  and reductions that were                                                                    
represented  as  a  combination.  She shared  that  lines  1                                                                    
through  3  restored  funding for  the  Alaska  Native  Arts                                                                    
Marketing, which  was the only  program that  was eliminated                                                                    
from  the  particular  component. She  noted  an  additional                                                                    
reduction  to  tourism  marketing, and  the  Alaska  Seafood                                                                    
Marketing  Institute (ASMI).  She shared  that $300,000  was                                                                    
the total request for the  Alaska Native Arts Marketing. She                                                                    
furthered that  there was  a $150,000  reduction to  each of                                                                    
the other programs.                                                                                                             
Vice-Chair Micciche queried the  page number. Co-Chair Kelly                                                                    
replied that it was page 104.                                                                                                   
9:12:04 AM                                                                                                                    
AT EASE                                                                                                                         
9:12:33 AM                                                                                                                    
9:12:35 AM                                                                                                                    
Vice-Chair  Micciche  wondered  how  much  of  the  $300,000                                                                    
appropriation was allocated for  the direct purchase of art.                                                                    
Ms.  Pitney  replied  that  she   did  not  know  the  exact                                                                    
proportion. The appropriation was  both helping rural artist                                                                    
market their  art from  their community  and moving  the art                                                                    
into Anchorage  to sell out of  a retail area. The  plan for                                                                    
the function was to eventually  move to privatization. There                                                                    
was  a  mistaken impression  that  it  could happen  in  the                                                                    
current year, so  it was restored with  the expectation that                                                                    
it would move away from state subsidy in the future.                                                                            
Vice-Chair  Micciche  shared  that  he was  a  supporter  of                                                                    
native  arts,  but  wondered  if  the  appropriation  was  a                                                                    
priority. He felt  that there were private  options for this                                                                    
category and other budget categories.                                                                                           
Ms. Pitney looked at line 4:                                                                                                    
     Partially Restore Regional  and Community Jails Program                                                                    
     and Cover Prisoner  Transportation Costs The Department                                                                    
     of  Corrections (DOC)  will renegotiate  contracts with                                                                    
     communities  to   provide  short-term   confinement  of                                                                    
     unsentenced persons  detained under  state law  for the                                                                    
     actual cost per bed per  day. This funding will also be                                                                    
     used  to  cover  any   additional  costs  for  prisoner                                                                    
     transportation. 7,000.0                                                                                                    
Senator  Hoffman   remarked  that  many  of   the  programs,                                                                    
including  the Regional  Jails,  were lined  with the  State                                                                    
Troopers and  Judicial System. He  urged the  examination of                                                                    
eliminating one of those programs.  He wondered if there was                                                                    
a  better  economical  effort  to  enhance  the  system.  He                                                                    
believed that  the original proposal  was a cost shift  to a                                                                    
different department.                                                                                                           
Senator Olson  applauded the  efforts of  the administration                                                                    
in examining the law enforcement  issue. He remarked that it                                                                    
was important  for a  community to  have a  holding facility                                                                    
for   law  enforcement.   He  wondered   if   there  was   a                                                                    
distribution  of the  communities  that  were reinstated  to                                                                    
partial payment. Ms.  Pitney replied that there  was a list,                                                                    
and she had engaged in  conversations with the Department of                                                                    
Corrections  (DOC). She  shared  that the  options would  be                                                                    
presented in the subcommittee process.                                                                                          
9:18:02 AM                                                                                                                    
Senator  Olson surmised  that the  final decisions  were not                                                                    
yet made regarding the specific  communities that would face                                                                    
partial or full funding. Ms.  Pitney agreed. She shared that                                                                    
the administration had requested  an analysis of the current                                                                    
jail   usage.   She  stated   that   there   should  be   an                                                                    
understanding  that  the  funding would  not  be  completely                                                                    
eliminated, because  the funding was  set up like  a revenue                                                                    
sharing program.                                                                                                                
Senator  Olson  felt  that  it was  not  a  revenue  sharing                                                                    
program.  He felt  that  communities,  like Kotzebue,  would                                                                    
bear all costs if the states eliminated the funding.                                                                            
Ms.  Pitney looked  at lines  5 and  6. The  items were  for                                                                    
accounting to  help the Post-Secondary  Education Commission                                                                    
to provide a clear view  of their receipts. They were intra-                                                                    
agency receipts to create a full picture of one component.                                                                      
Ms. Pitney addressed line 7.                                                                                                    
     Medicaid Cost  Containment Initiatives.  The Department                                                                    
     of Health  and Social  Services has identified  ways to                                                                    
     control  growth in  the current  Medicaid program  that                                                                    
     will  achieve  an  approximate $20,000.0  general  fund                                                                    
     savings in  the current Medicaid program.  The majority                                                                    
     of  the initiatives  will require  new regulations  and                                                                    
     fee  schedules and  include changes  to shift  costs to                                                                    
     100% federal match for tribal  services, changes to the                                                                    
     Personal    Care   Assistance    services   eligibility                                                                    
     requirements,  to  medical equipment,  vision,  dental,                                                                    
     behavioral  health,  hearing  services,  transportation                                                                    
     costs, and a contract for management of care.                                                                              
Co-Chair  Kelly  queried  the   mechanism  that  caused  the                                                                    
individuals to  shift to tribal  health. Ms.  Pitney replied                                                                    
that  there were  some waiver  requirements.  She agreed  to                                                                    
provide further information.                                                                                                    
Co-Chair Kelly asked if the  efforts were in anticipation of                                                                    
the  Alaska  Native  Medical  Center  patient  housing.  Ms.                                                                    
Pitney asked for more information.                                                                                              
Co-Chair   Kelly  clarified   that   he   would  like   more                                                                    
information  about  tribal  housing  at  the  Alaska  Native                                                                    
Medical Center related  to SB 88 from  a former legislature.                                                                    
He  shared  that  there was  anticipated  shift  of  medical                                                                    
expenses to pay for the  lease. Ms. Pitney agreed to provide                                                                    
that information.                                                                                                               
9:23:12 AM                                                                                                                    
Senator Dunleavy wondered if the  governor was formulating a                                                                    
Medicaid  expansion  bill,  so   the  legislature  can  hold                                                                    
hearings.  Ms.  Pitney  responded   that  the  governor  was                                                                    
considering a Medicaid expansion bill.                                                                                          
Senator Dunleavy  felt that Medicaid  expansion must  have a                                                                    
number  of hearings  in order  to understand  the governor's                                                                    
point of view.                                                                                                                  
Co-Chair MacKinnon shared that  Alaska had issued $35,000 on                                                                    
a bond that was on payment  in a hospital facility at Alaska                                                                    
Native  Health   Consortium.  The   state  would   then  see                                                                    
repayment  over  time  in the  proposed  cost  savings.  She                                                                    
wondered whether the funds were  for housing or the neonatal                                                                    
center that was addressed in the current budget.                                                                                
Co-Chair Kelly shared that the  neo-natal health was part of                                                                    
the funding, but it was  anticipated Medicaid money for more                                                                    
than just the neo-natal portions of the budget.                                                                                 
Co-Chair   MacKinnon  pointed   out   that   there  was   an                                                                    
anticipated debt service payment  on the current investment,                                                                    
with a portion represented as cost savings.                                                                                     
Co-Chair Kelly  agreed. He wanted  to clarify  the intention                                                                    
of the funding.                                                                                                                 
Ms. Pitney  looked at lines 8  and 9, which were  related to                                                                    
the aerospace move to more  self-reliance. The GF funding of                                                                    
$4  million  was  reduced. The  department  asked  that  the                                                                    
funding  be replaced  with receipt  authority for  aerospace                                                                    
Co-Chair  Kelly  recalled  that   the  board  and  executive                                                                    
director  had  a  different point  of  view.  The  executive                                                                    
director would welcome only federal  receipts, and the board                                                                    
felt that they still may  need $2 million. Ms. Pitney shared                                                                    
that  the administration  had  received information  stating                                                                    
that they only wanted receipts.                                                                                                 
Ms. Pitney  noted that  items 10  through 14  were combined.                                                                    
The  ferry schedules  were released  in October,  and people                                                                    
had purchased ferry tickets in  the meantime, so there was a                                                                    
desire for a temporary  ferry service restoration. There was                                                                    
a  one-time   reduction  in  the  highway   funds  from  the                                                                    
different regions.                                                                                                              
9:30:01 AM                                                                                                                    
Vice-Chair Micciche  felt that delaying the  ferry reduction                                                                    
would make  the legislature  look bad.  He shared  that this                                                                    
was   an   example  of   a   difficult   decision  for   his                                                                    
subcommittee.  He  shared  that  he  may  not  approve  this                                                                    
Senator  Dunleavy wondered  what services  would be  reduced                                                                    
from  the road  system  by  moving the  money  to the  ferry                                                                    
system. He  asked if the cost  of fuel had been  examined in                                                                    
the ferry  system. He wondered  if the potential  savings in                                                                    
fuel could be transferred to  the schedule issue. Ms. Pitney                                                                    
replied  that there  was  $27 million  in  the fuel  trigger                                                                    
mechanism in FY 15. That  fuel trigger mechanism was removed                                                                    
from   the   approved   budget,   so   the   Department   of                                                                    
Transportation  and  Public  Facilities (DOT/PF)  lost  that                                                                    
funding. In addition DOT/PF had  faced additional cuts, like                                                                    
other departments.                                                                                                              
Co-Chair MacKinnon wondered how  many ferry tickets had been                                                                    
purchased, and the cost of submitting a new fee schedule.                                                                       
Ms. Pitney  highlighted lines  15 and  16. The  contract was                                                                    
with the University of Alaska  Federation of Teachers (UAFT)                                                                    
was  finalized  in  the time  between  the  endorsed  budget                                                                    
deadline  and the  current  meeting.  The salary  adjustment                                                                    
required under the contract would  be $1.5 million, of which                                                                    
50 was  GF. She remarked that  line 16 was tied  directly to                                                                    
that contract.  She stated  that OMB had  a target  for each                                                                    
operating budget  for each department. She  stated that line                                                                    
16 should read, "Reduce the  general fund amount to meet the                                                                    
administration's  target for  the University  of Alaska  not                                                                    
tied to  this contract." She  announced that a  net increase                                                                    
of DGF of $754,000 was required between the two line items.                                                                     
Senator Dunleavy  explained that  school districts  paid for                                                                    
their  contracts out  of their  operating budgets  that were                                                                    
outlined by the  state. She wondered why that  did not occur                                                                    
for   the  University.   Ms.  Pitney   responded  that   the                                                                    
University's  contracts  were  treated  more  like  a  state                                                                    
agency. The  contracts were brought  to the  legislature for                                                                    
approval and  funding. She shared that  the legislature must                                                                    
approve the contract and appropriate the funding.                                                                               
Senator Dunleavy restated his  question. He wondered why the                                                                    
Universities  did not  function like  school districts.  Ms.                                                                    
Pitney  explained   that  the  school  districts   were  not                                                                    
required  to run  their contracts  through the  legislature.                                                                    
The  University and  other state  agencies were  required to                                                                    
run  their contracts  through the  legislature. She  did not                                                                    
know  what it  would require  to get  the University  to act                                                                    
like school districts, but felt that  there may need to be a                                                                    
statute adjustment.  There was a provision  in the operating                                                                    
budget  which said,  "The amount  appropriated in  this bill                                                                    
covers  the  provisions   of  these  negotiated  contracts."                                                                    
Therefore, any contract provisions must be funded.                                                                              
9:38:51 AM                                                                                                                    
AT EASE                                                                                                                         
9:40:00 AM                                                                                                                    
9:41:09 AM                                                                                                                    
Co-Chair  Kelly   felt  it  was  unusual   to  receive  this                                                                    
authority. He anticipated pushback on the University item.                                                                      
Ms. Pitney  understood that it  was an unusual  request. She                                                                    
shared that it  was not common practice,  but several states                                                                    
had   a  provision   to  allow   for  distributions   within                                                                    
departments  and across  departments. She  stressed that  it                                                                    
was an unusual fiscal season,  the request provided a degree                                                                    
of flexibility and prioritization within the legislature.                                                                       
Co-Chair  Kelly   felt  that  attaching  flexibility   to  a                                                                    
specific amount  resulted in a  "slush fund." He  felt there                                                                    
may be constitutional and statute  problems. He was not sure                                                                    
he was comfortable with the proposed mechanism.                                                                                 
Ms. Pitney  looked at line  18. It was  contingency language                                                                    
for  the  Spill Prevention  and  Response  (SPAR) fund.  She                                                                    
stated that during the formulation  of a long-term solution,                                                                    
the request covered  the SPAR fund through  2016. She shared                                                                    
that  there was  an anticipated  settlement that  would make                                                                    
the fund solvent.                                                                                                               
Co-Chair Kelly  wondered if the  request was for  Aniak. Ms.                                                                    
Pitney replied in the affirmative.                                                                                              
Vice-Chair  Micciche  remarked  that  he was  working  on  a                                                                    
solution to the  SPAR fund issue. He shared  that Alaska was                                                                    
in  a   difficult  fiscal  time.  He   remarked  that  state                                                                    
departments seemed to want to  continue with the status quo,                                                                    
rather  than  examining  creative  ways  to  solve  problems                                                                    
within the law.                                                                                                                 
Ms. Pitney looked  at lines 19 and 20. They  were the latest                                                                    
projections of the adjustments from  Permanent Fund into the                                                                    
earnings reserve.                                                                                                               
SB  27  was   HEARD  and  HELD  in   committee  for  further                                                                    
9:48:01 AM                                                                                                                    
AT EASE                                                                                                                         
9:51:09 AM                                                                                                                    
SENATE BILL NO. 40                                                                                                            
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,   and   other  appropriations;   making                                                                    
     reappropriations;  amending  appropriations;  repealing                                                                    
     appropriations;  making  appropriations  to  capitalize                                                                    
     funds; and providing for an effective date."                                                                               
9:51:33 AM                                                                                                                    
Senator Dunleavy  wondered how  the budget  approach reduced                                                                    
the budget by 25 percent.                                                                                                       
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF THE  GOVERNOR replied that the  budget reduced the                                                                    
agency  operating budgets  by approximately  6 percent.  She                                                                    
stated that,  over a four-year  timeframe, it was  the first                                                                    
step in a  25 percent reduction. She stressed  that this was                                                                    
a first step, and remarked  that the solutions would be more                                                                    
dramatic as the pressure was building.                                                                                          
Ms.  Pitney looked  at  line  4 of  the  FY 15  Supplemental                                                                    
Budget  Amendment Spreadsheet  (copy  on  file). She  stated                                                                    
that it  was a request  for emergency repairs for  the State                                                                    
Forest Road  System in the  Tanana Valley State  Forest. She                                                                    
shared  that it  was a  request that  had been  presented on                                                                    
multiple occasions. The need  became more apparent recently,                                                                    
which was why it did not  appear in the previous versions of                                                                    
the supplemental  budget. The request  was an  $896,000 road                                                                    
repair, which  was needed because  of the rain.  The revenue                                                                    
from the forest was approximately  $250,000 per year, so the                                                                    
repair was required to maintain the revenue.                                                                                    
Ms. Pitney looked at line  9, which was a reappropriation of                                                                    
two  projects.  The Harbor  Program  would  not be  complete                                                                    
because of an alternative  funding source. The Glenn Highway                                                                    
ruts would  be complete, plus additional  federal funds. The                                                                    
reappropriations allowed DOT/PF to install injection wells.                                                                     
Ms. Pitney  addressed lines  10 and  11, which  were airport                                                                    
repairs  fund source  changes. They  were originally  in the                                                                    
construction fund and were moved  to the airport fund. These                                                                    
were  net zero  changes, but  changing the  fund source  for                                                                    
project completions.                                                                                                            
Ms. Pitney  looked at line 12  was a repeal of  $2.7 million                                                                    
for Alaska Gasline Inducement Act (AGIA).                                                                                       
Ms.  Pitney  explained  lines  13 and  14.  The  items  were                                                                    
intended  to  note that  there  were  appropriations in  the                                                                    
previous year  that exceeded the  fund balance of  the funds                                                                    
that they were originated.                                                                                                      
Vice-Chair  Micciche felt  that the  final operating  budget                                                                    
would result in a great amount of discomfort.                                                                                   
SB  40  was   HEARD  and  HELD  in   committee  for  further                                                                    
9:59:06 AM                                                                                                                    
The meeting was adjourned at 9:59 a.m.                                                                                          

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