Legislature(2015 - 2016)SENATE FINANCE 532

05/04/2015 01:30 PM FINANCE

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Audio Topic
01:33:03 PM Start
01:33:23 PM SB1001
02:31:29 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB1001 Presentation: Overview FY17 Operating Budget TELECONFERENCED
Heard & Held
Pat Pitney
Bills Previously Heard/Scheduled
                 SENATE FINANCE COMMITTEE                                                                                       
                        May 4, 2015                                                                                             
                         1:33 p.m.                                                                                              
1:33:03 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Kelly called the Senate Finance Committee meeting                                                                      
to order at 1:33 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Anna MacKinnon, Co-Chair (via teleconference)                                                                           
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair (via teleconference)                                                                         
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; Representative Sam Kito;                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
SB 1001  APPROP: OPER. BUDGET/LOANS/FUNDS/AM APPRO                                                                              
          SB 1001                                                                                                               
SENATE BILL NO. 1001                                                                                                          
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations,  making  capital appropriations,  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."                                                                                                        
1:33:23 PM                                                                                                                    
Co-Chair Kelly discussed housekeeping.                                                                                          
1:34:00 PM                                                                                                                    
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF THE GOVERNOR, noted  that there were others in the                                                                    
gallery that  could speak to  specific items.  She explained                                                                    
that  the CS  isolated minor  changes, while  leaving HB  72                                                                    
intact. The CS  was isolated to the changes  provided by the                                                                    
administration as  a starting point  to spur  discussion and                                                                    
work toward a fully funded budget.                                                                                              
1:35:44 PM                                                                                                                    
Ms.  Pitney referred  to  page 2,  section  1, which  listed                                                                    
specific program funding sources:                                                                                               
     * Section 1. The  following appropriation items are for                                                                  
     operating expenditures  from the general fund  or other                                                                    
     funds  as set  out  in section  2 of  this  Act to  the                                                                    
     agencies  named  for  the purposes  expressed  for  the                                                                    
     fiscal year beginning July 1,  2015 and ending June 30,                                                                    
     2016,  unless otherwise  indicated. A  department-wide,                                                                    
     agency-wide, or  branch-wide unallocated  reduction set                                                                    
     out  in  this  section   may  be  allocated  among  the                                                                    
     appropriations   made   in   this   section   to   that                                                                    
     department, agency, or branch.                                                                                             
Ms. Pitney spoke to the reinstated education funding line                                                                       
items on Lines 13 and 14:                                                                                                       
     Alaska Learning Network  - 599, 700                                                                                      
     Pre-Kindergarten Grants  - 2,000,000                                                                                     
Ms. Pitney continued to Lines, which reflected the                                                                              
restoration of funds for Children's Services:                                                                                   
     Front Line Social Workers - 1,000,000                                                                                    
1:36:43 PM                                                                                                                    
Ms. Pitney  referred to Page  2, lines 21 through  27, which                                                                    
showed unallocated  reductions to  the Department  of Health                                                                    
and Social Services:                                                                                                            
     Departmental Support Services 0 1,175,000 -1,175,000                                                                     
     Public Affairs 0                                                                                                           
     Commissioner's Office 0                                                                                                    
     Administrative Support 0                                                                                                   
     Information Technology 0                                                                                                   
1:37:05 PM                                                                                                                    
Co-Chair  Kelly  asked  whether funding  for  the  Frontline                                                                    
Social Workers were in the governor's original budget.                                                                          
Ms. Pitney replied no.                                                                                                          
Co-Chair  Kelly asked  whether  Family Preservation  funding                                                                    
had been in the original budget.                                                                                                
Ms. Pitney replied yes.                                                                                                         
1:37:35 PM                                                                                                                    
Senator  Dunleavy wondered  how the  administration expected                                                                    
the CS would succeed in being fully funded.                                                                                     
Ms. Pitney hoped  that the CS would be a  starting point for                                                                    
a  conversation   that  would   result  in   the  compromise                                                                    
necessary to garner a three-fourths  vote needed to get to a                                                                    
fully funded budget.                                                                                                            
1:38:28 PM                                                                                                                    
Co-Chair  Kelly  noted that  the  CS  was not  fully  funded                                                                    
Ms. Pitney agreed.                                                                                                              
Co-Chair Kelly declared  that the senate had  passed a fully                                                                    
funded budget with HB 72.                                                                                                       
1:38:38 PM                                                                                                                    
Senator  Dunleavy  asserted that  the  senate  had passed  a                                                                    
fully funded  budget. He said  he did not understand  how SB                                                                    
1001 was fully funded.                                                                                                          
Ms. Pitney  reiterated that the  budget would only  be fully                                                                    
funded if a compromise were  struck between the minority and                                                                    
the majority that resulted in  a majority vote. She restated                                                                    
that SB  1001 was  intended to inspire  further conversation                                                                    
that  lead  to a  compromise.  She  said that  although  the                                                                    
senate  passed the  budget, the  legislation now  sitting on                                                                    
the governor's desk was only two-fifths funded.                                                                                 
1:39:59 PM                                                                                                                    
Ms. Pitney  continued to speak  to Page 2, lines  21 through                                                                    
27, which restored  unallocated administrative reductions in                                                                    
the Support  Services area of  the Department of  Health and                                                                    
Social Services. She said that  the reductions had been fund                                                                    
source changes  from general fund to  inter-agency receipts,                                                                    
but  would be  restored back  to general  funds because  the                                                                    
inter-agency  receipts  would  be unrecoverable.  She  added                                                                    
that  the Agency-wide  unallocated reduction  of travel  and                                                                    
support on Line 29, would also be restored.                                                                                     
1:40:58 PM                                                                                                                    
Ms.  Pitney referred  to Page  3,  line 6  of the  previous,                                                                    
unfunded  budget.  She relayed  that  $9  million of  a  $14                                                                    
million  dollar request  had been  included  for efforts  on                                                                    
North  Slope Gas  Commercialization;  the  CS reflected  the                                                                    
remainder of the original request  from the governor at $4.9                                                                    
Ms. Pitney  continued to Line  9, which listed  the proposed                                                                    
requests for the Department of Public Safety:                                                                                   
     Alaska State Troopers              500,000  500,000                                                                      
     Alaska Wildlife Troopers - 500,000                                                                                         
     Aircraft Section                                                                                                           
     Council on Domestic Violence and   1,500,000 1,500,000                                                                   
     Sexual Assault                                                                                                           
     Council on Domestic                                                                                                        
     Violence and Sexual Assault - 1,500,000                                                                                    
Ms. Pitney  spoke to the prioritization  of prevention funds                                                                    
by the previous and  current administrations for the Council                                                                    
on Domestic Violence and Sexual  Assault (CDVSA). She shared                                                                    
that the  program had been  funded at  $3 million in  FY 15.                                                                    
She said  that the  administration felt that  the prevention                                                                    
efforts  in  the  areas  of  domestic  violence  and  sexual                                                                    
assault  were  significantly  important in  the  state.  She                                                                    
reiterated that the bill was meant  to be a tool to generate                                                                    
discussion that would result in a fully-funded budget.                                                                          
1:42:39 PM                                                                                                                    
Co-Chair  Kelly asked  how much  had already  been allocated                                                                    
for the CDVSA.                                                                                                                  
Ms.  Pitney said  approximately $16  million, 80  percent of                                                                    
which was for operating shelters.                                                                                               
1:42:57 PM                                                                                                                    
Senator  Hoffman  understood  that   the  dollars  would  be                                                                    
transferred from the Governor's  Office to the Department of                                                                    
Public Safety as  one-time funds and would  be eliminated in                                                                    
Ms.  Pitney replied  that the  funding had  been changed  to                                                                    
one-time funding  on the house  side, and cut  altogether by                                                                    
the senate. She  stated that the $1.5 million  would be used                                                                    
for prevention efforts.                                                                                                         
Senator  Hoffman  interjected  that   the  council  had  $16                                                                    
million in its budget.                                                                                                          
Ms.  Pitney  clarified  that  the  current  $16  million  of                                                                    
available funding was not prevention funds.                                                                                     
1:44:44 PM                                                                                                                    
Ms. Pitney spoke to the  Alaska Marine Highway System (AMHS)                                                                    
item on page 3, line 22:                                                                                                        
Marine Vessel Operations  - 7,000,000                                                                                         
Ms. Pitney explained  that AMHS had been  sharply reduced in                                                                    
the  previous  budgets; the  CS  would  restore all  of  the                                                                    
already published  schedules for  summer 2015,  and maintain                                                                    
some winter schedules. She noted  that some winter schedules                                                                    
would be impacted even with the restoration of the funds.                                                                       
1:45:31 PM                                                                                                                    
Ms. Pitney moved to Line 27:                                                                                                    
     Budget Reductions/ Additions - 7,000,000                                                                                 
     - Systemwide                                                                                                             
Ms.  Pitney related  that the  restoration would  remove the                                                                    
need  to   eliminate  approximately  70  positions   at  the                                                                    
University of Alaska.                                                                                                           
1:45:57 PM                                                                                                                    
Senator  Bishop   asked  whether  a  breakdown   of  the  70                                                                    
positions could be provided.                                                                                                    
Ms. Pitney  replied that 40  percent of the  positions would                                                                    
be  from  the  University  of  Alaska  Fairbanks  (UAF);  30                                                                    
percent at the University  Alaska Anchorage (UAA); 7 percent                                                                    
at the University  of Alaska Southeast (UAS);  17 percent at                                                                    
the  statewide office.  She stated  that UAF,  UAA, and  UAS                                                                    
would see  a 50  to 60  percent of  faculty and  a 50  to 60                                                                    
percent  staff  reduction.  The statewide  office  only  had                                                                    
staff positions. She shared that  each university branch was                                                                    
preparing  a priority  list of  programs  and services  that                                                                    
would be reduced.                                                                                                               
1:47:14 PM                                                                                                                    
Co-Chair  Kelly asked  how  much of  the  allocation was  in                                                                    
anticipation of salary increases.                                                                                               
Ms. Pitney explained  that the $7 million  was separate from                                                                    
the salary increases.                                                                                                           
1:47:32 PM                                                                                                                    
Senator Bishop  stated that he  had written a letter  to the                                                                    
UAA Board of  Regents with cost savings  suggestions and had                                                                    
yet to  receive a  response. He hoped  that the  board would                                                                    
respond so that positions could be saved.                                                                                       
1:48:09 PM                                                                                                                    
Senator  Dunleavy  asked  Ms.  Pitney  to  repeat  what  the                                                                    
reductions would be at each university branch.                                                                                  
Ms. Pitney replied that  current percentage distributions of                                                                    
the reduction of  the $30 million in general  fund was: 41.9                                                                    
percent at  UAF; 33.4  percent at UAA;  7.2 percent  at UAS;                                                                    
17.5  percent in  the Statewide  Administration Office.  She                                                                    
furthered  that   the  statewide   off  had  been   given  a                                                                    
proportionally  larger share  of the  unrestricted funds  to                                                                    
minimize the impact on campuses and academic programs.                                                                          
Senator Dunleavy queried the total  number of positions that                                                                    
could be lost.                                                                                                                  
Ms. Pitney replied up to 70.                                                                                                    
Senator Dunleavy  asked how many  of the positions  would be                                                                    
teaching positions.                                                                                                             
Ms. Pitney responded that the  current estimate was 50 to 60                                                                    
percent teaching positions.                                                                                                     
Senator  Dunleavy understood  that the  increase would  fund                                                                    
positions that  were filled by  real people; there  would be                                                                    
no empty PCN's.                                                                                                                 
Ms.  Pitney said  that the  funds would  save 70,  currently                                                                    
filled, positions.                                                                                                              
1:50:40 PM                                                                                                                    
AT EASE                                                                                                                         
1:55:25 PM                                                                                                                    
Ms. Pitney  referred to  page 3, line  32, which  listed the                                                                    
restoration  of  the cost  of  living  (COLA) increases  for                                                                    
employees  under labor  contracts.  She  explained that  the                                                                    
intent  was to  allow the  administration to  honor existing                                                                    
labor  contracts and  to perform  "good faith"  negotiations                                                                    
with  unions, while  understanding that  non-union employees                                                                    
would not  receive the  COLA increase.  She said  that there                                                                    
were  three  contracts,  representing half  of  the  state's                                                                    
union  employees, currently  under negotiation.  She relayed                                                                    
that the  intent was not  to treat employees  unequally, but                                                                    
to  honor the  labor contracts  in  the same  way the  state                                                                    
would honor its contracts with any other third-party.                                                                           
1:57:03 PM                                                                                                                    
Co-Chair Kelly  asked why the  non-union COLA  increases had                                                                    
been removed.                                                                                                                   
Ms. Pitney  replied that the increases  for partially-exempt                                                                    
and  exempt employees  were not  under  legal contract;  the                                                                    
state  was  not  legally  bound by  contract  to  pay  those                                                                    
1:57:54 PM                                                                                                                    
Co-Chair  Kelly understood  that  negotiations would  happen                                                                    
again with the three biggest unions in 2017.                                                                                    
Ms. Pitney  confirmed that  negotiations would  be happening                                                                    
for 2017, the state would  be asking to reopen contracts for                                                                    
Co-Chair  Kelly asked  why keeping  the funds  for non-union                                                                    
employees had not been considered.                                                                                              
Ms. Pitney stated  that the determination had  been based on                                                                    
the state's fiscal climate and  the interest of honoring the                                                                    
legal contract.                                                                                                                 
1:58:52 PM                                                                                                                    
AT EASE                                                                                                                         
2:08:53 PM                                                                                                                    
Ms. Pat Pitney referred back  to the question of funding for                                                                    
labor  contracts  versus  funding  for  non-union  statewide                                                                    
employees.  She noted  that the  crux of  the issue  was the                                                                    
honoring  of the  legal contracts,  while understanding  the                                                                    
current fiscal  constraints. She  stated that  the contracts                                                                    
had been negotiated in good  faith; the administration would                                                                    
ask for reopeners  in 2016, and certainly  the fiscal crisis                                                                    
would be considered during negotiations for FY17.                                                                               
2:10:04 PM                                                                                                                    
Co-Chair  Kelly  stated  the  legislature  not  funding  the                                                                    
increases constituted  a reopener. He opined  that rejecting                                                                    
the language  was not equal  to not honoring  the contracts,                                                                    
it  would just  reopen the  negotiations. He  added that  he                                                                    
still  did not  understand why  the non-union  contracts had                                                                    
been removed.                                                                                                                   
Ms.  Pitney stated  that  the COLA  funding  for only  union                                                                    
employees made the most fiscal sense.                                                                                           
2:11:53 PM                                                                                                                    
Ms. Pitney referred to Section  2, pages 4 through 11, which                                                                    
listed the  funding sources associated  with Section  1. She                                                                    
continued to  Section 4, page  12, which listed  the numbers                                                                    
associated  with Medicaid  expansion. She  pointed out  that                                                                    
the Department of  Corrections (DOC) would see  a savings of                                                                    
$4,108,200 as  a result of  Medicaid expansion.  She relayed                                                                    
that  the Department  of Health  and Social  Services (DHSS)                                                                    
was expected  to see a  savings of $1,558,700  in Behavioral                                                                    
Health and  $1,000,000 in  Catastrophic and  Chronic Illness                                                                    
Assistance. Line  22 listed  the acceptance  of $145,438,400                                                                    
in federal funds for the expansion.                                                                                             
2:13:32 PM                                                                                                                    
Ms.  Pitney pointed  out to  the committee  that Section  5,                                                                    
page 13, listed the previous numbers by fund source.                                                                            
2:13:52 PM                                                                                                                    
Ms. Pitney turned to Page  15, section 7, which appropriated                                                                    
$118,000,000  from the  in-state  gas pipeline  fund to  the                                                                    
public education fund.                                                                                                          
2:15:43 PM                                                                                                                    
Senator  Hoffman asked  what the  additional funding  did to                                                                    
increase the base student allocation (BSA).                                                                                     
Ms. Pitney replied that she did not have the figure.                                                                            
Co-Chair  Kelly interjected  that the  bill would  bring the                                                                    
BSA to $58.80.                                                                                                                  
2:16:21 PM                                                                                                                    
Vice-Chair  Micciche understood  the  bill  was intended  to                                                                    
created conversation  that would  lead to  the three-quarter                                                                    
vote needed to fully fund  the budget. He contended that the                                                                    
appropriations  in   the  bill  were  the   desires  of  the                                                                    
governor.  He thought  that  the politics  of  saving a  few                                                                    
programs would not be the  answer to working toward a three-                                                                    
quarter vote.                                                                                                                   
Ms.  Pitney  reiterated  that  the  items  in  the  CS  were                                                                    
reflective of  the governor's priorities, and  that the bill                                                                    
was meant to  reopen the conversation in  order to negotiate                                                                    
a wat to a fully-funded budget.                                                                                                 
2:18:14 PM                                                                                                                    
Vice-Chair Micciche  wondered whether the  governor realized                                                                    
that  the appropriation  process was  the responsibility  of                                                                    
the legislature.  He asked whether  the governor  could ever                                                                    
support the previously passed budget bill.                                                                                      
Ms. Pitney responded that if  a fully funded budget had come                                                                    
to  the  Governor's  desk,  he   would  have  supported  the                                                                    
authority of the  legislature to pass a  budget. She related                                                                    
that the problem  was that HB 72 had not  been fully funded,                                                                    
and there  was no  mechanism in place  to move  forward with                                                                    
that piece of legislation.                                                                                                      
Vice-Chair Micciche stated that the  cuts that had been made                                                                    
to HB 72 had been  painful for everyone. He wondered whether                                                                    
the  administration recognized  the  difficulty  of the  job                                                                    
that the legislature had done.                                                                                                  
Ms. Pitney  stated that the administration  and the governor                                                                    
were  well  aware  of  the  state's  fiscal  situation.  she                                                                    
asserted that  the governor's  original budget  had proposed                                                                    
an  approximately  $700  million  reduction,  SB  1001  only                                                                    
changed the spending plan proposed  in HB 72 by 1.4 percent,                                                                    
and  the governor  would have  accepted  HB 72  had it  been                                                                    
fully funded.  She related that revenue  measures would need                                                                    
to   be   further   discussed   in   the   future   because,                                                                    
realistically,  oil  prices would  not  be  rebounding to  a                                                                    
level that would balance the budget.                                                                                            
2:21:55 PM                                                                                                                    
Senator Hoffman asked how large  of a cut the administration                                                                    
anticipated in 2017.                                                                                                            
Ms.  Pitney reminded  the committee  that when  the governor                                                                    
took  office  her  had   requested  that  all  commissioners                                                                    
provide 5 and 8 percent  reduction scenarios, which had been                                                                    
the basis  for the  initial budget  submitted for  FY16. She                                                                    
said that departments  had been asked to  project what their                                                                    
agencies would  look like  after a  25 percent  reduction in                                                                    
budget.  She  stated   that  talks  concerning  efficiencies                                                                    
across  all agencies  were still  underway.  She noted  that                                                                    
Conference Committee reductions  relative to management plan                                                                    
for several  agencies exceeded  25 percent.  She anticipated                                                                    
that cuts for FY17 would be more difficult.                                                                                     
2:26:18 PM                                                                                                                    
Senator Hoffman  understood that  8 percent was  most likely                                                                    
unachievable.  He  surmised   that  the  administration  was                                                                    
looking  to   submit  a  further   reduced  budget   to  the                                                                    
legislature in the future.                                                                                                      
Ms. Pitney replied that that was the goal.                                                                                      
2:26:44 PM                                                                                                                    
AT EASE                                                                                                                         
2:27:30 PM                                                                                                                    
Co-Chair  Kelly  expressed   that  the  unexpected  spending                                                                    
proposed in SB 1001 would  be difficult to explain. He spoke                                                                    
of the  $118 million  in education  funding, which  was one-                                                                    
time money.  He thought that  it was the governor's  goal to                                                                    
not  have any  cuts  to education,  but  replacing the  $118                                                                    
million -  plus increases -  would be challenging.  He spoke                                                                    
of  all of  the  cuts that  the committee  had  made to  the                                                                    
budget already and warned that  crafting a balance budget in                                                                    
FY17 was going to be even more of a challenge.                                                                                  
2:30:57 PM                                                                                                                    
2:31:29 PM                                                                                                                    
The meeting was adjourned at 2:31 p.m.                                                                                          

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