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