Legislature(2017 - 2018)SENATE FINANCE 532
02/07/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB43 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 43 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 7, 2017
9:01 a.m.
9:01:14 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Mike Dunleavy
Senator Peter Micciche
Senator Donny Olson
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Pat Pitney, Director, Office of Management and Budget,
Office of the Governor.
SUMMARY
SB 43 APPROP:SUPP; CAP; REAPPROP; AMEND; REPEAL
SB 43 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 43
"An Act making supplemental appropriations, capital
appropriations, and other appropriations; making
reappropriations; amending appropriations; repealing
appropriations; and providing for an effective date."
9:01:42 AM
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, thought that the supplemental bill
was fairly straightforward and informed that it included
four significant items.
Ms. Pitney discussed the presentation "FY2017 Supplemental
Bill - Senate Finance Committee" (copy on file). She turned
to slide 2, which showed a table entitled 'FY2017
Supplemental Summary.' She pointed out that the summary
included an Unrestricted General Fund (UGF) increment
request of $51.7 million. After adding the Designated
General Funds (DGF), federal funds, and other funds; the
total was $113.5 million.
Ms. Pitney showed slide 3, "UGF/DGF/Other/Fed Summary by
Department (1088)."
Ms. Pitney showed slide 4, "Statewide Department Summary -
Capital Budget (1183)."
Ms. Pitney addressed a 10-page FY 17 Supplemental Bill
Summary (paged 1 - 10) that was included within the
presentation. She pointed out line 2 on page 1 of the
summary, which showed a rate increase for Alaska Care from
$1,346 to $1,555 per month, per employee. She referred to
an amendment late in the previous session that had
requested a $15 million increase for the healthcare rate,
as the state was drawing down on reserves at a faster rate
than previously. The previous year there had been a $7.5
million deposit in to the Health Reserve Fund, which
enabled the state to get through the first half of the
year.
Ms. Pitney continued discussing the supplemental request
for healthcare, noting that there had been a mid-year
healthcare rate increase. The current request was for the
General Fund (GF) requirement for the rate increase. Most
of the non-GF components had been added in the budget.
9:05:41 AM
Co-Chair MacKinnon inquired about $853,000 being taken from
the Alaska Marine Highway Fund. She wondered if the funds
were intended to help cover the individuals in the union.
Ms. Pitney explained that the mid-year rate increase had
increased the cost, and the took care for the cost of the
healthcare rate increase for that group of employees. She
offered to give a complete breakdown by fund source for
each group listed in the supplemental item description.
Senator Micciche thought he might want to review the Marine
Highway Fund. He knew that many budget cuts had been
directed toward the use of the fund, and wondered if there
was a robust enough balance in the fund to cover the
supplemental item as well as the other DGF uses that had
been directed.
Ms. Pitney relayed that the administration felt comfortable
that the fund was healthy enough to fund the request.
Senator Micciche wondered if the administration had looked
at the health insurance increases and was devising a plan
for the future. He acknowledged that most of the groups
were bargaining units and did not know when the contracts
reopened. He thought it was time that the employees shared
the costs.
Ms. Pitney stated that the administration had the topic on
its radar, and furthered that Department of Revenue
Commissioner Sheldon Fisher was working with all the unions
(especially considering the healthcare authority
feasibility study) and looking at the various healthcare
strategies that unions were using. She mentioned that there
were some unions with healthcare trusts. She stated that
some of the negotiations had the amount paid for healthcare
for the unions aligned with the Alaska Care payment. Other
unions were looking at the healthcare trust and considering
what should be paid to cover healthcare needs.
Ms. Pitney continued that to limit the rate increase, the
administration was considering pharmacy cost-saving
efforts, provider contracting, as well as pushing more
costs to employees to pay part of the premium. She informed
that all employees in Alaska Care paid premiums, which were
increasing again on December 1, 2018.
9:09:24 AM
Co-Chair Hoffman asked how much of the healthcare increase
was included in the FY 18 budget. He asked how much of the
cost increases had the employee seen, or if all the
increased costs were falling on the employer.
Ms. Pitney stated that the Alaska Care increase was $12
million total (of which $6 million was UGF), of which
approximately $3 million had been passed on to employees.
Ms. Pitney stated that if the administration had not
increased the employee premium, the employer contribution
would have been $3 million more.
Ms. Pitney addressed line 3 on page 1 of the summary. She
explained that at the end of the summer, the supervisory
union contract was finalized. Part of the contract
negotiation had included a mandatory 15-hour furlough,
which resulted in savings of $900,000; $358,000 of which
was GF.
Co-Chair MacKinnon asked if the state had investigated the
long-term effects of furloughs, and how it affected future
contract negotiations. She wondered how it worked for a
salaried employee.
Ms. Pitney clarified that furlough was unpaid time off, and
it was mandated that employees take unpaid leave. If the
state wanted to avoid furloughs in the future, it would be
an increment to avoid forced furloughs.
9:13:13 AM
Co-Chair MacKinnon asked if there had been any study of
other organizations that had used furloughs to understand
possible consequences.
Ms. Pitney agreed to check with Commissioner Fisher to
ascertain an answer to Co-Chair MacKinnon's question.
Senator Micciche wondered how many members were in the
supervisory unit.
Ms. Pitney specified there were 2,300 members.
Senator Micciche wondered about possible savings through
taking the furlough program through all the ranks at the
state.
Ms. Pitney explained that the administration had negotiated
furloughs in most all of the contracts. The General
Government Unit (GGU) contract had also negotiated a
furlough that was included in the original 2017 budget.
Many of the exempt and non-exempt employees were forced to
take furloughs starting in 2016 to adjust to the budget
levels. Furlough days ranged from a minimum of 2 days (15
hours) for GGU, with some units (Department of Law,
Department of Natural Resources) using up to 5 days of
furlough to meet budgets.
Senator Micciche asked Ms. Pitney to provide the committee
with the furlough figures to examine overall effectiveness
towards savings. He wondered if the furlough days were
pushing work toward contractors.
Ms. Pitney agreed to provide the information.
9:16:32 AM
Co-Chair MacKinnon noted that the legislature had
implemented a similar furlough policy. She wondered, since
it was possible to negotiate 15-hour furloughs, what effort
had been made to negotiate across the board for pay
freezes.
Senator Micciche discussed unallocated cuts and the concept
of effective management in the agencies.
Senator von Imhof referenced Senator Micciche's comments,
and thought having uniform furloughs or pay freezes could
prohibit flexibility that managers could employ to
creatively manage to a dollar figure. She suggested that
tailored decision-making for each department would be
effective to get through lean fiscal times. She worried
that having one tool uniformly applied to all agencies
might not be the most effective way of managing. She
wondered if managers could be given more flexibility.
9:19:38 AM
Ms. Pitney addressed line 4 and line 5 on page 1 of the
supplemental summary, which were technical in nature. Line
4 referred to a Vendor Administrative Fee. She detailed
that part of shared services reorganization and process
streamlining included implementation of a cooperative
contract. If the state paid within ten days, the vendor
would return part of a small fee which would cover the cost
of the shared services procurement organization. She
detailed that the process was implemented after the FY 17
budget had been put together.
Co-Chair MacKinnon asked why the funds were being
designated as DGF rather than just dropping it in the GF.
Ms. Pitney stated that it had been assigned as a GF program
receipt.
Co-Chair MacKinnon asked if Ms. Pitney knew of estimated
cost savings for the statewide program.
Ms. Pitney referred to shared services reorganization in
the FY 18 budget, which would realize savings of $600,000.
The savings was anticipated to double in the following
year.
Co-Chair MacKinnon asked if the $600,000 in FY 18 savings
would be doubled, or if there would be an additional $1.2
million in savings.
Ms. Pitney clarified that there would be $1.2 million
additional savings.
9:22:33 AM
Vice-Chair Bishop referred to the fund source switch for
the Vendor Administrator Fee, and wondered if the savings
was realized through timely payment.
Ms. Pitney answered in the affirmative.
Vice-Chair Bishop referred to the oil and gas industry, and
negotiations.
Ms. Pitney recalled a reduction that the administration
took in FY 16, after negotiating down all the contracts.
She stated that Commissioner Fisher could show results of
the negotiation.
Co-Chair MacKinnon referred to Line 5, which appeared to be
a repurposing of funds. She wondered if there was a new
$1.4 million for the Alaska Land Mobile Radio (ALMR)
system.
Ms. Pitney answered in the negative. She elaborated that
the United States Department of Defense (DOD) had paid a
contract directly to the vendor; and the state had paid for
its share of the contract directly to the vendor. She
continued that DOD had new rules and could not pay directly
to the vendor, but rather must pay through the state.
9:24:52 AM
AT EASE
9:25:32 AM
RECONVENED
Ms. Pitney turned to page 2 of the summary, and addressed
line 6. The item was an increment request of $453,000 for
the Public Defender Agency. She explained that part of the
agency's revenue stream was collections; a large portion of
which was from the Permanent Fund Dividend (PFD). The
collections had fallen short of the original estimate, and
the increment would replace the lost revenue.
Ms. Pitney addressed line 7, which pertained to a federal
grant that would help the Division of Motor Vehicles
monitor the entities that did training and testing for a
commercial driver's license. The monitoring was a result of
an audit finding, and the federal government was providing
a grant to help support the monitoring.
Ms. Pitney addressed line 8, a $130,000 DGF increase which
was a result of a reclassification for occupational
licensing examiners. There was a reclassification for the
employees from range 13 to range 14. There was a
corresponding amount in the governor's proposed budget.
9:27:22 AM
Senator Dunleavy asked if the increase on line 8 was a
result of a decision to increase salary.
Ms. Pitney answered in the affirmative.
Co-Chair MacKinnon asked if there was a board that managed
the licensing structure that had requested the change, or
if it had been an administrative request.
Ms. Pitney was not aware if the request was from the board
or from the administration. She detailed that there was a
statute that provided for classification studies.
Senator Dunleavy commented that he did not understand why
there were salary increases being discussed when the state
had a $3 billion deficit. He did not understand why the
administration was not trying to reduce its budget by the
same amount that was being requested in the supplemental.
He did not think the state would get out of its fiscal
challenge by doing things as it had always done.
Co-Chair MacKinnon agreed with the premise of Senator
Dunleavy's comments, and thought it might be helpful to
examine a salary study. She wondered about the salary of a
range 13 versus a range 14.
9:30:56 AM
Ms. Pitney stated that the salary in question was $45,000
per year, and the average impact was about $4,000. She
qualified that the increase was based on the complexity of
work and the analysis of the classification study. She
referenced Department of Labor and Workforce Development
laws and the concept of equal pay for equal work.
Ms. Pitney turned to page 3 of the summary, and noted it
was full of technical changes. She specified that one item
was a fund source clean-up based on better accounting
information. The next item was associated with the health
insurance rate increase. There were two components
involved, and the original budget only had the appropriate
item in one.
Ms. Pitney turned to page 4 of the summary, and addressed
lines 11, 12, and 13; as well as line 14 on the following
page. The items pertained to increases in funding to the
Medicaid program, and totaled $26.7 million between the 4
components. She recalled that FY 16 payments from the
previous year were delayed and pushed in to FY 17, because
the FY 16 funding level had not been sufficient.
9:33:36 AM
AT EASE
9:37:48 AM
RECONVENED
Co-Chair MacKinnon referred to the Medicaid increases, some
of which had to do with normal healthcare increases over
time.
Ms. Pitney concurred.
Co-Chair MacKinnon asked Ms. Pitney to provide more
information on the reimbursement of the advance the state
had paid to Medicaid service delivery providers. She
thought the advance had started in FY 16. She recalled a
report from the previous year that suggested there was an
outstanding $80 million from vendors that had been advance-
paid in 2016. The committee had not been updated on the
vendor repayment, and wondered how it pertained to lines
11, 12, 13, and 14.
Ms. Pitney explained that an issue with Xerox at the end of
FY 16 had complicated budget resolution, so it was not
possible to accurately predict how much would be needed for
a supplemental at the same time last year. The
administration had made the decision to work to get the
reimbursements. She offered to provide a report with exact
figures as soon as possible, and stated that the situation
was being monitored consistently. She anticipated at least
$40 million of reimbursements in FY 17. She relayed that
Medicaid services was working diligently to get all the
bills processed (from the complication with Xerox), and to
get the reimbursements.
9:40:46 AM
Senator Micciche clarified that the committee was
discussing provider payments in lines 11 through 14, that
amounted to $27 million.
Co-Chair MacKinnon noted that the committee was looking at
an approximately $25 million UGF request for implementation
of Medicaid. The matter had been complicated by a lawsuit
with Xerox, pre-payment to vendors, a 9 percent increase to
the cost of healthcare, and an administrative order to
expand Medicaid. She asked Ms. Pitney to provide more
clarity on the requests. She thought it would be helpful to
have an update from Department of Health and Social
Services (DHSS) Commissioner of Valerie Davidson to discuss
the remaining problems.
Senator Micciche wanted greater detail, and noted that
through the executive order on expansion of Medicaid there
had been millions of dollars of expected savings. He wanted
to see the information compiled into one document, to
include expectations and reality. He wanted to see how
Medicaid expansion had affected the bottom line.
9:43:13 AM
Co-Chair Hoffman noted that each component being considered
included the text "As a result of reprocessing these claims
at the close of FY2016, the Department had to limit the
number of claims that were to process for Medicaid
providers." He wondered if it was possible to get a list by
component to determine which claims were limited. He wanted
to examine the claims in each category. He wondered what
type of guidelines were used to determine what would be
paid and what wouldn't.
Ms. Pitney agreed to provide the information.
Co-Chair Hoffman asked if he could review the claims listed
by vendor in order to help consider the supplemental
requests.
Co-Chair MacKinnon asked Ms. Pitney to work with
Commissioner Davidson to compile a short presentation for
the committee in order to discuss the components at a later
time.
Vice-Chair Bishop echoed Co-Chair Hoffman's comments about
the items being a one-time increment. He recalled the
previous year that there was approximately $27 million in
Medicaid savings. He thought if the request was a one-time
increment for $27 million, there should be no further
request, less normal customary increases.
Ms. Pitney stated that there was a one-time increment
because the items were a one-time cost pushed from FY 16 to
FY 17. Before the increase, the amount was $580 million,
which was $90 million below the FY 15 Medicaid cost. With
the increment, the cost was $60 million below the FY 15
Medicaid program cost. In conjunction with the savings from
cost shifting to federal dollars through Medicaid
expansion, the state was seeing significant increases in
the number of eligible individuals. She thought the economy
would drive the costs up as well.
Vice-Chair Bishop asked for any forthcoming information to
include a report on the savings from the previous year's
budget, and whether it was from the same area of expense as
the request.
9:47:46 AM
Senator von Imhof understood that prior to Medicaid
expansion, Indian Health Service (IHS) funding had covered
much of the healthcare for the population that now
qualified under Medicaid expansion. She thought since
Medicaid expansion, there had been a shift to Medicaid
funds; yet since IHS was population-based, healthcare
providers around the state were still receiving funds from
IHS. She wondered how IHS funds were presently being
allocated, and if they were a potential source of funds to
help offset some of the one-time fees.
Ms. Pitney agreed to provide more information on Senator
von Imhof's question. She referred the question to
Commissioner Davidson.
Co-Chair MacKinnon asked if the FY 18 operating budget bill
had the cost increases from lines 11-14 built into it. She
wondered if the FY 18 budget was constructed so there would
be no anticipated supplemental request.
Ms. Pitney answered that the FY 18 budget was at the
original FY 17 rate.
Co-Chair MacKinnon asked if the FY 18 budget would then be
short by $25 million.
Ms. Pitney stated that the administration was in
discussions as to how additional savings might be garnered,
but the FY 18 amount was at the FY 17 level of $580
million.
Co-Chair MacKinnon asked for clarification that the FY 18
budget did not reflect the increase to the budget, and
would be short $25 million.
Co-Chair Hoffman thought the department was on record
saying the FY 18 budget was one that could be administered.
He noted that the items all stated they were a one-time
increment, which did not expect an increment the following
year.
Co-Chair MacKinnon concurred with the language, but was not
sure if the budget reality would match.
Co-Chair Hoffman thought if administration did not believe
the explanation to be true, it should not have been
written.
9:51:05 AM
Senator Olson wondered how much, if any, of the GF dollars
that were allocated in FY 16 had lapsed as a result of the
delay from pushing FY 16 costs into FY 17.
Ms. Pitney stated there was no lapse, and the only reason
the payments were pushed into FY 17 was due to insufficient
funding in FY 16.
Co-Chair MacKinnon asked if there was a vote to access the
Constitutional Budget Reserve (CBR) in FY 16 that could
have accessed the funds.
Ms. Pitney stated that there might have been enough
flexibility within the CBR vote, but because of the
complications with the Xerox system and the implementation
of the IRIS system, the administration had been unclear as
to the amount of the payments. She asked the committee to
recall the prior year's supplemental request that had
overshot the mark.
Co-Chair MacKinnon asked Ms. Pitney if there was a CBR vote
in 2017, and if the administration needed access authority
for the spend.
Ms. Pitney stated that there was a CBR vote, that had a
$100 million UGF limit. The supplemental request was for
$51 million UGF.
Ms. Pitney informed that lines 15, 16, and 17 on page 5
were all grant related items, to receive receipt authority
to execute on grant programs.
Ms. Pitney relayed that lines 18, 19, 20, and 21 on page 6
were grants and technical changes.
Ms. Pitney spoke to line 24, related to the fact that Whale
Pass recently voted to become a Second Class City. The
organizational grant came with a $75,000 UGF grant from the
state.
Ms. Pitney moved to page 7, where lines 25 and 26 pertained
to Department of Fish and Game (DFG). The first item
provided funding for two organizations to continue studies
that had begun in 2013. The second item requested $3
million of DFG funds to match (and thereby utilize) $9
million of Pittman-Roberts federal funds.
Ms. Pitney spoke to line 30, which was a request to allow
the Labor Relations group to carry forward a capital grant
to augment its union negotiating issues. The grant was
started in FY 15, and there was approximately $250,000
remaining.
9:55:41 AM
Ms. Pitney spoke to line 31, which was a reappropriation
from the Department of Public Safety. There had been a
driving range proposed for the Sitka Police Academy, and it
had been considered a more prudent use of funds to pay for
maintenance and upgrade of the ALMR system. The item needed
$4.5 million for the immediate upgrade and maintenance
issues. She thought there would be a forthcoming amendment
for the remaining amount of funds.
Co-Chair MacKinnon recalled language in the previous year's
operating budget that had requested replacement or
dissolution of the system.
Ms. Pitney confirmed that there had been intent language to
find an alternative to the ALMR system, and there had been
two or three past studies and a recent report on the
matter. The study findings had been that ALMR was the best
alternative for the present time. She offered to provide
the report to the committee.
Co-Chair Hoffman referred to line 26, and asked Ms. Pitney
to provide the committee with the targeted use of the $12
million for wildlife management mapping, hunter access
improvements, and the locations with specific items for
each project.
Ms. Pitney agreed to provide the information.
Vice-Chair Bishop asked about Ms. Pitney's reference to a
driving range.
Ms. Pitney explained that the reappropriation for ALMR on
line 31 was from an older appropriation for a driving range
at the Sitka Police Academy. She added that the Alaska
State Troopers heavily depended upon ALMR, and accepted
that the communications system was a higher priority given
the fiscal environment.
Vice-Chair Bishop noted that if the police academy still
needed a driving range, it could reach out to Fort Greely
where there was a racetrack for testing automobiles.
Co-Chair MacKinnon thought the academy was currently using
a school parking lot for driving training.
9:59:46 AM
Ms. Pitney addressed line 32 on page 8 of the supplemental
table; which pertained to a federal grant for health
insurance enforcement and consumer protection.
Ms. Pitney shared that line 33 was a significant
supplemental request for Department of Corrections (DOC)
healthcare components. She detailed that through Medicaid
expansion, the department had been able to move prisoners
who spent more than 24 hours in hospitals on to Medicaid.
The administration had anticipated that there would have
been more savings, and were able to start the program in FY
16. The DOC healthcare component was reduced by $6 million
in FY 17 through the fiscal notes for the Medicaid reform
effort. The department was still receiving benefits through
Medicaid expansion (and would have more participants in the
expansion group), but the general healthcare for DOC was
surpassing the amount appropriated by $11 million.
Ms. Pitney continued, explaining that the supplemental
request was for up to $8 million in GF, and permission to
allow DOC to use any savings it could find in other areas
to offset the cost increase. She detailed that the
department was seeing significant cost increases for items
such as dialysis, Hepatitis-C medications. Additionally,
there were problems with nursing recruitment, and the
department was using overtime as well as temporary nursing
contracts. She reiterated that the department was not
seeing the savings it had anticipated. She emphasized that
the administration was working regularly with DOC to
monitor the situation, and would be working in the
framework of the healthcare authority to negotiate rates.
She noted that the item was the most significant
supplemental item.
10:03:50 AM
Senator Micciche referred to the $8 million appropriation
FY 14 for the PFD Criminal Fund, and wondered if it
occurred every year to go towards DOC healthcare for the
incarcerated population.
Ms. Pitney answered in the affirmative.
Senator Micciche asked if the supplemental request was over
and above the $8 million appropriation.
Ms. Pitney stated that the funds had been allocated, but
the mechanism was a year delayed. For FY 17, the amount of
money was based on the previous year's dividend checks. The
amount would be smaller the following year, and would have
to be made up with another fund source.
Co-Chair MacKinnon asked if the Governor's veto of half of
the PFD related to the cost expenditure. She wondered if
there was an unintended consequence of the veto.
Ms. Pitney specified that in FY 18, the amount of the fund
would be diminished as a result of reduced dividends.
Co-Chair MacKinnon asked if the consequence was
unanticipated.
Ms. Pitney relayed that the reduction of funds was a known
consequence of the veto.
Vice-Chair Bishop thought it might be helpful to have DOC
work with Ms. Pitney. He had chaired the Senate Finance
Budget Subcommittee for DOC for several years, and recalled
that the previous year there had been savings due to
Medicaid expansion, resulting in a lower GF spend. He was
interested in knowing what happened to the estimated
savings.
Co-Chair MacKinnon stated that some cost-drivers had been
raised in the health system, and referred to a new
treatment for Hepatitis-C. She understood that the
treatment was very costly, and wondered if Ms. Pitney had
referred to the new cure.
Ms. Pitney answered in the affirmative, and relayed that
the DOC healthcare treatment for Hepatitis-C was $74,000
per patient. She elaborated that the state had been able to
use a buying consortium in order to receive a relatively
low price. She noted that the occurrence of Hepatitis-C in
prisons was upwards of 20 percent.
10:07:54 AM
AT EASE
10:09:19 AM
RECONVENED
Co-Chair MacKinnon relayed that she had been inquiring
about the cost increase for Hepatitis-C treatment, and
whether the state was seeing a cost increase over time.
Co-Chair MacKinnon asked if Ms. Pitney had recommended
back-filling inmate funds with the Alaska Capital Income
Fund.
Ms. Pitney answered in the affirmative, for FY 18.
Co-Chair MacKinnon asked if there were dollars in the fund
that Ms. Pitney hoped to use for a recurring cost. She
stated that the Capital Income Fund was typically used for
one-time increments for capital projects.
Ms. Pitney stated that in the past, the Capital Income Fund
had been used for one-time increments; but it was a
recurring annual revenue stream.
Ms. Pitney moved to page 9, line 34 of the supplemental
summary, which was a reappropriation for the Alaska
Vocational Technical Center. The funds would allow
rescoping of a deferred maintenance appropriation of the
past to meet the center's most urgent need.
Ms. Pitney communicated that lines 35 and 36 addressed the
most recent judgements and settlements.
Ms. Pitney noted that line 37 pertained to a settlement
between the Department of Transportation and Public
Facilities (DOT) and the U.S. Environmental Protection
Agency (EPA). There had been a consent decree and final
order, involving $8 million to address the Class V
injection wells.
Ms. Pitney noted line 38 was a reduction in the state's
debt service cost due to the refinancing of the Goose Creek
Correctional Center, which resulted in $655,000 in savings.
Co-Chair MacKinnon referred to line 34, and asked if there
was a reason that the funds were not requested in FY 18, or
if the funds were FY 17 money that was expiring.
Ms. Pitney believed that some of the items had FY 17
expirations, while others had a lapse date of FY 18 or FY
19. She thought the line addressed urgent needs.
Co-Chair MacKinnon asked about line 37, and thought that
there had been a one-time request for funds for disposition
of the Class V Injection Wells. She wondered if there was a
new well, or if there had been increased costs or
expenditures. She asked if Ms. Pitney could provide further
clarification.
Ms. Pitney agreed to provide more detailed information at a
later date. She thought earlier funds had been used to
address the first one or two wells in order to demonstrate
progress. Fulfilling the consent decree would satisfy the
EPA's complaint with the state.
Co-Chair MacKinnon had a complaint with the federal
government about the wells that it had left. She asked if
there was a consent decree for the wells that the federal
government had abandoned on federal land.
Ms. Pitney did not track the wells left by the federal
government.
10:13:53 AM
Ms. Pitney looked at line 39 on page 10, which requested $3
million to maintain a balance in the Disaster Relief Fund.
Ms. Pitney noted that there was an item that should have
been included on the sheet - a $15 million supplemental
request for wildfires. She explained that there had been an
oversight within her office, and it would be brought in as
an amendment.
Co-Chair MacKinnon asked if the addition would bring the
overall supplemental request to $130 million.
Ms. Pitney answered in the affirmative.
Co-Chair Hoffman asked if the $15 million was for
anticipated wildfires between the present and June 30th,
2017.
Ms. Pitney answered in the affirmative.
Co-Chair Hoffman asked if it was normal to have wildfires
to that extent between the months of February and June.
Ms. Pitney detailed that only $5 million of the $15 million
was associated with anticipated fires.
Co-Chair Hoffman asked if the difference in funds was to
cover wildfires that occurred prior to the present.
Ms. Pitney stated she would provide documentation of the
costs associated with each associated fire.
Vice-Chair Bishop asked about the omission of the $15
million item.
Ms. Pitney reiterated that the omission had been an
oversight.
Vice-Chair Bishop thought there could be some opportunity
for federal funds for reimbursement for fires.
Ms. Pitney stated that the amount of the request had
accounted for federal funds. The request was for the state
funding portion. She agreed to provide details on the
amount of federal and state funds.
Co-Chair MacKinnon asked if the previous year's request for
fire suppression had been $47 million.
Ms. Pitney responded in the affirmative, and said the funds
were largely lapsed. She stated that the administration was
being much more conservative in its current request.
10:17:34 AM
Senator Micciche referred to line 37, and mentioned the 53
Class V injection wells. He wondered if the Department of
Environmental Conservation (DEC) worked with DOT to make
sure there was compliance with the Safe Drinking Water Act.
Ms. Pitney stated that DOT and DEC would have a much deeper
understanding of the consent decree and linkages.
Senator Micciche thought that $8 million was not
insignificant, and thought perhaps there was a larger
problem.
Co-Chair MacKinnon referenced "travesty" wells on Bureau of
Land Management land, which the federal government had
started to clean up.
Co-Chair MacKinnon asked if Ms. Pitney had covered the
administration's capital request as well as its operating
request.
Ms. Pitney specified that the capital requests were
detailed on page 6, line 24; and page 8, line 25 and line
26.
Co-Chair MacKinnon asked if the capital requests were the
White Pass organizational grant and the Wild Hatcheries
Salmon Management tool.
Ms. Pitney added that the Pittman-Roberts funding was also
included.
Co-Chair MacKinnon thought Co-Chair Hoffman had asked for
detailed follow-up concerning what regions would be
affected by individual projects.
10:20:13 AM
Senator Micciche pointed out his support for the "outside-
of-the-box" thinking on the capital budget. He mentioned
the $75,000 item for the Local Boundary Commission (as
required by state law). He highlighted the Wild/Hatchery
Salmon Management Tools item, which was simply receipt
authority for $5.9 million, and had committed funding from
Pacific Seafood Processors and the Northern Southeast
Regional Aquaculture Association. He wanted to see more
instances where those directly benefitting were willing to
invest in state processes.
Senator Dunleavy commented that he considered Ms. Pitney
and the administration to be going in an opposite direction
as the legislature. He asserted that the Senate was hoping
to reduce the budget by $750 million over seven years. He
requested that the administration go through an exercise to
identify areas in which funds could be shifted to avoid
increases. He emphasized the need for concurrence on the
budget.
Senator Micciche wondered if it would signify an
unallocated cut if Senate support was denied for some
increments in the supplemental bill. He asked Ms. Pitney to
explain how reductions would be managed if increments were
reduced by 50 percent.
Ms. Pitney referred to the DOC healthcare item, in which
the agency had asked for over $11 million. She reported
that the governor's office had pushed back and asked the
department how it could manage it to be less than $11
million within the department organization. She believed
that if the expense could be reduced to $8 million in DOC
as a whole, it would be well-managed. She thought that if
the amount was short-funded, it would require a
ratification in the next year.
10:24:37 AM
Senator Micciche asked if the administration was submitting
a supplemental budget that had already been substantially
scrubbed and reduced where possible. He pondered that if it
was the will of the legislature to push additional
scrubbing and more heavy-handed management of the
increments, the administration would have to absorb the
costs elsewhere.
Ms. Pitney answered in the affirmative.
Co-Chair MacKinnon thanked Ms. Pitney for her presentation.
She discussed the challenging fiscal climate, and referred
to spending from savings accounts. She thought there were
state services that were valued in different ways across
the state. She acknowledged that Ms. Pitney was managing a
difficult position and expressed appreciation for her
efforts. She wondered about the cost of overall personnel.
Ms. Pitney estimated that just over $2 billion of the $10
billion total state budget was personnel. She noted that
there were different proportions of personnel per
department; and the legislature had very high personnel,
while DOT had a fairly low percentage of personnel and a
higher percentage of contractual services. She stated that
as a rule of thumb, nearly 50 percent of the state budget
was sent out directly to providers, communities, or
individuals.
10:27:47 AM
Co-Chair Hoffman referred to the governor's State of the
State and State of the Budget public addresses, in which he
had classified the budget as a potential crisis. In
considering the supplemental budget request, he thought
that the Senate had been pushing for larger cuts than the
governor and House for the previous four years. He thought
it was because of the continued pressure by the Senate that
the state was able to see a diminished operating budget. He
thought many committee members felt that the supplemental
budget being presented was not treating the budget as a
crisis.
Co-Chair Hoffman continued, and shared concerns that there
was an over $60 million request at a time when the state
was in the last stages of using its budget reserves. He
knew the Senate had passed PFD reform, but did not know
what would happen with other revenue measures. He thought
the state needed to look at additional ways to address its
fiscal issues. He emphasized the need for tighter control
of spending, but thought it was not the prevailing position
of the House or the administration. He emphasized that the
state could not continue to have a status quo budget. He
knew that the state needed to continue to provide the
services that Alaskans had enjoyed, but did not know if the
financial means were available to fund the same level of
services.
Co-Chair Hoffman discussed the operating budget and the
5/4/3 plan, which seemed to be extreme at first glance and
included a reduction of $300 million. He mentioned looking
at overall reductions on a percentage basis, and referenced
the previous year's cut to the municipal assistance program
that was 50 cents on the dollar. He suggested that it was
possible to come up with reductions of 5 cents on a dollar.
He thought great strides had been made with reductions, but
thought further cuts were needed. He reiterated that the
budget being presented was a status quo budget, and the
state needed to look at things differently.
10:32:56 AM
Senator Micciche pointed out that DHSS was one of the four
categories of greatest state expenditures, and asked if the
administration had a team charged to evaluate the increase
in healthcare costs. He thought the legislature was
accepting the increases, without aggressively planning for
a reversal. He asked Ms. Pitney to explain the
administration's priority in addressing the healthcare
increase issue.
Ms. Pitney discussed increment requests that were health
cost related. She thought that the state must address
healthcare costs. She informed that the administration had
several teams addressing the issue; including the Division
of Insurance, which was working on the private market area.
She had just returned from a relevant meeting in Washington
D.C. She expected federal relief related to a private
market subsidy of $55 million. Department of Administration
Commissioner Sheldon Fisher was working on the matter with
his team. The area of employee and retiree healthcare
negotiations was being addressed.
Ms. Pitney continued to address Senator Micciche's
question. She discussed the Healthcare Authority
feasibility study, and pondered buying power and the
efficacy of a more combined risk pool. She reported
tremendous work in the area of Medicaid, and thought there
had been 17 different initiatives addressing healthcare
costs and containment. She added that there were school
district healthcare costs, local government healthcare
costs, and private employer healthcare costs. She thought
the only way the state could keep the costs of state
government at bay was through significant healthcare
reform. She relayed that Commissioner Davidson;
Commissioner Fisher; and Department of Commerce, Community,
and Economic Development Commissioner Chris Hladick; and
herself were working together to address the issue at
large. The group wanted to view healthcare in totality
rather than separated in disparate subjects such as
Medicaid, private insurance, and school district insurance.
10:38:10 AM
Senator Micciche referenced the DOC request for $34 million
of UGF, which was 75 percent related to healthcare costs.
He referred to the possibility of a white paper summarizing
the list of efforts happening concurrently. He was in
support of a spending limit. He thought if the state did
not get control of the healthcare costs it would be
challenging in the future.
Senator von Imhof asked why the state should be responsible
for absorbing the lion's share of healthcare cost increases
each year.
Ms. Pitney was not sure.
Senator von Imhof asked about stakeholders in the
healthcare industry in the state, and thought it seemed as
if the state seemed to be absorbing the majority of
healthcare cost increases for teachers and public
employees.
Ms. Pitney stated that there was more of the cost being
passed to employees in the current year, as well as a
forthcoming increase the subsequent year. She pondered to
what degree it would be possible to pass on the costs of
the premium, including to the provider community.
Senator Olson referred to comments by Senator Micciche and
thought the legislature seemed to have a resistance to
increased revenues. He wondered how different the
administration's requests would be if there was an income
tax or similar revenue measure in place.
Ms. Pitney stated that the administration was very
committed to reducing costs and cost containment. She
considered that the revenue strategies put forward by the
administration just filled the fiscal gap to meet the
current level of budget. She thought there needed to be a
plan to address the lack of capital spending in the state.
She recalled that the governor's proposed budget reduced
agencies by $127 million, with a net $60 million counting
fund source changes. The changes were offset by increase in
oil and gas tax credits, the minimum capital budget
requirements, and paying the full community debt
reimbursement amount.
Ms. Pitney continued that the administration was committed
to additional reductions, which were needed just to stay
even in any given year. Additionally, the administration
was committed to filling the $3 billion structural deficit
with revenue.
10:43:38 AM
Senator Olson discussed cost containment, and thought there
were detrimental effects associated with cuts to programs
like Head Start, and public safety. He mentioned problems
in his district associated with diminished funding airports
and police response time. He mentioned community revenue
sharing, which was important to small villages. He wanted
to ensure that such items were not cut too deeply so as to
impact necessary services.
Co-Chair MacKinnon discussed the schedule for the following
day.
SB 43 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:45:49 AM
The meeting was adjourned at 10:45 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 029717 SFIN FY17 Supplemental Overview 7.pdf |
SFIN 2/7/2017 9:00:00 AM |
SB 43 |