Legislature(2019 - 2020)SENATE FINANCE 532
02/25/2019 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB20 | |
| Department of Labor and Workforce Development | |
| Department of Administration | |
| Department of Commerce, Community and Economic Development | |
| Office of the Governor | |
| Department of Revenue | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 20 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
February 25, 2019
9:01 a.m.
9:01:00 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Peter Micciche
Senator Donny Olson
Senator Mike Shower
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Lacey Sanders, Budget Director, Office of Management and
Budget; Cheryl Lowenstein, Administrative Services
Director, Department of Administration, Office of
Management and Budget; April Wilkerson, Administrative
Services Director, Department of Commerce, Community and
Economic Development, Office of Management and Budget;
Shawn Henderson, Administrative Services Director, Office
of the Governor; Brad Ewing, Administrative Services
Director, Department of Revenue, Office of Management and
Budget; Mike Barnhill, Policy Director, Office of
Management and Budget; Paloma Harbour, Director, Division
of Administrative Services, Department of Labor and
Workforce Development; Senator Cathy Giessel; Senator Gary
Stevens; Senator Mia Costello.
SUMMARY
SB 20 APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 20 was HEARD and HELD in committee for further
consideration.
SENATE BILL NO. 20
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making appropriations under art. IX,
sec. 17(c), Constitution of the State of Alaska, from
the constitutional budget reserve fund; and providing
for an effective date."
9:04:17 AM
LACEY SANDERS, BUDGET DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, discussed the presentation, "State of Alaska;
Office of Management and Budget; FY 2020 Governor's Amended
Budget; Presentation to the Senate Finance Committee;
February 25, 2019; Budget Director Lacey Sanders" (copy on
file).
^DEPARTMENT OF LABOR and WORKFORCE DEVELOPMENT
9:04:33 AM
PALOMA HARBOUR, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT,
looked at slide 3, "FY2020 Budget: Department of Labor and
Workforce Development."
Senator Micciche queried the detail on the shift to DGF as
realizable revenue.
Ms. Harbour spoke to the question in the following slide.
Ms. Harbour highlighted slide 4, "FY2020 Budget: Department
of Labor and Workforce Development Snapshot ($ Thousands)":
? Discontinued Alaska Mental Health Trust Agreement (-
$125.5 GF and -1 FT)
? Decrease UGF to Offset Technical Vocational
Educational Program (TVEP) funding for the Alaska
Vocational Technical Center (+/-$261.7 Net Zero
Change)
? Statewide Support Executive Branch 50 percent
Travel Reduction (-$146.7 GF)
Co-Chair von Imhof wondered whether it was adjusted
annually based on expected DGF.
Ms. Harbour replied that it changed every year, depending
on the amount believed in the fund based on projections.
She stated that, in the last three years, there were
declines in the TVEP funding for the recipients of the
funding. She furthered that there were currently increases.
Co-Chair von Imhof requested commented on the anticipated
increase, and how it would be extrapolated to FY 21.
Ms. Harbour replied that the fund was doing well, and total
wages had not declined as anticipated. She stated that, for
FY 20, the total increase for all recipients was $1.5
million. She remarked that there was an economist in the
department that provided future year projections, and it
was expected to grow moving forward.
Senator Shower wondered whether the 50 percent travel
reductions was relative to the growth or decline of the
budget.
9:10:23 AM
Ms. Sanders replied that the travel reduction was applied
to the FY 18 actual expenditures in the travel line.
Ms. Harbour furthered that it was addressed in her third
bullet.
Senator Olson queried the impact of the second bullet on
TVEP.
Ms. Harbour agreed to provide the list of the full
recipients. The total increase was $1.5 million for all
recipients, but the amount by recipient depended on the
statutory formula.
Senator Olson wondered whether the proposal was in increase
or decrease.
Ms. Harbour replied that it was an increase.
Senator Bishop stressed that it was important to note that
it was paid for by the employees.
^DEPARTMENT OF ADMINISTRATION
9:12:55 AM
CHERYL LOWENSTEIN, ADMINISTRATIVE SERVICES DIRECTOR,
DEPARTMENT OF ADMINISTRATION, OFFICE OF MANAGEMENT and
BUDGET, addressed slide 6, "FY2020 Budget: Department of
Administration."
Co-Chair von Imhof looked at slide 7, which showed two
bullet points. She wondered whether her question could be
addressed on the slide.
Co-Chair Stedman replied in the affirmative.
Co-Chair von Imhof noted that the internal services had
increased in the Department of Administration (DOA) in
consolidating the duties of other agencies. She wondered
whether there was a corresponding reduction in other
agencies.
9:20:07 AM
Ms. Lowenstein replied that between FY 18 and FY 19 there
was a transfer of 140 positions. The funding remained in
the agencies, and the utilization of the services resulted
in charging of the agencies. She remarked that there could
be a reduction in the charge back once more efficiencies
were addressed.
Co-Chair von Imhof wondered whether the $26 million was an
increased.
Ms. Sanders noted that there were duplicated fund sources
in DOA. She noted that the agencies were paying into the
duplicated funds, which is why there was not a net
reduction in the agencies.
Co-Chair von Imhof queried the reason for the $26 million
increase.
Ms. Sanders replied that the amount was the budgeted cost
to DOA for the duplicated fund sources.
Co-Chair Stedman surmised that it was a net zero.
Ms. Sanders disagreed. She explained that the departments
were paying DOA for their services.
Senator Micciche noted the increase. He remarked that he
was the subcommittee chair for DOA, and wanted detail on
the interagency interplay specific to that shift.
Senator Shower requested a list of consolidated services
into DOA. He queried the number of vacant budgeted
positions statewide, and how it compared to the necessary
vacancy rate.
Senator Hoffman wondered whether the positions were not
physically moving to a facility in DOA.
Ms. Lowenstein replied in the affirmative.
Senator Hoffman queried the circumstance that would cause
that not to occur.
Ms. Lowenstein replied that it would occur, should there be
a service that only one person could provide to that
agency.
Co-Chair Stedman asked for more detail about that question,
and requested that it be submitted to the subcommittee
chair.
9:25:01 AM
Senator Hoffman wondered whether there would be an
expectation that the position stay in the same community.
Ms. Lowenstein replied that there were some positions that
were transferred and unable to fill.
Senator Olson noted that there was no money for managing
the assets in public broadcasting.
Co-Chair Stedman asked that slide 7 be addressed before
answering Senator Olson's question.
Ms. Lowenstein highlighted slide 7, "FY2020 Budget:
Department of Administration Snapshot ($ Thousands)":
? Withdraw State Grant for the Alaska Public
Broadcasting (-$3,496.1 GF)
? Statewide Support Executive Branch 50 percent
Travel Reduction (-$459.1 GF)
Senator Olson noted that there was no money for managing
the assets in public broadcasting.
Ms. Lowenstein agreed, and replied that no funding was
available for grants to the stations.
Co-Chair von Imhof recalled a discussion about adding $23
million, and wondered who would see the savings.
Ms. Lowenstein replied that it was savings to the Health
Trust, so it would reduce the health care costs.
Senator Shower queried the number of budgeted but vacant
positions.
Ms. Sanders agreed to provide that information.
Co-Chair von Imhof wondered whether the financials of the
Health Care trust public.
Co-Chair Stedman and if not, why not.
Ms. Lowenstein replied that the financials were published
in the comprehensive annual financial report from the
Division of Finance, so she agreed to provide that
information.
^DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT
9:30:40 AM
APRIL WILKERSON, ADMINISTRATIVE SERVICES DIRECTOR,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
OFFICE OF MANAGEMENT and BUDGET, looked at slide 9, "FY2020
Budget: Department of Commerce, Community and Economic
Development."
Ms. Wilkerson highlighted slide 10, "FY 2020: Department of
Commerce, Community and Economic Development Snapshot ($
Thousands)":
? Reorganize and Consolidate the Division of Economic
Development (-$243.4 GF and -2 PFT)
? Realign Local Government Support and Services
(-$1,000.0 GF)
? Withdraw Subsidy to Alaska Legal Services
Corporation (-$450.0 GF)
? Power Cost Equalization (PCE) Program Fund Source
Change (+/-$32,355 Net Zero Change)
? Statewide Support Executive Branch 50 percent
Travel Reduction (-$354.2 GF)
Senator Wilson noted that the governor's budget had
increases in focusing on crime and reducing rates of
domestic violence. He remarked that most domestic violence
victims were often fought in the civil process. He queried
the reason for the reduction in Alaska Legal Services
Corporation to assist those victims.
Ms. Sanders replied that it was a named recipient grant
that was not statutorily required, and was identified
outside of the core services for Department of Commerce,
Community and Economic Development (DCCED).
9:35:46 AM
Senator Wilson asked whether the money be better placed in
the Department of Public Safety (DPS).
Ms. Sanders replied that it was placed within DCCED,
because the department had authority to issue named
recipient grants.
Senator Shower felt that Senator Wilson's concerns were
placed in the crime bills.
Ms. Sanders replied that she was not familiar with
inclusion, but agreed to provide more information.
Senator Hoffman remarked that DOA wanted to protect savings
accounts, and stressed that the Power Cost Equalization
(PCE) fund was a savings account that did not follow that
philosophy. He wondered whether the intent was to transfer
the amount in the fund to GF.
Ms. Sanders replied that the proposed legislation would
eliminate the PCE fund, and return the funds to GF. The PCE
program would continue with general funds.
Senator Hoffman felt that there were inconsistencies with
how the savings accounts were being protected, and went
against what the administration had asserted. He felt it
was a major mistake to not protect the particular savings
account.
Co-Chair Stedman requested more information on the PCE
endowment fund.
Ms. Sanders recalled that the legislature had passed
legislation that allowed for the excess earnings of the
funds to be utilized for specific programs. The excess
earnings were only utilized after the initial program was
funded. The governor's amended budget had funds for PCE had
been replaced with general funds.
9:40:32 AM
Co-Chair von Imhof expressed concerns about rolling the
funds into the GF. She stated that the original spirit of
PCE was to help rural Alaska address high energy costs. She
noted that there were other agencies that could help rural
Alaska with their energy costs, and the PCE provided that
assistance.
Senator Micciche queried discussions about eliminating the
DCCED and absorb their costs into other departments, and
the reasons why or why not.
Ms. Sanders replied that there were conversations for all
agencies in reviewing core services and programs. She
stated that DCCED's budget was not being proposed to be
consolidated within another agency.
Senator Bishop remarked that PCE was a working program, and
felt that the earnings were more as an endowment than would
be earned in the general fund.
Senator Olson remarked that PCE was not designed as a
subsidy for rural Alaska, rather it was designed for all
residents of Alaska. He wondered whether there were
complicated fund shifts in the community assistance
program, with the addition of the alcohol tax. He queried
the ultimate outcome of those shifts.
Ms. Sanders replied that along with the PCE, the community
assistance fund was also proposed to be eliminated.
9:45:35 AM
Senator Olson wondered what the communities could
anticipate in the following year.
Ms. Sanders replied that there would be an annual
appropriation of $30 million in the operating budget.
Co-Chair Stedman wondered whether that appropriation was a
commitment.
Ms. Sanders replied that there was $30 million that would
flow out directly in FY 20. She stated that there would be
future proposals with general funds.
Senator Hoffman asserted that after community assistance,
the funds would go toward rural energy. He explained that
there was a law that gave the funds to the renewable energy
to program to encourage people to apply to get renewable
energy to put less pressure on the PCE.
Co-Chair Stedman noted that that it was difficult to level
the energy costs throughout the state.
^OFFICE OF THE GOVERNOR
9:49:40 AM
SHAWN HENDERSON, ADMINISTRATIVE SERVICES DIRECTOR, OFFICE
OF THE GOVERNOR, looked at slide 12, "FY2020 Budget: Office
of the Governor."
Mr. Henderson addressed slide 13, "FY2020 Budget: Office of
the Governor Snapshot ($ Thousands)":
? Reduce Contingency fund (-$300.0 GF)
? Consolidate Administrative Services Directors
(+2,706.3 I/A and +13 PFTs)
? Statewide Support Executive Branch 50 percent
Travel
Reduction (-$618.7 GF)
Senator Olson wondered how many of the added positions were
partially exempt or exempted positions.
Mr. Henderson agreed to provide that information.
Co-Chair von Imhof wondered whether it was a net zero with
the adjustment of positions.
Ms. Sanders replied in the affirmative.
Senator Hoffman wondered how much would be left with the
reduction of $300,000 in the fund for the last two years.
9:55:06 AM
Mr. Henderson replied that the contingency fund would be
reduced by $300,000, which left the balance at $250,000.
The only funding used out of that account in the year prior
were transition related costs.
Senator Micciche wanted to understand the shift in
responsibilities showing an approximately $30 million
increase.
Ms. Sanders responded that the $3 million was reflected in
the green bar, but was not familiar with the $30 million
change.
Senator Micciche explained that there was a jump in DOA.
Ms. Sanders remarked that it showed in the green bar, but
was significantly less.
^DEPARTMENT OF REVENUE
10:00:20 AM
BRAD EWING, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT OF
REVENUE, OFFICE OF MANAGEMENT and BUDGET, looked at slide
15, "FY2020: Department of Revenue."
Co-Chair von Imhof noted the blue bar large jump. She
stated that "cash is king" in the world of finances. She
heard the statement about bonuses and compensation for the
Department of Revenue (DOR) was paid in net fees.
Mr. Ewing stated that, in the Permanent Fund Corporation,
60 percent of the investments were externally managed and
40 percent were internally managed. There were fees
associated with the externally managed funds.
Ms. Sanders requested a "lifeline."
10:07:12 AM
AT EASE
10:07:35 AM
RECONVENED
10:07:52 AM
Mr. Ewing highlighted slide 16, "FY2020 Budget: Department
of Revenue Snapshot ($ Thousands)":
? Align Management Fees with Actuals:
? Alaska Permanent Fund Corporation (+$269,501.3
Other)
? Alaska Retirement Management Board (+$60,000.0
Other)
? Treasury Division (+$117.2 GF and +$70.4 Other)
? Deregulate Small Charitable Gaming (-$212.2 Other
and -2 PFT)
? Statewide Support Executive Branch 50 percent
Travel Reduction (-$53.3 GF)
10:09:15 AM
MIKE BARNHILL, POLICY DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, shared that there had been various practices in the
different contexts for illiquid investment management fees
be paid directly from the cash flow of those investments.
For all other liquid investments, the fees were paid by
check or wire from either the Permanent Fund Corporation or
the Department of Revenue. He explained that only the
latter category for which an appropriation had been sought
historically. The investment management of illiquid funds
was not free, and was substantially more expensive than the
active investment management of domestic, international and
fixed income securities.
Co-Chair von Imhof noted that the $328 million was
increased from FY 19 to FY 20 in the management fees. She
wondered whether it was an additional cash outflow from the
DOR to illiquid investment managers.
Mr. Barnhill replied that DOR had switched the billing, so
it was almost all paid from cash flow. He furthered that
there should be a focus on the total cost of investment
management for the funds.
Senator Micciche wondered where the cash outflow was
previously located, and why it was an increase in DOR for
$330 million.
Mr. Barnhill replied that, in the past for illiquid
investments, the investment management fees were paid from
the cash flow of the investment.
Co-Chair Stedman surmised that it was paid without an
appropriation.
Mr. Barnhill agreed.
Co-Chair Stedman stated that it was usually off of the
balance sheet.
Mr. Barnhill replied that there were different treatments
about the reporting of investment management fees.
Senator Hoffman wondered whether there was similar
legislation to charitable gaming on the House side.
Mr. Barnhill replied that he was not aware of similar
legislation currently in the House.
Senator Hoffman asked for the reason there was not similar
legislation.
Mr. Barnhill agreed to provide further information.
10:15:14 AM
Senator Micciche wondered why it mattered that it be
reported as a gross rather than net when there was not an
increase or decrease in the investment fees.
Mr. Barnhill replied that transparency with respect to
investment management fees was something that was a focus.
He remarked that the more investment fees one had would
impact the returns.
Co-Chair Stedman recalled that the committee had examined
for years about whether it was net or gross of fees in the
presentation and performance.
Senator Micciche requested a list of the liquid and
illiquid categories.
Mr. Barnhill replied that the investment management fees in
the Permanent Fund liquid investment with the expenses of
the corporation totaled just over $151 million.
10:17:21 AM
AT EASE
10:17:36 AM
RECONVENED
10:17:38 AM
Mr. Barnhill restated that the management fees associated
with the liquid investments paid for by appropriation was
just under $119 million. He that the management fees
associated with the illiquid investments paid for by
appropriation was $276.4 million. The fees for the
corporate expenses were just under $24 million.
Senator Hoffman wondered whether there was a difference in
the funds that were contracted, and the funds that were
invested internally.
Mr. Barnhill agreed to provide that information.
Senator Wielechowski queried the plan for the dividend
payout.
Mr. Barnhill replied that the position of the current
administration was that the dividend be paid outside of the
operating budget, so there was separate legislation.
Senator Shower surmised that it was the most transparent
way to see the spending by the administration. He wondered
whether there were other places to show actual spending.
Mr. Barnhill replied that there were a variety of ways to
show transparency in management fees.
Senator Wielechowski wondered whether there was a separate
appropriation for the dividend or whether there would be an
automatic transfer.
Mr. Barnhill replied that there would not be an automatic
transfer, and there would be a separate bill for an
appropriation for the dividend.
SB 20 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:23:14 AM
The meeting was adjourned at 10:23 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| FY2020 Gov Amend Budget to SFC 2.25.19 DLWD DOA DCCED GOV DOR.pdf |
SFIN 2/25/2019 9:00:00 AM |
SB 20 |
| 022519 FY2020 TVEP Distribution.pdf |
SFIN 2/25/2019 9:00:00 AM |
SB 20 |
| 2.25.19 OMB Response.pdf |
SFIN 2/25/2019 9:00:00 AM |
SB 20 |
| FY19 Budgeted Vacant PCNs as of 1-15-2019.pdf |
SFIN 2/25/2019 9:00:00 AM |
SB 20 |
| FY19 Mgt Plan to FY20 Gov Amend Federal Funds Comparison.pdf |
SFIN 2/25/2019 9:00:00 AM |
SB 20 |