HOUSE BILL NO. 307 "An Act making supplemental appropriations, capital appropriations, and other appropriations; amending appropriations; repealing appropriations; making appropriations to capitalize funds; and providing for an effective date." 2:38:47 PM KAREN REFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, discussed that she would provide an overview of HB 307 and would highlight supplemental budget items on a spreadsheet titled "FY 2012 Supplemental Requests"(copy on file). Ms. Rehfeld discussed that the FY 12 proposed supplemental budget totaled $97,236,400. She provided a breakdown of the total: Unrestricted General Funds $78,514,700 Designated General Funds ($2,350,600) Other Funds $4,810,000 Federal Funds $16,271,300 Ms. Rehfeld explained that within the supplemental request agency operations totaled $38.9 million; $30.4 million was general fund. The request included: Fire Suppression $4.9 million Disaster Relief $3.0 million Formula - Adult Public Assistance $2.6 million Ms. Rehfeld relayed that the capital supplemental for emergency repairs and projects that were ready to go to bid during the upcoming summer totaled $20.4 million; $10.1 million was general fund. The bill included two significant settlements: (1) a $20 million settlement was reached with the Department of Law for the Optional Retirement Program $20.0 million; and, (2) an $18 million settlement was reached with the Department of Education and Early Development for the Moore case. She explained that the bill had 18 sections. 2:42:34 PM Ms. Rehfeld pointed to items 4 through 7 related to Department of Commerce, Community and Economic Development (DCCED) (page 1 of the spreadsheet). She detailed that there had been challenges with the Corporations, Business and Professional Licensing (CBPL) Division fee structure and how it had charged various programs for indirect and other activities. The division had been working to capture what some of the problems had been for the past several years. Item 6 was the largest item and related to an adjustment for licensing fees: Corporations, Business and Professional Licensing: Adjustment for Licensing Fees - Fund source change from professional licensing receipts (receipt supported services) to the general fund to reimburse the professions for historical indirect cost overpayments that were associated with the Business License and Corporations programs. This is a one-time fund change. General Fund Receipt Supported Services $0.0 Ms. Rehfeld expounded that the professional licensing fees were supposed to be self-supporting; however, as the charges were incorrectly tagged to certain boards the fees had gone up. The one-time change would allow the fees to carry forward into the upcoming year, which would help smooth cost increases over time. Other CBPL items were related to indirect charges associated with support for professional licensing boards. She believed legislative subcommittees would spend a substantial amount of time on the issues. Co-Chair Thomas pointed to page 1, item 2 related to the Public Defender Agency (PDA) under the Department of Administration. He pointed to the backup materials (Section 1, page 2) and asked about the $125,000 for a new lease remodel for Kotzebue and an additional $150,000 for "other anticipated but unbudgeted maintenance." He opined the items should have been in the FY 12 budget. Ms. Rehfeld agreed. She explained that the administration had worked hard in the past several years to avoid not budgeting and using the supplemental to fall back on. She detailed that the budgets for the Office of Public Advocacy (OPA) and the PDA had been among the most difficult budgets because the administration had not been able to address the increasing caseloads in a reasonable way. Work was underway to determine a better way to budget for the two agencies in the future. Co-Chair Thomas wondered whether the $45,000 for an unbudgeted computer upgrade was for more than one computer. He repeated his concern about unbudgeted items. 2:48:03 PM Ms. Rehfeld replied that the PDA item would be detailed further during the subcommittee process. Representative Gara asked about a $244,000 increase for support for CBPL boards and commission members (page 1, item 4 on the spreadsheet). He wondered why the amount had been increased by 75 to 80 percent from the prior year. Ms. Rehfeld replied that the professional licensing boards were supposed to be self-sufficient; however, because of some business accounting challenges the state had not been able to track expenses to the right boards. She believed that the bill and the FY 13 budget tried to correct the issue through the fees paid by the boards. Representative Gara remarked that it was fine if the amount reflected reimbursement to boards that had put the funding in; however, he was concerned if the money was additional. Representative Joule referred to page 1, item 9 associated with Department of Corrections (DOC) community jails. He wondered how the $600,000 was broken out between the 15 community jails. The administration had brought forward $190,000 for the Kotzebue community jail the prior year; money had been moved around within the line item and the Kotzebue jail had been shorted by approximately $125,000. He asked whether the item included funds to cover the jail. Ms. Rehfeld believed there was a specific line item that covered the Kotzebue jail. She relayed that DOC had scheduled a meeting with the jail to discuss reopening; some of the funds in item 9 would help with the reopening. The item would be considered for the amended budget as well. Part of the issue related to how community jails were funded; the department was working to come up with a blended per bed rate to allocate funding to avoid the situation that had occurred when the jail had closed. 2:53:42 PM Vice-chair Fairclough communicated that according to the backup the Kotzebue jail was scheduled to reopen on February 1, 2012. She wondered whether the facility had reopened. Ms. Rehfeld replied in the negative. She restated that DOC was scheduled to meet with the jail to discuss reopening. Vice-chair Fairclough asked about a $75,000 budget item related to dispatching services for Kotzebue. Ms. Rehfeld replied that the item was for the Department of Public Safety (DPS) and was not related to the Kotzebue jail. Vice-chair Fairclough observed that the dispatch services had been paid for in matching funds previously, but would be charged to the state under the proposed budget. Ms. Rehfeld informed the committee that there was a DPS request for transportation during the time the Kotzebue jail was closed. Ms. Rehfeld pointed to page 2, item 10 for the Department of Education and Early Development (DEED): Student and School Achievement: Comprehensive System of Student Assessments Contractual Costs: this additional funding is needed to accommodate the negotiated contract for the Comprehensive System of Student Assessments. The FY 2013 Governor's budget includes an additional $750.0 for modified contract terms. General Fund $1,000.0 Ms. Rehfeld elaborated that an increase in the FY 13 budget had been included for standards based assessments. Representative Wilson believed that funding had not been included for the standards-based assessments for a couple of years and that the item made up for the error. Ms. Rehfeld believed the funding was for existing contract increases. She deferred the question to DEED for follow up. Representative Wilson had received a different response from DEED. Ms. Rehfeld replied that they would follow up on the question later. 2:56:23 PM Ms. Rehfeld highlighted Department of Health and Social Services (DHSS) items 14 through 16 on page 2: Item 14 Adult Public Assistance: Adult Public Assistance Caseload Growth - Increased program enrollment, particularly in the disabled and blind category - tied to the dramatic growth in the Alaska senior population. A $6,075.0 increment is included in the FY 2013 Governor's budget. General Fund $2,600.0 Item 15 Energy Assistance Program: Low Income Home Energy Assistance Program (LIHEAP) and Alaska Affordable Heating Program for the state based on projected needs. The impact of this supplemental request is being considered for a FY 2013 budget amendment. General Fund $928.7 Item 16 Energy Assistance Program: Low Income Home Energy Assistance Program (LIHEAP) and Alaska Affordable Heating Program for Tribes based on projected needs. The impact of this supplemental request is being considered for a FY2013 budget amendment. General Fund $1,691.6 Representative Edgmon asked whether the public assistance item had been included to meet increased caseload demand and expected federal shortfalls. Ms. Rehfeld replied that item 14 was based on increased demand. There was also contingency language that was dependent on the amount of federal funding that would be provided. The item was designed to fill the shortfall in the projection for the remainder of the fiscal year. She expected to receive updated numbers in the future. Ms. Rehfeld pointed to page 3, item 23 related to the Department of Law: Oil, Gas and Mining: Oil and Gas Outside Counsel - Increased litigation costs for oil and gas outside counsel attributable to three types of cases: tariff proceedings; Trans Alaska Pipeline System (TAPS) property tax proceedings; and oil and gas royalty issues. An increment of $6,150.0 is included in the FY2013 Governor's budget and is based on anticipated caseload. General Fund $3,116.0 Ms. Rehfeld discussed item 25 for the Department of Military and Veterans Affairs (page 3): Office of the Commissioner: Base Realignment and Closure Commission Impact - Department of Defense Secretary Leon Panetta has announced that the plan to cut nearly $500 billion in the next 10 years from the Department of Defense budget will impact all 50 states and a Base Realignment and Closure Commission (BRAC) will be requested of Congress to address facility reductions as soon as possible. The U.S. military's presence in Alaska represents 10% of the state's economy. The Alaska Military Force Advocacy and Structure Team (AMFAST) recommends the State of Alaska hire an experienced consulting group to address ideas proposed by the next BRAC. This request will promote and sustain Alaska's current military facilities and force structure. The impact of this request is being considered for a FY2013 budget amendment. General Fund $300.0 Co-Chair Thomas remarked that a resolution passed by the Senate discouraging the closure of military bases in Alaska had left out Coast Guard bases. He stressed that Coast Guard bases were very important to rural and Southeast Alaska and would be included in the House resolution. 3:00:17 PM Representative Gara referred to the $3 million outside counsel appropriation (page 3, item 23). He opined that it was less expensive to hire in-house counsel for research memos, briefings, and other. He wondered why the state should pay more money for outside counsel when the work could be done in-state. Ms. Rehfeld replied that there were excellent attorneys doing great work in the areas that needed assistance on some of the important larger ongoing cases. She relayed that it was possible for some of the work to be done by a line attorney if the state was willing to bring on additional employees; however, that was not the approach that had currently been taken. The item had been on the administrations list to include in the operating budget each year, but a supplemental request was usually required. Representative Gara noted that he had worked on the Exxon Valdez oil spill case and the state had hired outside counsel at that time as well. He explained outside counsel had done work that should have been done in-house. He believed that administrations had used outside counsel to keep the state employee count down, but it actually cost the state more money. Co-Chair Thomas commented that sometimes the state needed to hire former state attorneys who had done significant work on specific cases in order to gain their expertise. 3:03:55 PM Ms. Rehfeld flagged Department of Natural Resources item 35 (page 4): Fire Suppression Activity: FY2012 Fire Suppression Activity - This is a preliminary estimate of supplemental needs for spring firefighting and costs of initial attack of wildland fires through June 30, 2012. General Fund $4,892.5 Ms. Rehfeld directed attention to page 5, item 38 for DPS Alaska State Trooper detachments: Replace Federal Pass through Funds from Alaska Highway Safety Office - The Alaska Bureau of Highway Patrol will no longer receive federal funds for non-DUI related traffic enforcement. In order to maintain traffic enforcement to include non-DUI specific activity, such as impaired driving, youth drivers, aggressive driving and speeding, and seat belt enforcement, supplemental funding is necessary as the current budget cannot absorb these costs. Additional federal funding reductions are anticipated for DUI- related traffic enforcement starting in FY 2014. The impact of this supplemental request is being considered for a FY 2013 budget amendment. General Fund $1,900.0 Ms. Rehfeld expounded that the Department of Transportation and Public Facilities (DOT) would continue to receive federal highway safety funds, but the amount of funds related to driving under the influence (DUI) would be less. She noted that the issue would continue to be monitored, given the importance of ongoing DUI and non-DUI related enforcement on the highway safety corridors. Representative Doogan surmised that the federal government had discontinued funds and the state had become responsible for funding items with general fund money. Ms. Rehfeld responded in the affirmative. She clarified that continued work would not be funded through the specific highway safety grant. Representative Doogan wondered whether an evaluation had been made to determine whether the items should be continued or lapsed. Ms. Rehfeld replied that the governor considered the issues and had brought forward items that warranted ongoing work. 3:07:52 PM Representative Joule pointed to item 37 on page 5 in the amount of $106,000 for DPS jails and prisoner transportation. He did not know what time period had been used or whether there had been earlier expenses. He pointed to a $75,000 expenditure (item 36) and wondered how much the items would end up costing the state; he thought costs could have been saved. He discussed the difficulties related to transportation of prisoners from rural areas, many of which did not have holding facilities. He believed the state was beginning to realize that it had had a good deal. He hoped that a deal between Kotzebue and the administration could be settled. Ms. Rehfeld agreed. She understood that progress had been made and the administration hoped for a positive outcome. Co-Chair Thomas remarked that the seatbelt law had been implemented because the federal government would pay for the enforcement. He wondered whether the law would be repealed if the federal funding was taken away. Ms. Rehfeld answered that item 38 did not relate to seatbelt enforcement, which was attached to a different federal highway safety funding stream. Vice-chair Fairclough referred to bad weather conditions in Eagle River and Anchorage that had resulted in road closures and stranded drivers. She wondered whether substantial funds had been included for highway safety. She was concerned that residents would have been unreachable in emergency situations. She understood that DOT was working to stay on top of the issue. She pointed to two appropriations for $100,000 apiece for sanding and snow removal and wondered whether the amount was enough. Ms. Rehfeld responded that DOT would do what was needed to protect the safety of citizens. She expected the numbers would be refined during session to account for disaster relief. 3:14:00 PM Representative Neuman was concerned that the long-term programs (e.g. item 38) that had been funded by the federal government in the past almost became embedded in the operating budget. He wondered whether there was a way to identify federal funds that were not coming or if the state was backfilling them with general funds. Ms. Rehfeld replied that the administration worked with the departments to identify what they knew looking forward; typically the reductions and timing were not known very far in advance. She explained that the co-chair had requested a look-back on federal funds that could be identified as going away. The issue also involved funds that had gone directly to institutions, organizations, or communities; there would be pressure for the state to look at the items to determine whether it should continue them. She pointed to the DPS DUI enforcement federal grant change that specified allowable and unallowable costs as an example of an issue the state would need to address. Representative Neuman was interested in a ten-year forward plan that showed which federal funds the state would not receive. He believed there were many important non-state items that the state could become overloaded with when funding was lost. Ms. Rehfeld moved to DOT item 50 on page 6: AIA Field and Equipment Maintenance: Purchase De-icing Chemicals - In FY2011, the cost per ton of urea increased from $342 per ton to $719 per ton. Also, the airport has commissioned a third new tank for potassium acetate in order to mitigate continuing supply shortages. An increment of $1,634.5 has been included in FY 2013 Governor's budget. International Airport Revenue Fund $1,634.5 Ms. Rehfeld looked at item 52, page 6 related to the University of Alaska: Anchorage Campus: Federal Receipt Authority for Pell Grants - Additional federal receipt authority is needed to accommodate the increases in Pell grant activity. A related FY 2013 budget amendment is also being considered. Federal Receipts $5,000.0 Ms. Rehfeld directed attention to capital items; there were several items that were emergency in nature or could go to bid during the upcoming summer if the funding authority was moved up. She highlighted a DOC Yukon-Kuskokwim Correctional Center Dorm Renovation Project for Bethel (item 55, page 7): This project is necessary to replace capital funding that was redirected from other projects to address an emergency with overcrowding at Yukon-Kuskokwim Correctional Center (YKCC). The YKCC Dorm Renovation Project adds 28 additional bunks, increasing the offender housing capacity to 193. General Fund $1,284.5 Ms. Rehfeld furthered that DOC had used deferred maintenance funds that had been slated for other projects in order to complete the work; therefore, item 55 would provide the department with replacement funds. She looked at item 57 on page 7 that funded $1.1 million for a Kenai River parcel purchase from the Exxon Valdez Oil Spill Settlement (EVOSS) trustee council. The purchase would provide public access to the river. Co-Chair Thomas thought EVOSS funds were only designated for oil damaged properties. Ms. Rehfeld explained that the EVOSS council had recommended the fund source for the Kenai land purchase. She could not speak to the requirements of the EVOSS funding. Co-Chair Thomas thought follow up on the item was necessary. Ms. Rehfeld pointed to DOT items 59 and 60 on page 7: Item 59 Alaska Marine Highway System - Cordova Dock Emergency Repairs - The existing float system of the Cordova Dock needed emergency repairs in the fall of 2011. General Fund $1,200.0 Item 60 Alaska Marine Highway System - Vessel and Terminal Overhaul and Rehabilitation - Vessel and terminal overhaul and rehabilitation is primarily used to meet and maintain United States Coast Guard requirements and obtain Certificates of Inspection (COI) necessary to operate the vessels. Total spending this year is slightly higher than previous years due to the one- time $1.2M propeller shaft strut replacement work required by the Malaspina in order to clear a pending CG-835 No-Sail order which was about to expire. General Fund $5,455.0 Ms. Rehfeld relayed that in the past several years $7 million to $8 million had been included annually in the budget for overhaul work on state ferries. 3:20:59 PM Vice-chair Fairclough wondered which project had excess funds that had been redirected to fund the Bethel Yukon- Kuskokwim correctional facility (item 55, page 7). Ms. Rehfeld replied that the deferred maintenance money had been diverted from other projects in order to address immediate emergency overcrowding in the correctional facility; the funding would allow DOC to complete the projects that had been shorted funds. Vice-chair Fairclough asked why the Kenai River parcel purchase (item 57) had not been included in the FY 13 capital budget. Ms. Rehfeld answered that there were a number of items that Department of Natural Resources (DNR) needed to complete in order to purchase the property and prepare the boat launch; DNR felt that more work could be done on the boat launch if the funds were allocated sooner. Ms. Rehfeld explained that several items on page 8 had been moved to the supplemental budget in order to allow projects to go out to bid during the current spring. She highlighted several capital items: Item 68 Nome - Runway 10-28 Rehabilitation - This project will rehabilitate, repave and repaint the settled area on the main runway of the Nome Airport. Repair of the settled area has become a high priority safety concern. The project will advertise for construction bids in April 2012 with a schedule for completion by fall of 2012. Federal Receipts $3,900.0 Item 69 Unalaska - Runway Safety Area and Pavement Rehabilitation - This project will construct a runway safety area, runway extension, airport lighting and drainage improvements, other minor repairs, and address poor pavement conditions at the Unalaska Airport. In order to utilize the upcoming construction season and not have to wait another 12 months, authorization is needed before July 1. Federal Receipts $3,000.0 Item 71 Anchorage Metropolitan Area Transportation Solutions (AMATS) - Glenn Highway Trail Rehabilitation - This project will resurface the existing Glenn Highway trail between Muldoon Road and North Birchwood Loop, construct a wayside at milepost (MP) 8.6, pave existing parking area at the westbound weigh station, replace the existing pedestrian bridge over Ship Creek (bridge #1402), construct minor realignment of the pathway at the Muldoon Interchange, and upgrade any curb ramps not meeting ADA guidelines. In order to utilize the upcoming construction season and not have to wait another 12 months, authorization is needed before July 1. Federal Receipts $2,340.0 Ms. Rehfeld directed attention to page 9 that included Department of Law (DOL) judgments and settlements. She provided detail on the Moore settlement that focused on helping low performing districts to achieve success (item 79). The $18 million would be used over a five-year period and a committee would be appointed (that would include DEED) to design how the funds would be used. Co-Chair Thomas wondered whether funds for non-performing schools could be removed from the operating budget, given the $18 million allocation in the supplemental budget. Ms. Rehfeld replied that the funds in the supplemental were specific to a legal settlement. She deferred the question to DOL for follow up. 3:25:10 PM Representative Wilson relayed that they [Education Subcommittee] were meeting with the attorney general to determine what the state could and could not do. She wondered why the Moore settlement funds had been allocated all at once if they were to be spent over a five-year period. Ms. Rehfeld replied that the decision may have been part of the settlement negotiation. Representative Wilson would follow up on the issue. Ms. Rehfeld referred to page 9, item 80. She detailed that the backup materials included a complete list of judgments and claims. Item 80 was the largest and related to the optional retirement system for university professors and a change in the Teachers' Retirement System (TRS) employer contribution rate: Judgments and Settlements - Actual judgment and settlement costs received as of January 30, 2012 General Fund $20,770.8 Ms. Rehfeld discussed the supplemental request for disaster relief; it was hard to predict the level of funding needed (item 87). The item factored in expectations based on fall and winter storms and potential spring flooding and other: Supplemental Disaster Funding - Current disasters are expected to exhaust the available general funds in the Disaster Relief Fund. In addition to fall and winter storms, traditionally there are springs floods that have been eligible for expenditures from the Disaster Relief Fund. The impact of this supplemental request is being considered for a FY2013 budget amendment. General Fund $3,000.0 3:27:32 PM Ms. Rehfeld pointed to ratifications on page 10. Items 97 through 99 reflected precise dollar amounts; funds for fire suppression activity (item 97) were $36,388. Representative Costello looked at a DNR item related to the gas pipeline project (page 9, item 85) that included zero funding. She asked for an explanation on the item that appeared to be a statute related change. Ms. Rehfeld explained that the item related to ongoing Alaska Gasline Inducement Act (AGIA) efforts under DNR and extended the lapse date on a previous appropriation. She would follow up with the estimated amount. Representative Neuman wondered whether the item 85 was a reappropriation of a prior supplemental. Ms. Rehfeld responded that some of the AGIA appropriations were classified as a "multi-year operating"; the administration followed up to provide an estimate of available funds that would allow items to continue into the next fiscal year. She would follow up with more detail. Vice-chair Fairclough commended DOL for resolving multiple legal cases that had been ongoing.