HOUSE BILL NO. 321 "An Act making supplemental appropriations and other appropriations; making an appropriation to capitalize a fund; amending appropriations; and providing for an effective date." 1:36:37 PM NEIL STEININGER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, introduced himself. He referred to two documents distributed to committee members: "FY2018 Supplemental Summary" and "FY2018 Supplemental Bill Spreadsheet" (copy on file). He remarked that the total Supplemental request was $7,895.7 million in Undesignated General Funds (UGF) and the all funds total was negative $5.5 million. 1:37:54 PM Mr. Steininger moved to the document; "FY 2018 Supplemental Spreadsheet" and explained the items in the bill. He began with page 1, the Operating Numbers Section, line 2: Line 2 Department of Commerce, Community, and Economic Development Banking and Securities Component Financial Examiner I/II for Alaska Native Claims Settlement Act Filings and Support The division must timely process ANCSA corporate filings and respond to complaints within 10 business days. Without this position, the division would be forced to reduce resources tasked with examinations and enforcement activities for other programs. UGF $0.0 DGF $103.4 Other Funds $0.0 Federal Funds $0.0 Representative Guttenberg asked about the difference between the current supplemental budget request and the similar item in the FY 19 operating budget request. Mr. Steininger stated that the supplemental request allowed the Department of Commerce, Community and Economic Development (DCCED) to hire the position in FY 18. He reported that the volume of filings had dramatically increased, and the position was necessary as soon as possible. 1:39:10 PM Mr. Steininger reviewed lines 3 and 4. Line 3 Department of Environmental Conservation Solid Waste Management Increase Program Receipt Authority The Solid Waste Management program conducted a fee study in FY2017. Revised fee regulations have gone through public notice, review, and comment, and were enacted effective October 27, 2017. The Department anticipates revenue from the new fees will exceed general fund program receipt authority in FY2018. UGF $0.0 DGF $35. Line 4 Department of Environmental Conservation Air Quality Decrease Program Receipt Authority The Division of Air Quality expects to under collect general fund program receipt authority in FY2018 due to fluctuations in the amount of Title I permit work from year to year. UGF $0.0 DGF ($35.0) Other Funds $0.0 Federal Funds $0.0 Mr. Steininger turned to Line5. Line 5 Department of Health and Social Services Front Line Social Workers A recent amendment to the section of the Public Assistance Cost Allocation Plan (PACAP) covering the Office of Children's Services (OCS) changes the allocation methodology for the Front Line Social Workers component, the largest personal services component within the Office of Children's Services budget. The estimated increase is associated primarily with the claiming for the Title IV-E foster care, adoption, and guardianship programs. UGF $0.0 DGF $0.0 Other Funds $0.0 Federal Funds $6,500.0 Vice-Chair Gara asked whether the transaction assumed state match money was available. Mr. Steininger wanted to refer to the Department of Health and Social Services (DHSS). He understood that the transaction reflected an attempt to increase the amount of federal dollars or the "percent of the expenditures that were attributable to federal money by the division." Vice-Chair Gara did not understand the link between PACAP and the OCS. Mr. Steininger believed the PACAP covered more than just the Division of Public Assistance. He deferred to DHSS for details. 1:41:17 PM Mr. Steininger moved to Line 6. Line 6 Department of Health and Social Services Foster Care Base Rate Decline in Child Support Payment Collections The Office of Children's Services expects significant reductions in collections of child support and social security payments. UGF $1,000.0 DGF $0.0 Other Funds $0.0 Federal Funds $0.0 Mr. Steininger elaborated that OCS received child support collected by the Department of Revenue (DOR) for children in state custody. In recent years there had been a significant decline in child support collections that impacted the division. He noted that OCS was experiencing a decrease in Social Security benefits from children in its care. Co-Chair Seaton recognized that Representative Ortiz joined the meeting. Representative Pruitt asked why child support collections were declining. Mr. Steininger replied that through discussions with the division and DOR he discovered that many factors lead to the decline. He elucidated that economic factors, unemployment, and the inability to collect from Permanent Fund Dividend (PFD) garnishments were issues related to the decrease. 1:43:40 PM Mr. Steininger addressed Line 7. Line 7 Department of Health and Social Services Foster Care Special Need FY2017 Special Need Payments Made in FY2018 At the close of FY2017 the Office of Children's Services pushed payments for FY2017 obligations into FY2018 in the amount of $2,895.7. UGF $2,895.7 DGF $0.0 Other Funds $0.0 Federal Funds $0.0 Mr. Steininger reported that at the end of FY 17 OCS had to defer some payments to FY 18 due to a lack of funds. The item would cover the payments that were pushed into FY 18 and prevent a "domino effect" of pushing payments into FY 19. Representative Ortiz asked Mr. Steininger to define "special needs." Mr. Steininger responded that special needs for foster children would be clothing, medical care, etc., and were above and beyond the base foster care payments. Vice-Chair Gara clarified that Mr. Steininger was not talking about youth with special needs but foster children needing things that were not included in the base rate. Mr. Steininger responded affirmatively. 1:45:41 PM Mr. Steininger continued to Page 2, line 8. Line 8 Health and Social Services Alaska Temporary Assistance Program Temporary Assistance for Needy Families Maintenance of Effort The maintenance of effort (MOE) for the Temporary Assistance for Needy Families (TANF) program, mandated by the Federal Government, is primarily met by the expenditures within ATAP. The state received notification of penalty for failure to meet the MOE obligation for federal fiscal year 2017. UGF $2,000.0 DGF $0.0 Other Funds $0.0 Federal Funds $0.0 Mr. Steininger reported that the item reflected a notice from the federal government that certain criteria had not been met for TANF (maintenance of effort). Representative Guttenberg was under the impression that the maintenance of effort was not specific to a single program but applied across the board to other programs. He asked for further clarification. Mr. Steininger replied that there were several areas where the state could meet the maintenance of effort but TANF was the primary program. He explained that the department was attempting to find alternative sources to meet the maintenance of effort and some were not successful. He offered to provide detailed information regarding the alternate sources. The alternate sources needed to be approved through the Center for Medicaid Services (CMS). Representative Guttenberg commented that he suspected that a program cut of approximately $2 million created the problem and wanted to explore the issue. Vice-Chair Gara asked whether the state was incurring a $2 million penalty to the federal government for not meeting the maintenance of effort. Mr. Steininger knew that the transaction avoided further penalty and would provide further detail regarding the penalty later. Vice-Chair Gara indicated that the department had warned the legislature in 2016 that the scenario could happen. He noted that the "committee decided not to believe the department." Mr. Steininger reviewed Line 9. Line 9 Department of Revenue APFC Investment Management Fees Investment and Custody Fees Unanticipated market performance or manager changes could cause the actual amount of fees paid to exceed projections. As a prudent course of action, $5,000.0 supplemental authority for the Investment Management Fee allocation will ensure that APFC has sufficient funds to meet our contractual obligations. UGF $0.0 DGF $0.0 Other Funds $5,000.0 Federal Funds $0. 1:49:36 PM Mr. Steininger moved to the Language Section of the bill beginning on line 18. Line 18 Special Appropriations Comprehensive Insurance Program Payment from Premera to the Reinsurance Program Adjustment to the state contribution to the calendar year 2017 reinsurance program to reflect reimbursement from Premera Blue Cross Blue Shield. UGF $0.0 DGF ($25,000.0) Other Funds $0.0 Federal Funds $0.0 Mr. Steininger elaborated that in late November or early December 2018, Premera refunded the state $25 million for the Alaska Comprehensive Health Insurance (ACHIA). The $25 million reduction left a total balance of $30 million in the program. He highlighted line 19: Line 19 Fund Capitalization Disaster Relief Fund Disaster Relief Funding This increase is needed due to the low balance of the disaster relief fund and the estimated amount needed for spring 2018 disasters. Sufficient general fund authority of $2,000,000 currently exists in the FY2019 budget. UGF $2,000.0 DGF $0.0 Other Funds $0.0 Federal Funds $0.0 Mr. Steininger relayed that the spreadsheet inadvertently omitted two bargaining agreements included in the bill that had been completed with no impact to the budget for the University of Alaska system. 1:51:14 PM Mr. Steininger discussed the ratification section beginning on page 3, line 23. He reminded committee members that the transactions were ratifications of prior year expenditures. Ratifications Line 23 Department of Health and Social Services Pioneer Homes FY2016, AR H001 Alaska Pioneer Homes UGF $467,693.27 Mr. Steininger reported that the item represented a shortfall in revenue. He moved to line 24. Line 24 Department of Health and Social Services Public Health FY2016, AR H007 Public Health UGF $1,350,310.26 Mr. Steininger indicated there had been a shortfall in revenues. He turned to item 25. Line 25 Department of Health and Social Services Medicaid Services FY2016, AR H012 Medicaid Services UGF $8,715,670.72 Mr. Steininger indicated that while there was a shortfall in receipts in 2016 the department had recouped the revenue, but it was posted in FY 17. Mr. Steininger moved to Line 26 and Line 27, which were Capital Budget items. Line 26 Department of Health and Social Services Capital FY2010, AR H264 Mental Health Housing UGF $8,824.49 Line 27 Department of Health and Social Services Capital FY2011, AR H260 Mental Health Home Modification and Upgrades to Retain Housing UGF $7,355.06 1:53:01 PM Mr. Steininger presented line 28, which was a capital item. Line 28 Department of Health and Social Services Capital FY2016, AR HUBC Unbudgeted Capital RSA's UGF $300,310.83 Mr. Steininger reported that the item represented a shortfall in revenues. Representative Thompson asked what RSA meant. Mr. Steininger answered that RSAs were Reimbursable Services Agreements that were contracts between state agencies for providing services. 1:53:39 PM Mr. Steininger concluded with line 29. Line 29 Department of Public Safety Bureau of Highway Patrol AR 47863-13 Bureau of Highway Patrol Special Project UGF $4,304,930.00 Representative Pruitt asked what the initial appropriation was for line 29. He requested additional detail. 1:54:26 PM BRIAN FECHTER, POLICY ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, explained that the federal government denied certain expenditures for a grant that was passed through the Department of Transportation and Public Facilities (DOT) to the Department of Public Safety (DPS). The money was only to be used for alcohol enforcement and was used for other things. Representative Pruitt asked if the department was aware of the grant requirements and "knowingly jeopardized the federal funding." Mr. Fechter responded that it was a matter of interpreting the original grant agreement. He deferred to the department for further detail. Representative Pruitt requested an answer from the department regarding a $4 million misinterpretation. Co-Chair Seaton asked the chairman of the DPS subcommittee to flush the details out during subcommittee meetings. HB 321 was HEARD and HELD in committee for further consideration. 1:56:53 PM AT EASE 1:57:46 PM RECONVENED