HOUSE FINANCE COMMITTEE March 23, 1995 1:30 P.M. TAPE HFC 95-61, Side 1, #000 - end. TAPE HFC 95-61, Side 2, #000 - 557. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:44 p.m. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Nancy Slagle, Director, Division of Budget Review, Office of the Management and Budget, Office of the Governor; Janet Clark, Director, Division of Administrative Services, Department of Health & Social Services; Guy Bell, Director, Division of Administrative Services, Department of Commerce and Economic Development. SUMMARY HB 100 An Act making appropriations for the operating and loan program expenses of state government and to capitalize funds; making appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date. HB 100 was HELD in Committee for further discussion. HB 101 An Act making appropriations for operating expenses for certain programs for which the costs are derived from mandated formulas or criteria, and for expenses for certain leases and contracts for state services and operations; and providing for an effective date. HB 101 was HELD in Committee for further 1 discussion. HOUSE BILL NO. 100 An Act making appropriations for the operating and loan program expenses of state government and to capitalize funds; making appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date. FRONT SECTION NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR provided members with a sectional analysis of the front section of HB 100 (Attachment 1). She reviewed Attachment 1 by section: * Section 1. Identifies the balances in the Highway and Aviation Fuel Tax accounts available for appropriation. * Section 2. Provides a process for the Legislative Budget and Audit Committee to allow additional receipt authority for general fund and excess federal receipts. * Section 3 & 4. Provides that state funds cannot be used to replace a shortfall in federal receipts and that appropriations are reduced by the amount of any shortfall. * Section 5. Provides that general funds will be appropriated in the event of a shortfall in Title XX federal funds. Title XX is the Social Services Block Grant received by the Department of Health & Social Services. Representative Martin asked if general funds have been used to cover any shortfalls in Title XX funding. Ms. Slagle replied that there has not been any transfers due to shortfalls of Title XX funding. Representative Martin suggested that section 6 is unnecessary. JANET CLARK, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES explained that the Title XX Block Grant Offset Component in the Department of 2 Health & Social Services' budget represents a negative general fund and positive federal amount since they are unable to predetermine which areas will be allowed to be charged. Allowable expenditures are charged in the Division of Family and Youth Services' component. She emphasized that the Block Grant has grown to a current budget of $6.3 million dollars. * Section 6. Allows the Department of Commerce and Economic Development to utilize funds in the Insurance Catastrophe Reserve Account for the payment of claims. * Section 7. Allows the Commissioner of the Department of Revenue to issue revenue bond anticipation notes. * Section 8. Provides a state guarantee for AHFC Veterans Mortgage bonds. * Section 9. Provides a payment of $5,793.8 million dollars for the International Airport Revenue Fund debt service. * Section 10. Appropriates $9,628.2 million dollars to the Debt Retirement Fund which is then reappropriated for specific lease payments. * Section 11. Appropriates $21,337.3 million dollars for payment of the general obligation debt. Ms. Slagle noted that the Administration has requested that the existing balance in the Debt Retirement Fund be used to offset the payment instead of an appropriation from the general fund. There is a balance of $1,885.3 million dollars in the Fund due to refinancing efforts by the Department of Revenue. She noted that an early effective date would be needed to prevent the money from being swept into the Constitutional Budget Reserve Fund on June 30, 1995. * Section 12. Appropriates income of the Permanent Fund to the dividend account to pay dividends. * Section 13. Appropriates the amount calculated for inflation proofing the earnings of the Permanent Fund. 3 * Sections 14 & 15. Deposits to the Permanent Fund interest earned on the 25 - 50 percent for mineral lease rentals, royalties, royalty sale proceeds, net profit share and federal mineral revenue sharing designated for deposit to the Fund that accrues prior to receipt by the State. Ms. Slagle explained, in response to a question by Representative Therriault, that these revenues are collected and then transferred to the Permanent Fund. * Section 16. Allows the lapse balance of the STEP Program to be deposited in the Unemployment Compensation Fund. * Section 17. Makes appropriations to the AHFC Revolving Loan Fund, Housing Assistance Loan Fund and Senior Housing Revolving Loan Fund. * Section 18. Appropriates general fund and federal fund money to the Disaster Relief Fund. * Section 19. Appropriates 1996 tank registration fees to the Storage Tank Assistance Fund. Ms. Slagle explained that Sections 20, 21, 22 and 23 relate to the Oil and Hazardous Substance Release Response & Prevention Fund and associated mitigation accounts. She noted that the Prevention Mitigation Account may be effected by the Constitutional Budget Reserve Fund sweep. Ms. Slagle reviewed the flow of funding associated to the Mitigation Account. She explained that the Mitigation Prevention Account flows into the general fund. Money is being appropriated from the Mitigation Prevention Account to the Storage Tank Assistance Fund. The remaining balance will be deposited to the Oil and Hazardous Substance Release Response & Prevention Funds' Prevention Account. Representative Martin questioned if Section 22 should be deleted since the surcharge has been discontinued. Ms. Slagle explained that the language is need to address surcharges that were assessed prior to the shut off date which must be appropriated to the Fund. 4 * Section 24. Approves an appropriation to the Information Services Fund in the Department of Administration. Representative Martin suggested that the charge back system creates unnecessary paper work. Ms. Slagle noted that the charge back system was instituted to assure agency accountability and responsibility for the services they request. * Section 25. Appropriates funding for oil and gas litigation in the Department of Law and the Department of Revenue. Ms. Slagle noted that this request has been reduced and the funding source changed from the Constitutional Budget Reserve Fund to the general fund based on the structure of the cases involved. Ms. Slagle noted that an amendment, proposed by the Governor, to this section has been submitted to the committee along with other front section amendments (Attachment 2). Co-Chair Hanley explained that the intent is to provide oil and gas litigation funding for a full year. He noted that the reduction in the appropriation corresponds to case settlements. Representative Brown questioned if the Department of Law's cap accommodates a full year funding. Co-Chair Hanley noted that oil and gas litigation for FY 95 was funded through the Constitutional Budget Reserve Fund. He did not think the cap would be adversely effected. * Section 26. Appropriates $80,322.4 million dollars to the Debt Retirement Fund for School Construction Debt. * Section 27. Appropriates $60 - $80 thousand dollars in receipts from the 1995 Safety Advisory Council conference to allow funding of the 1996 conference. * Section 28. Allows the Real Estate Surety Fund to pay claims. * Section 29. Allows the expenditure of program receipts in FY 96 of receipts collected in FY 95 for Alaska Public Utilities Commission (APUC). 5 Ms. Slagle explained that Section 29 is the carry forward amount. GUY BELL, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT stated that the regulatory cost charge next fiscal year would be reduced by the amount of the carry forward. * Section 30. Allows for the use of FY 95 ASMI tax receipts for FY 96 expenditures. * Section 31. The administration recommends that section 31 pertaining to fire suppression be deleted from the front section and contained in the back section of HB 100. * Section 32. The administration has recommended an amended number of $29,616.3 million dollars for the Marine Highway System Fund. Representative Martin questioned the status of the supplemental request for funding to the Marine Highway System Fund. Ms. Slagle explained that the supplemental request is a result of labor contract costs. * Section 33. Appropriates from the Four Dam Pool Transfer Fund to the Power Cost Equalization and Rural Electric Capitalization Fund, Southeast Energy Fund and the Power project Fund based on the statutory 40/40/20 split. The total amount is approximately $10 to $11 million dollars. * Section 34. Allows the use of the Constitutional Budget Reserve Fund in the case that revenues are insufficient to cover appropriations. (Tape Change, HFC 95-61, Side 2) Ms. Slagle reviewed new amendments, offered by the Administration, to the front section contained on page 5 of Attachment 1. Co-Chair Hanley questioned if the $764.5 thousand dollar addition to the Marine Highway System Fund for collective bargaining costs of the InlandBoatmen's Union 6 relates to the additional $853.0 thousand dollars in section 33. Ms. Slagle agreed that the funding is for the same contract. She noted that an appropriation is being made into the Marine Highway System Fund from the general fund. The new amendment would provide authorization from the Marine Highway System Fund. Ms. Slagle noted that an addition to the Highways Equipment Working Capital Fund is need to accommodate increases in the Labor Trades and Crafts Agreement. Ms. Slagle noted that the Administration is requesting $1516.3 thousand dollars in general funds for the Alaska Clean Water Fund. The funding will capture $7.581.5 thousand dollars and provide low interest loans for clean water projects. Ms. Slagle pointed out that the Administration expects to receive settlements from Executive Life to be returned to the Investment Lost Trust Fund. Money from the settlement must be returned to the funds that they were originally appropriated from. A portion of the settlement came from the Statutory Budget Reserve Fund. The Administration has recommended language to allow the use of any funds returned to the Statutory Budget Reserve Fund. Ms. Slagle suggested that language be considered to clarified if funding to cover revenue shortfalls would come from the Statutory Budget Reserve Fund prior to accessing the Constitutional Budget Reserve Fund. In response to a question by Representative Martin, Ms. Slagle noted that the statutory references for the Statutory Budget Reserve Fund remain intact. Ms. Slagle discussed the front section for formula programs. She noted that shared taxes are estimated at $24,571.4 million dollars. Salmon Enhancement Taxes are estimated at $5.516 million dollars. Representative Martin questioned if the Governor intended to delete the shared taxes from inclusion in HB 100. Ms. Slagle stressed that the appropriation is needed to allow the pass through of funds. She stated that the numbers were not included in the accounting of total FY 95 or FY 96 operating budget amounts. Co-Chair Hanley explained that shared taxes were taken "off- budget" and put in the front section, so that an appropriation of the dollar amount was not shown. This had the effect of reducing the known value of the budget. He noted that shared taxes have increased by $7 million dollars over FY 95. He observed that if the numbers for shared 7 taxes are included the budget appears to grow by $7.0 million dollars. He emphasized that the tax is a pass through by the State. Members continued to discuss methods for accounting shared taxes used in previous budgets. Co-Chair Hanley referred to the anticipated sweep into the Constitutional Budget Reserve Fund. He stated that language is being drafted to allow any money swept into the Constitutional Budget Reserve Fund to be appropriated back to the sources from which it was swept at the end of the fiscal year. He noted that a three-quarter vote is needed to adopt the language. He stressed that this would maintain the status quo. He emphasized the controversy surrounding which funds would be appropriately swept into the Constitutional Budget Reserve Fund. He noted that the Department of Law is working on suggestions pertaining to what should be swept. He illustrated that confusion could result if issues concerning the sweep are not addressed prior to the sweep. SUBCOMMITTEE RECOMMENDATIONS Representative Mulder MOVED to adopt and incorporate into HB 100 the House Finance Subcommittees recommendations for the following operating budgets: Department of Administration Department of Revenue Department of Labor Department of Education Department of Commerce and Economic Development Department of Military and Veterans Affairs Department of Natural Resources Department of Transportation and Public Facilities Department of Environmental Conservation Department of Community and Regional Affairs Department of Corrections Alaska Court System Office of the Governor Discussion pursued regarding the inclusion of the accompanying letter of intents. Representative Brown OBJECTED to the adoption of letters of intent which were not adopted in the subcommittees. Co-Chair Hanley clarified that letters of intent that were not officially adopted by the subcommittees would not be adopted. Representative Brown OBJECTED for purpose of discussion. She stated that she did not support the subcommittee recommendations. 8 There being NO further OBJECTION, the subcommittee recommendations for the noted departments were adopted. The Governor's proposed amendments for the front section were not adopted. Discussion pursued regarding scheduling of amendments. ADJOURNMENT The meeting adjourned at 3:00 p.m. 9