Legislature(2009 - 2010)HOUSE FINANCE 519
03/19/2009 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB113 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 113 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 113
"An Act making supplemental appropriations, capital
appropriations, and other appropriations; amending
appropriations; making appropriations 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."
1:41:14 PM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, explained the circumstances that
guided drafting of the supplemental budget. She stated that
a lot has happened in the state that affected the budget
since the supplemental bill was introduced on February 3,
2009. The Office of Budget and Management released an
interim revenue forecast that determined state revenues will
be significantly lower than what the 2009 and 2010 budgets
were built on. The goal for drafting the supplemental budget
was to achieve a reduction in expenses for the current year.
All departments went through a process to find ways to
reduce general fund expenditures. The Office of Management
and Budget also looked at existing projects, especially
capital projects to identify lapsing balances from unspent
funds left over after a project is completed. Four million
dollars in lapsing funds were re-appropriated for other
needs. The governor instructed departments to develop
savings targets and identify ways to save money. The goal
was to find additional reductions of $20 million for the
2009 budget. The savings targets were incorporated into the
supplemental bill. The savings realized by the departments
totaled $17.5 million.
1:44:59 PM
Ms. Rehfeld spoke to the hiring freeze imposed on state
agencies. She noted that specific guidance was in place to
the departments. There is a waiver process and exemptions
available for positions in public safety and 24-hour
facilities. The overall goal is to minimize the draw from
state savings to cover the 2009 budget shortfall.
Ms. Rehfeld explained the ratifications section in the
supplemental. Primarily, ratifications correct errors when
recording revenue.
1:46:31 PM
Co-Chair Hawker interjected that ratifications shown on the
pink spreadsheets [amendments to the supplemental
legislation introduced by the governor on March 13, 2009]
reflect whole numbers to the penny.
1:47:12 PM
Co-Chair Hawker requested Ms. Rehfeld address only the
highlights of each section in the legislation. She noted
that two packets of amendments to the supplemental bill were
thth
previously submitted on February 24, and March 13.
1:50:02 PM
Representative Austerman asked for clarification on the $1.1
million amendment for the Department of Administration. Ms.
Rehfeld explained that on the pink spreadsheet, page 1, line
1, identifies an unallocated reduction of $1.1 million for
the Department of Administration. The entry on line 3,
$107.6 thousand for Retirement and Benefits is included in
the $1.1 million on line 1. This was an error that shows up
as a duplicate reduction. The entry on page 36, of the
spreadsheet, line 202, is an amendment correcting that
error.
Co-Chair Hawker explained that many amendment items in the
supplemental are really an appendage to the original budget
proposal, not an amendment. They were budget item changes
that were discovered after the transmittal of the original
supplemental bill.
1:52:21 PM
Representative Gara referred to the unallocated reductions
in every department. He asked how these reductions were
achieved. Ms. Rehfeld explained that she asked the agencies
to find reductions when the FY 2010 budget was signed by the
governor. The Office of Management and Budget set a target
of $20 million based on a percentage of general fund
expenditures for personal services spread across the
agencies. The Department of Public Safety and Department of
Corrections were exempted. Departments were asked to devise
plans to identify reductions from any budget component in
their agency. As the fiscal year progressed and revenue
changed, it became a priority to implement the savings plans
to achieve reductions. These reductions were built into the
supplemental budget.
1:54:36 PM
Representative Gara asked if all of the agencies unallocated
reductions have been earmarked for other uses. Ms. Rehfeld
responded that the departments did have plans in place on
how to achieve the reductions. She exemplified the
Department of Administration's plan that included managing
their vacancies to delay hiring, reallocating some general
fund expenditures to capital fund appropriations where
possible, and other measures.
1:55:32 PM
Co-Chair Hawker interjected that mechanically these are
reductions from the Office of the Commissioner who has the
authority to allocate the reductions throughout their
agency.
1:56:07 PM
Representative Gara stated that departments are adjusting
the time it takes to fill vacancies to achieve reduction
goals. He was concerned that OMB was not granting waivers in
order to maintain the savings targets. Ms. Rehfeld explained
that some departments were holding positions vacant for a
period of time to reduce spending as part of their plan.
Half way through the fiscal year the hiring freeze went into
effect. The departments now have to seek a wavier to fill
those positions. She believed that the waiver process was
causing a delay in re-hiring those positions. There are a
number of waiver requests pending. The Office of Management
and Budget is expediting those requests, focusing on the
positions deemed critical by a commissioner.
1:57:20 PM
Representative Gara reiterated his concern about keeping
positions open longer to reflect savings. Ms. Rehfeld felt
that commissioners were thoughtful when considering these
cost savings decisions. She reminded Representative Gara
that exemptions exist for critical positions.
1:59:41 PM
Ms. Rehfeld noted the item in the Department of
Administration for the Personnel Board on line 2, for $725.0
thousand. The expenditure was reduced by the amendment to
$560.8 thousand.
Representative Gara shared his concern that the state's
salary structure is so low agencies can not attract
professionals. He stated that the Department of
Administration announced they were going to do a salary
review. He wondered if the reduction will delay the study.
Ms. Rehfeld answered that the salary study has been
contracted out and is in progress. The results are expected
by the end of this year.
2:01:21 PM
Ms. Rehfeld pointed out the Department of Correction's item
on line 12, Inmate Health Care expenditure for $1.405.8
million. She voiced that OMB finds it difficult to
accurately determine the anticipated medical needs of the
inmate population in order to avoid a supplemental request.
Ms. Rehfeld added that another area that has proved
challenging to estimate is the amount of federal receipts
for federal prisoners. On line 204, $1.000.0 reflects a fund
source change from general fund expenditures to federal
receipt authorization.
2:03:07 PM
Representative Kelly requested the Department of Corrections
explain what happened to the operating expenses appropriated
for the Wildwood facility that has not yet opened. He asked
for a response in writing.
2:04:49 PM
Ms. Rehfeld moved on to the Department of Health and Social
Services. She noted that the general fund reductions in the
areas of Behavioral Health and Medicaid Services are based
on projections of need. Co-Chair Hawker interjected that on
line 24, the $8.100.0 general fund reduction is a reduction
in authorizations.
2:05:28 PM
Representative Gara asked for clarification of the $8,100.0
million reduction. Ms. Rehfeld answered that based on
current projections and trends the state won't need the
additional authorization. Co-Chair Hawker added that the
demand for Medicaid services was overestimated.
Representative Gara wondered if eligibility requirements
were increased to decrease the number of Medicaid
recipients. Ms. Rehfeld replied that there has not been a
change in eligibility requirements.
2:07:13 PM
Ms. Rehfeld reported that on line 26, the $6million request
for Medicaid Services has been withdrawn. The department
indicated that those services would not be necessary in the
current fiscal year.
Co-Chair Hawker asked about the request on line 30. Ms.
Rehfeld explained that the $500.0 general fund request
reflects the recent license suspension and takeover by the
state, of the Mary Conrad Center in Anchorage. The
expenditure is for interim management contract services. The
center is a residential care facility.
Representative Gara referred to line 29, $4,760.0 million
unallocated reduction in general fund expenditures. He
suggested that the funds could be redirected to underfunded
programs within the department that are not providing
adequate levels of service. He identified the Independent
Living Program within the Office of Children's Services
(OCS) as an example.
2:10:11 PM
Ms. Rehfeld agreed that funds could be redirected but the
goal of the savings target was to manage the budget to
provide services, minimize the reduction's impact, and still
achieve some savings. Representative Gara disagreed with the
philosophy of managing a budget just to reach a monetary
goal. He asked how the department plans to respond to the
program inadequacies he described. Ms. Rehfeld reported that
the department does communicate inadequacies to OMB and
requests budget increases. The department can not provide
for all services at a desired level considering the existing
budget shortfalls. The department will provide priority
services as effectively as possible under the current fiscal
restraints. Co-Chair Hawker acknowledged the political
differences in the legislative and executive branches. He
commended OMB's restraint in developing a supplemental
budget that focuses on reductions instead of large increases
while maintaining critical services.
2:12:41 PM
Representative Austerman voiced that he understood
Representative Gara's concern. He contended that the
legislature also has the ability to decide what budget items
are priorities.
2:13:59 PM
Ms. Rehfeld did not address any budget items for the
Department of Labor and Workforce Development nor the
Department of Law. She noted that the Department of Military
and Veterans Affairs was exempt from the savings targets.
The department uses very little general fund dollars.
Representative Gara cited lines 32-34, detailing Department
of Law expenditure requests for outside counsel. He
mentioned a recent Department of Law analysis that estimated
a cost savings of up to 25% for the department if more legal
work could be accomplished in house. He asked for OMB's
position on the study. Ms. Rehfeld alluded to the Department
of Administration's salary study. She indicated that the
findings will suggest that current salaries are insufficient
for attorneys which accounts for their difficulty in trying
to fill specialized positions. In addition, private firms
lure away experienced attorneys from the department offering
more lucrative wages. She concluded that the department
might always need to contract for outside counsel for
specialized attorneys. However, higher salaries might
achieve more of a balance within the department between the
amount of in-house counsel and contracted services.
Co-Chair Hawker reminded Ms. Rehfeld that the item on line
33, $1,335 million request for expertise and outside counsel
for Oil and Gas Projects has been withdrawn in Amendment
221.
2:17:05 PM
Ms. Rehfeld stated that the unallocated reduction on line
39, in the amount of $1,240.0 million is targeted for
personal services and will be spread throughout the
Department of Natural Resources. She noted that many of the
funding increases in the various Department of Public Safety
components reflect the results of the collective bargaining
agreement with the Public Safety Employees Association
(PSEA). The decrement on page 7, line 56, of $1.1 million
for Village Public Safety Officers' (VPSO) contracts reveals
the departments inability to hire all of the contracted
positions. The funds are included in the FY 2010 budget and
the commissioner has indicated that all of the positions
will be filled in that fiscal year.
2:19:35 PM
Vice-Chair Thomas asked why the Department of Public Safety
was not able to recruit and fill all of the positions.
2:20:07 PM
DAN SPENCER, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF PUBLIC SAFETY, explained that the hiring
process has not been able to keep pace with the amount of
additional positions recently funded. The department added
fifteen new VPSO positions. The goal is to increase the
overall number of VPSO positions and focus on recruitment
and retention. The department also instituted a salary
increase. In FY 2010, the department hopes to have all the
positions filled. Vice-Chair Thomas wondered what the
problem is with recruitment and retention of VPSOs. Mr.
Spencer answered that the recent salary increase to a $21
per hour starting salary may improved retention. In
addition, the department authorized periodic pay increases
similar to merit increases. Vice-Chair Thomas felt that a
deterrent in recruitment and retention is their inability to
carry firearms. Mr. Spencer explained that the VPSOs are not
certified police officers. Their level of training as well
as responsibility and liability are significantly different.
2:23:46 PM
Mr. Spencer added that the VPSO program is done in
partnership with the participating community's non-profit
organizations. The non-profit organizations are confident
that the salary increases and recruitment efforts will
result in more hires.
2:24:52 PM
Representative Thomas stressed that recruitment and
retention has been a problem with the VPSO program for
years. He did not feel confident that the problems will
resolve any time soon.
Representative Austerman pointed out that only five of the
fourteen villages in his district had VPSOs. He also
wondered where the problem lies. Mr. Spencer was not
familiar with the specific issues in that district.
Representative Gara questioned why the department can
attract new recruits now but was not able to in past. He
asked what will be different. Mr. Spencer emphasized that it
will take time to predict with certainty if the retention
efforts are working. The department believes they are. Newly
instituted salary increases along with periodic pay
increases enables candidates to look at the position as a
career. Enhanced recruitment efforts are taking place
around the state, which also takes time. If recruitment
takes place in an urban area and a qualified candidate is
found, the department will consider moving that person to
the village dependent on funding. The department identified
a problem with candidate selection. Half of the recruits did
not graduate from the academy. Many dropped out voluntarily.
Recruiters must do a better job of detailing expectations of
the candidates. The department has worked to improve state
trooper recruitment and all of the trooper positions are
currently filled. The department hopes to see the same
results with the VPSO program one year from now.
2:29:13 PM
Co-Chair Stoltze felt that much focused attention and
commitment by the legislature and department has been
directed at filling state trooper and VPSO positions. He
emphasized that not only has there been increased funding,
there is an on-going effort and commitment to fill these
positions.
2:31:22 PM
Representative Kelly added that the department was doing a
good job improving the recruitment efforts and increased
hiring of state troopers and VPSOs without the defined
benefit system.
2:33:03 PM
Mr. Spencer said he does not know how the state's retirement
plan affected recruitment. He informed the committee that
the VPSO program does not offer retirement benefits.
2:34:10 PM
Vice-Chair Thomas pointed out that he only has knowledge of
the VPSO program problems in his district. He thanked the
department for their endeavors to fill the positions.
Representative Austerman noted that on pages 36-37, the
Department of Health and Social Services amendment
components specify large sums of general fund and federal
fund reductions based on the economic stimulus package. He
asked how that will affect the department's ability to
provide the same services in the FY 2010 budget. Ms. Rehfeld
explained that OMB requested approval for the increase of
the Medicaid reimbursement rate allowed under the stimulus
package in the supplemental and the FY 2010 budget
amendments. The benefit of the increased reimbursement rate
will extend until the first quarter of FY 2011. The
reductions listed on pages 36-37 reflect the stimulus
funding.
2:36:54 PM
Co-Chair Hawker added that the aggregate total reductions in
the general fund for the federal supplement are roughly $53
million in FY2009, $74 million in FY2010, and $24 million in
FY2011. Representative Austerman asked when general fund
money will be needed for the reimbursement rate.
2:37:52 PM
Ms. Rehfeld stated that the department will need to seek
guidance from the federal agency for the reimbursement rate
projections for the last three quarters of FY 2011. Co-Chair
Hawker elaborated that the Federal Medical Assistance
Program (for Medicaid) (FMAP) rate fluctuates at the will of
Congress. The actual amount would be difficult to predict at
this time. He deduced that the general fund burden will
increase in FY 2011.
2:38:57 PM
Ms. Rehfeld directed attention to the Department of
Transportation's highlighted budget request items reflecting
three bargaining union contracts: Inlandboatmen's Union;
Masters, Mates, and Pilots; and Marine Engineers on page 39,
lines 226-228. She noted requests related to commodity price
increases and state equipment fleet costs. Co-Chair Hawker
interjected that $1,114.0 million in commodities price
increases reflects price fluctuations in sand and gravel and
winter chemicals (page 11, line 73).
2:41:15 PM
Ms. Rehfeld continued with a University of Alaska item on
page 16, line 86. The item reflects an unanticipated
workers' compensation claim. She also pointed out a
significant utility cost increase affecting multiple
campuses in the amount of $1,272.0 million on page 17, line
87.
2:42:40 PM
Representative Hawker reported that the supplemental capital
budget items are moved into the regular capital budget each
legislative session. Ms. Rehfeld stated that most of the
capital budget items in the supplemental (starting in
Section 3, page 17) are requests for federal receipt
authority for highway and aviation programs in the
Department of Transportation. She exemplified the request on
line 94, for the Alaska Military Youth Academy
Infrastructure Project Improvements for the Department of
Military and Veterans Affairs federal earmark in the amount
of $2,470 million.
2:44:08 PM
Co-Chair Hawker remarked that the federal funds came from an
earmark. He did not think the governor was accepting
earmarks. Ms. Rehfeld replied that OMB does consider
earmarks designated for a priority budget item or that has
gone thorough a public process.
Co-Chair Stoltze questioned why the Department of Military
and Veterans Affairs funding for the Youth Academy on line
164, is being transferred to the Alaska Marine Highway. Ms.
Rehfeld answered that in areas where OMB requested re-
appropriations the specific projects were completed and the
funds would have lapsed to the general fund. The funds were
directly re-appropriated for other needs.
2:46:23 PM
Ms. Rehfeld referred to page 18, line 95; $6 million in
Cruise Ship Gambling Tax revenues is being used for state
parks deferred maintenance. She announced that it is the
first proposal that expends gambling tax revenue.
Co-Chair Hawker added that an extensive legal evaluation has
determined that the cruise ship gambling tax revenue is part
of the general fund and available for general use. The tax
revenue does not have to be designated for specific use. Ms
Rehfeld affirmed.
2:47:24 PM
Vice-Chair Thomas asked what are the plans for deferred park
maintenance if this item is not approved in the capital
budget. Ms. Rehfeld stated that OMB would have to re-
evaluate the deferred maintenance needs. Co-Chair Stoltze
asked how OMB decided to expend the gambling tax revenue for
state parks. She explained that OMB looked at addressing the
state parks deferred maintenance needs for the benefit of
all Alaskans. Expenditures were not limited to the tourism
or cruise ship industry. Co-Chair Hawker reiterated that the
tax revenue a is simple general fund expenditure.
2:50:15 PM
Ms. Rehfeld addressed line 229, the Kalskag High School
Replacement. The school was destroyed by fire. The $18,688.7
million is the state's share of the replacement cost. The
insurance proceeds will be deducted from this amount.
2:51:35 PM
Ms. Rehfeld referred to the ratifications section starting
on line 192 on page 34. She explained that fire suppression
activity is an annual request. The six remaining
ratifications result from accounting transaction errors. Co-
Chair Hawker recommended OMB oversee internal accounting
improvements for the agencies involved. He felt the errors
were avoidable.
2:53:28 PM
Representative Fairclough remarked that the gambling tax
revenue should not be referenced as such in the budget to
avoid a risk of litigation from the cruise industry. The
money is general fund dollars.
2:55:04 PM
Representative Crawford recalled how the legislature took
PFD's from felons and misdemeanants to use the monies for
child support. He emphasized that has not been done and he
questioned when it would be. Ms. Rehfeld offered to discuss
that issue with him.
2:57:21 PM
Representative Austerman cited page 17, line 92, and
remarked that the fund source for the component is listed as
business license receipts. He felt it should be designated
as general funds. Co-Chair Hawker commented that there is
presently a statutory construct that earmarks business
license receipts as a separate fund source.
2:59:26 PM
Co-Chair Hawker closed public testimony.
HB 113 was HEARD and HELD
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