Legislature(2015 - 2016)HOUSE FINANCE 519
03/09/2016 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB256 || HB257 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 256 | TELECONFERENCED | |
| += | HB 257 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 256
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, making
reappropriations, making supplemental appropriations,
and 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."
HOUSE BILL NO. 257
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
9:09:40 AM
Co-Chair Neuman explained that the committee would be
taking up the committee substitutes incorporating the
amendments adopted from the previous day into HB 256 and HB
257.
Co-Chair Thompson MOVED to report CSHB 256(FIN) out of
Committee with individual recommendations.
Co-Chair Neuman OBJECTED for the purpose of discussion.
PETE ECKLUND, STAFF, REPRESENTATIVE MARK NEUMAN, explained
that the committee substitutes for both bills before the
committee, HB 256 and HB 257, incorporated the amendments
made in the previous day. He directed members' attention to
the handout of the summaries. He referred to the first page
on LFD Spreadsheet A and explained that after the
amendments were incorporated in the committee substitute
for HB 256 the total reflected a decrease of $8.6 down from
the total in the previous version. In other words, after
all of the amendments were calculated, the Committee
Substitute reflected $8.6 million less in unrestricted
general funds (UGF) than in the previous version of the
committee substitute. He pointed to column 5 titled: "2016
House". The agency operations formula and non-formula
totaled $3.813 billion. Next, he turned to the third page
on LFD Spreadsheet B and highlighted that UGF non-formula
funds, often referred to as day-to-day state government,
equaled $1.835 billion incorporating a $447 million
reduction or a 19.6 percent reduction from 2015.
9:11:38 AM
AT EASE
9:12:00 AM
RECONVENED
Mr. Ecklund returned to LFD Spreadsheet A on the first page
of the summary reports. He pointed to the -$8.6 million in
the very last column where it stated "between CS's."
Following the adoption of the amendments in the current
version of the bill the agency budget total was $8.6
million lower in UGF than in the previous version of the
committee substitute.
Representative Gara clarified that it was $8 million less.
However, the FY 16 appropriations that really went into FY
17 and FY 18 were not included. He wondered if he was
correct.
Mr. Ecklund pointed to the middle column 6 that showed a
$30 million appropriation in FY 16 for filling gaps in
substance abuse services, $1.8 million for elections in
order to flatten out elections expenses between years, and
$932 million for a single year audit which started in FY 15
or FY 16 for the Department of Health and Social Services.
The LFD Spreadsheet compared the FY 16 Management Plan to
the current committee substitute. It was $8.6 million less
in FY 17.
Representative Gara did not think the $8.6 million
difference included the $32 million addition. He asked if
he was correct.
Mr. Ecklund replied that Representative Gara was correct
because it was comparing FY 17 to FY 17 in the committee
substitutes. It was $8.6 million less in FY 17 between the
committee substitutes. The supplemental column was not a
part of the comparison.
Representative Gara referred to the previous evening's
meeting and the last amendment addressed at the end of the
meeting having to do with education. He understood that
most of the related money came out of the general fund. He
stated that about $150 million came from the public
education fund. He wondered if that money was reflected as
a general funds spend for FY 17. Mr. Ecklund responded that
the $145 million coming from the public education fund in
FY 17 was shown as a negative fund cap on LFD Spreadsheet C
which showed the formula fund programs.
Representative Gara pointed to the circled column 5. He
asked about the $3.8 million of UGF spending and wondered
if it included $150 million from public education funding
and the $30 million alcoholism and drug abuse treatment
program.
Mr. Ecklund answered that the $145 million from the public
education fund was not reflected in the $3.8 million. The
supplemental FY 16 appropriations were in a different
fiscal year and were not in that number either.
9:16:26 AM
Representative Wilson asked where she would find the fund
source changes done in the previous day on the forms. She
noted $1.4 million in the Department of Transportation and
Public Facilities (DOT) monies from the general fund to
$1.4 million in vehicle rental tax.
Mr. Ecklund responded in LFD Spreadsheet D reflecting "All
Funds."
Representative Wilson asked what page Mr. Ecklund was
referring to.
Mr. Ecklund responded LFD Spreadsheet D.
Representative Wilson asked if the column was circled.
Mr. Ecklund explained that it was in LFD Spreadsheet D and
was "All Funds". He directed her to the DOT line and
mentioned that the vehicle rental tax would not be seen
explicitly but could be found in the changes in "All
Funds."
Representative Wilson asked about the $7 million in federal
funding that was removed on LFD Spreadsheet D. She wondered
if it would be reflected as part of the savings of the UGF
seen on LFD Spreadsheet A.
Mr. Ecklund asked if she was referring to the aviation fuel
amendment.
Representative Wilson clarified that in the previous
evening the finance committee added $7 million in federal
funds and deleted $7 million in general funds before
putting in $275,900 into general funds. She understood the
general funds would show up on LFD Spreadsheet A because it
was an addition. The decrease of $7 million would also show
up on LFD Spreadsheet A. She wondered if the $7 million in
federal funds would show up on LFD Spreadsheet D all funds.
Mr. Ecklund responded, "That is correct."
Representative Wilson wondered about undesignated general
funds from the state's savings accounts. She was not asking
about federal transfers, tax receipts, or a higher
education fund. She thought those funds would still be paid
keeping government the same size. She thought it would look
as though there were less government services because the
state was spending less of its savings.
Mr. Ecklund disagreed with her characterization. He
explained that the reason the legislature concentrated on
UGF was because the difference between UGF revenue and
expenditures equaled the state's fiscal gap. If a person
wanted the total size or total spend of government they
would have to look at all funds not just UGF.
Representative Wilson understood. She wanted to find out
each piece of the transfer. She knew how to find the
federal fund transfers. She wondered where she could find
money from the higher education fund or the rental tax and
whether she could find them under designated general funds
(DGF).
Mr. Ecklund stated that the specific funds she mentioned
were DGF. There were many different funds including DGF,
federal, and other. She was correct about the two that she
specified.
Representative Wilson spoke of doing a LFD Spreadsheet to
match her numbers.
Mr. Ecklund responded affirmatively.
9:21:03 AM
Co-Chair Neuman explained that there was an effort to use
funds left over from FY 16 to decrease the amount of draw
on the Constitutional Budget Reserve (CBR). He thought it
was a very important fact and added that he did not believe
it would be a good idea to take money left over from the
previous year from some other unused funds that came from
CBR draws and some left over from the Statutory Budget
Reserve (SBR). The effort was to try to use those funds to
pay the following year's bills. He thought the state had a
long ways to go but acknowledged the committee's work in
cutting about $300 million more from the budget. He
remarked that some of FY 16 funds were used to pay the
following year's bills so they would not get used for
anything other than paying bills.
Representative Gattis agreed that the legislature should
not place money back into the CBR because of the three-
quarter vote requirement to access it. She struggled to
understand why the FY 16 budget was being discussed rather
that the FY 17 budget. More importantly, she asked about
the total spend amount. She received calls from her
constituents who were concerned with trusting the
legislature to impose taxes or to spend their Permanent
Fund Dividend (PFD). They felt legislators were playing
shell games. She thought it was important to note the
government's total spend for those watching on television.
Co-Chair Neuman interjected, "Representative Gattis, this
is not a shell game! This is using last year's funds and
Mr. Ecklund can answer your questions."
Representative Gattis rebutted that constituents could not
follow the numbers and legislators were having a difficult
time following as well. She thought it was imperative to
discuss the total spend, how it was broken out, and how it
compared.
Co-Chair Neuman responded that that was fine.
Representative Gattis thought her constituents were asking
a fair question. The legislature spent a significant time
talking about UGF and DGF. However, she wanted to know the
total spend of government, what the legislature was
spending, and how did the legislature make government
smaller. She thought they were fair questions to ask.
Co-Chair Neuman stated that it was fine, but he was not
ready for accusations. The committee would work on the
budget. He asked Mr. Ecklund for the total spend of
government.
Mr. Ecklund responded that the total funds for agency
operations, formula, non-formula, and state-wide equaled
$8.659 billion.
Co-Chair Neuman asked how much of the total was statewide
formula and non-formula.
Mr. Ecklund referred to the House [column 5] in the middle
of LFD Spreadsheet D. The total spend in FY 17 for agency
operations (formula and non-formula) equaled $8.169
billion. Statewide operating items totaled $490,478.5
million. The two figures together totaled $8.659 billion.
He also pointed to the 2016 House Supplemental column
[column 6].
Co-Chair Neuman indicated that in the previous year the
state had just under a $5.2 billion budget. The legislature
reduced the budget by about $274 million in the budget
finance subcommittees which left the budget at $4.85
billion. He asked where the number could be found.
Mr. Ecklund pointed to LFD Spreadsheet A which showed UGF.
He derived the total of $4.084895 billion by adding the
agency total and the statewide total.
Co-Chair Neuman stated that some FY 16 funds were used to
help cover the costs for FY 17.
Mr. Ecklund responded that Co-Chair Neuman was correct. He
reported $145 million was used from the public education
fund and $77 million was used from the higher education
fund.
Co-Chair Neuman asked for the total without using FY 16
funds.
Mr. Ecklund needed a moment to do some calculations.
Co-Chair Neuman instructed Mr. Ecklund to run the
calculations later.
9:26:48 AM
Vice-Chair Saddler responded to the Wasilla legislator
regarding her comment about "Shell games." He did not
believe it was a shell game that was being played and that
referring to it as such was a disservice to the committee
and to the complexity of the process. He used the analogies
of a household budget and a stock portfolio to illustrate
the complexity of the budgeting process. He stressed the
importance of explaining the process to constituents that
did not understand the system. He felt it was the
obligation of legislators to understand and convey the
process. He wanted people at home to know that it was not
simple, but complicated. It was not dishonest nor a shell
game, but rather, a complex state budget.
Co-Chair Neuman did not believe anyone was saying it was a
shell game. He reiterated that the legislature used FY 16
funds to cover FY 17 costs. He spoke of how to explain it
to his constituents. He gave an example of putting on a new
deck and a new roof on his house. He explained that the
legislature took money left over from FY 16 to pay for
expenses in FY 17. Co-Chair Neuman expounded that the left
over funds could have been used for other items such as
capital projects. However, he felt it was a priority to use
the extra funds to reduce the state's operating costs and
the amount of money that had to be drawn from the CBR. He
spoke of other items that would need to be dealt with
before the end of the session. He relayed that only 40
percent of the budget represented the state's day-to-day
operations. He mentioned formula programs in Medicaid equal
to $600 million or more. He also mentioned the Medicaid
reform bill and gave kudos to Co-Chair Thompson's office
and his staff for his efforts towards that legislation. He
mentioned having meetings with the governor and the
commissioner on Medicaid as well. He noted education and
the related formula programs and reported that the budgets
for Department of Health and Social Services and the
Department of Education and Early Development were the two
largest in the state. Both budgets would likely be further
reduced. He specified that legislation in the works
regarding education and oil and gas tax credits. He
commented that money was not allocated in the budget for
tax credit payments. He relayed that from the Senate's
report he gleaned there would be considerable reductions in
the amount of oil tax credits owed in future years.
However, there were still outstanding credits. He offered
that the state had yet to deal with the obligations of the
Teacher Retirement System (TRS) and the Public Employees'
Retirement System (PERS) as part of the budget process. His
goal was to reduce the overall state spend down to about
$4.5 million within 2 years. He referred to experts such as
Institute of Social and Economic Research (ISER) who
suggested that it would take 3 years to make such a
reduction. In order to arrive at a reduction in a short
time period he surmised it was important to use the money
left over from FY 16 to lower the costs to the state. He
posed the question about what it cost in the current year
to pay the following year's bills. He speculated that $2.1
billion would have to be taken out of the CBR to meet the
budget demands, considerably less than he expected. His
goal had been to reduce the amount of draw from the CBR. It
did not lower the amount of state spending. He thought he
had tried to make things very clear. He felt that the
legislature had a long way to go.
9:34:38 AM
Representative Gattis asked if the state had added to the
total spend for government by using the left over FY 16
funds. She asked for the prior year's total spend as well
as the current year spend. She asked if the legislature
added to the total spend by using the FY 16 funds that were
being discussed. She was talking about total spend versus
UGF.
Co-Chair Neuman asked if she was asking about total spend
including federal funds or funds that came in from
receipts.
Representative Gattis reiterated that she was speaking of
funds from UGF or DGF - funds collected by the state and
spent by the state. Constituents were watching legislator's
every move and how Alaskans' personal pockets would be
affected. She opined that it was incumbent upon legislators
to be clear so that constituents could trust them.
Co-Chair Neuman agreed.
Representative Gattis asked if the state had increased the
previous year's budget that the legislature voted on by
using FY 16 funds.
Co-Chair Neuman responded, "No."
Mr. Ecklund referred to LFD Spreadsheet D, all funds. He
wondered if she was interested in all state funds.
Representative Gara responded in the affirmative.
Mr. Ecklund pointed to the second page of LFD Spreadsheet D
noting the different categories under funding summary: UGF,
DGF, other state funds, and federal receipts.
Co-Chair Neuman stated that in the previous year the state
budget was under $5.2 billion. He asked Mr. Ecklund if he
was correct.
Mr. Ecklund clarified that the figure was UGF and did not
include DGF and other state funds. It depended on what
categories of funds he wanted to compare.
Representative Gattis would no longer burden the committee
with her questions but hoped to get together to review the
numbers.
Co-Chair Neuman interrupted the representative indicating
that the legislature could not use FY 16 funds. The only
thing the legislature could use the FY 16 funds for was to
continue the amount of draw that would have to be taken
from the CBR. However, the cost to the state remained the
same.
9:38:38 AM
Co-Chair Thompson commented on the state's total spend. He
thought the figure would vary significantly. The state was
receiving additional money in highway dollars in the
current year shown as $2.184 billion. Every time the state
received additional funds it would increase the state's
total spend for the year which he thought was important to
consider.
Representative Gara agreed that the total budget reduction
was approximately $300 million. He wanted to move away from
how everything was accounted for and focus on what was in
the budget. His major complaints had to do with what
happened to folks with disabilities, seniors, and children.
He wanted to have accurate numbers and he wanted to
understand what the legislature was doing in the future. He
remarked that the legislature had typically measured year-
to-year spending by UGF. In the current year things had
changed. He suggested that if the legislature wanted to
have an UGF amount equal to the previous year's figure, it
would require the legislature to cut an additional $220
million. To reach the same UGF amount several other funds
would have to be spent such as the $80 million from the
higher education fund and $145 million from the public
education fund. These funds were not reflected in general
funds. He mentioned that next year he did not want to
compare UGF to UGF because otherwise the legislature would
have to come up with $220 million cuts to reach the same
UGF number. He thought the legislature would have to start
considering DGF and UGF in order to have a true picture of
statewide spending. He did not want to have to cut $2
million to say that the state was at the same level as it
was in the previous year.
9:41:28 AM
Co-Chair Neuman agreed that the budget needed to continue
to be reduced. He noted funds were used to supplement the
UGF. The intent was to demonstrate to the public that the
legislature planned to have a lower budget in the following
year.
Representative Gara suggested that last year's cuts in the
amount of about $700 million and the proposed cuts for FY
17 in the amount of about $300 million equaled about $1
billion in reductions over the past two years. He thought
the cuts that were being proposed were terrible. He
suggested that the state was spending much less than 30
years ago (if adjusted for inflation) on a per capita
basis. The problem the public had was that there was always
someone in the legislature that spent unwisely. He
explained to Mr. Ecklund that he was having a difficult
time difficult time reconciling the numbers. He cited
several numbers and asked Mr. Ecklund for clarity. He
wondered if there had been roughly $270 million in cuts.
Mr. Ecklund explained that he was correct that looking at
agency operations in the current committee substitute
compared to the FY 16 Management Plan the legislature would
be cutting $282 million in agency operations. The additions
for the public education fund and retirement occurred in
the statewide section. He pointed to the bottom of the page
showing a total of $4.084 billion. By adding $145 million
and $80 million the number totaled $4.31 billion.
Representative Gara stated that there was a $280 million
cut in UGF. He wondered how he could explain that it was a
$280 million cut when $220 million was added to the
statewide number.
Mr. Ecklund responded that it would be better to compare
agency operations to agency operations, statewide numbers
to statewide numbers, and then come up with a total. The
legislature had cut $282 million from agency operations.
9:48:15 AM
Representative Pruitt wondered how things would look in the
following year regarding the budget. Currently, the
committee was hearing about how much was spent in previous
years. He understood that the current total spend amount
for FY 16 was about $5.2 billion. He wondered in the
following year if that number would be closer to $5.7
billion or whether the $5.2 figure include the $475 million
being used to pay for other things.
Mr. Ecklund replied that the FY 16 management plan would
stay constant.
Co-Chair Neuman clarified that the amounts needed were for
agency operations: formula, non-formula, and statewide
monies.
Representative Pruitt wanted to know about the total UGF
spend in the following year. He was not necessarily talking
about the management plan. He was referring to PowerPoint
slides provided by the Office of Management and Budget as
to how much was actually spent in FY 16 of total UGF spend.
Mr. Ecklund answered that the management plan represented a
fixed point in time and would not change. He surmised that
Representative Pruitt was interested in the supplemental
budget for FY 16 and how it would be reflected.
Representative Pruitt replied in the affirmative. He asked
if the supplemental numbers were included in the $5.2
million. In other words, he wanted to know if the actual
numbers would be shown on the PowerPoint and whether they
would be closer to $5.2 billion or $5.7 billion.
Mr. Ecklund deferred to Mr. Teal from the Legislative
Finance Division (LFD).
Co-Chair Neuman reported that the legislature had started
out at $5.2 million to run government in the following
year. There were monies that were taken out of the budget
under UGF. He asked what the number dropped to.
9:52:23 AM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, asked
Representative Pruitt to repeat his question.
Representative Pruitt discussed that OMB provided charts
showing the total amount of UGF spending and how the state
had decreased total spending. For the previous year it
showed $5.2 billion as the total spend. However, he was
aware that FY 16 was not done. He wondered if the total
spend would remain around the $5.2 billion level or if it
would increase with a supplemental budget to $5.7 billion.
Mr. Teal confirmed that because it was currently the middle
of the fiscal year the management plan numbers were used
and they did not include supplemental figures. When showing
the fiscal summary it also included capital spending equal
to an additional $200 million. In looking at the number on
LFD Spreadsheet A in column 5 it showed spending of $4.084
billion. In answer to Representative Pruitt's question
about what FY 16 would show, he offered that FY 16 would
show FY 16 final which would include supplemental spending.
9:55:01 AM
Mr. Teal continued that by the time the information was
available the legislature would already be looking at FY17
and FY 18 in the following session. He understood how it
might appear that there were shell games. The extra money
totaling $288 million resulted from revenue coming in
higher than expected and expenditures coming in lower. The
legislature did not empty the SBR as anticipated. In most
states, it would simply be an unspent balance that carried
forward into the following fiscal year and was available
for spending in the same fiscal year. Essentially, it would
reduce the states revenue in the next fiscal year. The
state did not operate in such a way because money got swept
into the CBR. The state spent the money in FY 16. He did
not understand why people referred to spending FY 16
revenue in FY 16 as a shell game. Spending the money in FY
16 in some ways reduced FY 17 expenditures. If the money
was carried forward into FY 17 the legislature would end up
in the same position; the legislature would have more money
available in FY 17 reducing the state's deficit. He urged
members to focus less on comparing what the state spent in
a particular year. He relayed he would be in front of the
committee over the next few days discussing models. In that
discussion he would emphasis that trying to separate one
fiscal year from another would be more confusing than
helpful. He stressed the importance of focusing on what was
happening to the reserve balance. It would be a major gage
as to how the state was doing without a whole lot of
confusion. The state would have deficits across the fiscal
years which meant the reserve balances would fall.
Ultimately, people could see how they were doing by simply
looking at what was happening to the reserves in the long
run. He pointed to LFD Spreadsheet A at the reduction in
column 5-2. At the bottom of the column there was a
reduction from the FY 16 Management Plan to the House
number of $993 million. It would indicate that the
legislature reduced FY 16 to the current budget by about $1
billion. He reminded members that the budget in its current
form did not fund oil and gas tax credits. He suggested
subtracting $500 million leaving a reduction of roughly
$493 million. He also mentioned the $145 million from the
public education fund added to the $80 million totaling
$225 million. He continued that by subtracting $225 million
from $493 million the true savings ended up being about
$270 million - the number he thought Representative Pruitt
was looking for. Currently the legislature did not have the
tax credits funded. He posed the question about whether the
legislature would fund them. There was money that carried
forward. He wondered if the legislature would bump the
budget up in the following year by $225 million because FY
16 money was used in FY 17. He reminded members that $145
million of the $225 was a three year carry forward. He
thought that the budget might increase by $80 million from
the higher education fund. He thought that, as
Representative Neuman was trying to convey, the budget was
an ongoing process without ever having a really firm number
for a starting place. The state would not be spending $5.7
billion. If oil and gas tax credits of $500 million were
added as well as a capital budget of $200million to $4.084
billion the total would be $4.7 billion. He relayed that
even with accounting for adjustments the figure would still
be under $5 billion.
10:01:31 AM
Representative Pruitt thought that Mr. Teal had given out a
significant amount of information. It was important to him
to be able to convey the happenings regarding the budget to
his constituents in a manner they could understand. He
talked about $500 million being withdrawn from savings. He
believed that for the first time the governor had asked the
legislature to look to the people of Alaska to help to fund
government. He spoke of the difference between spending the
state's money versus constituents' money. He wanted to be
very clear about what they should expect as far as them
helping to fund state expenditures including keeping
education funded at a steady level. He wanted to fully
understand the actual spend in FY 16. He also wanted to
have a clear understanding of what legislators would be
looking for in the future. He wanted to be able to return
to his constituents and be prepared to answer questions
about the budgetary process.
10:06:03 AM
Mr. Teal offered to update the graphs the LFD provided at
the beginning of the year which showed final spending
through FY 15. The numbers for FY 16 would reflect
appropriated numbers, and the governor's request for FY 17.
He could also update the chart with the FY 16 supplemental
numbers added to the anticipated FY 16 expenditures and the
budget as it was passed out of the committee.
Representative Pruitt thanked Mr. Teal.
Co-Chair Neuman asked about the budgets for FY 17 and FY 18
and forward funding for education. He wondered if the
budgets would be lower or higher.
Mr. Teal responded that it made the budget lower. The state
set aside $145 million per year to pay for education for FY
17, FY 18, and FY 19 which reduced the amount of money put
into education in those same years by $145 million per
year. There will be a jump in the budget for FY 20 of $145
million to bring education to the level it was at
currently.
Co-Chair Neuman commented that he hoped the legislature
would have things figured out by that time.
Representative Guttenberg asked how legislators accounted
for multi-year funding. He wondered if the column would
ever change or if it would show up in the supplemental
budget. He further asked if the column would ever change if
there were unrealized earnings or unrealized losses.
Mr. Teal explained that it would change. He suggested using
the chairman's amendment of $30 million for health care as
an example. It would show as $30 million of FY 16
expenditures or appropriations. A calculation would have to
be done at the time books were closed for FY 16 to know how
much of the $30 million was actually spent in FY 16. He
suggested that it was $5 million for FY 16. The unspent
money, $25 million, would carry forward into FY 17. When
the books were closed at the end of FY 17, and for example
$10 million was spent, only $10 million would show as an
expenditure. The next year, FY 18, another $10 million was
spent, and only $10 million would show for FY 18. The
numbers constantly adjusted. Currently, he could not tell
how much would be spent in FY 16, FY 17, or FY 18. It could
only be determined at the end of each year. In answer to
Representative Guttenberg's questions the numbers could and
would change.
10:10:20 AM
Representative Gara wanted to talk about the budget and its
contents. He completely disagreed with the Chamber of
Commerce telling the legislature what the budget should be.
He had oil industry folks tell him their opinion about the
budget. They wanted to make sure that there was no pressure
on them to have to pay a fair share towards revenue in the
state. He furthered that the lower the budget, the less
pressure on the oil industry. He listened to his
constituents and disliked the idea that the oil industry
knew what the state's budget should be. The budget
reflected the state's values. He did not feel anyone did
anything dishonest. He thought that from the present into
the future legislators needed to look at state spending. He
did not want to look at an artificial category of UGF
because he believed much of state spending was DGF. He
stressed that the budget was about what the state stood for
in society. He was not happy with the results of the
previous day's meeting and the results of the budget. He
reviewed a number of effects of the previous day's
reductions. He did not feel the budget reflected any
compassion or his version of compassion and did not believe
the state was that poor. He agreed with the governor that
the budget needed to be cut, but he thought the line had
been crossed away from compassion. The governor had
proposed $100 million in cuts in the current budget on top
of $700 million in cuts from the previous year's budget. He
spoke of cutting things seniors relied on. He mentioned
that $350 thousand was cut for emergency housing for senior
citizens. He provided additional examples of reductions to
senior services from the previous day including cuts to the
Pioneer Home. He was aware that people would not pay a fee
to remain on a waiting list. He cited additional examples
of cuts that would affect the senior population in Alaska.
10:16:28 AM
Representative Gara spoke about the need for money for Pre-
Kindergarten (Pre-k). He noted that the state provided
among the worst level of Pre-K in the nation. All of the
state funded Pre-K had been eliminated from the budget. He
specified that low income children that had the opportunity
to attend Pre-K graduated in higher numbers. Ultimately, it
saved the state money and built a better economy. However,
Pre-K funding was cut. He was disappointed in the $50
million reduction to the University budget. He talked about
the potential loss of students and teachers from the
university. He thought the best chance at diversifying the
economy and providing people opportunity. He opined that
the university was the best shot for kids to be able to
receive a proper education. He mentioned that there was $20
million less in K through 12 funding than there was 2 years
prior. Grant money had disappeared from the budget. He
spoke of losing 67 teachers in the following year. He
questioned what the legislature was doing for the next
generation.
Representative Gara opined that the budget was a moral
compass of sorts. He felt that the state was cutting things
that made people's lives better or gave them dignity rather
than cutting waste. He was tired of being the person
talking about abused children in the foster care system.
There were 450 additional children in the foster care
system in the current year than in the previous year. The
case-workers the state had were helping children and
families and had nothing to do with the rise in foster care
numbers. Caseworkers were overloaded and unable to work
with children and families to get kids out of the system
into an adoptive family or back with their family. Although
the state was good at taking children out of abusive or
neglectful homes, it was poor at supporting the same
children once they were displaced. They were the next
generation of 17 percent of kids who ended up in jail. He
furthered that 40 percent of foster kids ended up homeless
including those that couch surfed - 20 percent were couch
surfing and 20 percent were actually homeless. Caseworkers
took on twice the caseloads then they could really handle.
As a result foster parents were lost because of a lack of
proper follow-through. He suggested that it would save
money to do the right thing, transitioning children out of
foster care quickly into a loving home. An amendment was
offered to try to assist with the issue and it did not
pass. He had been told by the person who hired the state
child advocates that Alaska had among the highest caseloads
in the country. Caseloads had gone up 58 percent. The
amount of child abuse currently would be greater unless the
legislature did something to help. He reiterated being very
unhappy about the budget.
10:22:46 AM
Representative Gara continued that the state faced the risk
of losing federal funding such as Temporary Assistance for
Needy Families (TANF) money because of the way the budget
was written. He relayed that in order to maintain the pool
of federal TANF money the state had to contribute $36
million. The state would be below that amount with the
current budget. He spoke about having worked across party
lines in prior years to come up with a budget that people
were satisfied with enough to support. He thought that the
current year was very different because every amendment to
address the things he had talked about got voted down. He
advised members to vote the way they believed. He spoke of
hearing comments in the hallway which he did not like. He
cited that for every $100 million of cuts between 1200 and
1600 jobs would be lost. With a proposed cut of $300
million the state stood to lose roughly 4500 jobs. He felt
the budget was a pathway to a recession. He did not want
the legacy of the legislature to be a recession or to have
turned its back on people with disabilities. He suggested
that the best shot of educating a child was to invest in
their early childhood education. He was not happy at
present, nor was he happy about all of the amendments that
failed. He tried but would have lost all amendments even if
he had been Mother Theresa. He did not want it spun that
the legislature tried to increase the budget, when the
legislature agreed to budget cuts of over $100 million. He
emphasized he would not be an easy vote to give $500
million to the oil industry and for oil tax credits if that
came up during the session. He remarked that Alaska, for
the third year in a row, was giving oil companies more
money in oil tax credits than it received in production
taxes. He conveyed that the statute stated there was a
limit on what the state had to pay in oil tax credits when
it did not have revenue, about $70 million. He did not like
the budget at all. He relayed that a member had said that
they wanted to hear his arguments so that they could oppose
him. He felt it was a "sick" response of which he was very
disappointed.
10:29:12 AM
Representative Wilson asked Mr. Teal about something he had
said about paying attention to reserve balances. She was
concerned that the legislature had only been paying
attention to the CBR and prior to that the SBR, and now
potentially the Earnings Reserve Account (ERA). In the
current budget process other pockets of money had been used
such as the higher education fund. She wondered if he had a
presentation showing all of the available pots of money.
She assumed that Mr. Teal had been referring to all pots of
money, not just the CBR.
Mr. Teal referred to page 2 of the fiscal summary in the
governor's overview which listed all of the various savings
or reserve accounts. Some of them were considered
designated reserves such as some of the higher education
funds. The Earnings Reserve Account was included in the
list. Normally, when doing the model, the LFD was counting
only the SBR and CBR funds as reserves along with the ERA.
The balances of the other smaller funds were known. The
balance of the Power Cost Equalization (PCE) fund was about
$1 billion and the higher education fund balance was about
$400 million. There were some smaller funds, but the PCE
fund and the higher education fund were the two largest.
None of the remaining smaller funds contained more than
about $2 million.
Representative Wilson asked about the last page titled:
"Multi Year Agency Summary" [Page 2 of LFD Spreadsheet D].
She drew attention under funding summary at "Other State
Funds". She noted that in FY 15 [column 1] it listed over
$4 million and in column 5 it listed $1.4 million. She
wondered about the difference between the two numbers.
Mr. Teal replied that she was looking at the change from FY
15, the year in which the state made a $3 billion deposit
from the CBR account into the retirement account. The
Constitutional Budget Reserve was classified as other
funds. The large change was due to the $3 billion use of
the CBR.
Representative Wilson mentioned that in using the higher
education fund and the PCE fund to fill the budget gap it
also served as a warning to agencies that there would be
further reductions to the budget and that they needed to
prepare for those in the following year.
Co-Chair Neuman responded affirmatively.
10:33:23 AM
Representative Wilson had no problem using other funds as a
stair step down to decreased budgets. She wanted to ensure
that the message regarding the decrease of available
funding into the future was clear. She was very frustrated
being accused of not having good values because of her
votes from the previous evening. She thought there was a
difference between reducing the size of government and how
much was spent out of state savings to keep certain
departments functioning. She was uncomfortable with the
possibility of a large supplemental budget in the following
year. She thought the state was counting on many federal
funds which it might or might not receive. She did not
believe the budget process was as difficult as it appeared
to be. However, she thought it was important to convey that
funds were limited. She expressed concerns about hiring
positions at a time of a budget crisis. She understood a
significant amount of scrutiny had been applied to the
budget. She relayed that the legislature had decreased the
budget by about $320,184 all funds, a 4 percent reduction.
It included the state's DGF, UGF, and federal funds. She
thought everyone in the state would feel the effects of the
reductions to the budget. She reasoned that reductions to
the budget needed to happen prior to her constituents
having to pay additional costs. She wanted to make sure
government was the right size prior to asking constituents
to pay taxes or part with their PFD. She wanted to keep
prices down for constituents. She reiterated the difficulty
of the budget processes. She felt every subcommittee had
done a good job of making reductions. She was supportive of
the budget in its current form.
10:38:18 AM
Vice-Chair Saddler rejected the insinuation made by his
colleague from Anchorage that members of the committee were
being told by the Chamber of Commerce or the oil industry
what the budget should be. It was untrue, unfair, and
indecent. It would not be any more fair, accurate, or
decent to say that the public employee unions were telling
members of the committee what the state budget should be.
That kind of rhetoric did nothing more than inflame
passions and did not build bridges of understanding or
cooperation as they met to try to solve the state's
problems.
Vice-Chair Saddler commented that there had been a litany
of objections as to how the budget was put together and
about the morality of the document. He had difficulty
understanding how paying $12.5 million for a program was
compassionate but providing $12 million for the same
program was heartless and cruel. He heard that it was
illegitimate to include money in the budget that could not
be guaranteed and locked down. He also heard criticism that
the state was seeking to access federal TANF money by
matching the maintenance of effort for the homeless
programs and that it was illegitimate to count the money
unless it was solidified. During the discussions of
Medicaid expansion and reform the state heard promises that
there would be tremendous savings in expanding Medicaid
that were not guaranteed, but hoped for. He believed the
rhetoric and snark that had been used was not helpful.
Representative Gara objected.
Vice-Chair Saddler withdrew the word, "snark." He did not
appreciate the inflammatory language that had been used. He
did not think it was helpful and did not believe it helped
in building bridges. He continued that the legislature had
asked the administration to be creative, energetic, and
innovative in finding efficiencies and in finding new
sources of revenue in order to accomplish their mission and
serve the people of Alaska in the state's current financial
situation. He cited that the administration had responded.
He expressed his frustration that a very complicated
subject like the state's budget and finances was reduced in
the public media to 144 character tweets. He quoted Thomas
Jefferson who stated that democracy depended on a fully
informed public. He hoped the public took every opportunity
to become fully informed. He believed that it was the job
of the legislature to balance its unlimited needs and wants
to serve people with the state's limited financial
resources. He wanted to take care of peoples' needs but
could not wish for more money to do it all. The situation
was unpleasant for legislators and all Alaskans. He
reminded committee members that Alaskans pride themselves
for being able to overcome adversity. He felt that the
state's problems could be solved in part by working
together and building bridges, avoiding making enemies
along the way.
10:42:46 AM
Representative Edgmon felt that if all eleven House Finance
members walked away without some dispute over items in the
budget then the committee would not have accomplished its
objective. He agreed that it was just the beginning with
revenues coming down the pike. He suggested that if members
thought the budget process was difficult, he thought
implementing revenue measures and the accompanying pressers
from legislators' constituencies would be more
exasperating. As a rural legislator he could complain
mightily about certain reductions that took place and some
injustices delivered in the budget. He would not complain,
because his constituents were beginning to understand. He
had talked with all of the major mayors in his communities
and had talked with scores of people who realized they,
too, would have to tighten their belts and pay more to make
things work. He wanted to make sure that there were not
deeper cuts or cuts not crafted properly. He spoke of Mr.
Teal's warning that the day would come where spending
needed to end. Certain areas in the state, even at the high
water mark, remained chronically underserved and
economically challenged. He believed there were cuts in the
budget that had landed with a louder thud in Rural Alaska
than in other parts of the state. He was not going to
complain, but rather to look out for the next fifty years
of the future of the state. He felt that more accurately
reflected the gravity of the budget challenges facing
Alaska.
Representative Edgmon started his day by reading an article
regarding the mess the State of Louisiana was experiencing
with having to shut down core services. He appreciated
working with the diverse members of the committee who
represented the same diversity throughout the great State
of Alaska. There were members representing the largest
communities that were the core of the state in terms of
population. There were others who represented the energy
challenged regions of the state including the areas of
Fairbanks, Southeast, and Rural Alaska. The amalgamation of
the discussion would produce a budget that no one would
fully embrace or like. He surmised that it was the
beginning of a process that would not only challenge
legislators as policy makers and as leaders of Alaska's
future. He spoke of the difficulty in staff reductions in
state government. He mentioned that through the
subcommittee process in one department 39 positions were
eliminated. The budget was being reduced and tough
decisions were being made. He felt his task was to produce
a budget that was workable and where the cumulative impacts
were not too regressive in terms of their impacts on the
smaller communities. The smaller communities depended on
programs and services. He furthered that Alaska had very
symbolic relationships in which the smaller communities fed
off of the larger communities and the larger communities
provided important services and economic networks. He spoke
of returning to his constituents to discuss reducing the
dividend, cutting the budget further, and introducing new
taxes. A combination was necessary to solve Alaska's fiscal
situation. He emphasized that when he sat down with his
constituents, by-and-large, they understood and embraced
the tough decisions. He urged his colleagues to communicate
with their constituents as well. He believed it was
incumbent upon legislators to be ambassadors. He thanked
members and added that he thought everyone around the table
wanted to do the right thing.
10:51:36 AM
Representative Munoz thanked the chairman for his
leadership and guidance through the budget process, the
subcommittee chairs for their efforts, and all of the
members who had worked very hard. She spoke about a balance
of input and the work done by each of the committee members
towards the budget process. She was pleased that the state
was funding education at statutory levels. She was
supportive of leadership around behavioral health and of
addressing the crisis of heroin addiction and drug
addiction in Alaska's communities. She believed the current
budget recognized the crisis and made significant steps
toward improving treatment options. She relayed that half
of Alaska's budget, over $2 billion, went towards K-12
education and serving the less fortunate through health and
social services. She agreed that legislators needed to be
ambassadors working with communities and constituents to
educate folks about the state's difficult times. The
current budget reflected a reduction of about 6.9 percent
down from the previous year. The state's revenue had
declined by more than 75 percent in the same time period.
Alaska was in a challenging time period. However, she
thought legislators could be optimistic. She thought the
state had a bright future. She knew that tough decisions
would continue to be made through the revenue discussions
as well as in the reform of Alaska's oil and gas credit
program. In closing, she thanked members for their
dedication and hard work. She thought that sometimes it was
easier to vote no on a piece of legislation. There had been
plenty of times as a legislator where she would have
preferred to vote "no". She was confident that the
legislature was on the right track and would be voting in
favor of the budget.
10:54:37 AM
Representative Kawasaki stated that he would not be able to
support the current budget. He hoped he would be able to in
the future. He thanked Co-Chair Neuman for his work on the
process. He felt that committee members had worked together
on the budget but disagreed on some of its elements. He
shared the frustration of the member from the Anchorage
area. He stated that behind many of the numbers was a
person. He agreed that a budget was a moral document. It
spoke to Alaska's common goals and challenges and how the
state protected its most vulnerable, seniors, children, and
others. Because he felt that the budget was a moral
document it was difficult for him to see it pass in its
present form without addressing some important areas. He
cited a number of vulnerable people that would be affected
by the reductions in the budget. He relayed that University
students would be hit with huge targeted cuts across the
state. There was a $4 billion budget deficit. The state had
some major structural problems that it would have to deal
with. He referred to a current newspaper article. He stated
that the legislature could fix the problem and protect
seniors in the current session. He thought the worst part
was that the budget did not include a vision for the state.
He thought the budget was a roadmap towards recession. He
did not support cutting $100 million from the University
over a two-year period. He believed the legislature was
setting the state up for a recession. He would not be
supporting the budget as it stood.
11:00:52 AM
Representative Pruitt shared that he had been part of the
private sector in the past and had a work colleague who
frequently said, "Teamwork is messy." He agreed with the
sentiment. He thought that it had been messy working
together on the House Finance Committee. In the end,
though, they were a team. He appreciated the passion from
members about their constituents and communities. He
reminded the committee that it had only cut $283 million
from the budget. He stressed that it would not create a
recession. He relayed that thousands of people in the oil
and gas industry had lost their jobs because of oil prices.
He furthered that Alaska was either already experiencing a
recession or would be soon due to the industry not
providing the amount of money it had provided for Alaskans
in the past. He believed that the legislature had the
ability to accelerate a recession or make one worse by
asking for money from the pockets of constituents. He
wanted to make sure that the information provided to the
public was clear and understandable and included what the
legislature was doing and what to expect in the future. The
general fund had been decreased by about $1 billion.
Ultimately, the state would have to use savings from last
year or the current year to cover costs. The general fund
spend in the current year was lower due to utilizing
savings.
Representative Pruitt reported that the state was utilizing
savings to cover the budget. He made clear that the
legislature had not cut more than $283 million. He
suggested that no household would consider using savings to
pay bills as cutting spending. The cuts in the budget
resulted from a significant amount of hard work from the
co-chairs, the subcommittee chairs, and from every person
that sat on the subcommittees. He believed that in order to
continue to manage the budget statues would have to change,
delivery of services would have to be reevaluated, and
additional cuts would have to be made. Otherwise, programs
might be cut altogether. The monies from the higher
education fund of $145 million would be spent in the
following 3 years. After that period it would cost $436 per
working individual in Alaska to cover that funding. The
money being used from savings of $75 million to pay for TRS
equated to $225.90 per every working Alaskan. He opined
that legislators would have to have the tough conversations
necessary to address the budget deficit; Alaska 3.0 - a
time when the Permanent Fund (PF) was being considered to
pay for government. While he supported the budget moving
out of committee he wanted to make it clear that the
legislature was only borrowing time by using savings to pay
for operations. He surmised that at some point savings
would not be available for use.
11:09:21 AM
Representative Gattis thought it was important to be square
with Alaskans about the government spend. She believed all
Alaskans were willing to pitch in. She did not feel the
process was done. She thanked the co-chairs for their
efforts. She thought she brought a different perspective
than those members with longevity.
11:10:56 AM
Representative Guttenberg returned to the values instilled
by his parents. He relayed that what drove him to the
legislature were the issues around Alaskan hire. He had
come from the construction trade and viewed many issues
through that filter. He thought the state was well beyond
the point of waste, inefficiencies, and ineffective
programs. He believed the state was well beyond the meat
and tendons into the bones in terms of reductions. He
expressed his concerns about there being consequences to
the actions of the legislature. He thought many of the
amendments that were passed would have dire consequences
for Alaskans. He asserted that the programs that were being
cut from the budget had either been adopted or created
because they worked. The amendments proposed by Minority
members on the budget were both cost effective and
compassionate. He was very disappointed in the votes
because of the negative consequences that might result. He
opined that the budget was a reflection of the state's
moral compass. He did not see any bridges being built.
Rather, the same game was being played as in the previous
year. He wondered why the committee was not doing things
differently. He was concerned with the resulting disastrous
consequences. He claimed that what was done in the current
day would be significant for the future. At the end of the
day, all would be a compromise. He thought legislators
would need to better educate constituents about the fiscal
condition of the state. The current budget fell short in
his estimation. The burden that was being placed on some
people was disproportionate in his opinion. He advised that
legislators all needed to do the right thing. He asserted
that Alaska was a great state with significant opportunity.
He mentioned the Artic and its potential. He felt the
budget fell short.
11:19:18 AM
Co-Chair Thompson thanked Co-Chair Neuman for the amount of
time and energy he put into the budget process. He also
recognized Co-Chair Neuman's staff, Mr. Ecklund and Ms.
Brown, for their efforts. He recalled a difficult time in
the 80's having his own business and having to ask his
employees to share their medical insurance costs, give up
bonuses, and go without salary increases. He understood
hard times. He suggested that the budget was one that no
one was completely satisfied with because it affected
people. Although he shared his heartache with other members
of the committee about having to reduce the budget, he
wanted to focus on those things that remained in the budget
and the services still intact. He commended everyone for
all of their hard work. He agreed with a member from
Fairbanks that the budget fell short in revenues. The next
item of business would be how to fill the shortfall. He
believed there was far more work to be done moving forward.
There was a mix of constituents; some who felt that the
committee went too far and some that did not believe there
were enough cuts to the budget. He thought the state would
have to look at other sources of revenue including taxes
and the use of the earnings from the PF. He thanked Co-
Chair Neuman again for all of his hard work.
Co-Chair Neuman acknowledged the team effort that had been
made in compiling the budget. He knew the budgeting process
would be difficult.
11:23:15 AM
Co-Chair Neuman recognized that currently Alaska was
experiencing the hardest times that it had seen in several
years. He mentioned the high emotions of committee members
and members of the public which he believed were natural.
He conveyed having to deny financial requests from
Alaskans. Everyone that came to his office was told that
the state did not have money. He did not try to candy-coat
the state's fiscal woes. He highlighted trying to uncover
every small pocket of money that was available. It was
interesting to think of the budget in terms of having to
borrow money. He did not want to dip into the CBR. However,
he would rather dip into those funds than borrow additional
money. He spoke of a former president that talked about the
economy and how what government did effected the economy.
He spoke of legislation in the works to address other
pieces of the state financial situation. He thought
focusing on a change in regulations would be necessary. He
surmised that there was an overabundance of regulations and
that, with the cuts to agencies, it would be difficult to
maintain the current level of regulations. He had met with
the governor about requiring all of the departments to take
a serious look at reducing regulations. Many had been
identified that potentially could be removed from the
books. He avowed that the legislature needed to do all it
could to make Alaska attractive to industry and to reduce
their risks in investing in the state. Alaska did not have
capital dollars. Instead, the state would have to do all it
could to attract industry investment dollars in order to
create jobs developing its resources. He furthered that
Alaska needed to have a workforce capable of developing
state resources. However, a large number of Alaskans had
serious addictions to drugs and alcohol.
11:29:26 AM
Co-Chair Neuman conveyed the importance of dealing with the
state's alcohol and drug abuse situation. He spoke of the
budget containing a proposal of $30 million to be spread
over 3 years to assist in directly dealing with the scourge
attacking Alaska. He made it clear to the commissioner that
the money was to be used in proven and affective programs.
A system had already been set up containing the
methodologies in place to track programs to see what worked
and what did not work. The work was done through the
recidivism reduction group. The House Finance Committee had
approved of the work being done 3 years prior. He spoke of
seeing results with Alaska State Troopers having to deal
with a lesser number of offenders. He noted that troopers
were heroes. He mentioned Representative Gara discussing
children in need. Many of the children's parents were
hooked on drugs or alcohol and needed help. He mentioned
talking with several different parties about what needed to
be done to solve the addiction problem in Alaska. The state
was looking to have treatment available after being
arrested rather than after being sentenced. He stated that
40 percent of the 6,000 inmates in the corrections system
were still awaiting a sentence. The majority of them could
not receive any treatment until after their sentencing. The
state paid approximately $55 thousand in jail so they could
maybe get treatment.
Co-Chair Neuman indicated that the state legislature had
reduced the budget over 40 percent over the last three or
four years. Prior to that the state budget had grown for 57
years. Every tool was needed to address the issues. He
opined that Alaska was doing okay, even though the state
had its issues. He invited other legislators to challenge
him and to hold his feet to the fire. There was a machine
working behind the scenes to get things done. He
acknowledged his staff, Mr. Ecklund and Ms. Brown, and
Representative Thompson and his staff, the LFD, and the
Legislative Legal Division.
11:34:47 AM
Co-Chair Neuman WITHDREW his OBJECTION.
Representative Guttenberg OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Kawasaki, Munoz, Pruitt, Saddler, Wilson, Edgmon,
Gattis, Thompson, Neuman.
OPPOSED: Guttenberg, Gara.
The MOTION PASSED (9/2).
There being NO further OBJECTION, CSHB 256(FIN) was
REPORTED out of committee with a "do pass" recommendation.
Co-Chair Thompson MOVED to report CSHB 257(FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CSHB 257(FIN) was REPORTED out of committee with a "do
pass" recommendation.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 256 HB 257 Op Budget Public Testimony Pkt. 24.pdf |
HFIN 3/9/2016 9:00:00 AM |
HB 256 HB 257 |
| HB 256 HB 257 Op Budget Public Testimony Pkt. 25.pdf |
HFIN 3/9/2016 9:00:00 AM |
HB 256 HB 257 |
| HB 256 HB 257 Op Budget Public Testimony Pkt. 26.pdf |
HFIN 3/9/2016 9:00:00 AM |
HB 256 HB 257 |