Legislature(2017 - 2018)ADAMS ROOM 519
03/16/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB285 || HB286 | |
| HB346 | |
| HB255 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 346 | TELECONFERENCED | |
| + | HB 217 | TELECONFERENCED | |
| += | HB 216 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 285 | TELECONFERENCED | |
| += | HB 286 | TELECONFERENCED | |
| += | HB 255 | TELECONFERENCED | |
HOUSE BILL NO. 285
"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."
HOUSE BILL NO. 286
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; making supplemental appropriations;
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."
1:35:04 PM
Co-Chair Seaton relayed the committee had finished with
amendments to the bills the previous day. He reported that
the Legislative Finance Division (LFD) and Legislative
Legal Services had developed two new committee substitutes
(CS) based on adopted amendments. He noted that an error
had been discovered during review and had been corrected in
the new CS for the operating budget (HB 286). He read from
an explanation:
A subsection reference was inadvertently omitted in
the Permanent Fund inflation proofing amendment that
was H SAP 24. The beginning of the amendment on line
23 read 'the amount calculated under AS 37.13.145(c)
after the appropriations made in (c) of this section,
estimated to be $942 million.' It should have read
'the amount calculated under AS 37.13.145(c) after the
appropriations made in (c) and (d) of this section,
estimated to be $942 million.' Subsection (c) is the
earnings reserve account draw to the General Fund and
subsection (d) is the ERA draw to the Permanent Fund
Dividend (PFD). Legal Services corrected the
subsection 8(e) phrase so that it now reads as
intended 'after the appropriations made in (c) and (d)
of this section.'
There were three Legislative Finance Reports. They are
stapled together in members' packets and will be
posted on the Legislative Finance website once the new
committee substitutes are adopted. In addition to
these reports, Legislative Finance will also post
their usual array of department reports.
The budget's general funds totals $5.35 billion and
all funds total $10.44 billion. You'll note the
general fund report shows and increase of $170.8
million from the FY 18 management plan budget for
agency and statewide operations. The larger
unrestricted general fund changes that the committee
made include the addition of $19 million for the
University of Alaska; the temporary addition of $18
million for K-12 to replace the $18 million of Public
School Trust Funds until legislation is adopted; the
temporary deletion of $20 million from the senior
benefits payment program, until the reauthorization
legislation is adopted (we also adopted intent to
fully fund the program), the addition of $49 million
to capitalize the Oil and Gas Tax Credit Fund and the
deletion of the $27 million for the governor's oil and
gas tax credit financing legislation, as the $27
million should come forward as a fiscal note; the
addition $1 million for four attorneys and one support
staff in the Public Defender Agency; and the addition
of nearly $500,000 for four additional guardians ad
litem to represent children including Child in Need of
Aid cases.
HB 286 includes a 4.75 percent of market value draw
from the Permanent Fund Earnings Reserve Account; 67
percent of the draw or $1.65 billion would be
deposited into the General Fund and 33 percent of the
draw or $813 million would be deposited into the
dividend fund, resulting in an estimated PFD of
$1,258. We added the estimate of $942 million to
inflation proof the Permanent Fund in FY 19 and we
added $1 billion of expenditure authority to the
Alaska Gasline Development Corporation in FY 18 and FY
19 to help advance the development of the gas
pipeline. We added one-time fund balances to the
disaster relief fund, so the state is better prepared
to respond to disasters.
1:39:05 PM
Co-Chair Seaton continued to read from a statement:
This budget fully funds the community assistance fund
so that the communities can plan for the $30 million
distribution in FY 20. We added one-time funds to both
the Department of Health and Social Services and
Department of Fish and Game to be able to receive more
of the federal funds that the state had previously had
to revert to the federal government or simply had not
been able to claim due to a lack in matching funds. In
this budget the Constitutional Budget Reserve fund
would contribute $1 billion to filling the budget
deficit plus $100 million for possible FY 19
supplementals. Those are some of the larger amendments
we've adopted.
1:39:59 PM
Co-Chair Foster MOVED to ADOPT the proposed committee
substitute for HB 286, Work Draft 30-GH2564\R (Wallace,
3/16/18).
Representative Wilson OBJECTED. She did not support a $170
million increase at a time when the state did not have the
money.
Co-Chair Seaton pointed out that $100 million of the total
was for Medicaid, $19 million was for the University of
Alaska, and $43 million was for transportation.
1:41:13 PM
Vice-Chair Gara supported the budget. He stated that for
the past five years the legislature had been cutting the
budget repeatedly. He cautioned that the next round of cuts
would mean larger class sizes. He spoke about the safety
net that provided stability for people and enabled them to
work. He stressed that the unrestricted general fund (UGF)
budget was currently $560 million lower than 2015. Cuts had
resulted in the loss of over 1,000 teachers and support
staff since 2013. He did not believe it was something to be
proud of. In prior years there had been a fight against
individuals who wanted to cut education further. He pointed
to a proposal the preceding year to cut education by $70
million more. He was glad the cut had been staved off. Even
a flat-funded education budget would likely mean the loss
of another 200 teachers and support staff.
Vice-Chair Gara underscored the current budget was not a
luxury budget. Cutting over $500 million since 2015 had not
been without impacts. In the current budget cycle, he had
been alarmed to learn that there was still a revolving door
at the Alaska Psychiatric Institute (API). He detailed that
patients returned to API because there were not follow up
services to help the individuals stand on their own. He
reported that 30 percent of the people discharged from API
were back within six months.
Vice-Chair Gara discussed Medicaid and explained that the
way federal and state law was written, the lower a person's
income, the more likely they were to qualify for Medicaid.
He continued that all the state had done on Medicaid was
find efficiencies and cut costs paid to providers. With
33,000 more people on Medicaid since 2015, the Medicaid
budget was lower than it had been in 2015. He did not
believe the legislature had come together in a way to deal
with the current recession. As long as the state remained
in recession, the Medicaid budget would increase because
every time someone lost their job or had lower income, they
were more likely to qualify for Medicaid. He underscored
that the state could not deny individuals medical coverage
when statute specified individuals were entitled to
Medicaid coverage at low incomes. He noted that the vast
majority of Medicaid recipients were seniors, children, and
people with disabilities. He did not support cutting their
services. The remaining majority of Medicaid recipients had
lower income given the recession. The state had not added
Medicaid services. He stated it was a tough budget to deal
with, but it was not a luxury when 200 additional teachers
would be lost in the coming year and API was acting as a
revolving door.
1:45:35 PM
Representative Pruitt opposed the budget. He emphasized
that the issue facing the committee was about whether the
legislature was willing to manage what it was facing. He
stated that Republican Minority amendments that had been
offered in committee had not made drastic cuts. He pointed
out that they had not touched the education budget and had
agreed with other members about the amount. He recalled
that in 2017 he and his colleagues had been denied proposed
cuts they had based off of previous years. In the current
process they had looked at years like FY 17 for reference
but had not proposed reducing the budget to that level. He
reported that their amendments had proposed slight
reductions, but they had all been denied.
Representative Pruitt stated that whatever the
administration said had been treated like gospel. Yet
research by their competent staff had initiated realistic
discussions on how to manage the situation. He believed if
the public was asked to participate via a PFD reduction or
tax, it would be necessary to prove the legislature would
analyze every line of the budget. He did not believe the
committee had done that. He thought the committee had
merely "said no to say no." He detailed that during the
process the committee had heard from people on why a cut
should not be made. He opined that many times the
individuals had not been able to give justifiable reasons
the cuts should not be made. He stated that amendments had
been turned down anyway.
Representative Pruitt stated it was necessary to
continually analyze how things were delivered across the
scope of government agencies in order to prevent larger
class sizes and reductions to Medicaid and other things. He
did not believe it was tenable to turn down everything that
was offered. He thought the legislature should have a
dynamic process that could be adjusted based on what it was
facing. He stressed it was the difference between the
government and the private sector. He stated that something
would collapse and cease to exist if it was not innovative.
He shared that he had previously worked for two Fortune 500
companies - one was innovative and continued to grow, while
the other was not innovative and was faltering. He thought
the legislature was acting like it should not be innovative
when it failed to consider making spending changes. His
concern with the budget was that the committee had just
decided it was done with cuts, despite strategically
crafted amendments that had been done with a scalpel, which
had all been turned down.
Representative Pruitt did not believe the legislature would
gain the public's trust if it could not prove the public's
contribution would be spent appropriately. He believed the
committee needed to consider whether it wanted to tell the
public it was satisfied with the current budget. He opined
the public would vocalize that it still did not trust the
legislature. He thought they should take time to rethink
some of the things that had been offered.
1:50:44 PM
Representative Tilton expressed opposition to the budget.
She echoed comments of her colleagues. She stressed the
budget had increased by $170 million. She pointed out there
was a travel freeze, but the committee had increased
travel. Additionally, there was a hiring freeze, but PCNs
[position control numbers] and employees had been
increased. She stated the budget had not been increased
higher than $170 million because the legislature had used
some money from other funds. She characterized the move as
creative and clarified that it was not always bad but would
leave some holes in the next budget cycle. She stated it
was one of the reasons for the current situation - some
holes had been left from the last budget cycle. She
stressed that her constituents did not want an increase in
government spending. She was opposed to the current budget
because it gave more money to government.
1:52:07 PM
Representative Guttenberg spoke in support of the budget.
He believed the amendment process demonstrated how
difficult it was to strategically strike and cut the
budget. He stated there had been proposed cuts that were
below the typical level. He reasoned that if some of the
cuts had been accepted they would hinder economic
development through the Department of Natural Resources
related to permitting and public information on the state's
resources. He believed the committee had illustrated
significant restraint. He stressed that the money going to
the University associated with Arctic research was
important in terms of Alaska's global position. He
mentioned a recently published Alaska Gasline Development
Corporation (AGDC) report showing the perspective on Alaska
was closer to 80 percent of the industrial world than any
other location. He believed the distance would close;
Alaska was centrally located, and it was important to
ensure the state was prepared. He remarked that the state
had not gone far enough "in those economic development
things," but he did not believe it was currently poised to
get there.
Representative Guttenberg continued that if the budget had
not addressed issues pertaining to public defenders, the
state's criminal justice and courts would have been
incapacitated because a balance was needed. When he had
considered the overall budget cuts and actions that had
been taken he recognized how difficult it had been to make
the cuts. Many of the people the committee had heard from
who had discussed the size of government and what they
wanted to do, clearly illustrated the services were needed.
He noted that some people merely say government is
government, but he countered that government provided
services to the people of Alaska including education,
criminal justice, and Medicaid coverage. There were many
things the state needed to be doing that it was not doing,
but he acknowledged the fiscal crisis and reasoned it was
not possible to do everything that was needed.
Representative Guttenberg looked forward to the day the
state could dig itself out of its deficit and he reasoned
the problem would be solved by filling the hole in, not by
digging deeper. He spoke about roads that were not being
plowed on time - the priority of roads was slow in the
Interior. He noted the region had experienced one of its
snowiest winters during the current year. While people
wanted to see government cut, they also wanted the
services. He detailed that individuals wanted their
children in school, a college education, plowed roads, and
industrial services (i.e. permits granted for resource
development, projects, and jobs). He reported that
residents on the North Slope were losing jobs faster than
nonresidents. The budget was tight and would likely remain
tight for some time. He thought the state had done an
economic job of suppressing budget growth because it
happened whether the legislature did anything or not.
1:56:19 PM
Co-Chair Seaton responded to some of the points made by
Minority members. He referenced the general funds chart
[provided by the Legislative Finance Division titled
"Multi-year Agency Summary - Operating Budget - FY 2019
House Structure" dated March 16, 2018 (copy on file)]
showing all UGF and designated general funds (DGF). The
right column, compared to the governor's budget, showed
five line items with reductions and six line items with
increases. The chart identified all of the agencies that
received either reductions or increases. The second column
showed $21 million in the Department of Corrections (DOC).
He explained there had been a $21 million hole in the
budget because it had been left for a supplemental. The
current budget filled the hole, which should eliminate the
supplemental the following year. He explained that they had
tried to use the process throughout the entire budget. They
had capitalized funds for disaster relief and fire
suppression to avoid supplementals in the coming year. He
acknowledged the items made the budget look heavier, but
the approach was more honest.
Co-Chair Seaton pointed to the far right column showing all
general funds, which included $18 million for K-12 and $19
million for the University. He explained the importance of
the numbers that compared the FY 19 governor's amended
budget to the House Finance Committee final budget. He
acknowledged the hard work put in by finance subcommittees.
He noted that there had been almost as many reductions to
agencies as there had been additions. He hoped to ensure as
much transparency as possible in the budgeting process. He
appreciated all of the comments made by the Minority and
Majority during the process. He hoped there would be better
ways to get down to appropriation and allocation lines in
the future, which would result in a more strategic
conversation. He thanked all committee members for their
participation in the process.
1:59:42 PM
Representative Wilson pointed to page 2, line 1 of the LFD
multi-year agency summary. She referenced the negative
$5.913 million associated with the Permanent Fund under the
FY 19 governor amended column. She asked if the POMV
[percent of market value] and the 33 percent [for the PFD]
meant there would be $5.913 million less to be allocated
toward the PFD. She was trying to understand where the 0.7
percent decrease [shown in the last column on the right]
came from.
2:00:25 PM
AT EASE
2:01:17 PM
RECONVENED
Co-Chair Seaton pointed to the FY 19 governor's amended
budget under the third column on page 2 showing $818,876.5
million. He explained the figure had been based on a higher
number of participants in the PFD, even though the PFD
calculation was lower. The legislature had received an
updated number of estimated participants. He pointed to the
fourth column showing $812,963.0 million that reflected a
slightly higher dividend and a lower number of participants
due to some outmigration.
Representative Wilson thought that because the POMV was in
the budget, 66 percent would go to the government and 33
percent went to the people. She did not believe the money
shown in the chart should change based on the number of
participants. She detailed the amount was set and no longer
used a formula like in the past. She did not understand how
participants had anything to do with it. She thought it
appeared they were lowering the individual share, which she
did not believe made sense because the amount should be
set.
2:03:15 PM
Representative Pruitt explained that the governor had
included 5 percent with the 30 percent. One of the changes
made by the co-chair was a 4.75 percent [POMV draw] with 33
percent directed to the PFD. While there was less money,
the figure reflecting fewer people resulted in a higher
PFD, but it was the reason for the reduction of $6 million
(it was the change in the structure for the POMV draw and
where it went).
Co-Chair Seaton agreed that the governor's proposed budget
included a 5 percent POMV, and the House Finance Committee
CS included a 4.75 percent draw. The change accounted for
the difference in the gross amount of money.
Representative Wilson asked for verification the difference
[in the third and fourth column on page 2] was related to
the draw percentage, not to the participants.
Co-Chair Seaton agreed.
Vice-Chair Gara remarked that there was no agreement in the
legislature on what the dividend amount should be. He
recalled the current Republican Minority leader had
proposed $1,000 dividends two years back. There were also
others in both parties who were on the opposite end. The
House Finance Committee had determined the $1,000 dividend
was too small. He elaborated that the committee had worked
for a $1,200 dividend in 2017, but the Senate had not
agreed and a dividend of $1,100 had been decided on. He
highlighted that the current budget included a $1,250 PFD.
He reiterated there was huge disagreement among legislators
within their own parties on what the amount should be.
Co-Chair Seaton pointed out that the current discussion had
been about the gross amount taken for the dividend. He
corrected his earlier statements pertaining to the
difference between the two columns [columns 3 and 4 on page
2 of the LFD multi-year agency summary]. He explained that
Representative Pruitt was correct the difference between
the two columns was a 5 percent draw and a 4.75 percent
draw. He detailed that a 5 percent POMV draw would take
more out of the Permanent Fund than a 4.75 percent POMV
draw.
Representative Wilson clarified the money would come out of
the Permanent Fund Earnings Reserve Account (ERA); the
legislature could not draw from the Permanent Fund corpus.
She believed they needed to be careful with terminology.
She underscored that the proposed budget did not guarantee
$1,250 PFDs. She detailed the budget included a 66/33
percent cut [directed to government spending and the PFD
respectively] of the 4.75 percent [POMV draw from the ERA].
The number of individuals eligible for the PFD would
determine the dividend amount (the calculation would be
whatever the 33 percent came out to be divided by the
number of eligible recipients). She emphasized that the
proposed budget may result in PFDs of $1,250, but they may
be a little more or less. She did not think it was prudent
to discuss what the other body would or would not do. She
wanted to keep the conversation to the details of the bill.
2:07:37 PM
Co-Chair Seaton corrected that the POMV was calculated on
the average value of the five years preceding the current
year, which was on the total average value of the Permanent
Fund. The draw would come from the ERA, but the average
value calculation included the ERA and the corpus.
Representative Wilson wanted to ensure the public knew
something "was still sacred in this world."
Co-Chair Seaton agreed.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion to adopt the CS
for HB 286.
IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Foster,
Seaton
OPPOSED: Wilson, Tilton, Pruitt
Representative Thompson was absent from the vote.
The MOTION PASSED (7/3). There being NO further OBJECTION,
Work Draft 30-GH2564\R for HB 286 was ADOPTED.
Co-Chair Foster MOVED to ADOPT the proposed committee
substitute for HB 285, Work Draft 30-GH2566\U (Wallace,
3/16/18).
Representative Wilson OBJECTED for discussion. She believed
the committee needed to mature. She did not support
removing a project so the other body could remove a project
in order to take the bill to conference committee. She
believed the legislature had better things to do. She
elaborated that the Alaska Mental Health Trust Authority
(AMHTA) went through its budget very closely and decisions
were made by the board. She thought it was time to change
the practice of continuing something because it was the way
it had always been done. She WITHDREW her OBJECTION.
There being NO further OBJECTION, Work Draft 30-GH2566\U
for HB 285 was ADOPTED.
2:10:13 PM
Co-Chair Foster MOVED to REPORT CSHB 286(FIN) out of
committee with individual recommendations.
Representative Wilson OBJECTED.
2:10:33 PM
AT EASE
2:10:51 PM
RECONVENED
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Grenn, Guttenberg, Kawasaki, Ortiz, Gara, Seaton,
Foster
OPPOSED: Pruitt, Tilton, Wilson
Representative Thompson was absent from the vote.
The MOTION PASSED (7/3).
There being NO further OBJECTION, CSHB 286(FIN) was
REPORTED out of committee with four "do pass"
recommendations, one "no recommendation" recommendation,
and five "amend" recommendations.
2:11:52 PM
AT EASE
2:14:34 PM
RECONVENED
Co-Chair Foster MOVED to REPORT CSHB 285(FIN) out of
committee with individual recommendations.
There being NO OBJECTION, CSHB 285(FIN) was REPORTED out of
committee with four "do pass" recommendations, one "no
recommendation" recommendation, and five "amend"
recommendations.
2:15:11 PM
AT EASE
2:16:32 PM
RECONVENED
Co-Chair Seaton thanked members and staff for their work on
the budget. Additionally, he thanked Legislative Legal
Service, LFD, and his staff.