Legislature(1993 - 1994)
03/24/1994 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 455
An Act making and amending operating and capital
appropriations and ratifying certain state
expenditures; and providing for an effective date.
[Cross-reference between SB 288 and HB 455. Most Senate
Finance Committee discussion of FY 94 supplemental funding
relates to SB 288. The bill which ultimately passed the
1994 legislature was HB 455]
Upon convening the meeting, Co-chairman Frank directed that
a sectional overview of the FY 94 supplemental commence.
NANCY SLAGLE, Director of Budget Review, Office of
Management and Budget, came before committee. She explained
that the administration's policy on supplemental funding
reflects an attempt to accommodate shortages in agency
budgets through means (cost cutting or realignment of
funding) other than the supplemental. However, in areas
where a supplemental is unavoidable, particularly in areas
of judgments, claims, court-ordered payments, and formula
funded programs, etc., funding therefor has been
incorporated within the proposed bill.
Sec. 1. Appropriates $955.8 to the Office of Management and
Budget for compliance with the Fair Labors Standards Act.
Funding would pay retroactive overtime claims under the act.
In response to a question from Co-chair Frank, Mrs. Slagle
explained that the request relates only to retroactive
overtime. Agencies are required to absorb overtime for the
current year. Claims covered by the appropriation date back
to FY 91. Co-chair Frank requested a breakout by
department. Mrs. Slagle advised that the Dept. of Natural
Resource, Dept. of Health and Social Services, Dept. of
Corrections, and Dept. of Transportation and Public
Facilities are the four agencies impacted by the request.
Sec. 2. Contains a $1,694.9 appropriation for the longevity
bonus program. That amount will cover the increased number
of recipients for the fiscal year. NANCY USERA,
Commissioner, Dept. of Administration, explained that the
department budgets prospectively based on demographic
information on the number of people entering the program.
That information is adjusted on an annual basis. The
program contains no provisions for proration of funding.
Co-chair Frank suggested that the number of recipients has
been chronically under-estimated. Senator Rieger asked if
the increased number of participants is due to individuals
coming into Alaska and signing up for the program. Ms.
Usera said that the department has not conclusively
established a growth pattern. There has been a net
immigration of seniors. Senator Kerttula noted that was a
general immigration of people into the state during the past
year.
Sec. 3. Contains a $466.0 appropriation for the public
defender agency to cover underfunding in personal services
for FY 94. Co-chair Frank asked how the request correlates
with cuts in agency funding in the FY 94 budget. NANCY
USERA said that the requested appropriation reflects the
cut. She referenced a four-year supplemental history. Last
year's supplemental was $342.0. This year it is $466.0.
The increase reflects the deeper cut in last year's
operating budget. Co-chair Frank noted that the request
exceeds the amount cut. Ms. Usera concurred. Senator Kelly
asked what would happen if supplemental funding is not
provided. Ms. Usera pointed out that public defender
services are constitutionally mandated. The court orders
that a defense be provided, and the agency has an obligation
to respond. The agency is chronically underfunded and
understaffed.
Discussion followed between Ms. Usera and members regarding
court referrals and the increasing caseload. She noted that
the Dept. of Law seeks reimbursement of defense costs
through individual permanent fund dividends. To date,
approximately $400.0 has been recovered and returned to the
general fund.
Further discussion of determinations of indigence ensued.
Sec. 4. Appropriates $554.7 for the office of public
advocacy. Of that amount, $460.0 is for contractual
services.
Sec. 5. Appropriates $100.0 to the division of personnel
for arbitration case costs. NANCY USERA attested to a two-
year backlog in arbitrations. A number of unfair labor
practices have been filed for lack of arbitration. The
Public Employee Relations Act is very clear as to what state
obligation are. The request relates to the cost to bring an
arbiter to Alaska to issue rulings. The backlog consists of
400 grievances. The risk associated with not dealing with
these matters is substantial.
Sec. 6. In response to a question from Co-chair Frank, Ms.
Usera explained that the $18.0 request represents a single
grievance award resulting from a grievance brought by an
employee against the Dept. of Administration.
Sec. 7. The $60.0 for a salary survey and geographical
shift differential study was ordered by the court system.
Ms. Usera explained that the study is statutorily required.
In past years, the department has not had the needed funding
to conduct the study. The state was subsequently sued, and
the court ordered that the statutes be complied with.
Responding to questions by Co-chair Frank, Ms. Usera said
that the law predates collective bargaining. The department
has, on a number of occasions, suggested that the law be
changed. In 1991 legislation was introduced to correct the
situation, but it did not progress. Needed changes are
again incorporated within the administration's omnibus bill.
Sec. 8. Contains a $1,752.4 appropriation for additional
leasing costs for FY 94. In response to a question from Co-
chair Frank, Ms. Usera pointed to substantial savings from
renegotiated leases. However, that savings is inadequate to
stem growth or make up for last year's underfunding.
Data Processing Chargebacks
Discussion of data processing chargebacks followed between
Senator Rieger and Ms. Usera. Ms. Usera attested to the
fact that DOA chargeback rates have gone down as provision
of computer services has become more efficient. Agencies
have also effected savings.
Ethics Complaints
Mrs. Slagle directed attention to new requests within the
supplemental bill and noted the $35.0 appropriation for
ethics complaints grievance awards. NANCY USERA explained
that the personnel board is responsible for investigation
and findings concerning ethics complaints brought against
the governor, lt. governor, and attorney general.
Grievances have been filed. There is no funding for
investigations or contracts with independent counsel. Ms.
Usera noted that a number of the grievances were filed by
the Democratic Party.
Sec. 9. Appropriates $325.4 to the Dept. of Law for
judgments and claims. ELIZABETH SHAW, Deputy Attorney
General, Civil Division, Dept. of Law, came before
committee. She explained that funding relates to costs and
attorney fees on cases where the state has been deemed
responsible for payment. Funds represent either court
ordered payments or settlement of claims. Approximately
nineteen have been grouped together within the $325.4
request. Senator Sharp directed attention to backup detail
and suggested that eight claims totaling $209.0 are highly
questionable.
Ms. Slagle noted that subsection (b) of Sec. 9 contains a
$50.0 appropriation to the Dept. of Education for legal fees
for litigation relating to pupil transportation in
Fairbanks.
Sec. 10. Appropriates $462.4 to the Dept. of Law for
settlements stemming from the reapportionment case. Mr.
Slagle directed attention to information set forth on a
handout (page 4 of Attachment A) which, she explained, shows
the judgment amount and interest owed each of the four
plaintiffs.
Sec. 11. Contains a $142.6 appropriation from the permanent
fund to the Dept. of Revenue for printing of 1994 dividend
application booklets. Funding relates to default by the
original contractor. TOM WILLIAMS, Director, Permanent Fund
Dividend Division, Dept. of Revenue, came before committee.
He provided background information on award of the printing
contract to an Anchorage contractor. On December 2, the
contractor notified the department it would be unable to
meet the end of the month delivery deadline. At that point,
the department sought another source. Supplemental funding
covers additional costs relating thereto. Approximately
half of the cost relates to air freighting of the booklets
for timely distribution. The state has subsequently billed
the original contractor for the additional costs and has
asked that the Dept. of Law pursue collection should it not
be forthcoming. The original contractor is also seeking
damages from out-of-state subcontractors. Due to the
complexity of the booklet, Alaska printing companies are
unable to do the work.
Sec. 12. Provides a $3,195.0 appropriation to the Alaska
Permanent Fund for additional equity management and
international custody fees. Senator Kelly sought assurance
that funding flow to managers rather than additional
personnel at the permanent fund. PETER BUSHRE, Chief
Financial Officer, Alaska Permanent Fund, Dept. of Revenue,
came before committee. He said that the fund has never used
moneys that were not needed for management or international
custody fees to cover any other portion of the budget,
including personal services. The corporation has lapsed as
much as $2.5 million from this item in past years. Manager
fees and custody fees are based upon the market value of
assets. Those values have increased substantially. There
is a cost associated with that.
Mr. Bushre described the restructured investment strategy at
the permanent fund. Passive management was previously
utilized in buying index funds. During the current fiscal
year, that has been changed. Index funds have been de-
emphasized and management has become active. The results of
this change have been extremely good.
Senator Kelly suggested that, per the request, management
costs appear to have increased by a third. He then asked if
corporate assets increased by a like amount. Mr. Bushre
responded negatively, but he further advised that the assets
of the fund appreciated by $400 million from the end of
November to the end of January.
End: SFC-94, #36, Side 2
Begin: SFC-94, #38, Side 1
Senator Rieger voiced support for active over passive
management.
In response to a question from Senator Kelly, Mr. Bushre
acknowledged that the requested $3,195 million would be
added to the $10 million provided for management for FY 94.
The FY 95 budget seeks $19 million for equity management
fees and $3 million for custody fees.
Sec. 13. Provides $1.5 million for the Dept. of Education,
K-12 foundation, for increased enrollment based on an
October student count. In response to a question from
Senator Jacko, MS. SLAGLE explained that the administration
did not expect school districts to absorb increased costs
this year without advising them ahead of time that they
would be restricted next year.
Sec. 14. Relates to ratification of prior year expenditures
for the Dept. of Education.
Sec. 15. Contains a $244.4 appropriation to the Dept. of
Health and Social Services for the permanent fund dividend
hold harmless program. The increase relates to higher
caseloads in AFDC and other programs.
Co-chair Frank directed that the meeting be briefly recessed
at this time.
RECESS - 10:00 a.m.
RECONVENE - 10:10 a.m.
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