Legislature(2015 - 2016)SENATE FINANCE 532
02/12/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB27 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 27 | TELECONFERENCED | |
SENATE BILL NO. 27
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, making
reappropriations, 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."
Co-Chair Kelly introduced a visitor in the audience,
Cheyane Masey, Miss Alaska. She was visiting from Wasilla
and planned to attend law school in the future.
9:10:24 AM
Co-Chair Kelly asked the presenter to just hit the
highlights in her presentation and encouraged committee
members to ask questions.
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, recognized the gravity of the
state's revenue issue as well as the proposed reductions.
The reductions, although small relative to the budget
deficit, were significant. She relayed that the
commissioners or administrative services directors were
present at the meeting and that she might be calling on
anyone of them for assistance with specific questions. She
explained the documents provided to the committee. She
referred to a summary sheet that she favored [FY2016
Governor Endorsed Budget Summary by Department, Prepared by
the Office of Management and Budget (OMB), dated February
5, 2015]. She also mentioned that two other summary sheets
had been distributed to committee members [Department
Summary - Operating Budget by UGF and Department Summary -
Operating Budget by All Funds]. She indicated that she
would be discussing the changes from the original overview
provided about three weeks prior to OMB's summary sheet.
The top portion of the summary showed the non-formula
components for each department. There was a change in the
Department of Health and Social Services (DHSS) budget,
moving additional funding from formula programs to non-
formula programs to make up the department's overall
target. Between the management plan and the amendments
found on the summary sheet there was an overall reduction
for all departments of $134 million, a 6.12 percent
reduction from FY 15. The legislature had its own line item
apart from the agencies due to being a separate branch of
government.
Ms. Pitney pointed to the formula items. There was a $200
million decrease overall, a 5 percent decrease from the
previous year. She furthered that the formula decreased by
about $106 million, a 4.8 percent decrease. In adding
formula and non-formula reductions together there was a 5
percent total decrease.
Co-Chair Kelly asked for Ms. Pitney to point where she was
reading from on the slide. She pointed to the middle of the
page where it read, "Total Agency Operations", and directed
Co-Chair Kelly's attention to the far right of the row to
5.3 percent decrease from FY 15.
Co-Chair Kelly asked for the dollar amount. Ms. Pitney
responded that the decrement totaled $239 million.
Ms. Pitney discussed the statewide components that served
as tax credits and fund transfers increased by $129
million. Tax credits and retirement payments contributed to
the increase. Adding in the all of the statewide components
there was a total decrease in operations of about $100
million from the previous year, a 2 percent decrease.
9:16:36 AM
Ms. Pitney reported that agency operations and formula
funding decreased by $240 million and statewide components
increased by $129 million resulting in an overall operating
cost reduction of $109 million.
9:16:52 AM
AT EASE
9:17:18 AM
RECONVENED
Ms. Pitney moved on to the document titled: "Department
Summary - Operating Budget (6) - All Funds." She directed
members' attention to the far right side at the bottom of
the page where it shows 1.9 percent. She noted that the
summary depicted "All Funds" sources which included federal
funds, designated general funds (DGF), and other state
funds. The difference in the operating budget from FY 15 to
FY 16 was 1.9 percent, driven primarily by the $145 million
increase from Medicaid expansion.
Ms. Pitney turned to the document titled: "Department
Summary - Operating Budget (6) - Unrestricted General
Funds." She noted the total percentage decrease of 2
percent. She reported an 8.2 percent decrease from FY 15 in
the budget for the Department of Administration (DOA).
Public radio and television and some administrative changes
within the department contributed to DOA's decrease.
Co-Chair MacKinnon had questions regarding the DOA budget.
She mentioned that the Alaska Land Mobile Radio (ALMR)
payments were significantly decreased by 68 percent. She
referred to a 29.4 percent cut to the Enterprise Technology
Services, 68 percent of which appeared to be ALMR payments
from municipalities and another 13.4 percent for ALMR
directly. She asked Ms. Pitney to discuss the specific cut
to ALMR.
Ms. Pitney responded that in her discussions with DOA she
asked about the impacts of the reduction. The Department of
Administration reported that in making changes to
contractual services the department could reduce its
expenditures for the ALMR program and it could remain
intact. However, it was not DOA's intention to pass on the
savings to municipalities. She invited DOA staff to make
any additional comments.
9:21:50 AM
Co-Chair MacKinnon asked if the state believed it could
make changes that would reduce payments made to
municipalities. She wondered if it was shifting costs to
the municipalities. She considered her local fire
department and the fees it was asked to pay to provide a
beneficial service to the community. Fire service was
otherwise not available without volunteers. She wanted to
be clear as to whether it was a transfer of additional
costs to municipalities.
CHERYL LOWENSTEIN, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF ADMINISTRATION, responded that the
department would not be passing the costs to
municipalities.
Ms. Pitney highlighted reductions in travel and also noted
cuts within the Enterprise Technology Services (ETS)
division. The division's general fund (GF) was small
relative to its total operations. Enterprise Technology
Services was run largely through recharging for services
rendered. Although it was a large decrease in unrestricted
general funds overall it was a smaller decrease in the
total operation but removed money from the GF. In the
finance area there was a decrease in positions. The
Department of Administration decreased in positions in the
areas of supply and purchasing. She thought ALMR and public
broadcasting would have the largest number of advocates.
Co-Chair Kelly directed Ms. Pitney to continue down the
list of the departments focusing on the high points. There
would be the opportunity to delve into their details later.
Ms. Pitney reported that the Department of Commerce,
Community and Economic Development (DCCED) saw reductions
in tourism and marketing, Alaska Seafood Marketing
Institute (ASMI), and other administrative reductions. The
most publically impactful decrease in the Department of
Corrections (DOC) was the reduction in community jails. She
mentioned that within the Department of Education and Early
Development (DEED) some grant programs on the non-formula
side were reduced. For example the bandwidth program,
originally $5 million, was being reduced. There was a
learning network that was being cut out and there were
reductions to some of the early childhood programs. The
largest non-formula component within early childhood
development was the Mount Edgecombe School. Other
reductions had to do with the administration of the grants
she mentioned.
9:26:13 AM
Ms. Pitney explained the decreases in the Department of
Environmental Conservation (DEC). The reductions fell under
spill response and general administrative costs. The
largest piece was the reduction of inspection services and
water and food services within DEC.
Ms. Pitney reported that the significant changes within the
Department of Fish and Game (DFG) were fund source shifts
from UGF to designated general funds and receipts. In the
governor's office there were cutbacks in staff and
reductions of one-time items dealing with elections. She
emphasized that the vast majority of ongoing operating
decreases were personnel reductions within the governor's
office.
Ms. Pitney reported that within the DHSS budget there were
reductions in the senior program that replaced the
longevity bonus. There were three tiers of income in which
seniors receive payments. There was a 20 percent reduction
in monthly payments for seniors falling in the two higher
income levels. The reduction equated to approximately $5
million. She reported that there were administrative
decreases and other program reductions within DHSS.
Ms. Pitney continued to discuss the department summary. One
of The Department of Labor and Workforce Development's
(DLWD) largest decrements entailed a restructuring of its
Division of Business Partnerships. There were two divisions
within the department that were reorganizing. The
Department of Labor and Workforce Development was also
facing the federal reductions in the job centers. In the
prior year there had been some consternation about the
closing of a job center. However, federal funding was being
stepped-down and would end by 2017. The state would need to
determine how it would provide job center services in the
future.
Ms. Pitney reported that the cuts to the Department of Law
(DOL) were mainly staff reductions including dedicated
lawyers. There was also some reduction in contractual
services, travel, and commodities. The Department of
Military and Veterans Affairs (DMVA) would see reductions
in two areas. The first was in the Alaska Aerospace
Corporation, which was on a glide path of stepping down by
$2 million per year. The proposed budget did not set aside
any UGF for the aerospace corporation, leaving only federal
receipts and aerospace receipts in place. A more privatized
approach to the aerospace industry was being encouraged.
There were smaller reductions within DMVA where the primary
fund source were federal dollars.
9:31:53 AM
Ms. Pitney reported that the Department of Natural
Resources (DNR) had a few stand-alone offices such as the
areas of right-of-way and permitting that, rather than
having designated resources, would be combined with larger
offices. It was also suggested reductions to the fire
academy and fire services in the McGrath area. She
commented that she was presenting a very high-level
overview.
Ms. Pitney continued that the largest change to the budget
for the Department of Public Safety (DPS) was the reduction
in the number of staff and troopers and not having a
dedicated highway patrol unit. As there were fewer staff
they would be asked to be more generalist in nature. The
dedicated swat teams and dedicated highway patrol would be
asked to take on a broader range of trooper services rather
than, for example, highway patrol duties or strictly
investigations. It was a holistic change being proposed in
DPS.
Senator Dunleavy asked the commissioner of DOL about the
reductions in his department. He asked whether the
reductions were primarily in the areas of civil, criminal,
appellate law. He mentioned having ongoing issues with the
federal government regarding overreach. He wanted to know
which areas the reductions affected.
Co-Chair Kelly relayed that he had a breakdown of the
reductions to each division. The criminal division had an
unallocated reduction of $1.8 million, the civil division
encompassing oil, gas, and mining took a $3.5 million hit.
He would provide the hand-out to the subcommittee chair. He
encouraged Ms. Pitney to wait to answer Senator Dunleavy's
question more specifically after she finished.
9:35:28 AM
Ms. Pitney discussed the reductions within the Department
of Revenue (DOR). The department's reductions were largely
found within its administrative positions. Another
reduction was the proposal to eliminate the Film Tax Credit
Office. There were a few positions in several different
departments [divisions]. For instance there were 10
positions slated to be cut from the Tax Division inclusive
of the 3 positions in the film office.
Ms. Pitney moved on to discuss reductions within the
Department of Transportation and Public Facilities (DOT).
There was a significant reduction in highway and airport
surface maintenance and a decrease in the Alaska Marine
Highway System (AMHS) operations. There were smaller areas
in which there would be reductions including analyst
programmers and other IT functions. She noted a replacement
of fees in some areas. She suggested that the proposed
reductions within DOT were $115 million for road
maintenance and $115 million in UGF for AMHS operations.
There was a decrease of about $3 million in both areas and
there were smaller decreases for travel, commodities, and
other administrative areas where expenses could be reduced.
Ms. Pitney reported a decrease in the University of Alaska
budget of 2.5 percent similar to the one-time funding
reduction in education that resulted in a 2.5 percent
decrease. The university's reduction was currently
unallocated.
Ms. Pitney mentioned a $3 million reduction within
Judiciary and noted that the decrease was currently
unallocated. She skipped the overview for the Legislature's
budget.
Ms. Pitney noted that the largest piece of the state's debt
service under the work-in-progress budget was the
consideration of a pension obligation bond. Alternatively,
the choice had been made to make a full retirement payment.
9:40:08 AM
Co-Chair Kelly asked about a gap amount of approximately
$10 million. Ms. Pitney responded affirmatively. She added
it was a statewide UGF increment.
Co-Chair Kelly asked where the increment was held. Ms.
Pitney responded that her conceptual expectation was
similar to how the fuel trigger mechanism was held. The
money would be held at OMB with sideboards defining the
circumstances in which the funding could be moved. She
provided a hypothetical scenario where the state found it
necessary to reopen a community jail after closing them
down statewide. Gap funds could be used temporarily until a
more permanent plan was put into place in order to reopen a
jail if it was found absolutely necessary, at lease
offering a reduced amount of service. The money could be
used to fill the gap. She provided another example where
the state reduced a particular service within the ETS
division and later realized that a department was unable to
perform a particular piece of business because. The state
could then utilize the gap monies until a better solution
was determined.
Co-Chair Kelly remarked that he wanted to confirm that
there was $10 million available as gap funding that could
be used under certain circumstances. In the current fiscal
climate the money might be necessary.
9:42:10 AM
AT EASE
9:47:09 AM
RECONVENED
Co-Chair Kelly asked Ms. Pitney if DPS had a time
constraint. Ms. Pitney responded, "Correct." Co-Chair Kelly
asked that questions for DPS be asked first.
Senator Bishop asked how many aircraft DPS owned and of
those how many were fixed wing aircraft and how many were
rotor aircraft. His questions stem from the governor's
comments in the State of the Budget Address about public
and private partnerships. He had not heard much detail on
the subject and thought it was an area to further explore.
Co-Chair Kelly asked if Senator Bishop wanted the
commissioner of DPS to comment on the topic.
Vice-Chair Micciche asked Ms. Pitney to remind the
committee about guiding principles. He wondered if OMB had
reached its goal with the budget. He wanted to better
understand why reductions stopped at 2 percent.
Ms. Pitney responded that OMB used the previous
administration's management plan as a starting place. All
of the commissioners were asked to look at a range of
additional reductions from 5 to 8 percent. They were
directed to maximize service delivery while focusing on
administrative reductions and to determine what
partnerships could be formed with various local and
community counterparts. They were also asked to recognized
potential impacts on other departments. There was a
significant interplay between a change in one department
and an impact in another department. She provided an
example of interplay between DOC and DPS considering the
potential impact on public safety by closing community
jails. The Office of Budget and Management was able to
reduce the component parts in the agency budgets by 5
percent from the previous year. However, the reduction was
offset by having to pay tax credits, and making the
retirement payments netting a 2 percent reduction in the
state's overall budget. It was the desire of the
administration to arrive at a large reduction. She stated
it was a matter of balancing between downsizing and the
impacts in maintaining a stable economy.
9:52:46 AM
Senator Dunleavy referred to the supplemental budget that
was reviewed in the previous week. At the time there were
requests to shift money for a number of reasons including
purchasing land in Kodiak, and purchasing another place in
Southeast Alaska for $75 thousand. He wanted to better
understand the philosophy being used by the administration.
He understood that the new administration had inherited an
unprecedented set of circumstances. He did not understand
why money would be reappropriated rather than placing it
back into GF. He opined that the percentage would exhaust
the state's savings quickly. He wondered if the governor's
proposal would reflect a much larger reduction in the
following year. He wondered if the state would be proposing
new taxes and whether there would be requests to change
legislation to reduce cost drivers. He indicated he would
not be discussing Medicaid expansion, as it would take up
too much time. He wanted to understand the philosophy of
the administration to reduce the budget in order to get
through the current period.
Co-Chair Kelly asked if Vice-Chair Micciche had further
questions or comments before Ms. Pitney responded.
Vice-Chair Micciche compared the budget cuts to the
advertisements on free yard sticks at a home show. He felt
the administration had not arrived at the place where the
logo on the yard stick began. He was well aware of each
agency trying to protect its people, but he did not see
anything in the budget reductions "outside of the box." He
wanted to see some ideas on combining and streamlining the
administration rather than losing grader operators. He
asked if it was possible to combine administration between
like departments. He understood the separation of
departments but prior to getting any appreciable reductions
the commissioners would need to looking at new ways of
reducing costs without reducing services. He emphasized
that there would be an impact on services but he wanted to
be assured that the state was looking at sustentative cuts.
9:57:03 AM
Co-Chair Kelly summarized Vice-Chair Micciche's questions.
He asked about what the administration was doing regarding
future ways to reduce the budget other than simple math. In
other words there was nothing remarkable being done that
was creative. He asked Ms. Pitney to respond.
Ms. Pitney agreed that the remedy was not a 1-year
application. The administration anticipated implementing
reductions over a 3-year or 4-year period, to right-size
government. She directed commissioners from all of the
agencies to picture operating at 75 percent of what their
departments ran at presently. She wanted to know from them
what services the state would be able to provide. She posed
the question of how to address the issues together. She
mentioned that information technology (IT), administrative
services, and procurement were all areas of focus. Medicaid
expansion and reform provided an opportunity for the state
to review healthcare across the board. Alaska was the
primary funding entity for over 250 thousand health
insurance plans including Medicaid, retirees, active
employees, K-12 employees, and university employees. She
opined that reform could have a tremendous impact on the
budget, but it was a longer solution. The short answer was
that what she was providing in the current meeting was the
first step in the time the administration has had. Some of
the creative solutions included the consolidation of
administrative services, streamlining internet technology,
and addressing statutes that caused increased costs (she
referred to $75 thousand having to do with Etna Bay).
Reviewing and addressing certain laws were at the top of
the administration's agenda. The administration wanted to
wait to have a discussion about revenue until it had a
spending discussion. Based on the optimistic oil
projections the state might be able to weather the current
storm with overall reductions in place. She recalled her
first overview before the committee. She posed the question
then about how Alaska state government spending look in
comparison to other states spending. Alaska was higher but
not remarkably different. She posed the question about the
right size of government and what the size might be.
10:01:19 AM
Co-Chair MacKinnon directed a question to Commissioner
Folger of DPS. She referred to language pertaining to the
Alaska State Troopers as follows: "a Wildlife Trooper
aircraft selection with an increase of 69 percent and an
addition to the budget of $2.3 million." She suggested that
it appeared the state was replacing something or purchasing
something. She requested further detail on the increase.
GARY FOLGER, COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY,
responded that the increment increase was for personnel
steaming from Helicopter One's crash. The National
Transportation Safety Board (NTSB) came back with some
recommendations. The department also had an external audit
that encompassed three areas; maintenance, training, and
operations. The Department of Public Safety took the
resulting recommendations very seriously to improve its
safety culture. The proposed personnel would assist with
this goal.
Co-Chair MacKinnon wanted to better understand where the
recommendation came from. She furthered that she wanted to
know why the specific positions were a high priority while
positions were being lost in other areas. She asked why it
was a priority for the legislature to take notice of and
fund. Commissioner Folger answered that the recommendations
were suggested by NTSB. He explained that safety personnel
would divide the aircraft section into two parts; the
maintenance part and the operations part.
10:03:43 AM
Senator Bishop commented about the deletion of domestic
violence and sexual assault follow-up trooper positions. He
made mention of the governor discussing the public/private
partnership in the State of the Budget speech. He wonder if
there was an opportunity to have a public/private
partnership with the aircraft section in order to find a
savings and back-fill the domestic violence and sexual
assault follow-up trooper positions. He believed the
positions were sorely needed in Alaska, especially in rural
Alaska. He was trying to set a tone rather than picking on
Commissioner Folger. He wanted an honest conversation to
promote accuracy.
Co-Chair Kelly commented that whenever he talked with DPS
he got into the conversation about comparing Alaska to
other states. It seemed like Alaska spent way too much.
However, he argued that a comparison could not be made with
other states. Co-Chair Kelly compared the size of the
borough which he lived in to the size of Connecticut. The
city had a police department. The State of Alaska relied on
the state troopers to do all other policing, as there was
no county sheriff. There were also no county jails, no
county prosecutors, and no county judges. Nor did Alaska
have a community college that it paid for and the state
paid less for education. State responsibilities counted as
state spending. Almost anywhere else in the United States
the same expenses were paid for by the communities. Public
safety was a good example of the State of Alaska paid for
the costs rather than communities footing the bill. He
opined that DPS would not be able to cover all of the areas
around Alaska even if the department was increased
massively.
Commissioner Folger indicated that the state had about 563
thousand square miles to cover not including the fishery
patrol areas such as the Bering Sea. There were about 400
troopers in the state. He had often heard that for every
front soldier on the line there were 7 behind them. He was
barely at a one-to-one ratio.
10:07:07 AM
Senator Olson asked about the overall budget and
specifically personnel. He remarked that he would hate to
see any of the 400 troopers lost. However, the legislature
was looking at cuts. He commented that he came from an
aviation background and he had heard from people in the
aviation industry about all of the state's assets. In
looking at the history of aviation and of the state
troopers 20 years or 30 years ago there was a Cessna 180 or
a Piper Super Cub, equal to $10 thousand to $20 thousand,
in the rural areas. The state's aviation fleet was more
sophisticated and included larger aircraft. He relayed a
list of listed specific aircraft types. He mentioned the
ancillary expenses that went along with an aircraft
including the hangers, the required maintenance, the
inventory, and the ongoing training for pilots and
mechanics. He suggested cutting costs by reducing the
department's inventory of 47 aircraft including fixed-wing
and rotary. By liquidating some of the state's assets not
only would the state reduce the price of the aircraft but
it would also reduce operating costs. As a previous air
taxi operator he understood real savings in hard times. He
thought the state had a big problem to address and
suggested addressing part of it by liquidating assets, an
option he previously exercised in the private sector. He
asked about DPS's general plan regarding the issues he
brought up.
Co-Chair Kelly thought Senator Olson spoke with authority
on the issue.
Senator Olson mentioned that the more aircrafts the state
had, the more chance to have an accident occur. Within the
prior two weeks the state came very close to the state
having to pay out for a fatality with one of the troopers.
He asked what ideas had been discussed to ensure that DPS
and the State of Alaska would survive.
Commissioner Folger responded that there was no doubt that
over time Federal Aviation Administration and the NTSB had
clamped down on the public sector aircraft and the private
aircraft. He believed it was in the interest of safety.
Alaska was a huge state, mostly road-less. The trooper's
aircraft were the patrol vehicles. The department partnered
with the private sector in charting flights. There were
some core missions that private air charters would not
participate in. He provided the example of flying into an
airport with a madman in possession of a gun or
transporting a person with an emergency order of detention.
Co-Chair Kelly commented that he had listened to University
of Alaska President, Patrick Gamble, speaking for the
university and then went to a lunch-and-learn regarding
unmanned aerial vehicles (UAV). He wondered how much of the
public safety aviation mission was getting eyes on
something and could the state possibly trade some of its
inventory for a less expensive UAV.
10:12:08 AM
Commissioner Folger spoke of complaints about closing a
highway for five to six hours when there was a serious
accident. He envisioned a day in which a trooper could pull
up to an accident, deploy a UAV, and within ten minutes
could survey an entire accident scene. He supposed it would
be the wave of the future but added that rules and
regulations would apply.
Co-Chair Kelly shared that he was shocked to hear about the
price and availability of UAV's being impacted by the
following Christmas.
Senator Olson restated his question about liquidating some
of the state's assets. He asked if DPS had looked at
selling off some of its inventory.
Commissioner Folger responded that those were options DPS
would look at.
Senator Olson reiterated that Commissioner Folger had
talked about the NTSB's recommendations after the A-Star
accident in which people died, including ongoing training.
In the senator's discussions with the Medallion Foundation
the troopers had been involved with training. It was his
understanding that participation in the Medallion
Foundation and the star program had been cancelled or
reduced significantly. He conveyed that over the past three
years only three of the troopers stationed in rural areas
had taken the Medallion Foundation training. He asked the
commissioner if he was correct. Commissioner Folger was
unaware of the numbers but indicated that the department
was still in partnership with the Medallion Foundation. He
added that the department's aircraft section supervisor was
a flight simulator instructor. The last few flight safety
seminar were held at the state's safety seminar along with
the simulator.
Senator Olson asked that he be provided with the number of
people that had participated in the medallion Foundation
program over the prior year.
Senator Dunleavy asked Ms. Pitney about a target of 25
percent in reductions over the next so many years. He
suggested targeting an 8.33 percent for the current year as
opposed to what was being proposed currently. He wanted to
better understand why OMB did not propose a deeper
reduction for the following year.
Co-Chair Kelly asked if there were additional questions for
DPS.
Senator Olson asked about the reductions to the number of
village public safety officers (VPSO). He asked how many
positions would be left after the reductions were put in
place. Commissioner Folger replied that one of the
priorities was to make up the indirect costs to the
grantees and to roll the department's coordinators into the
overseers of the VPSO's from the grantees. In the end he
hoped that there would be about 90 positions.
Senator Olson asked if indirect costs had been funded at
$1.5 million and if the department went ahead with the
increased direct rates for certain areas what would be the
reduction in positions allowed. Commissioner Folger
answered that currently the positions were at 121. With the
reduction the department had always maintained 80 to 90
positions on average. In the long run he believed the VPSO
program would still those personnel employee numbers.
He asked for the highest number of filled positions in the
VPSO program in the previous year and for the current
numbers. Commissioner Folger reported that there were
approximately 101 position filled in the previous year and
80 currently.
Senator Olson concluded there was a 20 percent decrease.
Commissioner Folger responded that the turnover rate for
the VPSO program was approximately 33 percent.
10:18:00 AM
Co-Chair MacKinnon addressed that the budget reflected a
15.5 percent cut equal to $2.7 million related to VPSO's.
The committee wanted to ensure that communities expecting
to receive public safety assistance continued to see the
state's support with an understanding of the state's fiscal
constraints. She commented that she did not see a cut to
prisoner transportation or judicial services. She reported
$4.2 million allocated to judicial services and a separate
allocation of $2.8 million under prisoner transportation.
She asked if any policy decisions about delivering the
services differently to reduce costs either in the current
year or for the FY 16 budget. Commissioner Folger agreed
that transporting prisoners was a challenge. He indicated
that the department was internally struggling with not
having enough people to move prisoners. Prisoner transport
was primarily dictated by the court system. He told of
reviewing internal policies about when to physically make
an arrest; however, some procedures were mandated by law
such as those centered around domestic violence.
Co-Chair MacKinnon mentioned the use of video conferencing
to try to reduce DPS expenditures. She suggested that the
administration work with the courts, the judicial branch,
and DPS to see if it would be feasible to use video
conferencing for arraignments and to look at making the
necessary statutory changes. She cited an example in
Anchorage where vehicles were parked on the side of the
road. A uniformed police officer was required to physically
deliver the citations rather than having a contractor to
mark all of the cars. She thought there would be a cost
savings in contracting the job to a private organization
but would require a statutory change. At the time the issue
came up it was a big photo radar discussion in Anchorage.
Commissioner Folger affirmed that DPS would be looking at
suggestions such as the senator's as a result of budget
reductions. He conveyed that he sat on the Criminal Justice
Working Group that worked with the judicial system, DOL,
and with DOC.
10:22:36 AM
Vice-Chair Micciche remarked that he had been subject to
across-the-board cuts. He did not believe they worked
because often the highest priorities were hit as hard as
the lowest priorities. He asked if the administration had
prioritized departments such that DPS rose to the top
leaving some departments at a lower priority.
Ms. Pitney indicated that every department was directed to
look at a 5 percent and an 8 percent reduction. They were
prioritized based on the responses, previous years'
increases or decreases, and other known impacts. For
instance, DEED, DNR, DPS, and one other that she could not
recall were impacted less than others.
Vice-Chair Micciche asked if DPS had looked at creative
solutions to reduce the budget. He opined that it was
difficult to change how people look at things. He thought
the state's trooper academies were expensive. He wondered
if DPS had looked at partnering with the Anchorage Police
Department (APD) or another equally sophisticated agency in
closing the academies and the amount of potential savings.
Commissioner Folger reported that the department was
currently in the process of looking at the concept. He
relayed that there were 3 academies across the state
located in Fairbanks, Anchorage, and Sitka. The department
wondered if one academy would suffice.
Vice-Chair Micciche surmised that one of the biggest
challenges to the department was to fill both VPSO and
state trooper positions. Some of the difficulties in
recruiting had to do with police standards. He wondered if
someone with lower authority could carry out certain things
that currently require the authority at the level of a
trooper. He asked if the legislature could assist in
bringing the costs down for certain responsibilities the
troopers carried out. He asked about the possibility of
contracting out certain responsibilities.
Commissioner Folger replied that the department was looking
at such items. In terms of recruitment, within the upcoming
2-year block 102 troopers would become eligible to retire
which he was concerned about. He thought that there might
be certain duties that could be contracted out and others
that could not be hired out.
Senator Olson asked about the cost of flying people around
the state because of community jails being decommissioned.
He commented that any law enforcement officer in the rural
areas might be reluctant to charge a person if there was
not a community jail available to hold a person.
Co-Chair Kelly asked to reconvene at 10:35 AM.
10:28:05 AM
AT EASE
10:40:34 AM
RECONVENED
Co-Chair Kelly indicated that questions would begin with
DOA but first he returned to Senator Dunleavy.
Senator Dunleavy asked Ms. Pitney about her reference to
the 25 percent reduction equal to 8.33 percent over the
following three years. He commented that it would take
several years before the state budget was sustainable at
the rate of reductions proposed in the current budget. He
surmised that all of the state's reserves would be
exhausted by that time. The state would be faced with
accessing the Permanent Fund or imposing taxes. He wanted
to better understand the thinking of the administration in
being able to make sound decisions quickly. He asked Ms.
Pitney to elaborate about how the administration sees
filling the budget gap and getting the state on a sound
financial footing for the future.
Ms. Pitney stated that from a 30 thousand foot level
people, services, and geography would dictate the right
size of government for Alaska. There was a general
consensus that there was room in the budget for further
reductions. She suggested that looking at a 25 percent
reduction was simply a starting point for discussion. She
relayed that the administration understood that some
operations would not be able to be reduced by 25 percent.
Some operations might be reduced by 30 percent. The 25
percent figure was a target indicating that the state had
to think differently about how it conducted its business
such as changing the way it worked with partner agencies
and partner communities. If the reductions were applied
over 4 years the yearly reduction would be just over 6
percent. If the reductions were applied over 3 years the
yearly reduction would be over 8 percent. The 5 percent to
8 percent target was for the first year. It would be a
multi-year exercise but the 5 to 8 percent target would
allow for putting the pieces into place to make smart
reductions. It was a balancing act and was the first step
in setting the stage for the following 2 to 3 years of
reductions and kept the economy on a stable footing.
Senator Dunleavy asked about reducing staff in DOL when the
state was trying to address disagreements with the federal
government regarding overreach. He wondered how the
reduction played into Alaska asserting its rights under
statehood. He also asked about the philosophy of the
administration concerning the reduction and would the state
still have the resources to deal with issues with the
federal government.
Ms. Pitney replied that the administration was not backing
off from its policy. She commented that rather than having
stand-alone, single-purpose offices, the resources could be
consolidated. The people that would remain in the
department would be experts for certain cases. There would
also be the option to contract law services for expertise
in other specific areas. She reiterated that it was
changing from a stand-alone, specific office to
consolidating resources the state had and contracting for
additional resources when needed.
10:48:54 AM
Senator Dunleavy asked about the money placed in the budget
for Medicaid expansion. He asserted that the legislature
was trying to reduce the budget. He wondered how Ms. Pitney
saw the increase in the area of Medicaid affecting the
overall attempts to reduce the budget.
Ms. Pitney reported that the increase was on the federal
side. There were three primary decreases on the GF side
that came about because of the expansion. There was a small
amount in the behavioral health program grants in the
current year. Over the course of five years the number
would grow to over a $10 million decrease in GF. She
relayed that there was a Chronic and Acute Medical
Assistance program for expanded eligibility group that
addressed significant emergency health care bills. Patients
would be covered for services under Medicaid at 100 percent
for short-term care and 90 percent for long-term care.
Ms. Pitney reported the second decrement was in the area of
healthcare within corrections. For example, if a prisoner
was in a healthcare facility for 24 hours or more the
person would be eligible in the expanded population. The
first two decreased were direct decreases in the UGF.
Through reform efforts there would be additional reductions
in the original population and would be a topic of
discussion around the Medicaid implementation.
Senator Dunleavy briefed the committee that DOA affected
other departments. He wanted to know what cost drivers the
department was looking at to bring to the committee to slow
down or eliminate the growth in some of the areas of the
overall budget. He also inquired about functions or
divisions that could be privatized.
10:52:14 AM
Ms. Lowenstein responded that the department was looking in
all areas. She concurred that the department affected every
agency through its rates and the activities that are
consolidated. She indicated that the department was working
on and had not completed a five-year IT plan. The
department was meeting with each director and evaluating
the cost drivers for facilities, for enterprise technology,
and for personnel. The department has been gathering
information on places that it could consolidate and
streamline, and contracts that could be reduced. All areas
were being looked at by the department. She reported that
the department expected that its revenues would be reduced
from other agencies. As soon as the department knew what
might be shrinking in services requested, it could focus in
on specific reductions.
Senator Dunleavy commented that more questions would be
asked of the department in the finance subcommittee.
Co-Chair thanked Ms. Lowenstein for her testimony.
Senator Bishop addressed DLWD indicating that he wanted to
have a discussion about the privatization model that the
governor had talked about. He wanted to talk further about
job center closures such as the one in the Muldoon area. He
let Commissioner Taylor know that he wanted to have a
robust discussion about community jails and health care in
the correctional facilities. He expressed his concerns to
DNR about some of the decrements in its budget. He
mentioned some position cuts and defending Alaska's
resources. Lastly, he voiced his concerns about a position
cut within DFG.
Co-Chair Kelly clarified that DOC, DOL, and DNR were
Senator Bishop's purview in the subcommittees. He asked if
there were any other questions for those departments.
10:56:49 AM
Vice-Chair Micciche asked about the income level of the
senior group impacted by the senior benefit program
reductions. He wanted to know who the people were that were
affected and was the state essentially just shifting them
from the services of one state agency to another state
agency. Once the senior benefit payments were reduced he
asked if seniors qualified for other assistance. In other
words, he wondered if the state was realizing a reduction
or if it was shifting services between agencies.
VALERIE DAVIDSON, COMMISSIONER, DEPARTMENT OF HEALTH AND
SOCIAL SERVICES, responded that approximately 10 thousand
seniors would be impacted by the reductions to the senior
benefits program. The reduction was applied to the two
highest income level beneficiaries. Individuals in the
highest categories with incomes between 100 and 175 percent
of the federal poverty level would experience a transition
in their monthly benefit from $125 to $100 per month.
Individuals in the second highest category with incomes
between 75 to 100 percent of the federal poverty level
would see a reduction from $175 to $140 per month. She also
relayed that other benefits would possibly be available for
senior benefactors. She would provide more information at
the upcoming subcommittee meeting.
Vice-Chair Micciche suggested that he would have other
questions in the subcommittee and reasoned that the current
venue was probably not the best setting to bring them up.
Co-Chair MacKinnon asked for clarification about what it
really meant to be at 100 to 175 percent of poverty level.
She wondered if it meant a person making $14 thousand per
year or was it a person making $50 thousand in annual
income. She opined that the percentages were sometimes
deceiving. She asked the subcommittee chairman to see what
the actual income level was in order to know what magnitude
the reduction would have on the actual benefit being
received.
Co-Chair Kelly wondered about stacking income. Previously,
when the Healthy Families program was being discussed he
received information that a CIRI shareholder could have
made $103 thousand and qualified for Denali Kid Care
because the dividend that was paid in the same year did not
factor into income. He asked the subcommittee chairman to
find out more about stacking income and what counted and
what did not count.
Senator Olson asked Commissioner Davidson about the housing
funds that were removed from the budget. He asked about the
department's plans to remedy the removal of what he
believed was a basic necessity.
Commissioner Davidson asked if Senator Olson was asking
about the AHFC reductions in the capital budget.
Senator Olson responded affirmatively.
Commissioner Davidson responded that the department was
hearing concerns from stakeholder groups about the impacts
of not having adequate housing. She thought Governor Walker
was revisiting the issue. She indicated that one of the
challenges the department faced was that most often people
who experienced homelessness or who were part of the
transient population had significant substance abuse or
mental health issues. The department was ramping up its
efforts to be able to address the concerns. Another
challenge of the department was the way in which it
reimbursed for behavioral health services. It had evolved
over time. She compared it not to a patchwork quilt but
rather a moth-eaten blanket that did not make much sense.
The department had asked Jared Kosin, the executive
director of the Office of Rate Review, to look at the way
DHSS reimbursed for behavioral health services. He was
instructed to find a way to do billing that made more
logical sense and which valued things like treatment. The
idea was to be able to provide services more logically and
in a way that served and benefited outcomes. Additionally,
because the reimbursement methodologies through Medicaid
did not necessarily make sense, many of the behavioral
health grants that the state provided to providers were
shoring up losses. If the department looked at redesigning
how the state did the reimbursement it could have a huge
impact on the reduction of behavioral health grants.
Senator Olson asked if the redesign analysis would include
housing. Commissioner Davison responded positively.
Senator Dunleavy asked about the length of the meeting.
Co-Chair Kelly responded that although he had a meeting to
go to he would move in order to continue. He appreciated
having all of the people from the various departments
present.
Senator Dunleavy suggested having two or three departments
per meeting in order to help dig deeper to help with budget
reductions.
11:06:50 AM
Vice-Chair Micciche wanted Alaskans to know that the
legislature was focused on the households that would be
impacted by reductions. Some of the jobs being discussed
belonged to mothers and fathers and the topic was not
taking it lightly. He reported that many positions were on
the books but not currently filled. He wondered why
departments did not just zero out any vacancies and make do
with the positions already filled by moms and dads.
MARY SIROKY, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES
responded that the departments had historically used a
vacancy factor to pay for those cost that had not been
funded over time for things such as personal services and
merit increases. For the most part all vacancies were not
filed at any one time. She added that while certain
positions might be vacant at a certain point in time, they
might not be the same positions vacant at another point in
time.
Vice-Chair Micciche understood her point and thought it was
a "shell game" and suggested lowering the vacancy number.
He addressed Mr. Luiken about the AMHS budget. He remarked
that the system only served one-third of Alaskans and felt
that it was time to look at drastic reductions. He asked
Mr. Luiken if he had a vision for dramatically reducing the
cost of AMHS. He asked the commissioner if he had looked at
the possibility of private companies coming to the table to
either operate or replace the state services with
privatized services. He further asked if the department had
considered mothballing a couple of vessels and providing
on-demand service rather than empty schedule service.
MARK LUIKEN, COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND
PUBLIC FACILITIES stated that there was nothing off of the
table. The department was looking into several options that
would be brought forward once they have been vetted for
potential impacts. He had tasked Deputy Commissioner Mike
Neussl to start working the ideas and committed to bringing
them to the legislature before the end of the session.
Vice-Chair Micciche requested prioritizing a list prior to
starting or as the subcommittee process occurred. He had
suggested of his own and would like to be working with the
department. He respected the commissioner's experience;
however, the state was in a tough place. He elaborated that
the legislature would have to make significant impacts in
the current year. He made it clear that he was not at the
legislature to be reelected, rather he was present to do
the right thing for Alaskans. He suggested that some people
responded differently during an election year. The present
time was the ultimate opportunity to make the most
substantive reductions in services and spending.
Mr. Luiken commented that his task to the AMHS was to look
at how to maximize service to Alaskans with while finding
ways to be more efficient and to have a significant impact
on the department's budget.
11:12:23 AM
Vice-Chair Micciche closed by stressing that half of DOT's
budget was serving about 5 percent of the people of Alaska.
At some point the legislature would have to reevaluate the
mix [of funding].
Senator Olson understood that about half of DOT's budget
was appropriated to AMHS. However, he believed it served 15
to 18 percent of the population rather 5 percent. His
district was not concerned with AMHS therefore he did not
typically delve into that portion of the budget. He
continued by revisiting a point brought up earlier in the
meeting by Ms. Pitney that approximately $3 million had
been reduced for AMHS and highways. He asked about how the
proposed cuts affected airports. The state received
significant federal funds for airports. He wondered if
there were any substantial cuts to Alaska's airport system.
Ms. Siroky reported that three positions at the Bethel
airport were being eliminated. The department was given
funding and positions a few years prior to increase
staffing to 24/7 at the Bethel airport. The state had not
been able to fill the positions but had been successfully
keeping the airport open about 18 hours per day meeting the
needs of the airlines flying in first thing in the morning.
The department was officially getting rid of the positions
and their associated funding. Other impacts to aviation
included landing fees at the Deadhorse airport in order to
increase services there. Half of the landing fees would be
implemented in the current year and the full cost of
providing service 24/7 would be put into place in FY 17.
She reported significant reductions to the department's
highways and aviation components which would likely result
in delays in airport repairs in rural areas.
Senator Olson mentioned a study done years previously on
high landing fees. He found it interesting that landing
fees were being assessed at the airport in Deadhorse which
served Prudhoe Bay. It was the only airport in the state of
Alaska that had landing fees. The study showed that it
would cost more money to have an office open to collect the
fees. His concern was about who would be paying the fees.
For example, he wondered if someone flying a Super Cub or
an operator of a Cessna 207 carrying mail and passengers
would be charged. He opined that it was unfair to the poor
person flying in from Kaktovik to have to pay a landing
fee. While in other parts of Alaska such as Juneau or
Sitka, pilots were not burdened with increased fees.
Commissioner Luiken indicated that landing fees at
Deadhorse started at 6000 lbs. In his estimation that
aircrafts such as Cubs and 207's would not fall into the
applicable category. He mentioned that the Juneau Airport
did charge landing fees because it was a self-run facility.
The request came from companies that used the Deadhorse
airfield most and needed 24/7 service. The department's
solution to provide the increased service was to implement
landing fees paid for primarily by the larger aircraft that
would be landing there.
11:17:30 AM
Senator Olson commented that he had observed that there
were not many Super Cubs or 207's but Caravans and 1900's
carry passengers and bypass mail and weighed over 6000lbs.
He felt that it was unfair for some of the rural areas to
be targeted in such a way. He added that it was unfair for
135 operators who were trying to make a living in one of
the harshest areas to be penalized.
Commissioner Luiken indicated he would provide Senator
Olson with the impact numbers on the smaller carriers.
Senator Olson wondered if a King Air or Lear jet flying for
search and rescue purposes would be charged the landing
tax.
Ms. Siroky testified that the department would not be able
to implement anything without having put the regulations
together, which the department had not done. Landing fees
would not be charged for a full year. In that time the
department would go through the public regulation-setting
process prior to implementation. It would provide an
opportunity to reflect about the things the senator had
brought up.
Senator Olson responded that he would have to answer to his
constituents about why only one airport in Alaska was being
considered to incur increased landing fees. He stated that
it did not seem fair.
Co-Chair MacKinnon indicated that she was the subcommittee
chairman for DOR and was putting its staff on notice that
the issue would become part of the revenue discussions. It
directly affected fuel. She asked about those carriers that
were currently exempted under the AMHS and the aviation
system that were receiving a tax exemption or an indirect
credit on fuel. She relayed that the subcommittee had gone
through a process over the previous session where the
subcommittee asked DOR in combination with Legislative
Finance Division (LFD) to look at where Alaska was
foregoing revenue opportunities. There was a book produced
called, "Indirect Expenditures." As she was reviewing the
book she saw two areas that raised interest to her for
consideration. The first was that the state was not
collecting its statewide tax on foreign aviation fuel and
foreign marine fuel. She was uncertain how DOR or LFD came
up with their numbers and would need to find out how they
estimated the numbers. She wondered if DOT knew of a reason
why the state was not collecting the two fees. She was
trying to figure out the estimation of the credit because
the two combined equaled about $20 million in estimated
foregone revenue. It did not mean the loss of revenue, but
what had been identified with the information that was
available. She wondered what foreign ships were using
Alaska hydrocarbons in some way and why they were not
contributing. She believed it was because they were not
traveling on Alaska's roads, which was the reason for the
original exemptions.
Ms. Siroky did not know but would look into Co-Chair
MacKinnon's question.
Co-Chair Kelly asked Ms. Pitney for an update on the Ocean
Ranger Program, the number of Alaskans that were impacted,
and the cost of the program. He also wondered about the
Spill Prevention and Response fund (SPAR) and whether the
administration or department was planning on proposing any
statutory changes applicable to the program.
Ms. Pitney responded that based on the discussion of the
supplemental budget about a week previously the direction
was to have something like a subcommittee or a workgroup of
the interested parties including DEC and someone from OMB
to determine a good direction moving forward. She believed
if the parties came to a comfortable starting position the
administration would submit legislation.
Vice-Chair Micciche told about a meeting held the previous
day at which suggestions had been provided and things were
moving in a positive direction. He hoped to get something
into place before the end of session.
Co-Chair Kelly relayed that his staff had informed him that
Vice-Chair Micciche had contacted his office. He thanked
the senator.
11:24:09 AM
Co-Chair Kelly indicated he was trying to get a better
understanding of the FY 14 versus FY 15 budget. As he
looked on the sheet provided by OMB in FY 14 the
university's actuals were $377 [million] UGF and $370
[million] was authorized in the management plan. He asked
if the fuel trigger money was part of the university GF
spending when determining the amount between years.
Ms. Pitney responded that the $370 was inclusive of the $7
million that came through language on the heat and power
plant. She did not believe it was the fuel trigger
mechanism.
Co-Chair Kelly asked if bonded indebtedness was included.
Ms. Pitney responded, "Yes."
Co-Chair Kelly stated that there had not been any expenses.
Ms. Pitney explained that $7 million was an appropriation
that hit the operating budget for the bond indebtedness as
part of the financing plan approved the prior year.
Co-Chair Kelly asked if it was a capital project. Ms.
Pitney confirmed that it was a capital project.
Co-Chair Kelly stated that for the UGF year-to-year he
thought it would be more appropriate to say the university
was at $377 [million] in FY 14 and $363 [million] in FY 15.
Ms. Pitney replied, "Correct".
Co-Chair Kelly asked if Ms. Rizk agreed.
MICHELLE RIZK, ASSOCIATE VICE PRESIDENT, STATEWIDE PLANNING
AND BUDGET, UNIVERSITY OF ALASKA agreed.
Co-Chair MacKinnon commented that as the university budget
went forward she hoped that the subcommittees talked about
the cost overrun and the projections on the coal plant.
Co-Chair Kelly suggested that it was not a cost overrun, it
was a redesign.
Vice-Chair Micciche mentioned that it was essentially the
administrative budget. The legislature would be leading the
way with an assumed budget. He asked for an outline some
basic plans without putting anyone on the spot. He remarked
that the legislature intended to get aggressive with its
own budget. Currently it appeared that the legislature had
a 1.8 percent increase but it was certainly not the
legislature's plan going forward.
Co-Chair Kelly agreed and added that one of the problems
the legislature had at the current stage that ultimately
any budgetary recommendations were going to come from
Legislative Council. The legislature was looking at a 10
percent reduction to the budget as well as other measures
that would be taken. There was a reduction to the
legislative budget which was required to come through
Legislative Council. Even when it came through Legislative
Council it had to be vetted through the Senate Finance
Committee, and through the legislative process.
Senator Olson remarked that the governor had 30 days to add
amendments to the budget which was due on February 18th
[2015] He asked if there were plans to submit amendments
that would address some of the issues brought forward by
the committee.
Ms. Pitney offered that there would be a few minor
additional amendments. She explained that because of the
timing using the work-in-progress budget to come forward
everything on the list were technically amendments but
there would be a few more that would address certain
unintended issues.
Co-Chair Kelly thanked the presenters. He would likely
follow Senator Dunleavy's recommendation to choose a few
agencies per week to drill down on their budgets.
SB 27 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 16amd_deptsummary_2-5-15.pdf |
SFIN 2/12/2015 9:00:00 AM |
SB 27 |
| 16amd_deptsummary_ugf_2-5-15.pdf |
SFIN 2/12/2015 9:00:00 AM |
SB 27 |
| ABS Worldview 2-11-15.pdf |
SFIN 2/12/2015 9:00:00 AM |
SB 27 |
| Final_FY2016_Gov_Amended_Budget_Summary_2-5-15.pdf |
SFIN 2/12/2015 9:00:00 AM |
SB 27 |