Legislature(2015 - 2016)HOUSE FINANCE 519
02/10/2016 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Operating Budget and Subcommittee Process 101 Overview | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 53 | TELECONFERENCED | |
| + | HCR 4 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 10, 2016
1:32 p.m.
1:32:32 PM
CALL TO ORDER
Co-Chair Neuman called the House Finance Committee meeting
to order at 1:32 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Les Gara
Representative Lynn Gattis
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
Representative Bryce Edgmon
Representative David Guttenberg
ALSO PRESENT
David Teal, Director, Legislative Finance Division; Lacey
Sanders, Fiscal Analyst, Legislative Finance Division; Pete
Ecklund, Staff, Representative Mark Neuman; Representative
Louise Stutes; Representative Liz Vasquez; Representative
Wes Keller; Representative Cathy Tilton; Representative Dan
Ortiz; Representative Gabrielle LeDoux; Representative
Shelley Hughes.
SUMMARY
^OPERATING BUDGET AND SUBCOMMITTEE PROCESS 101 OVERVIEW
1:32:54 PM
Co-Chair Neuman discussed the meeting agenda. He explained
that the meeting would focus on the basics of the operating
budget and subcommittee process. He explained that the goal
was to help people better understand the budget process.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
introduced the PowerPoint Presentation: "Budget 101
Training" dated February 10, 2016 (copy on file). He
announced that the meeting would focus on basic budget
information and was not a discussion of the fiscal
situation. He addressed the goal of the presentation on
slide 2:
Goal of This Presentation:
Provide legislators and staff with basic budget
information. This is not a discussion of the fiscal
situation. It is a discussion of the budget - actually
only the appropriation side of the operating budget.
· Appropriation Structure - How the legislature can
control spending through appropriation (or
budget) structure
· Fund Groups - What they are & how they indicate
the level of legislative discretion
· Understanding the Fiscal Summary
· Subcommittee Process
· Resources helpful in analyzing and preparing
subcommittee budgets
Mr. Teal moved to slide 3: "Appropriation (Or Budget)
Structure."
What is an appropriation?
· An appropriation is legislative authorization to spend
funds. An appropriation has five requirements:
1. Purpose
2. Funding Source
3. Amount
4. Location
5. Time Frame
What is appropriation (or budget) structure?
· When many people speak about appropriations, they are
referring to the appropriation structure in the
numbers section of an appropriations bill.
ƒ Appropriations appear in bold
ƒ Allocations are indented and appear in non-bold
type
· Why is budget structure important?
ƒ The legislature controls where funding can be
spent through the budget structure.
o Funding cannot be transferred between the
various allocations within an appropriation.
[The slide contained a sample page from a numbers section
of an operating budget bill.]
1:36:15 PM
LACEY SANDERS, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION, continued to address slide 3. She pointed to the
right hand portion of the slide that provided an example
from a page of the appropriation bill. She exemplified a
Department of Education and Early Development (DEED)
appropriation to illustrate the point that money cannot be
transferred between the various allocations within an
appropriation, which provided the legislature control over
where the funding was spent.
PETE ECKLUND, STAFF, REPRESENTATIVE MARK NEUMAN, continued
to address slide 3. He emphasized that money could be moved
between allocations, but not across appropriations.
Mr. Teal elaborated that the legislature could cut a
program or specific expenditure within an allocation and
discovered that the agency was still offering the program
or "doing what the legislature thought it had cut."
Agencies could simply move funding within an allocation.
The only way for the legislature to control expenditures
was to develop a separate appropriation for an item it
wanted to cut. The legislature could not make an agency
spend money with an appropriation, but could halt specific
spending using the correct appropriation structure.
Mr. Ecklund detailed that in most agencies many
appropriations and many allocations were contained within
its budget. The exception was the University of Alaska
structure that contained one appropriation and many
allocations.
1:40:02 PM
Ms. Sanders moved to slide 4:
Fund Groups & Legislative Discretion:
The following four fund groups indicate the level of
legislative discretion over the use of the funding:
1. Unrestricted General Funds (UGF) - No statutory
designations or restrictions on these funds.
Deficits refer only to UGF. Deficits cannot occur
in other fund groups.
2. Designated General Funds (DGF) - Although the
Constitution prohibits the dedication of funds
(with a few exceptions); the legislature has
statutorily designated funds in this group for a
specific purpose.
3. Other Funds - The legislature has limited
discretion (includes dedicated and duplicated
funding).
4. Federal Funds - Funding received from the federal
government. The legislature has limited
discretion over the use of this funding.
Co-Chair Neuman asked Ms. Sanders to provide examples for
each fund group.
Ms. Sanders delineated that the most common UGF Fund Code
was 1004 and another category of UGF was "general fund
match." She noted that the Power Cost Equalization
Endowment Fund (PCE) was an example of designated general
funds. Other designated codes were for receipts that were
collected such as for motor vehicles. The third category
was other funds and very few existed. She exemplified the
Fish and Game fund that was constitutionally dedicated and
carried federal restrictions and requirements and statutory
designated program receipts that were exclusively used for
a specific purpose.
Representative Wilson asked about the Higher Education Fund
and noted that the finds were being utilized for different
purposes other than performance scholarships. Ms. Sanders
answered that while statutory guidelines were in effect for
a designated fund the legislature had the "discretion" to
reject the stated purpose and reappropriate the funds. She
expounded that the Higher Education Fund was a designated
fund and last year the legislature reappropriated the
excess for other educational purposes.
Mr. Ecklund remarked that the legislature chose to use the
higher education money for other elements in K-12
education, but it could have been used for any other
purpose.
Representative Wilson asked whether the PCE funding could
be used for any Alaska Energy Authority (AEA) projects. Ms.
Sanders answered in the affirmative.
Mr. Ecklund specified that the funds were dedicated and not
designated.
Mr. Teal clarified that both PCE and Higher Education Fund
monies could be utilized to operate the Alaska Marine
Highway System (AMHS). The legislature had the authority
over all designated funds.
Representative Gattis requested more information about the
funds and identify "each pot of money" and how it could be
spent.
1:46:13 PM
Ms. Sanders addressed the fourth category on slide 4
"Federal Funds". Is there a cut and paste? Or more info?
Mr. Ecklund emphasized that the reason the budget process
focused on UGF was that the difference between annual UGF
revenue and annual UGF expenditure made up the fiscal gap.
Ms. Sanders addressed slide 5 titled "Fiscal Summary." The
slide included a fiscal summary document that contained the
four fund categories. She noted that the summary contained
the four fund groups for FY 16 and compared it to the FY 17
governor's proposal. She noted the far right column
depicted the changes in UGF between fiscal years. She
elaborated that reading down the page it was divided into
four categories. The top was "revenue" and the next was
"appropriations" that was broken down into "operating
appropriation" which was divided into "agency operations"
and "statewide items" and the third category was "capital
appropriations."
Mr. Ecklund summarized that the fiscal summary was an
income and expenses statement and a deficit and surplus
statement with details in between.
Ms. Sanders relayed that the Legislative Finance Division
(LFD) published a fiscal summary twice a year. She briefly
highlighted slide 6: "Fiscal Summary (Continued)" that
contained fund transfers, Permanent Fund information, and
totals. She addressed slide 7:
Short Fiscal Summary
· Focus is on UGF Only
· Status Quo Removes the Governor's Proposed Legislation
ƒ New Revenue Sources
ƒ Pension Obligation Bonds
ƒ Oil Tax Credits
· Status Quo Dividends are not UGF
[The slide contained an example of a short fiscal summary
document on the right side of the slide]
Ms. Sanders explained that short fiscal summary contained
the same information as the fiscal summary but narrowed the
focus to UGF.
Mr. Ecklund elaborated on the importance of understanding
the short fiscal summary. There were items in the language
section of the governor's proposed operating budget that
required enabling legislation. Sometimes the House Finance
Committee drafted a status quo operating budget committee
substitute (CS) and made adjustments accordingly.
Ms. Sanders turned to slide 8: "Fiscal Summary: FY 17
Governor's Request: Agency Operating Budgets, Statewide
Items and Capital Budget (Formula and Non-Formula) (UGF
Only)." She detailed that the graph represented the capital
and operating expenditures in the fiscal summary. The
colored bars reflected the categories of capital and
operating expenditures. The light blue bars represented
non-formula totals, the red bar depicted debt service, the
yellow bar portrayed capital expenditures, the green bars
referenced statewide assistance retirement formula, and the
dark blue bars represented formula spending.
1:53:31 PM
Mr. Ecklund pointed out that the subcommittees looked at
the non-formula budget and in most instances the formula
expenditures required statutory change. Subcommittees were
not authorized to change statue, therefore only focused on
non-formula items.
Co-Chair Neuman interjected that last fiscal year the
budget totaled $5.2 billion. He delineated that $1.2
billion was spent on statewide services that included $500
million in oil and gas tax credits, $268 million in
retirement, and $228 million in debt service. The other $4
billion was split roughly into $2 billion each for formula
items: education and Medicaid and the remainder were spent
on non-formula items which he referred to as "day to day
government" spending.
Ms. Sanders addressed slide 9 titled "Agency Operations."
The chart depicted agency operations expenditures of UGF
only, adjusted for inflation over the last twelve years.
She noted that most departments reverted to 2006 and 2007
levels with few, but understandable exceptions. She pointed
out that the Department of Corrections (DOC) was at a 2011
level due to prison population and costs rising over time.
The Department of Military and Veterans Affairs (DMVA)
experienced a technical change. She explained that funds
for the Military Youth Academy had previously been funded
through DEED, but was now funded through DMVA, which was a
significant change for the department. The Department of
Public Safety's (DPS) and the Department of Revenue (DOR)
budgets were higher than 2007 levels. She summarized that
the chart was a comparison to the FY 2017 governor's
budget.
Co-Chair Neuman asked for an explanation of department
expenditures. He referred to the total figures as
"snapshots in time." He noted the difficulty in evaluating
agency growth due to funding moving between departments and
differing management.
1:57:28 PM
Ms. Sanders answered that when a change was made to a
categorized fund, for instance "other funds" changed to
DGF, the LFD system had the ability to go back in time and
applied the change historically to all years. She provided
the example of the Alaska Aerospace Corporation that was
located in the Department of Commerce, Community and
Economic Development (DCCED) budget but had been moved to
the DMVA budget. When the Alaska Aerospace Corporation was
moved the historical budget information moved to DMVA with
it.
Mr. Ecklund clarified that the LFD system included look
back graphs that provided an "apples to apples comparison."
Ms. Sanders moved to slide 10: "Agency Look-Back Graphs."
The graphs provided a further "drill down" of detailed
budget information.
Mr. Ecklund noted that LFD began developing the graphs with
the co-chairs approximately 6 years earlier. He explained
that the intent was to provide a "tool used by the
department" to communicate to the legislature the reason
for any growth that occurred and the budget history of the
department. His intention was to have agency staff provide
a historical narrative along with the graphed data.
Mr. Ecklund addressed slide 11:
Subcommittee Process:
· Mission/Core Services/Results
· 10 year Look-Back
· 10-Year Plan Look-Forward
· Audit Check
· Status of current year Changes
· Evaluate Increments/Decrements
Mr. Ecklund explained that roughly 5 or 6 years earlier
there had been complaints that members were not provided
enough information for the subcommittee process. As a
result, some veteran budget staffers and LFD devised a way
to provide better information and standardize the process.
Abundant information was available but the need was to
present it in a concise "more user friendly" manner. The
goal was to provide the most useful relevant information
that could be understood in a timely manner. He noted that
the focus of the information was the mission of the
departments, which included core services, results based
budgeting, and results based accountability. The
information allowed evaluation of every program, function
and, service of government. The Co-Chair instructed members
and staff to make all of the items deemed necessary as
efficient as possible. He restated that the agencies'
administrative services director, commissioner, or division
director should know the budget history of the agency and
explain the data provided on the 10-year look back graphs.
In addition to the 10-year look back graphs, LFD provided
additional data and highlights of significant budget
changes over the years for each department on their
website. He addressed the statutorily mandated executive
branch's 10-year Plan for each department that provided a
look forward for 10 years. FY 17 was the first year the
plans were provided.
2:06:25 PM
Mr. Ecklund referred to the audit check that the
subcommittees were requested to carry out. The
subcommittees held hearings on any audits that reported
problems or suggested corrective action and directed a plan
of action. He continued that by the time the subcommittee
reviewed the steps in the subcommittee process the members
possessed enough information to adequately evaluate the
budget increments and decrements. He concluded that the
standardized subcommittee process alerted the executive
branch as well as the committee members "what to expect."
Co-Chair Neuman interjected that the effort was not only
for the members but also for the staff. The process enabled
the staff to be well informed and answer the public's
questions. The goal was to provide accurate information.
His staff was meeting with other member's staff to ensure
the process and information was understood.
Mr. Ecklund noted that the subcommittee binder information
list had been included in the meeting packet titled
"Subcommittee Binders - Minimum information to be included"
(copy on file).The Co-Chairs office provided subcommittee
binders for members and staff. He emphasized that the
purpose of disseminating budget information was to assist
members in making "informed" budgetary decisions.
Representative Wilson asked whether after programmatic
decisions were made members should look into the detail
budget books for specifies regarding employee data and
determine whether two or three deputy commissioners or 10
economists were necessary in the Department of Labor and
Workforce Development or employees in other departments.
She also mentioned evaluating federal matching funds versus
general funds for programs and employee salaries. Mr.
Ecklund answered that it was up to the subcommittee chairs
to explore any other areas or delve deeper into budgetary
areas with additional information. The subcommittees were
provided with basic and necessary information.
2:11:05 PM
Ms. Sanders moved to slide 12:
Budget Resources:
The following slides provide information on:
· Budget resources available to legislators and the
public
· The types of information you can extract from
these resources
Ms. Sanders turned to slide 13:
Alaska Legislative Budget Handbook - The Swiss Army
Knife (SAK):
This publication is designed to be a step-by-step
guide to assist new legislators and staff in
developing agencies' budgets. Some of the information
included in the SAK is:
· LFD analyst contact information
· Tips for running effective subcommittee meetings
· Budget analysis questions
· Budget closeout procedures
· Conference Committee process
· Fund code and fund group information
· Appropriation law
· Glossary of budget terms
· Other Budget resources
Co-Chair Neuman asked whether the SAKs were available at
the LIOs (Legislative Information Offices) throughout the
state. Mr. Ecklund replied that the booklets were available
on the LFD website but probably not available at LIOs. Co-
Chair Neuman noted that individuals could contact their
legislators for a paper copy.
Mr. Ecklund encouraged legislators to refer to the
publication. He considered it the best resource for
providing a basic understanding of the budget process.
Ms. Sanders turned to slide 14:
Legislative Fiscal Analyst's Overview of the
Governor's Request (or the Overview):
This is typically Legislative Finance's 1st
publication in the budget process. It includes:
· A Fiscal Summary
· A summary analysis of the Governor's December
15th operating and capital budget requests,
including revenue measures and bills like the
Permanent Fund Protection Act
· Discussion of each agency's top issues as
identified by Legislative Finance analysts
· Analysis of the language sections in each
appropriation bill
This publication is typically available on the first
day of session.
Ms. Sanders spoke to on slide 14 and reported that the
summary was also available on the LFD website.
Co-Chair Neuman asked about the division's process when
determining what specific or significant issues were
highlighted in the overview.
2:16:15 PM
Mr. Teal replied that significant issues were often
identified because of costs. For instance, if a department
was requesting an item with a high expenditure for that
particular agency it indicated a policy change and LFD
would highlight the issue. He added that issues like
pension obligation bonds or anything that was a potential
policy change was examined via the overview. He reminded
the committee that the document was an overview of the
governor's proposed budget and any analysis provided by LFD
was not an endorsement. He described the document as a
"broad overview." He noted that the policy changes were
highlighted in the language section, which typically
comprised one quarter of the overview and were not topics
covered in subcommittee.
2:19:01 PM
Co-Chair Neuman stated that the book helped members
understand the budgets of the subcommittees that members
were not participating in.
Ms. Sanders moved to slide 15:
Subcommittee Books:
How to read a Subcommittee Book
· Column Definitions
· Blue pages contain Legislative Fiscal Analyst's
Overview of the Agency's budget request
· Goldenrod reports (contain summary reports)
· Agency Summary
· Agency Summary (General Funds & UGF Only)
· Agency Totals
· White pages (contain detail reports by
allocation)
· Allocation Totals
· Transaction Change Detail
· Wordage Report
· Transaction Type Definitions
Ms. Sanders indicated that LFD compiled a subcommittee book
for each department that consolidated the budget
information in the governor's request. She turned to Slide
16: "Subcommittee Books (Continued)." She delineated that
the slide included two sample pages from a subcommittee
book. The chart on the page titled "Multi Year Allocation
Summary - Operating Budget - FY 2017 Governor Structure"
contained figures under columns. The first column outlined
the most recently closed fiscal year actual, which was FY
15 and reported what was actually spent. The next column
was the "FY 16 conference committee" (CC) and listed the
budgets as approved by the conference committee. She
elaborated that the next column was FY 16 authorized and
reported the CC budget adjusted for vetoes, and included
appropriated fiscal notes and unallocated reductions. She
turned to the next two columns titled "Management Plans"
that contained authorized levels of expenditures beginning
in FY 15 and FY 16 including position adjustments and
departmental transfers within appropriations. She qualified
that due to the significant reductions over the previous
two years both fiscal years were included. She moved to the
next column titled "FY 17 Adjusted Base" that reflected the
"starting point" for the fiscal year. Adjustments included
one-time items, contractual salary adjustments, and
temporary increments (INCT) such as a short-term project.
The following column was the FY 17 Governor Request that
included the adjusted base plus the Governor's requests for
changes in programs or fund sources.
2:25:50 PM
Mr. Ecklund interjected that the subcommittee process
started with the FY 17 adjusted base figures. He noted that
comparisons often refer back to the Management Plan.
Representative Gara asked about comparing the budgets. He
clarified that the budget was built from the adjusted base
and management plan figures were used as a comparison. The
adjusted base numbers did not include any one-time items.
He asked for concurrence. Mr. Ecklund agreed with his
statements.
Mr. Teal added that LFD was often asked what information
was a "better comparison" and he asserted that a correct
answer was not possible. However, using the adjusted base
facilitated a consistent start for the subcommittee
process.
Representative Gara referred to salary contracts. He asked
which column included salary contract information. Mr. Teal
answered that the salary adjustments were included in the
adjusted base column so that they do not appear as
governors increments and were already included in the
budget.
Ms. Sanders spoke to the transaction-type definitions
included in the back of the subcommittee books. She
furthered that the front of the book contained the agency
overview section on blue pages. In addition, agency
summaries were included on goldenrod pages that included
reports such as UGF only data. The white pages included the
columns she spoke to.
2:31:34 PM
Mr. Teal added that the reports included were standardized.
He offered that members should all feel free to request any
type of customized report. The transactions typically
contained notes and could be made available by request. He
stated that if anyone desired a deeper understanding of a
particular request the notes could be provided with the
transactions.
Mr. Ecklund mentioned that each subcommittee maintained a
link to the different presentations and documents that were
presented during subcommittee meetings on the BASIS
website.
Ms. Sanders turned to slide 17: "Guide to OMB Budget
Reports" that depicted the one page summary prepared by the
Office of Management and Budget (OMB) and was a guide of
how the budget process flows, that included terminology,
and the items contained in the budget. She noted that there
was a terminology difference between LFD and OMB. She
explained that LFD referred to the budget in terms of the
department, appropriation, and allocation and OMB used
department, results delivery unit, and component
correspondingly.
2:35:22 PM
Ms. Sanders advanced to slide 18:
Legislative Finance Division's Website
(http://www.legfin.akleg.gov/)"
In addition to the standard operating, capital, and
supplemental reports, the following information can be
found on the LFD website:
· LFD analyst contact information
· Operating Budget Reports
· Current reports
· Appropriation bills that are still in
Committees (that haven't yet been posted on
BASIS)
· Historical Reports
· Budget Amendment Forms
· Capital Budget Reports
· Current Reports
· "Custom" historical capital budget reports:
· Summary reports (by HD, Agency, or
Statewide)
· Project detail reports by House
District or Agency
· Export to Excel of all projects
· Project Search
· Appropriation bills that are still in
Committees (that haven't yet been posted on
BASIS)
· Budget Amendment Forms
· CAPSIS
· Supplemental Budget Reports
· Fiscal Note System
· LB&A's RPLs (Revised Program-Legislative)
· LFD Publications - Fiscal Summaries, Yearly
Publications, Informational Papers & Other
· Analysis Tools - Look-back Graphs, Highlights,
Transaction Detail, Increment Status
· Links - To other websites such as Office of
Management & Budget (OMB)
Representative Gara assumed that adjusted base included
salary adjustments. He wondered about the usefulness of the
adjusted base data when only some of the contracts were
negotiated and some were still under discussions. Mr. Teal
replied that the information was "consistent." He explained
that all of the ratified salary adjustments were already
included in the budget. Some of the bargaining agreements
were not yet negotiated and subsequent to negotiation were
provided to the legislature. The legislature then provided
the contract numbers for the budget which were plugged in
by LFD. Language existed in the budget bill that referred
to all of the contracts whether all were ratified or not
that stated if the contract was not ratified the money
would be removed from the budget. The funding was not a
subcommittee topic and was included in the budget when
ratified. He characterized it as a "statewide' decisions.
Mr. Ecklund remarked that the legislature made the decision
whether to fund a ratified contract called "Monetary
Terms," and noted that the process was not an automatic. He
alerted the committee that 86 percent of the state's
workforce had contracts currently in negotiations.
Co-Chair Neuman asked whether the legislature had any
authority in negotiating the contracts. Mr. Ecklund
answered in the negative.
Mr. Teal expounded that the monetary terms of a contract
were a statewide decision that was made by the legislature.
He clarified that if the legislature included the funding
in the budget, the action represented approval and if the
monetary terms were not included the action was viewed as
disapproval and the contracts were sent back to the unions
for further negotiation.
Vice-Chair Saddler asked whether contracts could be
partially funded. Mr. Ecklund responded in the negative and
emphasized that the entire contract was approved or not.
Representative Gattis asked how step increases fit in with
contract negotiations and how the increases were accounted
for in the budget. Mr. Ecklund answered that the steps were
bargained for with covered employees and were absorbed.
2:42:05 PM
Mr. Teal expounded that step increases were not funded for
executive branch agencies. Theoretically, agencies absorbed
the increases. He provided the example that when one person
resigned it was possible to save 10 steps when a brand new
staffer was hired. He remarked that some agencies would say
that it worked for big departments, but not for small ones
especially where employee retention was high. He added that
all agencies absorbed step increases except the University.
The University step increases were a contractual obligation
and typically requested a budget increment.
Ms. Sanders continued to address slide 18. The screen
showed an image of the LFD website [not included in the
presentation]. She pointed to a matrix of reports on the
website [this was not in the presentation]. She described
the types of reports available on the website.
Mr. Teal emphasized that the reports were constantly
updated on the website. Every step of the budget process
gave a new batch of reports.
Ms. Sanders relayed that LFD provided comparisons that
included reports showing exactly what was accepted or
denied. The division reviewed all of the Revised Program-
Legislative (RPLs). She explained that RPLs were approved
by the Legislative Budget and Audit Committee (LBA) when
for example; an agency received additional federal grant
money but lacked the authorization to accept them. She
noted that LBA could not increase general funds. She
pointed to budget history graphs available on the website
and to the fiscal note system. She continued that along the
top of the main page drop down menus provided links to the
available information. She described the different analysis
tools listed on the slide. She concluded that a vast amount
of budget information was available on the LFD website.
2:50:59 PM
Ms. Sanders continued to highlight the LFD website. She
turned to slide 19:
Office of Management & Budget's Website
(http://omb.alaska.gov/):
In addition to standard budget reports, other
information on OMB's website includes:
· Personal Services Reports
· Performance Measures
· 10 Year Plans
· Comprehensive Annual Financial Reports (CAFR)
· Budget Terminology
· Capital Appropriation Status Reports
· Fee Reports
· Personal Services Transfer Reports
· Revenue Forecast
· Guide to OMB Budget Reports
Ms. Sanders moved to slide 20:
Governor's Detail Budget Books
These books are published by each agency and include
detailed information on agencies' budgets.
· Performance Measures
· Organization Charts
· Personal Services Detail (pcns, location, cost of
salary & benefits, vacancy factors, and the
amount of UGF budgeted for each position)
· Line Item Detail
· Revenue Detail
· Interagency Services
2:53:54 PM
Ms. Sanders indicated that the governor's Detail Budget
Books were referred to as "Black Books." She addressed
slide 21: "Personal Services Expenditure Detail: Department
of Commerce, Community and Economic Development." The slide
contained the sample of a Personal Services Expenditure
Detail page. She explained that the department included the
information for each position including the total salary
and every single position for an entire year. The total
cost for the year before applying any vacancy factor was
$6.8 million. She referred to a white paper titled
"Positions, Vacancy, And Legislative Control" included in
the packets (copy on file). She related that included in
the legislature's appropriation authority it had the power
to fund at whatever level desired. The executive branch had
the authority over positions. The governor's office
ultimately established positions. Each agency was assigned
a vacancy factor through OMB. She exemplified that on the
sample page for DCCED the vacancy factor was 8.45 percent
or $572 thousand. The department was underfunded and had to
either keep positions vacant or meet the unfunded amount
through attrition and turnover.
Ms. Sanders stated that departments had to maintain the
vacancies throughout the year or leave positions vacant for
a long period of time to meet the short funding.
2:58:25 PM
Representative Wilson wondered why the vacancy factor
method was used versus just including a blanket
appropriation for personnel costs. Ms. Sanders answered
that in a small agency personnel costs were more stable and
known and the vacancy factor was low or zero. However, in a
large agency, a reasonable vacancy rate needed to be
determined.
Ms. Sanders clarified that the zeros shown on slide 21
actually denoted deleted positions.
Representative Wilson asked how a legislator could
determine whether a position was vacant. Mr. Teal replied
that the slide did not show what position was vacant and
what was filled. The detail page reported the costs if
every position was filled. The figure of $6.7 million
(total pre-vacancy number on the slide) was the total of
all positions. The department received $6.2 million and had
to hold roughly 6 positions open all of the time. He
restated Representative Wilson's question that asked why
the positions were simply not deleted. He detailed that
over the years the legislature demonstrated much interest
in position counts but had no control over the positions.
Therefore, OMB became highly sensitive to the number of
positions departments maintained and made it difficult to
create new positions. The agencies responded by attempting
to hold on to the positions because it was easier to use a
vacant PCN (position control number) than it was to
establish a new one. He emphasized that the legislature did
not control the number of positions agencies maintained; it
only controlled the funding.
3:03:34 PM
Representative Gattis asked whether there was a way to
freeze step increases. Mr. Teal believed steps were
bargained. He observed that if a step wasn't approved an
employee could dispute it. He recounted that the
legislature was not funding the steps. An agency could
report a position at a K step but the job could be vacant
or may be hired as an A step. It was hard to say what an
agency would present to the legislature - they all did it
differently. The vacancy factor was "backed into" and
"fairly meaningless."
Co-Chair Thompson believed it was the legislature's
responsibility to question a vacancy that was held open for
two to three years.
Mr. Teal agreed. However, on the other hand, if one of the
vacant positions was eliminated it would reduce the number
of positions and the vacancy factor and leave the
appropriated amount "exactly where it was." He stated that
the action would be "chasing smoke." The position was not
filled; the money was not being spent, because the money
was not being paid.
Mr. Ecklund added that vacancy was an important thing to
look at because departments used the funding for other
things. He reiterated that "at a high level the legislature
did not control PCNs and they were a creature of the
executive branch." The legislature had tried to eliminate a
PCN in the past and it did not happen.
Mr. Teal emphasized that the scrutiny the legislature gave
to positions helped everyone stay honest. He discussed an
available report of actuals that revealed actual personal
services money. He voiced that "theoretically," the
legislature wanted the agency to turn in a budget request
showing exactly where it would spend its money. He declared
that the situation made it difficult to determine whether a
budget request was real.
Ms. Sanders offered slide 22:
Personal Services:
Informational Paper 16-3 Positions, Vacancy Factors
and Legislative Control - includes information
regarding:
· Governor's authority to create and appoint
positions within the Executive Branch
· Legislative control over positions
· Funding positions authorized by the legislature
· Transfers to and from the Personal Services line
· Vacancy factor
3:10:20 PM
Mr. Ecklund noted that the informational paper listed on
slide 22 provided much more information.
Co-Chair Thompson urged subcommittee members to ask
agencies for truthful reporting.
Mr. Ecklund read from a note that the legislature never
fully funded position costs and that vacancy factors were
always used.
Representative Gara indicated that initially he had a
difficult time grasping the concept of vacancy factors. He
offered that departments justify the vacancy factor under
the premise that it allowed the agency to operate optimally
without costing the state extra money and provided
flexibility in hiring. He asked whether his statement was
correct.
Mr. Teal answered that he was partially correct. He
clarified that the PCN what was important. He explained
that PCNs could be reclassified from one position to
another.
Mr. Ecklund interjected that the situation was complicated
situation. He stated that the issue was
cloudier than it was clear. He relayed that Pat Pitney,
Director, Office of Management and Budget, Office of the
Governor had testified that between December 2014 and
December 2015 the state had 600 fewer employees not
including the university. He thought that the correct
figures were difficult to determine.
Co-Chair Neuman added that the subcommittees needed to
focus on the issue.
Representative Munoz returned to an earlier question about
step increases. She asked whether the increases were
renegotiated with each contract. Ms. Sanders answered that
step or merit increases were generally granted every one or
two years; the increases were not renegotiated. She
explained that the unions negotiated base salary and were
not scrutinizing the step increases. The increases were
part of the bargaining contract, but the negotiation
focused on the base increase. Representative Munoz
understood, but she referred to a comment made by Mr. Teal
that step increases were subject to the contract. Ms.
Sanders restated that the increases were part of the
contract.
Mr. Ecklund added that the contracts would be collectively
bargained with the units through the Department of
Administration (DOA). The department outlined or "put on
the table" the items up for negotiation. He reminded the
committee that the legislature only had an up or down vote
on the end product.
3:16:20 PM
Co-Chair Neuman relayed that he would invite DOA to the
committee to discuss how it negotiated contracts.
Co-Chair Thompson shared that the lower range employees at
range 5 to range 11 were dependent on step increase for
living expenses. He suggested that the higher range
employees were not as dependent on step increases but
cautioned that the very low range state employees did not
earn much.
Mr. Ecklund recounted that the step increases were not
specifically funded as an increment in the budget and were
expected to be absorbed by the agency through attrition or
turnover.
Representative Munoz asked whether exempt employees were
eligible for step increases. Mr. Teal replied in the
affirmative. He noted the one exception of commissioners
who were hired at an "E" step and did not receive step
increases. He added that all other employees from a deputy
commissioner on were eligible.
Mr. Ecklund related that a "fire hose" of budget
information was available. He attempted to provide the
information in a more "user friendly" manner. He offered to
answer future questions along with LFD.
Co-Chair Neuman noted that each of the subcommittees had a
LFD analyst assigned to assist them. He recommended
reviewing the presentation with the analyst.
Co-Chair Thompson reviewed the schedule for the following
day.
ADJOURNMENT
3:19:57 PM
The meeting was adjourned at 3:19 p.m.