Legislature(2013 - 2014)HOUSE FINANCE 519

01/22/2013 01:30 PM FINANCE

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01:32:24 PM Start
01:32:39 PM Fy 14 Governor's Budget Overview: University of Alaska
02:45:55 PM Overview of Federal Funds and Grants in Alaska, the Fiscal Cliff, Possible Impacts of the Budget Control Act (sequestration), and Future Outlook of Federal/state Relations by Trinity Tomsic, Executive Director, Ffis.
03:28:14 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: "Federal Funding Issues" by Trinity TELECONFERENCED
Tomsic, Deputy Executive Director, Federal Funds
Information for States (FFIS)
- Overview of federal funds and grants in Alaska,
the Fiscal Cliff, possible impacts of the Budget
Control Act (sequestration), and future outlook
of federal/state relations
Scheduled But Not Heard
Scheduled But Not Heard
Scheduled But Not Heard
(Introductions Only, No Public Testimony)
+ Governor's FY14 Budget Overview: TELECONFERENCED
- University of Alaska
HOUSE BILL NO. 65                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs,    capitalizing   funds,   amending                                                                    
     appropriations,   and   making  reappropriations;   and                                                                    
     providing for an effective date."                                                                                          
HOUSE BILL NO. 66                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
^FY 14 GOVERNOR'S BUDGET OVERVIEW: UNIVERSITY OF ALASKA                                                                       
1:32:39 PM                                                                                                                    
PATRICK GAMBLE, PRESIDENT,  UNIVERSITY OF ALASKA, introduced                                                                    
himself and  Michelle Rizk, who  was the budget  officer and                                                                    
the  acting director  of  the  university's human  resources                                                                    
department.  He provided  a budget  overview and  noted that                                                                    
the  subcommittee process  had not  yet begun.  He explained                                                                    
that he  would refer to  charts prepared by  the Legislative                                                                    
Finance Division (LFD).                                                                                                         
Mr.  Gamble presented  the "FY14  Budget Overview"  (copy on                                                                    
1:36:50 PM                                                                                                                    
Mr.  Gamble  began  with  slide  2:  "Many  Traditions,  One                                                                    
Alaska." He noted that the  University of Alaska had various                                                                    
campuses  located  around  the  state. He  stated  that  the                                                                    
organization  was  regrouping  after  a  significant  growth                                                                    
period. He added that the  reassessment of processes was the                                                                    
focus in 2013.                                                                                                                  
1:38:00 PM                                                                                                                    
Mr. Gamble discussed slide 3: "UA's Mission."                                                                                   
     The   University  of   Alaska  inspires   learning  and                                                                    
     advances and  disseminates knowledge  through teaching,                                                                    
     research,  and public  service,  emphasizing the  North                                                                    
     and its diverse peoples."                                                                                                  
1:39:31 PM                                                                                                                    
Mr. Gamble discussed slide 4: "Who Are We?"                                                                                     
   · 34,000 students; 15 nationalities                                                                                          
   · 3 urban campuses; thirteen community campuses;                                                                             
     numerous outreach centers                                                                                                  
   · More than 500 degrees                                                                                                      
   · 4,174 graduates (FY 12)                                                                                                    
Mr. Gamble discussed slide 5: "Core Competencies."                                                                              
   · Higher Education                                                                                                           
        o PhD                                                                                                                   
        o MA/MS                                                                                                                 
        o BA/BS                                                                                                                 
        o AA                                                                                                                    
   · Workforce Development                                                                                                      
        o Licenses                                                                                                              
        o Certificates                                                                                                          
        o Skilled Labor Training                                                                                                
        o Industry Partnerships                                                                                                 
   · Research and Development(R&D)                                                                                              
        o State needs                                                                                                           
        o Federal needs                                                                                                         
        o International needs                                                                                                   
        o Economic needs                                                                                                        
   · Cultural Priority and Integration                                                                                          
   · Community Partners                                                                                                         
Mr.  Gamble  voiced  that college  graduates  were  in  high                                                                    
demand. He  mentioned conversations  with Exxon  and Alyeska                                                                    
who   expressed  interest   in  university   graduates.  The                                                                    
university provided industry with  the highest single source                                                                    
of  engineers. He  mentioned projections  of  growth in  the                                                                    
health care industry  over the next three to  four years. He                                                                    
added  that new  mining  opportunities provided  significant                                                                    
Mr. Gamble  pointed out industry  partnerships and  the need                                                                    
to  share the  burden of  training workers  that add  to the                                                                    
industry's benefit.                                                                                                             
1:42:34 PM                                                                                                                    
Vice-Chair Neuman asked  about duplicate programs throughout                                                                    
the  state.   He  wondered   about  the   university's  role                                                                    
regarding efficiencies in education  programs. He recalled a                                                                    
controversial  nursing  program  at  the  Alaska  Vocational                                                                    
Technical   Center  (AVTEC).   He   expressed  interest   in                                                                    
streamlining  and providing  efficiencies. He  asked if  the                                                                    
duplication of effort was inefficient.                                                                                          
Mr. Gamble  agreed that the state  and university duplicated                                                                    
workforce  training.  The  duplication was  a  problem  that                                                                    
could be  avoided. He clarified  that the  university's core                                                                    
competency  graduated four-year  nurses  and most  hospitals                                                                    
would  hire   nurses  with  a  four-year   degree  only.  He                                                                    
advocated for  a division of  courses between the  state and                                                                    
the university.                                                                                                                 
1:45:32 PM                                                                                                                    
Mr. Gamble  discussed sequestering  and the fact  that fewer                                                                    
universities would  receive federal dollars. He  stated that                                                                    
the arctic and circumpolar  north were important areas where                                                                    
the university  was primed  for success.  He added  that the                                                                    
cultural  priority   and  integration  of   native  learning                                                                    
methods  was important.  The  university  worked to  provide                                                                    
relevant  information  to  all cultures.  He  mentioned  the                                                                    
outreach in  the forms of agricultural  extension, which was                                                                    
a large statewide focus.                                                                                                        
1:47:46 PM                                                                                                                    
Representative Costello asked about the Fisher report.                                                                          
Mr. Gamble  responded that the  Fisher report  was addressed                                                                    
in  the Strategic  Directive  Initiative  (SDI). The  Fisher                                                                    
report  contained  approximately  80 write-ups,  which  were                                                                    
considered   in    SDI.   He   offered   to    address   the                                                                    
recommendations  during the  subcommittee process.  He noted                                                                    
that the Fisher report preceded  the recognition of the need                                                                    
for SDI.                                                                                                                        
Mr.   Gamble  addressed   slide  6:   "FY  12   Report  Card                                                                    
Performance   Review"  and   the  flat   performance  review                                                                    
exhibited. The  diversity was present for  numbers and types                                                                    
of  degrees. He  added  that the  chart  indicated that  the                                                                    
growth years  were over. The  demands of job growth  must be                                                                    
met, hence growth at the university must continue.                                                                              
1:51:22 PM                                                                                                                    
Mr.  Gamble mentioned  the  revolution  occurring in  higher                                                                    
education.   The  recognition   of  the   poor  returns   on                                                                    
investment, skyrocketing  tuition, high fixed costs  and low                                                                    
student  performance and  graduation existed  on a  national                                                                    
level. He appreciated the support  of the legislature, since                                                                    
other states  were forced to  operate without  such support.                                                                    
He  stated that  the university  was working  hard to  solve                                                                    
their problems.                                                                                                                 
Representative Gara  asked about live courses  versus online                                                                    
1:54:21 PM                                                                                                                    
Mr.  Gamble  explained  that   the  classroom  described  by                                                                    
Representative  Gara  was  known  as a  "mixed  class."  The                                                                    
university   offered  mixed   classes,  utilizing   multiple                                                                    
screens with presenters from various  areas. The goal was to                                                                    
equip  more  classrooms  with the  necessary  equipment.  He                                                                    
lamented  that  the  track  record   was  poor  because  the                                                                    
equipment required  modernization and  the funding  for that                                                                    
was  not  approved.  He  stated the  goal  of  expanding  e-                                                                    
learning. He  noted that the bandwidth  limitation presented                                                                    
challenges, especially in rural areas.                                                                                          
Representative Gara  pointed out that engineering,  math and                                                                    
science required higher education,  but liberal arts classes                                                                    
also proved  important in  teaching problem  solving skills.                                                                    
He wondered about  the importance placed on  liberal arts at                                                                    
the university.                                                                                                                 
Mr.  Gamble  replied that  critical  thinking  was the  most                                                                    
important  product  provided  to a  university  student.  He                                                                    
added that  a broad liberal  arts demand existed  across the                                                                    
2:00:06 PM                                                                                                                    
Representative  Costello  asked   about  the  percentage  of                                                                    
incoming  students  who  were  obligated  to  take  remedial                                                                    
courses. She asked if the  percentage had changed since last                                                                    
Mr. Gamble  replied 57  to 60  percent of  incoming students                                                                    
took  remedial  courses.  He  stated  that  the  number  had                                                                    
increased slightly, but was leveling  as demographics in the                                                                    
state were leveling.  He explained that one goal  of SDI was                                                                    
to remedy  the issue. The  university wished to  obviate the                                                                    
need for remediation.                                                                                                           
Representative  Costello  asked  if  the  university  should                                                                    
direct attention to primary  education and its deficiencies.                                                                    
She opined that  the need for remediation was  an issue that                                                                    
began earlier than high school.  She mentioned that children                                                                    
were most  successful when they  had learned to  read before                                                                    
entering the third grade.                                                                                                       
Mr. Gamble  responded that  reading and  especially critical                                                                    
thinking  was  important.  Critical  thinking  required  the                                                                    
basics of reading.                                                                                                              
2:02:33 PM                                                                                                                    
Mr. Gamble addressed slide 7: "Challenges."                                                                                     
   · State Funding support - trending down                                                                                      
   · Restrictions on internal budget reallocations                                                                              
   · Huge and aging facility complex                                                                                            
   · Enrollment - leveling out                                                                                                  
   · Matching degrees and training to workforce needs                                                                           
   · Health care costs - unsustainable                                                                                          
   · Bandwidth limitations - rural student impact                                                                               
Mr.  Gamble  discussed  slide 8:  "Meeting  UA's  Challenges                                                                    
Strategic Direction Initiative (SDI)."                                                                                          
   · Focus on Student Achievement                                                                                               
   · Asking "Why…?"                                                                                                             
        o Credit transfer - common complaint                                                                                    
       o Students service - "hassle factor" too high                                                                            
       o Limits to e-Learning - rural impact growing                                                                            
        o Tuition can't keep up with cost of doing business                                                                     
   · Placing Emphasis Across UA System                                                                                          
        o Value                                                                                                                 
        o Quality                                                                                                               
        o Throughput                                                                                                            
        o Excellence                                                                                                            
        o Attainment                                                                                                            
        o 3 critical years                                                                                                      
   · Incorporate lessons learned - studies, reports                                                                             
Mr.   Gamble   elaborated   that  the   university   was   a                                                                    
bureaucracy.  The  goal  of  SDI was  to  create  a  service                                                                    
organization.  He  stated  "we  are all  in  the  university                                                                    
business,  but  the  business  of   the  university  was  to                                                                    
graduate  students,  maintain  high standards  and  pay  the                                                                    
bills." The  burden of the  business should not fall  on the                                                                    
students.  Service was  deemed  important and  bureaucracies                                                                    
were not known for service. He  added that the cost of books                                                                    
was considerable.                                                                                                               
Mr. Gamble  noted that many  of the concerns  were expressed                                                                    
via student  surveys and the  question of why things  do not                                                                    
change was valid.  He explained that the purpose  of SDI was                                                                    
to  evaluate   the  reasons   for  the   various  university                                                                    
practices. He  believed that change required  the courage to                                                                    
act  on the  suggestions provided.  The emphasis  across the                                                                    
system was for  a value-added organization. He  spoke to the                                                                    
transition  period between  high  school  and college  where                                                                    
students required  the most help. The  university had master                                                                    
plans included in the accreditation process.                                                                                    
2:07:58 PM                                                                                                                    
Mr.  Gamble  discussed  slide   9:  "Major  SDI  Initiatives                                                                    
Underway Since Last Year."                                                                                                      
   · Improved Student Services                                                                                                  
        o MAP - Works                                                                                                           
        o UAS Honors Program                                                                                                    
        o UAA VetSuccess                                                                                                        
        o Stay on TRACK                                                                                                         
        o Educational opportunities in rural Alaska                                                                             
   · Partnerships K-12                                                                                                          
        o School Board dialogues with DEED                                                                                      
        o Alaska Middle College                                                                                                 
        o Cordova Campus relocated to Cordova High School                                                                       
2:10:49 PM                                                                                                                    
Mr.  Gamble  discussed  slide  10:  "Major  SDI  Initiatives                                                                    
Underway Since Last Year."                                                                                                      
   · Public Private Partnerships                                                                                                
        o UAS Center for Mine Training (CMT) has been                                                                           
        o UAF Sustainable Village                                                                                               
        o Dillingham nursing students trained and hired                                                                         
        o FSMI - Fisheries, Seafood, Maritime Initiative                                                                        
        o P3 Dining Facility                                                                                                    
   · Increased Alaska-Related Grant Funded Research                                                                             
        o Alaska adapting to changing environments                                                                              
        o Alaska Native health research                                                                                         
   · Program Review                                                                                                             
        o Common Courses                                                                                                        
        o Common Cut Scores                                                                                                     
Mr. Gamble continued with slide 11: "FY 14 Budget Request."                                                                     
     · Supporting SDI Themes                                                                                                    
        o Student Achievement and Attainment                                                                                    
        o Productive Partnerships with Alaska's Schools                                                                         
        o Productive Partnerships with Alaska's Public                                                                          
          Entities and Private Industries                                                                                       
        o R&D to Sustain Alaska's Communities and Economic                                                                      
        o Accountability to the People of Alaska                                                                                
Mr. Gamble  spoke about program  review. He planned  to have                                                                    
an in-depth  discussion during the subcommittee  process. He                                                                    
stated that many of the  classes were reviewed. He mentioned                                                                    
that  the  themes  listed above  were  integrated  into  the                                                                    
budget work.                                                                                                                    
2:13:52 PM                                                                                                                    
Mr. Gamble  discussed slide 12:  "Governor's Proposed  FY 14                                                                    
Operating Budget."  He pointed out the  state appropriations                                                                    
at  2.9  percent.  Compensation   increase  listed  as  $7.6                                                                    
million,   were    essentially   2.9   percent.    The   new                                                                    
facility/additions  estimated  operating  costs was  for  GO                                                                    
bond and legislative funded new initiatives.                                                                                    
Mr. Gamble discussed slide 13: "Deferred Maintenance."                                                                          
   · Bottom Line                                                                                                                
        o UA seriously needs a programmatic solution to                                                                         
          acquiring   annual   funds   for   real   property                                                                    
          maintenance, R&R  and DM reduction. Going  back to                                                                    
          the well each  year is clearly not  working in the                                                                    
          state's best financial interest.                                                                                      
2:16:44 PM                                                                                                                    
Mr.  Gamble  continued with  slide  14  and the  "Governor's                                                                    
Proposed  FY 14  Capital  Budget."  The governor's  proposed                                                                    
budget consisted  of $37.5  million, which  was appropriated                                                                    
for  the fourth  year with  the purpose  of buying  down the                                                                    
cost of deferred maintenance. The  receipt authority was for                                                                    
the "Sustainable Village Phase 2-4."                                                                                            
Mr. Gamble  skipped to slide 18:  "Sustainment Funding Model                                                                    
for UA  Facilities." He  noted that  the university  was the                                                                    
largest real property  owner in the state.  He described the                                                                    
chart,  the red  line  indicating  the deferred  maintenance                                                                    
backlog  with no  additional funding  beyond the  governor's                                                                    
five  year  plan.  He  mentioned  the  deferred  maintenance                                                                    
reductions displayed  by the green lines.  He explained that                                                                    
the curve  increased, which indicated that  (red line) would                                                                    
occur  without  additional  funding from  the  governor.  He                                                                    
noted that  FY 14 and FY  15 illustrated the descent  of the                                                                    
third green line. He described  the relationship between the                                                                    
various needs of the university.                                                                                                
2:22:53 PM                                                                                                                    
Mr.  Gamble  discussed   slide  13:  "Deferred  Maintenance,                                                                    
Bottom Line."                                                                                                                   
     UA   seriously  needs   a   programmatic  solution   to                                                                    
     acquiring annual  funds for real  property maintenance,                                                                    
     R&R and DM education. Going  back to the well each year                                                                    
     is clearly  not working  in the state's  best financial                                                                    
2:25:33 PM                                                                                                                    
Mr. Gamble  discussed slice 16:  "Federal Agencies  Seek Out                                                                    
UA Research."                                                                                                                   
   · $133 million external research funding                                                                                     
   · Growing recognition that Alaska should have more                                                                           
     involvement in circumpolar research questions and                                                                          
   · To be competitive complimentary Alaska funding for                                                                         
     research is needed                                                                                                         
2:28:44 PM                                                                                                                    
Mr. Gamble discussed slide 19  "University of Alaska's Share                                                                    
of Total Agency Operations," prepared  by LFD. He noted that                                                                    
the graphs  were valuable for illustrating  trends that lead                                                                    
to various issues. These graphs  provided general trends and                                                                    
the general trend lines were  in the positive direction. The                                                                    
growth  rate was  approximately 4.8  percent. He  added that                                                                    
the  percentage  would  change  if  the  state  contribution                                                                    
changed, which would be out  of the university's control. He                                                                    
pointed out that slide 20  was simply another way of viewing                                                                    
slide 19.                                                                                                                       
Mr.  Gamble   discussed  slide  21:  University   of  Alaska                                                                    
Unrestricted  General  Fund   (UGF)  Increases  Compared  to                                                                    
Designated General  Fund (DGF) Increases ($  Thousands). The                                                                    
House Finance Committee (HFC) proposed  a goal of reaching a                                                                    
ratio of $1.25  university to $1 state match  in revenue. In                                                                    
the process of  reaching the ratio, the  HFC recommended the                                                                    
goal of a 1 to 1  ratio. Slide 21 addressed the request/goal                                                                    
over the last several years.  He noted the volatility of the                                                                    
chart,  but highlighted  that the  trend was  good and  last                                                                    
year  the university  exceeded the  1 to  1 ratio.  He noted                                                                    
that if the university charged  the same tuition as they had                                                                    
last year, $6  million dollars could be added to  the FY DGF                                                                    
of  $8,081,000. The  university  made the  decision to  hold                                                                    
tuition to 2 percent.                                                                                                           
2:32:02 PM                                                                                                                    
Mr. Gamble  continued to discuss  slide 21.  The chancellors                                                                    
made  a  decision that  the  university  would remain  at  2                                                                    
percent through  efficiencies. He  had issued a  4.8 percent                                                                    
cut  across his  staff,  which amounted  to  $2 million.  He                                                                    
stressed  that the  university was  working  hard no  matter                                                                    
what the formula was and the results were good.                                                                                 
Mr. Gamble moved  to slide 22, which  illustrated a lookback                                                                    
for the  past 10 years. It  was not possible to  sustain 4.8                                                                    
percent  annual  growth that  far  into  the future  without                                                                    
initiatives. He pointed  out the break in  the graph's curve                                                                    
between FY  13 and  FY 14 where  the flattening  process was                                                                    
visible.  He furthered  that the  budget was  largely paying                                                                    
benefits. He  worried about national  health care  costs, as                                                                    
they might  present difficulty. He briefly  pointed to slide                                                                    
23, which provided another version of the theme.                                                                                
2:35:28 PM                                                                                                                    
Representative Wilson asked about  the K-12 tracking system.                                                                    
She wondered  whether the university  was able  to determine                                                                    
and track deficiencies.                                                                                                         
Mr. Gamble  replied that the  university received  a federal                                                                    
grant  and  was working  with  Department  of Education  and                                                                    
Early Development on a project  known as "P/20W" or "SLEDS."                                                                    
The grant  provided the opportunity to  gather the requested                                                                    
data  on  high  school  deficiencies.  The  "data  pipeline"                                                                    
extended from  a data source  prior to college to  allow for                                                                    
the  tracking  of  student  records.   It  was  possible  to                                                                    
populate the database with  many different options. Students                                                                    
were  then offered  remediation or  scholarships. He  stated                                                                    
that  the full  populated  and federally  approved data  set                                                                    
would  be provided  as a  result of  the grant  funding. The                                                                    
state   had   requirements   that  would   allow   for   the                                                                    
Representative Wilson requested a time frame.                                                                                   
Mr. Gamble replied  that the data was  prepared for loading.                                                                    
He stated that  the data would be  available for assumptions                                                                    
if the stipulations of the federal grant were met.                                                                              
2:39:23 PM                                                                                                                    
Representative  Thompson asked  about the  out migration  of                                                                    
jobs,  from  Fairbanks  to  Anchorage.  The  migration  left                                                                    
vacant  space in  the Butrovich  building.  He requested  an                                                                    
Mr. Gamble replied  that Fairbanks was a  difficult place to                                                                    
live. He  stated that a premium  must be paid to  get people                                                                    
to live  in Fairbanks. He  pointed out that the  staff count                                                                    
remained  level in  all  categories. He  added  that he  had                                                                    
great  staff in  Anchorage,  who preferred  not  to live  in                                                                    
Fairbanks.  He agreed  that it  would be  more efficient  to                                                                    
have  the entire  staff  in Fairbanks.  He  stated that  the                                                                    
video  teleconferencing   capabilities  had   provided  some                                                                    
relief,  but travel  from Anchorage  to  Fairbanks was  less                                                                    
than efficient.                                                                                                                 
Representative  Guttenberg  commented  that  each  community                                                                    
provides unique benefits.                                                                                                       
Mr.  Gamble  responded that  his  key  staff was  living  in                                                                    
Fairbanks and they loved it.                                                                                                    
Representative Munoz  announced the  university subcommittee                                                                    
2:45:29 PM                                                                                                                    
^OVERVIEW OF FEDERAL FUNDS AND  GRANTS IN ALASKA, THE FISCAL                                                                  
CLIFF,   POSSIBLE  IMPACTS   OF  THE   BUDGET  CONTROL   ACT                                                                  
(SEQUESTRATION),   AND  FUTURE   OUTLOOK  OF   FEDERAL/STATE                                                                  
RELATIONS BY TRINITY TOMSIC, EXECUTIVE DIRECTOR, FFIS.                                                                        
2:45:55 PM                                                                                                                    
TRINITY  TOMSIC, DEPUTY  EXECUTIVE  DIRECTOR, FEDERAL  FUNDS                                                                    
INFORMATION  FOR  STATES   (FFIS),  presented  "The  Federal                                                                    
Budget and Alaska"  (copy on file). She  explained that FFIS                                                                    
was a small organization with  five members that worked with                                                                    
all   states'  executive   and  legislative   branches.  The                                                                    
organization provided  federal level fiscal  information and                                                                    
predicted the potential fiscal impact.                                                                                          
Ms. Tomsic discussed slide 2:  "Where the money goes: Pieces                                                                    
of the federal  budget pie." She described  the chart, which                                                                    
showed that  the federal government  spent $3.6  trillion in                                                                    
FY  11  in  total.  More  than  half  of  the  spending  was                                                                    
considered "mandatory."  Mandatory spending  included Social                                                                    
Security,  Medicare, Medicaid  and  other  programs such  as                                                                    
nutrition  and farm  programs and  retirement benefits.  The                                                                    
mandatory  expenses  were  outside  of  the  regular  budget                                                                    
discussions  or  appropriation  process.  The  appropriation                                                                    
process  covered the  discretionary  aspect  of the  budget,                                                                    
which  included domestic  discretionary  and defense,  which                                                                    
amounted to  less than half  of the budget. She  pointed out                                                                    
that FY  11 saw  a federal budget  deficit of  1.5 trillion.                                                                    
The deficit  would exist with  the exclusion of  defense and                                                                    
domestic discretionary spending.                                                                                                
2:49:50 PM                                                                                                                    
Ms. Tomsic continued with slide  3: "Payments to individuals                                                                    
have   come  to   dominate   federal   grants."  The   chart                                                                    
illustrated federal outlays for state  and local grants as a                                                                    
share of total federal outlays.                                                                                                 
Co-Chair Stoltze asked about debt  service and the pie-chart                                                                    
on slide 2.                                                                                                                     
Ms. Tomsic  responded that the debt  service was illustrated                                                                    
in the "net interest" slice of the pie.                                                                                         
Ms.  Tomsic continued  with slide  4: "What  program's areas                                                                    
are supported by state/local grants?"  Of the $3.6 trillion,                                                                    
approximately $600 billion was  allocated to state and local                                                                    
governments  in the  form of  grants.  States also  received                                                                    
benefits  from  Social   Security  payments,  Medicare,  and                                                                    
defense.  Slide 4  detailed only  the grants  for state  and                                                                    
local  government.  Grants  represented 18  percent  of  the                                                                    
federal budget. The chart divided  the types of grants going                                                                    
to state  and local  governments. Medicaid  increased, while                                                                    
the  other categories  decreased. Capital  or transportation                                                                    
was declining.                                                                                                                  
Ms. Tomsic continued with slide  5: "Federal grants going to                                                                    
Alaska: share  of funding by  function." She  explained that                                                                    
the  chart was  broken down  by budget  function. The  chart                                                                    
compared  Alaska to  the national  average.  She noted  that                                                                    
state transportation,  mineral leasing and  national forests                                                                    
incurred greater  grant funding  than the  national average.                                                                    
Fish  and wildlife  federal programs  were also  higher than                                                                    
the  national  average.  Health  and  income  security  were                                                                    
charted below the national average.                                                                                             
2:54:04 PM                                                                                                                    
Ms. Tomsic  referred to  slide 6:  "Federal grants  going to                                                                    
Alaska: per capita, 2011." She  explained that Alaska ranked                                                                    
10 with  $1041 per  person in Medicaid  funds. Discretionary                                                                    
was ranked  number 1 with  $1812 per person. The  total rank                                                                    
was approximately twice the national average.                                                                                   
Ms.  Tomsic  discussed  slide   7:  "What  influences  grant                                                                    
   · Medicaid redistributes income from:                                                                                        
        o richer to poorer states                                                                                               
        o smaller to larger programs                                                                                            
        o cheaper to more expensive programs                                                                                    
        o Alaska receives $1041 per capita in federal                                                                           
          Medicaid funding and ranks number 10; FMAP =                                                                          
          50.00 percent                                                                                                         
   · Many programs allocate funds based on need                                                                                 
        o Alaska is a relatively wealthy state (high per                                                                        
          capita income and low poverty rate)                                                                                   
        o Alaska benefits from grant programs with small-                                                                       
          state minimums                                                                                                        
Representative Edgmon noted that  23 percent of fund sources                                                                    
were  from  the  overall  budget  and  Alaska  was  "federal                                                                    
government  driven." He  believed that  much of  the federal                                                                    
funding did not go through the state budget process.                                                                            
Ms. Tomsic responded  that the grants were the  focus of the                                                                    
previous  slide.  She agreed  that  the  defense budget  was                                                                    
greater and added to the money flowing through the state.                                                                       
Representative  Edgmon understood  the trend  in Alaska  for                                                                    
federal funding to remain static.                                                                                               
2:56:44 PM                                                                                                                    
Ms.  Tomsic stated  that the  discretionary grants  showed a                                                                    
slight decline over time, but  mandatory spending was driven                                                                    
by  caseloads.  As  caseloads   increased,  an  increase  in                                                                    
funding in food stamps and Medicaid occurred.                                                                                   
Representative Guttenberg asked for  a breakdown of cost for                                                                    
service. He wondered  if the cost of  delivering service was                                                                    
Ms.  Tomsic did  not have  a cost-of-service  breakdown. She                                                                    
provided  data related  to the  Medicaid dollars  flowing to                                                                    
Alaska on a per capita basis.                                                                                                   
Ms. Tomsic responded that the  intention of the presentation                                                                    
was  to  provide  a  quick  overview.  She  noted  that  the                                                                    
matching rate for Medicaid was 50 percent.                                                                                      
Ms.  Tomsic  referred to  slide  8:  "What influences  grant                                                                    
   · Demographics                                                                                                               
        o 26 percent of Alaska's population is under 18                                                                         
          (above average) and 8 percent is 65 or older                                                                          
          (below average)                                                                                                       
        o Alaska has experienced a slight increase in its                                                                       
          share of total population since 2000                                                                                  
   · Federal facilities/land                                                                                                    
        o Large federal presence in Alaska                                                                                      
        o Alaska benefits from programs with formulas based                                                                     
          on receipts from federal land                                                                                         
             ƒBLM's Payments in Lieu of Taxes, Mineral                                                                         
               Leasing Payments, Impact Aid                                                                                     
2:59:50 PM                                                                                                                    
Ms. Tomsic discussed slide 9: "What's the outlook in FY 1                                                                       
and beyond?"                                                                                                                    
   · Budget Control Act (BCA) sequester                                                                                         
   · FY 2013 appropriations                                                                                                     
       o Continuing Resolution (CR) expires 3/27/13                                                                             
        o State/local programs disproportionately targeted                                                                      
          for spending cuts since 2010                                                                                          
   · Comprehensive deficit reduction                                                                                            
        o Medicaid reform; cost-shift to states?                                                                                
        o Further cuts in discretionary spending                                                                                
        o Trade-off: more certainty, less funding                                                                               
3:01:45 PM                                                                                                                    
Ms.  Tomsic referred  to slide  10: "Discretionary  spending                                                                    
has been  on the decline:" The  chart detailed discretionary                                                                    
spending  as  red  bars,  which  decreased  over  time.  The                                                                    
mandatory spending saw a slight increase.                                                                                       
Ms. Tomsic discussed slide 11: "The BCA and Looming                                                                             
   · Sequester scheduled to occur on March 1, 2013                                                                              
   · $984 billion in cuts required over FYs 2013-2021                                                                           
     (roughly $109 billion per year, half from defense and                                                                      
     half from nondefense)                                                                                                      
        o "Fix" reduced FY 2013 cuts from $109b to $85b                                                                         
   · Many mandatory and few discretionary programs are                                                                          
     exempt (special rule for special/trust funds)                                                                              
   · ATB in FY 2013, different process for FY 2014+                                                                             
Ms. Tomsic stated that  Medicaid, transportation funding and                                                                    
other   mandatory   programs   that   benefit   low   income                                                                    
individuals  were all  exempt from  sequester. Much  federal                                                                    
funding  was  subject  to  a  "special  rule"  stating  that                                                                    
programs  subject  to sequester  would  get  the money  back                                                                    
Co-Chair Austerman  asked if the $984  billion included cuts                                                                    
to the base or to future growth.                                                                                                
Ms.  Tomsic  responded  future growth.  She  clarified  that                                                                    
every year  approximately $109  billion would  be cut  for a                                                                    
period of  ten years. She  noted that the base  assumed some                                                                    
growth over time.  She pointed out the  different process in                                                                    
2013,  where  every  program   subject  to  sequester  would                                                                    
receive   an   across-the-board   cut.  In   future   years,                                                                    
discretionary  programs   would  be   subject  to   a  lower                                                                    
reduction  in  the  discretionary spending  limits,  meaning                                                                    
that congress would determine which programs were reduced.                                                                      
Ms.  Tomsic  referred   to  slide  12:  "FAQs   on  the  BCA                                                                    
   1. What is the ATB percentage cut?                                                                                           
        a. FFIS estimates -5.9 percent for nondefense                                                                           
          discretionary (was -8.2 percent) and -5.7 percent                                                                     
          for nondefense mandatory (was -7.6 percent)                                                                           
        b. Exact percentage won't be known until march 2013                                                                     
   2. How will individual programs be affected?                                                                                 
        a. ATB cut applied to FY 2013 funding in place on                                                                       
          3/1/13 (CR?)                                                                                                          
        b. Cuts must be applied to each program, project,                                                                       
          and activity                                                                                                          
        c. OMB has authority to apply special rules,                                                                            
   3. What is the timing of the cuts?                                                                                           
        a. Agencies have some discretion                                                                                        
        b. Reflected in grant awards issued after March 1,                                                                      
3:07:05 PM                                                                                                                    
Representative   Holmes   understood    that   the   federal                                                                    
government would be  six months into their  fiscal year when                                                                    
they would be asked to make the cuts.                                                                                           
Ms. Tomsic responded  that the federal fiscal  year began in                                                                    
October,   but   circumstances   for  the   sequester   were                                                                    
different. She  explained that agencies had  some discretion                                                                    
regarding  the  timing  of  the  cuts.  States  had  already                                                                    
received grant awards for 2013.  Most of the cuts would come                                                                    
in the second  half of the fiscal year.  Some agencies, such                                                                    
as  education  preferred  that  school  districts  were  not                                                                    
worried  about this  school year.  Much of  the funding  was                                                                    
advance  funding, which  would  occur the  July -  September                                                                    
quarter. She expected  the preferences to vary  on a program                                                                    
by program  basis. The continuing  resolution was  funded on                                                                    
an  FY 12  level plus  a slight  adjustment for  across-the-                                                                    
board increases  in FY 13  included in CR, which  would mean                                                                    
new annualized levels for those programs.                                                                                       
Representative Holmes  opined that  the process  would prove                                                                    
interesting  for  this  legislature as  various  departments                                                                    
unveiled their plans.                                                                                                           
3:09:46 PM                                                                                                                    
Ms. Tomsic continued with slide  13: "While most state grant                                                                    
programs  are subject  to sequester…"  She explained  that a                                                                    
program subject to  a sequester would absorb  the costs. The                                                                    
Office of  Management and Budget  (OMB) would decide  how to                                                                    
apply or interpret the special rules and exemptions.                                                                            
Ms. Tomsic moved on to  slide 14: "Most Alaska grant funding                                                                    
is exempt."  She noted that  the data base had  216 programs                                                                    
and 165 were  covered by sequester (76  percent). Most grant                                                                    
funding  for  Alaska  was exempt  from  sequester.  Only  24                                                                    
percent  of  federal  funding  in   Alaska  was  subject  to                                                                    
Ms.  Tomsic  discussed  slide 15:  "Some  program  areas  in                                                                    
Alaska are  more affected than  others." The  chart observed                                                                    
the funding for  Alaska by budget function  to determine how                                                                    
much of the funding was  subject to sequester. Programs such                                                                    
as   agriculture,   employment   and   training,   community                                                                    
development,    justice,   energy,    environment,   natural                                                                    
resources,  and general  government had  100 percent  of the                                                                    
funding subject  to sequester. She mentioned  that education                                                                    
showed 87 percent  of funding covered by  sequester, but she                                                                    
added  that Pell  grants were  not tracked.  She noted  that                                                                    
only  6  percent  of  the  health  program  was  subject  to                                                                    
sequester,  although Medicaid,  children's health  insurance                                                                    
program  and  vaccines  for children  remained  exempt  from                                                                    
sequester.  The remainders  of  the  public health  programs                                                                    
were subject to sequester.  Transportation was the lowest at                                                                    
3 percent.                                                                                                                      
3:13:46 PM                                                                                                                    
Ms. Tomsic  continued with slide  16: "Among the  10 largest                                                                    
grants  in  Alaska,  7  are  totally  exempt."  Only  a  few                                                                    
programs were subject to sequester.                                                                                             
3:15:23 PM                                                                                                                    
Representative Edgmon asked if  the database allowed for the                                                                    
understanding of federally recognized tribes.                                                                                   
Ms.  Tomsic apologized  that the  federal fund  tracking was                                                                    
not well documented for tribal entities.                                                                                        
Representative Edgmon  wondered how Alaska would  compare to                                                                    
other states with large Native American populations.                                                                            
Ms.  Tomsic appreciated  the comment,  as the  need for  the                                                                    
data was valid.                                                                                                                 
Ms. Tomsic  continued with slide 17:  "The largest nonexempt                                                                    
grants  in Alaska  mostly  benefit  local governments."  She                                                                    
noted   that   most   non-exempt  grants   benefited   local                                                                    
governments. Examples  were impact aid,  consolidated health                                                                    
centers, Title  one, special education, etc.  She noted that                                                                    
mineral  leasing,  and  the  fish   and  wildlife  fish  and                                                                    
wildlife restoration  programs were subject to  the "special                                                                    
rule," meaning  that the state  should "get back"  any funds                                                                    
that were sequestered in the fiscal year.                                                                                       
3:17:24 PM                                                                                                                    
Ms. Tomsic discussed slide 18:  "Potential impact of amended                                                                    
sequester  in   Alaska."  She   explained  that   the  chart                                                                    
separated covered programs from  those that were exempt. She                                                                    
noted that  Alaska received $637 million  for those programs                                                                    
that were subject to sequester.  The estimation was that the                                                                    
difference  would   be  $18  million.  For   the  exempt  or                                                                    
mandatory programs,  funding would increase by  $77 million,                                                                    
which  was driven  by Medicaid  and food  stamp programs  as                                                                    
they  were  experiencing  growth.  Overall,  a  $59  million                                                                    
increase was expected for 2013.                                                                                                 
Ms.  Tomsic recommended  comparing the  covered program  for                                                                    
2013  under  CR  because  transportation  programs  recently                                                                    
underwent  a  reauthorization   and  the  structure  changed                                                                    
dramatically. Funding was  apparent in 2013 that  was not in                                                                    
2012 and was  subject to sequester. If  congress tackled the                                                                    
comprehensive deficit  reduction, the changes would  lead to                                                                    
between $18  million or  $37 million  cut with  sequester in                                                                    
2013.  She mentioned  that Medicaid  proposals  were on  the                                                                    
table, but no  action had occurred. One  proposal existed to                                                                    
reduce federal  match to 45  percent, which would lead  to a                                                                    
cut of $66  million. She offered the  information to provide                                                                    
perspective on Medicaid funding.                                                                                                
3:19:55 PM                                                                                                                    
Representative  Holmes  asked  about the  ratio  of  covered                                                                    
versus exempt nationwide.                                                                                                       
Ms.  Tomsic responded  that 18  percent of  the funding  was                                                                    
subject  to sequester.  Alaska had  access  to the  "special                                                                    
rule,"  which  would  allow a  refund  of  some  sequestered                                                                    
Representative  Holmes asked  if sequestration  would reduce                                                                    
the nationwide budget.                                                                                                          
Ms. Tomsic  responded that the  effect of the  sequester was                                                                    
estimated to reduce  the budget by $85 billion  in 2013. She                                                                    
added  that  mandatory programs  that  were  outside of  the                                                                    
process were growing based on eligibility and caseloads.                                                                        
Representative  Munoz  asked  about  mandatory  health  care                                                                    
insurance  and   its  effect  on  the   number  of  Medicaid                                                                    
Ms.  Tomsic  responded  that a  state's  caseload  would  be                                                                    
impacted if  they chose  to take  advantage of  the Medicaid                                                                    
eligibility expansion. She added  that a person could exempt                                                                    
themselves  from  Medicaid.  She stated  that  increases  to                                                                    
providers  would match  Medicare rates,  which would  affect                                                                    
3:23:03 PM                                                                                                                    
Representative  Gara  asked  about  the  federal  match  for                                                                    
Ms.  Tomsic responded  that the  trends were  masked by  the                                                                    
hold-harmless provision of the  stimulus program. She stated                                                                    
that the average had increased over time.                                                                                       
Representative Gara  asked if the  match would remain  at 50                                                                    
percent unless the law changed.                                                                                                 
Ms. Tomsic  reminded the committee that  the sequester would                                                                    
not affect  Medicaid. She added  that Congress  attempted to                                                                    
alter  the  matching  rate. Formula  changes  tended  to  be                                                                    
difficult to agree on.                                                                                                          
Representative Wilson  asked if the reference  to per capita                                                                    
income was based on residency.                                                                                                  
Ms.  Tomsic  explained that  the  information  was based  on                                                                    
census  data.  The  population   estimate  used  the  census                                                                    
numbers as a starting point.  The estimate was then adjusted                                                                    
for births,  deaths, and migration.  She offered  to provide                                                                    
the committee with additional  information once she obtained                                                                    
3:26:07 PM                                                                                                                    
Ms.  Tomsic  discussed  slide  19:  "We're  captive  on  the                                                                    
   · One "crisis" averted, more in store:                                                                                       
        o March 1 sequester                                                                                                     
        o Debt ceiling has been reached and will need to be                                                                     
        o FY 2013 appropriations                                                                                                
             ƒCR expires March 27                                                                                              
   · Total nondefense discretionary spending is $610                                                                            
     billion, the federal deficit is $1.1 trillion                                                                              
Ms. Tomsic discussed slide 20: "So what's the bottom line?"                                                                     
   · The yawning gap between federal revenues and spending                                                                      
   · Tax expenditures and Medicare/Medicaid are squeezing                                                                       
     out other spending                                                                                                         
   · The state-federal partnership is now defined by                                                                            
   · Non-Medicaid grants have been on the descent for                                                                           
     years, and that's unlikely to change                                                                                       
3:28:14 PM                                                                                                                    
Representative   Gara    recalled   a    past   presentation                                                                    
illustrating that  applications for Medicaid  had increased.                                                                    
The  per  capita  cost of  medical  care  was  skyrocketing,                                                                    
leading  to the  increased  Medicaid costs.  He mentioned  a                                                                    
healthcare   commission   that    might   provide   valuable                                                                    
recommendations.  He  proposed  the  idea  of  seeking  cost                                                                    
saving  ideas and  imagined that  the healthcare  commission                                                                    
would be helpful.                                                                                                               
HB  65  was   HEARD  and  HELD  in   committee  for  further                                                                    
HB  66  was   HEARD  and  HELD  in   committee  for  further                                                                    

Document Name Date/Time Subjects
FFIS Presentation HFC-1-21-13.pdf HFIN 1/22/2013 1:30:00 PM
FFIS Presentation
UofA-HFIN Overview1-22-13.pdf HFIN 1/22/2013 1:30:00 PM
UofA Overview