Legislature(2015 - 2016)ANCH LIO BUILDING

05/08/2015 01:00 PM House FINANCE

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01:08:33 PM Start
01:09:54 PM HB1001
03:05:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change Updated --
Location: 1st Floor Auditorium
Heard & Held
David Teal, Director, Legislative Finance
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
**Due to construction, streaming available in
Juneau in Capitol Rm 120**
HOUSE BILL NO. 1001                                                                                                           
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations,  making  capital appropriations,  and                                                                    
     making  appropriations  under   art.  IX,  sec.  17(c),                                                                    
     Constitution  of   the  State   of  Alaska,   from  the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
1:09:54 PM                                                                                                                    
Co-Chair    Neuman    recognized   Senator    Giessel    and                                                                    
Representative Josephson in the audience.                                                                                       
DAVID  TEAL, DIRECTOR,  LEGISLATIVE FINANCE  DIVISION (LFD),                                                                    
directed the committee's attention  to the provided handout.                                                                    
He began his  presentation with slide 1. He  pointed the top                                                                    
chart showing  unrestricted general  fund (UGF)  revenue and                                                                    
expenditures. The expenditure line  [Budget] was depicted in                                                                    
red. It  decreased from  FY 14  to FY  17 and  remained flat                                                                    
afterwards.   He   suggested   that  the   spreadsheet   was                                                                    
changeable; expenditure assumptions could  be adjusted up or                                                                    
down. The baseline  was shown on the slide.  He continued to                                                                    
explain  that the  blue line  represented the  Department of                                                                    
Revenue (DOR) fall revenue forecast.  He pointed out the gap                                                                    
between expenditures and revenue,  referred to as the fiscal                                                                    
gap or the  deficit. The deficit was close to  $4 billion in                                                                    
FY 15  and over  $3 billion  or $3.2 billion  in FY  16. The                                                                    
deficit simply meant  the state spent more  money than there                                                                    
was revenue resulting  in depleted reserves as  shown in the                                                                    
lower graph on the  slide. The Constitutional Budget Reserve                                                                    
(CBR) was  shown in  blue and  the statutory  Budget Reserve                                                                    
(SBR) in red.  The SBR was expected to  be depleted entirely                                                                    
in the  amount of  $2.8 billion  in FY  15. In  addition the                                                                    
state  would be  using  some  of the  CBR  balance. The  CBR                                                                    
balance by  the end of  FY 15  would be about  $9.2 billion.                                                                    
Each year there was a deficit the reserves went down.                                                                           
Mr. Teal continued  that many people looked at  the graph as                                                                    
if there  was not  a problem  because reserves  extended out                                                                    
until  2025. The  state's fiscal  problem became  evident if                                                                    
the  fall forecast  for revenue  was  changed. He  suggested                                                                    
looking at the spring forecast.                                                                                                 
1:13:18 PM                                                                                                                    
Co-Chair  Neuman  welcomed  Representative  Vasquez  to  the                                                                    
meeting.  He  asked Mr.  Teal  to  refer  to the  top  chart                                                                    
pointing out the increase in  revenue. He wondered about the                                                                    
price of oil per barrel  assuming production of 500 thousand                                                                    
barrels per day.                                                                                                                
Mr.  Teal stated  that production  was  currently about  500                                                                    
barrels of oil  per day but was falling. He  referred to the                                                                    
third  LFD  chart  in  member packets  (copy  on  file).  He                                                                    
indicated that the chart showed  the price of oil reflecting                                                                    
the spring  revenue forecast. He  surmised that part  of the                                                                    
problem was  that in looking  at the fall versus  the spring                                                                    
forecasts  the fall  forecast was  higher. There  was not  a                                                                    
great  deal of  difference over  several years.  However, in                                                                    
the  near  future  there  was   $1  billion  or  more  of  a                                                                    
difference. The actual price of  revenue was predicted to go                                                                    
from  the low  to  mid  $60s for  the  forecast  for FY  16,                                                                    
rapidly  recovering  and  climbing higher  than  any  prices                                                                    
Alaska  had experienced  previously. Looking  at the  graphs                                                                    
again where the fall  forecast showed reserves declining and                                                                    
comparing  it to  the spring  forecast that  showed a  minor                                                                    
change,  adding them  together resulted  in the  reserves no                                                                    
longer lasting beyond 2025; they  would be gone by 2022. The                                                                    
prices in  the forecast  were at  higher levels  that Alaska                                                                    
had seen.                                                                                                                       
Co-Chair Neuman acknowledged Representative  Kito III in the                                                                    
Vice-Chair Saddler  asked about  DOR's revenue  forecast and                                                                    
the outlook  for production  for the  following 4  years. He                                                                    
wondered if the department's  numbers were known, proven, or                                                                    
Mr.   Teal  stated   that   DOR   changed  its   forecasting                                                                    
methodology.  The  department  used  to  be  criticized  for                                                                    
overestimating   production    and   at   the    same   time                                                                    
underestimating pricing. The result  was that the production                                                                    
and  price estimates  canceled each  other out.  The overall                                                                    
forecasts  were fairly  accurate. However,  DOR changed  its                                                                    
forecasting  practice  3   years  previously.  The  forecast                                                                    
included  known  numbers  and  different  probabilities  for                                                                    
future  production, depending  on  where  producers were  in                                                                    
their  process.  If  they were  making  investments  towards                                                                    
production it  indicated high probability. If  the producers                                                                    
simply  found oil  it did  not factor  into the  forecast as                                                                    
heavily.  The  Department  of Revenue  did  adjust  for  the                                                                    
probability of future developed fields.                                                                                         
Vice-Chair  Saddler suggested  that  some  people would  say                                                                    
that every forecast  was wrong. He understood  that a person                                                                    
could  not  predict the  future  exactly.  He asked  if  the                                                                    
forecasting  was more  accurate than  in the  past 10  to 20                                                                    
Mr.  Teal  believed  the   production  forecasts  were  more                                                                    
accurate.  Production  was  on   the  constant  decline.  He                                                                    
pointed to production figures on  a page (copy not on file0.                                                                    
He  indicated   that  current   production  was   about  500                                                                    
[thousand barrels  per day] and  was anticipated to  drop to                                                                    
400 and  below in  the near future.  He explained  that even                                                                    
with high  oil prices,  the production decline  caused total                                                                    
revenue  to  be  lower  than in  other  years  with  similar                                                                    
1:18:47 PM                                                                                                                    
Representative Gara  stated that he  did not want  to engage                                                                    
in  a  debate  about  prior   oil  taxes.  However,  he  was                                                                    
realistic  about having  to discuss  ways  to raise  revenue                                                                    
including oil  or other proposals.  He wondered  whether the                                                                    
chart seemed to  show that at high prices ($110  or $120 per                                                                    
barrel  of oil)  the state  used to  be able  to generate  a                                                                    
surplus.  He  suggested  that  under  SB  21  [Oil  and  gas                                                                    
production  tax legislation  which passed  in 2013]  at high                                                                    
prices the state was not  able to generate surplus. He asked                                                                    
Mr. Teal to share his views on the subject.                                                                                     
Co-Chair  Neuman  remarked   that  Representative  Gara  was                                                                    
digressing away from the legislation before the committee.                                                                      
Representative  Gara  was not  trying  to  go backwards  but                                                                    
forwards into  the future. He mentioned  firing every Juneau                                                                    
employee and  still not  being able to  fund the  budget. He                                                                    
emphasized the need to do something.                                                                                            
Mr. Teal  indicated that  from his  perspective the  oil tax                                                                    
structure  currently  generated   more  revenue  than  under                                                                    
Alaska's Clear  and Equitable  Share (ACES).  It was  more a                                                                    
philosophical  or   a  political  argument  rather   than  a                                                                    
technical argument. Some people  looked at the situation and                                                                    
said  that high  prices revenue  remained low.  It primarily                                                                    
had to do  with the loss of production because  the price of                                                                    
oil  did  not matter  if  there  was  not  any to  sell.  He                                                                    
concluded that  no matter what  the tax was,  the difference                                                                    
was between  the tax mechanisms  that change from  one price                                                                    
to another.                                                                                                                     
Co-Chair  Neuman redirected  the committee  to focus  on the                                                                    
current legislation.                                                                                                            
1:21:26 PM                                                                                                                    
Representative  Gara  remarked that  it  was  an issue  that                                                                    
would have to be addressed.                                                                                                     
Co-Chair  Neuman responded  that the  topic was  the state's                                                                    
current fiscal situation.                                                                                                       
Representative   Gattis  summarized   Mr.  Teal's   previous                                                                    
statement. She  thought he stated  that with  current prices                                                                    
the state  was getting more for  its oil than it  would have                                                                    
without SB 21. She really wanted  to be clear because of the                                                                    
current reality; the  state had low oil prices  and a budget                                                                    
the legislature was trying to balance.                                                                                          
Co-Chair  Neuman acknowledged  Senator Donnie  Olson in  the                                                                    
Vice-Chair  Saddler  referred to  the  second  chart on  the                                                                    
first page, "Budget  Reserves by CBR and SBR."  He asked Mr.                                                                    
Teal to differentiate  the CBR from the  SBR including their                                                                    
origins and balances.                                                                                                           
Mr. Teal  explained that  the SBR  was established  prior to                                                                    
1990. It  was established  in recognition  of the  fact that                                                                    
the state's  primary source of  revenue was oil and  that it                                                                    
had  a volatile  revenue  source. Prices  were volatile  and                                                                    
therefore the revenue was volatile.  In order for government                                                                    
to function  reserves were needed.  The state  began setting                                                                    
aside money in  the SBR. In 1991 there  was a constitutional                                                                    
amendment creating the CBR fund.  At the time the balance of                                                                    
the SBR  was transferred  into the  CBR. The  big difference                                                                    
was that the  SBR was available to spend at  any time at any                                                                    
amount  with  a  simple majority  vote.  The  Constitutional                                                                    
Budget  Reserve required  a super  majority  vote of  three-                                                                    
quarters in  each house  in order to  access it.  Access was                                                                    
also  possible   with  a   simple  majority   under  certain                                                                    
conditions;  those conditions  had not  been met  since 1990                                                                    
when it was established.                                                                                                        
Vice-Chair  Saddler  relayed  the information  that  he  was                                                                    
providing to  his constituents. He  discussed how  the funds                                                                    
were specifically set  up by the legislature  and the people                                                                    
to provide savings  that the state could draw on  to pay the                                                                    
expenses  of government  when day-to-day  oil income  was no                                                                    
longer  sufficient, a  situation  that  the state  currently                                                                    
faced. He asked if the CBR  and SBR were established for the                                                                    
reasons he cited.                                                                                                               
Mr. Teal  acknowledged that  Representative Saddler's  was a                                                                    
fair assessment.  He added that  there were two  reasons for                                                                    
having  reserves.  The  first   was  to  cushion  short-term                                                                    
volatility such as  with a short-term decline  in oil prices                                                                    
accompanied by  overestimated revenues in a  given year. The                                                                    
reserves  would  be  available  as  a  shock  absorber  when                                                                    
forecasts  were off.  The second  reason  had to  do with  a                                                                    
prolonged shortage  of revenue.  The reserves would  then be                                                                    
used as a long-term shock  absorber. The reserves were never                                                                    
meant to  be large enough  to address a  structural deficit.                                                                    
He  clarified that  a structural  deficit was  defined as  a                                                                    
long-term deficit.  The reserves were really  established to                                                                    
address  revenues  below  expenditures.  However,  when  the                                                                    
state had  excess revenues  money would  be added  back into                                                                    
the  reserves.  He  mentioned   the  difficulty  of  cutting                                                                    
positions and  programs and trying to  reestablish them when                                                                    
revenues recovered,  hence the reserves. He  reiterated that                                                                    
it was  meant for bouncing  the expenditure line  around. It                                                                    
was a  different issue when  the state was  constantly below                                                                    
the expenditure line.                                                                                                           
1:26:30 PM                                                                                                                    
Vice-Chair Saddler commented that  many people often thought                                                                    
that the  legislature spent money  and did not pay  it back.                                                                    
He asked  for a  brief history  about how  well the  CBR was                                                                    
repaid for previous draws.                                                                                                      
Mr. Teal responded that whenever  money was removed from the                                                                    
CBR it  implemented a section  of the constitution  that was                                                                    
referred  to as  a "sweep."  Whenever the  state took  money                                                                    
from  the CBR,  the general  funds  and all  sub funds  were                                                                    
swept at the end of each  year into the CBR to replenish the                                                                    
fund. The fund  reached a higher balance in  2013. The state                                                                    
had reserves  of about  $16 million in  FY 14.  However, the                                                                    
state had massive deficits burning  the reserves quickly. As                                                                    
long  as there  was  a gap  in the  budget  the state  would                                                                    
continue  burning  the  reserves.   In  the  end,  once  the                                                                    
reserves were gone and the  deficits remained ongoing, there                                                                    
was no  choice but to  reduce expenditures all the  way down                                                                    
to revenue levels or generate new revenues.                                                                                     
Representative Wilson  understood the  vote of 21  to access                                                                    
the SBR and  that the account would be exhausted  at the end                                                                    
of FY 15.  She also understood that it  took a three-quarter                                                                    
vote  to access  the  CBR.  She wondered  if  there was  any                                                                    
provision in the constitution that  anticipated a decline in                                                                    
oil  production  excluding price.  She  asked  if any  other                                                                    
savings accounts were instituted other  than the SBR and CBR                                                                    
that could be accessed if needed.                                                                                               
Mr.  Teal stated  that the  first  of the  accounts was  the                                                                    
Permanent Fund.  The Permanent Fund structure  did not allow                                                                    
the fund's principal  to be spent. However,  the earnings of                                                                    
the fund  were designed  for use  when oil  revenues tapered                                                                    
off to  the point  that it  no longer  supported government.                                                                    
The expectation  was that  the state  would begin  using the                                                                    
Permanent Fund  earnings. The state  did not have  any other                                                                    
large  savings  accounts  unless  endowments  were  included                                                                    
(e.g. Power  Cost Equalization (PCE) fund).  Co-Chair Neuman                                                                    
remarked that  the PCE fund  had a balance  of approximately                                                                    
$1 billion. Mr. Teal  confirmed Co-Chair Neuman's figure. He                                                                    
also considered the Alaska  Higher Education Investment Fund                                                                    
to be  an endowment; the  fund had  a balance of  about $460                                                                    
million. The last fund he looked  at as an endowment was the                                                                    
Public  School  Trust Fund,  which  had  about $1.2  billion                                                                    
until  it  was  emptied  in the  current  budget  cycle.  He                                                                    
reported  that  there  were no  other  funds  that  remotely                                                                    
approached balances of more than $100 million or more.                                                                          
1:30:28 PM                                                                                                                    
Representative   Wilson   wanted   clarity   regarding   the                                                                    
Permanent  Fund.  She  understood that  the  Permanent  Fund                                                                    
basically had  two pots of  money, one from  which dividends                                                                    
were paid and  one containing earnings. She  wondered if she                                                                    
was  accurate.  She wanted  to  confirm  whether there  were                                                                    
additional assurances  put into place when  the constitution                                                                    
was formulated.                                                                                                                 
Mr.  Teal   explained  that  the  Permanent   Fund  had  two                                                                    
accounts:  the  corpus  account  and  the  earnings  reserve                                                                    
account.  The corpus  could not  be touched  as outlined  in                                                                    
Alaska's constitution and the  earnings reserve account held                                                                    
all  of  the earnings  of  the  principle and  the  earnings                                                                    
reserve itself. In  other words, all of the  earnings of the                                                                    
fund accumulated in the  earnings reserve account. Dividends                                                                    
were paid  from the  earnings reserve  account, which  had a                                                                    
balance of  $8.5 billion.  Dividends were  based on  a five-                                                                    
year  moving  average  of realized  earnings,  roughly  $1.4                                                                    
billion in 2015,  and the state paid  inflation proofing. If                                                                    
the  earnings  from  the fund  were  greater  than  dividend                                                                    
inflation proofing  then the earnings reserve  account grew.                                                                    
The growth of  the earnings reserve account  depended on the                                                                    
rate of return on investments of the Permanent Fund.                                                                            
Representative Wilson  had heard  that the state  could fire                                                                    
all of its employees several times  over and not make up the                                                                    
state's  deficit. She  speculated that  much of  the state's                                                                    
issues had  to do with  formula programs, programs  that the                                                                    
state  paid out.  She provided  examples including  Medicaid                                                                    
and  the  school  formula  (money  the  state  paid  out  in                                                                    
grants). She mentioned the state  previously capping some of                                                                    
the programs.  She wondered if  the state should  be looking                                                                    
more  at the  cap  approach versus  an  unlimited amount  of                                                                    
money being paid out for programs.                                                                                              
Mr. Teal detailed  that in the past there had  been a number                                                                    
of  formula programs  that had  been prorated.  In order  to                                                                    
prorate  formula programs  statute  had to  be  in place  to                                                                    
allow the  state to do  so. There was statutory  language in                                                                    
the education  formula regarding  prorating. There  was also                                                                    
statutory  language  regarding  PCE. Some  formula  programs                                                                    
such  as  Medicaid  were  considered  entitlement  programs,                                                                    
meaning that if  an individual was eligible and  had need of                                                                    
the program, services would be paid.  It was not a matter of                                                                    
prorating Medicaid  because it would difficult  to determine                                                                    
when  to  begin  prorating. He  suggested  the  hypothetical                                                                    
scenario of cutting people off  saying that no one could get                                                                    
sick after May. He emphasized  that Medicaid would be a very                                                                    
difficult program to prorate. However,  it did not mean that                                                                    
Medicaid was uncontrollable. It  meant that there were other                                                                    
methods  for controlling  Medicaid  costs  such as  waivers.                                                                    
Every state was  allowed, to some extent, to  design its own                                                                    
Medicaid program both  in terms of who was  covered and what                                                                    
services were covered.                                                                                                          
1:34:51 PM                                                                                                                    
Representative  Wilson   remarked  that  the  state   had  a                                                                    
complicated budget.  It was not  simply addressing  one area                                                                    
of costs.                                                                                                                       
Co-Chair Neuman  interjected that  some questions  were very                                                                    
important  in  order  for  the  public  to  understand  what                                                                    
legislators discussed regularly.                                                                                                
Representative  Wilson asked  about  options the  department                                                                    
might  have   in  controlling   costs  versus   changing  or                                                                    
implementing statutes. She wondered  if the department could                                                                    
make a change  in formulas or if such changes  would have to                                                                    
occur by changing the law.                                                                                                      
Mr.  Teal  responded  that   both  potentially  applied.  He                                                                    
referred to  a time two  years earlier when  the legislature                                                                    
debated the  permissibility of upper  and lower  ventures in                                                                    
one year. Under  Medicaid rules the state  could receive one                                                                    
per year.  Most changes would  have to come  through statute                                                                    
modifications. There  were regulations that  accompanied the                                                                    
statutes. In the late 1990s  and early 2000s the legislature                                                                    
was very  concerned about Medicaid costs  escalating rapidly                                                                    
and  wanted  better control  of  the  costs. The  department                                                                    
responded   that  while   it  implemented   regulations  the                                                                    
legislature   would  have   to  enact   corresponding  laws,                                                                    
potentially  a two-year  process.  Assuming the  legislature                                                                    
wanted  to   reform  Medicaid,  results  would   not  happen                                                                    
Co-Chair  Neuman suggested  the  committee  would hear  much                                                                    
more on Medicaid in the following week.                                                                                         
Representative  Wilson  used  Medicaid as  an  example.  She                                                                    
remembered  having a  discussion a  few years  earlier about                                                                    
the  heating assistance  program when  the state  was seeing                                                                    
high  costs  for  energy  around   the  state.  The  federal                                                                    
government had  a limit on  its funding. The  state followed                                                                    
suit by limiting  the amount of assistance.  After the first                                                                    
year  of  the  program  existing without  a  cap  the  state                                                                    
realized the  overwhelming cost and  initiated a  limit. She                                                                    
believed   there  were   several  formula   programs  within                                                                    
different departments  that could  be capped.  She indicated                                                                    
she  was trying  to look  at the  larger picture  keeping in                                                                    
mind the  history of oil  price fluctuation.  She understood                                                                    
that imposing caps in statute was  not a quick fix but might                                                                    
be an example of one way to help with the deficit.                                                                              
1:38:40 PM                                                                                                                    
Representative  Gara  asked   about  the  governor's  budget                                                                    
numbers. He asked  Mr. Teal if he could  plug the governor's                                                                    
budget  numbers  into  a spreadsheet.  Mr.  Teal  asked  for                                                                    
clarification  about which  numbers Representative  Gara was                                                                    
referring  to. Representative  Gara  responded  that he  was                                                                    
talking about  the governor's budget  numbers filed  for the                                                                    
current  special   session.  Mr.   Teal  responded   in  the                                                                    
negative. He  suggested the  numbers would  not show  in his                                                                    
Representative Gara asked  Mr. Teal to show  the current oil                                                                    
prices  (approximately $66  per barrel)  and the  decline in                                                                    
budget reserves based on the  budget passed by the Majority.                                                                    
He wanted to know how  quickly the state's savings would run                                                                    
out. Mr. Teal relayed that he  had entered $70 per barrel of                                                                    
oil into his model.                                                                                                             
Representative Gara asked  Mr. Teal to input  $66 per barrel                                                                    
of oil. Mr. Teal responded affirmatively.                                                                                       
Co-Chair  Neuman recognized  Representative Drummond  in the                                                                    
Mr.  Teal pointed  out  that the  line  hardly changed  when                                                                    
inputting  oil prices  between $65  and $75  per barrel.  He                                                                    
continued that  at any price  below $80 per  barrel, revenue                                                                    
was not  very sensitive  (the gap would  be nearly  the same                                                                    
with prices  between $40 and  $70 per barrel).  He explained                                                                    
that at an oil price of $65  per barrel the state had a very                                                                    
large,   long-term,   unsustainable,   structural   deficit.                                                                    
Reserves would be gone before FY 19.                                                                                            
Representative Gara asked Mr. Teal  to move the budget up by                                                                    
$79 and then down  by $79 in order to see  the effect on the                                                                    
time in which the state savings were depleted.                                                                                  
Mr. Teal changed  the line on the chart from  $20 to $90 for                                                                    
the capital  budget. It did  not matter where the  money was                                                                    
spent. It  reflected an increase  of $70. He pointed  to the                                                                    
line that moved on the chart.                                                                                                   
1:42:03 PM                                                                                                                    
Representative Gara asked for  verification that whether the                                                                    
chart  moved up  or down  by approximately  $70 million  the                                                                    
state reserves would  decline to zero in  about three years.                                                                    
Mr. Teal responded affirmatively.                                                                                               
Representative  Gara directed  attention to  questions asked                                                                    
by Representative  Wilson about using the  earnings reserves                                                                    
of the  Permanent Fund. He expressed  that he was not  a fan                                                                    
of  the idea.  He  received a  memo  from Legislative  Legal                                                                    
Services  indicating  that  if  the  state  spent  from  the                                                                    
Permanent  Fund earnings  reserve it  would result  in lower                                                                    
dividends.  He  wondered  if Mr.  Teal  disagreed  with  the                                                                    
Mr. Teal responded  that if that was all the  state did, any                                                                    
money removed from  the Permanent Fund on  a perpetual basis                                                                    
would reduce  dividends in the  future. The  reduction would                                                                    
be phased in over a five-year period.                                                                                           
Co-Chair  Neuman  welcomed   Representative  Pruitt  to  the                                                                    
Representative  Gara had  an additional  problem with  using                                                                    
the earnings  reserve. He suggested that  even though people                                                                    
saw a high  number of $8 billion, the  figure fluctuated. He                                                                    
relayed  that  in  2008  and  2009  when  the  stock  market                                                                    
performed poorly the earnings  reserve of the Permanent Fund                                                                    
was so  low that the state  came close to not  having enough                                                                    
for  a dividend  payout.  He continued  that  in high  stock                                                                    
market years there was a  significant amount in the reserves                                                                    
fund.  He asked  if it  was fair  to say  that the  reserves                                                                    
account went  up and down  based on market  performance. Mr.                                                                    
Teal replied in the affirmative.                                                                                                
Representative  Gara stated  that  some  people thought  the                                                                    
economy  was  in  for  a stock  market  retraction.  If  the                                                                    
Legislature began spending from  the earnings reserve of the                                                                    
Permanent Fund there would be  a chance that there would not                                                                    
be  enough  money  in  the   fund  to  pay  a  dividend  and                                                                    
inflation-proof the fund. He asked if he was accurate.                                                                          
Mr. Teal responded  that the earnings reserves  moved up and                                                                    
down  no matter  what the  state  did. If  the stock  market                                                                    
performed well  then there would  be plenty of money  to pay                                                                    
dividends,  inflation-proof   the  fund,  and  add   to  the                                                                    
reserves. If  there was a bad  year in the stock  market the                                                                    
reserve balance  could fall. He furthered  that if inflation                                                                    
proofing and dividends exceeded the  amount of earnings in a                                                                    
given year then  the balance would fall. He  believed it was                                                                    
in 2008 or 2009 that the  state came very close to having an                                                                    
insufficient balance in the fund to pay dividends.                                                                              
1:45:08 PM                                                                                                                    
Representative Gara  referred to Mr. Teal's  presentation on                                                                    
page 1.  He asked  about the  top chart  that showed  a flat                                                                    
line of  spending. He commented that  with population growth                                                                    
and  inflation, the  flat spending  line indicated  less and                                                                    
less  money per  person in  the  state in  real dollars.  He                                                                    
asked  if   he  was  correct.   Mr.  Teal  replied   in  the                                                                    
Representative  Gara  asked  whether   more  cuts  would  be                                                                    
required if  the state's spending remained  flat. Cuts could                                                                    
include reductions  to education  on a per-person  basis, to                                                                    
senior  services   on  a  per-person  basis,   or  to  other                                                                    
services. He wondered if he was correct.                                                                                        
Mr. Teal responded that Representative  Gara was correct. He                                                                    
noted  that  if  the  budget   remained  flat  and  was  not                                                                    
increased  for inflation  purposes, it  would have  the same                                                                    
impact on spending as a cut as large as inflation.                                                                              
Representative  Gara  opined  that  the  budget  before  the                                                                    
committee   was  not   a  sustainable   budget  unless   the                                                                    
legislature did something to  increase revenues. Options for                                                                    
generating  revenues   included  imposing  an   income  tax,                                                                    
raising  sales tax,  or adjusting  oil taxes.  He asked  Mr.                                                                    
Teal if he  agreed that the budget was  not sustainable. Mr.                                                                    
Teal did not believe the budget was sustainable.                                                                                
Co-Chair  Neuman informed  the committee  that the  governor                                                                    
had announced  he would  be having  meeting in  Fairbanks in                                                                    
early June  2015. The  governor had  invited some  people to                                                                    
accompany  him to  discuss  some of  the  fiscal issues.  He                                                                    
relayed  that  the  governor  was taking  the  lead  on  the                                                                    
1:48:10 PM                                                                                                                    
Vice-Chair  Saddler made  reference to  the comment  made by                                                                    
the legislator  to his left  about the budget passed  by the                                                                    
Majority. In  actuality, the legislature passed  the budget.                                                                    
He asked about  Mr. Teal's comment about  being surprised at                                                                    
the large  reductions the legislature  was able to  make. He                                                                    
asked Mr. Teal to expound on his comment.                                                                                       
Mr. Teal  pointed to Figure  3 [Page  5] of the  packet. The                                                                    
chart  showed  per capita  UGF  revenue  and budget  history                                                                    
adjusted  for  inflation.  It  was  directly  responding  to                                                                    
Representative  Gara's comments  about  how  much the  state                                                                    
spent per  person as  inflation eroded  the spending  of the                                                                    
expenditure  and as  there  were more  people  to serve.  He                                                                    
highlighted that  2016 agency expenditures  on a  per capita                                                                    
basis were as  low as they had ever been  previously. In the                                                                    
early  2000s there  were  a  few years  were  the state  was                                                                    
fairly close. There were two  or three years where the state                                                                    
was below  current spending. There  was always  the question                                                                    
anytime there  was a deficit as  to whether the state  had a                                                                    
spending problem  or a revenue  problem. The answer  was one                                                                    
of the two or a combination  of both. He turned to the chart                                                                    
and pointed  out that  when revenue  increased in  the 1980s                                                                    
expenditures  followed. He  explained that  the big  capital                                                                    
budgets  were  highlighted  in yellow.  Agency  expenditures                                                                    
also grew. He  confirmed that the same  thing happened after                                                                    
2005;  revenue jumped  resulting in  larger capital  budgets                                                                    
and  agency  budgets increased.  They  were  presently on  a                                                                    
downward  trend  but  at  its   peak  the  real  per  capita                                                                    
expenditures  were  lower than  in  the  1980s. The  state's                                                                    
current level  of spending was  high per capita;  there were                                                                    
only  4  other  years  in   history  where  the  per  capita                                                                    
expenditures were  higher. He did  not see the  situation as                                                                    
an  expenditure problem.  He saw  revenues  as the  problem.                                                                    
Revenues on a per capita basis  were by far the lowest since                                                                    
1975. In reading across the  chart the state had deficits in                                                                    
the early  2000s with  state revenues  of about  $4 thousand                                                                    
per capita.  He pointed to  the $5 thousand dollar  mark and                                                                    
then  at the  mark of  $3  thousand per  capita in  revenue.                                                                    
Currently  the  state  was  at  the  lowest  per  capita  in                                                                    
Co-Chair  Neuman remarked  that when  looking at  the agency                                                                    
operations costs,  represented by  the dark blue  lines, the                                                                    
day-to-day  agency operations,  the state  paid the  same as                                                                    
was spent in 1977 when the  state likely had about less than                                                                    
half as many people as it  did now. He thought the chart was                                                                    
interesting.  He noted  that when  there  was an  assumption                                                                    
that the legislature or the  government spent a lot of money                                                                    
per capita  per person within  the State of Alaska  He asked                                                                    
Mr. Teal if he was correct.                                                                                                     
Mr. Teal invited  committee members to turn to  the last two                                                                    
pages of  the handout to  further answer what the  state was                                                                    
doing  in  the  current  year. He  referred  to  the  Senate                                                                    
version of  the budget rather than  the conference committee                                                                    
budget. For  the purpose of  review it did not  matter which                                                                    
budget was being referred to. The  point of the chart was to                                                                    
determine  how many  years of  spending was  unwound in  the                                                                    
current year's budget. He  highlighted in yellow, agency-by-                                                                    
-agency, the budget closest to  the FY 16 level of spending.                                                                    
He summarized  that on an  overall basis, four  years' worth                                                                    
of  spending was  unwound. The  state was  back at  spending                                                                    
levels of  FY 12.  Some agencies were  three years  back and                                                                    
some reached  back as  far as  FY 08.  He stated  that there                                                                    
were some massive reductions.  He referred to Representative                                                                    
Gara's question as  to whether he was surprised  at what the                                                                    
legislature  had cut.  He relayed  that he  would have  been                                                                    
surprised  to see  a  5 percent  reduction,  but the  actual                                                                    
reduction was 9.9 percent. If  the amounts were adjusted for                                                                    
inflation,  the legislature  unwound approximately  7 years'                                                                    
worth of spending, back to  FY 09 levels. He reiterated that                                                                    
some agencies  were more  and some were  less.   He reported                                                                    
that DHSS  and DEED accounted for  the largest expenditures.                                                                    
The Department of Education  and Early Development Education                                                                    
took  up over  30 percent  of the  state's budget,  and DHSS                                                                    
followed  closely behind.  Together the  budget for  DHSS ad                                                                    
DEED  made  up 60  percent  of  the state's  available  UGF.                                                                    
Budgets for the University of  Alaska, DOC, and DOT were the                                                                    
only other ones  exceeding 5 percent of  the overall budget.                                                                    
Other departments were small in comparison.                                                                                     
1:55:42 PM                                                                                                                    
Co-Chair Neuman  asked Mr.  Teal to return  to the  chart on                                                                    
page  9  of  the   handout  that  showed  agency  operations                                                                    
adjusted   for  inflation   2014.  He   though  it   was  an                                                                    
interesting  chart that  basically described  to the  public                                                                    
what  the legislature  recommended for  reductions in  state                                                                    
government for the current year.  He asserted that the chart                                                                    
reflected  a   dollar-for-dollar  evaluation   adjusted  for                                                                    
inflation.  He suggested  that the  legislature rolled  back                                                                    
agency operations  worth more than  half of  the departments                                                                    
within the State  of Alaska. He opined that it  was a fairly                                                                    
dramatic  reduction. At  the  same time  the  state lost  60                                                                    
percent of its revenue stream  in the previous fall within 5                                                                    
or 6  months. The  legislature reacted to  try to  slow down                                                                    
the  burn  rate  of  spending in  order  to  ensure  funding                                                                    
availability  in the  state saving  accounts for  government                                                                    
into  the future.  Many of  the  department budgets,  almost                                                                    
half of  them, were rolled back  7 or 8 years.  He noted his                                                                    
concerns in reducing the budgets  for DOC and DPS that might                                                                    
have long-range effects  on the economy such  as job losses.                                                                    
Even these  budgets were rolled  back 4 years.  He indicated                                                                    
that the page  told him more about what  the legislature did                                                                    
to  reduce agency  operations  within  state government.  He                                                                    
highlighted that it  showed how many years  were rolled back                                                                    
department-by-department. He  emphasized the descriptiveness                                                                    
of the page.                                                                                                                    
Vice-Chair Saddler stated that  people from his district had                                                                    
been  telling him  that  the  legislature should  prioritize                                                                    
these items. As  he looked into the audience he  saw many of                                                                    
the  people who  had  been authors  of  those messages.  The                                                                    
chart  before   the  committee   showed  clearly   that  the                                                                    
legislature had  and continued  to prioritize  education and                                                                    
health  and  social  services.  He  wished  the  press  were                                                                    
present  so  that they  could  carry  the message  to  their                                                                    
viewers  and  readers.  He  believed  it  was  an  important                                                                    
message Alaskans deserved to hear.                                                                                              
Vice-Chair  Saddler  told  of his  experience  hearing  from                                                                    
people that  the state  government was  bloated and  that it                                                                    
was spending more and more  of whatever it had. The previous                                                                    
chart contained  UGF revenues. He  clarified that  the state                                                                    
did not have  a bloated government. The  state generated the                                                                    
lowest revenue per capita in many  years. He asked if he was                                                                    
Mr.  Teal stated  that Vice-Chair  Saddler was  correct that                                                                    
the state was at $5  thousand per capita agency spending. He                                                                    
asserted that agency spending was  discussed because of both                                                                    
the  formula  and  non-formula  funds  running  through  the                                                                    
agencies.  The  other spending  was  capital  in yellow  and                                                                    
statewide expenditures  depicted in  light blue.  The number                                                                    
equaled $1.5 billion. Luckily half  of the money was the tax                                                                    
credits and  $200 million of  debt service monies,  and $250                                                                    
million for retirement.                                                                                                         
1:59:30 PM                                                                                                                    
Vice-Chair Saddler referred  again to the blue  lines in the                                                                    
previous two year. He wondered  what percentage of the solid                                                                    
blue  line indicating  agency operations  actually accounted                                                                    
for DEED and DHSS expenditures.                                                                                                 
Mr. Teal restated  that DHSS and DEED had  remained at about                                                                    
60 percent  of the  budget. He added  that the  growth rates                                                                    
had been  remarkably similar for  formula programs  and non-                                                                    
formula programs.                                                                                                               
Co-Chair  Neuman  asked,  "So,  about  two-thirds  for  that                                                                    
Vice-Chair Saddler  interjected, "I  call that  a priority."                                                                    
He indicated that in the  past some state leaders had wanted                                                                    
to  limit the  drawdown  of  the CBR  balance  to a  certain                                                                    
level. He  wondered if it  was prudent to ensure  that there                                                                    
was  some amount  left in  the CBR  to act  as a  cushion, a                                                                    
level  below  which   the  CBR  should  not   be  drawn.  He                                                                    
understood his question might be  a policy question that Mr.                                                                    
Teal  should not  answer. He  also asked  if there  were any                                                                    
structural  problems  with  drawing  the CBR  down  below  a                                                                    
certain level.                                                                                                                  
Mr. Teal remarked that it  was a policy choice. He indicated                                                                    
he  liked a  certain level  [Note:  Mr. Teal  referred to  a                                                                    
level on  a chart  not specified]. He  relayed that  his job                                                                    
was to  make sure  the legislature did  not get  into fiscal                                                                    
problems.  People  who  wanted  to see  a  higher  level  of                                                                    
expenditures  might  be  comfortable with  a  certain  level                                                                    
during a  year or more of  a bad deficit. He  suggested that                                                                    
the balance  that was acceptable  to the  legislature should                                                                    
depend on  the volatility of  revenue sources. If  the state                                                                    
relied on  income tax,  sales tax,  property tax,  and other                                                                    
taxes, more stable  revenue sources, then a  higher level of                                                                    
reserves  would  not  be needed.  Alaska  currently  had  an                                                                    
extremely  volatile  revenue  source,   which  lead  him  to                                                                    
conclude that the state also  needed an extremely high level                                                                    
of reserves. He corrected himself  by saying that Alaska did                                                                    
have a  high level of  reserves. He thought  legislators had                                                                    
been  to National  Conference of  State Legislatures  (NCSL)                                                                    
conferences  where  reserve  balances were  discussed  as  a                                                                    
measure  of  state  fiscal health.  In  those  presentations                                                                    
Alaska was  typically removed  because its  reserves distort                                                                    
the  entire nation's  picture.  He  suggested examining  why                                                                    
Alaska needed a significant level  of reserves. He asked how                                                                    
anyone  could budget  when  in  one year  the  state had  $9                                                                    
billion and within  two years the state had  $2 billion. The                                                                    
volatility  in  the  state's revenue  was  larger  than  the                                                                    
budget. Other states look at  a 5 percent decline in revenue                                                                    
as a major crisis.                                                                                                              
Co-Chair  Thompson asked  if DOR  had  made any  projections                                                                    
associated  with  additional  production   as  a  result  of                                                                    
increased   activity   occurring  presently   or   estimates                                                                    
reflecting the effects  of the expiration of  tax credits at                                                                    
the end of 2016.                                                                                                                
Mr. Teal suggested  that DOR might have  the information but                                                                    
he had not seen it.  He relayed that DOR typically generated                                                                    
a single  production forecast.  The forecast  was risk-based                                                                    
but included possible and  probable production increases. He                                                                    
believed that  the production  increases the  department was                                                                    
looking at  were more than  offset by the declines.  The net                                                                    
loss  was  going down  to  400  [thousand barrels  per  day]                                                                    
according  to DOR  projections.  The  Department of  Revenue                                                                    
could certainly  change risk measures;  however, he  did not                                                                    
have access to the numbers.                                                                                                     
2:04:52 PM                                                                                                                    
Co-Chair Neuman  believed that  DOR forecasted  $450 million                                                                    
in  small producer  credits  for the  year,  but the  actual                                                                    
credits equaled $700 million for the year.                                                                                      
Mr. Teal  relayed that the  small producer tax  credits were                                                                    
expected to decline. They were  stacked to some degree in FY                                                                    
15 and FY  16. He explained that part of  the reason for the                                                                    
decline from  FY 16 to FY  17 was that the  tax credits were                                                                    
supposed to  be declining  from $700  million to  about $250                                                                    
million in  a certain period  [Note: Mr. Teal pointed  to an                                                                    
unspecified curve on a chart].                                                                                                  
Representative Wilson wanted  her constituents to understand                                                                    
the  options  the  legislature had  certain  questions.  She                                                                    
explained  that her  questions did  not necessarily  reflect                                                                    
her position  on an issue.  She maintained that there  was a                                                                    
difference  of  opinion   amongst  committee  members  about                                                                    
certain  issues. She  believed that  there were  things that                                                                    
could  be  done  to  further reduce  spending  while  others                                                                    
preferred       to       spend       additional       money.                                                                    
She opined that Alaskans had  the right to be informed about                                                                    
the   state's  different   financial   accounts,  how   they                                                                    
correlated, and  the growth of  the accounts.  She expressed                                                                    
her  displeasure   with  other  members'   interpreting  the                                                                    
meaning of her questions.                                                                                                       
Co-Chair  Neuman  did  not believe  anything  was  meant  to                                                                    
offend Representative Wilson personally.                                                                                        
Representative Gara  acknowledged that he had  no idea about                                                                    
the  views of  Representative Wilson.  He remarked  that all                                                                    
members should be mutually respectful.                                                                                          
Co-Chair Neuman  urged all  members to do  their best  to be                                                                    
2:07:44 PM                                                                                                                    
Representative    Kawasaki    brought   up    Representative                                                                    
Thompson's  comments  on projections  for  oil  and gas  tax                                                                    
credits. He  noted that DOR released  historical information                                                                    
on  production  tax  credits.  In his  freshman  year  as  a                                                                    
legislator the  state did  not have  any refundable  oil and                                                                    
gas  tax credits.  He continued  that in  the previous  year                                                                    
preliminary numbers  were about  $600 million  in refundable                                                                    
tax credits,  $625 million in  2015, and $700 in  the coming                                                                    
year.  He opined  that the  legislature should  be reviewing                                                                    
the  amounts  of  the  credits  and  the  total  amount.  He                                                                    
remarked that  it was a  "spend" and was within  the state's                                                                    
tax code. He asked if it should be part of the discussion.                                                                      
Mr. Teal thought it was  part of the discussion. Tax credits                                                                    
were included in the forecast  and were declining. The graph                                                                    
did  not  provide  a  history   but  it  was  available.  He                                                                    
suggested  that  the  tax credits  had  been  fairly  large.                                                                    
Another way to  look at the tax credits was  to view them as                                                                    
a loss of  revenue rather than an  expenditure. He explained                                                                    
that it was  debatable how to treat a  tax credit. Certainly                                                                    
the  tax  credits  claimed  by the  major  producers  was  a                                                                    
reduction of  revenue. The tax credits  that were refundable                                                                    
appeared  as  an expenditure.  He  asserted  that both  were                                                                    
really reductions  in revenue.  If the expenditure  line was                                                                    
reduced  by $700  million in  conjunction with  reducing the                                                                    
revenue line by $700, the deficit would remain the same.                                                                        
Co-Chair  Neuman commented  that there  were a  multitude of                                                                    
tax credits involved.                                                                                                           
Representative  Kawasaki  asked  about  the  small  producer                                                                    
credits under SB 21 [Oil  and gas production tax legislation                                                                    
passed  in 2013]  amounted to  $44 million  in the  previous                                                                    
year, rose to  $50 million, rose again to  $60 million, then                                                                    
began to taper off. He  asked about the credits used against                                                                    
tax  liability  and  the refundable  credits  looked  to  be                                                                    
increasing in  the following several years.  He relayed that                                                                    
in FY 07 showed $600  million in tax credits, $1.4 [billion]                                                                    
in  FY  15,  $1.2  [billion] in  the  following  year,  $1.3                                                                    
[billion],   and   $1.8   [billion].   In   terms   of   the                                                                    
sustainability of  the budget  whether credits  used against                                                                    
the  liability or  refundable credits,  which were  actually                                                                    
expenditures, the numbers seemed  to be increasing according                                                                    
to  DOR.  [Note:  Representative  Kawasaki  referred  to  an                                                                    
unspecified document].  Mr. Teal  indicated that he  did not                                                                    
have the revenue forecast in front of him.                                                                                      
Co-Chair  Neuman  interjected  that   no  one  else  on  the                                                                    
committee  had the  information Representative  Kawasaki was                                                                    
referring to.                                                                                                                   
Mr. Teal reported that when  he looked at the information he                                                                    
focused only on the expenditure  side. He furthered that LFD                                                                    
took the revenue  forecast as a given. He had  not looked at                                                                    
the detail  to determine what  was built  in by DOR  and how                                                                    
much was attributable  to the regular tax  credits for major                                                                    
producers.  He added  that LFD  did track  tax credits  more                                                                    
carefully and relayed that they  were projected to drop from                                                                    
the  current  level  of  $700   [million]  to  roughly  $250                                                                    
[million]. After looking at his  paperwork he confirmed that                                                                    
the tax  credits were supposed  to drop from  $716 [million]                                                                    
to $400 [million] to $250 [million] in the future.                                                                              
Co-Chair  Neuman  interjected  that  care had  to  be  taken                                                                    
because   some  of   the  credits   were  done   under  ACES                                                                    
legislation and some were done under SB 21.                                                                                     
2:12:28 PM                                                                                                                    
Representative Kawasaki pointed out  that when he first took                                                                    
office there were no costs  associated with tax credits. The                                                                    
state did not have a refundable  tax credit at all. It was a                                                                    
very  significant expense.  He also  noted that  the credits                                                                    
used  against liability  due to  the per-barrel  credit that                                                                    
would come into  effect soon seemed to keep  growing off the                                                                    
chart.  He asked  the presenter  to refer  to figure  3. The                                                                    
light blue  bars on the  chart representing UGF  revenue for                                                                    
statewide  operating costs  would be  growing. Whereas,  the                                                                    
dark  blue representing  agency operations  such as  funding                                                                    
for schools and troopers would  be declining. He opined that                                                                    
it was alarming that the big  blue line was not being looked                                                                    
at as part of the problem.                                                                                                      
Co-Chair  Neuman remarked  that  he  believed the  committee                                                                    
had.  He explained  that in  looking at  statewide operating                                                                    
costs  a moratorium  on school  bond debt  reimbursement was                                                                    
imposed, a statewide salary freeze  was implemented for both                                                                    
union and  non-union employees,  and there  was a  freeze on                                                                    
education funding to name a few.                                                                                                
Mr. Teal responded that  Representative Kawasaki was correct                                                                    
that  when he  took office  the tax  credits did  not exist.                                                                    
However,  the statewide  operating costs  in 2006  were less                                                                    
than  $300   million  total.  Statewide   expenditures  were                                                                    
comprised  of  debt  service. The  legislature  had  started                                                                    
issuing  general obligation  bonds. He  reported that  bonds                                                                    
had been  paid off  at a  certain point  in time  [Note: Mr.                                                                    
Teal  pointed to  an  unspecified place  in  Figure 3].  The                                                                    
bonds were  issued and currently  the debt service  was over                                                                    
$200 million per year.                                                                                                          
Mr. Teal continued  to explain that in  2008 both retirement                                                                    
costs and the  tax credits began. The  growth represented by                                                                    
the blue line  was primarily retirement costs.  Both went to                                                                    
$700 million in the current  year. Retirement costs had also                                                                    
climbed  over  $700  million  in   the  previous  year.  The                                                                    
legislature took  action in the  prior year  depositing $300                                                                    
billion of state assistance to  the retirement funds as well                                                                    
as applied  the changes  involved in  re-amortization. These                                                                    
actions reduced  the amount to  $250 million in  the current                                                                    
year.  He  commented that  it  was  a massive  $500  million                                                                    
reduction in  retirement debt.  Currently, tax  credits made                                                                    
up half  of the statewide budget.  The legislature addressed                                                                    
the  other  major  statewide  expenditures:  bond  debt  and                                                                    
2:16:14 PM                                                                                                                    
Co-Chair Neuman  added that  the legislature  reduced agency                                                                    
operations  by  $444 million  from  the  prior year  to  the                                                                    
current year. Mr. Teal asked  which document Co-Chair Neuman                                                                    
was referring to.                                                                                                               
Co-Chair  Neuman  responded  that  he  was  looking  at  the                                                                    
spreadsheet  numbered   1516.1  titled,  Gas   State  Fiscal                                                                    
Summary.  He relayed  that  the state  had  $444 million  in                                                                    
agency  operations and  about $477  million  in capital.  He                                                                    
noted that Mr.  Teal had stated that there  was $450 million                                                                    
to  $500 million  less in  retirement costs  in the  current                                                                    
year  because  about  $3  billion had  been  paid  into  the                                                                    
retirement finds. Instead  of having to pay  $700 million in                                                                    
the current year,  the state had to pay  about $200 million.                                                                    
The  state  reduced  the   statewide  agency  operations  by                                                                    
approximately $1.4 billion from  the previous year. Mr. Teal                                                                    
agreed  that  what Co-Chair  Neuman  stated  was true  after                                                                    
correcting for the retirement.                                                                                                  
Co-Chair Thompson reported that the  tax credits were put in                                                                    
place  due to  declining  throughput. The  state  had to  do                                                                    
something  to encourage  new investment,  new drilling,  and                                                                    
new  oil  into the  line.  It  was  also done  to  encourage                                                                    
production  in  Cook  Inlet. He  thought  the  credits  were                                                                    
working.  All of  a  sudden the  state  went from  brown-out                                                                    
practices in  Anchorage and the  possibility that  the state                                                                    
would run out  of gas to currently there was  not a problem.                                                                    
He  relayed that  have of  the  tax credits  applied in  the                                                                    
previous year  were associated with  Cook Inlet.  There were                                                                    
small producers on the North  Slope drilling, exploring, and                                                                    
discovering new  oil, confirming  that the tax  credits were                                                                    
working. Also,  the amount of equipment  the Alaska Railroad                                                                    
was shipping to the North  Slope, such as drill stems, pipe,                                                                    
and equipment was at an  all-time high over the previous ten                                                                    
years. He elaborated that there  was three times the tonnage                                                                    
that  was hauled  to the  North  Slope in  the current  year                                                                    
compared to the prior year.  The tax credits were also being                                                                    
reduced. The  state reached $750  million in tax  credits in                                                                    
the current year, a surprise to  the state. Both ACES and SB
21 credits applied.  The state doubled up  because there was                                                                    
an expedited  amount of time  for producers to  submit them.                                                                    
The state was  projected to payout $250  million in credits.                                                                    
He reemphasized  that the tax  credits had worked.  Once oil                                                                    
was   found  it   took   two  to   three   years  to   build                                                                    
infrastructure  before  the oil  hits  the  line. The  state                                                                    
would not see  immediate results. However, he  felt that the                                                                    
state  would   see  a  turn-a-round   and  an   increase  in                                                                    
Co-Chair  Neuman  noted  that   there  would  be  plenty  of                                                                    
discussions on oil and gas taxes in the future.                                                                                 
2:19:40 PM                                                                                                                    
Representative  Munoz  agreed  with Co-Chair  Thompson  that                                                                    
there was  a combination of  tax credits for Cook  Inlet and                                                                    
the North  Slope under two  different structures  (one under                                                                    
ACES and one under SB 21)  that equaled the $700 million and                                                                    
were expected  to go  down in the  following few  years. She                                                                    
thought  it was  very fair  to  tell the  entire story  when                                                                    
discussing the tax credits.                                                                                                     
Representative  Gara agreed  with  Representative Munoz  and                                                                    
Representative  Thompson that  smartly  written tax  credits                                                                    
encouraged  production. However,  the state  had to  have an                                                                    
oil tax that could afford  the credits, which he thought was                                                                    
the problem. He commented that  the state had probably saved                                                                    
itself roughly  $750 million by  paying down  the retirement                                                                    
debt.  Had  the state  not  chosen  to  do so,  the  current                                                                    
retirement  payment  would  have equaled  about  $1  billion                                                                    
rather than $250 million. Although  the savings did not show                                                                    
anywhere,  the state  had  saved money  by  paying down  the                                                                    
debt. He  reemphasized a  savings of  about $750  million in                                                                    
the current year and wanted to verify his number.                                                                               
Co-Chair  Neuman  thought  the  retirement  expenditure  was                                                                    
going to be about $700 million instead of $1 billion.                                                                           
Mr. Teal  relayed that depending on  the amortization method                                                                    
used  (the  Alaska  Retirement  Management  Board  preferred                                                                    
level  dollar) the  payments would  have been  just over  $1                                                                    
billion in  the current  year instead  of $250  million that                                                                    
the state was paying.                                                                                                           
Representative  Gara gave  credit  to  the good  bi-partisan                                                                    
work that was done.                                                                                                             
Co-Chair  Neuman asked  committee members  to be  mindful of                                                                    
the  time  as  the  Department of  Administration  was  also                                                                    
present to  discuss union  contracts before  the end  of the                                                                    
2:23:07 PM                                                                                                                    
Representative Gara  stated that  the cloud  over everyone's                                                                    
heads was the impending  government shutdown. He asked about                                                                    
the state's financial status if  the legislature remained at                                                                    
an impasse on  the budget beyond July 1, 2015.  He had heard                                                                    
from  OMB that  there was  money  available as  a result  of                                                                    
delaying payments to  maintain government operations through                                                                    
August  27,   2015.  He  wondered   if  there  was   also  a                                                                    
continuation budget for FY 16 to keep operations running.                                                                       
Mr. Teal stated  that the legislature was not  like the U.S.                                                                    
Congress  where  there  was an  option  to  pass  continuing                                                                    
resolutions.  The legislature  either passed  a budget  bill                                                                    
and  made the  appropriations or  did not.  Congress had  an                                                                    
authorization  and an  appropriation process.  If the  state                                                                    
did not  have a  signed appropriation  bill the  state could                                                                    
not  spend money  from  the treasury.  He  was uncertain  of                                                                    
Representative  Gara's reference  to a  plan, but  there was                                                                    
not  a  continuing  resolution that  would  take  effect  to                                                                    
enable spending if a signed budget was not in place.                                                                            
Co-Chair Neuman  remarked about previous votes  on the House                                                                    
floor  that failed.  He  discouraged  members from  entering                                                                    
into a discussion about those votes.                                                                                            
Representative  Gara believed  it was  clear that  without a                                                                    
budget by  July 1, 2015, there  would be no funding  [for FY                                                                    
16]. He asked  if he was correct. Mr. Teal  responded in the                                                                    
Co-Chair Neuman  added, "If there  is no money, there  is no                                                                    
Vice-Chair Saddler asked if there  had ever been a situation                                                                    
in which the governor had  introduced a new operating budget                                                                    
before  signing  or vetoing  a  budget  bill passed  by  the                                                                    
legislature  and transmitted  by the  legislature. Mr.  Teal                                                                    
did not believe so; however, he  could not swear that it had                                                                    
never happened.                                                                                                                 
2:26:49 PM                                                                                                                    
Representative Gattis  cited that  the legislature  had been                                                                    
unable to get the votes to  access the CBR to fully fund the                                                                    
FY 16  budget. She asked  Mr. Teal  if he was  familiar with                                                                    
any other  economists such as  those at  Commonwealth North,                                                                    
and  at  the  Institute  of  Social  and  Economic  Research                                                                    
(ISER). She  relayed that in  ISER's report there  were some                                                                    
technicalities that,  upon further  research, may  allow for                                                                    
access to the  CBR and the use of income  from the Permanent                                                                    
Fund.  Mr.  Teal  had not  seen  the  report  Representative                                                                    
Gattis was referring to.                                                                                                        
Representative Gattis wanted  to look at all  of the options                                                                    
including those  suggested by outside experts.  She reported                                                                    
that the House was four votes short of passing a budget.                                                                        
Co-Chair Neuman  responded that there were  many options and                                                                    
the legislature  would be looking  at every  possible option                                                                    
2:28:51 PM                                                                                                                    
AT EASE                                                                                                                         
2:34:42 PM                                                                                                                    
Co-Chair   Neuman  reviewed   the  history   of  the   union                                                                    
contracts.  He  reported  that   in  the  present  year  the                                                                    
legislature passed  legislation that  froze salaries  at the                                                                    
current level  eliminating increases  in salaries  for union                                                                    
and non-union employees. The changes  were made in an effort                                                                    
to slow down  the growth of government.  Although the salary                                                                    
increases were frozen, step increases  were not affected and                                                                    
equated to  approximately $32 million  per year.  The salary                                                                    
increases for non-union employees  totaled about $18 million                                                                    
and   salary   increases   for   union   employees   equaled                                                                    
approximately  $35 million  or $36  million. The  discussion                                                                    
that was to pursue would  focus on the governor's request in                                                                    
HB  1001 to  finance a  salary increase  of 2.5  percent for                                                                    
union employees  to honor  year three  of the  state's union                                                                    
Representative  Gattis  asked  the commissioner  to  explain                                                                    
some  terms,  such as  "step",  for  individuals working  in                                                                    
private industry.                                                                                                               
Co-Chair  Neuman  suggested  that  the  department  provided                                                                    
definitions on the first page of the presentation.                                                                              
2:36:43 PM                                                                                                                    
SHELDON FISHER, COMMISSIONER,  DEPARTMENT OF ADMINISTRATION,                                                                    
expressed his  thanks for the  opportunity to  appear before                                                                    
the committee. He explained that  due to the time constraint                                                                    
he would  be moving  quickly through the  slide presentation                                                                    
to allow  time for questions at  the end. He would  focus on                                                                    
the monetary  terms and  potentially the  bargaining process                                                                    
if time allowed.                                                                                                                
Co-Chair Neuman  asked Commissioner  Fisher to  explain step                                                                    
increases. Commissioner Fisher indicated the answer to Co-                                                                      
Chair Neuman's question was part of the slide presentation.                                                                     
Commissioner Fisher referred to slide 3: "Bargaining Units                                                                      
    Contracts That Expired on June 30, 2014 (Number of                                                                          
     · IBU -Inlandboatmens' Union of the Pacific (624)                                                                          
     · MEBA -Marine Engineers Beneficial Association (94)                                                                       
     · MMP -Masters, Mates and Pilots (98)                                                                                      
     Contracts That Expire on June 30, 2015                                                                                     
     · ACOA -Alaska Correctional Officers Association (947)                                                                     
     · LTC -Public Employees, Local 71 (1,690)                                                                                  
     · TEAME -Teachers' Education Association of Mt.                                                                            
        Edgecumbe (29)                                                                                                          
     Contracts That Expire on June 30, 2016                                                                                     
    · ASEA -Alaska State Employees Association (8,303)                                                                          
     · APEA -Alaska Public Employees Association (2,278)                                                                        
     · CEA -Confidential Employees Association (188)                                                                            
     Contracts That Expire on June 30, 2017                                                                                     
     · AVTECTA -Alaska Vocational Technical Center Teachers                                                                     
     · PSEA -Public Safety Employees Association (491)                                                                          
    Non-Covered -Exempt, Partially Exempt and Excluded                                                                          
Commissioner  Fisher   outlined  that   the  state   had  11                                                                    
bargaining  units   (BU).  Each  BU   negotiated  three-year                                                                    
contracts. He pointed out that  the first three BU contracts                                                                    
expired in the  prior year and were  negotiated the previous                                                                    
fall  as  well   as  the  first  contract   for  the  Alaska                                                                    
Correctional  Officers  Association   (ACOA).  The  monetary                                                                    
terms of  these four  contracts, representing a  little over                                                                    
12  percent  of  the  state's  workforce,  were  before  the                                                                    
legislature for consideration.  The department was currently                                                                    
in  negotiations for  the following  two  contracts for  the                                                                    
Public  Employees,   Local  71   (LTC)  and   the  Teachers'                                                                    
Education  Association of  Mt.  Edgecumbe  (TEAME); the  two                                                                    
units equaled about 11 percent  of the state's workforce. He                                                                    
furthered   that  in   the  fall   of   the  current   year,                                                                    
negotiations would begin for contracts  that expired on June                                                                    
30,  2016  representing  about 73  percent  of  the  state's                                                                    
workforce).  He pointed  out  that  the contracts  currently                                                                    
before  the legislature  in addition  to contracts  it would                                                                    
consider  the  following  session,  represented  roughly  95                                                                    
percent  of  the  state's overall  workforce.  He  would  be                                                                    
discussing it further as he went through the presentation.                                                                      
2:39:12 PM                                                                                                                    
Commissioner Fisher turned to slide 4: "Monetary Terms":                                                                        
     In addition to negotiated Cost of Living Adjustments,                                                                      
     State employees receive:                                                                                                   
     Merit Increases                                                                                                            
     · Steps A-F (A-G for General Government Unit members)                                                                      
        on the salary schedule;                                                                                                 
     · Represent an increase of approximately 3.5% every                                                                        
       year providing the employee's performance is                                                                             
        considered "acceptable or better;"                                                                                      
     · Automatically awarded unless a proactive action is                                                                       
        taken to deny the merit increase through a timely                                                                       
        performance evaluation.                                                                                                 
     Pay Increments                                                                                                             
     · 3.25% increase awarded every two years providing the                                                                     
        employee's performance is "acceptable or better;"                                                                       
     · For administrative purposes, pay increments are                                                                          
       designated as steps J and above on the salary                                                                            
     · No limit as to how many pay increments an employee                                                                       
        can earn.                                                                                                               
Commissioner  Fisher offered  that there  were two  or three                                                                    
concepts related  to the growth  in wages for  an individual                                                                    
employee. The first was a  cost of living adjustment (COLA).                                                                    
There had been significant  discussion about the adjustment,                                                                    
which  he would  detail in  a following  slide. The  cost of                                                                    
living adjustment  was intended to address  inflation and to                                                                    
protect employees from adjustments in inflation.                                                                                
Commissioner   Fisher   continued   that  there   were   two                                                                    
additional concepts that  were referred to as  step or merit                                                                    
increases  and pay  increments. He  explained that  merit or                                                                    
step  increases  occurred within  the  first  five years  of                                                                    
employment with the state. Each  year, in addition to a cost                                                                    
of  living  increase, an  employee  received  a 3.5  percent                                                                    
increase. Following the  first five years and  six years for                                                                    
the General Government Unit (GGU)  pay increments kicked in.                                                                    
Pay increments were provided every  two years and equaled an                                                                    
increase  of 3.25  percent. He  summarized  that the  salary                                                                    
increases  an  employee  received   in  their  lifetime  was                                                                    
comprised of  COLA increases (merit increases  for the first                                                                    
5 or 6 years of employment) and pay increments.                                                                                 
2:41:49 PM                                                                                                                    
Commissioner Fisher  referred to slide 5:  "Monetary Terms."                                                                    
He noted  that there were  other monetary terms  relating to                                                                    
differential, travel  pay, and  training that  factored into                                                                    
BU negotiations.                                                                                                                
Commissioner   Fisher  continued   with  slide   6:  "Sample                                                                    
Historical COLAs  and CPI Comparison." The  slide provided a                                                                    
sense of  the Consumer Price  Index (CPI) increases  as well                                                                    
as the negotiated COLA increases  for the previous 10 years.                                                                    
Over  the past  10 years  there had  been an  approximate 23                                                                    
percent increase in the CPI.  Each BU had a story associated                                                                    
with the CPI percentage.  Sometimes the BUs wanted something                                                                    
else in  lieu of receiving  a portion of the  COLA increase,                                                                    
for example. The slide depicted a  range of 24 percent to 14                                                                    
percent. Additionally,  in the  third column from  the left,                                                                    
under  the  heading  "Non-Covered",  employees  received  24                                                                    
percent.  Essentially  the practice  had  been  to give  the                                                                    
state's non-covered  employees the  same COLA  increase that                                                                    
had been negotiated with the state's supervisory union.                                                                         
Commissioner  Fisher advanced  to  slide  7: "Built-In  Wage                                                                    
Escalation: COLA  + Longevity." He suggested  that the slide                                                                    
highlighted the  salary increase that an  employee received.                                                                    
He specified  that the  slide represented the  GGU BU  for a                                                                    
10-year  period from  2006  to 2015.  Over  the previous  10                                                                    
years the  combined COLA and  merit increases resulted  in a                                                                    
63 percent hourly wage increase.                                                                                                
Commissioner Fisher  moved to slide 8:  "Average Yearly Base                                                                    
Salary for FY 14." He  highlighted that the slide showed the                                                                    
average annual pay  by the various units.  It also accounted                                                                    
for  geographical differentials  sometimes  paid to  attract                                                                    
and retain  people in  high-cost areas  but did  not include                                                                    
2:44:51 PM                                                                                                                    
Commissioner  Fisher  skipped   to  slide  17:  "Contractual                                                                    
Terms."  He indicated  that there  had been  questions about                                                                    
potential consequences if the  legislature chose not to fund                                                                    
and to  reject the contracts, something  the legislature had                                                                    
the right  to do. He  explained that in each  contract there                                                                    
was a  period of  negotiations. For  example, in  looking at                                                                    
the  GGU  or  Alaska   State  Employees  Association  (ASEA)                                                                    
contract the state was contractually  required to enter into                                                                    
Co-Chair Neuman  asked for clarification about  what type of                                                                    
employees were part of the  GGU or ASEA. Commissioner Fisher                                                                    
replied that  the GGU  typically represented  employees that                                                                    
were secretaries,  clerical workers, and  some environmental                                                                    
Co-Chair  Neuman asked  if GGU  represented the  majority of                                                                    
state employees. Commissioner Fisher  confirmed that GGU was                                                                    
the majority of state employees.  The GGU was the largest BU                                                                    
with over 8 thousand members.  If an agreement was unable to                                                                    
be negotiated members  could take a strike vote  after a 10-                                                                    
day period  of renegotiations.  All of the  bargaining units                                                                    
had  some  language in  their  contracts  that required  the                                                                    
state  to   enter  into  negotiations  and   renegotiate  if                                                                    
necessary. He added that it  was his interpretation that the                                                                    
department  would  not  be  negotiating  on  monetary  terms                                                                    
because the  legislature had already expressed  its opinion.                                                                    
Instead,  it would  be  attempting to  find  other areas  of                                                                    
agreement that  would continue to  support the  contract. He                                                                    
reiterated  the  department's  position  that  it  was  very                                                                    
important  to  honor  the contracts.  He  relayed  that  the                                                                    
contracts  were entered  into in  good faith.  The employees                                                                    
had relied  upon them. He  believed that if  the legislature                                                                    
rejected  the contracts  (specifically those  contracts that                                                                    
the legislature had previously  approved the monetary terms)                                                                    
it would make  it more difficult for the  state to negotiate                                                                    
in the  future, particularly if  the state asked  the unions                                                                    
to  forego  a current  benefit  with  a commitment  to  some                                                                    
future benefit. The administration  urged the legislature to                                                                    
honor  the  commitments  that had  been  provided  to  state                                                                    
Co-Chair Neuman  asserted that most  of what was  covered in                                                                    
the remainder  of the handout  was individual  BU summaries.                                                                    
He  reiterated that  all of  the contracts  were subject  to                                                                    
appropriation. He reviewed that  the legislation that passed                                                                    
reflected  contract  negotiations  during a  time  when  the                                                                    
price of  oil was  over $100 per  barrel versus  the current                                                                    
price below $50 per barrel  of oil. The legislature chose to                                                                    
find ways to reduce the  budget. He expressed the difficulty                                                                    
of  making a  decision  not to  fund  the salary  increases.                                                                    
Several  legislators  delivered  heartfelt messages  on  the                                                                    
House floor on the issue.  He expressed appreciation for all                                                                    
of the  hard work  of state employees.  The decision  not to                                                                    
continue to fund  the increases had more to  do with keeping                                                                    
as  many  employees  in their  current  positions  at  their                                                                    
present  salaries rather  than people  losing their  jobs to                                                                    
fund another employee's increases.  He reemphasized that the                                                                    
vote was very emotional for many House members.                                                                                 
2:50:33 PM                                                                                                                    
Vice-Chair  Saddler referred  to slide  2 [Note:  Vice-Chair                                                                    
Saddler   was  actually   referring  to   slide  4   of  the                                                                    
presentation].  He   asked  whether   the  cost   of  living                                                                    
adjustment was  a separate increase from  the merit increase                                                                    
of  3.5  percent annually  and  the  pay increment  of  3.25                                                                    
percent  every  two  years.  Commissioner  Fisher  responded                                                                    
affirmatively.  He elaborated  that employees  saw both  the                                                                    
cost  of living  adjustment  and either  the merit  increase                                                                    
within  the   first  five  years   or  the   pay  increments                                                                    
Vice-Chair Saddler  asked about the percentage  of employees                                                                    
who   did  not   qualify   for  merit   or  pay   increases.                                                                    
Commissioner Fisher  responded that the only  employees that                                                                    
would not  qualify for  a merit or  pay increase  were those                                                                    
who  had  been  rated  below "acceptable."  He  thought  the                                                                    
percentage was less than 1 percent.                                                                                             
Vice-Chair Saddler  asked the  commissioner to  confirm that                                                                    
99 percent of state  employees received automatic increases.                                                                    
Commissioner Fisher answered, "Yes."                                                                                            
Representative  Pruitt referred  to slide  4 concerning  the                                                                    
merit increase discussion. He  understood the merit increase                                                                    
existed  only for  the  first six  years  of employment.  He                                                                    
wondered if  the term was set  to zero again if  an employee                                                                    
was promoted to a different position.                                                                                           
Commissioner  Fisher   offered  that  it  depended   on  the                                                                    
position and  the individual's circumstance.  It may  or may                                                                    
not start again.                                                                                                                
2:52:29 PM                                                                                                                    
Representative  Pruitt  wanted   to  better  understand  the                                                                    
impact  of   not  honoring  the   already-agreed-upon  union                                                                    
contracts and  how it  might affect  the state's  ability to                                                                    
negotiate contracts in  the future. He noted  he was looking                                                                    
at  slide  17  outlining  contractual terms.  He  wanted  to                                                                    
better understand the timeline.                                                                                                 
Commissioner Fisher  explained the process  of negotiations.                                                                    
For example, the department would  begin negotiations in the                                                                    
fall of 2015 for those contracts  that expired at the end of                                                                    
June  in  2016.  The  department  would  then  come  to  the                                                                    
legislature  with   monetary  terms  during   the  following                                                                    
session. The monetary terms would  be before the legislature                                                                    
for approval  or rejection  prior to  the expiration  of the                                                                    
contract.  If the  legislature accepted  the monetary  terms                                                                    
then  they would  go  into  effect. If  the  terms were  not                                                                    
accepted  additional  negotiations  would ensue.  He  opined                                                                    
that there was an  important distinction between rejecting a                                                                    
previously negotiated  contract approved by  the legislature                                                                    
and rejecting  a contract  that was  being presented  to the                                                                    
legislature for approval  for the first time.  In the former                                                                    
scenario where a  contract was negotiated in  good faith and                                                                    
approved by  the legislature,  he felt  it was  important to                                                                    
honor and  respect the  contract in order  for the  state to                                                                    
maintain its credibility with the bargaining units.                                                                             
2:55:33 PM                                                                                                                    
Representative  Pruitt asked  about what  would happen  if a                                                                    
vote was taken at the end  of session and the contracts were                                                                    
voted down. He wanted to know what actions would follow.                                                                        
Commissioner Fisher reported that  the state would negotiate                                                                    
a  revised  set  of  terms.   Assuming  that  there  was  no                                                                    
opportunity for the  legislature to take action  on it until                                                                    
the  following session,  the state  would in  all likelihood                                                                    
continue  with the  union under  the  current terms  through                                                                    
July  until the  legislature  reconvened. In  the event  the                                                                    
state  has agreed  to terms  that  the legislature  approved                                                                    
then a retroactive  payment would be initiated  to cover the                                                                    
Representative Pruitt asked about  the current situation. He                                                                    
wondered why  "subject to appropriation" was  included if it                                                                    
was really  not a tool  in the legislative toolbox  when the                                                                    
state did not have money.                                                                                                       
Commissioner  Fisher responded  that there  was no  question                                                                    
that the legislature had the  right to reject the contracts.                                                                    
He agreed that  it was a tool in  the legislature's toolbox.                                                                    
He  and   the  administration   believed  that   there  were                                                                    
consequences   that  would   follow  from   the  legislature                                                                    
breaking  the contract.  He continued  that he  believed the                                                                    
consequences would be  more costly in the  end. The governor                                                                    
had signaled  to DOA and  DOA had  signaled to the  BUs that                                                                    
the  state  intended  to  negotiate  very  aggressively  any                                                                    
future contracts.                                                                                                               
2:59:05 PM                                                                                                                    
Representative  Gattis  wondered   why  non-exempt  [exempt]                                                                    
employees would  not want to  become union employees  if the                                                                    
legislature   honored  only   the   union  employee   salary                                                                    
increases.  She  argued that  the  state  was sending  mixed                                                                    
messages when  it did  not honor all  of its  employees. She                                                                    
was concerned about  sending a message to  all Alaskans that                                                                    
one  group  of  individuals would  receive  their  increases                                                                    
while  another group  would  not. She  felt  such an  action                                                                    
would encourage employees  to join a union.  She opined that                                                                    
it was  a poor message  to convey.  She also wanted  to make                                                                    
sure that  all state workers  understood that the  state was                                                                    
on a  fiscal cliff. She  stated emphatically that  the state                                                                    
had to do something different.                                                                                                  
Representative  Wilson commented  that the  state negotiated                                                                    
the terms  with what it  had. She  did not believe  that the                                                                    
legislature  was   being  disrespectful  by   rejecting  the                                                                    
negotiated contracts. She expressed  her appreciation to all                                                                    
state employees for the work  they do throughout Alaska. She                                                                    
opined that she did not  see the rejection of the negotiated                                                                    
contracts  as a  loss  of credibility.  She  argued that  it                                                                    
would be different if the  state had a significant amount of                                                                    
money.  She asked  why the  administration did  not approach                                                                    
the unions  in the  prior months  of December  through April                                                                    
since it did not like  the legislature's decision. The state                                                                    
did not have money. She  wanted to know why the commissioner                                                                    
had  not  approached  the unions,  rather  than  making  the                                                                    
legislature do it.                                                                                                              
Commissioner  Fisher was  uncomfortable  with revealing  any                                                                    
conversations with the unions. He  did say that the governor                                                                    
had explored every possible option.                                                                                             
Representative Wilson relayed that  in a previous discussion                                                                    
she had  suggested that Commissioner Fisher  or someone from                                                                    
DOA approach  the unions with  the question about  what they                                                                    
preferred:  increasing  wages   but  loosing  employees,  or                                                                    
keeping employees but not  receiving increases. She wondered                                                                    
if anyone had gone to the  unions with the two scenarios she                                                                    
Commissioner  Fisher  indicated  that there  had  been  long                                                                    
conversations   with   the   bargaining  units   about   the                                                                    
consequence of  maintaining the COLA's. The  unions had been                                                                    
clear  on  their  position  that  the  contracts  should  be                                                                    
Co-Chair  Neuman   drew  attention  to   the  commissioner's                                                                    
comments about  honor and  respect regarding  the contracts.                                                                    
He  opined that,  no  matter what  position  a person  took,                                                                    
every person  in the legislature  and in  the administration                                                                    
honored the state employees.                                                                                                    
3:03:19 PM                                                                                                                    
Co-Chair  Thompson reviewed  the  agenda  for the  following                                                                    
week that  were to be  held in Anchorage at  the Legislative                                                                    
Information Office.                                                                                                             
Co-Chair Neuman  thanked the members and  the presenters for                                                                    
their participation.                                                                                                            
HB  1001  was  HEARD  and  HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB 1001 HFC Teal Presentation.pdf HFIN 5/8/2015 1:00:00 PM
HB 1001 Admin House Finance Presenatin 5 8 15.pdf HFIN 5/8/2015 1:00:00 PM