Legislature(2017 - 2018)HOUSE FINANCE 519

01/31/2018 01:30 PM FINANCE

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Audio Topic
03:02:37 PM Start
03:03:30 PM HB285 || HB286
03:03:34 PM Fy 19 Budget Overview: Department of Fish and Game
03:28:24 PM Fy 19 Budget Overview: Department of Commerce, Community and Economic Development
04:09:43 PM Fy 19 Budget Overview: Department of Law
04:31:37 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 10 Minutes Following Session --
Heard & Held
Heard & Held
+ FY19 Dept. Budget Overviews: TELECONFERENCED
- Dept. of Fish & Game
- Dept. of Commerce, Community, & Economic
- Dept. of Law
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 285                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
HOUSE BILL NO. 286                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  making   supplemental  appropriations;                                                                    
     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."                                                                                                        
3:03:30 PM                                                                                                                    
^FY 19 BUDGET OVERVIEW: DEPARTMENT OF FISH AND GAME                                                                           
3:03:34 PM                                                                                                                    
SAM  COTTEN,  COMMISSIONER,  DEPARTMENT OF  FISH  AND  GAME,                                                                    
provided   a   PowerPoint    presentation   titled   "Alaska                                                                    
Department  of Fish  and Game  House  Finance Committee:  FY                                                                    
2019  Budget  Overview"  dated January  31,  2018  (copy  on                                                                    
file). He  relayed that he  would keep careful to  take note                                                                    
of any questions that arose during the meeting.                                                                                 
Commissioner Cotten  began with the department's  mission on                                                                    
slide  2.   He  noted   that  Article   8  of   the  state's                                                                    
constitution provided  guidance to  the department  and gave                                                                    
the legislature  direction on  how to  manage fish  and game                                                                    
resources in Alaska. Section 1,  Article 8 dealt with policy                                                                    
including  developing resources  consistent with  the public                                                                    
interest. One  of the components  of public interest  had to                                                                    
do with conservation. Section  2 described the legislature's                                                                    
requirements  in  terms  of  resource  development  for  the                                                                    
maximum  benefit  of  the people.  Section  4  pertained  to                                                                    
sustained  yield.  He  remarked   that  it  had  often  been                                                                    
mistakenly referred to as  maximum sustained yield; however,                                                                    
the  word   "maximum"  did  not   actually  appear   in  the                                                                    
constitution  pertaining  to  sustained yield.  He  detailed                                                                    
sustained  yield meant  a resource  should not  be harvested                                                                    
beyond what could be regenerated in following years.                                                                            
Commissioner  Cotten turned  to slide  3 and  discussed core                                                                    
services   including   management;  stock   assessment   and                                                                    
research; and  customer service  and public  involvement. He                                                                    
reported  that the  Department of  Fish and  Game (DFG)  was                                                                    
probably  the largest  science  organization  in Alaska;  it                                                                    
took  significant pride  in its  professional  staff -  many                                                                    
people  stayed for  30 more  years and  included scientists,                                                                    
wildlife managers, biologists, geneticists, and others.                                                                         
3:07:23 PM                                                                                                                    
Co-Chair  Seaton  noted  that  Representative  Thompson  and                                                                    
Representative Pruitt had joined the meeting.                                                                                   
Commissioner  Cotten addressed  the  public involvement  the                                                                    
legislature and  DFG had set up  with the Board of  Fish and                                                                    
Board of Game. He had been  told Alaska was unlike any other                                                                    
state  in  terms of  the  regulatory  process involving  the                                                                    
public. He shared  that he had recently been in  Sitka for a                                                                    
two week  [board] meeting  where members  of the  public had                                                                    
the opportunity  to take ample chance  of participating. The                                                                    
board  and department  enjoyed  myriad  benefits from  local                                                                    
knowledge  and  public  input. He  moved  to  a  Legislative                                                                    
Finance  Division  (LFD)   chart  showing  the  department's                                                                    
portion of the  total General Fund (GF)  budget beginning in                                                                    
FY 09 on  slide 4. The department's GF  budget accounted for                                                                    
1.4  percent of  the  overall GF  expenditures. He  remarked                                                                    
that  he  had  to  leave  the meeting  and  would  turn  the                                                                    
presentation over to department staff.                                                                                          
Co-Chair  Seaton noted  that  Representative Guttenberg  had                                                                    
joined the meeting.                                                                                                             
3:08:59 PM                                                                                                                    
Representative  Ortiz  spoke  to  the  department's  concern                                                                    
about the protection of fish  habitat and asked if the state                                                                    
was involved in discussions  on transboundary mining between                                                                    
the Alaskan and British Columbia governments.                                                                                   
Commissioner  Cotten  replied  in the  affirmative.  He  had                                                                    
personally  participated in  many  of the  meetings and  the                                                                    
department's  director of  the  Division  of Habitat,  David                                                                    
Rogers, attended  all of the meetings.  He highlighted field                                                                    
trips the  department had  taken including  one up  the Taku                                                                    
River  with  the  British  Columbia  minister  of  mines  to                                                                    
examine the  Tulsequah Chief Mine.  He detailed  the minster                                                                    
of mines had been surprised to  see a pipe from the old mine                                                                    
shaft   spewing  dirty   water.  He   reiterated  that   the                                                                    
department  was directly  involved  in  the discussions.  He                                                                    
excused himself from the meeting.                                                                                               
Co-Chair Seaton noted that  Representative Tilton had joined                                                                    
the meeting.                                                                                                                    
3:10:56 PM                                                                                                                    
CAROL   PETRABORG,    DIRECTOR,   ADMINISTRATIVE   SERVICES,                                                                    
DEPARTMENT OF FISH AND GAME, moved  to an LFD chart on slide                                                                    
5 and discussed the department's  budget (all funds) by line                                                                    
item.  The  department's  largest  line  item  was  personal                                                                    
services  at  61  percent, followed  by  contractual  at  31                                                                    
percent. Over  91 percent of the  DFG budget was made  up of                                                                    
personal services  and contractual.  She detailed  that half                                                                    
of  the contractual  was for  core services  to other  state                                                                    
agencies.  Slide   6  showed  the  department's   budget  by                                                                    
appropriation  (GF   only).  The  top  line   reflected  the                                                                    
Commercial  Fisheries Division  and the  bottom three  lines                                                                    
reflected Wildlife  Conservation, Sport Fish,  and Statewide                                                                    
Support Services. The budget for  the bottom three divisions                                                                    
trended  down  and  flattened  between  FY  18  and  FY  19.                                                                    
Commercial  Fisheries  had  an  increase in  FY  18  due  to                                                                    
amendments  offered by  Representative Ortiz.  Additionally,                                                                    
in the past  the department had a  component for facilities'                                                                    
rents within  the Statewide Support  Services that  had been                                                                    
allocated out to  the division in order  for expenditures to                                                                    
be reflected in the proper appropriation.                                                                                       
Ms. Petraborg  moved to an  LFD chart on slide  7 reflecting                                                                    
all funds.  She reported  the department's all  funds budget                                                                    
was trending down slightly. Over  the past several years DFG                                                                    
had  reduced "empty"  or uncollectible  fund sources,  which                                                                    
accounted for most of the downward trend.                                                                                       
3:12:52 PM                                                                                                                    
Ms. Petraborg turned  briefly to a map  of Alaska reflecting                                                                    
DFG office locations  on slide 8. She  relayed the following                                                                    
slides showed divisions broken out  by program. Slides 9 and                                                                    
10 pertained  to the Division  of Commercial  Fisheries. She                                                                    
reported DFG typically did not  budget by program due to the                                                                    
department's regional  structure. The information  on slides                                                                    
9 and 10  had been broken out by fish  species. The Division                                                                    
of Sport Fish  was reflected on slides 11 and  12, which had                                                                    
been  broken  out  by  functional  areas.  The  Division  of                                                                    
Wildlife Conservation was shown on  slides 13 and 14 and had                                                                    
been broken  out by  function. She noted  some of  the items                                                                    
were program  specific such  as the  threatened, endangered,                                                                    
and  diversity  program;  and  the  education  and  outreach                                                                    
3:14:17 PM                                                                                                                    
Ms. Petraborg moved to the  Division of Subsistence on slide                                                                    
15. The  division had  two programs -  one for  research and                                                                    
analysis and another for applied research.                                                                                      
Co-Chair  Seaton referenced  Ms. Petraborg's  statement that                                                                    
DFG was eliminating hollow receipt authority.                                                                                   
Ms. Petraborg  confirmed the department was  getting down to                                                                    
truth in  budget. She moved  to slides 16 and  17 pertaining                                                                    
to  the Division  of Administrative  Services. She  reported                                                                    
there  were  two sections  in  the  division that  were  not                                                                    
typically  found  under  administrative  services  divisions                                                                    
including   the   Licensing   Section  (the   division   was                                                                    
responsible  for licensing  for sport  fishing and  hunting)                                                                    
and the  administration for  all small  divisions (including                                                                    
Administrative Services,  Habitat, Subsistence,  boards, and                                                                    
the  Office  of  the  Commissioner).  Slide  18  showed  the                                                                    
Division   of  Habitat,   which   included  permitting   and                                                                    
compliance,  project  review  and monitoring,  and  a  small                                                                    
federal state wildlife grant.                                                                                                   
Ms.  Petraborg  addressed  the  Commercial  Fisheries  Entry                                                                    
Commission (CFEC)  on slide 19.  She detailed that  CFEC was                                                                    
administratively  attached  to  DFG  -  its  allocation  was                                                                    
within the  Commercial Fisheries component, but  it had been                                                                    
separated  out  for  the presentation.  The  Boards  Support                                                                    
Section  broken out  by component  was on  slide 20  and the                                                                    
Office of Commissioner was shown  on slide 21. She noted the                                                                    
slides included links for  additional information related to                                                                    
the  rating of  effectiveness;  the links  were directed  to                                                                    
performance measures on the Office  of Management and Budget                                                                    
(OMB) website  and provided  guidance to  other information.                                                                    
She pointed to healthcare costs  on slide 22 and relayed DFG                                                                    
was  working  with  the  Department  of  Health  and  Social                                                                    
Services on  efforts to get  the word out. According  to the                                                                    
budgeted  numbers  on the  chart,  the  percentage of  total                                                                    
personal  services had  not changed  significantly since  FY                                                                    
14.  She noted  she would  have preferred  to have  the data                                                                    
based on actuals  by fund source, but she could  not get the                                                                    
information to  break out. She  noted that there could  be a                                                                    
substantial  difference  between  the budgeted  numbers  and                                                                    
what actually took place.                                                                                                       
3:17:33 PM                                                                                                                    
Co-Chair Seaton remarked that the  DGF healthcare costs were                                                                    
higher  than  those  in other  departments.  He  wanted  the                                                                    
department   to  address   the  issue   during  the   budget                                                                    
subcommittee process.                                                                                                           
Ms. Petraborg agreed.                                                                                                           
Co-Chair  Seaton   clarified  the  focus  was   on  avoiding                                                                    
preventable costs to decrease the healthcare cost curve.                                                                        
Representative  Ortiz  remarked  on the  funding  reductions                                                                    
across state agencies in recent  years. He asked how DFG had                                                                    
been reduced since FY 15.  Ms. Petraborg answered that DFG's                                                                    
unrestricted general  fund (UGF) budget had  been reduced by                                                                    
almost 37 percent.                                                                                                              
Representative Ortiz  asked if  DFG believed  the reductions                                                                    
were hindering its ability to fulfill its mission.                                                                              
Ms. Petraborg answered that the  department had been able to                                                                    
do  fund source  changes for  much of  the reduced  UGF. The                                                                    
department had  increased general  fund program  receipts to                                                                    
Commercial  Fisheries -  test fish  receipts, which  was not                                                                    
popular. The department had worked  with industry to provide                                                                    
additional  funding   to  cover  some  GF   reductions.  She                                                                    
clarified that the  funds were not guaranteed,  but they had                                                                    
been available  thus far.  As long  as the  department could                                                                    
continue  to get  the  funds it  could  provide its  mission                                                                    
critical  services.  She added  that  the  department was  a                                                                    
research agency and  the more research it could  do the more                                                                    
information it could gather, which  resulted in more precise                                                                    
3:20:41 PM                                                                                                                    
Co-Chair Seaton  asked about slide  4 and remarked  that the                                                                    
department's total  GF was lower than  it had been in  FY 09                                                                    
and FY  10; it was something  the committee had not  seen in                                                                    
many  departments.   He  believed  the   subcommittee  would                                                                    
consider  the effectiveness  of  managing  on a  sustainable                                                                    
level  that  was  not  too   conservative  or  resulting  in                                                                    
foregone harvests.                                                                                                              
Representative  Kawasaki referenced  slide  6, which  showed                                                                    
the  Division of  Wildlife Conservation  had lost  almost 73                                                                    
percent of  its GF. He  observed that the trend  appeared to                                                                    
be  up on  slide 7  showing an  increase of  31 percent.  He                                                                    
questioned the difference  between slides 6 and  7. He asked                                                                    
for more detail on receipts used by the department.                                                                             
Ms.  Petraborg  answered  that  regarding  the  Division  of                                                                    
Wildlife  Conservation,  the  department had  been  able  to                                                                    
offset  GF reductions  with  an increase  to  fish and  game                                                                    
funds. The  passage of  HB 137  had increased  license fees,                                                                    
which  had  helped  tremendously.  The  department  received                                                                    
federal Pittman-Robertson funds (from  the sales of guns and                                                                    
ammunition),  which  were  matched by  the  department.  The                                                                    
state's  apportionment was  at  the highest  level from  the                                                                    
federal  government,  meaning  the department  was  matching                                                                    
more federal dollars.                                                                                                           
Representative   Kawasaki  asked   if  the   department  was                                                                    
receiving  the maximum  Pittman-Robertson funding  available                                                                    
or  whether  an  increase  in  state  matching  funds  would                                                                    
capture more federal funds.                                                                                                     
Ms. Petraborg answered that for  the first time, almost $1.9                                                                    
million in  federal funding had  lapsed because DFG  did not                                                                    
have the state matching funds.                                                                                                  
Representative Kawasaki asked if the match was one to one.                                                                      
Ms. Petraborg  responded that the  match was a three  to one                                                                    
(federal to state respectively).                                                                                                
Co-Chair  Seaton  asked  the subcommittee  to  consider  the                                                                    
3:24:04 PM                                                                                                                    
Representative   Pruitt  stated   there   was  an   existing                                                                    
initiative that would impact DFG  and fell within the fiscal                                                                    
year. He asked  if the department had been  able to quantify                                                                    
how the initiative would impact its budget if passed.                                                                           
Ms. Petraborg  replied she did not  know what Representative                                                                    
Pruitt was referring to.                                                                                                        
Representative  Pruitt  answered  he was  referring  to  the                                                                    
anadromous fish initiative that  would potentially be on the                                                                    
ballot [in the fall].                                                                                                           
Representative  Ortiz  believed  it was  called  the  salmon                                                                    
Ms. Petraborg asked if he was  referring to HB 199 [fish and                                                                    
wildlife habitat protection legislation].                                                                                       
Representative Pruitt  answered that  he was  referencing an                                                                    
initiative that was very similar to HB 199.                                                                                     
Ms. Petraborg  answered that it  would increase  the Habitat                                                                    
Division's budget and workload. She  would have to follow up                                                                    
with more detail.                                                                                                               
Co-Chair Seaton  suggested reviewing the fiscal  note for HB                                                                    
Representative  Pruitt  believed   there  were  some  slight                                                                    
differences  between   the  initiative  and  the   bill.  He                                                                    
requested follow  up. Additionally,  he had been  told there                                                                    
were people  in DFG  that had worked  on the  initiative. He                                                                    
asked if  it was  the case  and thought  it was  outside the                                                                    
scope of what state employees should be doing.                                                                                  
Ms. Petraborg did not know anything about the issue.                                                                            
Representative  Pruitt  asked  if DFG  discovered  the  that                                                                    
someone did  or was  assisting with the  initiative process,                                                                    
whether  it was  allowable or  would result  in disciplinary                                                                    
Ms.  Petraborg answered  that the  question was  outside her                                                                    
realm of expertise.  She reported that if  an issue occurred                                                                    
it would be handled by human resources.                                                                                         
Co-Chair Seaton  stated it would be  an appropriate question                                                                    
for the commissioner.                                                                                                           
Representative Pruitt agreed.                                                                                                   
3:27:29 PM                                                                                                                    
AT EASE                                                                                                                         
3:28:20 PM                                                                                                                    
^FY 19  BUDGET OVERVIEW:  DEPARTMENT OF  COMMERCE, COMMUNITY                                                                  
AND ECONOMIC DEVELOPMENT                                                                                                      
3:28:24 PM                                                                                                                    
MIKE   NAVARRE,   COMMISSIONER,  DEPARTMENT   OF   COMMERCE,                                                                    
COMMUNITY,  AND  ECONOMIC  DEVELOPMENT  (DCCED),  introduced                                                                    
other   department   staff.   He   provided   a   PowerPoint                                                                    
presentation   titled   "Alaska  Department   of   Commerce,                                                                    
Community  and  Economic  Development  Department  Overview:                                                                    
House Finance  Committee " dated  January 31, 2018  (copy on                                                                    
file).  He addressed  the department's  mission on  slide 1,                                                                    
which was  to promote a healthy  economy, strong communities                                                                    
and   protect  consumers   in  Alaska.   He  spoke   to  the                                                                    
department's   diverse    responsibilities   including   the                                                                    
licensing   of   doctors,   pawn  brokers,   midwives,   and                                                                    
morticians.  The  department   trained  rural  residents  to                                                                    
maintain  local utility  systems and  finance infrastructure                                                                    
projects  (often  large   projects)  through  its  corporate                                                                    
quasi-government   agencies.   Additionally,  DCCED   loaned                                                                    
fishermen money to purchase boats  and permits and it worked                                                                    
to hold down the cost of health insurance.                                                                                      
Commissioner  Navarre  relayed   the  department  activities                                                                    
created the framework for a  strong economy - the foundation                                                                    
necessary for economic growth. He  explained the items could                                                                    
present  obstacles  to  economic   growth  if  not  properly                                                                    
addressed.  For example,  healthcare  costs  in Alaska  were                                                                    
extraordinarily high  and unsustainable and  impacted public                                                                    
and  private  sector  budgets. He  reported  the  issue  was                                                                    
something DCCED  was working to address  in conjunction with                                                                    
other departments  as part of a  healthcare authority review                                                                    
and to  determine other  ways to combine  and gain  a better                                                                    
handle on healthcare costs.                                                                                                     
Commissioner  Navarre  shared  that  he  was  working  on  a                                                                    
detailed  presentation on  fiscal  policy that  he hoped  to                                                                    
present to  the committee.  He listed the  department's four                                                                    
core  services   listed  on   slide  2   including  consumer                                                                    
protection,   economic  growth,   strong  communities,   and                                                                    
affordable  energy.   The  slide   included  web   links  to                                                                    
department  program and  budget  information for  additional                                                                    
3:31:01 PM                                                                                                                    
Commissioner  Navarre addressed  an organizational  chart on                                                                    
slide 3, which  included six core divisions  (shown in blue)                                                                    
and six corporate entities (shown  in yellow). The corporate                                                                    
entities  were aligned  with  the  department's mission  and                                                                    
appeared in its budget -  DCCED provided the entities with a                                                                    
variety  of services  varying by  entity. Services  included                                                                    
information  technology,  human   resources,  and  personnel                                                                    
services. The entities were governed  by boards appointed by                                                                    
the governor  and confirmed by  the legislature  rather than                                                                    
by the  commissioner of the department.  The Alaska Railroad                                                                    
was  also part  of the  department's corporate  entities but                                                                    
was exempt  from the Budget  Act and  did not appear  on the                                                                    
chart.  The  department  had  office  locations  in  Juneau,                                                                    
Anchorage,  Fairbanks,   Dillingham,  Kotzebue,   Nome,  and                                                                    
Bethel (Community  and Regional Affairs  held responsibility                                                                    
for the  last four).  He elaborated that  Kodiak had  a one-                                                                    
person  office  staffed  by   an  Alaska  Seafood  Marketing                                                                    
Institute (ASMI)  employee. He reported that  ASMI's Seattle                                                                    
office  was scheduled  to close  by the  end of  FY 18.  The                                                                    
positions  had  been relocated  to  Juneau,  which had  been                                                                    
initiated by the legislature.                                                                                                   
Commissioner Navarre  moved to slide  4 and spoke  about the                                                                    
department's  FY 19  budget of  $166.781 million.  The slide                                                                    
provided a  picture of the  department's overall  budget and                                                                    
gave  context  to proposed  changes.  The  chart depicted  a                                                                    
response to the  drop in oil revenue that  began in calendar                                                                    
year  2014. The  first column  showed  FY 15  with a  budget                                                                    
total  of  $215  million  and 585  positions.  Since  FY  15                                                                    
federal funds had  remained fairly steady, there  had been a                                                                    
$2.7  million  drop  in  tourism  marketing  funding,  a  $3                                                                    
million  in  revised  cost   estimates  for  Alaska  Gasline                                                                    
Development Corporation (AGDC), $1  million in Alaska Energy                                                                    
Authority (AEA)  energy receipts,  and $2 million  in Alaska                                                                    
Industrial   Development   and  Export   Authority   (AIDEA)                                                                    
receipts.  Designated  general  funds (DGF)  were  shown  in                                                                    
yellow and had  been fairly level with the  exception of the                                                                    
additional  $55 million  for the  reinsurance program  in FY                                                                    
17.  He noted  the success  of the  reinsurance program.  He                                                                    
expounded that  DGF funding was stable  because it consisted                                                                    
of licensing  fees, Power Cost  Equalization (PCE),  and the                                                                    
Revolving  Loan   Fund.  He   highlighted  the   75  percent                                                                    
reduction in UGF  over the past several  years from slightly                                                                    
over  $40 million  down to  $10  million. He  noted that  if                                                                    
tourism funding  of $50.2 million  and ASMI funding  of $7.4                                                                    
million, the department's UGF budget  had dropped from $17.9                                                                    
million to $10 million (a 44 percent decrease).                                                                                 
Commissioner  Navarre reported  the total  department budget                                                                    
had decreased from  $250 million to $166.8 million  in FY 19                                                                    
(a $48.5  million reduction), while  the number  of employed                                                                    
positions  had declined  by 80  (from 585  to 505).  Slide 5                                                                    
showed  deleted  positions  and   positions  that  had  been                                                                    
included  as part  of the  department's responsibility.  The                                                                    
department was  requesting one position  in the  Banking and                                                                    
Securities Division because  Alaska Native Claims Settlement                                                                    
Act (ANCSA) corporations were not  governed and did not have                                                                    
oversight  by   the  Securities  Exchange   Commission.  The                                                                    
department needed to do a  superior job at oversight because                                                                    
more   and   more  proxy   issues   were   arising  in   the                                                                    
corporations,   which   was   taking  up   time   from   the                                                                    
department's   other   responsibilities   in   banking   and                                                                    
securities.   The   department   was  also   requesting   an                                                                    
additional   seven    positions   for   the    Division   of                                                                    
Corporations,  Business  and Professional  Licensing  (CBPL)                                                                    
and eight  positions for the  Alcohol and  Marijuana Control                                                                    
Office (AMCO).                                                                                                                  
3:35:25 PM                                                                                                                    
Commissioner Navarre turned to slide  6 and pointed out that                                                                    
in FY  17 and  FY 18 the  legislature had  appropriated $110                                                                    
million  to  the  Alaska Reinsurance  Program  to  stabilize                                                                    
Alaskan's health  insurance rate  (reflected in green  in FY                                                                    
17 and blue and yellow in  FY 18. The yellow bar represented                                                                    
funds  that  had been  appropriated  but  not spent  in  the                                                                    
previous  year  (the funds  had  rolled  over from  FY  17).                                                                    
Deducting the  yellow portion  of the  bar showed  a decline                                                                    
within the department.                                                                                                          
3:36:33 PM                                                                                                                    
CATHERINE  REARDON,  DIRECTOR,  DIVISION  OF  ADMINISTRATIVE                                                                    
SERVICES,  DEPARTMENT OF  COMMERCE,  COMMUNITY AND  ECONOMIC                                                                    
DEVELOPMENT,  addressed  the  Legislative  Finance  Division                                                                    
(LFD) chart  on slide 6  showing all GF funds.  She reported                                                                    
that  UGF had  become a  small portion  of the  department's                                                                    
budget at  6 percent  (one-seventh of the  bar shown  for FY                                                                    
19).  Most of  the  bar represented  DGF, including  license                                                                    
fees, PCE payments  (approximately $32 million in  FY 19 and                                                                    
previous  numbers) to  utilities. The  department's UGF  had                                                                    
decreased  substantially  since  FY  15.  Generally  special                                                                    
projects  and initiatives  accounted for  the ups  and downs                                                                    
over  the  ten-year period  shown  on  slide 6.  The  green,                                                                    
yellow, and blue shading had been  added to the FY 17 and FY                                                                    
18  bars   to  reflect  the  reinsurance   program.  If  the                                                                    
reinsurance funds were  excluded from the chart  there was a                                                                    
fairly straight line decline from  the FY 14 management plan                                                                    
to FY 19.                                                                                                                       
3:38:47 PM                                                                                                                    
Vice-Chair Gara  asked if the  decrease in UGF  was included                                                                    
on the chart on slide 6.                                                                                                        
Ms. Reardon answered  that the chart combined UGF  and DGF -                                                                    
the numbers were  not broken out separately on  slide 6. She                                                                    
noted  that most  of  the funds  on slide  6  were DGF.  She                                                                    
pointed to slide 4 that showed the breakdown.                                                                                   
Ms.  Reardon turned  to an  LFD chart  showing all  funds on                                                                    
slide 7 by line item.  There had been some personal services                                                                    
growth, but  most was  due to cost  of living  increases for                                                                    
employees. The department's overall  position count was down                                                                    
from 516  full-time positions in  FY 08  to 500 plus  5 non-                                                                    
permanent  positions in  2019. The  growth had  been in  fee                                                                    
supported areas  (license fees supported the  cost). Changes                                                                    
in  contractual line  (shown in  pink) and  the grants  line                                                                    
(shown in  light yellow) reflected changing  duties assigned                                                                    
to the department.  The largest item in the  2019 budget was                                                                    
PCE payments  ($26.7 million in  FY 09 and $32.4  million in                                                                    
FY  19).  Revenue  sharing represented  another  significant                                                                    
item  in the  grants  line, which  included national  forest                                                                    
receipts,  payment in  lieu of  taxes (PILT),  and fisheries                                                                    
tax  programs  (money  distributed by  the  department  from                                                                    
those  sources). The  slide  also  included the  reinsurance                                                                    
Commissioner  Navarre  underscored the  distinction  between                                                                    
UGF and DGF  and the changes that had occurred  since FY 08.                                                                    
He explained that  entities had asked the  legislature to be                                                                    
regulated and the entities had  agreed to pay for regulation                                                                    
via license  fees. He expounded  the money was DGF,  but the                                                                    
public did not make a  distinction when looking at positions                                                                    
and jobs in  state government. The department  had looked at                                                                    
areas  where it  could  find efficiencies  even though  they                                                                    
were DGF  funded. The  department was  also required  by the                                                                    
Division of Legislative Audit to cover the costs.                                                                               
3:42:42 PM                                                                                                                    
Ms. Reardon  moved to slide 8  showing appropriations within                                                                    
DCCED  (GF   only).  She  noted   the  chart   could  appear                                                                    
overwhelming due  to the diversity of  the department's work                                                                    
and  initiatives that  come and  go.  The chart  illustrated                                                                    
that the  agency was  dynamic with  many different  areas of                                                                    
expertise.  Slide 9  illustrated  the  same information  but                                                                    
included all funds.                                                                                                             
Ms. Reardon  provided detail requested  by the  committee by                                                                    
division on slides 10 through  17. She reported the takeaway                                                                    
from the information  on the slides was that UGF  was a very                                                                    
small portion of  the agency's budget. She  pointed out that                                                                    
the  column labeled  "percent cost  through  fees" showed  a                                                                    
substantial number  of the department's programs  were 98 or                                                                    
100  percent fee  or fund  supported.  Another takeaway  was                                                                    
that almost every Alaskan household  was touched in some way                                                                    
by DCCED. She  relayed the department had  spend $10 million                                                                    
UGF  and had  deposited  $27 million  UGF  into the  General                                                                    
Fund. The  agency was  a revenue  generator. She  noted that                                                                    
was without  the inclusion of  the insurance  premium taxes,                                                                    
which was  a $55 million  to $60  million item likely  in FY                                                                    
Ms.  Reardon  began  with the  executive  administration  on                                                                    
slide 10, which included the  Office of the Commissioner and                                                                    
Administrative Services.  The two entities had  been reduced                                                                    
by  14  positions  since  FY  15 as  described  on  slide  5                                                                    
(including the  deletion of  a deputy  commissioner position                                                                    
and   all   administrative    support   in   the   Anchorage                                                                    
commissioner's  office). The  department had  been making  a                                                                    
concerted effort  to reduce  back office  costs in  order to                                                                    
focus remaining  funds on  services -  ideally in  ways that                                                                    
were   invisible   to   the  public.   She   reported   that                                                                    
consolidating  space and  reducing space  costs had  been an                                                                    
effort  by the  current administration.  The department  had                                                                    
moved two  agencies into its  footprint on the 9th  floor of                                                                    
the Juneau State Office Building  (SOB) out of the Community                                                                    
Building in 2015, which had  eliminated 7,000 square feet of                                                                    
space  DCCED  had  used  for the  Division  of  Banking  and                                                                    
Securities, Division of Community  and Regional Affairs, and                                                                    
the  Alcohol and  Marijuana Control  Office (AMCO).  In 2018                                                                    
department had  moved the  Division of  Economic Development                                                                    
to the 9th floor of the  SOB, which had eliminated an annual                                                                    
lease costing  about $250,000  and reduced  the department's                                                                    
footprint by 8,000 square feet.                                                                                                 
Ms. Reardon  expounded that DCCED had  reduced 15,000 square                                                                    
feet in  Juneau since  FY 15. The  department had  moved the                                                                    
Anchorage AMCO  office to  the existing  DCCED space  in the                                                                    
Atwood Building.  Additionally, the Fairbanks office  was in                                                                    
a much smaller lease than it  had been in FY 14. She relayed                                                                    
the space reduction  was one of the  department's efforts to                                                                    
use its money well.                                                                                                             
3:47:32 PM                                                                                                                    
Ms. Reardon highlighted the  Banking and Securities Division                                                                    
on  slide  11, which  was  funded  entirely with  fees.  She                                                                    
referenced  the significant,  but not  widely known  banking                                                                    
function   of   regulating   proxy  related   filings   (and                                                                    
shareholder inquires) from  ANCSA corporations. She detailed                                                                    
the  filing  reports,  proxy solicitations,  and  statements                                                                    
were significant  because they  could impact the  outcome of                                                                    
board  elections, management  direction, and  ultimately the                                                                    
financial  profitability of  the corporations.  The division                                                                    
had  established  a  fee from  ANCSA  corporations  and  the                                                                    
department  was asking  permission  in FY  19  to spend  the                                                                    
revenue on a  position to help meet the  statutory and civic                                                                    
Ms.  Reardon addressed  the Community  and Regional  Affairs                                                                    
Division on  slide 12. The  department had aimed to  use the                                                                    
slides as a  way to show the agency  functions. The division                                                                    
had about  $6.5 million UGF  - it  was not possible  to have                                                                    
user  fees  for  many  of   the  services  provided  by  the                                                                    
division. She  elaborated that the division  was responsible                                                                    
for DCCED's constitutionally  mandated functions. Article 10                                                                    
required the state to have  an agency providing services and                                                                    
support to  local government and  communities. Additionally,                                                                    
the  Local   Boundary  Commission  was   a  constitutionally                                                                    
mandated function.                                                                                                              
Co-Chair Seaton  asked if the  RDU revenue sharing  on slide                                                                    
12 was the community assistance program.                                                                                        
Ms.  Reardon  answered that  in  the  budget system  revenue                                                                    
sharing pertained to the three  items shown at the bottom of                                                                    
slide  12  including  PILT, national  forest  receipts,  and                                                                    
fisheries  taxes.  The   corresponding  amounts  were  $10.4                                                                    
million, $600,000, and $3.1  million respectively. She added                                                                    
that  community  assistance  payments  were  issued  by  the                                                                    
department  and  appropriated  by  statute;  therefore,  the                                                                    
money was not actually seen in the DCCED budget.                                                                                
Ms.  Reardon turned  to  slide 13  and  addressed CBPL.  The                                                                    
professional licensing side of  the division was supposed to                                                                    
be a breakeven  by statute. Fees were raised  and lowered by                                                                    
regulation with the  goal of each of  the licensing programs                                                                    
breaking even  over time, without  any excess  spilling over                                                                    
into the General Fund (per AS 08.01.065).                                                                                       
Co-Chair Seaton  asked for verification the  program support                                                                    
line item  (on slide 13)  was not  funded by fees.  He noted                                                                    
there was no cost allocation included for the component.                                                                        
Ms. Reardon answered  that DCCED did not  actually budget in                                                                    
most of  the program units,  but at  the RDU level.  For the                                                                    
presentation,  the  department  had  approximated  how  much                                                                    
staff worked on  the functions. All of the costs  of the RDU                                                                    
on  slide 13  were  covered by  fees.  Investigations was  a                                                                    
subset  of   professional  licensing  and   program  support                                                                    
included  the  division  director,  accountants,  and  front                                                                    
counter   staff.  She   explained  that   once  professional                                                                    
licensing and  investigations had been broken  out under the                                                                    
division, the  remaining costs were  referred to  as program                                                                    
Co-Chair Seaton  asked for verification program  support was                                                                    
100 percent covered [by fees].                                                                                                  
Ms. Reardon agreed. She noted  a distinction in the specific                                                                    
RDU. Professional  licensing programs  (shown at  the bottom                                                                    
of  slide  13),  investigations included,  were  statutorily                                                                    
mandated  to  try  to  break even  (lower  fees  if  revenue                                                                    
exceeded costs  and raise fees  if costs  exceeded revenue).                                                                    
However, the  business licensing and corporations  line item                                                                    
did  not have  the breakeven  mandate. The  business license                                                                    
fee was  set by  statute and  it resulted  in money  for the                                                                    
general fund. In FY 17, the profit was almost $8 million.                                                                       
Commissioner   Navarre  added   that   the  department   had                                                                    
instituted   a   streamlining   process   for   professional                                                                    
licensing  in  order  to  reduce  the  turnaround  time.  He                                                                    
detailed it was initially  applicable to medical and nursing                                                                    
licenses, but information technology  (IT) staff was helping                                                                    
put  together an  online  process in  order  to process  the                                                                    
information  faster  and  apply  it  to  other  professional                                                                    
licensing areas as well.                                                                                                        
Ms.  Reardon remarked  that it  was not  only for  increased                                                                    
efficiency,  but  part  of  working  to  facilitate  private                                                                    
sector  economic  development.   The  faster  licenses  went                                                                    
through for new hires, the better for everyone.                                                                                 
3:54:34 PM                                                                                                                    
Representative Ortiz  addressed the department's  efforts to                                                                    
increase  the speed  in licensing.  He asked  if the  effort                                                                    
applied to licensing of doctors as well as nurses.                                                                              
Commissioner  Navarre  answered   in  the  affirmative;  the                                                                    
initial focus was  on medical and nursing, with  the goal of                                                                    
applying efficiencies across all licensing programs.                                                                            
Representative  Ortiz  asked what  was  being  done to  make                                                                    
licensing move faster.                                                                                                          
Commissioner  Navarre  replied   the  department  was  doing                                                                    
online applications and getting  to uniform information. The                                                                    
processing time had already been  cut significantly from six                                                                    
months  to  under  30  days  or  less.  The  initial  effort                                                                    
[focused  on  medical  and nursing  licenses]  included  the                                                                    
formation of a steering  committee (including IT, department                                                                    
personnel,  and   the  commissioner's  office)   to  further                                                                    
streamline  the process  and apply  it across  all licensing                                                                    
programs.  He  believed  the  process  would  be  undergoing                                                                    
testing in  the following week  to ensure any  glitches were                                                                    
worked out.                                                                                                                     
Representative Kawasaki  referenced the division's  98 total                                                                    
positions, 78  of which were  filled. He asked if  there was                                                                    
foregone revenue because the positions were vacant.                                                                             
Ms.  Reardon  replied in  the  negative.  She detailed  that                                                                    
because  the  division  was  supposed  to  break  even  (not                                                                    
produce  a profit)  there  was no  foregone  revenue to  the                                                                    
General Fund.  For example, if  the division spent  less due                                                                    
to  vacancies it  meant nurses  would be  charged less  than                                                                    
they otherwise  would be,  to have  their program  cover its                                                                    
costs. If it was in  the business corporations and licensing                                                                    
side, less would  be spent and more profit  would spill into                                                                    
the General  Fund. The vacancies  were not ideal  because of                                                                    
the  division's  high work  volume  -  keeping the  licenses                                                                    
moving was of utmost importance  to many Alaskans. She added                                                                    
that the positions  and vacancies shown on slide  13 were as                                                                    
of December 15.                                                                                                                 
3:57:55 PM                                                                                                                    
Ms.  Reardon highlighted  the Economic  Development Division                                                                    
on slide 14 that included  two RDUS: economic investment and                                                                    
investments  (the  revolving  loan  funds).  She  noted  the                                                                    
economic   development   component  had   seen   substantial                                                                    
reductions since FY  15 and had decreased  from 13 positions                                                                    
to 5.  The component had lost  64 percent of its  UGF budget                                                                    
and more than  half its staff but was holding  steady in the                                                                    
FY 19  budget. The component  had been focusing on  where it                                                                    
could make a  difference, part of which was  included in its                                                                    
comprehensive  economic  development strategy.  She  relayed                                                                    
the  investments  component  was funded  entirely  with  the                                                                    
revolving loan funds.                                                                                                           
Representative  Grenn asked  for verification  there was  no                                                                    
user fee  (for farmers or  other users) associated  with the                                                                    
"Made in Alaska" brand.                                                                                                         
Ms.  Reardon  clarified  that  farmers  typically  used  the                                                                    
"Alaskan Grown"  brand, which was  operated by  the Division                                                                    
of  Agriculture. She  explained that  DCCED was  responsible                                                                    
for the  "Made in Alaska" program  and it charged a  fee for                                                                    
the   stickers   that   people  put   on   their   products.                                                                    
Additionally,   there  was   a  relatively   small  fee   to                                                                    
participate   in  the   program.   She   noted  there   were                                                                    
Ms. Reardon  briefly highlighted the Division  of Insurance,                                                                    
which was 100 percent fee  funded (slide 15). She added that                                                                    
the  line items  were  not separate  programs  but had  been                                                                    
broken out to show the types of division functions.                                                                             
Ms. Reardon reviewed  AMCO on slide 16. She  noted the slide                                                                    
broke  out revenue  from alcohol  versus marijuana.  Alcohol                                                                    
was entirely fee supported. She  reported that marijuana was                                                                    
on a  three-year trajectory to  get off UGF.  She elaborated                                                                    
that initially there had been  expenses but no license fees.                                                                    
There were  now licensees  who had begun  renewing licenses.                                                                    
The  fund   source  had  gone   from  100  percent   UGF  to                                                                    
approximately $532,000 in FY 19.  She reported that by FY 20                                                                    
there should be no UGF funds required.                                                                                          
Commissioner Navarre added that  AMCO was housed under DCCED                                                                    
for administrative  purposes. He explained that  in the past                                                                    
the  office  had  been  under   the  Department  of  Revenue                                                                    
followed by  the Department of  Public Safety.  The director                                                                    
had been  hired by the  administration but worked  under the                                                                    
direction  and answered  to the  Alcoholic Beverage  Control                                                                    
Board  and the  Marijuana  Control Board.  He clarified  the                                                                    
position did not answer to the DCCED commissioner.                                                                              
4:01:35 PM                                                                                                                    
Ms. Reardon reported that slide  17 showed all of the allied                                                                    
corporations  except  AMCO, which  had  its  own slide.  Fee                                                                    
support for  each of the  corporations ranged.  For example,                                                                    
the  Regulatory Commission  of Alaska  (RCA) was  almost 100                                                                    
percent  funded by  fees (2  percent  came from  interagency                                                                    
receipts). She  highlighted that ASMI received  no UGF funds                                                                    
(it  was 78  percent fee  funded with  the remainder  coming                                                                    
from  federal   funds).  She  indicated  that   AEA  had  no                                                                    
positions of  its own  even though it  used positions  - all                                                                    
positions were  housed within AIDEA.  She noted that  in the                                                                    
budget PCE showed  an "estimated to be"  number. She relayed                                                                    
the figure  was about $5  million lower  than in FY  18. The                                                                    
actual formula dictated how much would be paid out.                                                                             
4:02:55 PM                                                                                                                    
Representative Ortiz  asked if the Alaska  tourism marketing                                                                    
component was included in the presentation.                                                                                     
Ms. Reardon  indicated that DCCED  no longer  provided funds                                                                    
to  the Alaska  Travel  Industry Association  (ATIA) in  the                                                                    
operating budget.                                                                                                               
Ms. Reardon  reviewed the five-year health  care cost trends                                                                    
on  slide 18.  She noted  that the  department's percent  of                                                                    
healthcare  was  relatively  small compared  to  some  other                                                                    
departments.  The   reason  was   because  DCCED   had  some                                                                    
significant expenditures  that had  no personal  services or                                                                    
workers involved.  For example,  if the department  gave out                                                                    
$32 million of PCE, there  would be no associated healthcare                                                                    
costs except  for two or  three employees.  The department's                                                                    
percent  was  impacted  by its  large  non-employee  related                                                                    
expenditures. She  added the cost  was governed by  the cost                                                                    
in worker contracts.                                                                                                            
Co-Chair Seaton  pointed to the  5.6 percent  healthcare for                                                                    
FY  19 on  slide  18,  which he  surmised  was  all UGF.  He                                                                    
believed  that on  slide  6 the  department  had stated  the                                                                    
total percent of  the budget was 6 percent UGF.  He asked if                                                                    
it   meant  almost   all  the   department's  UGF   went  to                                                                    
Ms. Reardon replied in the  negative. She explained that the                                                                    
health insurance portion  of an employee cost  was billed to                                                                    
their funding  source just like  their salary.  For example,                                                                    
if a person worked  for Professional Licensing, professional                                                                    
licensing fees  paid their health insurance.  She added that                                                                    
the number  should match  the department's  funding sources;                                                                    
the  federal  government  was billed  for  federally  funded                                                                    
Co-Chair Seaton  asked if DCCED  had business  licenses. Ms.                                                                    
Reardon  answered  in  the affirmative  and  referenced  the                                                                    
Division   of   Corporations,  Business   and   Professional                                                                    
Co-Chair Seaton  asked the subcommittee to  address a change                                                                    
made by the  legislature that allowed a  person with several                                                                    
businesses to  have one business  license. He wanted  to see                                                                    
an analysis  by the  department showing  how much  money the                                                                    
state was losing due to the change.                                                                                             
4:05:54 PM                                                                                                                    
Representative Guttenberg looked at the  RCA on slide 17. He                                                                    
had  been approached  earlier  in the  day  by Alaska  Power                                                                    
Authority groups with a request to  fund the RCA at a higher                                                                    
level.  He  had responded  that  the  power authority  could                                                                    
increase  fees if  it wanted  to fund  the RCA  at a  higher                                                                    
level. The response he had  received was the RCA budget went                                                                    
through DCCED  for review and  they could not  add personnel                                                                    
or increase  the budget  without the  department's approval.                                                                    
He believed it was  all reimbursable service agreement (RSA)                                                                    
funds.  He  asked  if  DCCED   reviewed  the  RCA's  budget.                                                                    
Alternatively, he  wondered if the Office  of Management and                                                                    
Budget  (OMB)  could  tell  the  RCA  it  could  not  expand                                                                    
services.  He  asked  if  it  was  something  he  needed  to                                                                    
Ms.  Reardon  responded  that  in  the  budget  process  the                                                                    
legislature told  RCA and the  department how much  it could                                                                    
spend. She  elaborated that even  though the cash  came from                                                                    
fees, like the department's  other fee-funded divisions, the                                                                    
legislature decided on spending  authority. For example, the                                                                    
RCA may  have plenty of cash  on hand, but could  only spend                                                                    
$9 million.  She explained that  the legislature  would have                                                                    
to increase  funding authority if  the commission  wanted to                                                                    
spend $10 million.                                                                                                              
Commissioner Navarre  added that  the RCA  funding increment                                                                    
went through the DCCED budget, but it was OMB driven.                                                                           
Representative  Guttenberg  noted  that he  would  take  the                                                                    
issue up with the subcommittee.                                                                                                 
4:08:39 PM                                                                                                                    
AT EASE                                                                                                                         
4:09:37 PM                                                                                                                    
^FY 19 BUDGET OVERVIEW: DEPARTMENT OF LAW                                                                                     
4:09:43 PM                                                                                                                    
JAHNA  LINDEMUTH,  ATTORNEY   GENERAL,  DEPARTMENT  OF  LAW,                                                                    
introduced  department  staff.  She  provided  a  PowerPoint                                                                    
presentation titled "Department  of Law Department Overview:                                                                    
House Finance  Committee" (copy on file).  She addressed the                                                                    
department's three  core services funded with  general funds                                                                    
including  the prosecution  of crimes,  protecting children,                                                                    
and  statehood  defense  and  revenue  protection.  She  had                                                                    
communicated to  the committee the  previous year  that cuts                                                                    
to  the  Department of  Law  (DOL)  had  gone too  far.  She                                                                    
reviewed that  the committee  had authorized  two additional                                                                    
prosecutors at the end of  the past session. She shared that                                                                    
at the  time it had not  been known that crime  had risen in                                                                    
the past  several years. The  Uniform Crime Report  had come                                                                    
out  in the  summer of  2017, which  showed crime  was on  a                                                                    
significant uptick, while at the  same time the department's                                                                    
budget had  seen cuts  beginning in FY  14. The  increase in                                                                    
crime was  also impacting the department's  child protection                                                                    
cases.  The opioid  epidemic was  a primary  driver and  was                                                                    
impacting DOL's core services.                                                                                                  
Attorney General  Lindemuth moved  to slide 2  and addressed                                                                    
the department's core mission:                                                                                                  
     The Alaska Department of Law prosecutes crime and                                                                          
     provides legal services to state government for the                                                                        
     protection and benefit of Alaska's citizens.                                                                               
Attorney  General Lindemuth  detailed  that DOL  represented                                                                    
all  departments  and  agencies  statewide  except  for  the                                                                    
University of  Alaska and  the Alaska  Railroad Corporation.                                                                    
The department  had an Administrative Services  Division and                                                                    
two operating divisions including  the Criminal Division and                                                                    
Civil Division.                                                                                                                 
4:12:17 PM                                                                                                                    
Attorney General  Lindemuth addressed the Civil  Division on                                                                    
slide 3.  All of  the divisions 13  sections fell  into four                                                                    
core  services: protecting  Alaskans'  safety and  financial                                                                    
well-being;    fostering    conditions    for    responsible                                                                    
development of our natural  resources; protecting the fiscal                                                                    
integrity of  the state; and promoting  good governance. She                                                                    
relayed  that  much  of   protecting  Alaskans'  safety  and                                                                    
financial  well-being included  child and  adult protection.                                                                    
The  Commercial, Fair  Business  and  Child Support  section                                                                    
housed the department's  Consumer Protection Unit. Fostering                                                                    
conditions  for  responsible   development  of  the  state's                                                                    
natural     resources    included     the    Transportation,                                                                    
Environmental,   and   Natural   Resources   sections.   The                                                                    
department's  core service  to  protect  the state's  fiscal                                                                    
integrity   included   the   following   sections:   Natural                                                                    
Resources, Labor  and State Affairs, Regulatory  Affairs and                                                                    
Public  Advocacy,  and   Torts  and  Worker's  Compensation.                                                                    
Promoting good  governance included the  following sections:                                                                    
Opinions, Appeals  and Ethics  (focused on  child protection                                                                    
appeals);  Special  Litigation;  Labor  and  State  Affairs;                                                                    
Legislation  and Regulations;  and  Information and  Project                                                                    
Attorney  General Lindemuth  stated  that when  representing                                                                    
state  agencies,   the  department's  work  fell   into  two                                                                    
categories. The  first was litigation, which  involved going                                                                    
to  trial. She  elaborated that  if the  state got  sued the                                                                    
department defended claims and if  the state had claims, the                                                                    
department pursued  them. The second, was  transactional and                                                                    
advice  oriented.  The   department  represented  all  other                                                                    
departments  in making  good decisions  for  the state.  She                                                                    
reported  the  Civil Division  was  half  funded by  general                                                                    
funds  and half  funded by  interagency receipts  from other                                                                    
departments.  The division's  capacity had  been cut  to the                                                                    
bone  [due to  a  decrease  in funding].  Since  FY 14,  the                                                                    
division's  budget was  down 32  percent. She  detailed that                                                                    
further cuts to the  division would impact child protection,                                                                    
statehood  defense, revenue  protection  cases.  All of  the                                                                    
cases in the  upper left and lower right corners  of slide 3                                                                    
accounted for  about 75 percent  of the  departments general                                                                    
fund budget.                                                                                                                    
Attorney General  Lindemuth addressed the  Criminal Division                                                                    
on  slide  4.  Unlike  other states,  Alaska  did  not  have                                                                    
counties  with elected  district  attorneys; therefore,  DOL                                                                    
had primary responsibility  for prosecuting cases statewide.                                                                    
Anchorage and Juneau had  municipal prosecutors to prosecute                                                                    
misdemeanors  and DOL  was responsible  for prosecuting  all                                                                    
other  misdemeanors and  felonies statewide.  The department                                                                    
had 12  district attorney offices  along with the  Office of                                                                    
Special Prosecution and the  Appeals Section responsible for                                                                    
statewide matters. The division  was 85.6 percent GF funded;                                                                    
the remainder of the budget  was funded with federal dollars                                                                    
for specific federal programs such as Medicaid fraud.                                                                           
4:15:45 PM                                                                                                                    
Attorney General  Lindemuth turned to a  Legislative Finance                                                                    
Division (LFD)  chart reflecting  the department's  share of                                                                    
total agency  operations (GF only)  on slide 5. Since  FY 14                                                                    
the department was down 20  percent or $12.6 million (it was                                                                    
down 26 percent  since FY 12). The bulk  of the department's                                                                    
GF  funding  went to  criminal  prosecutions  and civil  and                                                                    
child   protection  cases.   She   reiterated  her   earlier                                                                    
statement  that  while  the  department's  budget  had  been                                                                    
decreasing,  there had  been  an uptick  in  the demand  for                                                                    
those  types of  cases  in criminal  prosecutions and  child                                                                    
protection. For  example, child protection cases  were up 48                                                                    
percent  since FY  14;  the department  was  down the  added                                                                    
staff  to  cover the  work  and  was without  two  assistant                                                                    
attorney  generals  to  handle   the  cases  (caseloads  had                                                                    
Attorney  General  Lindemuth  moved   to  an  allocation  of                                                                    
resources  chart showing  all funds  on slide  6. The  chart                                                                    
illustrated that  the bulk of the  department's funding went                                                                    
to  personal services  (i.e. attorneys  and staff  providing                                                                    
legal services to the state  in civil and criminal matters).                                                                    
The  purple   portion  of  each  bar   represented  services                                                                    
(contractual  relationships held  by the  department), which                                                                    
accounted for  slightly over 20 percent  of the department's                                                                    
budget. The  bulk of the contracts  included outside counsel                                                                    
and  experts,  but the  component  also  covered leases  and                                                                    
DOL's contracts with other departments.  She noted there had                                                                    
been a  48 percent reduction  to the component since  FY 12.                                                                    
In  order to  reduce costs,  the department  had focused  on                                                                    
bringing legal  work in-house that had  previously been done                                                                    
by outside counsel. The  department's attorneys charged $165                                                                    
per  hour,  which  was much  cheaper  than  outside  counsel                                                                    
costing  $250 to  over $500  (depending  on expertise).  She                                                                    
noted  the  department  still had  to  use  outside  counsel                                                                    
occasionally when  expertise DOL  did not have  in-house was                                                                    
required (especially for one-off cases).                                                                                        
4:18:31 PM                                                                                                                    
Attorney General  Lindemuth advanced to  a chart on  slide 7                                                                    
showing appropriations  within DOL (GF only),  broken out by                                                                    
civil,  criminal,  and  administrative  services  divisions.                                                                    
The  red  line  representing  the  Civil  Division  had  the                                                                    
steepest decline  at 32  percent since  FY 14.  The criminal                                                                    
Division  was down  10.5 percent  since FY  14. Compared  to                                                                    
other public safety agencies including  the Office of Public                                                                    
Advocacy,  the Public  Defender  Office,  and Department  of                                                                    
Public Safety,  DOL had suffered  far greater cuts  since FY                                                                    
14. She explained the difference  accounted for the increase                                                                    
in funds for DOL in the governor's proposed budget.                                                                             
Attorney  General  Lindemuth  briefly  highlighted  slide  8                                                                    
showing appropriations  within DOL  (all funds),  broken out                                                                    
by  civil, criminal,  and administrative  services divisions                                                                    
over the  past ten years.  She turned to slide  9 reflecting                                                                    
the total funding  comparison by fund group.  The light blue                                                                    
portion  of the  bar  reflected GF,  which  was the  primary                                                                    
component  of the  department's budget.  The red  portion of                                                                    
the  bar  represented  interagency  receipts  received  from                                                                    
other departments,  primarily for the Civil  Division, which                                                                    
was funded  with half interagency receipts  and half general                                                                    
fund   dollars.  The   dark  purple   portion  of   the  bar                                                                    
represented designated  general funds and the  green portion                                                                    
represented federal receipts, both  of which accounted for a                                                                    
small portion of the department's overall budget.                                                                               
4:20:50 PM                                                                                                                    
DAN SPENCER,  DIRECTOR, ADMINISTRATIVE  SERVICES, DEPARTMENT                                                                    
OF LAW, spoke  to five-year health care trends  on slide 10.                                                                    
He relayed  the budgeted healthcare  cost was made up  of 60                                                                    
percent  UGF  and 40  percent  other  funds.  In FY  18  the                                                                    
department's healthcare costs accounted  for 10.4 percent of                                                                    
the  overall  budget.  He   briefly  highlighted  slides  11                                                                    
through 14  showing a matrix  of the department's  funds and                                                                    
Representative     Guttenberg      remarked     that     the                                                                    
telecommunications definition  of the  Regulatory Commission                                                                    
of  Alaska   (RCA)  clearly   included  broadband.   If  DOL                                                                    
supported the RCA  with its legal opinions,  he wondered why                                                                    
the RCA did not think the definition included broadband.                                                                        
Attorney General  Lindemuth answered  that she did  not have                                                                    
the  answer and  directed  the question  to Deputy  Attorney                                                                    
General Ed Sniffen for follow up.                                                                                               
Representative Pruitt referenced  the department's testimony                                                                    
regarding  personnel  levels.  He  surmised  the  department                                                                    
believed personnel levels had  been reduced substantially in                                                                    
the area  of environmental  law. He  asked if  his statement                                                                    
was accurate.                                                                                                                   
Attorney General  Lindemuth answered that  the environmental                                                                    
law section had  been reduced. She detailed  the section was                                                                    
primarily  funded  through  interagency  receipts  from  the                                                                    
Department   of   Environmental  Conservation   (DEC).   She                                                                    
elaborated that  DEC would have  to determine the  amount it                                                                    
wanted to  spend on  legal dollars,  which would  impact the                                                                    
amount  of  work  done  by  DOL.  She  pointed  out  that  a                                                                    
significant  portion of  the work  DOL did  for DEC  brought                                                                    
revenue to the state.                                                                                                           
4:24:14 PM                                                                                                                    
Representative  Pruitt  asked about  HB  199  and a  current                                                                    
initiative.  He remarked  there  was a  fiscal  note from  a                                                                    
similar  bill  the  previous  year  of  about  $450,000.  He                                                                    
believed  the bill  was different  than  the initiative.  He                                                                    
asked  if  DOL  had  an   estimate  of  additional  cost  or                                                                    
personnel  it  may need  if  the  bill or  initiative  moved                                                                    
Attorney General Lindemuth asked for more information.                                                                          
Representative  Pruitt  replied   the  bill  and  initiative                                                                    
pertained to anadromous fish.                                                                                                   
Attorney General  Lindemuth replied  she would follow  up on                                                                    
the question.                                                                                                                   
Representative  Pruitt clarified  there  was  a fiscal  note                                                                    
associated with  the legislation. He remarked  that the bill                                                                    
was  different than  the  initiative and  he  was trying  to                                                                    
understand the impacts the initiative would have on DOL.                                                                        
Co-Chair  Seaton remarked  on the  difficulty of  estimating                                                                    
the impact of an initiative  because it would not go through                                                                    
the committee process.                                                                                                          
4:25:50 PM                                                                                                                    
Representative  Guttenberg asked  about a  recent settlement                                                                    
on  a Trans-Alaska  Pipeline System  (TAPS) tariff  case. He                                                                    
was  always  concerned when  the  industry  could write  its                                                                    
costs off against the tariffs. He  asked if a paper had been                                                                    
written on the settlement's benefit to the state.                                                                               
Attorney  General  Lindemuth  responded the  department  had                                                                    
published  a press  release on  the  subject. She  explained                                                                    
there  were  a number  of  benefits.  First, litigation  was                                                                    
expensive,  and the  state had  been litigating  the subject                                                                    
for   many  years.   She  noted   the   industry  had   been                                                                    
incentivized to  fight everything because it  could roll the                                                                    
litigation  dollars into  rates going  forward. The  primary                                                                    
fight had  been about  whether industry could  include their                                                                    
reconfiguration   costs  in   the   rates.  The   settlement                                                                    
specified that  none of the  reconfiguration costs  would be                                                                    
included in the rates  going forward; therefore, rates would                                                                    
be  significantly lower,  resulting  in  additional tax  and                                                                    
royalty dollars to  the state. The department  saw the issue                                                                    
as a win-win. She continued  DOL was estimating $165 million                                                                    
more in addition  to the $200 million the  state had already                                                                    
collected  over  the  prior years.  Second,  the  settlement                                                                    
provided  certainty to  the industry  about what  the future                                                                    
tariff  rates  would  be  because  a  methodology  had  been                                                                    
established  (actuals could  be audited).  The side  benefit                                                                    
was the state  would not have to  litigate annually, meaning                                                                    
litigation  costs would  be reduced.  The  state would  have                                                                    
audit rights  and would  not have to  go into  litigation to                                                                    
audit the rates.                                                                                                                
Representative  Guttenberg  stated  that  in  the  past  his                                                                    
concern was that people working  on the project did not know                                                                    
the  definitions or  the physical  parameters  of what  they                                                                    
were  defining.  He recalled  working  on  the pipeline  and                                                                    
commented  on the  ease  of  manipulating configurations  to                                                                    
circumvent anything a company was  doing. He had always been                                                                    
concerned about the issue.                                                                                                      
Co-Chair  Seaton  referenced   slide  10  showing  five-year                                                                    
health  care   trends.  He   noted  that   the  department's                                                                    
healthcare costs  had been 9.1  percent of its budget  in FY                                                                    
17. The FY 18 cost had  been 1.3 percent more at an increase                                                                    
of 14  percent. He  acknowledged that  some of  the increase                                                                    
was in  relationship to  total budget.  He spoke  to concern                                                                    
about  healthcare costs  taking away  from the  department's                                                                    
core services. He  remarked on the need  to avoid healthcare                                                                    
costs  by  avoiding  health conditions.  He  hoped  to  move                                                                    
towards  a healthier  Alaska in  order to  reduce costs.  He                                                                    
could not  see getting  there by reducing  payment schedules                                                                    
only. He mentioned changing the  healthcare authority to get                                                                    
$30 million across all of  the insurance pools including the                                                                    
school districts, municipalities, which  would wash out as a                                                                    
smaller number compared to total healthcare dollars.                                                                            
HB  285  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  286  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Seaton reviewed  the  schedule  for the  following                                                                    

Document Name Date/Time Subjects
LAW_FY19_HFIN-Full-Committee_Overview_1-31-18.pdf HFIN 1/31/2018 1:30:00 PM
HFIN - LAW Budget Overview
DEED HFIN Overview 1.25.18 FINAL.pdf HFIN 1/31/2018 1:30:00 PM
HFIN - DCCED Budget Overview
DCCED 01.31.2018 HFIN Overview - FINAL c.pdf HFIN 1/31/2018 1:30:00 PM
HFIN - DCCED Budget Overview
01.31.2018 HFC - DCCED Followup.pdf HFIN 1/31/2018 1:30:00 PM
DCCED Response Qs HFIN overview