Legislature(2017 - 2018)ADAMS ROOM 519
03/16/2018 01:30 PM FINANCE
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|HB285 || HB286|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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." 1:35:04 PM Co-Chair Seaton relayed the committee had finished with amendments to the bills the previous day. He reported that the Legislative Finance Division (LFD) and Legislative Legal Services had developed two new committee substitutes (CS) based on adopted amendments. He noted that an error had been discovered during review and had been corrected in the new CS for the operating budget (HB 286). He read from an explanation: A subsection reference was inadvertently omitted in the Permanent Fund inflation proofing amendment that was H SAP 24. The beginning of the amendment on line 23 read 'the amount calculated under AS 37.13.145(c) after the appropriations made in (c) of this section, estimated to be $942 million.' It should have read 'the amount calculated under AS 37.13.145(c) after the appropriations made in (c) and (d) of this section, estimated to be $942 million.' Subsection (c) is the earnings reserve account draw to the General Fund and subsection (d) is the ERA draw to the Permanent Fund Dividend (PFD). Legal Services corrected the subsection 8(e) phrase so that it now reads as intended 'after the appropriations made in (c) and (d) of this section.' There were three Legislative Finance Reports. They are stapled together in members' packets and will be posted on the Legislative Finance website once the new committee substitutes are adopted. In addition to these reports, Legislative Finance will also post their usual array of department reports. The budget's general funds totals $5.35 billion and all funds total $10.44 billion. You'll note the general fund report shows and increase of $170.8 million from the FY 18 management plan budget for agency and statewide operations. The larger unrestricted general fund changes that the committee made include the addition of $19 million for the University of Alaska; the temporary addition of $18 million for K-12 to replace the $18 million of Public School Trust Funds until legislation is adopted; the temporary deletion of $20 million from the senior benefits payment program, until the reauthorization legislation is adopted (we also adopted intent to fully fund the program), the addition of $49 million to capitalize the Oil and Gas Tax Credit Fund and the deletion of the $27 million for the governor's oil and gas tax credit financing legislation, as the $27 million should come forward as a fiscal note; the addition $1 million for four attorneys and one support staff in the Public Defender Agency; and the addition of nearly $500,000 for four additional guardians ad litem to represent children including Child in Need of Aid cases. HB 286 includes a 4.75 percent of market value draw from the Permanent Fund Earnings Reserve Account; 67 percent of the draw or $1.65 billion would be deposited into the General Fund and 33 percent of the draw or $813 million would be deposited into the dividend fund, resulting in an estimated PFD of $1,258. We added the estimate of $942 million to inflation proof the Permanent Fund in FY 19 and we added $1 billion of expenditure authority to the Alaska Gasline Development Corporation in FY 18 and FY 19 to help advance the development of the gas pipeline. We added one-time fund balances to the disaster relief fund, so the state is better prepared to respond to disasters. 1:39:05 PM Co-Chair Seaton continued to read from a statement: This budget fully funds the community assistance fund so that the communities can plan for the $30 million distribution in FY 20. We added one-time funds to both the Department of Health and Social Services and Department of Fish and Game to be able to receive more of the federal funds that the state had previously had to revert to the federal government or simply had not been able to claim due to a lack in matching funds. In this budget the Constitutional Budget Reserve fund would contribute $1 billion to filling the budget deficit plus $100 million for possible FY 19 supplementals. Those are some of the larger amendments we've adopted. 1:39:59 PM Co-Chair Foster MOVED to ADOPT the proposed committee substitute for HB 286, Work Draft 30-GH2564\R (Wallace, 3/16/18). Representative Wilson OBJECTED. She did not support a $170 million increase at a time when the state did not have the money. Co-Chair Seaton pointed out that $100 million of the total was for Medicaid, $19 million was for the University of Alaska, and $43 million was for transportation. 1:41:13 PM Vice-Chair Gara supported the budget. He stated that for the past five years the legislature had been cutting the budget repeatedly. He cautioned that the next round of cuts would mean larger class sizes. He spoke about the safety net that provided stability for people and enabled them to work. He stressed that the unrestricted general fund (UGF) budget was currently $560 million lower than 2015. Cuts had resulted in the loss of over 1,000 teachers and support staff since 2013. He did not believe it was something to be proud of. In prior years there had been a fight against individuals who wanted to cut education further. He pointed to a proposal the preceding year to cut education by $70 million more. He was glad the cut had been staved off. Even a flat-funded education budget would likely mean the loss of another 200 teachers and support staff. Vice-Chair Gara underscored the current budget was not a luxury budget. Cutting over $500 million since 2015 had not been without impacts. In the current budget cycle, he had been alarmed to learn that there was still a revolving door at the Alaska Psychiatric Institute (API). He detailed that patients returned to API because there were not follow up services to help the individuals stand on their own. He reported that 30 percent of the people discharged from API were back within six months. Vice-Chair Gara discussed Medicaid and explained that the way federal and state law was written, the lower a person's income, the more likely they were to qualify for Medicaid. He continued that all the state had done on Medicaid was find efficiencies and cut costs paid to providers. With 33,000 more people on Medicaid since 2015, the Medicaid budget was lower than it had been in 2015. He did not believe the legislature had come together in a way to deal with the current recession. As long as the state remained in recession, the Medicaid budget would increase because every time someone lost their job or had lower income, they were more likely to qualify for Medicaid. He underscored that the state could not deny individuals medical coverage when statute specified individuals were entitled to Medicaid coverage at low incomes. He noted that the vast majority of Medicaid recipients were seniors, children, and people with disabilities. He did not support cutting their services. The remaining majority of Medicaid recipients had lower income given the recession. The state had not added Medicaid services. He stated it was a tough budget to deal with, but it was not a luxury when 200 additional teachers would be lost in the coming year and API was acting as a revolving door. 1:45:35 PM Representative Pruitt opposed the budget. He emphasized that the issue facing the committee was about whether the legislature was willing to manage what it was facing. He stated that Republican Minority amendments that had been offered in committee had not made drastic cuts. He pointed out that they had not touched the education budget and had agreed with other members about the amount. He recalled that in 2017 he and his colleagues had been denied proposed cuts they had based off of previous years. In the current process they had looked at years like FY 17 for reference but had not proposed reducing the budget to that level. He reported that their amendments had proposed slight reductions, but they had all been denied. Representative Pruitt stated that whatever the administration said had been treated like gospel. Yet research by their competent staff had initiated realistic discussions on how to manage the situation. He believed if the public was asked to participate via a PFD reduction or tax, it would be necessary to prove the legislature would analyze every line of the budget. He did not believe the committee had done that. He thought the committee had merely "said no to say no." He detailed that during the process the committee had heard from people on why a cut should not be made. He opined that many times the individuals had not been able to give justifiable reasons the cuts should not be made. He stated that amendments had been turned down anyway. Representative Pruitt stated it was necessary to continually analyze how things were delivered across the scope of government agencies in order to prevent larger class sizes and reductions to Medicaid and other things. He did not believe it was tenable to turn down everything that was offered. He thought the legislature should have a dynamic process that could be adjusted based on what it was facing. He stressed it was the difference between the government and the private sector. He stated that something would collapse and cease to exist if it was not innovative. He shared that he had previously worked for two Fortune 500 companies - one was innovative and continued to grow, while the other was not innovative and was faltering. He thought the legislature was acting like it should not be innovative when it failed to consider making spending changes. His concern with the budget was that the committee had just decided it was done with cuts, despite strategically crafted amendments that had been done with a scalpel, which had all been turned down. Representative Pruitt did not believe the legislature would gain the public's trust if it could not prove the public's contribution would be spent appropriately. He believed the committee needed to consider whether it wanted to tell the public it was satisfied with the current budget. He opined the public would vocalize that it still did not trust the legislature. He thought they should take time to rethink some of the things that had been offered. 1:50:44 PM Representative Tilton expressed opposition to the budget. She echoed comments of her colleagues. She stressed the budget had increased by $170 million. She pointed out there was a travel freeze, but the committee had increased travel. Additionally, there was a hiring freeze, but PCNs [position control numbers] and employees had been increased. She stated the budget had not been increased higher than $170 million because the legislature had used some money from other funds. She characterized the move as creative and clarified that it was not always bad but would leave some holes in the next budget cycle. She stated it was one of the reasons for the current situation - some holes had been left from the last budget cycle. She stressed that her constituents did not want an increase in government spending. She was opposed to the current budget because it gave more money to government. 1:52:07 PM Representative Guttenberg spoke in support of the budget. He believed the amendment process demonstrated how difficult it was to strategically strike and cut the budget. He stated there had been proposed cuts that were below the typical level. He reasoned that if some of the cuts had been accepted they would hinder economic development through the Department of Natural Resources related to permitting and public information on the state's resources. He believed the committee had illustrated significant restraint. He stressed that the money going to the University associated with Arctic research was important in terms of Alaska's global position. He mentioned a recently published Alaska Gasline Development Corporation (AGDC) report showing the perspective on Alaska was closer to 80 percent of the industrial world than any other location. He believed the distance would close; Alaska was centrally located, and it was important to ensure the state was prepared. He remarked that the state had not gone far enough "in those economic development things," but he did not believe it was currently poised to get there. Representative Guttenberg continued that if the budget had not addressed issues pertaining to public defenders, the state's criminal justice and courts would have been incapacitated because a balance was needed. When he had considered the overall budget cuts and actions that had been taken he recognized how difficult it had been to make the cuts. Many of the people the committee had heard from who had discussed the size of government and what they wanted to do, clearly illustrated the services were needed. He noted that some people merely say government is government, but he countered that government provided services to the people of Alaska including education, criminal justice, and Medicaid coverage. There were many things the state needed to be doing that it was not doing, but he acknowledged the fiscal crisis and reasoned it was not possible to do everything that was needed. Representative Guttenberg looked forward to the day the state could dig itself out of its deficit and he reasoned the problem would be solved by filling the hole in, not by digging deeper. He spoke about roads that were not being plowed on time - the priority of roads was slow in the Interior. He noted the region had experienced one of its snowiest winters during the current year. While people wanted to see government cut, they also wanted the services. He detailed that individuals wanted their children in school, a college education, plowed roads, and industrial services (i.e. permits granted for resource development, projects, and jobs). He reported that residents on the North Slope were losing jobs faster than nonresidents. The budget was tight and would likely remain tight for some time. He thought the state had done an economic job of suppressing budget growth because it happened whether the legislature did anything or not. 1:56:19 PM Co-Chair Seaton responded to some of the points made by Minority members. He referenced the general funds chart [provided by the Legislative Finance Division titled "Multi-year Agency Summary - Operating Budget - FY 2019 House Structure" dated March 16, 2018 (copy on file)] showing all UGF and designated general funds (DGF). The right column, compared to the governor's budget, showed five line items with reductions and six line items with increases. The chart identified all of the agencies that received either reductions or increases. The second column showed $21 million in the Department of Corrections (DOC). He explained there had been a $21 million hole in the budget because it had been left for a supplemental. The current budget filled the hole, which should eliminate the supplemental the following year. He explained that they had tried to use the process throughout the entire budget. They had capitalized funds for disaster relief and fire suppression to avoid supplementals in the coming year. He acknowledged the items made the budget look heavier, but the approach was more honest. Co-Chair Seaton pointed to the far right column showing all general funds, which included $18 million for K-12 and $19 million for the University. He explained the importance of the numbers that compared the FY 19 governor's amended budget to the House Finance Committee final budget. He acknowledged the hard work put in by finance subcommittees. He noted that there had been almost as many reductions to agencies as there had been additions. He hoped to ensure as much transparency as possible in the budgeting process. He appreciated all of the comments made by the Minority and Majority during the process. He hoped there would be better ways to get down to appropriation and allocation lines in the future, which would result in a more strategic conversation. He thanked all committee members for their participation in the process. 1:59:42 PM Representative Wilson pointed to page 2, line 1 of the LFD multi-year agency summary. She referenced the negative $5.913 million associated with the Permanent Fund under the FY 19 governor amended column. She asked if the POMV [percent of market value] and the 33 percent [for the PFD] meant there would be $5.913 million less to be allocated toward the PFD. She was trying to understand where the 0.7 percent decrease [shown in the last column on the right] came from. 2:00:25 PM AT EASE 2:01:17 PM RECONVENED Co-Chair Seaton pointed to the FY 19 governor's amended budget under the third column on page 2 showing $818,876.5 million. He explained the figure had been based on a higher number of participants in the PFD, even though the PFD calculation was lower. The legislature had received an updated number of estimated participants. He pointed to the fourth column showing $812,963.0 million that reflected a slightly higher dividend and a lower number of participants due to some outmigration. Representative Wilson thought that because the POMV was in the budget, 66 percent would go to the government and 33 percent went to the people. She did not believe the money shown in the chart should change based on the number of participants. She detailed the amount was set and no longer used a formula like in the past. She did not understand how participants had anything to do with it. She thought it appeared they were lowering the individual share, which she did not believe made sense because the amount should be set. 2:03:15 PM Representative Pruitt explained that the governor had included 5 percent with the 30 percent. One of the changes made by the co-chair was a 4.75 percent [POMV draw] with 33 percent directed to the PFD. While there was less money, the figure reflecting fewer people resulted in a higher PFD, but it was the reason for the reduction of $6 million (it was the change in the structure for the POMV draw and where it went). Co-Chair Seaton agreed that the governor's proposed budget included a 5 percent POMV, and the House Finance Committee CS included a 4.75 percent draw. The change accounted for the difference in the gross amount of money. Representative Wilson asked for verification the difference [in the third and fourth column on page 2] was related to the draw percentage, not to the participants. Co-Chair Seaton agreed. Vice-Chair Gara remarked that there was no agreement in the legislature on what the dividend amount should be. He recalled the current Republican Minority leader had proposed $1,000 dividends two years back. There were also others in both parties who were on the opposite end. The House Finance Committee had determined the $1,000 dividend was too small. He elaborated that the committee had worked for a $1,200 dividend in 2017, but the Senate had not agreed and a dividend of $1,100 had been decided on. He highlighted that the current budget included a $1,250 PFD. He reiterated there was huge disagreement among legislators within their own parties on what the amount should be. Co-Chair Seaton pointed out that the current discussion had been about the gross amount taken for the dividend. He corrected his earlier statements pertaining to the difference between the two columns [columns 3 and 4 on page 2 of the LFD multi-year agency summary]. He explained that Representative Pruitt was correct the difference between the two columns was a 5 percent draw and a 4.75 percent draw. He detailed that a 5 percent POMV draw would take more out of the Permanent Fund than a 4.75 percent POMV draw. Representative Wilson clarified the money would come out of the Permanent Fund Earnings Reserve Account (ERA); the legislature could not draw from the Permanent Fund corpus. She believed they needed to be careful with terminology. She underscored that the proposed budget did not guarantee $1,250 PFDs. She detailed the budget included a 66/33 percent cut [directed to government spending and the PFD respectively] of the 4.75 percent [POMV draw from the ERA]. The number of individuals eligible for the PFD would determine the dividend amount (the calculation would be whatever the 33 percent came out to be divided by the number of eligible recipients). She emphasized that the proposed budget may result in PFDs of $1,250, but they may be a little more or less. She did not think it was prudent to discuss what the other body would or would not do. She wanted to keep the conversation to the details of the bill. 2:07:37 PM Co-Chair Seaton corrected that the POMV was calculated on the average value of the five years preceding the current year, which was on the total average value of the Permanent Fund. The draw would come from the ERA, but the average value calculation included the ERA and the corpus. Representative Wilson wanted to ensure the public knew something "was still sacred in this world." Co-Chair Seaton agreed. Representative Wilson MAINTAINED her OBJECTION. A roll call vote was taken on the motion to adopt the CS for HB 286. IN FAVOR: Gara, Grenn, Guttenberg, Kawasaki, Ortiz, Foster, Seaton OPPOSED: Wilson, Tilton, Pruitt Representative Thompson was absent from the vote. The MOTION PASSED (7/3). There being NO further OBJECTION, Work Draft 30-GH2564\R for HB 286 was ADOPTED. Co-Chair Foster MOVED to ADOPT the proposed committee substitute for HB 285, Work Draft 30-GH2566\U (Wallace, 3/16/18). Representative Wilson OBJECTED for discussion. She believed the committee needed to mature. She did not support removing a project so the other body could remove a project in order to take the bill to conference committee. She believed the legislature had better things to do. She elaborated that the Alaska Mental Health Trust Authority (AMHTA) went through its budget very closely and decisions were made by the board. She thought it was time to change the practice of continuing something because it was the way it had always been done. She WITHDREW her OBJECTION. There being NO further OBJECTION, Work Draft 30-GH2566\U for HB 285 was ADOPTED. 2:10:13 PM Co-Chair Foster MOVED to REPORT CSHB 286(FIN) out of committee with individual recommendations. Representative Wilson OBJECTED. 2:10:33 PM AT EASE 2:10:51 PM RECONVENED Representative Wilson MAINTAINED her OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Grenn, Guttenberg, Kawasaki, Ortiz, Gara, Seaton, Foster OPPOSED: Pruitt, Tilton, Wilson Representative Thompson was absent from the vote. The MOTION PASSED (7/3). There being NO further OBJECTION, CSHB 286(FIN) was REPORTED out of committee with four "do pass" recommendations, one "no recommendation" recommendation, and five "amend" recommendations. 2:11:52 PM AT EASE 2:14:34 PM RECONVENED Co-Chair Foster MOVED to REPORT CSHB 285(FIN) out of committee with individual recommendations. There being NO OBJECTION, CSHB 285(FIN) was REPORTED out of committee with four "do pass" recommendations, one "no recommendation" recommendation, and five "amend" recommendations. 2:15:11 PM AT EASE 2:16:32 PM RECONVENED Co-Chair Seaton thanked members and staff for their work on the budget. Additionally, he thanked Legislative Legal Service, LFD, and his staff.