Legislature(2015 - 2016)
04/25/2015 09:03 PM House CONFERENCE COMMITTEE ON HB72 AND HB73
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| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 72(FIN)
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs and capitalizing funds; and providing
for an effective date."
SENATE CS FOR CS FOR HOUSE BILL NO. 72(FIN) am S
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs and capitalizing funds; amending
appropriations; and providing for an effective date."
And
CS FOR HOUSE BILL NO. 73(FIN)
"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."
SENATE CS FOR CS FOR HOUSE BILL NO. 73(FIN)
"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."
9:03:36 PM
DEPARTMENTS
Department of Administration
Department of Fish and Game
Department of Health and Social Services
Department of Transportation and Public Facilities
University of Alaska
Department of Education and Early Development
Chair Neuman communicated that the committee would take up
all remaining open items in HB 72 and HB 73, based on the
motion sheets distributed to members earlier in the day
(copy on file), dated April 25, 2015, for the following
departments:
9:03:53 PM
DEPARTMENT OF ADMINISTRATION
Vice-Chair Kelly MOVED to ADOPT the Chair's recommendation
on the following items for the Department of
Administration:
Item 1 Senate
Item 6 House
Item 7 House
Item 8 Senate
Item 9 House
Item 10 House
There being NO OBJECTION, it was so ordered.
Vice-Chair Kelly MOVED to REOPEN Item 3 in the Department
of Administration.
There being NO OBJECTION, Item 3 was back before the
Committee.
Vice-Chair Kelly MOVED to RESCIND its action adopting the
Senate on Item 3.
There being NO OBJECTION, the committee rescinded the
adoption of the Senate intent for Item 3.
Vice-Chair Kelly MOVED to ADOPT the House for Item 3.
There being NO OBJECTION, it was so ordered.
The action closed all conferencable items in the budget for
the Department of Administration.
9:05:05 PM
DEPARTMENT OF FISH AND GAME
Vice-Chair Kelly MOVED to REOPEN Items 10 and 25 in the
Department of Fish and Game.
There being NO OBJECTION, Items 10 and 25 were back before
the Committee.
Vice-Chair Kelly MOVED to RESCIND its action adopting the
Senate plus $200 thousand on Item 10 and to adopt the
Senate on Item 25.
Representative Gara OBJECTED for the purpose of discussion.
He relayed that the Senate version was a $500 thousand
decrement to the Marine Mammal program. He asked what
services would be impacted by the decreases. He corrected
his figure to $394 thousand.
Co-Chair Neuman ask Mr. Teal to respond.
David Teal, Director, Legislative Finance Division, asked
Representative Gara to repeat his question.
Representative Gara asked what services would not be
provided with the suggested cut to the program.
9:06:35 PM
AT EASE
9:06:48 PM
RECONVENED
James Armstrong, Staff, Senator Pete Kelly relayed that the
commissioner of Department of Fish and Game asked for the
amendment but was out of town for two weeks. The Senate
discussed the change with the House and found it agreeable.
It was a request made by the department.
Representative Gara WITHDREW his OBJECTION.
There being NO OBJECTION, the committee RECINDED its
previous ACTIONS on Items 10 and 25.
Vice-Chair Kelly MOVED to ADOPT the Senate plus $105.9
thousand for Item 10 and the House for Item 25.
There being NO OBJECTION, it was so ordered.
The action closed all conferencable items in the budget for
Department of Fish and Game.
9:07:49 PM
DEPARTMENT OF HEALTH AND SOCIAL SERVICES
Vice-Chair Kelly MOVED to ADOPT the following in the
Department of Health and Social Services' budget:
Item 1 House for both fund sources
Item 2 Senate
Item 3 Senate
Item 4 House for both fund sources
Item 5 House
Item 6 Senate for both fund sources
Item 7 House
Item 8 House minus $50.0 thousand
Item 9 Senate for both fund sources
Item 10 Senate for both fund sources
Item 11 Senate for both fund sources
Item 12 Senate for both fund sources
Item 13 Senate
Item 14 House for both fund sources
Item 15 Senate
Item 16 Add new intent to read: It is the intent of
the legislature that reductions to the
Juneau Pioneer Home be taken from the
contractual line rather than from the
personal services line to ensure that
staffing levels for direct care are
sufficient.
Representative Gara OBJECTED. He pointed to Item 5 which
related to the state's foster care system. He conveyed that
the number of foster youth had grown significantly in the
previous five years from about 17 hundred to almost 25
hundred. He emphasized that staffing shortages were
chronic. In a recent letter he had received from the Office
of Children Services (OCS), it referred to itself as an
agency in crisis. He did not want sympathy for the agency
but rather to ponder the children the agency was unable to
serve. He discussed a study from three years previously
that showed OCS was over 50 staff short. Since that time
the number of foster youth had grown to the point where the
staff shortage was more likely 80 to 90 staff short. He
understood that the state could not afford to pay for 80 or
90 additional OCS staff. He opined that without staff at
OCS kids were being left in foster care for a lengthier
time and costing the state more money. He relayed that the
state had 849 foster youth waiting for an adoptive home
because of the lack of social workers available to address
the cases. He explained that the state paid a daily rate
for foster care for each child. He added that it also cost
the child because it was every day that the child was
without a loving home. He concluded that without the needed
number of social workers in the system problems were
exacerbated. Currently, the homelessness rate for foster
care youth was about 40 percent. He detailed that 20
percent of kids were actually homeless coming out of care
and the remaining 20 percent of kids couch-surfed. There
was also a 27 percent incarceration rate for foster youth.
He emphasized that the state held guardianship for the
foster care youth. He did not believe in leaving a system
in place that the agency had described as one in crisis
where kids were left languishing in foster care, bouncing
between 5, 10, and 15 homes. He believed that by not having
necessary social workers in place, the state would pay in
moral fiber and in more costs related to crime and
homelessness. He did not believe the Committee's approach
was reasonable in addressing a system that was in crisis
and producing a 40 percent homelessness rate for foster
youth.
He reviewed that the Senate number was money freed up by
the department and identified as a no-cost item. The state
had been able to take in $3 million of additional Tana
funds of which $2 million were designated to hire
additional social workers. He believed it was the right
thing to do hiring staff the state knew it needed. He would
not be supporting the amendment and was pretty disappointed
in the change.
Representative Gara MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Representative Thompson, Senator McKinnon,
Representative Neuman, Senator Kelly
OPPOSED: Representative Gara, Senator Olson
The MOTION PASSED (House 2/1, Senate 2/1). The House for
Item 5 was ADOPTED.
Representative Gara OBJECTED further. He expressed his
objection concerning Item 13. He was concerned with the
estimate the state would have to pay for people that needed
Medicaid services. If the amount of people increased and
more had to be paid, it would cost the state more. If the
amount of people decreased, it would cost the state less.
He viewed that the larger decrement in Item 13 was only an
estimate of what the state would have to pay in Medicaid
over the next year. He wondered if he was correct about
Item 13.
Mr. Teal responded that the motion was $20 million versus
$11 million. He added that Representative Gara was correct
in saying that if the state cut too much there would likely
be a need for a supplemental. The representative was also
correct in saying it was an estimated amount. Currently, it
was impossible to determine the need for a supplemental
under either option.
Representative Gara asked Mr. Teal whether the amount was
an estimate the state would have to pay for Medicaid
services. The state was obligated to pay for the services.
If the number ended up being higher, the state would have
to pay for it. If the number ended up being less than
anticipated, the state would see a savings. The number was
just an estimate. He wanted to know if he was accurate.
Mr. Teal answered, "It is."
Representative Gara WITHDREW his OBJECTION on action Item
13.
There being NO further OBJECTION, it was so ordered.
This action closes the conferencable items in the budget
for the Department of Health and Social Services.
9:14:56 PM
DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES
Vice-Chair Kelly MOVED to ADOPT the following in the
Department of Transportation and Public Facilities' budget:
Item 33 House
Item 38 House
Item 39 House
Item 48 House
There being NO OBJECTION, it was so ordered.
The action closed all conferencable items in the Department
of Transportation and Public Facilities' budget.
9:15:30 PM
UNIVERSITY OF ALASKA
Vice-Chair Kelly MOVED to ADOPT the following in the
University of Alaska's budget:
Item 1 Senate
Item 2 Senate
Item 3 Senate
Item 4 Senate
There being NO OBJECTION, it was so ordered.
The action closed the conferencable items for the
University of Alaska's budget.
9:16:00 PM
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT
Vice-Chair Kelly MOVED to ADOPT the following in the
Department of Education and Early Development's budget:
Item 1 No selection is required. Decisions will be
made in Language Items 6 and 11.
Item 8 House for both fund sources
Item 9 Senate plus $550.0 thousand
Item 10 Senate
Item 12 Senate for both fund sources
Item 13 Senate
Item 14 Senate
Item 15 Senate
Item 16 House
Item 17 House
Item 18 House
Item 19 Senate
Item 20 Senate
Item 22 Senate
Item 24 Senate
Representative Gara OBJECTED. He referred to Item 1. His
understanding was that in addition to the $32 million in
grant money cuts another $18 million would be cut from the
budget. If he was accurate he would object. Currently he
was willing to remove his objection.
Representative Gara WITHDREW his OBJECTION.
There being NO OBJECTION, Item 1 was so ordered.
There being NO further OBJECTION, it was so ordered.
The action closed the conferencable items for the
Department of Education and Early Development's budget.
Representative Gara asked if the Committee would be
discussing the language section.
Co-Chair Neuman responded that the language section would
be discussed next.
9:17:53 PM
LANGUAGE SECTIONS
Vice-Chair Kelly MOVED to ADOPT the following in the Language
Sections of the budget:
Item 1 Senate
Items 2, 3, and 4 No selection is required
Item 5 Senate
Items 7 and 8 No selection is required
Item 9 Senate
Item 12 No selection is required
Representative Gara OBJECTED. He stated that it was his
understanding that the education cuts in the budget were in
Items 6 and 11. He remarked that he was looking at the
language for the first time and viewed it as complex. He
wanted an explanation of the language and of the total cut
being proposed in addition to the cut of $32 million in
grant monies.
Mr. Teal responded that the item that was chosen was Item 1
which dealt with crime victim intent language. He referred
to Item 5 and explained that it dealt with federal and
other program receipts and would eliminate the need for
going to the Legislative Budget and Audit Committee for
additional federal receipt authority for Medicaid
expansion. It would require going to the full legislature
for approval. He explained that Item 9 was shared taxes
moving the aviation fuel out of the general funds.
Co-Chair Neuman interrupted Mr. Teal to clarify whether
Representative Gara' questions were regarding Items 6 and
11.
Representative Gara answered that his first questions were
about Items 6 and 11.
Mr. Teal relayed that Items 6 and 11 had not been addressed
presently.
Representative Gara clarified that the items were open.
Mr. Teal responded, "At this point."
Representative Gara indicated that he had a few more
objections.
Senator Olson asked if it was true that cuts were being
considered in the amount of $32 million.
Senator McKinnon called for a point of order.
9:20:39 PM
AT EASE
9:21:33 PM
RECONVENED
Representative Gara OBJECTED to Item 5. He noted that there
had been 26 legislative hearings on Medicaid expansion and
reform in the year to date. He thought that there had been
more hearings on Medicaid than anything with the exception
of Marijuana of which there had been about 125 hearings. He
believed that DHSS had demonstrated that they would be able
to save $600 million in state money over the following six
years. He did not agree with dragging the issue out in the
middle of a fiscal crisis. He suggested that by expanding
Medicaid money would be freed up to spend in other areas
such as education, children's services, and senior
services. He opined that blocking Medicaid without a bill
through Item 5 was not the right course to take, especially
with the potential savings of $600 million.
9:22:58 PM
AT EASE
9:23:18 PM
RECONVENED
Co-Chair Neuman asked if there was further discussion on
Item 5.
Representative Gara MAINTAINED his OBJECTION.
A roll call vote was taken on Item 5.
IN FAVOR: Representative Thompson, Senator MacKinnon,
Senator Kelly, Representative Neuman
OPPOSED: Senator Olson, Representative Gara
The MOTION PASSED (House 2/1, Senate 2/1).
9:24:01 PM
AT EASE
9:24:38 PM
RECONVENED
Co-Chair Neuman asked if there was any objection to Item 1 and
Item 9.
There being NO OBJECTION, it was so ordered.
The action closed the conferencable items 1, 5, and 9 in
the Language section of the budget. [Note: Representative
Gara reconsidered and objected. See immediately below.]
Representative Gara OBJECTED to Item 9. [Representative Gara
reconsidered and objected for the purpose of reviewing the
items].
Co-Chair Neuman allowed the objection but wanted to keep the
meeting moving.
Representative Gara remarked that he was trying to keep up but
noted that it was the first time he had seen the cut sheets.
He relayed that Item 9 addressed the issue as to whether the
local communities were going to receive cruise ship revenue
that they were statutorily entitled to or if there would be a
delay. He could not decipher what was being proposed in Item
9.
Co-Chair Neuman commented that Representative Gara was looking
at the incorrect item number. He should be looking at Item 10.
He directed Mr. Teal to review Item 9.
Mr. Teal explained Item 9 affected aviation fuel. In the House
version the appropriation of $200 thousand distributed to
communities came out of the general fund. It turned out that
the $200 thousand was not general fund money because aviation
tax collections were dedicated to be used only at airports.
The Senate language took the funds from the general fund
portion and moved it into Section B and stipulated that the
$200 thousand would be refunded from the surcharge. He
concluded that it was the same money, the same communities
receiving the money, and the proper source of the money being
identified.
Representative Gara thanked Co-Chair Neuman for correcting
him. He was concerned about Item 10 not Item 9.
Representative Gara WITHDREW his OBJECTION.
There being NO OBJECTION, it was so ordered.
The action closed the conferencable items 1, 5, and 9 in
the Language Sections of the budget.
9:27:08 PM
AT EASE
9:28:07 PM
RECONVENED
Vice-Chair Kelly MOVED to ADOPT the following in the Language
Section: Item 10 and to ADOPT Amendment 29-GH1780\F.A.7
Wallace 4/16/15, which includes the original House language
and a new subsection.
Page 80, following line 23:
Insert new subsections to read:
"(c) The amount necessary to pay the first seven ports
of call their share of the tax collected under AS
43.52.220 in calendar year 2015 according to AS
43.52.230(b), estimated to be $15,500,000, is
appropriated from the commercial vessel passenger tax
account (AS 43.52.230(a)) to the Department of Revenue
for payment to the ports of call for the fiscal year
ending June 30, 2016.
(d) If the amount available for appropriation under
(c) of this section is less than $15,500,000, then the
appropriation made in (c) of this section shall be
reduced in proportion to the amount of the shortfall."
Co-Chair Neuman OBJECTED for the purpose of explanation. He
directed Mr. Teal to describe the amendment.
Mr. Teal explained that Section C was included in the
House. It paid the communities' ports of call their share
of what was referred to as the "Cruise Ship Head Tax."
Under Section D, a new section, the payments were prorated
to the ports of call if the balance in the fund plus
calendar year 2015 revenue was insufficient to pay all
communities their share of collection. It was prorating
language.
Co-Chair Neuman WITHDREW his OBJECTION.
Representative Gara OBJECTED. He and asked Mr. Teal about
Section D. He understood prorating if cruise ship head tax
revenue was less than $15.5 million. He wondered if he
should be concerned about any other appropriation from the
cruise ship head tax that he did not see in the amendment.
Mr. Teal responded that there was no appropriation listed.
The amendment simply prorated the $15.5 million. He added
that there might be other appropriations of the head tax
money. In general, if the ports of call money was
distributed with money left over, the funds could be
appropriated to communities for capital projects. However,
the specific section made no appropriation.
Senator MacKinnon commented that there was an issue inside
of the account which was the reason for the Senate flagging
it for further discussion. She explained that the state was
advancing money prior to the cruise ship tax money being
received by the state. It was overestimated in the prior
year in receipts to other communities. Section D was
clarifying that if $15.5 million was received, it would
then be distributed to the ports of call. If the money was
not received the money would be prorated. To her knowledge
there were no other places the particular money was used to
somehow short communities. The problem became an issue when
the state was confronted with a fiscal deficit and
continued to draw from its savings. In other words, the
state was advancing general funds and anticipating and
waiting for the taxes. She would be continuing to follow
the issue to try to resolve it in the following legislative
session.
Representative Gara WITHDREW his OBJECTION.
Senator Olson stated that it was his understanding that it
was an internal issue that the state was trying to address
making sure that there were no real objections from the
communities involved.
There being NO OBJECTION, it was so ordered.
9:32:19 PM
AT EASE
9:33:16 PM
RECONVENED
Vice-Chair Kelly MOVED to ADOPT the following in the Language
Section and to ADOPT Amendment 29-GH1780\F.A.17 Wallace
4/25/15, which addressed Language Items 6 and 11:
Page 77, lines 5 - 10:
Delete all material and insert:
"(c) The sum of $157,000,000 is appropriated from the
in-state natural gas pipeline fund (AS 31.25.100) to
the public education fund (AS 14.17.300).
(d) The amount necessary, after the appropriations
made in (c) of this section and in sec. 28(c), ch. 16,
SLA 2014, as amended by sec. 30 of this Act, when
added to the balance of the public education fund (AS
14.17.300) on June 30, 2015, estimated to be
$950,555,700, to fund the total amount for the fiscal
year ending June 30, 2016, of state aid calculated
under the public school funding formula under AS 14.l
7.410(b) multiplied by 0.9859, is appropriated from
the general fund to the public education fund (AS
14.17.300).
(e) If the amount of the appropriation made in (c) of
this section is less than $157,000,000, the
appropriation made in (d) of this section shall be
reduced on a dollar-for-dollar basis, equal to the
amount of the reduction in (C) of this section."
Reletter the following subsections accordingly.
Page 80, line 29, following "Sec. 30.":
Insert "PUBLIC EDUCATION FUND."
Page 80, line 30:
Delete "$1,002,568,100"
Insert "$77,008,600"
Page81, line9:
Delete all material.
Renumber the following bill section accordingly.
Page 81, line 10:
Delete "secs. 33 and 34"
Insert "sec. 33"
Representative Gara OBJECTED.
Co-Chair Neuman directed Mr. Teal to describe the amendment
to the committee.
Mr. Teal directed the committee members and the public to
refer to the spreadsheet at the back of the amended. He
suggested that the spreadsheet went in chronological order
more than in the amendment itself. On the spreadsheet the
$1.249 billion shown on line 1 was a projected balance of
the Public School Trust Fund prior to any amendments on the
FY 15 operating budget. The amount was intended to pay
foundation and pupil transportation costs in FY 16. The
state forward funded a year. He continued that lines 2 and
3 reflected the action in Amendment F.A.17 on lines 21 and
22. In looking at the amendment it showed that it was
replacing $1.02 billion with $77 million. It reduced the
deposit in FY 15 that was made to the Public School Trust
Fund to $77 million eliminating the deficit for FY 15. He
added that the $1.125 billion reduction gave an FY 15 year-
end balance of $123 million and also reflected the
beginning balance in FY 16 on line 4. He moved on to
explain line 5.A that showed the full projected FY 16
foundation amount, $1.168 billion. On line 5B it showed a
proration percentage of 98.59 percent. He explained that on
line 5.C the formula would be short-funded by about $16.5
million if it were prorated to the 98.59 percent. Line 5.D
showed that the amount distributed in FY 16 to school
districts via the foundation formula would be about $1.152
billion. If line 6 was added, pupil transportation costs of
$79.2 million, the total would equal $1.231 billion shown
on line 7. He furthered that with the FY 15 balance on line
4, the FY 16 balance needed to be about $1.108 billion as
depicted on line 8. The money came from two sources; $157
million came from Alaska Stand Alone Pipeline (ASAP) fund
code 1229 shown on line 9 which corresponded to lines 3 and
4 on Amendment F.A.17. He pointed out that line 10 was an
estimate of the general funds needed to fund the foundation
formula at 98.59 of full funding which was shown on lines 5
through 10 of the amendment. The effective date of the FY
16 deposit changed from December 1st to July 1st because
when there was a balance carried forward the cash flow
would have survived with a December 1st date but currently
needed to be the first day of the fiscal year. It needed to
be on hand in order to have the money for distribution. He
directed committee members to turn to the amendment itself
on lines 11 through 13 in Section E. The lines were
contingency language that reduced funding dollar-for-dollar
if the $157 million appropriated in Section C was
unavailable. He concluded that the FY 15 appropriation to
the public education was rescinded in order to eliminate
the fiscal gap. In FY 16 education was funded at 98.59
percent of full funding leaving a zero balance in the
Public School Trust Fund at the end of FY 16.
Representative Gara spoke to his objection. He wondered if
the amendment eliminated all forward funding for education.
He asked if the forward funding would be at zero.
Mr. Teal responded affirmatively.
Representative Gara noticed that much of the amendment
affected the current budget year. He asked whether the
change in FY 15 in education funding affected the amount
that was appropriated to schools during FY 15 at all.
Mr. Teal responded in the negative.
Representative Gara relayed his understanding was that
instead of fully funding what was passed the previous year
the legislature would be funding education at 98.59 percent
which equated to a $16.4 million reduction in K-12 funding
in addition to the $32 million reduction made in an earlier
budget. He asked Mr. Teal if he was correct.
Mr. Teal answered in the affirmative.
Representative Gara believed he understood what was
happening and had two objections. First, he suggested that
by forward funding the state had seed money of over $1
billion to help the state get through tough financial
years. In the budget before the committee the legislature
was eating up the full $1.2 billion so that it would not be
available in future lean years. If the state maintained the
$1.2 billion it would be able to use $50 million dollars
here or there until the state came out of its current
fiscal crisis. By spending the entire $1.2 billion the
state had essentially removed a tool for adequately funding
education.
Representative Gara relayed his second objection. He
pointed out that the $16.4 million reduction in addition to
the $32 million reduced previously equated to a $48 million
reduction for the state's public schools. He opined that it
was a devastating amount of funding cuts. Although he was
well aware of the state's fiscal crisis he believed there
were smarter ways to deal with it. He suggested the
possibility of saving the state $6 million by expanding
Medicaid. He also spoke of oil tax reform. He claimed that
currently the state was paying out $650 million more in tax
credits over the following two years to oil companies than
what the state was receiving in production tax revenue. He
attributed this to the hole in the state's budget.
Vice-Chair Kelly interjected that he had heard enough about
oil tax credits. He opined that the discussion was almost
always disingenuous.
9:42:32 PM
AT EASE
9:44:05 PM
RECONVENED
Co-Chair Neuman asked Representative Gara if he had another
question.
Representative Gara responded that he did not have a
question but commented that with a total $48 million in
education reductions in the current year it equaled close
to a 5 percent cut in education funding. He suggested that
the reductions combined with a lack of public commitment to
education was a recipe for parents to leave the state. He
acknowledged that there was a philosophical disagreement
between legislators. He did not believe education was the
place to cut claiming there were other areas of the budget
that could be decreased.
Co-Chair Neuman asked if the $32 million referenced by
Representative Gara was money outside of the funding
formula. He wondered if the reduction outside the formula
was part of Governor Walker's budget recommendations.
Mr. Teal responded that it was part of the governor's
original budget. It was a complicated question. He supposed
that the $32 million could not be seen as a reduction,
rather it was a planned increase that did not occur.
Vice-Chair Kelly stated that he was going to point out that
it was a planned increase. He liked the way Mr. Teal
phrased it. He added that the $16.5 million was also
anticipating a planned increase in the $50 base student
allocation (BSA) that was passed in the previous year. It
was not a one-to-one. He had been trying to figure out some
general numbers. In the previous year when the price of oil
was $120 per barrel the legislature voted for a $50 million
BSA increase and some other additional increases. He did
not think the legislature would have voted affirmatively if
the price of oil had been $45 per barrel. The increases
were being pulled back. He also mentioned that the forward
funding of education had not been spent, it was just not
going to be recharged. In most of the budgets there was an
additional $1.1 million or $2 billion and education was
forward-funded a year. However, the legislature would not
be doing so in the current year because the state did not
have the money. One of the reasons the state could not get
the money was due to not having a 3/4 majority vote. He
suggested it might be something to add to the Minority's
list so that the legislature could forward fund education.
Senator Olson asked about line 9. It was his understanding
that for some reason if there was a shortfall in the
following year's education funding that $157 million would
be taken from the ASAP project.
Mr. Teal explained that the intention of Section D was that
the state would take the balance carried forward from FY 15
(projected to be about $123 million), add the $157
appropriated in Section C, and add general funds to get to
98.59 percent of the full formula funding.
Senator Olson wanted to clarify that $157 million would be
gone from the ASAP project.
Mr. Teal indicated that Section C took $157 million from
the ASAP project and appropriated it to the Public School
Trust Fund.
Vice-Chair Kelly added that money would be left in the ASAP
account to continue working towards a pipeline.
Co-Chair Neuman believed that instead of further reductions
from the general fund there would be less general fund
money added plus the $157 million plus the other funds to
get to the appropriation amount needed for education
funding.
Representative Gara declared that he would be voting
against the amendment. He wanted to know whether there
would be a chance to make comments and to direct questions
to Mr. Teal at the end. He wanted to further understand the
overall impact of the budget.
Co-Chair Neuman encouraged Representative Gara to ask his
questions.
Representative Gara did not agree with the characterization
that there were no cuts to education. In the previous year
the one-time grant money equaled $43 million. In the
current year it was proposed at $32 million, an $11 million
reduction. He viewed it as an offset to the $50 BSA
increase in the budget. He continued that by going from $43
million to $32 million in the last year's education bill,
education was basically flat funded. He specified that $32
million and $18 million in reductions, $50 million total,
equated to a $200 reduction per student since the prior
year. He could not agree to the cuts.
Representative Gara mentioned hearing discussions about the
Constitutional Budget Reserve (CBR) but the current budget
remained billions of dollars short-funded based on the
anticipated revenue. He asked if he was accurate.
Mr. Teal asked Representative Gara to clarify if he was
talking about FY 15 or FY 16.
Representative Gara responded, "FY 16."
Mr. Teal reported that the FY 16 budget was short-funded by
approximately $3.2 billion.
Representative Gara remarked that the budget before the
committee had approximately $3.2 billion in excess expenses
versus anticipated revenue. He asked if he was correct.
Co-Chair Neuman clarified that the budget had a deficit of
over $3 billion because of the loss of revenue coming to
the state due to low oil prices.
Vice-Chair Kelly remarked that the budget the committee was
currently putting together in the meeting would reflect an
approximate cut of $822 million cut from the previous
year's budget. He speculated that if the budgets were
placed side-by-side Mr. Teal would argue that it reflected
a $1.2 billion reduction.
Representative Gara maintained his objection.
A roll call vote was taken on Amendment 29-GH1780\F.A.17
Wallace 4/25/15.
IN FAVOR: Senator MacKinnon, Representative Thompson,
Senator Kelly, Representative Neuman
OPPOSED: Representative Gara, Senator Olson
The MOTION PASSED (House 2/1, Senate 2/1).
9:52:47 PM
AT EASE
9:54:15 PM
RECONVENED
Co-Chair Neuman called the meeting back to order.
Vice-Chair Kelly MOVED to ADOPT the following in the Language
Section and to ADOPT Amendment 29-GH1780\F.A.2 Wallace
4/16/15, relating to the Constitutional Budget Reserve Fund
and Higher Education Investment Fund, which addresses new
Language Item 13:
Page 1, line 2, following "appropriations;":
Insert "making appropriations under art. IX, sec.
17(c), Constitution of the State of Alaska, from the
constitutional budget reserve fund;"
Page 80, following line 31:
Insert new bill sections to read:
"* Sec. 31. CONSTITUTIONAL BUDGET RESERVE FUND.
(a) If the unrestricted state revenue available for
appropriation in fiscal year 2015 is insufficient to
cover the general fund appropriations that take effect
in fiscal year 2015, the amount necessary to balance
revenue and general fund appropriations is
appropriated to the general fund from the budget
reserve fund (art. IX, sec. 17, Constitution of the
State of Alaska).
(b) If the unrestricted state revenue available for
appropriation in fiscal year 2016 is insufficient to
cover the general fund appropriations that take effect
in fiscal year 2016, the amount necessary to balance
revenue and general fund appropriations is
appropriated to the general fund from the budget
reserve fund (art. IX, sec. 17, Constitution of the
State of Alaska).
(c) The unrestricted interest earned on investment of
general fund balances for the fiscal years ending June
30, 2015, and June 30, 2016, is appropriated to the
budget reserve fund (art. IX, sec. 17, Constitution of
the State of Alaska). The appropriation made in this
subsection is intended to compensate the budget
reserve fund (art. IX, sec. 17, Constitution of the
State of Alaska) for any lost earnings caused by use
of the fund's balance to permit expenditure of
operating and capital appropriations in the fiscal
years ending June 30, 2015, and June 30, 2016, in
anticipation of receiving unrestricted general fund
revenue.
(d) The appropriations made in (a) and (b) of this
section are made under art. IX, sec. 17(c),
Constitution of the State of Alaska.
*Sec. 32. HIGHER EDUCATION INVESTMENT FUND. If, and
only if, the appropriation made in sec. 31 (a) of this
Act fails to pass upon an affirmative vote of three-
fourths of the members of each house of the
legislature and the unrestricted state revenue
available for appropriation in fiscal year 2015 is
insufficient to cover the general fund appropriations
that take effect in fiscal year 2015, the amount
necessary to balance revenue and general fund
appropriations is appropriated from the Alaska higher
education investment fund (AS 37.14.750) to the
general fund."
Renumber the following bill sections accordingly.
Page 81, following line 7:
Insert a new bill section to read:
"* Sec. 35. CONTINGENCY. The appropriation from the
Alaska higher education investment fund (AS 37.14.750)
made in sec. 32 of this Act is contingent on the
failure of the appropriation made in sec. 31(a) of
this Act to pass upon an affirmative vote of three-
fourths of the members of each house of the
legislature."
Renumber the following bill sections accordingly.
Page 81, line 8:
Delete "Sections 30 and 32"
Insert "Sections 30, 3 l(a), 3 l(c), and 34"
Page 81, line 10:
Delete "secs. 33 and 34"
Insert "secs. 36 and 37"
Representative Gara OBJECTED.
Co-Chair Neuman asked Mr. Teal to explain the amendment.
Mr. Teal pointed out that Subsection A reflected the FY 15
draw or appropriation from the CBR that required a super
majority vote to pass. He relayed that Section B was the FY
16 appropriation from the CBR that also required a super
majority vote to be affective. Section C appropriated
earnings or interest to the CBR from the general fund if
money was drawn from the CBR for cash flow purposes.
Typically, a draw would occur early in a fiscal year prior
to revenue flowing into the state coffers. If the state had
cash flow needs it might take a draw from the CBR. However,
the action was not considered a super majority draw if it
was paid back within a year. In order to categorize it in
such a way, the draw was considered a loan which included
an appropriation of interest from the general fund. It
applied to both FY 15 and FY16 and did not require a super
majority vote.
Mr. Teal went on to explain Section D. He stated that it
contained the provision that outlined the requirement of a
super majority vote for Sections A and B. Section 32 stated
that if there was a shortage of revenue to make the general
fund appropriations for FY 15 the amount necessary to
balance the general fund appropriations would come out of
the Alaska Higher Education Investment Fund. As mentioned
earlier, the language was back-stop language. Since the
conference committee adopted Amendment F.A.17 the state's
deficit should have been eliminated because it started with
about a $3.8 billion deficit. He reported that there was
$2.8 billion in the Statutory Budget Reserve (SBR) leaving
a deficit of approximately $1 billion. By removing the FY
15 deposit of $1.125 billion from the ` the state currently
had a surplus projected to be about $125 million in FY 15.
He was uncertain if the amount would be sufficient given
the volatility of oil prices and revenue currently. The
provision would appropriate money from the Alaska Higher
Education Investment Fund to fill a deficit if it occurred.
Section 35 was the contingency language that confirms that
Section 32 (the draw from the Alaska Higher Education
Investment Fund) went into effect only if the super
majority vote failed.
Representative Gara MAINTAINED his OBJECTION.
Senator Olson asked Mr. Teal about Section 31, Subsection
C. He wondered if the provisions in these sections had been
used in previous legislatures when there were shortfalls.
Mr. Teal answered that the language had occurred ever since
2004. In terms of draws a legal opinion differentiated a
short term cash flow draw from a true super majority draw.
It had occurred in several budgets and had been used
frequently.
Senator Olson stated since 2004 he believed there had been
surpluses in intervening years where it was not necessary
to access the fund. He asked for verification from Mr.
Teal.
Mr. Teal confirmed that in most of the years there were
surpluses. In 2004 and 2005 there were not surpluses.
Senator Olson asked if that was when the provision was
implemented.
Mr. Teal responded, "Yes."
Representative Gara referred to Subsection C, the interest
section. He asked how much money would be transferred,
roughly.
Mr. Teal commented that it was difficult to say currently.
He claimed that it might be zero. The short term cash flow
draws from the CBR might not be accessible because in order
to take them the Department of Revenue and other certifying
authors would have to indicate that there would be money
available to repay the draws. Conceivably, they would not
be able to certify that the money would be available. If
there were no draws, there would be no interest. If draws
were made, essentially borrowing, from the CBR the interest
amount would be minimal in terms of percentages. He thought
the interest rate would parallel the rate at which the
general fund earned money, approximately 1 percent.
Representative Gara asked for a rough dollar amount if
there was a draw.
Mr. Teal responded that he could not because it depended on
the cash flow needs. He could not predict what they would
be in the future.
Representative Gara referred to Section 32 that had
language which allowed money to be taken from the Alaska
Higher Education Investment Fund. He asked what for the
current balance of the fund.
Mr. Teal responded that there was approximately $460
million.
Representative Gara asked if Section 32 would only be used
if the state budget was short for FY 15. He wanted to
clarify whether Section 32 applied for FY 16.
Mr. Teal responded in the affirmative.
Representative Gara asked Mr. Teal if he thought a CBR
super majority vote was needed to balance the FY 16 budget
currently before the committee.
Mr. Teal answered that the projected deficit was about $3.2
billion and there was no language getting money from
anywhere else. The budget was simply short $3.2 Billion at
present.
Representative Gara restated his question. He asked Mr.
Teal if he believed a super majority vote would be required
to access the CBR funds for FY 16.
Mr. Teal stated that a super majority vote would be
required to access the needed amount from the CBR.
Representative Gara asked if there was any other fund
besides the CBR identified in the budget to cover the $3.2
billion deficit.
Mr. Teal responded that Representative Gara had not missed
anything.
Senator Olson referred to Section 31, Subsection C where a
loan was essentially being taken and paid back within a
year. He wanted to know what the consequences would be if a
loan was not paid back within the year.
Mr. Teal did not know. He reiterated that the loans could
not be made unless a finance officer could certify that the
money would be available. At present, a finance officer
could not certify that the money would be available.
Senator Olson shared his concern about being able to access
the money and to be able to repay it within a year based on
current projections.
Mr. Teal announced that that was his point; there might not
be interest payments because of an inability to draw funds.
Senator MacKinnon relayed that in the current day the
Senate Finance Committee had talked with the administration
about a cash deficiency plan. In addition, she believed the
administration had set aside the 10 year projection on how
to fund budgets. She relayed that members were waiting to
hear from the administration about what happened if a 3/4
vote failed. It was her understanding the Majority's main
attempt to achieve a 3/4 vote had not been successful to
date. She furthered that the Senate Finance Committee had
left it to the administration to define to the legislature
how to access the funds, in what manner and in what order.
Representative Gara expressed particular concern about
draining or tapping into the Higher Education Fund which
was used for needs-based and merit-based college
scholarships. He thought draining the fund was premature.
He referred to a memo from the administration that stated
that for FY 15 the state had enough funds to cover expenses
through late August or early September 2015. He did not see
a need to dip into the Alaska Higher Education Investment
Fund at present. He opined that the state had enough money
For FY 15 to get through the end of August 2015. He thought
that the legislature would be able to have a budget
agreement prior to the end of August. If the current
amendment passed would take money from the Alaska Higher
Education Investment Fund before the legislature would be
able to come up with an agreement on the budget. He
concluded that the ability of the state to fund
scholarships would be damaged. He believed the legislature
would be able to come to an agreement in short order. He
saw no reason to put the Alaska Higher Education Investment
Fund at risk under the amendment.
Senator MacKinnon argued that Representative Gara's
statement was inaccurate. She reported that the only way
that the Alaska Higher Education Investment Fund would be
touched was if the FY 15 budget did not balance out between
the reserves that were identified to close out FY 15.
Co-Chair Neuman asked Mr. Teal if Senator MacKinnon was
correct.
Mr. Teal responded affirmatively and added that he thought
there was some confusion over FY 15 and FY 16. There were
only two months left in FY 15 with a projected balance of
$125 million. He though the state should be safe. However,
given the volatility and uncertainty of revenue projections
the provision ensured that the state had the budget
covered. The Alaska Higher Education Investment Fund
currently contained approximately $80 million in excess
earnings generated by the balance to the needs of the
scholarships and grants. If there was money taken form the
Alaska Higher Education Investment Fund less than that [$80
million] should not impact either grants or scholarships in
FY 16 or in the future.
Representative Gara relayed that it had been very clearly
stated by the administration that the state had enough
money to fund state operations through August 15. He still
held his position that the section was unnecessary to the
amendment.
Representative Gara maintained his objection.
Senator Olson asked to take a brief at ease.
10:09:20 PM
AT EASE
10:10:56 PM
RECONVENED
Representative Gara MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Representative Thompson, Senator MacKinnon,
Senator Olson, Representative Neuman, Senator Kelly
OPPOSED: Representative Gara
The MOTION PASSED (House 2/1, Senate 3/0).
The action closed the conference-able items in the Language
Sections of the budget.
10:11:42 PM
AT EASE
10:12:14 PM
RECONVENED
Vice-Chair Kelly MOVED to give Legislative Finance and
Legislative Legal the ability to make technical and
conforming adjustments to the Conference Committee
Substitutes for House Bill 72 and House Bill 73.
There being NO OBJECTION, it was so ordered.
Vice-Chair MOVED to report CCSHB 72 out of Committee with
individual recommendations.
Representative Gara OBJECTED. He believed he had already
spoken to is objection.
Representative Gara MAINTAINED his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Senator MacKinnon, Senator Olson, Representative
Thompson, Senator Kelly, Representative Neuman
OPPOSED: Representative Gara
The MOTION PASSED (House 2/1, Senate 3/0).
Vice-Chair MOVED to report CCSHB 73 out of Committee with
individual recommendations.
There being NO OBJECTION, it was so ordered.
Co-Chair Neuman Thanked Vice-Chair Kelly and James
Armstrong of his staff, Senator MacKinnon and Senator Olson
and Representative Thompson and Representative Gara and
their staff. He also thanked David Teal, Amanda Ryder and
the exceptional crew at the Division of Legislative
Finance. He also thanked Megan Wallace, the drafter of both
bills at Legislative Legal, Pat Pitney and her staff at
Office of Management and Budget, the Finance Committee
assistants and secretaries, and his staff, Pete Ecklund and
Joan Brown.
Co-Chair Neuman asked if there was any other business or
comments from Committee members.
Representative Gara asked about the section on union
contracts, Item 8. He relayed that it referenced Section 9
of HB 73. He did not recall there being anything on union
contracts in HB 73, the mental health budget. He asked if
he was correct.
Mr. Teal confirmed that HB 73 was the mental health budget
He clarified that the language paralleled the language in
HB 72 even though it was not necessarily needed.
Representative Gara expressed confusion. He recalled that
in prior action the committee did not approve a number of
union contracts. He did not know where to find them in HB
73. He asked that if a person were to vote in favor of HB
73 would they be voting on any of the union contracts that
were addressed in prior committee actions.
Mr. Teal answered that the salary adjustments were all
removed whether they occurred in HB 73. He furthered that
there might be some mental health salary adjustments.
However, those were not tracked separately. The language
paralleled, was removed from both bills, and the salary
adjustments applied across the board.
Co-Chair Neuman clarified that he was asking for closing
comments before moving the bill.
Vice-Chair Kelly MOVED to adjourn the Conference Committee.
There being NO OBJECTION, it was so ordered.
CCS HB 72 was REPORTED out of committee with a "do pass"
recommendation.
CCS HB 73 was REPORTED out of committee with a "do pass"
recommendation.
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