Legislature(1995 - 1996)
03/29/1996 08:08 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
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CS FOR HOUSE BILL NO. 468(FIN) am
An Act making supplemental appropriations for the
expenses of state government and making and
amending appropriations; ratifying certain state
expenditures; and providing for an effective date.
Co-chairman Frank directed that the FY 96 supplemental
budget be brought on for continued committee review.
Dept. of Military and Veterans Affairs
NICO BUS, Acting Director, Division of Administrative
Services, Dept. of Natural Resources, came before committee
and advised that he would be representing the Dept. of
Military and Veterans Affairs on supplemental items. The
$6.5 million for the National Guard and Naval Militia
Retirement Program will provide additional solvency to the
fund. The program is now funded at 17 percent. Co-chairman
Frank inquired concerning the ratio of future savings to up-
front moneys placed in the fund. Mr. Bus explained that the
Governor requested $2.5 million for FY 97. The department
asked the actuary to calculate the impact of the $5.5
million. The result was that for FY 97 the operating budget
could be reduced by $850.0. If additional FY 96 funding is
provided, the FY 97 operating budget could be further
reduced. Co-chairman Frank asked that the department
provide numbers "all the way up to full actuarial
soundness." NANCY SLAGLE, Director of Budget Review, Office
of Management and Budget, explained that projections
indicate that a $10 million lump-sum contribution would
reduce the FY 97 number to $1.2 million.
At the request of Senator Randy Phillips, Mr. Bus provided a
history of the program. He explained that a 1988 provision
in the National Guard Retirement System allowed for lump-sum
payments. Many of the participants request this payment
when they retire. The fund was thus drawn down much faster
than anticipated. That is the main reason for the present
situation. Lump-sum payments are continuing, but the
department is working with the division of retirement and
benefits to solve the problem and will bring forth
recommendations next year.
Discussion followed between Senator Rieger and Mr. Bus
regarding the target funding ratio for the program. Nancy
Slagle advised that adding $5 million to the fund would
raise the ratio from the present 17 percent to 53 percent.
If $10 million were appropriated, funding would be at 88
percent.
In response to questions from Senator Phillips, Mr. Bus
voiced his understanding that with the requested $6.5
million in the supplemental plus FY 97 operating budget
funding, the program should be stabilized.
Mr. Bus explained that the $1.5 million for disaster relief
has two elements. The first is $557.0 for floods in the
Kenai area. The total cost of the flood exceeded $3
million. The department found most of the needed funding
within existing appropriations. The $557.0 request
represents the remainder. The second part of the
supplemental seeks $1 million for activity between the
present time and June 30, 1996.
In response to a question from Co-chairman Frank concerning
House Finance action, Mrs. Slagle explained that the House
funded the $1 million. The Governor included $1.5 million
in his original request, for response to emergency needs.
Mrs. Slagle voiced concern on behalf of the administration
that "We have no other moneys available to respond to
disasters through the end of the fiscal year." The
department has functioned thus far on outstanding balances
from previous disasters.
Dept. of Natural Resources
NICO BUS again came before committee to speak to the
$5,258.6 for fire suppression which he said would fund
remaining activity through FY 96. Included is the balance
of fixed costs for aviation contracts, suppression, and
other efforts. It also includes $750.0 for routine
suppression activity (initial attack) as well as $2 million
for project fires. Mr. Bus referenced $1.5 million that was
to carry over from FY 96 to '97. Due to a fire in June, the
funding was used in 1995. The department presently has
$9,000.00 remaining. Aviation contracts are due April 1.
The department should not technically obligate these $200.0
payments to vendors if there is not sufficient funding. If
contracts are cancelled, vendors may commit their aircraft
to other uses. Total need for these fixed costs is
$2,256.4. That includes aviation, helicopters, tanker
craft, fixed wing craft, etc. These are basic commitments
the department makes to prepare for the fire season.
Discussion of past fire seasons followed. Mr. Bus
acknowledged that last year's season was one of the lowest
on record.
In response to a question from Co-chairman Halford
concerning costs for the $236.0 listed as "aviation
section," Mr. Bus explained that it relates to in-house
expenditures for staff that manages aviation contracts. Mr.
Bus advised that he would provide a spread sheet listing
individual items of the supplemental request. Discussion
followed among the co-chairmen and Mr. Bus concerning
whether this effort should be included within fixed
operating costs or within the supplemental. Mr. Bus noted
that last year the department used a portion of its fixed
cost funding for actual fire suppression because funding for
suppression was so small.
Further discussion followed regarding the nature of aviation
and BLM smoke-jumper contracts.
In response to a question from Senator Phillips, Mr. Bus
said that predictions indicate this is a potentially high
fire year, mainly in the interior.
Co-chairman Frank asked that Mr. Bus speak to the $1,457.0
in uncollectible federal receivables. Mr. Bus advised that
both the department and the Dept. of Law are working with
federal agencies to obtain a settlement.
Dept. of Law
Co-chairman Frank directed that review revert to discussion
of Dept. of Law requests. BARBARA RITCHIE, Deputy Attorney
General, Civil Division, Dept. of Law, came before committee
to speak to Berger v. State. She explained that the
situation commenced in 1989 when Roger Berger, dba Frontier
Financial Services, began to purchase permanent fund
dividends for $325 to $400. In return for the cash, Mr.
Berger received an assignment of individual rights to the
$873 dividend. The Dept. of Revenue, permanent fund
division, began to experience an escalation in the number of
assignments. As a result, it took action to adopt a
regulation under which it would decline to honor assignments
other than those to governmental agencies. Frontier then
required individuals who made assignments to complete a
change of address form and power of attorney so that the
dividend went directly to Frontier and was subsequently
signed over by the borrower. The Dept. of Revenue noted
circumvention of the new regulation and all parties were
notified. In December of 1989, Frontier filed suit
challenging the regulation and department refusal to
implement the address changes. The superior court
determined that the regulation was beyond statutory
authority and thus invalid. The statute has since been
changed to allow assignment only to a court or governmental
agency. In arguing the case, the state raised issues of
usury and violation of the small loans act. In December of
1995 the supreme court ruled that the transactions were not
loans and returned the case to the superior court for a
determination of "what was owed to Mr. Berger." In the
meantime, the $873.00 permanent fund dividend was paid to
the recipients.
Discussion followed regarding advice in the above matter
provided by the Dept. of Law to the Dept. of Revenue. VINCE
USERA, Assistant Attorney General, Dept. of Law, voiced his
understanding that former Assistant Attorneys General, Jeff
Bush and Peter Froehlich, advised the Dept. of Revenue that
it should not adopt the regulation. Co-chairman Halford
voiced his understanding that the department was advised
against adoption but did so anyway. He then asked for
copies of memos containing Dept. of Law recommendations to
the department.
Discussion of the failed petition for rehearing before the
supreme court followed between Mr. Usera and Senator Rieger.
Further discussion followed regarding the stipulated
judgment settling the amount versus a superior court trial
to determine the amount.
Addition discussion occurred regarding the legal standing of
those who received both the advance from Mr. Berger and the
dividend as well as Dept. of Revenue notification to
recipients that the assignments would not be honored by the
department.
Senator Sharp noted that the $873.00 dividend for 1989,
times the number of assignments (2,600), plus interest and
attorney fees, does not approximate the requested $3.5
million. It thus appears that the "individual was made more
than whole." Mrs. Ritchie noted that statutory interest on
the $2.2 million at 10.5 percent for 74 months totaled
"almost $1.3 million."
Dept. of Public Safety
NANCY SLAGLE again came before committee. She explained
that the House decided the request for manuals and equipment
should be considered within the capital budget. It was thus
removed from the supplemental.
Dept. of Revenue
NANCY SLAGLE advised that the $198.2 request from Alaska
Housing Finance Corporation relates to consolidation of
leased facilities. Inability to construct a facility for
AHFC has necessitated additional lease costs. JOHN BITNEY,
Alaska Housing Finance Corporation, came before committee.
He explained that the FY 96 budget contained funding for
lease payments for six months in anticipation that AHFC
would occupy its own facility when leases expired in
December. Since the corporation will be remaining in
current facilities, the above request is for the remaining
six months of this fiscal year as well as a rate increase
which incurred. In response to a question from Co-chairman
Frank, Mr. Bitney noted that the overall budget was reduced
by $2.5 million. He said he had no answer to a question
regarding where moneys would be derived if supplemental
funding is not provided. Responding to a question from
Senator Sharp, Mr. Bitney advised that the rate increased
from $1.27 to $1.30 per square foot. Co-chairman Frank
asked that Senator Sharp, chairman of the subcommittee on
the Dept. of Revenue budget, review the matter and forward a
recommendation to committee.
Co-chairman Frank inquired concerning the status of space
for the corporation. Mr. Bitney acknowledged an RFP for new
leases and receipt of six bids. No new leases would be
entered before July 1, 1996. The RFP has no relation to the
supplemental request.
END: SFC-59, Side 1
BEGIN: SFC-59, Side 2
NANCY SLAGLE noted that Sec. 12(b) involves a fund source
change between PERS and benefit system receipts. The FY 96
budget inadvertently cut too much out of receipts and
brought the total to $19,200.00. The shift will cover costs
and ensure that charges are made to proper benefit system
accounts. BETTY MARTIN, Comptroller, Division of Treasury,
Dept. of Revenue, came before committee. She explained that
a portion of the shortage results from the fact that "the
SBS accounts went participant directed over the last year .
. . ." Management fees for the change were not in the FY 96
budget when it was prepared. The remainder is due to a
miscalculation in performance measurement fees. There are
two structures for these fees. One is for active management
and the other is for passive management. Fees included in
the budget reflect passive management when SBS accounts are
actively managed.
Dept. of Law
Discussion next reverted to Sec. 9(c), the $66.6 for a
district attorney in Bethel. LAURIE OTTO, Deputy Attorney
General, Criminal Division, Dept. of Law, came before
committee. She attested to three-person offices for both
the public defender and the district attorney in Bethel.
Last August, two of the public defenders quit. One of them
was hospitalized for a stress-related disease. One of the
district attorneys quit, and another actively began asking
for transfer to another job. The third described himself as
desperate. Ms. Otto said that, when she visited the area
and reviewed statistics, she found that staff in Bethel is
carrying double and sometimes triple the caseload of other
offices.
In response to a question from Senator Phillips, seeking the
root of the heavy caseload, Ms. Otto attested to a high rate
of crime between ages 15 and 30. The Bethel region has "a
very large number of people" in that age range. The Bethel
office covers all 56 villages in the region.
Comments followed by Ms. Otto and committee members
regarding the impact of alcohol and prohibitions against
alcohol in the area. Ms. Otto noted that Anchorage appears
to be the source of much alcohol bootlegged into the region.
Over 50 percent of the crime in the DA's office in Bethel
comes for the villages. Serious crime in Bethel itself
appears to involve local residents.
A review of files, indicates that the office is not
overcharging criminal actions. It appears that staff
undercharges and does not pursue cases it should because of
the overload. Staff is routinely working 70 to 80 hours a
week and is only paid for 37.5. Ms. Otto said she returned
from her review much alarmed by the situation and conveyed
her concern to both the Governor and the Attorney General.
Further review by staff from the Dept. of Corrections, Dept.
of Health and Social Services, and Dept. of Public Safety
concluded that an emergency situation exists. There is need
for the fourth position requested in the supplemental. A
similar position has been requested in the public defender
agency. The effect of the fourth attorney is that staff
will work six days a week instead of seven.
In response to an inquiry from Senator Rieger, Ms. Otto
cited sexual assault and domestic violence as the most
frequently committed crimes in the area. In the state of
Alaska, most crimes are alcohol-related. That is true in
the Bethel region among its 30,000 residents.
Responding to further questions from Senator Zharoff, Ms.
Otto attested to an 82 percent increase in the amount of
crime in Bethel while Nome and Dillingham have remained
stable. She speculated that much of the increase is due to
the fact that Bethel has the highest rate of unemployment,
and there is no significant economy. It also has the
highest rate of social problems such as child abuse and
suicide. The problem is primarily economic. Co-chairman
Halford concurred in the foregoing assessment.
University of Alaska
NANCY SLAGLE spoke to the request for monetary terms for the
classified employees association and the Alaska community
college federation of teachers for FY 96. The House wished
to consider all monetary contracts at one time.
Stale Dated Warrants
Senator Randy Phillips asked if the state had developed
general policies regarding stale dated warrants. NANCY
SLAGLE said she was unaware of a time frame after which the
state is no longer obligated to pay. The money was owed at
some point in time. Statutes require an appropriation to
cover warrants that are over two years old.
Ratification of Overexpenditures
NANCY SLAGLE explained that the administration has reviewed
this area of concern. Legislative Audit identified several
places where accounting records do not balance expenditures
with appropriation levels, for a variety of reasons. Mrs.
Slagle referenced audit and management review of the process
and noted that the result of that review was furnished to
members. The administration will continue to work with
agencies to attempt to bring accounting records up to date.
The next legislative session has been established as the
deadline for cleaning up everything through FY 94. The
intent is to clean up accounts on an annual basis and
attempt to avoid need for ratifications in the future.
Mrs. Slagle noted that much of the $6,877.5 total involves
the Dept. of Transportation and Public Facilities. It
relates to conversion from the old PBA accounting system to
the new system in 1983. Much of the problem resulted from
lack of understanding, lack of training, lack of educated
staff, etc. Backtracking has been difficult because of lack
of documentation in early years. Mrs. Slagle reiterated
that much of the problem within DOTPF occurred because
moneys were received in a different year than expenditures
were made. Collection of revenues was not aligned with
expenditures.
Co-chairman Frank announced that the committee would again
meet at 9:30 a.m., Monday, April 1, 1996, to conclude review
of supplemental requests.
RECESS - 9:15 A.M.
RECONVENE - 9:30 A.M.
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