Legislature(2009 - 2010)SENATE FINANCE 532
02/09/2010 09:30 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB253 | |
| SB254 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 253 | TELECONFERENCED | |
| *+ | SB 254 | TELECONFERENCED | |
| *+ | SB 229 | TELECONFERENCED | |
| *+ | SB 231 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 9, 2010
9:31 a.m.
9:31:47 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee meeting
to order at 9:31 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Karen Rehfeld, Director, Office of Management and Budget,
Office of the Governor; Jack Kreinheder, Chief Analyst,
Office of Management and Budget, Office of the Governor;
Laura Baker, Deputy Director, Division of Administrative
Services, Transportation; Leta Simons, Director, Division of
Support Services, Department of Natural Resources; Kim
Garnero, Director, Division of Finance, Department of
Administration.
PRESENT VIA TELECONFERENCE
None
SUMMARY
SB 229 APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 229 was SCHEDULED but not HEARD.
SB 231 APPROP: MENTAL HEALTH BUDGET
SB 231 was SCHEDULED but not HEARD.
SB 253 APPROP: DEFERRED MAINTENANCE/REPLACEMENT
SB 253 was HEARD and HELD in Committee for
further consideration.
SB 254 SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS
SB 254 was HEARD and HELD in Committee for
further consideration.
9:32:01 AM
Co-Chair Hoffman explained that the governor requested quick
action on SB 253, the deferred maintenance bill.
SENATE BILL NO. 253
"An Act making capital appropriations for deferred
maintenance projects, equipment replacement, and
emergency repairs; and providing for an effective
date."
SB 253 was HEARD and HELD in Committee for further
consideration.
9:34:06 AM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, explained that her task was to
provide a high level overview of both the supplemental
requests beginning with the deferred maintenance
legislation. She explained the governor's plan to preserve
state owned assets and create jobs in the process. She
announced that the state has 2300 buildings and a $1.9
billion backlog of deferred maintenance projects. The
governor included the first $100 million in the December 14
budget for FY11. The governor is requesting the legislature
consider accelerating approval to allow funding projects
this construction season. She highlighted the eight page
bill containing five sections.
Ms. Rehfeld provided a sectional analysis. Section 1
includes a specific request by department. Section 2 is a
simple funding summary by department. Section 3 includes a
total funding summary. Section 4 includes the lapse
provision of the bill. Section 5 informs of the immediate
effective date.
9:36:31 AM
Ms. Rehfeld highlighted by agency the department requests.
Some departments requested allocations within a total
amount. She reported that the Department of Administration's
(DOA) allocation of $100 million is $7.25 million. The
proposal is to split between facilities with the deferred
maintenance at approximately $4.25 million and the State of
Alaska Telecommunications System (SATS) telecommunication
system deferred maintenance at $3 million. She continued
with the Department of Corrections (DOC) which has $6.5
million in deferred maintenance projects. She depicted the
Department of Education and Early Development's (DEED)
request of $1.7 million for deferred maintenance at Mt.
Edgecombe high school.
Co-Chair Hoffman asked Ms. Rehfeld about potential jobs
provided in the state. She invited the senior policy analyst
from the Office of Management and Budget (OMB) who has been
working on Institute of Social and Economic Research (ISER)
studies of employment information.
JACK KREINHEDER, CHIEF ANALYST, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, explained that the
projections available for this type of deferred maintenance
package and repair work result in $100 million in general
funds and approximately $106 million in total funds. The
direct jobs are estimated at 700 on an annual average basis.
If employees are hired for a six month job, more than 700
people could be hired. The multiplier effects of the money
spent in the economy equals approximately 1100 jobs. Ms.
Rehfeld pointed out the potential projects funded with the
approval this legislation. Most agencies do not have the
internal capacity to do the work themselves, so they must
contract.
Ms. Rehfeld continued with the Department of Environmental
Conservation (DEC) who allocated $200 thousand to address
the deferred maintenance needs at the environmental health
lab. The allocation for the Department of Fish and Game
(DFG) is $2 million with specific allocations within that
including $850 thousand for statewide employee housing
needs, $700 thousand for statewide storage and shop
facilities, and $450 thousand for the Kodiak warehouse
compound upgrades.
9:41:04 AM
Ms. Rehfeld discussed the Department of Health and Social
Services (DHSS) and their decision to split the $7 million
allocation. She continued with the deferred maintenance
allocation for the Department of Labor and Workforce
Development (DLWD) including $1 million for the Alaska
Vocational Technical Center. The Department of Military and
Veterans Affairs (DMVA) allocates $4 million in general
funds and $6.3 million in federal funds to support a number
of components.
Ms. Rehfeld explained that the Department of Natural
Resources proposed to receive a $4 million allocation. The
Department of Public Safety (DPS) proposed a single
allocation of $1.3 million to statewide facilities for
statewide deferred maintenance. Ms. Rehfeld addressed the
Department of Transportation and Public Facilities (DOT) and
the proposed allocation of $25 million of the entire package
allocated across the various modes of transportation within
the department. The airport deferred maintenance request is
$3.5 million, the Alaska Marine Highway Vessel Facility
request of $3 million, facilities deferred maintenance for
$1 million, harbor deferred maintenance for $600 thousand,
and highway deferred maintenance package request of $16.9
million.
9:43:46 AM
Co-Chair Hoffman acknowledged the committee's initiation of
a boost in the department's deferred maintenance last year.
He asked the department to comment. Co-Chair Stedman echoed
Co-Chair Hoffman's request and noted imbedded policy issues
such as harbor maintenance listed on Page 57. Ms. Rehfeld
suggested that the department discuss the specific
questions.
LAURA BAKER, DEPUTY DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, TRANSPORTATION, discussed the estimates. Co-Chair
Stedman requested further information on harbor maintenance.
Ms. Baker replied that the harbor deferred maintenance
funding addresses the top priority item on the harbor list,
which is the Port Alexander Inner Float repair and
replacement. The float is used by school children and the
boarding ramp is not Americans with Disabilities' Act (ADA)
compliant. The project total is estimated at $630 thousand.
9:46:33 AM
Co-Chair Stedman acknowledged that municipal harbors
received funding for deferred maintenance. He informed that
many harbors have been privatized. These remaining harbors
contain areas that through moorage could support the harbors
themselves. He felt concern about policies regarding small
harbors and docks. Ms. Baker offered to follow up with the
committee on the concern including outstanding projects and
plans. Co-Chair Hoffman requested that time frames on
transfers be included in the follow up.
Co-Chair Stedman asked about the follow up. He expressed
opposition to the state funding private docks. He provided
the example of Baranof Warm Springs. Ms. Baker answered that
she would include that information. Co-Chair Stedman
remarked that the committee could commune and discuss the
issue further. He stressed that he is philosophically
opposed to the state building and maintaining private docs.
Ms. Baker agreed to schedule a meeting to follow up on the
issue.
Co-Chair Hoffman requested comment upon funds in the budget
to address deferred maintenance of pot holes throughout the
state. He remarked that the program was well received. He
received requests for additional funds for roads and road
construction, especially for the road to Dillingham. He
opined that Alaskan citizens prefer to have funds spent on
the repair and construction of roads.
Ms. Baker informed about an updated report regarding the
$12.4 million added to the highway and aviation base budget.
A portion of the funds were used to offset the potential
supplemental need this year. She offered to provide the
report to the committee. The funds recently added to the
operating budget in July will address work required on roads
this construction season and fiscal year.
9:51:46 AM
Co-Chair Hoffman asked about the $1 million for deferred
maintenance and critical repairs. Ms. Baker responded that
the facilities' deferred maintenance of $1 million will be
spread across the regions adding sprinkler systems,
ventilation systems, compliance for the Environmental
Protection Agency (EPA), and the addition of an overhead
hoist for the Tok equipment building. She stated that she
was available to discuss the issue further. Co-Chair Hoffman
asked about the $16.9 million for highway deferred
maintenance and the $37.5 million for maintaining existing
facilities. Ms. Rehfeld answered that OMB plans to provide
the committee with a list including a breakdown of the
requested projects.
9:54:12 AM
Senator Olson asked why only $3.5 million dollars was
requested out of a $94 million backlog. Ms. Baker responded
that current needs in the department are approximately $94
million. She agreed that the portion for aviation was small,
but the allocation was based on needs by mode. The aviation
portion in the deferred maintenance allocation includes a
number of projects at the top of the list.
Co-Chair Stedman requested information about the process
used to identify and recommend certain agencies. He asked
how the process integrates with last year's reduced deferred
maintenance budget. He elucidated that the state now has the
responsibility to "catch up" and restructure for the next
generation.
Ms. Rehfeld defined the five year plan with the goal of $100
million appropriated each year to address the backlog. The
general allocation was based on square footage by agency.
She noted that adjustments did occur, but allocations must
be scrutinized because some agencies have greater needs for
deferred maintenance funding.
Co-Chair Hoffman asked how the allocation values between
departments are determined. Ms. Rehfeld maintained that the
allocations were determined by observing the footage of the
facilities within the agency. Co-Chair Stedman expressed
curiosity about the ages and condition of the various
agencies. Ms. Rehfeld agreed that the age and condition of
the agencies must be reviewed carefully to determine
priorities.
10:00:49 AM
Senator Thomas asked about the intention to move the 2011
maintenance list to 2010. Ms. Rehfeld responded that the
governor is proposing that the second year of the five year
plan begin in FY12. She explained that FY11 is the first
year requesting an accelerated start date. Senator Thomas
noted the lack of steady funding during the various years in
the five year plan. He provided examples.
Ms. Rehfeld informed about the various agencies' ten year
plans. She explained why some years show higher
appropriations. Senator Thomas observed that the projects
are more similar to capital projects than deferred
maintenance projects.
10:03:14 AM
Senator Egan asked a policy question regarding various
projects and the corrosive salt used on the Southeast
Alaskan roads in the winter. He observed that the state
saves money by resorting to the less expensive salt versus
the newer varieties of ice control. The burden is passed on
to the owner of the vehicle. Ms. Rehfeld commented that DOT
is the best contact, as they have had issues with the EPA
and other regulatory agencies. Ms. Baker added that the
department is considering alternatives to the salt mixture
used for icy roads. She offered to provide more information,
but maintained that the belief about salting the roads is a
misconception. Co-Chair Hoffman asked if Frank Richards was
available for questioning. Ms. Baker responded that Mr.
Richards was not available. Co-Chair Stedman agreed that the
concern about salt content is also expressed in Sitka,
Ketchikan, and Anchorage as the belief exists that cars are
dissolved by the brine mixture.
10:06:32 AM
Co-Chair Stedman referenced Page 46 and the deferred
maintenance cost for the Mount McKinley meat plant. He asked
about the meat plant.
Senator Olson regressed to a question for (DOT) about the
road between Saint Mary's and Mountain Village in his
district, which is in need of repair. He asked about the
state's maintenance of the road. Ms. Baker promised to
follow up with an answer as she was currently unaware.
Senator Olson commented about the resistance to the
maintenance possibly due to a misunderstanding about whether
equipment is owned by the state or federal government. He
emphasized that the road must be maintained for the safety
of the local people.
10:08:47 AM
LETA SIMONS, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES, discussed the Mt. McKinley
meat plant. She explained that the meat plant is an asset of
the agricultural revolving loan fund, which is an enterprise
fund. Mt. McKinley meat plant is in need of some
improvements to maintain safety standards and to retain good
working conditions in the facility.
Co-Chair Stedman reviewed the list of deferred maintenance
repairs. He opined that most of the items should have a
sinking fund available for replacement reserves. He asked if
the meat factory had a process to replace equipment. Ms.
Simons noted that the plant was an asset of the Agricultural
Revolving Loan Fund. The fund's focus is to provide
agricultural loans.
Co-Chair Stedman stated that the assets should be protected
by policies. He requested that the department follow up with
the committee about the management of the organization's
assets. Ms. Baker agreed to comply.
Senator Huggins agreed with Co-Chair Stedman's point.
Senator Olson followed up that the Mt McKinley meat plant is
a valuable processing plant. He stated that he has used it
himself. He believed that the funding should continue.
10:12:55 AM
Ms. Rehfeld noted that a request was not reflected for the
Alaska Court System, which is $2.5 million for deferred
maintenance.
Co-Chair Hoffman pointed out a revised update illustrating
that the state will have $2.2 billion in reserves. The
Senate bipartisan working group proposed to save $1.5
billion of the $2.2 billion. The governor agreed that the
responsible act is to save additional dollars from FY10. The
roller coaster effect on the state budget may not
necessitate $100 million for the next five years. He
suggested thinking twice about expenditures made today
versus later when the future price of oil is yet unknown. He
opined that the state acted responsibly by saving $1.5
billion of the additional revenues.
Senator Thomas interjected that some departments listed the
total estimated deferred maintenance cost listed as a
number. He appreciated information presented in that form.
10:15:51 AM AT EASE
10:16:50 AM RECONVENED
SENATE BILL NO. 254
"An Act making supplemental appropriations, capital
appropriations, and other appropriations; amending
appropriations; repealing appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
SB 254 was HEARD and HELD in Committee for
further consideration.
Ms. Rehfeld provided a high level overview of the
supplemental bill before the committee. She noted that
agency representatives are available online for questions.
She explained the proposal to place funding into savings due
to the potential surplus in FY10. She mentioned the public
education fund appropriation of approximately $1.1 billion
as witnessed in Section 12(a) of SB 254. She discussed the
various appropriations and the repayment of the
Constitutional Budget Reserve (CBR). The regular discussion
about supplemental funding includes unanticipated needs. She
discussed the various operating components of the budget
addressed through the supplemental appropriations. Fire
suppression comprises a significant component of the budget.
She mentioned Alaska's significant fire season this year.
The base amount in the budget for fire suppression is $35.4
million. The non formula agency operating requests equal
approximately $32 million. She mentioned statewide items
included in the operating proposal in Section 12(b), which
includes the movement of funds into the small business
economic development revolving loan fund. Additionally, a $5
million request is included to replenish the disaster relief
fund under Section 12(c). Specific capital requests are
"emergency" in nature and address areas where funding was
not sufficient to complete a project. The total of the
capital component of the budget is $58.3 million.
10:21:43 AM
Ms. Rehfeld observed that the review of supplemental
requests includes discernment of standalone items versus
those that can be addressed in the next budget cycle. Some
items were not incorporated into the FY11 budget, but are
currently discussed in terms of budget amendments. She noted
that inmate health care is another area of significant
concern with a supplemental request based on the number of
catastrophic cases. She noted the number of catastrophic
cases. The state must not charge other federal programs for
health care of inmates when they enter incarceration.
Medicaid growth causes concern, as the authorization in FY10
was not sufficient.
10:23:46 AM
Ms. Rehfeld highlighted sections of the 17 page bill. The
first section of the bill is the operating supplemental
request by departments. Section 2 summarized the funding by
agency. Section 3 provides the capital requests. Section 4
summarizes the capital funding. Section 5 is the language
section and spurs discussion about the Federal Matching
Assistance Program (FMAP) rate under the American Recovery
and Reinvestment Act (ARRA). In order for the state to
receive the benefit under the ARRA funds requires conditions
of no change to current Medicaid program and the state
cannot place the savings in a "rainy day" account. Included
in the supplemental bill is language clarifying that that
the state's ability to utilize the higher reimbursement rate
has allowed the use of general funds to cover other
increased costs in our budget. Section 6 includes the
request for funding to implement the arbitrator's decision
from March 19, 2009 regarding the Alaska Correctional
Officer Association. Section 7 includes a specific item for
pupil transportation under DEED. Section 8 involves a
miscellaneous claim for the Division of Juvenile Justice.
Section 9 is a correction to an appropriation in the FY10
budget concerning $85 thousand for pipeline training from
DLWD. Section 10 from the Department of Law (DOL) is a
request for $28 thousand for judgments and claims. Section
11 allows the Department of Natural Resources (DNR) the use
of program receipts from the sale of aircraft estimated at
$2 million. Section 12 addresses fund transfers proposing
the transfer of $1.1 billion to the public education fund
and also addresses the Alaska International Airport System
(AIDEA) revolving loan fund to the small business economic
development fund along with the $5 million for disaster
relief referenced earlier. Section 13 addresses
ratifications. Ratification is sometimes known as zero
balancing and is a term used to request authorizations to
cover expenditures that have already occurred and resulted
in an over expenditure of an appropriation. The
legislature's authorization to ratify the appropriations
gives the department the additional authorization for what
occurred in a prior year, but does not affect cash in the
current year.
Co-Chair Hoffman asked for the ratification history for the
last five years. He recalled that the category of
expenditures is now in excess of $10 million. He asked if
departments are spending unauthorized funds because the
legislature will ratify them. What is the administration
doing to control the unauthorized spending?
10:29:36 AM
Ms. Rehfeld answered that ratifications include a couple of
outstanding items. The largest portion is the $10.3 million
ratification for firefighting. Ratifications are an area of
the budget where a base appropriation is decided upon, not
knowing what the fire season will look like. The next step
is to approach the legislature with the supplemental request
based on the estimates from the firefighting that took place
during the last fire session. Following adjournment of the
legislature, language in the supplemental bill allows
ratification for the following year. Because last year's
fire season was so dramatic, the $10.3 million represents
funding needed for firefighting during the end of FY09.
Ms. Rehfeld announced another significant piece concerning
the Department of Corrections (DOC) who overestimated the
amount that they would receive from the federal government
for housing federal prisoners. The department reduced the
authorization in the budget because DOC does not receive
funding to house federal prisoners.
10:33:17 AM
Co-Chair Stedman asked the ramifications if the legislature
does not ratify. Ms. Rehfeld responded that the accounting
system clean up will not be effective. Co-Chair Hoffman
asked if the departments would have to pay the costs from
their current budget. Ms. Rehfeld answered that she was not
sure that the department could revisit past years because
the statute prohibits it.
KIM GARNERO, DIRECTOR, DIVISION OF FINANCE, DEPARTMENT OF
ADMINISTRATION, stated that departments cannot accrue
expenditures from previous years that have now expired due
to uncollectable receivables because of the legal sanctity
of the appropriations. The appropriation level at which the
legislature creates the language locks the accounting system
and the users of the funds at the legal level. Co-Chair
Stedman compared the ratification situation with the Alaska
Marine Highway System's compliance with legislative
appropriations.
Co-Chair Hoffman understood the situation with fire
suppression and correction officers. He agreed that a plan
was necessary to correct expenditures that have not been
appropriated by the legislature.
Ms. Rehfeld informed that an authorization of the
expenditures was approved, but were unavailable in the end.
She explained that areas identified as problems in the
ratification process must be corrected in the budget
document. Several corrections are proposed in the
supplemental bill and in the FY11 budget.
Ms. Garnero noted that $481 thousand of ratifications are
related to several departments. The process is a onetime
clean up of the accounting system receivables. The future
intention is to reconcile annually.
Ms. Rehfeld addressed Section 14 and the correction allowing
DOL to address the receipt of restitution in juvenile cases.
The state debt and other obligations require adjustments to
address international airport revenue fund and
recommendations from their bond council to minimize the
revenue needed from customers within the international
airport.
Ms. Rehfeld stated that Section 16 extends the lapse for the
instate gas pipeline appropriation. The budget was scheduled
to lapse on February 28, 2010. The department requests
authority to extend the lapse date to the end of the fiscal
year, June 30, 2010.
10:38:58 AM
Co-Chair Stedman wished to discuss the gas pipeline
appropriation further in the future. Co-Chair Hoffman
recalled that the legislature "short funded" so that the
department could justify their accomplishments. He pointed
out that the short fund equaled $3 million. Ms. Rehfeld
responded that the instate pipeline coordinator has not
requested additional funds in the current year. Existing
contracts are in place, and work is ongoing. Only a request
for an extension exists.
Ms. Rehfeld announced that Section 17 addresses the
Constitutional Budget Reserve (CBR) and the management of
the funds. The department is proposing to replace the
management with general funds at $1.673 million. Section 17
also authorizes a draw from the Statutory Budget Reserve
(SBR) if revenues are not sufficient to cover expenditures
in FY10.
10:41:13 AM
Co-Chair Stedman requested clarification on the $1.6
million. He asked if it included the cost of handling the
$400 million over the next 90 days or is it a portion of the
management funds by DOR. Ms. Rehfeld explained that the
mentioned funds are the management fees for the entirety of
the CBR.
Co-Chair Hoffman asked for justification. He asked if it was
because the administration does not believe that a three
quarter vote in the legislature was possible. Ms. Rehfeld
explained that if the goal is to retain the CBR then it
should not be drawn from to manage the funds. Co-Chair
Stedman declared that a discussion about plans for the
sizable state savings should be held this session.
Ms. Rehfeld referred to Section 18 and the regular lapse
provisions for capital projects. Appropriations requested in
Section 12 and the deposit to the public education fund does
not lapse. Section 19 is a repeal of Section 43c known as
the 17(b) provision. The administration does not believe
that the provision is necessary given the objective to repay
the CBR. Section 20 requires an effective date for the
passage of the bill. Section 21 states that the act will
take effect April 18, 2010.
10:44:59 AM
Senator Ellis asked about Section 6 and the bargaining
agreement with DOC. He asked about an adjustment to the FY11
budget regarding the agreement. Ms. Rehfeld answered that if
the government approves this, these funds will be allocated
to the personal services components within the DOC budget in
order to pay the increased wages as incorporated in
arbitrator's decision. She stated that the $3 million will
be spread where their personal services cost exist within
their budget.
10:46:14 AM
Ms. Rehfeld noted that if the legislature chooses to approve
the funding, then the FY11 budget must be amended. Senator
Ellis asked if the agreement would exist in a section
related to the department. Ms. Rehfeld revealed that a large
bargaining unit agreement that covers all departments
requires a single section that allocates across all of the
agencies and the funding sources and is spread throughout
all of the budgets if approved by the legislature.
10:47:15 AM
Co-Chair Hoffman elaborated that the committee would address
the legislation further in the future. He requested the
questions about SB 253 be answered tomorrow.
Senator Olson asked a question about Section 11 and the
Department of Natural Resources (DNR). He voiced concern
about an appropriation for aircraft replacement. He assumed
that the aircraft referred to was the CL214 used for water
bombing. He asked why the parts and accessories were sold.
Ms. Rehfeld could not answer the question. Senator Olson
suggested a future meeting regarding the issue.
ADJOURNMENT
The meeting was adjourned at 10:49 AM.
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