Legislature(2013 - 2014)SENATE FINANCE 532

01/29/2013 09:00 AM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 18 BUDGET: CAPITAL TELECONFERENCED
*+ SB 19 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
SENATE BILL NO. 19                                                                                                            
                                                                                                                                
     "An Act making appropriations for the operating and                                                                        
     loan program expenses of state government and for                                                                          
     certain   programs,    capitalizing   funds,   amending                                                                    
     appropriations, and making reappropriations; and                                                                           
     providing for an effective date."                                                                                          
                                                                                                                                
9:03:57 AM                                                                                                                    
                                                                                                                                
KAREN REHFELD,  DIRECTOR, OFFICE  OF MANAGEMENT  AND BUDGET,                                                                    
OFFICE  OF THE  GOVERNOR,  stated that  she  had provided  a                                                                    
summary  of  the  highlights  of the  bills  at  a  previous                                                                    
meeting.    She   referred    to    "Operating   Budget    -                                                                    
UGF/DGF/Other/Fed  Summary by  Department;  Senate Bill  19/                                                                    
House Bill  65" (copy on  file). She noted that  the summary                                                                    
included  the  mental  health   portions  of  the  operating                                                                    
budget, so  the outline included both  SB 18 and SB  20. The                                                                    
total  budget for  mental health  was $240.891  million. She                                                                    
looked  at   page  2,   which  was   a  comparison   of  the                                                                    
unrestricted  general  fund (UGF)  changes  from  the FY  13                                                                    
management plan to FY 14 governor proposed budget.                                                                              
                                                                                                                                
Co-Chair Kelly  queried the total  budget the  mental health                                                                    
portion  of  the  budget. Ms.  Rehfeld  responded  that  the                                                                    
mental  health operating  budget  totaled $240.891  million;                                                                    
which included UGF of $205.921 million.                                                                                         
                                                                                                                                
9:06:37 AM                                                                                                                    
                                                                                                                                
Ms. Rehfeld shared  that the total number  that was proposed                                                                    
for the  operating budget  was $9.795  billion. The  UGF was                                                                    
just  over 59  percent at  $5.7 billion;  designated general                                                                    
funds (DGF) was  8 percent at roughly  $777.4 million; other                                                                    
funds were $1.283  billion at 13 percent;  and federal funds                                                                    
were approximately  $2 billion  at 20  percent of  the total                                                                    
budget.  She explained  that the  budget  process begins  in                                                                    
July, and it takes months  to complete the budget proposals.                                                                    
She  remarked that  the supplemental  budget  bill would  be                                                                    
introduced  the following  day,  and  the budget  amendments                                                                    
would  be due  to the  legislature on  the 30th  day of  the                                                                    
session.  She  stressed  that   the  budget  work  continued                                                                    
throughout the  year. The  structure of  SB 19  contained 36                                                                    
sections, and was 67 pages long.                                                                                                
                                                                                                                                
Ms. Rehfeld looked  at Sections 1 through 3 of  SB 19, which                                                                    
were known as  the number sections of SB  19. These sections                                                                    
totaled  $6.741  billion.  The sections  were  organized  by                                                                    
department; and  by appropriation and allocation  within the                                                                    
department. She remarked that  some particular components in                                                                    
these sections may be  specific appropriation language, such                                                                    
as "carry  forward of  program receipts."  Sections 2  and 3                                                                    
were the  breakdowns of the  funding sources. Section  2 was                                                                    
funding sources  by department and  Section 3 was  the total                                                                    
of all funding sources for Section 1.                                                                                           
                                                                                                                                
Ms.  Rehfeld  explained  that Section  4  was  the  language                                                                    
section  of SB  19.  She stated  that  the language  section                                                                    
included funding for  various corporations: Alaska Aerospace                                                                    
Corporation;  Alaska  Housing  Finance  Corporation  (AHFC);                                                                    
Alaska   Permanent  Fund   Corporation;  Alaska   Industrial                                                                    
Development   and  Export   Authority  (AIDEA);   the  state                                                                    
catastrophic and  working reserve funds; shared  taxes under                                                                    
the   Department  of   Commerce,   Community  and   Economic                                                                    
Development (DCCED); and other various items.                                                                                   
                                                                                                                                
Ms.  Rehfeld  stated  that Section  13  was  the  particular                                                                    
appropriation  of  $25  million  for  education,  which  was                                                                    
addressed  at a  previous  meeting.  This appropriation  was                                                                    
specific  funding  that was  targeted  for  energy costs  in                                                                    
school  districts,  but  was allocated  and  distributed  to                                                                    
school districts on the adjusted average daily membership.                                                                      
                                                                                                                                
Ms.  Rehfeld explained  that  Section 20  was  known as  the                                                                    
"fuel  trigger."  This  section was  introduced  some  years                                                                    
prior  in an  appropriation language,  rather than  building                                                                    
ongoing  costs  into  the base  of  agencies'  budgets.  The                                                                    
preference  was  to  include a  fuel  trigger  at  different                                                                    
prices. The  fuel trigger estimate  going into FY 14  was at                                                                    
$36 million; allocated  twice a year. There  was currently a                                                                    
thorough  analysis  on   individual  departments'  fuel  and                                                                    
utility  costs, in  order to  determine  if this  particular                                                                    
language should be changed.                                                                                                     
                                                                                                                                
Co-Chair  Kelly wondered  if the  fuel trigger  estimate was                                                                    
$36 million.  Ms. Rehfeld responded in  the affirmative. She                                                                    
looked at page  53 of the bill, which  showed the allocation                                                                    
based on  $100 per barrel  or more  of $18 million  that was                                                                    
distributed  twice a  year. She  furthered that  the current                                                                    
year   had  distributed   approximately   $7  million.   The                                                                    
departments  were  currently  adjusting, and  would  provide                                                                    
estimates at a later date.                                                                                                      
                                                                                                                                
9:11:44 AM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld stated  that Section  23 was  the debt  service                                                                    
obligations. This  included debt  service and  bond payments                                                                    
for previously approved debt. One  of the largest components                                                                    
of this  section was the  School Debt  Reimbursement program                                                                    
on page  59, lines 17 through  21. The projection for  FY 14                                                                    
school  debt   reimbursement  would  be   $128.263  million.                                                                    
Section  24  was  the federal  and  other  program  receipts                                                                    
language.  It  was  Legislative   Budget  and  Audit  (LB&A)                                                                    
language that addressed  federal receipts as it  came to the                                                                    
State and State  agencies. Section 25 contained  a number of                                                                    
capitalizations  for different  funds, like  disaster relief                                                                    
and  the  replenishment  of  the  revenue  sharing  program.                                                                    
Section  26 outlined  the fund  transfers. The  largest fund                                                                    
transfer  was the  Public Education  Fund  transfer of  $1.2                                                                    
billion to  forward fund education. Section  27 was specific                                                                    
to the  State retirement systems unfunded  liability: $312.5                                                                    
million  for  Public   Employee  Retirement  System  (PERS);                                                                    
$316.8 million for the Teacher  Retirement System (TRS); and                                                                    
$4.5  million  for  the   Judicial  Retirement  System.  The                                                                    
retirement system budget was roughly  a $20 million over the                                                                    
current  year budget.  Section 28  was  language related  to                                                                    
salary and  benefits for various bargaining  unit agreements                                                                    
in  the   University  of  Alaska.  Currently,   the  general                                                                    
government,  supervisory, and  confidential employees  units                                                                    
were under negotiations.                                                                                                        
                                                                                                                                
Co-Chair Kelly  wondered if  the benefits  that were  not up                                                                    
for  negotiation were  ratified  year by  year. Ms.  Rehfeld                                                                    
replied that  the language  in the bill  referred to  all of                                                                    
the  bargaining  agreements  that  were  ratified  by  their                                                                    
members, so  the request continued  those that  were already                                                                    
agreed upon.                                                                                                                    
                                                                                                                                
Co-Chair Kelly  wondered if the  legislature had  to approve                                                                    
the  benefits year  by year.  Ms. Rehfeld  replied that  the                                                                    
legislature had to approve the benefits year by year.                                                                           
                                                                                                                                
Senator Hoffman looked at Section  27. He relayed that there                                                                    
were new  requirements that local governments  declare their                                                                    
liabilities for PERS  and TRS. He wondered  if Department of                                                                    
Administration (DOA) had addressed  this issue.  Ms. Rehfeld                                                                    
replied that  it was a  new requirement, and  furthered that                                                                    
the State  had agreed to fund  beyond the current cap  of 22                                                                    
percent for PERS and 12.56 percent  for TRS. There was not a                                                                    
final decision  whether there would  be a change  to reflect                                                                    
that increase in the State's financial statements.                                                                              
                                                                                                                                
9:16:46 AM                                                                                                                    
                                                                                                                                
Senator Hoffman wondered if  there was communication between                                                                    
the  municipalities and  DOA  regarding  the possibility  of                                                                    
substantial liabilities  on the municipalities.  Ms. Rehfeld                                                                    
replied   that   DOA   had  been   in   contact   with   the                                                                    
municipalities about the  issue, and how it  would appear on                                                                    
their  financial  statements.  She  shared  that  it  was  a                                                                    
continuing conversation that DOA had been engaged in.                                                                           
                                                                                                                                
Ms. Rehfeld explained  that Section 29 was  for shared taxes                                                                    
to local governments and other  entities: the fisheries tax;                                                                    
fuel  tax; cost  recovery; and  cruise ship  seven ports  of                                                                    
call.  Section  32 was  the  budget  reserve language,  that                                                                    
would allow  a draw  on the  statutory budget  reserve (SBR)                                                                    
should the  revenue be  insufficient in FY  14 to  cover the                                                                    
projected expenditures. Sections 33  and 36 were the lapsing                                                                    
provisions,   retroactivity,   and  effective   dates.   She                                                                    
remarked that the  majority of SB 19 would  take effect July                                                                    
1, 2013 for FY 14.                                                                                                              
                                                                                                                                
Ms.  Rehfeld  restated  that  the  FY  14  Operating  Budget                                                                    
included   full-funding   and   forward-funding   for   K-12                                                                    
education;  Medicaid and  other formula  programs; Permanent                                                                    
Fund  appropriations  for dividend  and  inflation-proofing;                                                                    
energy  assistance; tourism  marketing;  and the  bargaining                                                                    
unit components that were a work in progress.                                                                                   
                                                                                                                                
Co-Chair  Kelly  requested  more information  regarding  the                                                                    
catastrophic and  the working reserves. Ms.  Rehfeld replied                                                                    
that  there were  two components.  There was  a reimbursable                                                                    
services  agreement to  pay for  working reserve,  which was                                                                    
terminal leave  or leave cash-in for  employees. The working                                                                    
reserve  included a  payroll deduction  that was  built into                                                                    
the  rates  and the  budget  positions;  and a  reimbursable                                                                    
services agreement. There was  language in the appropriation                                                                    
bill that would allow funds  to "sweep" into working reserve                                                                    
and the state catastrophic reserve.                                                                                             
                                                                                                                                
9:21:23 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly  requested further information  regarding the                                                                    
impact of the  operating budget for years out  to 2020, from                                                                    
the FY 08,  FY 09, and FY 10. Ms.  Rehfeld agreed to provide                                                                    
that information.                                                                                                               
                                                                                                                                
Senator  Dunleavy  wondered  if   there  was  a  process  to                                                                    
determine how  much State  money was  needed to  support the                                                                    
$2.7 billion  in federal  receipts. He  specifically queried                                                                    
whether  it was  in addition  to the  budget, or  if it  was                                                                    
written  into the  budget. Ms.  Rehfeld  replied that  there                                                                    
were   specific    match   requirements    and   maintenance                                                                    
requirements for  many capital  requests. The  federal funds                                                                    
were  often  matched  with   the  State  contributions.  She                                                                    
offered  to provide  more detailed  information  at a  later                                                                    
date.                                                                                                                           
                                                                                                                                
Senator  Dunleavy wondered  whether the  federal funds  were                                                                    
linked  to the  State,  or  the States  were  linked to  the                                                                    
federal funds. Ms.  Rehfeld responded that if  the state had                                                                    
participated  in  a federal  program,  the  state agreed  to                                                                    
commit a  certain amount  of resources  in order  to receive                                                                    
the federal dollars.                                                                                                            
                                                                                                                                
Senator Dunleavy  remarked that many Alaskans  felt that the                                                                    
budget was growing, but revenue  was not keeping up with the                                                                    
budget.  He wondered  if there  was  a discussion  regarding                                                                    
possible statutes or regulations  that would reduce the cost                                                                    
of  government.   Ms.  Rehfeld   replied  that   there  were                                                                    
conversations  each   year  that  focused  on   the  current                                                                    
priorities that were already written in statute.                                                                                
                                                                                                                                
SB  19  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.