Legislature(1993 - 1994)

03/24/1994 09:10 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
  HOUSE BILL NO. 455                                                           
                                                                               
       An  Act  making  and  amending  operating  and  capital                 
       appropriations    and    ratifying     certain    state                 
       expenditures; and providing for an effective date.                      
                                                                               
  [Cross-reference  between SB  288 and  HB 455.   Most Senate                 
  Finance Committee discussion of  FY 94 supplemental  funding                 
  relates to SB  288.   The bill which  ultimately passed  the                 
  1994 legislature was HB 455]                                                 
                                                                               
  Upon convening the meeting,  Co-chairman Frank directed that                 
  a sectional  overview of  the FY  94 supplemental  commence.                 
  NANCY  SLAGLE,  Director   of  Budget   Review,  Office   of                 
  Management and Budget, came before committee.  She explained                 
  that  the administration's  policy  on supplemental  funding                 
  reflects  an  attempt  to accommodate  shortages  in  agency                 
  budgets  through  means  (cost  cutting  or  realignment  of                 
  funding) other  than the  supplemental.   However, in  areas                 
  where a supplemental  is unavoidable, particularly  in areas                 
  of judgments,  claims, court-ordered  payments, and  formula                 
  funded   programs,   etc.,   funding   therefor   has   been                 
  incorporated within the proposed bill.                                       
                                                                               
  Sec. 1.  Appropriates $955.8 to the Office of Management and                 
  Budget for compliance  with the  Fair Labors Standards  Act.                 
  Funding would pay retroactive overtime claims under the act.                 
  In  response to a question from  Co-chair Frank, Mrs. Slagle                 
  explained  that the  request  relates  only  to  retroactive                 
  overtime.  Agencies  are required to absorb overtime for the                 
  current year.  Claims covered by the appropriation date back                 
  to  FY  91.    Co-chair   Frank  requested  a  breakout   by                 
  department.   Mrs. Slagle advised that the  Dept. of Natural                 
  Resource,  Dept.  of Health  and  Social Services,  Dept. of                 
  Corrections,   and  Dept.   of  Transportation   and  Public                 
  Facilities are the four agencies impacted by the request.                    
                                                                               
  Sec. 2.  Contains a $1,694.9 appropriation for the longevity                 
  bonus program.   That amount will cover the increased number                 
  of  recipients   for  the   fiscal  year.     NANCY   USERA,                 
  Commissioner,  Dept. of  Administration, explained  that the                 
  department  budgets  prospectively   based  on   demographic                 
  information on the  number of  people entering the  program.                 
  That  information  is adjusted  on  an  annual basis.    The                 
  program  contains no  provisions for  proration of  funding.                 
  Co-chair Frank suggested  that the number of  recipients has                 
  been chronically  under-estimated.  Senator Rieger  asked if                 
                                                                               
                                                                               
  the increased number  of participants is due  to individuals                 
  coming into  Alaska and  signing up  for the  program.   Ms.                 
  Usera  said   that  the  department  has   not  conclusively                 
  established  a  growth  pattern.    There  has  been  a  net                 
  immigration of seniors.   Senator Kerttula noted that was  a                 
  general immigration of people into the state during the past                 
  year.                                                                        
                                                                               
  Sec.  3.   Contains a  $466.0  appropriation for  the public                 
  defender agency  to cover underfunding in  personal services                 
  for FY 94.  Co-chair Frank  asked how the request correlates                 
  with cuts in  agency funding  in the  FY 94  budget.   NANCY                 
  USERA said  that the  requested  appropriation reflects  the                 
  cut.  She referenced a four-year supplemental history.  Last                 
  year's supplemental  was $342.0.   This  year it  is $466.0.                 
  The  increase  reflects  the  deeper   cut  in  last  year's                 
  operating budget.   Co-chair  Frank noted  that the  request                 
  exceeds the amount cut.  Ms. Usera concurred.  Senator Kelly                 
  asked  what  would  happen if  supplemental  funding  is not                 
  provided.    Ms.  Usera  pointed  out that  public  defender                 
  services are constitutionally  mandated.   The court  orders                 
  that a defense be provided, and the agency has an obligation                 
  to  respond.    The agency  is  chronically  underfunded and                 
  understaffed.                                                                
                                                                               
  Discussion followed between Ms.  Usera and members regarding                 
  court referrals and the increasing caseload.  She noted that                 
  the  Dept.  of  Law  seeks  reimbursement of  defense  costs                 
  through  individual permanent  fund  dividends.    To  date,                 
  approximately $400.0 has been recovered  and returned to the                 
  general fund.                                                                
                                                                               
  Further discussion of determinations of indigence ensued.                    
                                                                               
  Sec. 4.    Appropriates  $554.7  for the  office  of  public                 
  advocacy.    Of  that  amount,  $460.0  is  for  contractual                 
  services.                                                                    
                                                                               
  Sec.  5.  Appropriates  $100.0 to the  division of personnel                 
  for arbitration case costs.  NANCY  USERA attested to a two-                 
  year backlog  in arbitrations.   A  number  of unfair  labor                 
  practices  have been  filed for  lack of  arbitration.   The                 
  Public Employee Relations Act is very clear as to what state                 
  obligation are.  The request relates to the cost to bring an                 
  arbiter to Alaska to issue rulings.  The backlog consists of                 
  400  grievances.  The risk  associated with not dealing with                 
  these matters is substantial.                                                
                                                                               
  Sec. 6.  In  response to a question from Co-chair Frank, Ms.                 
  Usera explained that  the $18.0 request represents  a single                 
  grievance award  resulting from  a grievance  brought by  an                 
  employee against the Dept. of Administration.                                
                                                                               
  Sec. 7.   The  $60.0 for  a salary  survey and  geographical                 
                                                                               
                                                                               
  shift differential study  was ordered  by the court  system.                 
  Ms. Usera explained that the  study is statutorily required.                 
  In past years, the department has not had the needed funding                 
  to conduct the study.  The  state was subsequently sued, and                 
  the  court  ordered  that  the  statutes be  complied  with.                 
  Responding to questions  by Co-chair  Frank, Ms. Usera  said                 
  that the law predates collective bargaining.  The department                 
  has, on a  number of  occasions, suggested that  the law  be                 
  changed.   In 1991 legislation was introduced to correct the                 
  situation,  but it  did not  progress.   Needed  changes are                 
  again incorporated within the administration's omnibus bill.                 
                                                                               
                                                                               
  Sec. 8.   Contains a  $1,752.4 appropriation for  additional                 
  leasing costs for FY 94.  In response to a question from Co-                 
  chair Frank, Ms.  Usera pointed to substantial  savings from                 
  renegotiated leases.  However, that savings is inadequate to                 
  stem growth or make up for last year's underfunding.                         
                                                                               
  Data Processing Chargebacks                                                  
                                                                               
  Discussion of data  processing chargebacks followed  between                 
  Senator Rieger and  Ms. Usera.   Ms. Usera  attested to  the                 
  fact that DOA  chargeback rates have gone  down as provision                 
  of computer services  has become  more efficient.   Agencies                 
  have also effected savings.                                                  
                                                                               
  Ethics Complaints                                                            
                                                                               
  Mrs. Slagle directed  attention to  new requests within  the                 
  supplemental  bill and  noted  the  $35.0 appropriation  for                 
  ethics complaints  grievance awards.   NANCY USERA explained                 
  that the  personnel board  is responsible  for investigation                 
  and findings  concerning ethics  complaints brought  against                 
  the  governor,   lt.   governor,   and   attorney   general.                 
  Grievances have  been  filed.    There  is  no  funding  for                 
  investigations  or contracts with  independent counsel.  Ms.                 
  Usera noted that  a number of  the grievances were filed  by                 
  the Democratic Party.                                                        
                                                                               
  Sec.  9.    Appropriates $325.4  to  the  Dept.  of Law  for                 
  judgments  and  claims.    ELIZABETH SHAW,  Deputy  Attorney                 
  General,  Civil   Division,  Dept.   of  Law,  came   before                 
  committee.  She explained that funding relates to  costs and                 
  attorney fees  on  cases where  the  state has  been  deemed                 
  responsible  for  payment.    Funds  represent  either court                 
  ordered  payments or  settlement of  claims.   Approximately                 
  nineteen  have  been  grouped  together  within  the  $325.4                 
  request.  Senator Sharp directed  attention to backup detail                 
  and suggested that  eight claims totaling $209.0  are highly                 
  questionable.                                                                
                                                                               
  Ms. Slagle noted  that subsection (b)  of Sec. 9 contains  a                 
  $50.0 appropriation to the Dept. of Education for legal fees                 
                                                                               
                                                                               
  for   litigation   relating  to   pupil   transportation  in                 
  Fairbanks.                                                                   
                                                                               
  Sec.  10.   Appropriates  $462.4  to  the Dept.  of  Law for                 
  settlements  stemming from  the reapportionment  case.   Mr.                 
  Slagle  directed  attention to  information  set forth  on a                 
  handout (page 4 of Attachment A) which, she explained, shows                 
  the  judgment amount  and  interest owed  each  of the  four                 
  plaintiffs.                                                                  
                                                                               
  Sec. 11.  Contains a $142.6 appropriation from the permanent                 
  fund to the Dept.  of Revenue for printing of  1994 dividend                 
  application booklets.   Funding  relates to  default by  the                 
  original contractor.  TOM WILLIAMS, Director, Permanent Fund                 
  Dividend Division,  Dept. of Revenue, came before committee.                 
  He provided background information on  award of the printing                 
  contract to  an Anchorage contractor.   On  December 2,  the                 
  contractor notified  the department  it would  be unable  to                 
  meet the end of the month delivery deadline.  At that point,                 
  the  department sought another source.  Supplemental funding                 
  covers  additional costs  relating  thereto.   Approximately                 
  half of the cost  relates to air freighting of  the booklets                 
  for timely distribution.  The  state has subsequently billed                 
  the original  contractor for  the additional  costs and  has                 
  asked that the Dept. of Law  pursue collection should it not                 
  be forthcoming.   The  original contractor  is also  seeking                 
  damages  from  out-of-state  subcontractors.    Due  to  the                 
  complexity  of  the booklet,  Alaska printing  companies are                 
  unable to do the work.                                                       
                                                                               
  Sec. 12.   Provides a $3,195.0  appropriation to the  Alaska                 
  Permanent  Fund   for  additional   equity  management   and                 
  international custody fees.   Senator Kelly sought assurance                 
  that   funding  flow  to  managers  rather  than  additional                 
  personnel  at  the  permanent  fund.   PETER  BUSHRE,  Chief                 
  Financial Officer,  Alaska Permanent Fund, Dept. of Revenue,                 
  came before committee.  He said that the fund has never used                 
  moneys that were not needed  for management or international                 
  custody fees  to  cover any  other  portion of  the  budget,                 
  including personal services.  The  corporation has lapsed as                 
  much as $2.5 million from this item in past years.   Manager                 
  fees and custody  fees are  based upon the  market value  of                 
  assets.  Those  values have increased substantially.   There                 
  is a cost associated with that.                                              
                                                                               
  Mr. Bushre described the restructured investment strategy at                 
  the  permanent  fund.   Passive  management  was  previously                 
  utilized in buying index funds.   During the current  fiscal                 
  year, that  has been  changed.   Index funds  have been  de-                 
  emphasized and management has become active.  The results of                 
  this change have been extremely good.                                        
                                                                               
  Senator Kelly  suggested that, per  the request,  management                 
  costs appear to have increased by a third.  He then asked if                 
                                                                               
                                                                               
  corporate assets  increased by  a like  amount.  Mr.  Bushre                 
  responded negatively, but he further advised that the assets                 
  of the  fund appreciated  by $400  million from  the end  of                 
  November to the end of January.                                              
                                                                               
  End:      SFC-94, #36, Side 2                                                
  Begin:    SFC-94, #38, Side 1                                                
                                                                               
  Senator  Rieger  voiced  support  for  active  over  passive                 
  management.                                                                  
                                                                               
  In  response to a  question from  Senator Kelly,  Mr. Bushre                 
  acknowledged  that  the requested  $3,195  million would  be                 
  added to the $10 million provided  for management for FY 94.                 
  The FY  95 budget  seeks $19  million for  equity management                 
  fees and $3 million for custody fees.                                        
                                                                               
  Sec. 13.  Provides $1.5 million  for the Dept. of Education,                 
  K-12  foundation,  for  increased  enrollment  based  on  an                 
  October  student count.    In response  to  a question  from                 
  Senator Jacko, MS. SLAGLE explained  that the administration                 
  did not expect  school districts  to absorb increased  costs                 
  this year  without advising  them ahead  of  time that  they                 
  would be restricted next year.                                               
                                                                               
  Sec. 14.  Relates to ratification of prior year expenditures                 
  for the Dept. of Education.                                                  
                                                                               
  Sec. 15.   Contains a $244.4  appropriation to the Dept.  of                 
  Health and Social  Services for the permanent  fund dividend                 
  hold  harmless  program.   The  increase  relates  to higher                 
  caseloads in AFDC and other programs.                                        
                                                                               
  Co-chair Frank directed that the meeting be briefly recessed                 
  at this time.                                                                
                                                                               
                       RECESS - 10:00 a.m.                                     
                     RECONVENE - 10:10 a.m.                                    

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