Legislature(1993 - 1994)
03/24/1994 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.