Legislature(2017 - 2018)SENATE FINANCE 532

02/07/2017 09:00 AM FINANCE

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Audio Topic
09:01:14 AM Start
09:01:42 AM SB43
10:45:49 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 43 APPROP:SUPP; CAP; REAPPROP; AMEND; REPEAL TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 43                                                                                                            
                                                                                                                                
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,   and   other  appropriations;   making                                                                    
     reappropriations;  amending  appropriations;  repealing                                                                    
     appropriations; and providing for an effective date."                                                                      
                                                                                                                                
9:01:42 AM                                                                                                                    
                                                                                                                                
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF  THE GOVERNOR, thought that  the supplemental bill                                                                    
was  fairly straightforward  and informed  that it  included                                                                    
four significant items.                                                                                                         
                                                                                                                                
Ms. Pitney  discussed the presentation  "FY2017 Supplemental                                                                    
Bill - Senate Finance Committee"  (copy on file). She turned                                                                    
to  slide   2,  which   showed  a  table   entitled  'FY2017                                                                    
Supplemental  Summary.' She  pointed  out  that the  summary                                                                    
included  an  Unrestricted   General  Fund  (UGF)  increment                                                                    
request  of  $51.7  million.  After  adding  the  Designated                                                                    
General  Funds (DGF),  federal funds,  and other  funds; the                                                                    
total was $113.5 million.                                                                                                       
                                                                                                                                
Ms.  Pitney showed  slide 3,  "UGF/DGF/Other/Fed Summary  by                                                                    
Department (1088)."                                                                                                             
                                                                                                                                
Ms. Pitney  showed slide 4, "Statewide  Department Summary -                                                                    
Capital Budget (1183)."                                                                                                         
                                                                                                                                
Ms.  Pitney  addressed a  10-page  FY  17 Supplemental  Bill                                                                    
Summary  (paged  1  -  10)  that  was  included  within  the                                                                    
presentation.  She pointed  out  line  2 on  page  1 of  the                                                                    
summary, which showed  a rate increase for  Alaska Care from                                                                    
$1,346 to  $1,555 per month,  per employee. She  referred to                                                                    
an  amendment   late  in  the  previous   session  that  had                                                                    
requested a  $15 million increase  for the  healthcare rate,                                                                    
as the state  was drawing down on reserves at  a faster rate                                                                    
than previously.  The previous  year there  had been  a $7.5                                                                    
million  deposit  in  to  the  Health  Reserve  Fund,  which                                                                    
enabled  the state  to get  through  the first  half of  the                                                                    
year.                                                                                                                           
                                                                                                                                
Ms.  Pitney continued  discussing  the supplemental  request                                                                    
for  healthcare,  noting  that  there had  been  a  mid-year                                                                    
healthcare rate  increase. The current  request was  for the                                                                    
General Fund  (GF) requirement for  the rate  increase. Most                                                                    
of the non-GF components had been added in the budget.                                                                          
                                                                                                                                
9:05:41 AM                                                                                                                    
                                                                                                                                
Co-Chair MacKinnon inquired about  $853,000 being taken from                                                                    
the Alaska  Marine Highway Fund.  She wondered if  the funds                                                                    
were intended to help cover the individuals in the union.                                                                       
                                                                                                                                
Ms.  Pitney explained  that the  mid-year rate  increase had                                                                    
increased the  cost, and the took  care for the cost  of the                                                                    
healthcare rate  increase for that  group of  employees. She                                                                    
offered  to give  a complete  breakdown by  fund source  for                                                                    
each group listed in the supplemental item description.                                                                         
                                                                                                                                
Senator Micciche thought he might  want to review the Marine                                                                    
Highway  Fund.  He  knew  that many  budget  cuts  had  been                                                                    
directed toward the  use of the fund, and  wondered if there                                                                    
was  a  robust enough  balance  in  the  fund to  cover  the                                                                    
supplemental item  as well  as the other  DGF uses  that had                                                                    
been directed.                                                                                                                  
                                                                                                                                
Ms. Pitney relayed that  the administration felt comfortable                                                                    
that the fund was healthy enough to fund the request.                                                                           
                                                                                                                                
Senator Micciche  wondered if the administration  had looked                                                                    
at the  health insurance increases  and was devising  a plan                                                                    
for  the future.  He acknowledged  that most  of the  groups                                                                    
were bargaining  units and did  not know when  the contracts                                                                    
reopened. He thought  it was time that  the employees shared                                                                    
the costs.                                                                                                                      
                                                                                                                                
Ms. Pitney stated  that the administration had  the topic on                                                                    
its  radar,   and  furthered  that  Department   of  Revenue                                                                    
Commissioner Sheldon Fisher was  working with all the unions                                                                    
(especially    considering    the    healthcare    authority                                                                    
feasibility  study) and  looking at  the various  healthcare                                                                    
strategies that unions were using.  She mentioned that there                                                                    
were  some unions  with healthcare  trusts. She  stated that                                                                    
some of the negotiations had  the amount paid for healthcare                                                                    
for the unions  aligned with the Alaska  Care payment. Other                                                                    
unions were looking at the  healthcare trust and considering                                                                    
what should be paid to cover healthcare needs.                                                                                  
                                                                                                                                
Ms. Pitney  continued that to  limit the rate  increase, the                                                                    
administration   was    considering   pharmacy   cost-saving                                                                    
efforts,  provider  contracting,  as well  as  pushing  more                                                                    
costs to employees to pay  part of the premium. She informed                                                                    
that all employees in Alaska  Care paid premiums, which were                                                                    
increasing again on December 1, 2018.                                                                                           
                                                                                                                                
9:09:24 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  asked how much of  the healthcare increase                                                                    
was included in  the FY 18 budget. He asked  how much of the                                                                    
cost  increases  had  the  employee  seen,  or  if  all  the                                                                    
increased costs were falling on the employer.                                                                                   
                                                                                                                                
Ms.  Pitney stated  that the  Alaska Care  increase was  $12                                                                    
million  total  (of which  $6  million  was UGF),  of  which                                                                    
approximately $3 million had been passed on to employees.                                                                       
                                                                                                                                
Ms.  Pitney  stated  that  if  the  administration  had  not                                                                    
increased  the employee  premium, the  employer contribution                                                                    
would have been $3 million more.                                                                                                
                                                                                                                                
Ms. Pitney  addressed line 3 on  page 1 of the  summary. She                                                                    
explained that  at the  end of  the summer,  the supervisory                                                                    
union  contract   was  finalized.   Part  of   the  contract                                                                    
negotiation  had  included  a  mandatory  15-hour  furlough,                                                                    
which  resulted in  savings of  $900,000; $358,000  of which                                                                    
was GF.                                                                                                                         
                                                                                                                                
Co-Chair MacKinnon  asked if the state  had investigated the                                                                    
long-term effects  of furloughs, and how  it affected future                                                                    
contract  negotiations. She  wondered  how it  worked for  a                                                                    
salaried employee.                                                                                                              
                                                                                                                                
Ms. Pitney clarified that furlough  was unpaid time off, and                                                                    
it was  mandated that  employees take  unpaid leave.  If the                                                                    
state wanted to  avoid furloughs in the future,  it would be                                                                    
an increment to avoid forced furloughs.                                                                                         
                                                                                                                                
9:13:13 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon asked  if there  had been  any study  of                                                                    
other organizations  that had  used furloughs  to understand                                                                    
possible consequences.                                                                                                          
                                                                                                                                
Ms.  Pitney  agreed to  check  with  Commissioner Fisher  to                                                                    
ascertain an answer to Co-Chair MacKinnon's question.                                                                           
                                                                                                                                
Senator  Micciche  wondered how  many  members  were in  the                                                                    
supervisory unit.                                                                                                               
                                                                                                                                
Ms. Pitney specified there were 2,300 members.                                                                                  
                                                                                                                                
Senator  Micciche wondered  about  possible savings  through                                                                    
taking the  furlough program  through all  the ranks  at the                                                                    
state.                                                                                                                          
                                                                                                                                
Ms. Pitney explained that  the administration had negotiated                                                                    
furloughs  in  most  all  of   the  contracts.  The  General                                                                    
Government  Unit  (GGU)  contract   had  also  negotiated  a                                                                    
furlough  that was  included in  the  original 2017  budget.                                                                    
Many of the  exempt and non-exempt employees  were forced to                                                                    
take  furloughs starting  in 2016  to adjust  to the  budget                                                                    
levels. Furlough  days ranged from  a minimum of 2  days (15                                                                    
hours)  for  GGU,  with  some   units  (Department  of  Law,                                                                    
Department  of Natural  Resources)  using up  to  5 days  of                                                                    
furlough to meet budgets.                                                                                                       
                                                                                                                                
Senator Micciche  asked Ms. Pitney to  provide the committee                                                                    
with the  furlough figures to examine  overall effectiveness                                                                    
towards  savings.  He wondered  if  the  furlough days  were                                                                    
pushing work toward contractors.                                                                                                
                                                                                                                                
Ms. Pitney agreed to provide the information.                                                                                   
                                                                                                                                
9:16:32 AM                                                                                                                    
                                                                                                                                
Co-Chair   MacKinnon   noted   that  the   legislature   had                                                                    
implemented a  similar furlough policy. She  wondered, since                                                                    
it was possible to  negotiate 15-hour furloughs, what effort                                                                    
had  been  made  to  negotiate  across  the  board  for  pay                                                                    
freezes.                                                                                                                        
                                                                                                                                
Senator Micciche discussed unallocated  cuts and the concept                                                                    
of effective management in the agencies.                                                                                        
                                                                                                                                
Senator  von Imhof  referenced Senator  Micciche's comments,                                                                    
and thought  having uniform furloughs  or pay  freezes could                                                                    
prohibit   flexibility  that   managers   could  employ   to                                                                    
creatively  manage to  a dollar  figure. She  suggested that                                                                    
tailored  decision-making  for   each  department  would  be                                                                    
effective  to get  through lean  fiscal  times. She  worried                                                                    
that  having  one tool  uniformly  applied  to all  agencies                                                                    
might  not  be  the  most effective  way  of  managing.  She                                                                    
wondered if managers could be given more flexibility.                                                                           
                                                                                                                                
9:19:38 AM                                                                                                                    
                                                                                                                                
Ms. Pitney  addressed line  4 and  line 5 on  page 1  of the                                                                    
supplemental summary,  which were technical in  nature. Line                                                                    
4  referred to  a  Vendor Administrative  Fee. She  detailed                                                                    
that  part of  shared  services  reorganization and  process                                                                    
streamlining  included   implementation  of   a  cooperative                                                                    
contract.  If the  state paid  within ten  days, the  vendor                                                                    
would return part of a small  fee which would cover the cost                                                                    
of  the   shared  services  procurement   organization.  She                                                                    
detailed that  the process was  implemented after the  FY 17                                                                    
budget had been put together.                                                                                                   
                                                                                                                                
Co-Chair   MacKinnon  asked   why  the   funds  were   being                                                                    
designated as DGF rather than just dropping it in the GF.                                                                       
                                                                                                                                
Ms. Pitney stated that it had  been assigned as a GF program                                                                    
receipt.                                                                                                                        
                                                                                                                                
Co-Chair  MacKinnon asked  if Ms.  Pitney knew  of estimated                                                                    
cost savings for the statewide program.                                                                                         
                                                                                                                                
Ms.  Pitney referred  to shared  services reorganization  in                                                                    
the FY 18  budget, which would realize  savings of $600,000.                                                                    
The  savings  was anticipated  to  double  in the  following                                                                    
year.                                                                                                                           
                                                                                                                                
Co-Chair MacKinnon  asked if the  $600,000 in FY  18 savings                                                                    
would be  doubled, or if  there would be an  additional $1.2                                                                    
million in savings.                                                                                                             
                                                                                                                                
Ms.  Pitney  clarified  that there  would  be  $1.2  million                                                                    
additional savings.                                                                                                             
                                                                                                                                
9:22:33 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Bishop referred  to the  fund source  switch for                                                                    
the Vendor  Administrator Fee, and  wondered if  the savings                                                                    
was realized through timely payment.                                                                                            
                                                                                                                                
Ms. Pitney answered in the affirmative.                                                                                         
                                                                                                                                
Vice-Chair Bishop referred to the  oil and gas industry, and                                                                    
negotiations.                                                                                                                   
                                                                                                                                
Ms.  Pitney recalled  a  reduction  that the  administration                                                                    
took in  FY 16,  after negotiating  down all  the contracts.                                                                    
She stated  that Commissioner Fisher  could show  results of                                                                    
the negotiation.                                                                                                                
                                                                                                                                
Co-Chair MacKinnon referred to Line  5, which appeared to be                                                                    
a  repurposing of  funds. She  wondered if  there was  a new                                                                    
$1.4  million  for  the  Alaska  Land  Mobile  Radio  (ALMR)                                                                    
system.                                                                                                                         
                                                                                                                                
Ms.  Pitney answered  in the  negative. She  elaborated that                                                                    
the United  States Department  of Defense  (DOD) had  paid a                                                                    
contract directly to the vendor;  and the state had paid for                                                                    
its  share  of the  contract  directly  to the  vendor.  She                                                                    
continued that DOD had new  rules and could not pay directly                                                                    
to the vendor, but rather must pay through the state.                                                                           
                                                                                                                                
9:24:52 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:25:32 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Ms. Pitney  turned to page  2 of the summary,  and addressed                                                                    
line 6.  The item was  an increment request of  $453,000 for                                                                    
the Public Defender  Agency. She explained that  part of the                                                                    
agency's revenue stream was collections;  a large portion of                                                                    
which  was  from  the Permanent  Fund  Dividend  (PFD).  The                                                                    
collections had  fallen short of the  original estimate, and                                                                    
the increment would replace the lost revenue.                                                                                   
                                                                                                                                
Ms. Pitney  addressed line 7,  which pertained to  a federal                                                                    
grant  that  would  help  the  Division  of  Motor  Vehicles                                                                    
monitor the  entities that  did training  and testing  for a                                                                    
commercial driver's license. The  monitoring was a result of                                                                    
an audit  finding, and the federal  government was providing                                                                    
a grant to help support the monitoring.                                                                                         
                                                                                                                                
Ms. Pitney addressed  line 8, a $130,000  DGF increase which                                                                    
was  a   result  of  a  reclassification   for  occupational                                                                    
licensing examiners.  There was  a reclassification  for the                                                                    
employees  from   range  13  to   range  14.  There   was  a                                                                    
corresponding amount in the governor's proposed budget.                                                                         
                                                                                                                                
9:27:22 AM                                                                                                                    
                                                                                                                                
Senator  Dunleavy asked  if the  increase  on line  8 was  a                                                                    
result of a decision to increase salary.                                                                                        
                                                                                                                                
Ms. Pitney answered in the affirmative.                                                                                         
                                                                                                                                
Co-Chair MacKinnon asked  if there was a  board that managed                                                                    
the licensing  structure that had  requested the  change, or                                                                    
if it had been an administrative request.                                                                                       
                                                                                                                                
Ms. Pitney was  not aware if the request was  from the board                                                                    
or from  the administration. She  detailed that there  was a                                                                    
statute that provided for classification studies.                                                                               
                                                                                                                                
Senator Dunleavy  commented that  he did not  understand why                                                                    
there were  salary increases being discussed  when the state                                                                    
had  a $3  billion deficit.  He did  not understand  why the                                                                    
administration was  not trying to  reduce its budget  by the                                                                    
same amount  that was being  requested in  the supplemental.                                                                    
He  did not  think the  state would  get out  of its  fiscal                                                                    
challenge by doing things as it had always done.                                                                                
                                                                                                                                
Co-Chair  MacKinnon  agreed  with  the  premise  of  Senator                                                                    
Dunleavy's  comments, and  thought  it might  be helpful  to                                                                    
examine a salary  study. She wondered about the  salary of a                                                                    
range 13 versus a range 14.                                                                                                     
                                                                                                                                
9:30:56 AM                                                                                                                    
                                                                                                                                
Ms. Pitney  stated that the  salary in question  was $45,000                                                                    
per  year, and  the  average impact  was  about $4,000.  She                                                                    
qualified that the  increase was based on  the complexity of                                                                    
work  and  the analysis  of  the  classification study.  She                                                                    
referenced  Department of  Labor  and Workforce  Development                                                                    
laws and the concept of equal pay for equal work.                                                                               
                                                                                                                                
Ms. Pitney  turned to page  3 of  the summary, and  noted it                                                                    
was full of  technical changes. She specified  that one item                                                                    
was  a  fund  source  clean-up based  on  better  accounting                                                                    
information. The  next item was  associated with  the health                                                                    
insurance   rate  increase.   There   were  two   components                                                                    
involved, and  the original budget only  had the appropriate                                                                    
item in one.                                                                                                                    
                                                                                                                                
Ms. Pitney  turned to page  4 of the summary,  and addressed                                                                    
lines 11,  12, and 13; as  well as line 14  on the following                                                                    
page. The  items pertained  to increases  in funding  to the                                                                    
Medicaid program,  and totaled  $26.7 million between  the 4                                                                    
components.  She  recalled  that  FY 16  payments  from  the                                                                    
previous year were  delayed and pushed in to  FY 17, because                                                                    
the FY 16 funding level had not been sufficient.                                                                                
                                                                                                                                
9:33:36 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:37:48 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair MacKinnon referred to  the Medicaid increases, some                                                                    
of which  had to  do with  normal healthcare  increases over                                                                    
time.                                                                                                                           
                                                                                                                                
Ms. Pitney concurred.                                                                                                           
                                                                                                                                
Co-Chair  MacKinnon   asked  Ms.  Pitney  to   provide  more                                                                    
information on  the reimbursement  of the advance  the state                                                                    
had  paid  to  Medicaid   service  delivery  providers.  She                                                                    
thought the  advance had  started in FY  16. She  recalled a                                                                    
report from  the previous year  that suggested there  was an                                                                    
outstanding $80 million from vendors  that had been advance-                                                                    
paid  in 2016.  The committee  had not  been updated  on the                                                                    
vendor  repayment, and  wondered how  it pertained  to lines                                                                    
11, 12, 13, and 14.                                                                                                             
                                                                                                                                
Ms. Pitney explained that an issue  with Xerox at the end of                                                                    
FY  16 had  complicated  budget resolution,  so  it was  not                                                                    
possible to accurately predict how  much would be needed for                                                                    
a   supplemental   at  the   same   time   last  year.   The                                                                    
administration  had made  the decision  to work  to get  the                                                                    
reimbursements. She  offered to provide a  report with exact                                                                    
figures as soon  as possible, and stated  that the situation                                                                    
was being  monitored consistently. She anticipated  at least                                                                    
$40 million  of reimbursements  in FY  17. She  relayed that                                                                    
Medicaid  services was  working  diligently to  get all  the                                                                    
bills processed  (from the complication with  Xerox), and to                                                                    
get the reimbursements.                                                                                                         
                                                                                                                                
9:40:46 AM                                                                                                                    
                                                                                                                                
Senator   Micciche   clarified   that  the   committee   was                                                                    
discussing provider  payments in  lines 11 through  14, that                                                                    
amounted to $27 million.                                                                                                        
                                                                                                                                
Co-Chair MacKinnon  noted that the committee  was looking at                                                                    
an approximately $25 million  UGF request for implementation                                                                    
of Medicaid.  The matter had  been complicated by  a lawsuit                                                                    
with Xerox, pre-payment to vendors,  a 9 percent increase to                                                                    
the  cost  of healthcare,  and  an  administrative order  to                                                                    
expand  Medicaid.  She  asked Ms.  Pitney  to  provide  more                                                                    
clarity on the requests. She  thought it would be helpful to                                                                    
have  an  update  from  Department   of  Health  and  Social                                                                    
Services (DHSS) Commissioner of  Valerie Davidson to discuss                                                                    
the remaining problems.                                                                                                         
                                                                                                                                
Senator  Micciche  wanted  greater detail,  and  noted  that                                                                    
through the  executive order on expansion  of Medicaid there                                                                    
had been millions of dollars  of expected savings. He wanted                                                                    
to  see  the  information  compiled into  one  document,  to                                                                    
include  expectations  and reality.  He  wanted  to see  how                                                                    
Medicaid expansion had affected the bottom line.                                                                                
                                                                                                                                
9:43:13 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman noted that  each component being considered                                                                    
included the text "As a  result of reprocessing these claims                                                                    
at  the close  of FY2016,  the Department  had to  limit the                                                                    
number  of   claims  that  were  to   process  for  Medicaid                                                                    
providers." He wondered if it was  possible to get a list by                                                                    
component to determine which claims  were limited. He wanted                                                                    
to examine  the claims  in each  category. He  wondered what                                                                    
type  of guidelines  were used  to determine  what would  be                                                                    
paid and what wouldn't.                                                                                                         
                                                                                                                                
Ms. Pitney agreed to provide the information.                                                                                   
                                                                                                                                
Co-Chair Hoffman asked if he  could review the claims listed                                                                    
by  vendor  in  order  to  help  consider  the  supplemental                                                                    
requests.                                                                                                                       
                                                                                                                                
Co-Chair   MacKinnon  asked   Ms.   Pitney   to  work   with                                                                    
Commissioner Davidson  to compile  a short  presentation for                                                                    
the committee in order to  discuss the components at a later                                                                    
time.                                                                                                                           
                                                                                                                                
Vice-Chair Bishop  echoed Co-Chair Hoffman's  comments about                                                                    
the  items  being  a one-time  increment.  He  recalled  the                                                                    
previous year  that there was  approximately $27  million in                                                                    
Medicaid savings. He  thought if the request  was a one-time                                                                    
increment  for  $27  million, there  should  be  no  further                                                                    
request, less normal customary increases.                                                                                       
                                                                                                                                
Ms.  Pitney  stated  that there  was  a  one-time  increment                                                                    
because the items were a one-time  cost pushed from FY 16 to                                                                    
FY 17.  Before the  increase, the  amount was  $580 million,                                                                    
which was  $90 million below  the FY 15 Medicaid  cost. With                                                                    
the  increment, the  cost was  $60 million  below the  FY 15                                                                    
Medicaid program cost. In conjunction  with the savings from                                                                    
cost   shifting   to   federal  dollars   through   Medicaid                                                                    
expansion,  the state  was seeing  significant increases  in                                                                    
the number of eligible  individuals. She thought the economy                                                                    
would drive the costs up as well.                                                                                               
                                                                                                                                
Vice-Chair Bishop  asked for any forthcoming  information to                                                                    
include a  report on  the savings  from the  previous year's                                                                    
budget, and whether it was from  the same area of expense as                                                                    
the request.                                                                                                                    
                                                                                                                                
9:47:46 AM                                                                                                                    
                                                                                                                                
Senator  von   Imhof  understood  that  prior   to  Medicaid                                                                    
expansion, Indian  Health Service (IHS) funding  had covered                                                                    
much  of   the  healthcare  for  the   population  that  now                                                                    
qualified  under  Medicaid   expansion.  She  thought  since                                                                    
Medicaid  expansion,  there had  been  a  shift to  Medicaid                                                                    
funds;  yet  since   IHS  was  population-based,  healthcare                                                                    
providers around  the state were still  receiving funds from                                                                    
IHS.  She  wondered  how  IHS  funds  were  presently  being                                                                    
allocated, and if  they were a potential source  of funds to                                                                    
help offset some of the one-time fees.                                                                                          
                                                                                                                                
Ms.  Pitney agreed  to provide  more information  on Senator                                                                    
von  Imhof's   question.  She   referred  the   question  to                                                                    
Commissioner Davidson.                                                                                                          
                                                                                                                                
Co-Chair MacKinnon asked if the  FY 18 operating budget bill                                                                    
had the cost  increases from lines 11-14 built  into it. She                                                                    
wondered if the FY 18  budget was constructed so there would                                                                    
be no anticipated supplemental request.                                                                                         
                                                                                                                                
Ms.  Pitney  answered that  the  FY  18  budget was  at  the                                                                    
original FY 17 rate.                                                                                                            
                                                                                                                                
Co-Chair MacKinnon asked  if the FY 18 budget  would then be                                                                    
short by $25 million.                                                                                                           
                                                                                                                                
Ms.   Pitney  stated   that   the   administration  was   in                                                                    
discussions as to how additional  savings might be garnered,                                                                    
but  the  FY 18  amount  was  at the  FY  17  level of  $580                                                                    
million.                                                                                                                        
                                                                                                                                
Co-Chair MacKinnon  asked for clarification  that the  FY 18                                                                    
budget  did not  reflect  the increase  to  the budget,  and                                                                    
would be short $25 million.                                                                                                     
                                                                                                                                
Co-Chair  Hoffman  thought  the  department  was  on  record                                                                    
saying the FY 18 budget  was one that could be administered.                                                                    
He  noted that  the items  all stated  they were  a one-time                                                                    
increment, which  did not expect an  increment the following                                                                    
year.                                                                                                                           
                                                                                                                                
Co-Chair MacKinnon concurred with  the language, but was not                                                                    
sure if the budget reality would match.                                                                                         
                                                                                                                                
Co-Chair Hoffman  thought if administration did  not believe                                                                    
the  explanation  to  be  true,  it  should  not  have  been                                                                    
written.                                                                                                                        
                                                                                                                                
9:51:05 AM                                                                                                                    
                                                                                                                                
Senator Olson wondered  how much, if any, of  the GF dollars                                                                    
that were allocated  in FY 16 had lapsed as  a result of the                                                                    
delay from pushing FY 16 costs into FY 17.                                                                                      
                                                                                                                                
Ms. Pitney  stated there was  no lapse, and the  only reason                                                                    
the payments were pushed into  FY 17 was due to insufficient                                                                    
funding in FY 16.                                                                                                               
                                                                                                                                
Co-Chair MacKinnon asked  if there was a vote  to access the                                                                    
Constitutional  Budget Reserve  (CBR)  in FY  16 that  could                                                                    
have accessed the funds.                                                                                                        
                                                                                                                                
Ms.  Pitney  stated  that  there   might  have  been  enough                                                                    
flexibility  within  the  CBR   vote,  but  because  of  the                                                                    
complications with  the Xerox system and  the implementation                                                                    
of the IRIS  system, the administration had  been unclear as                                                                    
to the  amount of the  payments. She asked the  committee to                                                                    
recall  the  prior  year's  supplemental  request  that  had                                                                    
overshot the mark.                                                                                                              
                                                                                                                                
Co-Chair MacKinnon asked Ms. Pitney  if there was a CBR vote                                                                    
in 2017,  and if the administration  needed access authority                                                                    
for the spend.                                                                                                                  
                                                                                                                                
Ms. Pitney  stated that  there was  a CBR  vote, that  had a                                                                    
$100  million UGF  limit. The  supplemental request  was for                                                                    
$51 million UGF.                                                                                                                
                                                                                                                                
Ms. Pitney  informed that  lines 15,  16, and  17 on  page 5                                                                    
were all  grant related items, to  receive receipt authority                                                                    
to execute on grant programs.                                                                                                   
                                                                                                                                
Ms. Pitney relayed  that lines 18, 19, 20, and  21 on page 6                                                                    
were grants and technical changes.                                                                                              
                                                                                                                                
Ms. Pitney spoke to line 24,  related to the fact that Whale                                                                    
Pass  recently voted  to  become a  Second  Class City.  The                                                                    
organizational grant came with a  $75,000 UGF grant from the                                                                    
state.                                                                                                                          
                                                                                                                                
Ms. Pitney moved to page 7,  where lines 25 and 26 pertained                                                                    
to  Department  of  Fish  and Game  (DFG).  The  first  item                                                                    
provided funding  for two organizations to  continue studies                                                                    
that  had  begun  in  2013. The  second  item  requested  $3                                                                    
million  of DFG  funds  to match  (and  thereby utilize)  $9                                                                    
million of Pittman-Roberts federal funds.                                                                                       
                                                                                                                                
Ms. Pitney  spoke to line 30,  which was a request  to allow                                                                    
the Labor Relations  group to carry forward  a capital grant                                                                    
to  augment  its union  negotiating  issues.  The grant  was                                                                    
started  in  FY 15,  and  there  was approximately  $250,000                                                                    
remaining.                                                                                                                      
                                                                                                                                
9:55:41 AM                                                                                                                    
                                                                                                                                
Ms. Pitney  spoke to  line 31,  which was  a reappropriation                                                                    
from  the Department  of  Public Safety.  There  had been  a                                                                    
driving range proposed for the  Sitka Police Academy, and it                                                                    
had been considered  a more prudent use of funds  to pay for                                                                    
maintenance and upgrade of the  ALMR system. The item needed                                                                    
$4.5  million  for  the immediate  upgrade  and  maintenance                                                                    
issues. She  thought there would be  a forthcoming amendment                                                                    
for the remaining amount of funds.                                                                                              
                                                                                                                                
Co-Chair MacKinnon recalled language  in the previous year's                                                                    
operating   budget  that   had   requested  replacement   or                                                                    
dissolution of the system.                                                                                                      
                                                                                                                                
Ms. Pitney confirmed that there  had been intent language to                                                                    
find an alternative  to the ALMR system, and  there had been                                                                    
two  or  three past  studies  and  a  recent report  on  the                                                                    
matter. The study  findings had been that ALMR  was the best                                                                    
alternative  for the  present time.  She offered  to provide                                                                    
the report to the committee.                                                                                                    
                                                                                                                                
Co-Chair Hoffman referred  to line 26, and  asked Ms. Pitney                                                                    
to provide  the committee with  the targeted use of  the $12                                                                    
million  for  wildlife  management  mapping,  hunter  access                                                                    
improvements,  and the  locations  with  specific items  for                                                                    
each project.                                                                                                                   
                                                                                                                                
Ms. Pitney agreed to provide the information.                                                                                   
                                                                                                                                
Vice-Chair Bishop  asked about  Ms. Pitney's reference  to a                                                                    
driving range.                                                                                                                  
                                                                                                                                
Ms. Pitney  explained that the  reappropriation for  ALMR on                                                                    
line 31 was from an  older appropriation for a driving range                                                                    
at  the Sitka  Police  Academy. She  added  that the  Alaska                                                                    
State  Troopers heavily  depended  upon  ALMR, and  accepted                                                                    
that the  communications system was a  higher priority given                                                                    
the fiscal environment.                                                                                                         
                                                                                                                                
Vice-Chair  Bishop noted  that if  the police  academy still                                                                    
needed a  driving range, it  could reach out to  Fort Greely                                                                    
where there was a racetrack for testing automobiles.                                                                            
                                                                                                                                
Co-Chair MacKinnon  thought the academy was  currently using                                                                    
a school parking lot for driving training.                                                                                      
                                                                                                                                
9:59:46 AM                                                                                                                    
                                                                                                                                
Ms. Pitney addressed  line 32 on page 8  of the supplemental                                                                    
table;  which  pertained  to  a  federal  grant  for  health                                                                    
insurance enforcement and consumer protection.                                                                                  
                                                                                                                                
Ms.   Pitney  shared   that  line   33  was   a  significant                                                                    
supplemental  request for  Department  of Corrections  (DOC)                                                                    
healthcare  components. She  detailed that  through Medicaid                                                                    
expansion, the  department had been  able to  move prisoners                                                                    
who spent  more than 24  hours in hospitals on  to Medicaid.                                                                    
The  administration had  anticipated that  there would  have                                                                    
been more savings, and were able  to start the program in FY                                                                    
16. The DOC  healthcare component was reduced  by $6 million                                                                    
in FY  17 through the  fiscal notes for the  Medicaid reform                                                                    
effort. The department was  still receiving benefits through                                                                    
Medicaid expansion (and would  have more participants in the                                                                    
expansion  group), but  the general  healthcare for  DOC was                                                                    
surpassing the amount appropriated by $11 million.                                                                              
                                                                                                                                
Ms.  Pitney  continued,  explaining  that  the  supplemental                                                                    
request was  for up to $8  million in GF, and  permission to                                                                    
allow DOC  to use any savings  it could find in  other areas                                                                    
to  offset   the  cost  increase.  She   detailed  that  the                                                                    
department was  seeing significant cost increases  for items                                                                    
such  as  dialysis, Hepatitis-C  medications.  Additionally,                                                                    
there  were  problems  with  nursing  recruitment,  and  the                                                                    
department was  using overtime as well  as temporary nursing                                                                    
contracts.  She  reiterated  that  the  department  was  not                                                                    
seeing the  savings it had anticipated.  She emphasized that                                                                    
the  administration  was  working   regularly  with  DOC  to                                                                    
monitor  the   situation,  and  would  be   working  in  the                                                                    
framework of  the healthcare  authority to  negotiate rates.                                                                    
She   noted  that   the  item   was  the   most  significant                                                                    
supplemental item.                                                                                                              
                                                                                                                                
10:03:50 AM                                                                                                                   
                                                                                                                                
Senator Micciche  referred to  the $8  million appropriation                                                                    
FY  14  for  the  PFD  Criminal Fund,  and  wondered  if  it                                                                    
occurred every  year to  go towards  DOC healthcare  for the                                                                    
incarcerated population.                                                                                                        
                                                                                                                                
Ms. Pitney answered in the affirmative.                                                                                         
                                                                                                                                
Senator Micciche asked if the  supplemental request was over                                                                    
and above the $8 million appropriation.                                                                                         
                                                                                                                                
Ms. Pitney  stated that  the funds  had been  allocated, but                                                                    
the mechanism was  a year delayed. For FY 17,  the amount of                                                                    
money was based on the  previous year's dividend checks. The                                                                    
amount would be  smaller the following year,  and would have                                                                    
to be made up with another fund source.                                                                                         
                                                                                                                                
Co-Chair MacKinnon asked  if the Governor's veto  of half of                                                                    
the PFD  related to  the cost  expenditure. She  wondered if                                                                    
there was an unintended consequence of the veto.                                                                                
                                                                                                                                
Ms. Pitney specified  that in FY 18, the amount  of the fund                                                                    
would be diminished as a result of reduced dividends.                                                                           
                                                                                                                                
Co-Chair   MacKinnon   asked    if   the   consequence   was                                                                    
unanticipated.                                                                                                                  
                                                                                                                                
Ms. Pitney relayed  that the reduction of funds  was a known                                                                    
consequence of the veto.                                                                                                        
                                                                                                                                
Vice-Chair Bishop  thought it might  be helpful to  have DOC                                                                    
work  with Ms.  Pitney. He  had chaired  the Senate  Finance                                                                    
Budget Subcommittee for DOC for  several years, and recalled                                                                    
that  the  previous  year  there had  been  savings  due  to                                                                    
Medicaid expansion,  resulting in a  lower GF spend.  He was                                                                    
interested  in  knowing  what   happened  to  the  estimated                                                                    
savings.                                                                                                                        
                                                                                                                                
Co-Chair MacKinnon  stated that  some cost-drivers  had been                                                                    
raised  in  the  health  system,   and  referred  to  a  new                                                                    
treatment   for  Hepatitis-C.   She   understood  that   the                                                                    
treatment was  very costly, and  wondered if Ms.  Pitney had                                                                    
referred to the new cure.                                                                                                       
                                                                                                                                
Ms.  Pitney answered  in the  affirmative, and  relayed that                                                                    
the  DOC healthcare  treatment for  Hepatitis-C was  $74,000                                                                    
per patient. She elaborated that  the state had been able to                                                                    
use a  buying consortium  in order  to receive  a relatively                                                                    
low price. She  noted that the occurrence  of Hepatitis-C in                                                                    
prisons was upwards of 20 percent.                                                                                              
                                                                                                                                
10:07:54 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:09:19 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  MacKinnon  relayed  that she  had  been  inquiring                                                                    
about  the  cost  increase for  Hepatitis-C  treatment,  and                                                                    
whether the state was seeing a cost increase over time.                                                                         
                                                                                                                                
Co-Chair  MacKinnon  asked  if Ms.  Pitney  had  recommended                                                                    
back-filling  inmate funds  with the  Alaska Capital  Income                                                                    
Fund.                                                                                                                           
                                                                                                                                
Ms. Pitney answered in the affirmative, for FY 18.                                                                              
                                                                                                                                
Co-Chair MacKinnon asked  if there were dollars  in the fund                                                                    
that  Ms. Pitney  hoped to  use  for a  recurring cost.  She                                                                    
stated that the  Capital Income Fund was  typically used for                                                                    
one-time increments for capital projects.                                                                                       
                                                                                                                                
Ms. Pitney stated that in  the past, the Capital Income Fund                                                                    
had  been  used  for  one-time  increments;  but  it  was  a                                                                    
recurring annual revenue stream.                                                                                                
                                                                                                                                
Ms.  Pitney moved  to page  9, line  34 of  the supplemental                                                                    
summary,  which   was  a  reappropriation  for   the  Alaska                                                                    
Vocational   Technical  Center.   The   funds  would   allow                                                                    
rescoping  of a  deferred maintenance  appropriation of  the                                                                    
past to meet the center's most urgent need.                                                                                     
                                                                                                                                
Ms. Pitney communicated  that lines 35 and  36 addressed the                                                                    
most recent judgements and settlements.                                                                                         
                                                                                                                                
Ms.  Pitney noted  that line  37 pertained  to a  settlement                                                                    
between   the  Department   of  Transportation   and  Public                                                                    
Facilities  (DOT)  and  the  U.S.  Environmental  Protection                                                                    
Agency  (EPA). There  had been  a consent  decree and  final                                                                    
order,  involving   $8  million  to  address   the  Class  V                                                                    
injection wells.                                                                                                                
                                                                                                                                
Ms.  Pitney noted  line 38  was a  reduction in  the state's                                                                    
debt service cost due to  the refinancing of the Goose Creek                                                                    
Correctional Center, which resulted in $655,000 in savings.                                                                     
                                                                                                                                
Co-Chair MacKinnon referred  to line 34, and  asked if there                                                                    
was a reason that the funds  were not requested in FY 18, or                                                                    
if the funds were FY 17 money that was expiring.                                                                                
                                                                                                                                
Ms.  Pitney  believed that  some  of  the  items had  FY  17                                                                    
expirations, while  others had a lapse  date of FY 18  or FY                                                                    
19. She thought the line addressed urgent needs.                                                                                
                                                                                                                                
Co-Chair  MacKinnon asked  about line  37, and  thought that                                                                    
there had been a one-time  request for funds for disposition                                                                    
of the Class V Injection Wells.  She wondered if there was a                                                                    
new  well,  or   if  there  had  been   increased  costs  or                                                                    
expenditures. She asked if Ms.  Pitney could provide further                                                                    
clarification.                                                                                                                  
                                                                                                                                
Ms. Pitney agreed to provide  more detailed information at a                                                                    
later  date. She  thought  earlier funds  had  been used  to                                                                    
address the first  one or two wells in  order to demonstrate                                                                    
progress. Fulfilling  the consent  decree would  satisfy the                                                                    
EPA's complaint with the state.                                                                                                 
                                                                                                                                
Co-Chair  MacKinnon   had  a  complaint  with   the  federal                                                                    
government about  the wells that  it had left. She  asked if                                                                    
there was  a consent decree  for the wells that  the federal                                                                    
government had abandoned on federal land.                                                                                       
                                                                                                                                
Ms.  Pitney did  not track  the  wells left  by the  federal                                                                    
government.                                                                                                                     
                                                                                                                                
10:13:53 AM                                                                                                                   
                                                                                                                                
Ms. Pitney looked at line 39  on page 10, which requested $3                                                                    
million to maintain a balance in the Disaster Relief Fund.                                                                      
                                                                                                                                
Ms. Pitney  noted that  there was an  item that  should have                                                                    
been  included on  the sheet  - a  $15 million  supplemental                                                                    
request for wildfires. She explained  that there had been an                                                                    
oversight within her  office, and it would be  brought in as                                                                    
an amendment.                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon asked  if the  addition would  bring the                                                                    
overall supplemental request to $130 million.                                                                                   
                                                                                                                                
Ms. Pitney answered in the affirmative.                                                                                         
                                                                                                                                
Co-Chair  Hoffman   asked  if   the  $15  million   was  for                                                                    
anticipated  wildfires between  the present  and June  30th,                                                                    
2017.                                                                                                                           
                                                                                                                                
Ms. Pitney answered in the affirmative.                                                                                         
                                                                                                                                
Co-Chair Hoffman  asked if it  was normal to  have wildfires                                                                    
to that extent between the months of February and June.                                                                         
                                                                                                                                
Ms. Pitney detailed that only  $5 million of the $15 million                                                                    
was associated with anticipated fires.                                                                                          
                                                                                                                                
Co-Chair Hoffman  asked if  the difference  in funds  was to                                                                    
cover wildfires that occurred prior to the present.                                                                             
                                                                                                                                
Ms.  Pitney stated  she would  provide documentation  of the                                                                    
costs associated with each associated fire.                                                                                     
                                                                                                                                
Vice-Chair  Bishop  asked  about  the omission  of  the  $15                                                                    
million item.                                                                                                                   
                                                                                                                                
Ms.  Pitney  reiterated  that  the   omission  had  been  an                                                                    
oversight.                                                                                                                      
                                                                                                                                
Vice-Chair Bishop  thought there  could be  some opportunity                                                                    
for federal funds for reimbursement for fires.                                                                                  
                                                                                                                                
Ms.  Pitney  stated  that  the amount  of  the  request  had                                                                    
accounted for federal  funds. The request was  for the state                                                                    
funding  portion.  She  agreed  to provide  details  on  the                                                                    
amount of federal and state funds.                                                                                              
                                                                                                                                
Co-Chair MacKinnon asked if the  previous year's request for                                                                    
fire suppression had been $47 million.                                                                                          
                                                                                                                                
Ms. Pitney responded in the  affirmative, and said the funds                                                                    
were largely lapsed. She stated  that the administration was                                                                    
being much more conservative in its current request.                                                                            
                                                                                                                                
10:17:34 AM                                                                                                                   
                                                                                                                                
Senator Micciche referred  to line 37, and  mentioned the 53                                                                    
Class V  injection wells. He  wondered if the  Department of                                                                    
Environmental  Conservation (DEC)  worked with  DOT to  make                                                                    
sure there was compliance with the Safe Drinking Water Act.                                                                     
                                                                                                                                
Ms. Pitney stated that DOT and  DEC would have a much deeper                                                                    
understanding of the consent decree and linkages.                                                                               
                                                                                                                                
Senator   Micciche  thought   that   $8   million  was   not                                                                    
insignificant,  and  thought  perhaps  there  was  a  larger                                                                    
problem.                                                                                                                        
                                                                                                                                
Co-Chair MacKinnon referenced "travesty"  wells on Bureau of                                                                    
Land  Management  land,  which the  federal  government  had                                                                    
started to clean up.                                                                                                            
                                                                                                                                
Co-Chair  MacKinnon  asked if  Ms.  Pitney  had covered  the                                                                    
administration's capital  request as  well as  its operating                                                                    
request.                                                                                                                        
                                                                                                                                
Ms.  Pitney   specified  that  the  capital   requests  were                                                                    
detailed on  page 6, line 24;  and page 8, line  25 and line                                                                    
26.                                                                                                                             
                                                                                                                                
Co-Chair MacKinnon  asked if the  capital requests  were the                                                                    
White  Pass organizational  grant  and  the Wild  Hatcheries                                                                    
Salmon Management tool.                                                                                                         
                                                                                                                                
Ms. Pitney  added that the Pittman-Roberts  funding was also                                                                    
included.                                                                                                                       
                                                                                                                                
Co-Chair MacKinnon  thought Co-Chair  Hoffman had  asked for                                                                    
detailed   follow-up  concerning   what  regions   would  be                                                                    
affected by individual projects.                                                                                                
                                                                                                                                
10:20:13 AM                                                                                                                   
                                                                                                                                
Senator Micciche  pointed out his support  for the "outside-                                                                    
of-the-box"  thinking on  the capital  budget. He  mentioned                                                                    
the  $75,000  item for  the  Local  Boundary Commission  (as                                                                    
required  by state  law). He  highlighted the  Wild/Hatchery                                                                    
Salmon  Management  Tools  item, which  was  simply  receipt                                                                    
authority for  $5.9 million, and had  committed funding from                                                                    
Pacific  Seafood  Processors   and  the  Northern  Southeast                                                                    
Regional  Aquaculture Association.  He  wanted  to see  more                                                                    
instances where  those directly benefitting were  willing to                                                                    
invest in state processes.                                                                                                      
                                                                                                                                
Senator  Dunleavy commented  that he  considered Ms.  Pitney                                                                    
and the administration to be  going in an opposite direction                                                                    
as the legislature.  He asserted that the  Senate was hoping                                                                    
to reduce  the budget by  $750 million over seven  years. He                                                                    
requested that the administration  go through an exercise to                                                                    
identify  areas in  which funds  could be  shifted to  avoid                                                                    
increases.  He emphasized  the need  for concurrence  on the                                                                    
budget.                                                                                                                         
                                                                                                                                
Senator   Micciche  wondered   if   it   would  signify   an                                                                    
unallocated  cut  if  Senate support  was  denied  for  some                                                                    
increments in the supplemental bill.  He asked Ms. Pitney to                                                                    
explain how  reductions would be managed  if increments were                                                                    
reduced by 50 percent.                                                                                                          
                                                                                                                                
Ms. Pitney  referred to  the DOC  healthcare item,  in which                                                                    
the  agency had  asked for  over $11  million. She  reported                                                                    
that the  governor's office  had pushed  back and  asked the                                                                    
department  how it  could  manage  it to  be  less than  $11                                                                    
million  within the  department  organization. She  believed                                                                    
that if  the expense could be  reduced to $8 million  in DOC                                                                    
as a  whole, it would  be well-managed. She thought  that if                                                                    
the   amount   was   short-funded,  it   would   require   a                                                                    
ratification in the next year.                                                                                                  
                                                                                                                                
10:24:37 AM                                                                                                                   
                                                                                                                                
Senator Micciche asked if  the administration was submitting                                                                    
a supplemental  budget that  had already  been substantially                                                                    
scrubbed and reduced where possible.  He pondered that if it                                                                    
was  the   will  of  the  legislature   to  push  additional                                                                    
scrubbing   and   more   heavy-handed  management   of   the                                                                    
increments,  the administration  would  have  to absorb  the                                                                    
costs elsewhere.                                                                                                                
                                                                                                                                
Ms. Pitney answered in the affirmative.                                                                                         
                                                                                                                                
Co-Chair MacKinnon thanked Ms.  Pitney for her presentation.                                                                    
She discussed  the challenging fiscal climate,  and referred                                                                    
to spending  from savings accounts.  She thought  there were                                                                    
state  services that  were valued  in different  ways across                                                                    
the state. She  acknowledged that Ms. Pitney  was managing a                                                                    
difficult  position  and   expressed  appreciation  for  her                                                                    
efforts. She wondered about the cost of overall personnel.                                                                      
                                                                                                                                
Ms. Pitney  estimated that just  over $2 billion of  the $10                                                                    
billion  total state  budget was  personnel. She  noted that                                                                    
there   were   different   proportions  of   personnel   per                                                                    
department;  and the  legislature had  very high  personnel,                                                                    
while DOT  had a  fairly low percentage  of personnel  and a                                                                    
higher percentage  of contractual services. She  stated that                                                                    
as a  rule of thumb, nearly  50 percent of the  state budget                                                                    
was  sent   out  directly  to  providers,   communities,  or                                                                    
individuals.                                                                                                                    
                                                                                                                                
10:27:47 AM                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman referred  to the  governor's State  of the                                                                    
State and State of the  Budget public addresses, in which he                                                                    
had  classified  the  budget   as  a  potential  crisis.  In                                                                    
considering  the  supplemental  budget request,  he  thought                                                                    
that the  Senate had been  pushing for larger cuts  than the                                                                    
governor and House  for the previous four  years. He thought                                                                    
it was because of the  continued pressure by the Senate that                                                                    
the state was able to  see a diminished operating budget. He                                                                    
thought many  committee members  felt that  the supplemental                                                                    
budget  being presented  was not  treating the  budget as  a                                                                    
crisis.                                                                                                                         
                                                                                                                                
Co-Chair Hoffman  continued, and shared concerns  that there                                                                    
was an  over $60 million  request at  a time when  the state                                                                    
was  in the  last stages  of using  its budget  reserves. He                                                                    
knew  the Senate  had passed  PFD reform,  but did  not know                                                                    
what would  happen with other  revenue measures.  He thought                                                                    
the state needed  to look at additional ways  to address its                                                                    
fiscal issues.  He emphasized the  need for  tighter control                                                                    
of spending, but thought it  was not the prevailing position                                                                    
of the House  or the administration. He  emphasized that the                                                                    
state could  not continue  to have a  status quo  budget. He                                                                    
knew  that  the state  needed  to  continue to  provide  the                                                                    
services that Alaskans had enjoyed,  but did not know if the                                                                    
financial means  were available  to fund  the same  level of                                                                    
services.                                                                                                                       
                                                                                                                                
Co-Chair  Hoffman discussed  the  operating  budget and  the                                                                    
5/4/3 plan, which  seemed to be extreme at  first glance and                                                                    
included a  reduction of $300 million.  He mentioned looking                                                                    
at overall reductions on a  percentage basis, and referenced                                                                    
the previous year's cut to  the municipal assistance program                                                                    
that was  50 cents on the  dollar. He suggested that  it was                                                                    
possible to come up with reductions  of 5 cents on a dollar.                                                                    
He thought great strides had  been made with reductions, but                                                                    
thought  further cuts  were needed.  He reiterated  that the                                                                    
budget  being presented  was a  status quo  budget, and  the                                                                    
state needed to look at things differently.                                                                                     
                                                                                                                                
10:32:56 AM                                                                                                                   
                                                                                                                                
Senator Micciche pointed  out that DHSS was one  of the four                                                                    
categories of greatest state expenditures,  and asked if the                                                                    
administration had  a team charged to  evaluate the increase                                                                    
in  healthcare   costs.  He  thought  the   legislature  was                                                                    
accepting the  increases, without aggressively  planning for                                                                    
a   reversal.   He  asked   Ms.   Pitney   to  explain   the                                                                    
administration's  priority  in   addressing  the  healthcare                                                                    
increase issue.                                                                                                                 
                                                                                                                                
Ms.  Pitney discussed  increment requests  that were  health                                                                    
cost  related.  She  thought that  the  state  must  address                                                                    
healthcare costs.  She informed that the  administration had                                                                    
several teams  addressing the issue; including  the Division                                                                    
of Insurance, which was working  on the private market area.                                                                    
She had just returned from  a relevant meeting in Washington                                                                    
D.C.  She  expected  federal relief  related  to  a  private                                                                    
market subsidy of $55  million. Department of Administration                                                                    
Commissioner Sheldon  Fisher was working on  the matter with                                                                    
his  team.  The  area  of employee  and  retiree  healthcare                                                                    
negotiations was being addressed.                                                                                               
                                                                                                                                
Ms.   Pitney  continued   to   address  Senator   Micciche's                                                                    
question.   She    discussed   the    Healthcare   Authority                                                                    
feasibility  study,  and  pondered   buying  power  and  the                                                                    
efficacy  of  a  more  combined   risk  pool.  She  reported                                                                    
tremendous work in  the area of Medicaid,  and thought there                                                                    
had  been  17  different initiatives  addressing  healthcare                                                                    
costs  and containment.  She added  that  there were  school                                                                    
district  healthcare  costs,   local  government  healthcare                                                                    
costs, and  private employer  healthcare costs.  She thought                                                                    
the  only  way the  state  could  keep  the costs  of  state                                                                    
government  at   bay  was  through   significant  healthcare                                                                    
reform.    She   relayed    that   Commissioner    Davidson;                                                                    
Commissioner Fisher; and  Department of Commerce, Community,                                                                    
and  Economic Development  Commissioner  Chris Hladick;  and                                                                    
herself  were  working  together  to address  the  issue  at                                                                    
large.  The  group wanted  to  view  healthcare in  totality                                                                    
rather  than   separated  in  disparate  subjects   such  as                                                                    
Medicaid, private insurance, and school district insurance.                                                                     
                                                                                                                                
10:38:10 AM                                                                                                                   
                                                                                                                                
Senator Micciche referenced the  DOC request for $34 million                                                                    
of UGF,  which was 75  percent related to  healthcare costs.                                                                    
He referred to the possibility  of a white paper summarizing                                                                    
the  list  of  efforts  happening concurrently.  He  was  in                                                                    
support of  a spending  limit. He thought  if the  state did                                                                    
not  get  control  of  the  healthcare  costs  it  would  be                                                                    
challenging in the future.                                                                                                      
                                                                                                                                
Senator von Imhof asked why  the state should be responsible                                                                    
for absorbing the lion's share  of healthcare cost increases                                                                    
each year.                                                                                                                      
                                                                                                                                
Ms. Pitney was not sure.                                                                                                        
                                                                                                                                
Senator   von  Imhof   asked  about   stakeholders  in   the                                                                    
healthcare industry in  the state, and thought  it seemed as                                                                    
if  the  state  seemed  to  be  absorbing  the  majority  of                                                                    
healthcare   cost   increases   for  teachers   and   public                                                                    
employees.                                                                                                                      
                                                                                                                                
Ms.  Pitney stated  that there  was more  of the  cost being                                                                    
passed  to employees  in  the  current year,  as  well as  a                                                                    
forthcoming increase  the subsequent  year. She  pondered to                                                                    
what degree  it would be  possible to  pass on the  costs of                                                                    
the premium, including to the provider community.                                                                               
                                                                                                                                
Senator Olson  referred to comments by  Senator Micciche and                                                                    
thought  the  legislature seemed  to  have  a resistance  to                                                                    
increased   revenues.   He   wondered  how   different   the                                                                    
administration's requests  would be if  there was  an income                                                                    
tax or similar revenue measure in place.                                                                                        
                                                                                                                                
Ms.  Pitney   stated  that   the  administration   was  very                                                                    
committed  to  reducing  costs  and  cost  containment.  She                                                                    
considered that  the revenue strategies  put forward  by the                                                                    
administration  just  filled  the  fiscal gap  to  meet  the                                                                    
current level  of budget. She  thought there needed to  be a                                                                    
plan to address  the lack of capital spending  in the state.                                                                    
She  recalled that  the governor's  proposed budget  reduced                                                                    
agencies by  $127 million, with  a net $60  million counting                                                                    
fund source changes. The changes  were offset by increase in                                                                    
oil  and  gas  tax   credits,  the  minimum  capital  budget                                                                    
requirements,   and   paying   the   full   community   debt                                                                    
reimbursement amount.                                                                                                           
                                                                                                                                
Ms. Pitney  continued that the administration  was committed                                                                    
to  additional reductions,  which were  needed just  to stay                                                                    
even  in any  given year.  Additionally, the  administration                                                                    
was committed  to filling the $3  billion structural deficit                                                                    
with revenue.                                                                                                                   
                                                                                                                                
10:43:38 AM                                                                                                                   
                                                                                                                                
Senator Olson discussed cost  containment, and thought there                                                                    
were detrimental  effects associated  with cuts  to programs                                                                    
like Head  Start, and public  safety. He  mentioned problems                                                                    
in his district associated  with diminished funding airports                                                                    
and  police response  time. He  mentioned community  revenue                                                                    
sharing, which  was important to  small villages.  He wanted                                                                    
to ensure that  such items were not cut too  deeply so as to                                                                    
impact necessary services.                                                                                                      
                                                                                                                                
Co-Chair MacKinnon discussed the  schedule for the following                                                                    
day.                                                                                                                            
                                                                                                                                
SB  43  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
029717 SFIN FY17 Supplemental Overview 7.pdf SFIN 2/7/2017 9:00:00 AM
SB 43