Legislature(2011 - 2012)HOUSE FINANCE 519
01/19/2011 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Committee Introductions | |
| Overview of the Governor's Fy2012 Proposed Budget | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
January 19, 2011
1:33 p.m.
1:33:18 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:33 p.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Reggie Joule
Representative Mark Neuman
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Karen Rehfeld, Director, Office of Management and Budget,
Office of the Governor; John Boucher, Senior Economist,
Office of Management and Budget, Office of the Governor;
Louanne Christian, Committee Assistant, Finance Committees;
Helen Phillips, Committee Assistant, House Finance
Committee.
PRESENT VIA TELECONFERENCE
None
SUMMARY
COMMITTEE INTRODUCTIONS
OVERVIEW OF THE GOVERNOR'S FY2012 PROPOSED BUDGET
^COMMITTEE INTRODUCTIONS
1:34:21 PM
Co-Chair Thomas introduced committee members and explained
their roles on the committee. Each committee member
introduced their staff.
1:40:50 PM
Co-Chair Thomas directed attention to the handout, "House
Finance Committee Rules" (copy on file). He detailed
expectations of meetings and discussed protocol as outlined
in the handout. He informed the committee that the budgets
would be completed by the end of February. He discussed the
expected subcommittee process, noting that the committee as
a whole would act for the University of Alaska.
LOUANNE CHRISTIAN, COMMITTEE ASSISTANT, FINANCE COMMITTEES,
described the duties of the finance committee staff. She
explained various functions in the room and pointed to a
memorandum dated January 19, 2011 that contained more
detail. She introduced the Senate Finance Committee staff
and asked Helen Philips to introduce staff for the House
Finance Committee.
HELEN PHILLIPS, COMMITTEE ASSISTANT, HOUSE FINANCE
COMMITTEE, introduced staff to the House Finance Committee.
1:46:27 PM
Ms. Christian explained how to use the microphones and
described additional resources in the committee room.
Co-Chair Thomas noted how to deliver notes to other
committee members and described expectations for decorum in
the room.
^OVERVIEW OF THE GOVERNOR'S FY2012 PROPOSED BUDGET
1:49:47 PM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced her senior economist
John Boucher. She congratulated the finance committee
members on their appointment to the committee and
acknowledged the significant amount of work the committee
had ahead of them. She offered the assistance of the Office
of Management and Budget (OMB) and conveyed their pleasure
in working with the committee.
Ms. Rehfeld provided an overview, using a PowerPoint
presentation, "FY 2012 Budget Overview, House Finance
Committee" (copy on file). She began on Slide 2 with OMB
staff introductions.
1:54:50 PM
Ms. Rehfeld pointed out that Governor Parnell released the
budget on the statutory due date of December 15. The due
date marked the beginning of OMB's work and discussion
about state fiscal policy, resources and assets, and goals
for the future. She informed the committee that the
governor's overall mission and fiscal policy was to
position Alaska's economy for growth and its families for
opportunity (Slide 3). The FY 12 budget was developed to
support the governor's overarching vision.
Ms. Rehfeld drew attention to specific guiding budget
principles (Slide 4). The first principle was related to
fiscal restraint. She highlighted that as a result of good
work done by the legislature and administration, Alaska was
in much better financial shape than many other states.
Budget discipline had been maintained and money had been
put into savings. She purported that by maintaining
spending discipline a portion of the savings could be used
to leverage long-term investments while still assuring
healthy reserves to draw from in lean years. The state was
recently given a AAA bond rating as a result of spending
discipline and cash reserves. The upgraded bond rating
reflected recognition from the financial community and
lowered the cost of debt for the state.
Ms. Rehfeld described the second principle related to
strategic investments. She highlighted that economic growth
occurs when money is spent on fostering resource
development and capitalizing infrastructure. Opportunities
for the future are created though investment in more
affordable energy. She delineated that the budget proposed
key investments in resource and economic development.
Ms. Rehfeld discussed the third principle regarding the
maintenance of cash reserves. She informed the committee
that Alaska currently had almost $12 billion in savings,
excluding the Permanent Fund and Public Education Fund. She
emphasized that Alaska had a balanced budget, substantial
cash reserves, and an excellent bond rating.
Ms. Rehfeld pointed to the governor's FY 12 budget
priorities (Slide 5). She outlined that the budget focused
on constitutional priorities including resource
development, education, and public safety.
Ms. Rehfeld expounded on elements in the budget that
provided support for the constitutional priorities. She
brought attention to several key components under the
category of resource and economic development. The budget
proposed using the remaining $65.7 million in the Railbelt
Energy Fund to jumpstart planning, design, and permitting
for the Susitna Hydro Project. Funding would supply much-
needed energy to Southcentral and Interior Alaska, to
create jobs, and to help Alaska reach its energy policy
goal of 50 percent electricity generated via renewable
resources by 2025. She highlighted that the budget also
proposed the use of $25 million for renewable energy
grants, $25 million for weatherization programs to create
more energy efficient homes, and $10 million for the
Southeast Energy Grant Fund.
Ms. Rehfeld delineated that another key piece of the
governor's budget addressed access to resources. She
expounded that in the governor's inaugural address, he
stated that "…We must have access to our own lands. It is
time to put Alaska's resources to work for Alaskans."
1:58:44 PM
Ms. Rehfeld continued that the budget included funding to
build roads which would provide access to Alaska's
resources and create jobs. The budget also included a
request for $8 million to continue work on the
environmental analysis and public meeting process for a 90-
mile transportation link from the Dalton Highway to the gas
fields at Gubik. She detailed that ultimately the road
could provide access to hundreds of millions of barrels
of high-quality oil reserves at Umiat. She furthered that
the budget proposed $1.25 million each for continued access
work to the Ambler Mining District and Western Alaska.
Ms. Rehfeld discussed the budget designation of $173
million for natural gas development. Approximately $160
million of the total amount would be specific to
reimbursement for the natural gas pipeline project under
the Alaska Gasline Inducement Act (AGIA). She detailed that
through the current fiscal year 2011 OMB appropriated $185
million for reimbursement of allowable expenditures. The
proposed appropriation would bring the reimbursement level
up to $345 million and the final installment of $155
million would be brought before the legislature for
appropriation in FY 13.
Ms. Rehfeld detailed that the operating budget included
$6.9 million for ongoing AGIA coordination efforts and
legal assistance.
Ms. Rehfeld acknowledged that in the previous year the
Alaska Housing Finance Corporation (AHFC) was designated as
the Alaska Gasline Development Corporation (AGDC) and that
their report for the in-state gas project was due July 1,
2011. The budget request included $5.5 million to keep the
in-state gas project moving forward in preparation for the
next steps identified in the upcoming report.
Representative Neuman requested a copy of the budgetary
figures. Ms. Rehfeld answered that she would be happy to
provide a copy of the notes.
Representative Joule asked whether the hydro project for
Susitna and in-state gas use for Central Alaska would be
considered separately and what the cost estimate was for
each.
Ms. Rehfeld responded that the budget contained $5.5
million related to in-state gas for the continuation of
work that has been started by the AHFC. The budget also
included $75 million for design and permitting work to
obtain Federal Energy Regulatory Commission (FERC)
certification for the Susitna hydro project to be paid with
the remainder of the Railbelt Energy Fund. She believed it
would take until 2014 to achieve FERC certification.
Representative Joule wondered if OMB had an estimate for
the total cost of each of the projects. Ms. Rehfeld
answered that there was not currently a cost estimate for
the in-state project. She pointed out that a preliminary
report would be available in July 2011 and that AHFC may be
able to provide preliminary figures.
Representative Joule asked for a cost estimate regarding
the hydro project. Ms. Rehfeld communicated that OMB would
provide the cost estimate to the committee.
2:04:15 PM
Ms. Rehfeld brought the committee's attention to the
education component of her presentation (Slide 5). She
relayed that the budget included $8.2 million for the first
year of the Alaska Performance Scholarship for eligible
high school seniors graduating in the spring of 2011. The
Alaska Performance Scholarship was established with the
legislature's help to transform public education. She
furthered that with hard work and through the completion of
a more challenging curriculum, every Alaska high school
student would have ability to earn a scholarship for
postsecondary training and education. She remarked that the
governor was looking forward to working with the
legislature on a sustainable funding mechanism for the
program.
Ms. Rehfeld detailed that the budget contained full funding
for K-12 schools and pupil transportation for Alaska's
nearly 130,000 students in 53 school districts across the
state. Also included in the budget was the proposal to
forward-fund K-12 education for FY 13.
Representative Doogan asked for clarification on the costs
related to the Alaska Performance Scholarship. Ms. Rehfeld
explained that the estimate in the current budget covered
projected scholarships for eligible students in the spring
of 2011. The Department of Education and Early Development
has estimated an annual cost of $20 million for the
program. She elaborated that when the governor introduced
the bill the previous year, there was discussion about
placing $400 million into savings to generate the $20
million needed to fund the program on an annual basis.
Representative Doogan queried whether the governor was
currently proposing to set aside $400 million for funding
of the program. Ms. Rehfeld clarified that the governor had
proposed the structure for the fund. A funding task force
provided several recommendations that would be brought to
the legislature for consideration during the 2011 session.
Included in the recommendations was an option similar to
the savings fund discussed during the 2010 legislative
session.
Ms. Rehfeld addressed funding for public safety (Slide 5).
The budget proposed funding for the second year of Governor
Parnell's initiative to end domestic violence and sexual
assault in Alaska. The initiative focuses on prevention,
investigation, research, services to victims, and child
safety. She reported that the budget included $3.4 million
for the funding of 15 new Village Public Safety Officers
(VPSO) and three new trooper positions. The governor's
capital budget also designated $1 million for VPSO housing
in rural Alaska. She detailed that Alaska had gone from 47
funded VPSO positions three years ago, to 86 by the end of
FY 11. She denoted that with the legislature's approval of
the FY 12 budget, funding would be available for 101 VPSOs
by the end of FY 12. The governor's goal was to have a
trooper, police officer, or VPSO in every community in
Alaska that wanted a law-enforcement presence. The budget
contained a request related to the continuation of the $3
million for Domestic Violence and Sexual Assault (DVSA)
prevention efforts included by the legislature last year.
Additionally, the FY 12 budget included $3.2 million to
combat domestic violence and sexual assault through
investigation, reporting, research and services for
victims. She highlighted that the budget also included two
positions for the Technical Crimes Unit to investigate
internet crimes against children.
2:09:02 PM
Representative Neuman remarked that in discussions with the
director of the Office of Public Defenders, he deduced that
vocational education programs were needed to assist in the
reduction of the recidivism rate. He wondered whether funds
would be designated to re-establish prison employment
programs that were cancelled last year in order to increase
skill sets.
Ms. Rehfeld expounded that the Departments of Labor and
Workforce Development, Corrections, and Health and Social
Services had all worked on planning efforts related to
advance preparation for the release and transitional of
inmates. She indicated that the Department of Corrections
would provide detail on the specific budgetary figure and
item.
Ms. Rehfeld directed attention to a pie chart (Slide 6)
depicting the total $11 billion proposed budget spending
plan. Just over half of the total budget (the gold slices
on the left) was comprised of non-discretionary items such
as formula programs, permanent fund, and statewide costs
associated with retirement system unfunded liability and
debt service. She pointed out that just under half of the
budget (blue and red slices on the right) was considered
discretionary in terms of agency non-formula programs and
capital spending. Also on the right side of the pie chart
was the agency non-formula unrestricted general funds and
other funds. The blue checked slice indicated the
unrestricted general fund where OMB examined the budget and
proposed expenditures related to state agency operations.
Excluding the budget for the court system and the
legislature, the governor limited the growth of state
agencies to 1.9 percent. Included were the six collective
bargaining units, non-covered employees, and the
university, totaling $40 million in increased general fund.
The overall cost of the bargaining unit agreements was
$76.9 million. She indicated there were six pending
bargaining unit negotiations, one each with the Public
Safety Employees Association, the Alaska Vocational
Technical Teachers Association, and the Alaska Correctional
Officers Association, and three with the Alaska Marine
Highway System unions. She relayed that due to the
restrained operating budget, agencies would have to absorb
fixed cost increases in a number of areas such as leasing,
internal chargebacks, and merit increases for state
employees.
2:14:09 PM
Representative Gara wondered whether the budget included
funds to address increased school district costs. Ms.
Rehfeld clarified that funding for education was based on
the current statutory formula. The increase indicated in
the budget was related to the fourth year of the
implementation of adjustments for district cost factors.
She communicated that FY 13 would be the fifth and final
year of the district cost factors implementation. There was
no proposed change to the base student allocation in the
current budget.
Ms. Rehfeld attributed the overall FY 12 budget increases
to statutory formula programs (Slide 7). She depicted that
the K-12 education formula (including pupil transportation)
totaled $1.16 billion, or 10.2 percent of the total budget.
Alaska's constitution directs the state to provide a system
of public education for its 53 school districts. She
explained that education funding was a formula-driven
program based on student allocations and other provisions
within the formula program. The budget request of $1.13
billion would fully fund Alaska's K-12 education funding
formula for FY 12 and was based on the current statutory
formula with the base student allocation set in statute at
$5,680 per Average Daily Membership. The budget included
year four of the implementation of adjustments for district
cost factors that will be fully implemented in FY 13. The
governor had also proposed forward funding K-12 education
for FY 13 in the amount of $1.14 billion to the Public
Education Fund.
Ms Rehfeld delineated that the other formula totaled $1.82
billion, or 16 percent of the budget. Medicaid comprised
$1.5 billion of the $1.82 billion, of which approximately
$507 million was general fund. She expounded that the
increase of people eligible for services in addition to
higher demand equated to more spending. Approximately
126,000 Alaskans used the Medicaid program in FY 10. The
number of individuals eligible for services increased from
128,000 in FY 09 to 135,000 in FY 10 and the costs of
providing services were increasing. She summarized that the
budget included an increase of nearly $187 million in FY 12
of which $68.2 million was general fund.
Ms. Rehfeld informed the committee that the budget would
not replace the American Reinvestment and Recovery Act
(AARA) funds with general funds. She explained that states
were afforded a higher reimbursement rate under the federal
Medicaid program. The budget proposed switching from ARRA
to a regular federal-funding source as the ARRA extension
was scheduled to terminate at the end of FY 11. The
administration's general approach was based on the fact
that many states were struggling financially, in response
the federal government could consider an enhanced federal-
match percentage beyond June 30, 2011. Many states were
asking the federal government to either extend the higher
reimbursement rate or to provide states with greater
flexibility by allowing them make changes in response to
rising costs. She relayed that a task force was created to
examine what could be done differently in Alaska to contain
Medicaid cost increases. The cost would be approximately
$123 million without the reimbursement rate extension.
2:19:33 PM
Vice-Chair Fairclough queried whether the state had
considered setting $123 million aside in the event that a
contribution was required. She reflected on the $46 million
increase included in the governor's budget and noted that
it did not include the $123 million. She requested that OMB
report the Medicaid Task Force findings and recommendations
when they became available.
Ms. Rehfeld turned to the statewide appropriations portion
of the OMB presentation (Slide 8). She reported that
statewide appropriations total $1.30 billion, or 11.4
percent of the total budget. The retirement system unfunded
liability accounted for $479.5 million of the total amount,
indicating an increase of $123 million over fiscal year
2011. The current retirement system unfunded liability was
$9.7 billion, consisting of the Public Employees Retirement
System (PERS) at $6.3 billion and the Teachers Retirement
System (TRS) at $3.4 billion. She explained that the
current unfunded liability was based on the actuarial
valuation of system assets, which smooths out gains and
losses. The state was hoping for continued market gains to
offset the remaining unrecognized losses from 2008-2009.
The Alaska Retirement Management Board (ARMB) reviewed and
set the rates for each fiscal year. She relayed that SB 125
defined the contribution rate for the state as the
difference between the rate adopted by ARMB and 22 percent
for PERS employers and 12.56 percent for TRS employers.
The current amortization term was 25 years and the amount
required for the annual contribution was projected to
increase from $479.5 million in FY 12 to $786 million in FY
16 and to almost $1 billion FY 21. She acknowledged that
additional work was required to develop recommendations to
address the unfunded liability and manage the annual cost
to the state. Legislative Finance, OMB, and the Departments
of Revenue, Law, and Administration were working hard to
develop an approach to deal with the increase in cost
occurring over time.
2:22:54 PM
Co-Chair Thomas commented that the committee intended to
review the cost increases that were occurring over time.
Vice-Chair Fairclough wondered how much it would cost to
pay down state debt now as opposed to extending the
liability out into the future. She noted that when the
issue first arose the shortfall was approximately $1
billion and that it was currently $12 billion to $13
billion. She believed that it could be best to pay down the
liability sooner rather than later, given the substantial
increase.
Co-Chair Thomas advised the committee that an overview on
the subject would be provided sometime in the weeks to
come.
Co-Chair Stoltze agreed with remarks made by Vice-Chair
Fairclough and indicated the need for a full-day session
and commentary by the administration regarding all
legislative proposals that may have an impact on the
unfunded liability.
Vice-Chair Fairclough communicated that a recent letter she
received from the state announced that the retirement
system amortization time period would be moving from 25
years out to 30 or 35 years. She wondered how the change in
time period would impact employees retiring at a future
date. She believed the state was shifting costs to make the
current liability appear lower, without taking into account
aging adults who would need to apply for benefits. She
wondered whether the particular solution was part of a
national trend that ARMB was considering and indicated she
wanted the board's commentary on the strategy.
Ms. Rehfeld relayed that ARMB possessed of a great deal of
information regarding various scenarios and would be happy
to share the information with the committee members.
Co-Chair Thomas noted that OMB could be asked to discuss
the unfunded liability with committee in the future. He
shared that the committee looked forward to developing a
comprehensive program.
2:26:24 PM
Ms. Rehfeld moved on to discuss the proposed $400 million
for oil exploration tax credits (Slide 8). The tax credits
were made available to encourage more oil exploration in
Alaska. The administration's original projection for FY 11
exploration tax credits was $180 million. In October 2011,
the Department of Revenue (DOR) revised the estimate and
asked for an additional $250 million. The revised estimate
was based on the actual applications for credits that they
had received and payments that they projected to make for
the remainder of FY 11. She relayed that language in the FY
11 budget included the ability to adjust the oil
exploration tax credits appropriation to the necessary
amount. The state had several years of experience with the
program and the biggest challenge had been estimating the
timing of expenditures and payments. She pointed out that
there had been a significant increase in oil exploration.
The administration would continue to work with DOR on
actual payments made FY 11 and would revise it as
necessary. She clarified that OMB would bring changes to
the legislature in the amended budget if necessary.
Ms. Rehfeld discussed debt service under the category of
statewide appropriation budget items (Slide 8). The debt
service referred to the state's annual cost of paying down
debt. Items included in the category were: school debt
reimbursement, where school districts are reimbursed for 60
percent to 70 percent of voter-approved bonds; voter
approved general obligation (GO) bonds; and lease-purchase
obligation. She expounded that the debt service was
approximately $37 million higher than in the FY 11 budget.
Representative Guttenberg asked how applicants apply for
oil tax credits and what the process entailed. Ms. Rehfeld
deferred the question to DOR to discuss specific details.
She added that the department determined the eligibility of
expenditures submitted by applicants.
JOHN BOUCHER, SENIOR ECONOMIST, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR explained that the oil tax
credits in the budget were related to producers with no tax
liability.
2:29:45 PM
Ms. Rehfeld examined the community revenue sharing
component of statewide appropriations (Slide 8). The annual
appropriation replenished the amount drawn from the
Community Revenue Sharing Fund. The funds were distributed
to 162 incorporated and 149 unincorporated communities
throughout Alaska on an annual basis.
Ms. Rehfeld directed attention to the proposed FY 12
capital budget (Slide 9). The proposed capital budget was
$1.6 billion, or 14 percent of the total FY 12 budget. She
highlighted key components that were previously discussed,
including natural gas development. Also included were $103
million in general funds that would act to leverage federal
and other funds, including the federal highway and aviation
programs, water and sewer projects, and municipal harbor
grants. She shared that the administration aimed to capture
the general funds that leverage other funds whether they
came through the state or not. She discussed the $60
million included for access to resources comprised of $10.5
million for resource roads and $50 million for the Port of
Anchorage, Port MacKenzie, and improvements to the Skagway
dock. She touched on the Susitna energy project, renewable
energy grants, and weatherization. She examined the five-
year annual designation of $100 million to deferred-
maintenance. By the end of December 2010, state agencies
estimated that nearly one half of the deferred-maintenance
projects would be out to bid or under construction. Indoor
project work would continue throughout the winter and
outdoor projects would wait until the summer construction
season.
Ms. Rehfeld pointed out that a very important point was
excluded from the capital budget chart related to funding
for schools. The top priority on the school construction
list was the designation of $28 million for the Quinhagak
K-12 renovation project. Also included was just under $20
million for 14 major-maintenance school projects.
Co-Chair Thomas asked whether the $100 million to deferred-
maintenance included the university. Ms. Rehfeld confirmed
that $37.5 million of the $100 million was designated for
the university.
Vice-Chair Fairclough wondered about specific deferred-
maintenance projects under consideration in the
administration's five-year plan. Ms. Rehfeld replied that
the total was approximately $1.8 billion to $1.9 billion
when the five-year plan was introduced during the 2010
legislative session and agencies were asked to provide
their deferred-maintenance priorities. The state lacked a
cohesive reporting system that would allow departments to
submit deferred-maintenance needs in a consistent way. She
stipulated that department priorities should be treated
equally and that there was more work to be done to
determine how to handle the issue.
Vice-chair Fairclough asked for confirmation that the $1.8
million to $1.9 million in the five-year plan did not
include roads but did include the university. Ms. Rehfeld
did not believe that roads were included in the deferred-
maintenance budget item. She relayed that the Department of
Transportation designated some of its deferred-maintenance
allocation to roads.
2:35:10 PM
Representative Doogan referred to the $1 billion on Slide 9
that did not have a proposed spending breakout listed. He
wondered if the figure was related to federal funding.
Ms. Rehfeld clarified that a significant portion of the $1
billion would be federal spending.
Representative Doogan referenced the school construction
funding that would be added to the presentation and
inquired about the total cost. Ms. Rehfeld answered that
the total designated to school construction was just under
$50 million and included $28.5 million to Quinhagak and
$19.9 million for major maintenance.
Representative Doogan asked whether the school projects
were general funds. Ms. Rehfeld explained that she would
address the question later in her presentation.
Ms. Rehfeld continued to discuss the governor's FY 12
proposed capital budget (Slide 9). The governor's proposal
included a funding source that utilizes the Alaska Housing
Capital Corporation (AHCC) funds for a number of projects.
She detailed that several years back, the legislature
placed $300 million into the fund and that there had been
discussions related to its purpose. The budget proposed
using $295.4 million of the fund, including $160 million
for the AGIA reimbursement, $5.5 million for the in-state
gas effort, $50 million for port projects, $60 million for
renewable energy, weatherization, and Southeast energy
projects, and $19.9 million for school major maintenance.
She clarified that the $28.5 million designated for the
Quinhagak K-12 renovation project was general funds. She
pointed out that funds extracted from the AHCC account were
classified as unrestricted general funds in the budget's
fiscal summary.
Representative Doogan asked for detail on the decision to
fund certain items with the AHCC. Ms. Rehfeld answered that
the administration prioritized projects to bring before the
legislature and once the potential funding sources were
determined the specific projects were selected.
Co-Chair Stoltze wondered how the AHCC fund was chosen to
fund the selected projects. Ms. Rehfeld responded that
finding the appropriate level of balance related to funding
sources was important. She reasoned that the state could
continue to grow the Statutory Budget Reserve (SBR), could
pull money from unrestricted general funds or could choose
to use alternative funding sources. She believed that in
policy discussions it would be important to consider the
right balance related to the projects and investments the
state wanted for FY 12.
2:40:22 PM
Ms. Rehfeld continued to detail capital budget funding
sources (Slide 9). The administration proposed the use of
the balance of the Railbelt Energy Fund in the amount of
$65.7 million for the Susitna project. The budget also
included funding requests using dividends from the Alaska
Industrial Development and Export Authority (AIDEA) and
AHFC.
Ms. Rehfeld pointed to a pie chart for a visual
representation of the total state budget allocation (Slide
10). She delineated that nearly 60 percent of the total
state budget benefited Alaska communities, organizations,
and individuals through grants, direct payments, and
capital spending. She listed specific items including
Medicaid, Permanent Fund Dividends, revenue sharing, school
funding, retirement system unfunded liability, capital
projects, and names recipient grants. Twenty-one percent of
the budget was allocated to purchased services such as
travel, contractual, commodities, and equipment. She
relayed that a sizeable portion of the 21 percent was
internal but a significant number was for purchased
services to Alaskan vendors for travel, hotels, equipment,
fuel, and professional services contracts. The remaining 20
percent of the budget represented salaries and benefits for
state employees tasked with delivering core services
efficiently and effectively to Alaskans.
Ms. Rehfeld concluded that the proposed budget provided a
starting point for work with the legislature. She
identified the OMB website as a resource for detailed
information (www.omb.alaska.gov), and noted that the
executive summary of the ten-year plan was available online
and individual agency plans would be posted as soon as
possible. She furthered that OMB had been working closely
with the finance committees and the Legislative Finance
Division over the past couple of years on the Budget
Clarification Project. The goal of the clarification
project was to provide consistency on how revenues and
expenditures were classified and how they were displayed.
She opined that great progress had been made, including the
elimination of dueling fiscal summaries. Some clean-up work
would be required, as pointed out in an analysis done by
David Teal, Legislative Fiscal Analyst, Legislative Finance
Division. She agreed with many of the items pointed out by
Mr. Teal and consented that the budget contained some
errors that required correction. For example, revenue
received from AIDEA and AHFC corporate dividends were
previously classified as other funds and were currently
included in the unrestricted general fund column. The
amount of the corporate dividends was also included in the
revenue section of the budget, meaning that revenue was
overstated. She informed the committee that the appropriate
corrections would be made and shared her appreciation of
the good working relationship between OMB and Legislative
Finance.
Representative Joule wondered when budget amendments would
be provided to the committee. Ms. Rehfeld replied that the
budget amendments would be submitted to the committee on
February 16, 2011, the 30th legislative day. She offered
that the supplemental bill would be provided to the
committee on day 15 of the legislative session.
2:46:10 PM
Representative Gara asked how close the proposed budget
would come to draining the AHCC fund. Ms. Rehfeld responded
that there was currently $366 million in the AHCC and the
governor's budget proposed to spend $294 million.
Representative Edgmon asked for the overall government
spending figure factoring in the state budget in addition
to other areas such as tribal government and military
spending. Ms. Rehfeld responded that OMB would follow up on
the question.
Representative Edgmon clarified his interest in receiving a
breakdown of contributions for tribal activities throughout
the state. Mr. Boucher expounded that OMB would examine
whether all tribal spending was included.
Representative Edgmon elaborated that he would like a sense
of overall government spending for the entire state,
including items that may not be reflected in the proposed
$11 billion budget.
Representative Doogan wondered whether there were any other
large spending items that were not factored into the
proposed budget in addition to the $400 million for
education and $1 billion in proposed give-backs to the oil
industry. Ms. Rehfeld explained that the governor proposed
using the earnings from a designated $400 million in
savings for the Alaska Performance Scholarship. She
clarified that currently there was not an appropriation
request related to the proposal. A task force was examining
several different options. She addressed the potential
impact on revenue related to changes in the oil tax
structure and pointed out the long-range fiscal plan
revenue and expenditure scenarios. She identified the
Medicaid reimbursement rate as a prospective additional
expenditure.
Representative Doogan asked whether the Medicaid
expenditure would potentially increase to $120 million. Ms.
Rehfeld responded that in the absence of the federal
reimbursement rate, the expenditure would be approximately
$123 million for Medicaid reimbursement.
Representative Doogan questioned whether there would be any
other large expenditures. Ms. Rehfeld responded that she
was not aware of any.
2:51:46 PM
Representative Wilson asked whether OMB had researched
options that other states were considering regarding
Medicaid reimbursement. Ms. Rehfeld responded that the task
force was examining strategies under consideration by other
states.
Vice-Chair Fairclough inquired whether the Medicaid task
force met in January 2011. Ms. Rehfeld replied that she did
not know.
Vice-Chair Fairclough noted that the Medicaid task force
had been experiencing trouble obtaining a quorum. Ms.
Rehfeld agreed that the group's difficulty in reaching a
quorum was very unfortunate. She observed that the
department has been working hard on pulling useful data
together for the task force.
Co-Chair Thomas thanked Ms. Rehfeld and staff for
addressing the committee. He noted that the committee
looked forward to working with OMB.
ADJOURNMENT
The meeting was adjourned at 2:55 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| KJR Budget Overview HFC 01 19 2011.pdf |
HFIN 1/19/2011 1:30:00 PM |
|
| HFC Process Rules Related Memos.pdf |
HFIN 1/19/2011 1:30:00 PM |