Legislature(1995 - 1996)
01/31/1996 01:58 PM House FIN
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HOUSE FINANCE COMMITTEE
January 31, 1996
1:58 P.M.
TAPE HFC 96-23, Side 1, #000 - end.
TAPE HFC 96-23, Side 2, #000 - end.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 1:58 p.m.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Navarre
Representative Brown Representative Therriault
Representative Grussendorf
Representative Kelly
Representative Kohring
Representatives Parnell and Mulder were absent from the
meeting.
ALSO PRESENT
Annalee McConnell, Director, Office of Management and
Budget, Office of the Governor; Mike Greany, Director,
Legislative Finance Division; Fred Fisher, Analyst,
Legislative Finance Division; Virgina Stonkus, Analyst,
Legislative Finance Division.
SUMMARY
PRESENTATION BY LEGISLATIVE FINANCE DIVISION
Total Funds Spending; Travel and Contractual
MIKE GREANY, DIRECTOR, LEGISLATIVE FINANCE DIVISION provided
members with spreadsheets: General Comparisons, Non-Formula
General Fund Funding for Contractual and Travel, FY 95
Actual to FY 97 Governor (Attachments 1 & 2). He explained
that travel and contractual costs are included in the annual
operating budget as line item appropriations. He observed
that amounts for contractual and travel costs are
estimations. Agencies routinely make transfers and
movements from one item to another. He observed that some
transfers must be made with the concurrence of the Office of
Management and Budget. He reiterated that the line items
approved in the budget are subject to change. He pointed
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out that miscellaneous reductions are spread by agencies to
the line items. He stressed that actual expenditures differ
from the amount included in the authorized operating budget.
He suggested that comparisons of FY 95 Actual to FY 97
Governor will provide bench marks or indicators for work by
the subcommittees. He observed that the operating budget is
described by fund source and line item. He noted that line
items are not budgeted by fund. Therefore, each line item
must be calculated for its general fund portion. He
acknowledged that recalculations to the component level
would provide different results. He stressed that it is
appropriate to make these comparisons at the beginning of
the budget process. He noted that across the board or
miscellaneous reductions taken at the end of the budget
process could negate action taken by subcommittees regarding
funding priorities. He pointed out that some FY 97 travel
levels are below FY 95 actual.
Mr. Greany suggested that agencies have more ability to
control travel expenditures than contractual expenditures.
He pointed out that a wide variety of items go into the
contractual line. Professional services, legal services,
investment fees, telephones, office rental and supplies are
included in the contractual line.
Mr. Greany acknowledged that calculations for the University
of Alaska are not very accurate. He observed that
reductions to the University of Alaska's budget are taken as
lump sum miscellaneous cuts. He emphasized that the
attachments should be used as indicators, not as self
actuating numbers.
Co-Chair Hanley referred to FY 95 lapse balances as compiled
for the Committee by the Legislative Finance Division. He
noted that excess authorization and incorrect calculations
accounted for the majority of the $40.0 million dollars
identified. He stated that agencies have been requested to
provide justifications of their lapsed balances. He
estimated that there was $8.0 million dollars in excess
authorization for contractual items in the agencies' FY 95
budgets. There was $3.5 million dollars in excess travel
authorization for FY 95. He asked agencies to "draw a map"
so that subcommittees can understand the justification and
comparisons of authorized and expanded travel and
contractual money.
Mr. Greany stressed that Attachments 1 & 2 are "more tools
in the toolbox." He added that figures for the University
of Alaska could be off by as much as $3.0 million dollars.
He noted that the Department of Law receives significant
contractual money for oil and gas litigation and direct
appropriations from the Constitutional Budget Reserve Fund.
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He observed that the direct appropriation from the
Constitutional Budget Reserve Fund to the Department of Law
was shown in the contractual spreadsheet. He reiterated
that the Legislative Finance Division focused on general
fund appropriations.
Mr. Greany provided members with a spreadsheet: FY 96 and
FY 97 Legislative All Funds Fiscal Plan (Attachment 3). In
response to a question by Representative Brown, Mr. Greany
explained that "Specials & Fund Transfers" refers to
transfers to and from the Permanent Fund. Deposits to the
Fund as proposed by the Governor or SB 84, inflation
proofing and dividend payments are included. He observed
that without the Permanent Fund items the difference in
total other funds between FY 96 and FY 97 would be
approximately $15.0 million dollars.
Representative Martin commended the Legislative Finance
Division for its research. Co-Chair Hanley pointed out that
the lapsed balance is smaller when excess authorization is
taken into account. In addition, travel and contractual
appropriations may be transferred to other line items.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR observed that the Office of
Management and Budget does similar review during the
development of the budget. She emphasized that unseen
factors can account for apparent changes in travel or
contractual expenditures. She pointed out that if a
component has a federal grant that is heavier or lighter on
travel it can distort calculations used by the Legislative
Finance Division.
Representative Martin referred to the Administration's
effort to reduce rent and lease costs. He questioned if
contract negotiations affected the contractual amount of
some agencies. He asked if there was a main theme as to why
contractual line items were high in some agencies. Ms.
McConnell explained that savings were identified by project
or program. She stressed that the Office of Management and
Budget requested justifications from the agencies for
increases in contractual or travel.
Co-Chair Hanley pointed out that the Department of Revenue
shows $6.0 million dollars in excess authorization after
expenditures. He suggested that this is the result of
authorization provided for management of the Permanent Fund.
Ms. McConnell noted that mid course changes are sometimes
implemented during the year and may result in over
authorization.
Co-Chair Hanley and Ms. McConnell discussed how agencies
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would respond to subcommittees regarding their travel and
contractual levels contained in Attachments 1 & 2. They
concluded that, in general, agencies will submit brief
written explanations for differences in funding levels.
Mr. Greany discussed Attachment 3. He noted that past
years' spending plans have focused on general fund
expenditures. He observed that the focus has been broaden
to encompass "all funds". He pointed out that the arrival
of the constitutional amendment on the Constitutional Budget
Reserve Fund resulted in the need to look at all funds
available for appropriation. He emphasized that the work of
the Long Range Financial Planning Commission (LRFPC) also
brought a heightened awareness of "all funds". He noted
that the Legislative Finance Division is using a format
which includes general funds, federal funds, other funds and
total funds for each year. He noted that the amounts
contained in Attachment 3 under FY 96 authorized are those
passed in FY 96 appropriation legislation. He stressed that
the figures contained under FY 97 Governor are based on
legislation introduced by the Governor on January 11, 1996.
He observed that the Legislature has not received the
Governor's capital appropriations legislation. He referred
to duplicated expenditures included in Attachment 3. He
noted that money appropriated and then transferred to
another agency results in double accounting. He stated that
interagency receipts, Reimbursable Service Agreements, the
Highway Equipment Working Capital Fund, Information Services
Fund, Marine Highway Fund and capital improvement projects
are among those appropriations that are duplicated for
accounting purposes. (Page 2 of Attachment 3 contains a
list of duplicated funds.) He pointed out that although the
money is appropriated twice it is only spent once. He
observed that duplications were demonstrated on a statewide
basis. He stressed that the Legislative Finance Division
can display duplications by agency. He observed that the
Department of Law receives a large portion of its funding
through interagency receipts.
(Tape Change, HFC 96-23, Side 2)
Mr. Greany referred to the Debt Retirement Fund. He noted
that appropriations for general obligation service and
school debt reimbursement are deposited into the Debt
Retirement Fund. These items are then appropriated from the
Debt Retirement Fund to the receiving fund or purpose. He
observed that the Legislature can choose to continue this
process or make direct appropriations. He referred to
Capital Improvement Project (CIP) receipts. He observed
that CIP receipts may not have been appropriated in the
current budget year.
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Co-Chair Hanley referred to the title of Attachment 3. He
noted that it is not a legislative plan. He observed that
the attachment is a balance sheet as opposed to a
legislative plan.
Co-Chair Hanley noted that the Governor's FY 97 capital
projects request is $6.0 million dollars below the FY 96
authorized level. He observed that adjustments were made
for CIP transfers from the capital budget to the operating
budget. Mr. Greany explained that approximately $6.5
million dollars were transferred to the operating budget
from the FY 97 CPI request. He added that an adjustment was
also made in the FY 96 authorized budget to reflect an
appropriation that should have been contained in the FY 95
budget. Co-Chair Hanley observed that if there is an
agreement on the transfers to the operating budget that a
similar adjustment should be made to the FY 96 authorized
budget for comparison purposes.
Mr. Greany pointed out that the Legislative Finance
Division's calculations for FY 96 authorized columns were
based on FY 96 appropriation law. He agreed that a similar
adjustment for FY 96 would provide a better comparison.
Representative Martin questioned if adjustments were made to
include Legislative Budget and Audit Committee approved
general fund program and federal receipts. Mr. Greany
stressed that Revised Program Legislature receipts (RPL)'s
are traditionally included once a year at the end of the
fiscal year. He noted that the Governor's budget plan shows
approximately $1.5 million dollars in approved general fund
program receipts from RPL activity in FY 96 to date. He
noted that no amounts are shown for FY 97. He stressed that
either RPL's should not be included for comparison purposes
or they should be included in both years.
Co-Chair Hanley pointed out that some appropriation items
have been partially funded with the intent that the full
cost would be included in supplementals. He noted that
RPL's increase actual spending after the legislature
adjourns.
Mr. Greany stated that general fund program receipts
approved through RPL's have amounted to approximately $3.5
million dollars annually. He noted that the inclusion of
federal and other funds would result in a significantly
higher amount. He noted that the Legislative Budget and
Audit Committee recently approved $40.0 million dollars in
Exxon Valdez Oil Spill Settlement (EVOSS) funds for land
purchase. He noted that EVOSS monies have come in through
the RPL process rather than through the budget. Therefore,
EVOSS funds have been treated off budget. He suggested that
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discussion needs to occur to decide if EVOSS funds will
remain in the RPL process or be brought into the budget
process for an initial appropriation each year. He pointed
out that appropriations can be fine tuned during the interim
through the RPL process. Representative Martin asserted
that legislators will have a better understanding of how
EVOSS funding impacts the three major departments at the end
of the year. He noted that the Department of Environmental
Conservation has 250 positions funded through EVOSS. He
questioned what will happen to departments which have become
dependent on EVOSS money when EVOSS funding ends. He
observed that EVOSS funding will end in six years.
Representative Martin suggested that duplication can be
reduced through statutory changes. Co-Chair Hanley noted
that some duplication is necessary for accounting purposes.
Mr. Greany referred to the Marine Highway System. He noted
that an accounting process was developed to recognize that
passenger receipts are budgeted into the next year. He
stressed that if the Debt Retirement Fund was repealed that
general fund expenditures for debt retirement would still be
shown in the front section of the budget.
Co-Chair Hanley maintained that supplementals were not
included in calculations for FY 96 or FY 97 in Attachment 3.
Mr. Greany pointed out that FY 96 supplemental legislation
has not been passed.
Representative Martin referred to the Fisheries Enhancement
Tax and shared taxes. Mr. Greany noted that an agreement
was reached between the Governor and the Senate and House
Finance Committee Chairmen to take these items off budget.
He noted that these items were not included in FY 96 or FY
97 budgets. Co-Chair Hanley noted that it would be helpful
to show the amount of these items as a footnote. Mr. Greany
explained that shared taxes are specifically listed by their
statute reference in the front section of the budget. He
added that the State collects the Fisheries Enhancement Tax
on behalf of the aquaculture associations.
Ms. McConnell pointed out that shared taxes were added as a
footnote in the Governor's budget summary. She corrected
statements by Mr. Greany by pointing out that $17.0 million
dollars for a FY 97 supplemental and $2.0 million dollars
for new legislation were included in the Governor's proposed
FY 97 budget.
Discussion ensued regarding discrepancies between the
Administration and the Legislative Finance Division
regarding the level of the Governor's FY 97 proposed budget.
Mr. Greany noted that the calculations by the Legislative
Finance Division are based on the Governor's introduced
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legislation. The Governor's spending plan is at variance
with the appropriation legislation due to the inclusion of
the Alaska Court System's full request and other items that
are not represented in the spending plan.
Representative Martin encouraged the Administration to offer
suggestions for statutory changes that would simplify the
budget process. Ms. McConnell noted that appropriations
from the 470 Fund could be clarified.
In response to a question by Representative Therriault, Co-
Chair Hanley reiterated that the estimated FY 97
supplemental would be $17.0 million dollars. Two million
dollars was also included in the FY 97 Governor's proposed
budget for new legislation.
Ms. McConnell pointed out that the cost of implementing the
Retirement Incentive Program has not been allocated to the
agencies. Agencies will have to incorporate the $5.0
million dollar savings to the State from early retirements.
Ms. McConnell provided members with information on FY 95
lapse balances for the Department of Education (Attachment
4). Co-Chair Hanley noted that Ms. McConnell could discuss
the attachment during the scheduled joint Senate and House
Finance Committee meeting on February 2, 1996.
Ms. McConnell noted that the Administration is preparing a
letter regarding EVOSS funds. Discussion ensued regarding
items that would be discussed during the February 2, 1996
proposed meeting. It was agreed that risk management rates,
forward funding retirement actuarials and health benefit
reserves would be discussed.
In response to a comments by Mr. Greany, Ms. McConnell
explained that the Administration intends to bring EVOSS
appropriations into the FY 97 operating budget.
Ms. McConnell referred to Attachment 4. She observed that
the Administration anticipates a $1,839.5 million dollar
lapse in K-12 support for FY 95. She suggested that the
lapse could be used as a carry-forward to balance the FY 97
one-time increased appropriation from the Public School
Fund.
Co-Chair Hanley asked for the Administration's preference
regarding the spring pupil count. He noted that a line item
of $1.0 million dollars is included in the revised numbers
of Attachment 4 to fund pupil count adjustments. He noted
that school districts are required to perform a pupil count
in the fall for school foundation formula funding. A second
pupil count is performed in the spring. The Department of
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Education is required to consider and submit an adjustment
for school districts that provide adjusted counts. He
observed that school districts are not required to submit
the revised figures. He pointed out that only school
districts with increased attendance submit their counts. He
questioned if two counts should be required and adjustments
be made for decreased enrollment or if the second count
should be eliminated.
In response to a question by Representative Therriault, Ms.
McConnell explained additional funds are needed for an
Anchorage vocational education adjustment. She added that
$123.0 million dollars is owed to the Canadian government
for Hyder students attending school in Canada during FY 95.
ADJOURNMENT
The meeting adjourned at 3:29 p.m.
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