Legislature(2007 - 2008)HOUSE FINANCE 519
01/24/2007 01:30 PM House FINANCE
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HOUSE FINANCE COMMITTEE
January 24, 2007
1:35 P.M.
CALL TO ORDER
Representative Chenault called the House Finance Committee
meeting to order at 1:35:56 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Les Gara
Representative Mike Hawker
Representative Mike Kelly
Representative Mary Nelson
Representative Bill Thomas Jr.
MEMBERS ABSENT
Representative Richard Foster
Representative Reggie Joule
ALSO PRESENT
Karen Rehfeld, Director, Office of the Governor, Office of
Management and Budget (OMB)
^
GENERAL SUBJECT(S):
OVERVIEW: OFFICE OF MANAGEMENT & BUDGET
The following overview was taken in log note format.
Handouts are on file with the House Finance Committee
through the 25th Legislative Session, contact 465-6814.
After the 25th Legislative Session they will be available
through the Legislative Library at 465-3808.
TIME SPEAKER DISCUSSION
1:36:25 PM Representative Convened the House Finance Committee
Chenault meeting in order to hear a presentation
from the Governor's Office of
Management and Budget proposed budget
strategy.
1:36:44 PM KAREN REHFELD, Introduced the staff for the Office of
DIRECTOR, Management and Budget (OMB): Budget
OFFICE OF Analysts including Karen Elliott, Kym
MANAGEMENT & Mauseth, Steve Hildebrand, Mike Crabb,
BUDGET Tuula Marquardt, Lena Simmons & Mary
Sutton; Management Analyst Jo Ellen
Hanrahan, performance based budgeting;
Internal Auditor Diane Burnham; the two
Policy Analysts are Jack Kreinheder and
John Boucher; and the Chief Budget
Analyst for the entire office is Joan
Brown. Ms. Rehfeld added appreciation
for the Legislative Finance Division
employees for the work that they do
each year.
1:39:02 PM Ms. Rehfeld Provided a general overview of the
Governor's FY08 proposal. The Governor
has been clear that her intent is to
spend less, control the growth of
government, save surplus and live
within the State's means. The FY08
Capital and Operating budget was
prepared with those goals in mind. The
budget was based on a revenue estimate
of $3.9 billion dollars from the $52.25
bbl oil price.
1:39:43 PM Ms. Rehfeld Budget estimates will be adjusted as
the Department of Revenue updates their
forecast. At this point, a decline has
been indicated, which reinforces that
the State needs to look at ways to
control spending.
1:40:04 PM Ms. Rehfeld The Governor intends to save the
surplus by depositing $1.9 billion
dollars into the Constitutional Budget
Reserve (CBR), based on an estimated
FY07 surplus of $1.4 billion dollars;
in FY08 of about $500 million dollars.
1:40:37 PM Ms. Rehfeld In the FY08 budget package, the
Governor introduced HB 97, a separate
education funding bill. That bill
includes full funding for the
foundation program and pupil
transportation. The Governor is also
committed to cost increases in the
retirement system; she is hoping that
there is legislative consideration &
action on that bill prior to the March
2007 deadline.
1:41:44 PM Ms. Rehfeld The Governor has introduced the
operating and comprehensive mental
health budget bills - HB 95 and HB 96.
The Governing is intending to cover
approximately $77.5 million dollars in
the retirement system cost increases
for local governments to cover the
costs of State government. The
Governor plans to restore the Longevity
Bonus Program at just under $34 million
dollars.
Ms. Rehfeld highlighted focus on the
Public Offices Commission, funding of a
new investigator position. A $150
million dollar spending reduction was
included for State government and all
departments are in the process of
program reviews. That review will look
at the effectiveness of the programs
and the changes that could be made
resulting in cost savings. She noted
the perforce-based budgeting - mission
and measure guidelines.
1:43:50 PM Ms. Rehfeld Referenced the handout - "Results at a
Glance", a summary of the mission and
measures framework. [Copy on File].
The handout provides a highlighted
summary. The Governor's Office is
looking at ways for savings within each
agency. The targets were established
to provide departments with a goal to
work toward. She added that the
Governor would be asking the
University, the Court System and the
Legislature to contribute toward the
savings plan.
1:45:49 PM Ms. Rehfeld Stated that the Governor has introduced
a barebones FY08 Capital budget,
including a general fund match, federal
funds and school construction projects.
The spending plan highlights
approximately $133 million dollars
available for allocation to priority
projects in the capital budget. The
Governor wants to work with the
Legislature to develop those
priorities.
1:47:01 PM Ms. Rehfeld Pointed out the early supplemental bill
request components including a general
fund request in the amount of $1.2
million dollars for the April 2007
election on the same-sex benefits.
Those costs are related to the printing
of the ballots & the costs of that
election. Another cost relates to the
Copper River - Prince Williams Sound
Development Association, which began
collecting taxes in FY05. Also, large
component of that request is the $12
million dollars for litigation in the
Department of Law for actuarial
services for the State of Alaska. The
Department looks forward to discussing
that request with the Legislature.
The regular supplemental request
includes information from the agencies.
OMB is targeting $60 million dollars.
Ms. Rehfeld understood that the
th
deadline for requests was February 14.
1:49:30 PM Ms. Rehfeld Highlighted other items in the
Governor's proposed packet: The repeal
of the studded tire tax [HB 106], a
$1.4 million dollar reduction in
revenue.
There will be legislation to reduce the
cost of business license fees.
The Governor has introduced HB 99, the
proposed appropriation to the principle
of the Permanent Fund in the amount of
$1.3 billion dollars, leaving $1.7
billion for dividends and inflation
proofing. The Governor anticipates
working closely with the Legislature to
help Alaska sustain in the future.
1:51:04 PM Representative Asked about full-funding for education
Gara and if it would be full funding at last
year's level with no increases. Ms.
Rehfeld responded that full funding
meant, full funding of the current
formula entitlement, based on the
current formula. There has been no
change proposed to date of the base
student allocation.
Representative Gara asked about
increases to the budget to cover
retirement costs. Ms. Rehfeld
explained that the Governor is
committed to providing resources for
the retirement system costs.
th
1:52:51 PM Representative Mentioned the memo dated January 19
Gara regarding the Governor's proposed
operating budget reduction. He
questioned how those cuts could be
offset with the proposed program
increases. Ms. Rehfeld advised that
the memo had a spreadsheet attached,
indicating how the calculations had
been determined. The General Fund
identified for the agencies, (excluding
the University, the Legislature and the
Court System), $3 billion dollars,
backing out priority items. A 10%
reduction was applied to the main
General Fund.
1:55:19 PM Representative From that testimony, Representative
Gara Gara understood that the Administration
was not attempting to get a $150
million dollar budget reduction as far
as the overall budget. Ms. Rehfeld
clarified that the Governor's fund
proposal for General Fund spending is
approximately $3.9 billion dollars and
within that, the agencies will attempt
to find savings of about $150 million
dollars. If they are successful in
getting the savings on the operating
side, it will impact what is done on
the capital side of the budget.
1:56:31 PM Vice Chair Asked if the FY07 surplus of $1.4
Meyer billion dollars had been updated. Ms.
Rehfeld responded that was the best
number on hand at this time.
Vice Chair Meyer understood the surplus
would be placed into the Capital Budget
Reserve (CBR). He noted historically,
the amount was placed into the
education fund; he questioned the
unfunded liability debt, currently
existing. He proposed using ½ the
savings for the education fund and half
for the CBR. Ms. Rehfeld advised that
the proposal was only a starting point
and that the Governor was willing to
discuss options.
Vice Chair Meyer inquired regarding
discussion about the unfunded
liability. Ms. Rehfeld stated that
they were working with the Department
of Administration regarding various
approaches to the retirement system.
1:59:55 PM Vice Chair Questioned if the collective bargaining
Meyer contracts would be brought forward.
Ms. Rehfeld responded that there are 8
contracts up for negotiation in FY08.
Vice Chair Meyer acknowledged that they
can not be budgeted for.
Co-Chair Meyer mentioned the Longevity
Bonus being revisited & substitution of
the Senior Care program, which is needs
based. He asked if that program would
"go away". Ms. Rehfeld responded that
both programs are included in the FY08
budget.
Vice Chair Meyer questioned if the
Administration believed that the $150
million dollars budget reduction could
be met. He stated it would not be easy
to meet that goal. Ms. Rehfeld agreed.
2:02:16 PM Representative Voiced concern with the targeted
Nelson reduction of $150 million dollars
statewide. She said her greatest
concern was with cuts to the Department
of Health & Social Services and
Department of Public Safety. Ms.
Rehfeld reiterated that the Governor
looks forward to discussions with
legislators regarding impacts resulting
from the proposed budget.
2:04:47 PM Representative Agreed that the Legislature is capable
Hawker of making such reductions; however, he
worried about the consequences of such
drastic cuts. Ms. Rehfeld advised that
the Governor has identified a "place-
holder" in the amount of approximately
$133 million dollars. If the $150
million dollar goal is not met, the
priorities will be established by the
Legislature. Otherwise, the dollars
would be removed from either the
operating or capital budget.
2:06:44 PM Representative Emphasized that it will be difficult to
Chenault reach that $150 million dollar
reduction, especially in 90-days. He
pointed out the schedule for closing-
out the budget within 90-days. He did
not want to see a diminished public
process and hence had concerns.
2:10:42 PM Representative Added concerns regarding the
Stoltze accelerated schedules, reiterating
comments about the enhanced challenges
meeting proposed budget reductions.
2:11:53 PM Vice Chair Addressed expended boundaries at
Meyer Prudhoe Bay to cover some of the
marginal fields. He asked about the
higher tax rate and if that was
currently being collected. Ms. Rehfeld
did not know but offered to provide
that information to the Committee.
Vice Chair Meyer asked when the State
would receive money from the Crew Ship
Initiative. Ms. Rehfeld understood
that would begin to be collected in the
beginning of May 2007. That money
would not be built into the budget
until FY09.
2:13:36 PM Representative ADJOURNMENT
Chenault
The meeting was adjourned at 2:13 P.M.
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