Legislature(2017 - 2018)HOUSE FINANCE 519
10/24/2017 01:00 PM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Looking Forward to Fy 19 | |
| Presentation: Criminal Justice Agencies Budget Information | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
October 24, 2017
1:44 p.m.
FOURTH SPECIAL SESSION
1:44:36 PM
CALL TO ORDER
Co-Chair Seaton called the House Finance Committee meeting
to order at 1:44 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson (via teleconference)
MEMBERS ABSENT
None
ALSO PRESENT
David Teal, Director, Legislative Finance Division; Amanda
Ryder, Fiscal Analyst, Legislative Finance Division;
Representative Justin Parish.
PRESENT VIA TELECONFERENCE
Representative Tammie Wilson
SUMMARY
PRESENTATION: LOOKING FORWARD TO FY 19
David Teal, Director, Legislative Finance Division
PRESENTATION: CRIMINAL JUSTICE AGENCIES BUDGET INFORMATION
Amanda Ryder, Fiscal Analyst, Legislative Finance
Division
Co-Chair Seaton reviewed the meeting agenda.
^PRESENTATION: LOOKING FORWARD TO FY 19
1:46:29 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
provided a spreadsheet titled "Potential Increases in the
FY19 Budget" dated October 23, 2017 (copy on file). He
shared that he had emailed the spreadsheet to the committee
members earlier in the fall in order to remind people about
how FY 18 actions would impact FY 19. He pointed to line 1
on the spreadsheet pertaining to Medicaid. The scenario
assumed no additional growth in FY 18. He explained that
the Office of Management and Budget had generated a similar
document with numbers.
1:49:07 PM
Vice-Chair Gara remarked that the difference was massive -
between the LFD $32 million and OMB $75 million
projections. He asked about the difference.
Mr. Teal assumed it was due to different projections built
into the data. He remarked that there were additional
budget reductions built into the Medicaid projections,
which may not materialize. He stated that there was an
assumption that all the anticipated savings would
materialize. He remarked that OMB may be saying that if the
savings did not materialize, there could be as much as $75
million. He deferred to OMB for more information. He stated
that the numbers would differ from the OMB numbers, but
this was the largest variation. He stressed that he and OMB
both came up with nearly $300 million in "holes."
Mr. Teal moved to line 2 related to the Alaska Marine
Highway System (AMHS). He stated that the notes said that
it was attempted use of one-time money in FY 18.
Representative Ortiz asked for detail on the reason for the
current situation.
Mr. Teal replied that there was House proposal from the
previous session using some of the FY supplemental head
room of $100 million of additional spending from the
Constitutional Budget Reserve (CBR) that was allowed by the
FY 17 appropriation bill. He stated that the House proposed
using some of the head room to eliminate the need for FY 18
CBR supermajority vote. He shared that the Senate applied
that concept to reducing FY 18 spending. He remarked that
the Senate declared that they would not avoid a
supermajority vote or use of the CBR. Therefore, the Senate
chose to deposit $30 million of the FY 17 money into the
AMHS fund. He stated that the Senate also reappropriated
$9.4 million from the Community Quota Revolving Loan Fund.
He announced that the result allowed for a $40 million swap
in FY 18, because there was money in the AMHS fund in FY 17
and in FY 18 the money would be withdrawn and used. He
stated that the use of the AMHS money in FY 18 resulted in
not using the unrestricted general funds (UGF) that were
typically used in FY 18. He noted that there was an
apparent $40 million reduction in FY 18 spending. He shared
that he had consulted with Department of Health and Social
Services (DHSS) on a Medicaid supplemental, and recalled
language in the appropriation bill that said that Medicaid
could spend up to $50 million to pay provider claims. He
remarked that DHSS did not anticipate needing the language.
He shared that there were three problems with the current
situation. He stated that the Senate's proposal to transfer
money across fiscal years for continuing costs instead of
one-time items would "always come back to haunt you." He
stressed that there would be a replacement of the money
that was only available once. He stated that DHSS did not
expect to use the supplemental language to eliminate some
provider payments. He stated that DHSS was approximately
two weeks behind in FY 17, so those payments would be moved
forward into FY 18.
1:54:29 PM
Mr. Teal noted that there was no backstop language, because
of the conversations with DHSS. He remarked that there was
no language in the appropriation bill that said that in FY
18, if Medicaid uses money or for some other reason, if
there was insufficient money in AMHS to be available for FY
18 then there would be a backfill with UGF. He announced
that OMB told DHSS to pay approximately $31 million in FY
17 provider payments, which reduced the head room. He felt
that crossing fiscal years only confuses people. He stated
that OMB asked that DHSS pay seventeen claims in FY 17, and
make the FY 18 payments with FY 18 money. He stated that
the Medicaid payments left AMHS short in FY 18 by between
$23 million and $24 million. He stated that the $31 million
used up the head room from the CBR draw that was expected
to be available to AMHS. He shared that AMHS ended up
approximately $24 million short. He stated that there was a
$10 million reappropriation, and then AMHS would get
approximately $7 million of the anticipated $30 million.
The result was roughly a shortfall of $24 million. He
remarked that AMHS would need a supplemental appropriation
in FY 18 in order to provide the planned level of service.
He shared that AMHS could get a supplemental appropriation
of up to $30 million.
1:59:12 PM
Mr. Teal addressed line 3 related to fire suppression and
line 4 related to salary and benefits. He stated there was
approximately $15 million in anticipated increases in
health care. He shared that the legislature did not
typically health care cost increases for school districts.
The increase was only for the state employees.
Representative Pruitt recalled reading that either health
care costs would be flat for retirees. He wondered why
there would be an increase in the regular employees.
Mr. Teal shared that the chairman wanted LFD to address the
committee regarding healthcare the following week.
Co-Chair Seaton replied that the following week the
committee would address budget drivers and what could be
done to curtail the increases.
Mr. Teal moved to line 5 related in inmate healthcare. He
surmised there would be a supplemental. He moved to line 6
pertaining to Mt. Edgecumbe, and remarked that the sum was
about $116.7 million (shown at the top middle column of the
chart).
Representative Guttenberg wondered what part of the total
healthcare for students at Mt. Edgecumbe. He wondered what
they were paying regardless of shortfalls.
Mr. Teal asked if Representative Guttenberg was referring
to healthcare only.
Representative Guttenberg answered in the affirmative.
Mr. Teal responded that the number was multiplied by the
annual cost increase.
Representative Guttenberg referred to various drivers for
inmate healthcare. He noted that often silos were created.
He wondered about places to locate efficiencies to drive
down the cost of healthcare in Alaska. He surmised the
question may be more for OMB.
Mr. Teal that the employee health care benefit payments
quite a bit faster than for Medicaid. He believed members
would be shocked at how much the state was spending on
healthcare expenses for employees and how much it was
increasing.
2:06:37 PM
Co-Chair Seaton recalled the healthcare authority
publications required by the previous session's bill SB 74.
The healthcare authority provided an analysis of the cost
rise, and included the different units done by each
subdivision. He noted that there was a range of escalation.
Vice-Chair Gara remarked that healthcare benefits had not
increased. He wondered whether the increase in healthcare
costs for state employees was due to the control of
Medicaid costs, but the employees required a market rate or
the insurance company payments.
Mr. Teal answered that the statement was probably true, but
the healthcare authority would address the negotiations
between the state and school districts.
Vice-Chair Gara characterized it as a buying power issue.
Mr. Teal agreed.
Vice-Chair Gara asked for verification the information was
included in the Mark Foster report.
Mr. Teal answered in the affirmative. He moved to lines 7
through 9 pertaining to debt service and fund
capitalizations.
2:10:27 PM
Representative Ortiz asked for verification Mr. Teal was
speaking to what had previously been referred to as revenue
sharing.
Mr. Teal replied in the affirmative. The name was now
called community assistance.
Representative Ortiz asked about the $30 million versus $8
million.
Mr. Teal answered that the governor had not requested a $30
million standard appropriation to the Community Assistance
Fund. It had not been added to the FY 18 budget.
Co-Chair Foster referred to Power Cost Equalization (PCE)
and asked whether the $30 million would be paid from the
excess earnings. That payment would not change what would
normally paid out to folks in the program.
Mr. Teal replied in the affirmative.
Vice-Chair Gara referred to community assistance. He
believed it had been $60 million in FY 15 and had declined
over the years.
Mr. Teal answered in the affirmative. He moved on to line
10 and addressed oil and gas tax credits.
2:16:26 PM
Mr. Teal addressed line 12 related to state assistance to
retirement. He noted that it was the largest number. He
shared that in FY 18 the legislature used $29 million of
money from the Higher Education Fund, but that was not
repeatable. He stated that, arguably, its use in FY 17 was
one-time money. He shared that the governor did not do a
fund source change to use general funds. He stated that the
legislature did not change the fund source. The larger
impact came from the latest valuation, which showed that FY
19 costs would increase by roughly $114 million. The total
was $143 million in retirement costs in FY 19, with a real
total of $182 million in the statewide costs. The capital
budget was "left alone" and he had no idea what the capital
budget might be for FY 19. He shared that a substantial
amount of the capital budget was funded through
reappropriations.
2:21:01 PM
Mr. Teal shared that there could be continually budgeting
of only using "one-time money" and other sources to reduce
the amount of money from its $300 million level. He shared
that in FY 18 there was oil revenue of $1.8 billion plus
dividends, adjustments, and carry forward resulting in a
total revenue of roughly $2.6 billion and a deficit of $2.3
billon based on spending of $5 billion. He shared that in
FY 19 the budget would increase by $300 million, and may
increase if it was treated as UGF "holes." He stated that
revenue should increase, dividends and adjustments would
remain the same. He noted that there was an insurance
premium tax. He stated that the net of slightly higher
revenue plus adjusting for $300 million left a deficit of
roughly $2.5 billion. He stated that the balance coming
into FY 19 was expected to be roughly $2.1 billion. The CBR
would be roughly $350 million short of being able to fill
the deficit. He stated that the statutory budget reserve
(SBR) contained approximately $172 million, or almost
exactly half of the expected balance shortfall. He
explained that if there were no additional revenues and
cuts with included assumptions then the CBR and SBR
reserves would still leave a gap of approximately $170
million. He announced that there would be a $55 million
from the insurance premium tax. The last two years, the $55
million in insurance premiums were diverted from the UGF to
the Alaska Comprehensive Health Association (ACHIA) Fund,
which was the health reinsurance program. He remarked that
the fund was scheduled to sunset in 2018, and the $55
million would go into the UGF. He shared that the change
was roughly $100 million, not $300 million in the modeling.
He shared that the FY Medicaid fiscal notes may have been
too optimistic, because they removed approximately $30
million in FY 19 that may or may not materialize. He stated
that the previous session's criminal justice legislation,
SB 91, may increase the costs in the Department of
Corrections (DOC) and elsewhere was not included in the
model. He explained that the oil tax credits, based on the
forecast, production was expected to increase. He stated
that if there was an increase in production, then the oil
tax credit deposit would be roughly $100 million more than
the $54 million in the model.
2:26:34 PM
Co-Chair Seaton stated that the reason for looking at the
budget was because the legislature was looking at revenues
and what those amounts would do to the budget holes. He
noted that there would needed to be converting of the
earnings reserve to a management system.
Mr. Teal replied that the state used roughly $1 billion a
year from the CBR for cash flow management. He suggested
that if the CBR went to zero then the balance at the end of
FY 19 would be zero.
Co-Chair Seaton wanted everyone to understand that in
looking at next year's budget and the hole that would have
to be filled with revenue.
Representative Pruitt noted that there would be an increase
in FY 18 by $300 million. He expressed concern over the
possibility of a pattern of continued increases. He
remarked that he could discount the state assistance
retirement. He felt that there would be a new normal in
UGF. He wondered whether there should be an anticipated $32
million a year increase to Medicaid. He queried the year
over year additional costs going beyond FY 19.
Mr. Teal replied that there were one-time fixes. He stated
that, from that point on, there would be a budget of $5.3
billion in spending. He shared that the model would give
the expectations in spending. He shared that LFD used the
OMB spending plan for state agencies, which increased with
inflation. He stated that, beyond the ten-year plan, there
would be specific adjustments for state assistance to
retirement, which was scheduled to increase steadily. He
noted that there was roughly $150 to $200 million a year in
annual increases after FY 19.
2:32:15 PM
Representative Pruitt relayed that the public was concerned
with the increases. He was concerned that as the
legislature tackled the revenue conversation it would be a
continual conversation rather than resolving the revenue
issue.
Mr. Teal responded that he understood people expecting the
budget to go down. Revenue growth was projected to slightly
exceed deficits. The increase in expenditures were not
necessarily increases in the deficit. It was not an easy
problem to deal with.
2:36:11 PM
Co-Chair Seaton recognized Representative Justin Parish in
the audience.
Representative Pruitt wanted to see that revenues were
outpacing budget growth. He believed there was a better
opportunity to look at the UGF expenditures because there
were not locations to hide money by pulling from other
accounts.
Mr. Teal replied that the OMB 10-year plan had been used.
He stated that the new revenue plan would not change the
shape of the graphs. The concern from LFD was that when
things like cross spend were done, it would come back to
haunt the legislature. He recommended focusing on the
deficit.
2:41:54 PM
Co-Chair Seaton relayed that budgetary anomalies such as
the AMHS Fund were all things that required passage through
both legislative houses.
Representative Grenn asked about line 10 related to oil and
gas tax credits. He asked for a repeat of the information.
Mr. Teal deferred to the Department of Revenue (DOR) for
the following day.
2:45:01 PM
AT EASE
2:46:03 PM
RECONVENED
^PRESENTATION: CRIMINAL JUSTICE AGENCIES BUDGET INFORMATION
2:46:08 PM
AMANDA RYDER, FISCAL ANALYST, LEGISLATIVE FINANCE DIVISION,
provided a PowerPoint presentation titled "Criminal Justice
Agencies' Budget Information" dated October 24, 2017 (copy
on file). She relayed the information would be combined and
in inflation adjusted dollars. She began on slide 3 with a
line graph showing FY 02 to FY 18.
Co-Chair Seaton asked if the data was reflecting that when
the state had more money it had spent more money and when
it had less money, cuts had been made.
Ms. Ryder answered in the affirmative.
Representative Pruitt asked for verification that if a
chart included other agencies there would be a similar
pattern.
Ms. Ryder answered in the affirmative.
Representative Pruitt asked if it included beginning with
FY 17.
Ms. Ryder replied that she did not believe SB 91 had made a
huge difference in terms of increased funding. She detailed
it had saved a bit over all based on fiscal notes passed by
the bill. The departments on slide 3 were the most impacted
by SB 91.
2:51:29 PM
Ms. Ryder advanced to slide 4 that included a chart from FY
02 to FY 18 with criminal justice agencies. It was what
many people considered the most apples-to-apples
comparison. She noted an increase of about $100 for
Alaskans. One could see a similar trend in all funds (red
line). She advanced to slide 6 that highlighted the four
criminal justice agencies.
Representative Thompson talked about the replacement of
funds. He asked if there were any DGF fund source changes
on the chart.
Ms. Ryder moved to slide 7 titled "Criminal Justice
Agencies' Filled Permanent Full-Time Positions." Between FY
15 and FY 18 there had been more than 350 positions not
filled, and remarked that there was a steady decline in the
number of filled full-time positions.
Representative Thompson asked if there were unfilled
positions that were funded.
Ms. Ryder encouraged examining each division during the
subcommittee process. She believed there was a lot of
misinformation about slush funds for unfilled positions.
There were many positions that departments could not afford
to fill due to increased costs and other.
2:59:14 PM
Representative Thompson hoped the subcommittees would do
that. He stressed the need to have clarity on the issue.
Co-Chair Seaton asked if the personal services line item
was transferrable.
Ms. Ryder answered that the personal services could be
transferred, with the question of what funding had been
transferred.
Co-Chair Seaton pointed to slide 7 and asked about
information included in the box on the left. He asked if it
was a reason for dismissals.
Ms. Ryder answered that DOL had long maintained that their
numbers had increased. She deferred to DOL for further
detail.
Co-Chair Seaton surmised that there was an impact of
collections.
Ms. Ryder answered that collections would be part of the
decrease that occurred in the past fiscal year. She turned
to slide 8 related to the legal and advocacy services
appropriation. She moved to slide 9 related to community
revenue sharing. The funding source may impact funding for
criminal justice activities in individual communities.
Co-Chair Seaton observed there seemed to be wide variety in
the chart.
Ms. Ryder answered that the formula did change, and she
believed Petersburg had become a borough.
3:05:23 PM
Representative Guttenberg spoke to the revenue sharing
component in the presentation. He talked about criminal
justice agencies. Some communities did not have police. He
wondered how it impacted communities.
Ms. Ryder answered that she had also been curious about the
question and had contacted the Alaska Criminal Justice
Council. She had received information she would be happy to
share. She would provide the information.
Co-Chair Seaton addressed the agenda for the following day.
ADJOURNMENT
3:08:06 PM
The meeting was adjourned at 3:08 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 10-24-17 Criminal Justice HFC Presentation.pdf |
HFIN 10/24/2017 1:00:00 PM |
HFIN |
| 10 24 17 HFC Budget Holes Presentation.pdf |
HFIN 10/24/2017 1:00:00 PM |
HFIN |
| UCR Law Enforcement Personnel Counts (LEO) 2013-2016.pdf |
HFIN 10/24/2017 1:00:00 PM |