Legislature(2021 - 2022)ADAMS 519
02/24/2021 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Governor's Fy 22 Budget and 10-year Plan | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
February 24, 2021
1:32 p.m.
1:32:59 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:32 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Sara Rasmussen
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
None
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor.
SUMMARY
OVERVIEW: GOVERNOR'S FY 2022 BUDGET and 10-YEAR PLAN
Co-Chair Foster reviewed the agenda for the day.
^OVERVIEW: GOVERNOR'S FY 22 BUDGET and 10-YEAR PLAN
1:34:34 PM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced the PowerPoint
Presentation: "FY 2022 House Finance Overview."
Mr. Steininger began the presentation with slide 2 titled
Historical Savings Balances depicted on a graph. He
provided a background of how the state arrived at its
present financial condition. He referred to the solid gold
line on the graph representing traditional Unrestricted
General Fund (UGF) revenues. The solid red showed the
states UGF expenditures. He expounded that prior to 2013
the state experienced a period of budget surpluses. Much of
the surplus was deposited into the states savings
accounts; the Statutory Budget Reserve (SBR) and the
Constitutional Budget Reserve (CBR). He commented that the
dark blue bars represented the savings balance that peaked
at over $16 billion in FY 2013. The balance really helped
the state to weather the last decade of revenue shortfall.
Deficit spending began in FY 15 as revenues began a
precipitous decline. He indicated the gap between revenues
and expenditures had continued since then. He indicated
that the yellow dotted line represented draws from the
Earnings Reserve Account (ERA) and the dotted red lines
represent the addition of the Permanent Fund Dividend (PFD)
payments to expenditures. Prior to FY 19, the draws from
the ERA were only used for dividends. Beginning in FY 19,
the state moved to a Point of Market Value (POMV)
percentage draw from the ERA. The POMV created a rule based
stable way to generate extra revenues for the state. Even
with the sustainable draw, by FY 21 and FY 22, the state
did not have enough revenue to meet basic operational needs
and the gap was even greater when the statutory PFD draw
was accounted for. He furthered that despite significant
efforts to constrain spending and create more access to
revenue a significant fiscal problem persisted.
1:38:33 PM
Mr. Steininger discussed slide 3 titled Elements of Fiscal
Package on slide 3:
Operating Budget Reductions
Fast Track Supplemental Budget
Utilize Bonding for Capital
• $59 million UGF leverages $1.4 billion total
capital spending with use of $101 million AHFC
bond financing
• $356 million general obligation bond package for
shovel-ready critical infrastructure investment
to jumpstart economy
Constitutional Amendments
• Set framework for a path to fiscal stability
• Statutory PFD change to compliment constitutional
amendment
Mr. Steininger elaborated that the proposed fiscal package
contained an operating budget that offered core services
and restrained spending. The fast track supplemental budget
addressed unresolved items due to COVID 19 precipitating an
early adjournment in 2020. The governor was also offering a
suite of constitution amendments.
1:41:14 PM
Mr. Steininger reviewed slide 4 titled Fiscal Summary as
of February 16, 2021. The chart showed a condensed version
of the fiscal summary. He explained that the top of the
chart reflected revenues available for government. There
were reductions of about $40 million in UGF compared to the
Department of Revenues projections. The budget proposed
using the entire POMV draw for government spending
excluding the PFD. He stated that there was not enough
funding to support government spending if paying a
statutory dividend. He delineated that the Carryforward and
Adjustments line reflected the federal revenues approved
through the Revised Program Legislative (RPL) process to
address the pandemic response that totaled roughly $1.2
billion. The $95.8 million UGF was largely Department of
Health and Social Services (DHSS)appropriations for COVID
response. Mr. Steininger continued to explain the fiscal
summary. He pointed to a net operating reduction of $225.6
million in the lower expenditures section of the chart due
to the expiration of some multi-year items. He indicated
that statewide operations spending was relatively flat. The
amount included an increase in school bond debt
reimbursement to 50 percent. In FY 21 no money was
appropriated for the school bond debt reimbursement. He
offered that in total there was a reduction of $253.4
million. The reduction of $50. 8 million in the Capital
Budget included the proposed utilization of the Alaska
Housing Finance Corporation (AHFC) bonding for capital
projects, which would typically increase the capital budget
but was shown as a decrease due to bonding. He furthered
that there was a deficit of about $81 million that was
covered by the CBR.
1:45:34 PM
Mr. Steininger continued to slide 5: "FY 2022 Projected
Draws." The slide showed the different balances in state
reserves; the ERA and the CBR. He pointed to the beginning
balance in the CBR that was $1.7 billion in FY 21 and
decreased to $915.3 million for FY 22. The proposed deficit
draw of $80.7 million would leave an end balance of $860
million. He remarked that there was significant discussion
as to what was the right balance to maintain in the CBR.
He reported that the state counted on the CBR daily for the
purpose of cash flow; at any given time, the state had up
to $500 million in cash expenditures in advance of revenue
collections received. The account provided a bridge between
revenues coming in and payments going out. He cautioned
against draining the CBR any further than the ending
balance to ensure it could meet the states basic cash flow
needs. He related that was the reason the proposed budget
utilized the ERA to pay a PFD. He directed attention to the
ERA balance on the left of the slide that showed the POMV
draw and an additional draw for paying a statutory FY 21
and FY 22 dividend.
1:48:48 PM
Mr. Steininger advanced to slide 6 titled Five-Year Fiscal
Outlook (From OMB 10-Year Plan), which showed a 5-year
fiscal outlook from the Office of Management and Budget's
(OMB) 10-year plan. He commented that trying to project out
10 years was not a valuable exercise. He thought a short-
term outlook was more helpful. The slide compared the
status quo outlook versus the governor's plan. The
governor's plan included the constitutional changes being
proposed. He reported that the blue represented the 50/50
split between the POMV draw and the dividend. The
difference in deficit amounts was illustrated on the PFD
line between the blue versus brown (representing the status
quo budget) sides of the chart. He highlighted that the
suite of reforms did not solve all the state's fiscal
problems. He thought that the chart reflected that
resolving the dividend formula debate and the ERA were the
first priorities and the key pieces to resolving the
longstanding fiscal issues and move forward with a robust
fiscal plan.
1:51:33 PM
Mr. Steininger moved to slide 7: "State of Alaska Operating
Budget." He noted that the chart and graph portrayed a high
level snapshot of the operating budget. He spoke to the
philosophy behind the FY 22 budget and future years. He
explained that the governor considered efficiencies and
reductions. He indicated that efficiencies were discovered
while dealing with the COVID crisis over the last year that
led to savings through working from home and finding new
ways of doing business. He reported that such savings were
peppered throughout the budget. He exemplified that some
significant savings were discovered in the Department of
Health and Social Services (DHSS) related to the reduction
of paper processes. He reported that federal COVID relief
was utilized to reduce GF in the operating budget. He
acknowledged that the federal relief funding was a short-
term measure but saved GF for a future budget until a long
term solution was implemented. He remarked that the small
savings added up.
1:55:06 PM
Mr. Steininger pointed to the Budget Change Summary at the
top right of the slide. He communicated that since FY 2019
through the FY 22 proposed budget, UGF spending was reduced
by $389 million.
Mr. Steininger reviewed Slide 8 titled Budget Cost
Drivers:
From FY2019 to FY2022 ?..
State assistance to retirement has increased
$70.3 million
Employee salary adjustments for cost of living
and health insurance have increased $50.0 million
Public protection services including law
enforcement, prosecution, defense, courts, and
corrections have required investment of $52.8
million
$173.1 million in UGF reductions to maintain a
flat budget
Mr. Steininger indicated that just maintaining a flat
budget, the state had to accommodate natural cost drivers
in areas like public safety before reductions could be
realized.
1:57:03 PM
Mr. Steininger turned to slide 9 titled FY 22 Department
UGF Budgets, which showed the FY 22 undesignated general
fund budget for each department compared to the statutory
PFD. He communicated that the statutory PFD was over $2
billion, and the next highest spending was the Department
of Education and Early Development (DEED) that included the
foundation payments to school districts and departmental
expenditures. He highlighted that DHSS was the next highest
where roughly $650 million reflected the cost of Medicaid
and other formula programs that provided assistance
payments to individuals. The Department of Corrections
(DOC) was next; its budget was significantly lower than the
prior three with the remaining agencies following.
1:58:14 PM
Representative Rasmussen referred to slide 6. She asked if
the POMV projection reflected the losses that might occur
with the loss of revenue by drawing down the ERA above the
POMV percentage. Mr. Steininger answered in the
affirmative. He indicated that the reduction in revenue was
included on the POMV line comparing the status quo to the
Governors plan. He pointed to the brown section or status
quo section for FY 26 and noted the draw amount was $3.4
billion versus the blue section $3.25 billion.
2:00:25 PM
Representative Wool referred to slide 6. He drew attention
to the bottom of the blue chart that showed the draw from
the ERA at over $2 billion primarily to pay for the PFD in
FY 22 and the zero remaining surplus on the bottom line. He
noted that in FY 23 the remaining surplus was $1.23
billion. In FY 22 the ERA would be used to fill the gap. He
wondered about the following year. Mr. Steininger agreed
with Representative Wools understanding. He continued that
the deficit would be reduced by the proposed change to the
PFD statute and operating budget constraints. However, the
measures did not address the entire deficit that needed to
be addressed through other ways via spending or revenue. He
shared that the administration felt that addressing the PFD
formula first would drive the discussion on how to resolve
the remaining deficit.
2:03:03 PM
Representative Wool referred to slide 8 which indicated
that to maintain a flat budget a reduction of $170 million
would need to be made each year. He deduced a reduction of
that size would be hard to find. He noted that the public
safety budget surpassed the Universitys budget and was
increasing. He mentioned revenue measures took time to
implement. He did not think it was too soon to have the
discussion regarding deficits. He was glad Mr. Steininger
had mentioned revenue in response to his questions.
2:04:23 PM
Representative Thompson referred to slide 6 and asked
whether bond payments were figured into the out years. Mr.
Steininger indicated that the information was based on the
10-year plan put forward in December 2020. The numbers were
not inclusive of any amendments nor were the bond payments
explicitly included in the Statewide Items line. The
projections for the statewide items decreased and was
associated with some debt service expiring. He noted that
the roughly $400 million bond package payments would need
to be accommodated in future budgets.
2:05:30 PM
Representative Josephson referred to slide 7. He reiterated
that the administration cut UGF spending by $389 million.
He inquired whether that was net of the $173.1 million
reflected in the following slide. Mr. Steininger replied in
the affirmative. Representative Josephson wondered if it
had the net effect of cutting half of $1 billion to provide
the same service. Mr. Steininger answered in the
affirmative. He elaborated that slide 8 illustrated that in
order to make reductions in the operating budget some
natural increases had to be considered. Therefore, in
order to maintain a $389 million reduction over $500
million had to be reduced.
Representative Josephson queried about the utilization of
COVID relief bullet point on slide 7. He asked for the main
categories or items where the relief money was used to
backfill the budget. Mr. Steininger responded that the
primary areas were the Department of Transportation and
Public Facilities and the Medicaid program. The governor
proposed utilizing some of the Medicaid savings from FY 21
and using it in FY 22 to allow changes to the program to be
phased in over time. Representative Josephson asked if he
was talking about the 6.2 percent increment from the
federal government. Mr. Steininger responded in the
affirmative and added that the savings amounted to about
$15 million per quarter.
2:08:27 PM
Representative LeBon asked what the minimum balance was for
the CBR to function as the working capital resource for
the state. Mr. Steininger repeated that the amount was $500
million. Representative LeBon asked whether the utilization
of the CBR as an operating line of credit was an implied
authority. Mr. Steininger replied in the affirmative. He
furthered that besides the authority to deficit draw from
the CBR, the administration had the authority to borrow
between accounts in advance of revenue within a fiscal
year. He noted that the term for borrowing between accounts
for cash flow purposes was interfund borrowing.
2:10:16 PM
Representative LeBon pondered that if the administration
drew on the CBR and the amount could not be paid back at
the end of the fiscal year, would the administration have
to report the shortfall to the legislature. Mr. Steininger
responded in the affirmative and added that for almost a
decade every CBR draw included deficit language.
2:10:59 PM
Representative Rasmussen referred to slide 6 again. She
asked about returning the $16 billion that had been
borrowed from the CBR. She wondered if a repayment
provision was included in OMB's 10-year plan. Mr.
Steininger responded that one of the proposed
Constitutional amendments included eliminating the CBR
payment provisions. He indicated that the status quo
scenario did not address the CBR debt nor could any
scenario address the CBR debt presently. Representative
Rasmussen asked him to identify the governors proposed
constitutional amendment that eliminated the need to repay
the CBR funds. Mr. Steininger thought it could be found in
one of the amendment proposals but could not remember which
one. He would get back to her. Representative Rasmussen
believed that it was disturbing that the Legislature was
considering the same type of borrowing from the ERA as was
done at the beginning of 2013 from the CBR. She thought
that at the time, the legislature could not comprehend a
point when the CBR would be practically empty, and the
state would be functioning on a basic level.
2:14:11 PM
Representative Wool referred to slide 7. He noted a
reduction of about $191 million from FY 19 to FY 22. He
wondered if the reduction between FY 21 to FY 22 was due to
COVID funding and asked whether in FY 23 spending would
increase to provide the same level of services. Mr.
Steininger responded that the administration had utilized
federal COVID money for operational expenses. The
administration realized the challenge to accommodate
natural cost pressures and backfilling the federal revenues
in FY 23. A significant amount of the COVID revenues could
be spent over a period of fiscal years. Representative Wool
asked if the Medicaid items had the same multi-year horizon
for spending. Mr. Steininger shared that the administration
was currently setting aside a Medicaid amount for FY 23 to
utilize any lapsing Medicaid money. He discerned that the
set aside provided enough time to work with the Center for
Medicaid Services (CMS) and subject matter experts to
reform to the Medicaid program. He expounded that certain
Medicaid item requirements could not be altered during the
pandemic. However, it allowed time to identify changes in
service levels and reforms to meet the target number for FY
23. Changes to Medicaid required a significant amount time
to work with other partner entities and CMS before
implementation of the changes. He did not anticipate having
to backfill any Medicaid funding for FY 23.
2:18:18 PM
Representative Edgmon referred to slide 6. He was trying to
understand the numbers in the FY 22 and FY 23 Remaining
Surplus/(Deficit)columns. He discerned that something major
would have to occur in the following year for the governors
proposed numbers to work. He implied that either major
budget reductions, substantial new sources of revenue,
major overdraw of the ERA, or liquidation of the Power Cost
Equalization Endowment Account(PCE) would need to occur to
reach the governors numbers. He wondered how the
legislature would accommodate the large change within FY 22
to FY 23 (a deficit of $1.2 billion) without turning to one
of the options he listed. Mr. Steininger agreed that the
administration needed to find a way to accommodate a $1.2
billion deficit. The governor welcomed conversations
regarding addressing the deficit. He noted that in FY 22
the administration proposed some operating reductions and
an overdraw of the ERA. However, overdrawing the ERA would
not be sustainable in FY 23. He reported that one of the
governors amendments would limit the ERA draw to the POMV
formula. He reiterated that discussions regarding the major
formula programs that were the cost drivers of state
spending and revenue were necessary. He repeated that the
first step was to solve the question of the PFD formula.
Representative Edgmon suggested that this would all have to
occur during an election year. He spoke of the lag time in
putting a significant new revenue stream in place when it
typically took at least 18 months to implement. He was
struggling to comprehend how the governors proposals could
be considered a plan when there were no steps to get from
point A to point B included. He did not understand how the
plan could be implemented and how the legislature would
fill a $1.2 billion gap when either adoption of the
constitutional amendments or new revenues would not be
available until FY 24. He suggested that the plan had a gap
in logic. He stated that he did not understand how this
can be presented to me or to my constituents or any of us
in a way that suggests that this could actually happen. He
asked for further clarification on how the $1.2 billion
fiscal gap could be filled by FY 23. Mr. Steininger was not
qualified to speak to what could happen in an election
year. He acknowledged that the task was difficult and some
of the plans framework did not solve the entire problem.
He reiterated that the administration put forward the most
important piece of the framework that needed to be
addressed first, addressing the access to the ERA and
setting a statutory change to the PFD. He pointed out that
the fiscal problem was not new. He suggested that part of
the solution could not be implemented through the operating
budget. He asserted that additional major conversations
needed to occur regrading budgetary cost drivers that could
not be solved through transactional changes in an
operating budget. He acknowledged that very real timing
considerations existed and that the plan did not solve the
entire problem but considered it as a step in the right
direction.
Representative Edgmon judged that major cuts, major new
revenue, and major overdraws from the ERA were necessary.
He did not see a plan for any of the three options in the
presentation. He wondered whether the governor was planning
a major revenue proposal but voiced that he did not see any
evidence of that. He wondered where major cuts could come
from without severely harming Alaskans quality of life. He
did not want to consider overdrawing the ERA for a second
year in a row in FY 23. Any constitutional vote of the
people or new revenues interfered with the time constraints
and could not be accomplished by FY 23. He believed many
elements of the plan hindered the legislatures ability to
make major decisions regarding the budget.
2:28:15 PM
Representative Josephson shared some of Representative
Edgmon's concerns. He believed that his constituents had
sent him to do a job without asking for any additional
authority except where the constitution required it. He
cited slide 7 and referred to the $85 million in DGF
reductions. He wondered if a portion of the funding was
COVID related or whether a suspension of fee or receipt
programs had occurred. Mr. Steininger offered to provide
him with a list.
2:29:48 PM
Vice-Chair Ortiz referred to slide 6 and the transition
from FY 22 to FY 23 and the $1.2 billion deficit. He
understood that the governor had proposed $900 million to
$1.2 billion in additional revenue. He asked whether it was
included on the slide or in the presentation.
Mr. Steininger indicated that it was recognized in the 10-
year plan that the $1.2 billion deficit required an
additional $1.2 billion in new revenues even after the $50
million and $100 million in year one and two of the plan
were met. Vice-Chair Ortiz asked if the governor was
anticipating an additional revenue amount of $1.2 billion
in FY 23. Mr. Steininger answered in the affirmative. Vice-
Chair Ortiz asked for specificity and if the governor had a
proposal for additional revenue. Mr. Steininger responded
that some of the amount could be derived from changes to
existing sources of revenue and proposals still under
consideration like a gaming revenue measure. However, he
could not speculate on a full revenue plan. He deferred to
the commissioner of the Department of Revenue for further
answers.
2:33:13 PM
Vice-Chair Ortiz suggested that if reductions to the
largest cost drivers were considered, it meant significant
reductions to education. Mr. Steininger proposed that it
was necessary to look at how money was spent on the largest
cost drivers. The decisions needed to be based on policy
related to the programs. The objective and goal were not to
simply make budget cuts but to ensure students received an
adequate and good education in the state. He
characterized it as a policy decision that had budget
impacts. He advised that policy discussions about how the
state spent money to achieve its policy goals was necessary
to address the deficit. He suggested that the policy
discussions were much wider than the transactional
decisions in the states budget.
2:35:50 PM
Representative Wool hoped that adequate education was not
the goal of the state. He mentioned Ms. Rodells [Angela
Rodell, Executive Director, Alaska Permanent Fund
Corporation] presentation the prior day. She articulated
concerns about additional draws from the ERA. He expressed
his own concern about an overdraw from the ERA. He noted
the $1.2 billion deficit in FY 23, but no mention of an
overdraw on the ERA. He noted that a fourth option to
reduce the deficit not mentioned by Rep. Edgemon was to
dramatically reduce or eliminate the PFD. He wondered if
Mr. Steininger felt the same concern about overdrawing the
ERA in FY 22 and whether the ERA would end up like the CBR.
He thought that the administrations approach to the
withdraw was nonchalant. Mr. Steininger replied that the
overdraw proposed by the governor was not taken lightly. He
explained that it was proposed due to the unusual
circumstances of the time. He noted the impacts of COVID to
the economy. He restated that the governor had proposed the
constitutional amendment so that drawing down the ERA in
additional years could not occur. He emphasized that the
governor saw the overdraw as a one-time occurrence and was
not something to take lightly. The constitutional amendment
in concurrence with the one-time overdraw was of paramount
importance.
2:40:35 PM
Representative Wool mentioned the constitutional amendments
regarding taxation. He aligned with Representative
Josephsons comments that legislators were elected to make
the touch decisions. He appreciated the constitutional
amendment to lockup the ERA.
2:41:21 PM
Representative Carpenter referred to slide 2. He looked at
the blue bars representing savings that had been dwindling.
He thought it reflected doing business as usual without
making hard decisions by both, prior governors and
legislatures. He expressed concern regarding the ERA and
business as usual. He characterized prior budgets as
kicking the can down the road. He wanted it to stop in
the current year. He asked if the executive branch was the
only branch that had the ability to propose solutions for
revenue. Mr. Steininger indicated that the legislature
could make revenue proposals as well. Representative
Carpenter declared that the House and Senate Finance
Committees were the best place to begin the process for new
revenues and asked if he was correct. Mr. Steininger agreed
with the statement.
2:44:14 PM
Representative Edgmon asked if the administration would be
a willing participant in revenue discussions. Mr.
Steininger related that the administration was open to
conversations on solving the deficit issue.
2:45:12 PM
Representative Thompson referred to slide 5. He cited that
the statutory payout of the POMV for the PFD in FY 21 was
$680 million. He noted that a further draw of $1.2 billion
in FY 21 and a draw of $2 billion in FY 22 was projected.
He deduced that a PFD of over $3 thousand would be paid.
He spoke of the taxes owed related to the dividend. He
commented that people would have to be educated about the
tax burden. Mr. Steininger responded that part of the PFD
application process included a notification of taxes owed.
He remarked that the PFD was considered federal taxable
income.
Co-Chair Foster asked Mr. Steininger to continue with his
presentation.
2:47:27 PM
Mr. Steininger advanced to slide 10 titled
"Administration." He explained that the Department of
Administrations (DOA) budget included duplicated funds.
Duplicated funds were monies that were spent from one
department and repaid to another department for services
rendered. The bulk of the business of DOA, as part of its
mission was to provide services to other agencies. He
highlighted the significant drop-off between FY 21 to FY 22
indicated on the graph. The decrease represented a transfer
out of some of DOAs functions. The department transferred
public building facility management and lease
administration to the Department of Transportation (DOT).
However, DOA reduced activity in the Office of Information
Technology: State Microsoft license change. The license was
upgraded, which allowed for cost reductions elsewhere in
services and amounted to a net decrease of $1.25 million in
total IT costs. In addition, the governor proposed closing
6 Division of Motor Vehicle (DMV) offices saving $582.5
thousand. The administration was also making a significant
adjustment by how it billed for centralized services. He
relayed that from FY 19 to FY 22 DOA realized a decrease of
8.7 percent UGF and 22.7 percent DGF.
2:51:40 PM
Representative Rasmussen was curious why the changes were
summarized from FY 19 to FY 22. She thought that it
obscured the 28 position increase from FY 21 to FY 22. She
was curious what positions were needed. Mr. Steininger
answered that the increase was due to the consolidation of
procurement staff into DOA. He explained that the
procurement for all departments was being centralized into
the Office of Procurement and Property Management within
DOA. The centralization would also allow for the
procurement staff to look for further consolidation and
savings opportunities. He added that a governors amendment
for the department contained another increase in DOA staff
due to consolidation of Human Resources activities.
Representative Rasmussen asked if 28 positions were
eliminated from other agencies. Mr. Steininger responded
that the staff were transferring between agencies.
2:54:22 PM
Vice-Chair Ortiz asked which DMV offices would be closing.
Mr. Steininger replied that the Tok, Delta Junction,
Haines, Eagle River, and Homer. He would provide the
complete list later. Vice-Chair Ortiz asked if those areas
would be served by a private service. He wondered what the
intent for those areas was to receive services. Mr.
Steininger replied that in several of the locations a
private service partner already existed and other locations
were working on arrangements with private providers to
ensure each location had an in-person option. In addition,
DMV expanded the services offered online.
2:56:15 PM
Mr. Steininger continued to slide 11 to review the budget
for the Department of Commerce, Community and Economic
Development (DCCED). He pointed out that the graph
portrayed a significant reduction in UGF over the last 10
years from $60 million in 2013 down to approximately $7
million in FY 22. He noted a portion of the change was due
to the transfer of the Alaska Development Team to the
Office of the Governor where it became a cabinet level
activity. He furthered that the budget eliminated a DGF
grant to Alaska Civil Legal Services [-450.0 UGF]. He
delineated that the grant was the last UGF recipient grant
distributed by DCCED and legal services received a
different grant. Also, a vacant position in Division of
Economic Development was deleted. The governor deleted
departmental positions that were vacant for 6 months to 9
months lacking a goal to fill them. He added that there was
also the deletion of 3 Alaska Gasline Development
Corporation (AGDC) positons. However, the department added
2 Regulatory Commission of Alaska (RCA Utility Master
Analyst positions. The final change replaced UGF authority
at Alaska Energy Authority (AEA) with Power Cost
Equalization funds [-847.3 UGF, 847.3 PCE]. The transaction
removed the last of the UGF appropriated to AEA.
2:58:45 PM
Representative Johnson remembered that the legal services
grant had been removed by the governor in FY 19 but was
replaced and endorsed by the governor. She wondered what
factors had changed to bring elimination of the grant
again. She wondered if it would affect domestic violence
services. Mr. Steininger could not speak to the change in
position from FY 19. However, he explained that the state
provided money to legal services through court filing fees.
The question had to do with whether to retain the last
remaining UGF funded discretionary grants in DCCED. It did
not have anything to do with the work provided by the
organization.
3:00:55 PM
Representative Josephson countered that aside from the
court filing fees, rescinding the grant was a large cut to
the agency. He stated that it left legal service seriously
underfunded. Mr. Steininger indicated that the court
filing fees amounted to $350 thousand and the $450 thousand
grant reduction was in addition to the fee funding. He
observed that the cut would not reduce the amount to state
funding to zero. Representative Josephson remarked that he
effectively just said that. Representative Josephson
inquired whether the transfer of the Alaska Development
Team was the same proposal that the legislature had
rejected in a prior budget. Mr. Steininger responded that
the transfer was a new proposal related to economic
development and transferred the positions over to the
governor's office. He deferred to the department for
details.
Co-Chair Foster asked Mr. Steininger to further explained
the amount related to PCE. Mr. Steininger retorted that AEA
had roughly $850 UGF in its operating budget for activities
primarily related to energy access throughout the state and
some grant funding. He noted that while the work AEA
carried out was not specifically delineated in the statute
directing PCE fund use, it supported the overall goal of
equal energy access to the state. The administration felt
that the appropriation was an appropriate use of the fund
source. The transaction was an attempt to constrain costs
and look for different ways to pay for activities through
existing funds that had a nexus to the activity. Co-Chair
Foster commented that the PCE statute only included a
waterfall provision, Community Assistance, and Renewable
Energy Grants. He asked if the connection was associated
with the grants. He did not think the use was consistent
with the statute. Mr. Steininger answered that the AEA use
fell within the broader context of PCE; to equalize the
cost of power throughout the state. He contended that the
appropriation was still in general support of equalizing
the cost of energy throughout the state. Co-Chair Foster
voiced that the issue would be addressed further in
subcommittee.
3:06:17 PM
Representative Edgmon would be working with DCCED in
subcommittee and would be scrutinizing the suggested
appropriation. He commented that the proposal was clearly
outside the confines of the PCE statute.
3:07:08 PM
Representative LeBon asked whether the shift away from
using DGF to PCE was a one-time transaction or a permanent
change in budgeting. Mr. Steininger responded that the
change was permanent.
Representative Carpenter wondered what the excess balance
was in PCE aside from program requirements. Mr. Steininger
would provide the answer later. Representative Carpenter
thought that if the legislature was discussing shifting AEA
funding from UGF to PCE permanently it was beneficial to
know the balance of the PCE fund to determine its
sustainability.
3:08:33 PM
Mr. Steininger discussed the budget for the Department of
Corrections (DOC) on slide 12. The department had seen
significant growth over the past few fiscal years to ensure
correctional facilities were adequately supported. The
reductions that had occurred in earlier prior fiscal years
did not adequately support the department. He reported that
additional beds in Community Residential Centers (CRCs)
were being proposed [3,975.0 UGF] and added GPS tracking to
CRC residents [461.5 UGF]. In addition, an effort to
utilize federal and municipal man-day receipts to offset
UGF [-3,500.0 UGF, 2,400.0 GFPR, 1,100 Fed]. He elucidated
that man-day receipts were collected for federal inmates
housed in state correctional institutions. The man-day
funds were variable year-to year and they had been under-
reflected in the budget. The department appropriated the
average collection amount of $3.5 million to offset UGF.
There was a technical change that resulted in the
replacement of insufficient Restorative Justice Account
funds with UGF [4,344.9 UGF, -4,344.9 Other]. He explained
that the account was for the PFDs of incarcerated or
convicted individuals that was distributed primarily to
DOC. The number dramatically decreased to $4.3 million due
to the lower PFD amounts and less people incarcerated or
convicted of felonies. In order to keep the department
whole funding had to be backfilled with UGF. Finally, the
budget restored positions and funding to meet the Palmer
Correctional Center staffing needs [791.7 UGF, 6 PCN].
3:12:10 PM
Representative Johnson asked about the projected opening of
the Palmer facility. She inquired whether the additional
PCN number was for an entire year or the partial year from
the projected opening. Mr. Steininger replied that he was
unaware of the projected date of the opening. He added that
the positions would be filled by FY 22 and reflected a full
years worth of funding.
3:13:15 PM
Representative Josephson asked about the $2.4 million of
municipal man-day contributions. He deduced that the
accounting was similar to the effort to shift costs for
prosecutions to municipalities that were not paying for
them. Mr. Steininger answered that there were already
existing agreements between DOC and municipalities that
house inmates. He deferred to DOC for further information
regarding the agreements. He reported that the transaction
was not like the Department of Law (DOL) proposal.
Representative Josephson expressed concerns about shifting
the financial burden from the state to municipalities. He
believed that it was not beneficial to the people of the
state. He characterized the governors budget as narrowly
reflecting the states obligations. He asked if he was
correct. Mr. Steininger responded that where there was a
responsibility that belonged to the state, the state should
meet its responsibility. He maintained that if the service
the state was providing a municipality was the
municipality's responsibility, like the DOL example, a
level of cost sharing was expected.
3:16:36 PM
Representative Carpenter referenced the man-day accounting.
He wanted clarification whether the request was related to
new authority to collect for man-day services or if the
federal authority was not utilized in the past. Mr.
Steininger explained that in the prior year that the state
expended federal man-day monies that had accrued over
several years for supplemental healthcare. Therefore, the
state had been spending UGF. Once the department discovered
that the man-day collections were available for the
supplemental need it realized the funds were not utilized
when collected. The proposal to expend the man-day funds
when they were collected was a more appropriate way to
budget. The proposal was offsetting UGF. It was
advantageous in the prior year because the built up
collection was available for a supplemental need but was
not reflective of accurate budgeting.
3:19:01 PM
Representative Carpenter was concerned with the municipal
man-day funds. He did not want the change to be a surprise
to the municipalities. Mr. Steininger responded that it was
not a surprise to the municipalities and wanted DOC to
explain the process in detail when appropriate.
Representative Wool cited the Regulatory Commission of
Alaska Master Analyst positions and compared them to the
DOC positions. He deemed that the DOC positions were more
costly because they were medical in nature. Mr. Steininger
responded in the affirmative. He offered that the
additional positions were nursing staff. Representative
Wool noted that the additional positions did not include
correctional officers. He asked for further clarification.
Mr. Steininger replied that most of the positions related
to the Palmer facility had already been added to the budget
in FY 19. The PCNs were reflected in the budget numbers.
3:21:44 PM
Representative Wool asked for further clarification. He did
not see the increase in staff in the PCN count to open a
new prison. Mr. Steininger relayed that the increase took
place in FY 19 to FY 20 and were PCNs only. The medical
professionals were not added at the time but were brought
in to provide services.
3:23:35 PM
Representative Thompson returned to the topic of charging
municipalities for prosecutions. He indicated that the City
of Fairbanks did not have a Driving Under the Influence
(DUI) law. A municipal office charged an inebriated driver
under state law. He did not know how the City of Fairbanks
could be billed for state law prosecutions. Mr. Steininger
answered that the DOL proposal was related to misdemeanor
prosecutions, which would be municipal laws. The state laws
would remain the responsibility of the state. He deferred
further explanation to DOL.
3:25:12 PM
Representative Rasmussen returned to the PCNs at the Palmer
Correctional Center. She wondered if the positions had been
funded without occupancy. Mr. Steininger replied that if
the staff was not hired there were no costs. The PCNs
allow the department to hire the staff when necessary. The
costs in FY 20 and FY 21 were related to staff needed to
the reopening the facility. Representative Rasmussen asked
about the 150 new PCNs from FY 19 to FY 21 and wanted more
clarification. Mr. Steininger responded that the
correctional officer PCNs were sitting vacant. The PCN
number reflected the maximum number of employees DOC could
hire but not necessarily the number of current employees.
The department may have used some of the PCNs for
correctional officers for other correctional facilities. He
noted that trying to tie PCNs to actual counts was a
difficult endeavor.
Co-Chair Foster reviewed the agenda for the following day.
ADJOURNMENT
3:29:03 PM
The meeting was adjourned at 3:29 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HFIN OMB Budget Overview 2.24.21.pdf |
HFIN 2/24/2021 1:30:00 PM |