Legislature(1999 - 2000)
01/12/2000 09:05 AM Senate FIN
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SENATE FINANCE COMMITTEE LOG NOTES 01/12/00 GENERAL SUBJECT(S): Recap of Significant Issues in the FY'00 Budget and Overview of Governor's Proposed FY'01 Operating Budget Annalee McConnell, Director, Office of Management & Budget The following overview was taken in log note format. Tapes and handouts will be on file with the Senate Finance Committee through the 21st Legislative Session, contact 465-4935. After the 21st Legislative session they will be available through the Legislative Library at 465-3808. Time Meeting Convened: 9:05 am Tape(s): SFC-00 #2, Side A and B PRESENT: Senator Parnell Senator Adams Senator Torgerson Senator P. Kelly Senator Donley Senator Green Senator Leman Senator Phillips Senator Wilken ALSO PRESENT: ANNALEE MCCONNELL, DIRECTOR OFFICE OF MANAGEMENT AND BUDGET SENATOR KIM ELTON LOG SPEAKER DISCUSSION 00 CO-CHAIR PARNELL Called the meeting to order. 23 ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT & BUDGET Stated that she would talk in general terms about where they were headed with the 2001 proposed budget. She mentioned the Governor's combined State of the State and State of the Budget speech this same evening. Ms. McConnell then introduced the department's new Chief Budget Analyst, Joan Brown. This is the first year that all of the departments are in the new Alaska automated budget system. On the operating side, all of the Capital Budget figures for the last two years have been produced through this system. The changes made to these budget formulations are in sync with what the legislature is attempting, such as a clearer focus on how narratives are generated, as well as performance measures incorporated directly into the budget. These efforts help with the public perception that the department looks beyond the numerical value of the budget to the service value of the budget as well. Ms. McConnell then discussed generally how budgets should be tracked and reported upon. She then spoke to an increase in the Governor's budget since its original release in December. In regards to the total budget of $6.7 million, the largest increase has been in the Permanent Fund arena. Between the increase of the Permanent Fund dividends and the inflation proofing for next year, this accounts for a $266 million increase. Much of this increase is an investment to produce savings in the long term. She used the Welfare Reform and the Child Protection programs, as examples of needing up-front investments to produce satisfactory results for the future. Education is also considered in the context of investing for the future, in terms of children graduating high school and placed in good employment. Ms. McConnell noted that some individuals have suggested looking at the FY00 budget rather than at the Governor's proposed budget. Keeping this in mind, she wished to flag for the Committee, some considerations as they looked at the 2000 budget. For instance, as part of the effort to cut the budget last year, a number of the formula programs were funded at a lower level than what they had originally projected. She used Foster Care, Medicaid, Adult Public Assistance and Day Care Assistance (all formula programs) as those programs totaling about $14 million less in the FY00 budget. On the other side, there are low school enrollments, which will create some offsets. She mentioned the leasing budget, where the FY00 budget was known in advance, and would require a supplemental in order to fully fund their existing commitments with the private sector for leases that the state has in various communities. If the 2000 budgets were at the full level, they would allow for $25 million in areas such as Medicaid, Adult Public Assistance, Pupil Transportation, etceteras. A third area accounting for Governor's FY01 requested budget increase is what Ms. McConnell termed "existing commitments", meaning, for example, youth facilities such as the one in Matsu or Ketchikan which are still under construction. These will also require monies for staffing once they are completed at $3.4 million. Statewide Elections would also be put in this category, for next year, at $1.7 million. 142 The Governor has proposed investments to generate capital for the "Children's Budget, the first of these being "Smart Start." Some of these monies, again, are extensions of their current commitments, such as the Child Health portion. The department does not propose to expand the nature of this program, but as families sign onto Denali Kid Care, and hence increasing the numbers served, the budget will require growth. They have made some tremendous progress in the Child Protection area, along with money funded and new statutes implemented. While they are much closer to the goal of zero tolerance, their response to reports of harm is at 90 percent, yet there is still more that must be done. The caseload is still growing. Childcare is a large part of welfare reform. Other states have found that one of the absolute requirements to ensure keeping people off welfare rolls, is an expansion of childcare. Not all of the families that have signed up for this service and are eligible based on their income, are able to enroll because of the sheer volume of people coming off the welfare rolls. They have proposed an investment of $700,000 in the Infant Learning Program (ILP). This figure would eliminate the wait list for ILP. This is a $700,000 increase in the spending for this program, but this is a relatively little investment up front. This preventative investment saves tremendous cost in the long term. When a child's needs are identified early and they can get the necessary attention required, they are able to get out of the special needs system and require less future care. This means low state dollars spent. The other major area for the Children's Budget is education. Just under $20 million less will be required next year in state aid. This is the result of three factors: lower school enrollment and increase in federal aid and local aid. These three elements have effectuated a drop in required monies for fully funding the school foundation formula. The Governor proposes to reinvest less than half of this amount in two areas, one being an increase in the Quality Schools Grant which is already a part of the school foundation formula at $16 per Average Daily Membership (ADM). The Governor proposes to increase this figure to $52, for a total of about $7.6 million. Ms. McConnell then outlined the benefits of requiring exit exams for graduating high school students. 217 Next she addressed the Head Start project, which has done a great deal to improve the way in which children learn. The Governor also supports the University's Board of Regents request and its' proposed $16.9 million operating budget. Ms. McConnell noted that these two programs were an investment in the education of Alaska's children. The prison population in Alaska continues to grow, although this number is beginning to level off. $2.7 million is still required next year to stay within the Cleary requirements. They have also proposed $900,000 for the Public Safety Department. Ms. McConnell also explained that the budget of $8.7 requested by the Court System here was simply transmitted. They chose to replace the one-time funds for Municipal Assistance and Revenue Sharing. The $3.4 million of Statewide Transportation Improvement Program (STIP) funds that were in the FY00 budget were replaced with the general funds because they felt it would be important to keep the Municipal Assistance and Revenue Sharing at the current year level. Debt service accounts for about 12 percent of the increase between 2000 and 2001, this number being $12.3 million. She then went into the background and rational behind these numbers as an outgrowth of discussions which took place last spring. 279 CO-CHAIR PARNELL Asked how Alaska Housing Finance Corporation (AHFC) dollars are treated when the budget is computed? Are they considered general funds or other funds? 280 ANNALEE MCCONNELL The first $33 million does not even come in as a dividend because this figure gets directly paid by AHFC and applied to any debt. This part does not factor in as general funds. The remaining amount is committed directly to the Debt Retirement Fund. There are areas, in the budget, that many people felt should not have been increased. Ms. McConnell spoke directly to these different areas, such as the Department of Environmental Protection. There are areas within the management of the State's natural resources where long-term improvements have not been realized. Also, about employee contracts, the state is under negotiation with the bargaining unit and none of these related numbers have been included in this budget. When these negotiations are concluded, the related budgets will be presented to the legislature. 319 Ms. McConnell then said a few words about the capital budget and those department monies that would have an impact on the operating budget as well. Out of the total $6.7 billion budget, $1.8 billion of this is in the Permanent Fund Inflation Proofing and Dividends, $1.7 of this is in federal funds for both the operating and capital side, (restricted funds). About 1 billion of this is for K-12 and the University, both operating and capital, including school debt reimbursement. 349 SENATOR PHILLIPS With the exception of the University district in Fairbanks, he asked Ms. McConnell how she thought the advocates for these increases voted on September 14? 353 ANNALEE MCCONNELL Most everybody says they would like to see the budget decreased, but when it comes to specifics, most of these same people wonder why the state does not do more. She then referred to a meeting between the Governor and the Board of Regents last month where 3400 letters, written by students all around the state, were written to request increased financial support for the University. 368 SENATOR PHILLIPS Spoke for his district and stated that he voted yes and was a yes campaigner for the advisory vote. The one constant he heard was that, they did not cut enough even after reducing the budget by $218 million. No one has asked him to increase this university budget. He stated that he would not work to increase this budget or to vote to increase this budget. He said he would work toward reducing this budget by at least $30 million from the prior year. 387 ANNALEE MCCONNELL Reiterated her prior statement that these same people, who wish to cut the budget, when asked how, are at a loss to do so since so many people depend on the programs now in place. 410 SENATOR PHILLIPS Stated that he just recently sent out a questionnaire regarding the $6.7 billion state spending proposals. He did not think it was very responsible to continue on this path and at the same time begin increasing the budget. 426 CO-CHAIR PARNELL Asked what was still left on the table besides labor contracts. The administration is negotiating with 11 out of 12 unions. The Governor noted that he would negotiate increases in these contracts. This will add to the $98 million increase already. Parnell asked what the range increases have historically been for labor contracts on an annual basis. 432 ANNALEE MCCONNELL Stated that she did not have ready access to these figures, but they have conducted surveys, which attempt to compare the state as public sector to that of the private in Alaska over the last five years. They have seen a differential. The state's wage rates have changed far less in comparison to the private sector. These types of questions might be better directed to Commissioner Poe (Department of Administration). 441 CO-CHAIR PARNELL The rumor mill is substantial regarding additional increases due to union negotiations. If there is going to be $1 million increase proposed, the Committee needs to know as soon as possible. 443 ANNALEE MCCONNELL It is the department's hope that negotiations will be concluded before the end of the session since these numbers will affect the overall budget discussions. 446 CO-CHAIR PARNELL Agreed and noted that at the end of last year, the health benefit issue was dropped on the Committee at the very end. He did not want the Committee to be put in this position again. Co-Chair Parnell then asked about the tobacco settlement money as being general fund dollars, which was applied to Medicaid to cover costs of smoking. He understood that the state is not getting as much money in this tobacco settlement area and asked Ms. McConnell to speak to this issue. 456 ANNALEE MCCONNELL Noted that the tobacco funds are treated as general funds. They are "tagged" in the same way that a Mental Health or general fund match is tagged, although it still counts as a general fund. From this standpoint there is not any difference between tobacco money and other general funds. The Legislature appropriated about a little over $29 million last year, most of this went to Medicaid, but there was also $1.4 million for tobacco control and some money in a couple of other areas. This was a combination of the annual payment and the one time "signing bonus," which was about $8 million. The projections for this next year are lower, at approximately $20 million. These tobacco revenues are part of the fall forecast. They are treated as general- purpose revenues in the forecast from here on out. These monies are still aggregate as part of the general funds, so a fund source change does not need to be made. Because of this, less money is coming into the general fund from this source. These monies are still being counted in both the 2000 and 2001 budgets as general funds. The amount of money that was in the tobacco settlement, which varied from year to year, are subject to volume adjustments. This is on a national basis. This means that the projection used does incorporate the possibility that there might be some reduction in the amount of tobacco consumption nationwide. 480 SENATOR DONLEY What is the Governor's proposed level of funding for the Division of Motor Vehicles and how does this compare to last year? 482 ANNALEE MCCONNELL Answered that she did not think there was any change in this department's budget. 487 SENATOR DONLEY Then asked what the Administration's position within this proposed budget was for the continuation of the Financial Responsibility Act enforcement? 492 ANNALEE MCCONNELL Noted that she did not believe there was any change in this policy that she was aware of. She stated that she would have Commissioner Poe get back to him with that information. 495 SENATOR LEMAN Asked how the TransAlaska Pipeline Liability Fund is accounted for in this proposed budget. 497 ANNALEE MCCONNELL Stated that she could not recall whether this fund was considered in the fall forecast, but she believed it was. She said she would confirm this. She believed that this amount was accounted for as part of the general fund revenues in the fall forecast. 500 SENATOR WILKEN Noted that his question was in regards to head counts and funding sources. A year ago, the number "600" was proposed and this increase was discussed all through the session, and then again through the summer. He felt as though it was important, in relation to this present budget that they know whether the head count has increased or decreased, as well as determining the funding source. These types of inconsistencies last session were hard to run down. He felt it was important to be able to say that, yes, head counts were increased to take care of these services, while at the same time being able to show where the money was coming from to fund specific budgets. 515 ANNALEE MCCONNELL Empathized with this frustration. She noted that they now have on their web page a sheet that does just that, along with a narrative. As part of their backup, they've generated spreadsheets that budget technicians would find useful as well. This new system seems to be working well. The raw count of positions changed by the amount of 97 between the 2000 and 2001 budgets. Twenty-five of these are federally funded positions, both operating and capital. She then proceeded to give a specific description of the affected positions and the related projects. 544 CO-CHAIR PARNELL Noted that the Committee had yet to receive detail books for at least two departments. He asked when they could expect these. 545 ANNALEE MCCONNELL Stated that these would be forthcoming and apologized for the delay. 554 SENATOR DONLEY He understood that the Governor's budget did not move forward with at least one of the new youth facilities, specifically the Kenai project. 555 ANNALEE MCCONNELL Responded that the Governor has not proposed any additional construction at this point, but they would be fully staffing the three facilities that are under construction now, including the 30 additional beds at McLaughlin, the facility in the Matsu and in Ketchikan. They also accounted for some operating budget concerns with overcrowding at the Bethel facility, but they would not be proposing more construction at this point. 559 SENATOR DONLEY Asked why this was so. He noted that the Administration's long-range plan included the Kenai facility, the Legislature put the money into the budget for the design and he asked why they had decided not to go through with this project presently. 562 ANNALEE MCCONNELL She noted that this was for a couple of reasons. They knew there would be some significant relief on the system once these beds currently under construction, come on line. They have had to discontinue some projects because of budget constraints. 572 SENATOR ADAMS Responded to a previous comment made by one of the committee members, about Eagle River not feeling the pain of budget cuts. He noted that there are communities around the State of Alaska that have felt the pain of budget cuts, especially in the area of Municipal Assistance. Some of the villages have had to start up Bingo enterprises to pay for some of their police protection and administration. He also noted the cuts that affect the Red-Dog Mine and its production. He suggested that before they start disseminating their budgets, they should reduce the number of state employees in Anchorage down to the 1985 employee numbers, which was 6,890. The numbers there presently stand at 8,504. The average pay salaries in this district is about $60,000, including benefits which would constitute about a 98 million reduction. He added that there are people around the state that have felt the pain, it depends on where a person lives and what governmental services are utilized. 590 SIDE B 9:54 AM 587 SENATOR LEMAN Stated that he has visited the Red-Dog Mine several times. He was aware of a permit not being issued there. He felt this was a travesty. He spoke to the commissioner about this, but it had nothing to do with what the Committee had done with the department's budget that affected this situation. 583 CO-CHAIR PARNELL Adjourned the meeting at 9:54 am. SENATE FINANCE COMMITTEE LOG NOTES01/12/00 Page 10
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