Legislature(2015 - 2016)SENATE FINANCE 532
02/05/2015 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Overview: Governor's Fy 15 Supplemental Request | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 30 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
February 5, 2015
9:02 a.m.
9:02:20 AM
CALL TO ORDER
Co-Chair Kelly called the Senate Finance Committee meeting
to order at 9:02 a.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Pat Pitney, Director, Office of Management and Budget,
Office of the Governor.
SUMMARY
SB 30 MARIJUANA REG;CONT. SUBST;CRIMES;DEFENSES
SB 30 was SCHEDULED but not HEARD.
OVERVIEW: GOVERNOR'S FY 15 SUPPLEMENTAL REQUEST
^OVERVIEW: GOVERNOR'S FY 15 SUPPLEMENTAL REQUEST
9:03:48 AM
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, stated that the overview was
related to SB 40. The total UGF amount was $50 million, but
there were both increases and decreases in the budget bill.
There were some significant components to the bill
including the Medicaid payment from 2014 that was not
recorded in 2014 because of accounting rules and a
recommendation by Legislative Audit to move it to 2015 for
completion. There was a corresponding lapse in 2014 of a
slightly higher amount of $92 million. The second major
component of the bill was the repeal of the one-time
education funding from 2015 of approximately $100 million
in K-12 education funding over three years.
Senator Dunleavy queried the number of dollars that were
already encumbered. Ms. Pitney replied that she knew of a
few that were encumbered, and others she was unsure. The
$92 million was committed in 2014, because of the intention
of the accounting. There were some judgments and
settlements that were committed encumbered items. The items
that were available to go without spending did not get
included in the supplemental budget.
9:07:18 AM
Senator Dunleavy wondered what would occur if the
legislature denied the supplemental requests. Ms. Pitney
agreed to provide that information. She felt it would be
extremely detrimental.
Senator Dunleavy requested a list of the encumbered items,
and would like to see the impact on the agencies would the
legislature deny the requests.
Senator Olson wondered which department would be most
affected by the budget reductions. Ms. Pitney replied that
the Department of Health and Social Services (DHSS) would
see the greatest impact.
Ms. Pitney stated that another component of the
supplemental budget was the reappropriations of unobligated
amounts on community, sewer, and water projects that were
already completed. She explained that there could be a
project with a $2.5 million allocation, and there may be
$100,000 remaining. There were several small community,
sewer, and water projects with small amounts in their
project balance, so they were consolidated for an amount of
money for the Spill Prevention and Response (SPAR) fund
necessary to complete operations in the current year.
Co-Chair Kelly wondered if the SPAR amount was net zero.
Ms. Pitney responded in the affirmative.
Senator Dunleavy queried the result of declining the
Department of Environmental Conservation (DEC) transfer for
SPAR.
Co-Chair Kelly wondered what document Ms. Pitney was
working from. Ms. Pitney referred to the spreadsheet.
Co-Chair Kelly queried the page of the spreadsheet.
9:12:15 AM
AT EASE
9:14:35 AM
RECONVENED
9:14:47 AM
Co-Chair Kelly directed the committee to page 6 of the
spreadsheet.
Vice-Chair Micciche wondered if the municipalities were
contacted to determine the finalization of their projects,
and the availability of the reappropriation to the SPAR
fund. Ms. Pitney responded that, traditionally, the
community was allowed to reappropriate any funds that were
left over after a project's completion. The current fiscal
situation in Alaska propelled the administration to take
back the funds to cover the SPAR budget shortfall.
Vice-Chair Micciche wondered if there were other projects
in the state that may possibly have leftover funds. Ms.
Pitney replied that she understood that the projects were
as many as were complete in the state.
Vice-Chair Micciche surmised that it was every project in
the state with unexpended dollars. Ms. Pitney agreed.
Co-Chair Kelly stated that any other project would not be
included in the supplemental budget.
In response to a question from Senator Dunleavy regarding
the SPAR fund source, she stated that there was a 5 cent
per barrel fee for oil in Trans-Alaska Pipeline System
(TAPS). The SPAR fund was adequate at a time when there
were 2 million barrels in TAPS. The 5 cent fee had not been
adjusted in 20 years. She pointed out that there were
currently only 500,000 barrels of oil per day in TAPS. The
SPAR fund program needed to be structurally corrected,
because of the lower number of barrels of oil. The
supplemental budget allowed the SPAR fund to get funded
through 2016 without correcting the 5 cent structural
deficit. A policy discussion regarding the level of state
responsibility in SPAR, and how would SPAR be funded. The
supplemental budget allowed SPAR to manage through FY 15
and FY 16, but FY 17 required a structured solution. She
remarked that she and Commissioner Hartig would provide a
recommendation later in the current session, in order to
have a conversation regarding the structural changes
necessary. The supplemental budget allowed for time within
the existing program, through a pending settlement and
reappropriation to maintain the program through FY 16.
9:20:01 AM
Co-Chair Kelly wondered why FY 16 related to the
supplemental budget. Ms. Pitney replied that the SPAR fund
required a minimum of $800,000 to complete the current
fiscal year. She remarked that the reappropriation was $3.2
million into SPAR, which would allow $2 million for FY 16.
There was also a pending settlement at approximately $5
million, which would be deposited into SPAR. Those two
components plus the 5 cents per barrel fee would allow for
the management of SPAR through FY 16.
Co-Chair Kelly wondered why money for FY 16 was included in
the supplemental budget. Ms. Pitney agreed to provide that
information.
Ms. Pitney explained that there were two more program
repeals: $750,000 in the Alaska Digital Teaching
Initiative.
9:22:02 AM
AT EASE
9:25:37 AM
RECONVENED
9:25:44 AM
Ms. Pitney referred to the spreadsheet in the supplemental
budget request folder (copy on file). She looked at page 1,
line 6, and looked at the request of $785,000 to the
Alcohol Beverage and Control (ABC) Board for implementation
of the Marijuana sale and use law. She remarked that there
were other smaller items on the page.
9:26:37 AM
Co-Chair MacKinnon looked at line 7 on page 1, and the $2
million for the 1066 Public School Trust Fund. She queried
the asset value in the trust. She understood that the
legislature could only remove in excess amounts of the
actual value of the fund, based on statute. She wondered if
there was any additional revenue in the fund. Ms. Pitney
agreed to provide that information.
Ms. Pitney looked at page 2, and noted the three listed
items in Department of Health and Social Services (DHSS).
Two components were related to the growing number of
children in foster care and subsidized adoption or
guardianship.
Co-Chair Kelly wondered if the $1.7 million was only for
foster parent payments. Ms. Pitney replied in the
affirmative. She explained that the request was based on
the number of children in care.
Co-Chair MacKinnon remarked that nearly $7 million was in
the supplemental budget to support a recently modified
program. She queried the fiscal note projections from the
change, as compared to the current budget request. She
stressed that her inquiry was not an examination of the
need, but rather a comparison of the previous fiscal note
versus the current request. Ms. Pitney agreed to provide
that information.
Ms. Pitney looked at page 2, line 8, the Wood Bison
Transport, which was a primarily federally funded program
that would transport bison through Department of Fish and
Game (DFG)
Senator Bishop wondered if the state had received the
federal receipt for the Wood Bison Transport.
Co-Chair MacKinnon remarked that there had been some
concern regarding the federal government's approval of
reintroducing bison to an area that contained hydrocarbons
or other minerals that Alaskans may want to access. She
wanted to ensure that the reintroduction would not create
an entitlement or trigger on the Endangered Species Act to
preclude Alaska from developing its natural resources.
There was a recent letter of inquiry to the federal
government to ensure that the state would not be penalized
for ensuring the animal is returned to its natural habitat.
9:31:29 AM
Senator Dunleavy remarked that there was a federal waiver
that would allow the bison transport. Ms. Pitney agreed to
provide further information.
Ms. Pitney looked at page 3, line 12, and the Medicaid
payment. The $92 million request was for payments that were
made in 2014. At the request of Legislative Audit, the
payments should be put into the 2015 budget.
Co-Chair Kelly wondered why the payment was moved from 2014
to 2015. Ms. Pitney agreed to provide that information.
Senator Dunleavy shared that the term for the term for the
Bison Transplant was accepted as "experimental", and the
bison would be moved to the Innoko River.
Co-Chair Kelly asked for clarification.
Senator Dunleavy announced that the bison would be moved to
the Innoko River area.
Ms. Pitney looked at page 3, lines 13 through 15, which
were related to fund management costs, and fee associated
with managing the funds. She stated that line 16 was for
investment management fees. The current calendar year saw a
good return, so the management fees were based on the
returns. She could not speak to the return levels in the
upcoming year. The
Co-Chair MacKinnon wondered if the fees on line 16 were
related to the Public Employees' Retirement System (PERS)
and Teachers' Retirement System (TRS) one-time cash
infusion of $3 billion from the previous legislative
session. Ms. Pitney replied that the deposits were timed
over the course of three periods. She agreed to provide
further information.
Co-Chair Kelly noted that there were various topics that
Ms. Pitney would address at a later date.
9:37:02 AM
Vice-Chair Micciche looked at line 9, which related to HB
126. He stated that HB 126 would increase the age that
children would stay in care from age 20 to age 21. He
wondered if the state could afford the $2.3 million. He
felt that there needed to be an analysis of previous
legislation to determine their current affordability.
Co-Chair Kelly surmised that the request was from various
funds. Vice-Chair Micciche added his concern whether there
were additional requests, or fund transfers. Ms. Pitney
replied that the request was from a fund, but did not know
if there was a fee associated with the fund. She agreed to
provide further information.
Ms. Pitney looked at page 4, explained that there were some
net zero technical adjustments on lines 18 through 20. The
Municipal Bond Bank on line 17 was an additional cost due
to the regulatory oversight. She shared that line 22 was
related to a statute that provided for a grant, if there
was a change in a community organization. She stated that
Edna Bay had changed their community organization, so it
required the $75 million.
Ms. Pitney looked at page 5, line 25, which was an
outsourcing of the single audit for the DHSS major federal
programs like Medicaid. The single audit was traditionally
conducted by Legislative Audit, but it was requested that a
third party provider conduct future audits. The request was
for a tree-year contract for an external audit.
Co-Chair MacKinnon wondered if the administration worked
with the department to ensure that its information
technology system was working properly. She felt that
current system was not functioning as anticipated. She
pointed out that the information extraction must be
ensured, before funding the audit. She stressed that the
system must be repaired to access the information. Ms.
Pitney replied that the system needed dramatic and
immediate improvement, and was the highest priority for the
current administration to improve the system. She felt that
an improved system may provide the opportunity for auditing
responsibilities to revert back to Legislative Audit.
9:43:16 AM
Co-Chair MacKinnon stressed that she was not requesting the
responsibility return to Legislative Audit, though she
recognized the additional funding requests for a third
party audit. She noted that the DHSS was sometimes
unwilling or unable to respond to auditing requests from
Legislative Audit. She hoped that the independent auditor
would be able to pull all the data from the system to
provide the necessary information for the completion of the
audit.
Ms. Pitney looked at line 26, which was a settlement for
the correctional officers. She explained that line 27 was
additional federal receipts that were available for Alaska
Energy Authority (AEA) programs, if the authority was
available to accept those receipts. The line 28 was
connected to the reappropriation of the Mount Spur
projection the DGF. The capital budget appropriation in the
capital budget was reappropriated to cover some of the AEA
programs, so the supplemental request was a repeal of the
DGF portion of the project into the Renewable Energy Fund.
Senator Bishop stressed that he wanted to evaluate the
Mount Spur request, in order to prevent future redundant
requests. Co-Chair Kelly replied that the concern was
related to previous administration.
Co-Chair Kelly asked that the Department of Corrections
(DOC) connected with Senator Bishop to address the
redundancy concern. Ms. Pitney agreed to provide that
information.
Co-Chair Kelly requested a discussion regarding the future
of the SPAR fund. He stressed that there was not enough
money to sustain the program, and the mechanism to provide
money was connected to oil production. He noted that oil
production had decreased, and also remarked that there was
no benefit at higher oil prices. He felt that a half-hour
discussion would be sufficient.
Vice-Chair Micciche echoed Co-Chair Kelly's concerns. He
explained that there were entities that paid into the fund
who had their own spill response program, supplementing
many other industries that did not pay into the fund. He
felt that other industries should share the cost. He
remarked that he was not against raising the SPAR fee.
Co-Chair Kelly suggested that a subcommittee be formed to
discuss the issue.
9:48:30 AM
Senator Dunleavy remarked that the subcommittee for DEC had
addressed the SPAR fund issue during recent years. He
remarked that the original mission of the SPAR fund must be
examined.
Ms. Pitney looked at page 6, line 29, which was the
reappropriation that opened the scope for the Interior Gas
Project to allow for purchase of instate versus strictly
North Slope assets, for facilitation of the Interior Gas
Project.
Co-Chair Kelly wondered if the item should be included in
the budget rather than legislation. He noted that the
original appropriation was a statute from SB 23.
Vice-Chair Micciche shared that he had offered an amendment
to SB 23 to provide for statewide potential, but the
amendment was not accepted. He felt that a discussion
should occur in a committee setting, rather than included
in the supplemental budget.
Ms. Pitney addressed page 7. She stated that lines 33 and
34 were judgments and settlements; and line 35 was a scope
change for existing funds to be used for information
technology beyond the safety and information network. She
stated that line 36 was an estimate for the anticipated
fire suppression activities for Department of Natural
Resources (DNR) for $3 million. She stated that line 38
would repeal funding for the redistricting board, because
it had completed its work.
Ms. Pitney looked at page 8, line 39 through 43, which
outlined the repeals. She stated that line 39 was the
school debt reimbursement reduction, which reduced the
overall required debt service.
9:53:22 AM
Co-Chair Kelly remarked that one-time funding for education
from the previous year, had dollars specifically targeted
to policy. The bill had an increase to the base student
allocation (BSA), and the other dollars were related to the
policy initiatives. He requested an analysis of an
adjustment, if the BSA-increase were removed, instead of
the policy initiatives' funding. He wondered what would
occur, if there was a reduction to the BSA.
Vice-Chair Micciche remarked that there should be
transparent conversations regarding policy adjustments. The
SPAR fund required important discussions, because there was
$7 million into the SPAR fund for emergency management. The
open discussions should occur regarding what the state
could afford. The SPAR fund should be utilizing fees from
the individuals that take advantage of its services. The
state could not afford to continue to cover the costs of
many programs. He appreciated the creative efforts to
manage the shortfall, but reiterated that the cost should
be shared by those who use the benefits of the program.
Co-Chair Kelly restated that he would set aside some time
for committee discussion. He encouraged Vice-Chair Micciche
to organize a task force related to the SPAR fund.
Ms. Pitney stated that page 8, lines 47 through line 63
were ratifications, which were prior year accounting
"clean-ups."
9:58:14 AM
Co-Chair Kelly surmised that the ratifications were
essentially bills that required payment. Ms. Pitney agreed.
Co-Chair Kelly appreciated the work of Ms. Pitney. He
remarked that there were no assistants in Ms. Pitney's
presence. He cautioned against using the budget to shape
policy that was already designated by the legislature. He
looked at the one-time funding repeal, and stressed that
the previous year's education discussion was impactful and
important, and did not feel that the funding should be
repealed.
Co-Chair MacKinnon remarked that each administration could
draft a supplemental budget as they work to resolve
financial challenges. She noted that Alaska was facing a
financial challenge, and remarked that it was a great
challenge to find $2.4 billion. She remarked that education
was bearing the cost of paying a bill from 2014 that once
had a positive revenue. She pointed out that the
legislature was facing difficult choices. There were
students in Alaska that were seeking a quality education,
and the legislature had worked to specifically allocate
some various resources to enhance education. She furthered
that there were many in the state that were accessing
current Medicaid services, and the state needed to pay $92
million to Medicaid. She noted that there was an intent
from the current administration to expand Medicaid. She
looked forward to the conversations to determine the cost
to Alaskans in perpetuity. She stressed that the cost of
Medicaid services would be weighed against the cost of
education. She announced that Alaska's education used 28
cents of every dollar in the general fund, and another 28
cents was spent on health and human services in the state.
Co-Chair Kelly remarked that there was a large amount of
money that needed to be removed from government.
Vice-Chair Micciche cautioned against "short-cutting" the
system. He stressed that policy discussions were important
to the process, and budget issues could not be solved by
discounting recently enacted policy.
10:05:04 AM
Co-Chair Kelly expressed opposition to most new budget
requests because Alaska had a bonded indebtedness bill of
$228 million per year in the operating budget. He felt that
the bond debt should be in the capital budget instead,
because it effected the actual size of the capital
expenditures. The capital budget should reflect the total
capital expenditures. The capital budget was used to
balance the needs of different communities in the state,
but the $228 million provided a skewed perspective. He
noted that the current year's capital budget was unusually
small, but encouraged the inclusion of the bonded
indebtedness in the capital budget in future years.
10:07:08 AM
Senator Dunleavy hoped that the administration was
composing methods to work with the legislature to reduce
the size of government. He understood that budget
reductions were imperative in this time of fiscal crisis,
but felt that laws must be made to limit the growth of
government. He stressed that the cost drivers would always
require funding. He felt that many of his constituents
understood the budget issues, but understood that it will
be devastating to some people. He encouraged the
administration to eliminate some regulations to lower the
cost to specific industries, non-profits, etc. He remarked
that there would be continual budget reductions, and the
legislature may violate its own laws and regulations. He
shared that the education system bureaucrats were trained
to continue to ask for more funding for programs. He feared
that Alaskans may wait for the cost of oil to increase, and
felt that waiting would be a devastating mistake for
Alaska. Ms. Pitney appreciated Senator Dunleavy's comments.
Co-Chair Kelly felt the Senator Dunleavy adequate described
the direction of Alaska.
ADJOURNMENT
10:12:39 AM
The meeting was adjourned at 10:12 a.m.
| Document Name | Date/Time | Subjects |
|---|