Legislature(1995 - 1996)

02/22/1995 09:07 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                        February 22, 1995                                      
                            9:07 a.m.                                          
  SFC-95, # 4, Side 1 (395-575)                                                
  SFC-95, # 4, Side 2 (575-end)                                                
  SFC-95, # 6, Side 1 (000-575)                                                
  CALL TO ORDER                                                                
  Senator  Steve  Frank,  Co-chair,  convened the  meeting  at                 
  approximately 9:07 a.m.                                                      
  In addition to Co-chairs Frank and Halford, Senators Donley,                 
  Phillips, Sharp  and Zharoff  were in  attendance.   Senator                 
  Rieger arrived shortly after the meeting began.                              
  ALSO ATTENDING:  Jim Baldwin,  Assistant Attorney General of                 
  Oil, Gas & Mining Section, Department of Law; Margaret Pugh,                 
  Commissioner  of  Corrections, Annalee  McConnell, Director,                 
  Office of Management  and Budget; Nancy Slagle,  Director of                 
  Budget Review, Office of Management and Budget; Mike Greany,                 
  Director,   Legislative   Finance  Division,   Art  Snowden,                 
  Administrative Director,  Alaska Court System;  Robert Cole,                 
  Director   of   Administrative   Services,   Department   of                 
  Corrections;   Sharon   Barton,   Director,    Division   of                 
  Administrative  Services,   Department  of   Administration;                 
  Barbara  Richie,  Assistant  Attorney General,  Governmental                 
  Affairs,   Department  of   Law;   Dick  Pegues,   Director,                 
  Administrative  Services Division,  Department  of Law;  Bob                 
  Baratko,  Director,  Administrative Services,  Department of                 
  Revenue;  Mike McMullen,  Acting  Director  for Division  of                 
  Personnel, Department of Administration.                                     
  SUMMARY INFORMATION:                                                         
       SB  57    FY  95  SUPPLEMENTAL   REQUEST  -  OFFICE  OF                 
  MANAGEMENT AND             BUDGET                                            
              Discussion was  had with Nancy  Slagle, OMB, and                 
  depart-          ment representatives.  Ms. Slagle spoke  to                 
  the Fast                                                                     
              Track Supplementals, reviewing sections  1-17 in                 
  HB 178.                                                                      
       SB 47  APUC EXTENSION AND REGULATORY COST CHARGE                        
              Discussion  was  had  regarding  a  need for  an                 
              to reflect that this is a sunset bill.  Co-chair                 
              Halford recommended taking the bill up after the                 
        SENATE BILL NO. 57                                                     
        "An   Act   making  supplemental   appropriations  for                 
  operating            expenses of state government for fiscal                 
  year 1995; and            providing for an effective date."                  
  Co-chair  Frank invited  Nancy  Slagle,  Director of  Budget                 
  Review,  Office  of  Management  and  Budget,  to  join  the                 
  committee    and    proceed   with    the    Department   of                 
  Administration's     FY95     Supplemental     Appropriation                 
  Ms.  Slagle  based  her  presentation   on  the  fast  track                 
  supplementals provided to  the committee.  She  outlined the                 
  Department of Law's need for an additional $18,000.0 for oil                 
  and gas litigation, pointing out a $2.8 million reduction of                 
  the department's original request with the completion of the                 
  BP Case.                                                                     
  Co-chair  Frank inquired as  to the  long-range expectations                 
  regarding   costs   and   the   potential  for   prospective                 
  settlements  versus  previous  settlements.    Jim  Baldwin,                 
  Assistant  Attorney General,  Department  of Law,  responded                 
  that  cases  tend  to  change  between  groupings  of  audit                 
  periods.  Co-chair Frank asked if the negotiations  could be                 
  established for future  settlements?  Mr. Baldwin  said that                 
  in the past there have been settlements for which there were                 
  no assessments  formerly issued.   He warned that  there are                 
  risks in terms of paying out  money unnecessarily.  He noted                 
  a $5 million  reduction from the  Knowles budget.   Co-chair                 
  Frank requested  information  regarding  the  costs  in  the                 
  Hickel budget  for this  particular component.   Ms.  Slagle                 
  responded that the identified need in  the Hickel budget was                 
  $36 million, reduced by $5 million. The total Knowles budget                 
  is  $31 million. Co-chair Frank asked how that compared with                 
  the FY94 budget.   Ms.  Slagle responded that  it was  $28.8                 
  million.    Mr. Baldwin  stated  an expectation  for further                 
  reduction in the budget by another $5 million.                               
  Ms. Slagle explained the  need of $313.3 for the  Department                 
  of  Revenue to  be  allocated for  the  Mental Health  Trust                 
  Authority.  Trustees  are to be  appointed and an  executive                 
  officer  hired.  The funding is to come from the earnings of                 
  the trust settlement account. Senator  Rieger inquired as to                 
  the  transference  of  money  from  the permanent  fund  for                 
  management which  is the cash  trust component.   Ms. Slagle                 
  said the transfer  has not yet taken place.   She noted that                 
  the  trustees  must  be appointed  and  the  Trust Authority                 
  established  prior  to  the  transfer.   The  trustees  will                 
  negotiate a contract with the Permanent Fund Corporation for                 
  the management of the cash trust.  Ms.  Slagle said that the                 
  cash trust is within  the Department of Revenue.   It earned                 
  over $500.0   the first month.   Co-chair Frank and  Senator                 
  Rieger asked for a further breakdown of costs.                               
  Ms.  Slagle  presented   the  need  of  $44,600.0   for  the                 
  Department of Military  and Veteran Affairs, to  be directed                 
  to the disaster relief associated with the Koyukuk flooding.                 
  She pointed out the request has been reduced by $900.0 based                 
  on a contribution  by the federal  government.  Recently,  a                 
  letter was sent to Governor  Knowles from President Clinton,                 
  stating  that  the  federal  government  has  approved   the                 
  contribution rate of  85% for the public  assistance portion                 
  of the disaster costs.   The implication by the department's                 
  calculation is a reduction in need  from the general fund by                 
  $5.8 million.  Needed is a corresponding increase in federal                 
  receipts plus  another $1.1 in federal receipts to cover the                 
  change in  contribution from  the federal  government.   Co-                 
  chair  Halford inquired  as  to the  government's  intention                 
  regarding payment in all the other areas?  Ms. Slagle stated                 
  that they  will stay  as they  are.   Mitigation portion  is                 
  75%/25%,  and  FEMA  remains  at   100%  coverage.    Public                 
  Assistance  includes:  emergency  work, area-wide  projects,                 
  specific projects, and other anticipated  needs, for a total                 
  of over  $60 million.  She stressed  the federal  government                 
  will  be  reimburing at  85%.   Co-chair  Halford questioned                 
  "anticipated needs"?   Ms. Slagle noted that  the Department                 
  is still performing work on the flood.                                       
  End:   SFC-95, #4, Side 1                                                    
  Begin: SFC-95, #4, Side 2                                                    
  Senator Rieger  asked  if there  were dollar  limits on  the                 
  statutes that  govern the disaster relief fund?   Ms. Slagle                 
  responded that the  limit was over  a million dollars.   She                 
  went on  to explain  that letters  were sent  to the  senate                 
  president and to the speaker of  the house informing them of                 
  the need to exceed the dollar amounts and asked if a special                 
  session  was necessary.   In both cases,  the department was                 
  given the  go ahead,  that a  special session  would not  be                 
  Ms.  Slagle  took  up  the   supplemental  request  for  the                 
  Department  of Corrections.  Senator  Donley questioned  the                 
  high costs  associated  with the  court  appointed  monitor.                 
  Margaret Pugh, Commissioner  for Department of  Corrections,                 
  explained that the fee was partially paid by  the Department                 
  of Corrections.  Art Snowden, Director of the Courts, agreed                 
  to  research  the   shared  cost  and  report  back  to  the                 
  committee.   Co-chair Frank  requested detailed  information                 
  regarding the court appointed monitor duties: How many hours                 
  a  year  it  takes for  compliance,  and  who  pays for  the                 
  position.   Ms. Pugh  responded that  in September,'94,  the                 
  court determined that the Department  of Corrections had not                 
  come into compliance with  the population caps.  A  fine for                 
  contempt  has cost $67,000.  An  oversight was appointed and                 
  is  required  to report  to the  court  on a  regular basis.                 
  Senator Rieger requested a copy of the contract.                             
  Senator  Rieger asked  for  explanation  regarding the  $2.5                 
  million in the  budget "to be  discussed".  Ms. Pugh  stated                 
  the department is close  to receiving $2.5 million from  the                 
  U.S.  Marshal  Service  for the  service  of  reserving, for                 
  federal prisoners, fifty  beds.   The amount is  to pay  for                 
  future  or  past  costs   associated  with  housing  federal                 
  prisoners.  This amount is in addition to  a per diem amount                 
  per prisoner.                                                                
  Senator Rieger inquired if federal prisoners were subject to                 
  the provisions of the Cleary Settlement?  Ms. Pugh responded                 
  that   the  institutions  themselves   are  subject  to  the                 
  Co-chair Frank asked: 1) What are the per diem reimbursement                 
  costs? 2) Are  there other contingencies to  housing federal                 
  prisoners?    3)  Is  it  at  the State's  option  to  house                 
  prisoners?   Ms.  Pugh stated  that she  would respond  with                 
  specific answers  to the  questions at  a later  time.   She                 
  noted that once the contract is signed, the state is obliged                 
  to  provide  50 beds.  The  state  is not  required  to take                 
  prisoners. This  is a courtesy  that all states  provide the                 
  federal government.                                                          
  Co-chair Halford asked  why Alaska would consider  signing a                 
  contract to guarantee 50 beds to the federal government when                 
  it  is over  the population  caps and  sending prisoners  to                 
  another  state?     Ms.  Pugh  answered  that   the  federal                 
  government does not have many prisoners for Alaska, and when                 
  they do,  they  do  not  tend  to stay  long.    This  is  a                 
  convenience contract for the government.  The government has                 
  much larger contracts with other states,  and it would be to                 
  their benefit  to utilize  their services  before coming  to                 
  Senator  Zharoff  questioned  the  out-of-state  costs   for                 
  Alaskan prisoners.    Ms. Pugh  responded that  the cost  of                 
  $2,392.4 million is a 6-month charge for 207 prisoners.  She                 
  noted that they would be shipped back to Alaska if the state                 
  does not fund the program.                                                   
  Co-chair  Halford   requested   from   the   Department   of                 
  Corrections,  the  final  orders on  those  personnel  legal                 
  actions which the  state lost, to analyze the mistakes made,                 
  in an effort to correct the problem.                                         
  Senator Rieger questioned  the logic  in paying recruits  at                 
  the Correctional  Academy a salary.  Ms. Pugh responded that                 
  it  is a 6-week program  at a range 8 salary.   They are not                 
  guaranteed a job.   She expressed her concern  in attracting                 
  people into the  program if they had to bear the cost of the                 
  Senator Rieger asked if Ms. Pugh favored the bill concerning                 
  the terminal leave parole provisions for prisoners? He noted                 
  that  the costs  associated with not  passing the  bill have                 
  cost  the  state $2.1  million.    Ms. Pugh  said  she would                 
  support the  bill. She  stated that  six inmates  alone have                 
  cost over a million dollars in  health care.  Senator Rieger                 
  asked  if  there  is  a  plan  for  the   administration  to                 
  reintroduce  the bill?   Ms. Pugh stated that  it was a good                 
  Discussion regarding Rural Alaska  Television Network/RATNET                 
  was taken up.  It was brought  out that RATNET has been down                 
  due to a  cable break.   Co-chair Halford questioned if  the                 
  state is actually at a cost  savings with the RATNET outage?                 
  Sharon Barton, Department  of Administration responded  that                 
  the calculations would be done once the outage is over.  She                 
  felt that most,  if not  all, the monies  requested will  be                 
  withdrawn on this supplemental. Ms. Barton noted that RATNET                 
  costs $25.0 a week to run the entire program.                                
  Co-chair Frank  asked what the experience has  been with the                 
  collection  of  permanent  fund  dividends  with  regard  to                 
  offsetting the costs of the Office of Public Advocacy (OPA)?                 
  Ms.  Barton  responded that  with  authority from  LB&A, the                 
  department will  receive  $120.0  in receipts  for OPA.  Co-                 
  chair  Frank questioned why  OPA was not  entirely funded by                 
  the permanent fund  since the Public  Defender (PD) and  the                 
  OPA's  operating costs  per  client was  $500.   Ms.  Barton                 
  stated  that  there  are  other   calls  on  permanent  fund                 
  dividends ahead of OPA and PD.  In  addition, she noted that                 
  not  all clients  of  OPA  and  PD  receive  permanent  fund                 
  dividends.  Co-chair Frank asked for specific analysis to be                 
  Ms. Slagle  noted the  change for the  Defender Agency.  The                 
  department asked LB&A for $89.0 in receipt authority for the                 
  portion that would come  from the permanent fund.   That was                 
  not approved.                                                                
  Ms.  Slagle  moved through  the  supplemental to  the Alaska                 
  Public Offices Commission (APOC).  Discussion was had on the                 
  hearing officer costs associated with the Gravo hearing. Co-                 
  chair Frank asked for a breakdown of costs.                                  
  Ms. Slagle  continued with the supplemental to the Personnel                 
  EEO  section of  the  supplemental,  specifically  to  labor                 
  arbitration  costs.    Co-chair  Frank  questioned how  many                 
  backlog  arbitration  cases are  in  existence.   Ms. Barton                 
  responded  that  260 cases  are  in backlog  after receiving                 
  supplemental funding last year. She mentioned that employees                 
  do not share in the  associated costs. Mike McMullen, Acting                 
  Director  for  the  Division  of  Personnel,  Department  of                 
  Administration, said  that the arbitrator assesses his costs                 
  to the loser,  or as he  determines equitable.  The  formula                 
  for costs is at the arbitrator's discretion.  Co-chair Frank                 
  asked what is typical.  Mr. McMullen responded that if there                 
  is a win, the loser will pay  all. In disciplinary cases, in                 
  a contract interpretation case, the cost will be split.  The                 
  split can be  60%/40% or  50%/50%.  He  emphasized that  the                 
  loser  is the  union, not  the employee.   Co-chair  Halford                 
  asked if the money to fund the positions desired, within the                 
  arbitration process,  should be considered in  the operating                 
  budget  or the supplemental?   Ms. Barton  responded that it                 
  has  been  added into  an  FY96 increment.  Co-chair Halford                 
  stated that with the approval  of the supplemental, there is                 
  an   acceptance   for  the   increment   to   continue.  She                 
  acknowledged in agreement.                                                   
  End:    SFC-95, #4, Side 2                                                   
  Begin:  SFC-95, #6, Side 1                                                   
  Ms. Slagle  spoke to  the Department  of Law  and the  legal                 
  services  provided  for  Mental  Health  Lands.  The  monies                 
  involved are for  settling the   plaintiff's attorney's,  as                 
  well as  costs in  the Department  of Law.   Co-chair  Frank                 
  asked  for a  monthly breakdown of  costs.   Barbara Richie,                 
  Assistant Attorney  General for Governmental  Affairs within                 
  the Department  of Law responded  that she would  obtain the                 
  information and get back  to the committee.   Co-chair Frank                 
  noted that the case has been settled, with an  appeal by two                 
  of the non-settling  attorney's.  He questioned the  cost of                 
  $1 million  in attorney fees from November to the end of the                 
  fiscal year, and asked for an additional breakdown of costs.                 
  Senator Rieger questioned the rationale used by the court in                 
  awarding attorney's  fees.  Ms. Richie responded that it was                 
  more often public  interest rationale which would  result in                 
  such  an  award.     Co-chair   Frank  asked  for   detailed                 
  information determining  actual money allocated  to specific                 
  Senator Sharp  questioned the  Department of  Law's expenses                 
  for  the Mental Health  Lands' judgements  and claims.   Ms.                 
  Richie  noted that  there is more  than one,  full-time, in-                 
  house,  lawyer  working on  the  Mental Health  Lands issue.                 
  This  will   be   continued  throughout   the   appeal   and                 
  implementation   process.   In  addition,   there   are  two                 
  contractual lawyers providing additional services.   Senator                 
  Sharp asked why  appropriate more money for salaries  if the                 
  lawyers  are full time and  budgeted.  Dick Peques, Director                 
  of Administrative  Services  within the  Department  of  Law                 
  responded that the money for the department  pertains to the                 
  use of  outside counsel used extensively in  early summer to                 
  put the  final settlement  before the  court.   Other  costs                 
  involved  public awareness  and comment for  preparation for                 
  the court.  There was no  money for additional salaries. Two                 
  people worked full-time.  The appeal itself consisted of 169                 
  points on  appeal. It is  going to be  extensive work to  be                 
  accomplished quickly.                                                        
  Ms.  Slagle  continued  outlining the  Department  of  Law's                 
  supplemental.  She noted the $500.0 charge for repayment  to                 
  the federal  government for  inappropriate cost  allocation.                 
  Co-chair  Frank  asked  why  this   would  show  up  in  the                 
  Department of Law's budget.   Ms. Slagle stated that  it had                 
  to do with legal costs. Co-chair Frank asked for the history                 
  behind it.   Ms.  Richie responded  that this  appropriation                 
  would  resolve  the federal  claims  on charges  against the                 
  State of Alaska  made by the  Department of Law during  FY93                 
  and FY94 both  directly and indirectly to  federal programs.                 
  With   regard   to   timekeeping    and   cost   allocation,                 
  methodologies that were used during those two years were not                 
  in compliance with federal requirements.   During that time,                 
  the department  was revising and  implementing new  policies                 
  and  procedures  related  to its  cost  recovery  allocation                 
  methodologies.  The  procedures were in compliance  with the                 
  state regulation,  but in  some instances  they were not  in                 
  accordance with  federal regulations for recovering costs on                 
  federally funded programs.   There were two  principal areas                 
  that were not properly documented that  had to do with staff                 
  time and support costs.  Co-chair Halford asked if that  was                 
  within the  Department of  Law or  Department of  Health and                 
  Social  Services?   Ms.  Richie stated  that  it was  in the                 
  Department of Law. Senator Zharoff asked if the state was at                 
  a  higher liability? Mr. Pegues answered that the $500.0 was                 
  negotiated down from $1000.0.                                                
  Ms.  Slagle  discussed  the  Legal  Services  and Operations                 
  supplemental request  of $494.8.  Co-chair  Halford inquired                 
  as  to  the  interest rate  on  unpaid  costs.   Ms.  Richie                 
  responded  that it  is 10-1/2%  by statutory  law.   Senator                 
  Rieger  asked  for an  explanation of  charges.   Mr. Pegues                 
  answered that the  amount is  an overcharge dispute  between                 
  the  utilities and  the AEA.    Ms. Richie  interjected that                 
  there will be  additional settlements  that come in  between                 
  now and the end  of the session  which will be presented  as                 
  Co-chair Frank asked  for a breakdown  of the $50.0 for  the                 
  gubernatorial election  lawsuit.   Ms. Slagle  noted that  a                 
  portion  of  the cost  related to  expert witnesses  for the                 
  gubernatorial  election.     Co-chair   Frank  requested   a                 
  breakdown of  costs for  expert witnesses  including outside                 
  counsel, outside experts, and the  change in funding source.                 
  Ms. Richie stated that the difference was $12.5.                             
  Ms.  Slagle  continued  with  the  Department  of  Revenue's                 
  supplemental for  the Alcohol Beverage Control  Board (ABCB)                 
  covering costs associated  with a  license denial appeal  in                 
  Egegik.    Bob Baratko,  Director,  Administrative Services,                 
  Department of Revenue,  testified to the background  of this                 
  particular case.    Co-chair Halford  questioned  the  costs                 
  associated with the hearing officer.                                         
  Ms.  Slagle  continued  with  the  Department  of  Revenue's                 
  supplementals.  Specifically,  she  addressed the  Permanent                 
  Fund Dividend/PFD  and the need for $91.1 to fund additional                 
  data processing costs.   Senator Rieger questioned  the data                 
  processing costs. Mr. Bartko gave discussion surrounding the                 
  additional request for $91.1.                                                
  Ms.  Slagle spoke on the  costs associated with the creation                 
  of the  Alaska Mental Health  Trust Authority.  She stressed                 
  that  the  amount  of  $283.1  is  needed to  establish  the                 
  Authority.   Senator  Rieger  questioned  the  office  space                 
  allocation. Ms. Slagle explained that  the trustees have not                 
  yet been appointed and they will be the ones to decide where                 
  the location will be.                                                        
  Co-chair Frank thanked Ms. Slagle  for her participation and                 
  recessed on the supplemental, beginning  with the Department                 
  of Education, at 8:30 a.m. Thursday, February 23, 1995.                      
  SENATE BILL NO. 47                                                           
       "An  Act relating  to  the extent  to which  the Alaska                 
       Public  Utilities Commission  may  exercise its  powers                 
       when  regulating  utilities; establishing  a regulatory                 
       cost charge on public  utilities and pipeline carriers;                 
       relating to the allocation of  costs in hearings before                 
       the Alaska Public Utilities Commission; relating to the                 
       method by which  utilities are  exempted from and  made                 
       subject to regulation  by the  Alaska Public  Utilities                 
       Commission;  relating  to  the  monetary threshold  for                 
       regulation of certain kinds of  utilities by the Alaska                 
       Public  Utilities  Commission;  extending   the  Alaska                 
       Public  Utilities  Commission;  relating  to  staggered                 
       terms  for  members  of  the  Alaska  Public  Utilities                 
       Commission; and providing for an effective date."                       
  Co-chair Halford asked  to take  up SB 47.   Co-chair  Sharp                 
  moved to pass out of committee SB 47 with zero fiscal notes.                 
  Senator  Donley  objected,  stating  the  fiscal  notes  are                 
  inaccurate,  that the notes do not  reflect a fee assessment                 
  by the Department  of Revenue which was sunset  in December.                 
  Discussion was had  on the attached  fiscal notes.   Senator                 
  Donley stated a need  for an amendment to reflect  that this                 
  is a sunset bill.  Senator Rieger stated that the value of a                 
  sunset bill  is that  it  allows various  agencies to  bring                 
  concerns before the legislature.  He stated he supported the                 
  bill but  would also  support a  shorter extension.  Senator                 
  Donley  presented   an  amendment   indicating  a   one-year                 
  extension.  Senator Sharp noted that this bill  represents a                 
  balanced testimony including what the needs are of the APUC.                 
  Co-chair Halford recommended  a recess on  this issue to  be                 
  taken up after the supplements.  He recommended at this time                 
  reviewing Senator Donley's amendment to SB 47.                               
  Co-chair Halford recessed the meeting at 11:05 a.m.                          

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