Legislature(1995 - 1996)

05/09/1996 03:45 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                      FIRST SPECIAL SESSION                                    
                           May 9, 1996                                         
                            3:45 p.m.                                          
  SFC-96, FSS #1, Sides 1 and 2                                                
  SFC-96, FSS #2, Side 1 (000-426)                                             
  CALL TO ORDER                                                                
  Senator Steve Frank, Co-chairman, convened the first meeting                 
  of  the  Senate  Finance  Committee  for the  First  Special                 
  Session of the Nineteenth Legislature at  approximately 3:45                 
  In  addition  to  Co-chairmen  Frank and  Halford,  Senators                 
  Phillips, Rieger, Sharp, and Zharoff  were present.  Senator                 
  Donley arrived soon after the meeting began.                                 
  ALSO ATTENDING:  Senator Leman; Annalee McConnell, Director,                 
  Office  of Management  and  Budget;  Jim Baldwin,  Assistant                 
  Attorney  General, Governmental  Affairs  Section, Dept.  of                 
  Law;  Nancy  Slagle, Director,  Division  of  Budget Review,                 
  Office  of Management  and Budget;  Janet  Clarke, Director,                 
  Division of  Administrative  Services, Dept.  of Health  and                 
  Social  Services; Dan  Spencer,  Budget  Analyst, Office  of                 
  Management  and   Budget;   Sam   Kito,   III,   Legislative                 
  Liaison/Special  Assistant,  Dept.  of   Transportation  and                 
  Public Facilities; Eric Swanson, Budget Analyst, Division of                 
  Administrative  Services,  Dept. of  Administration; Beverly                 
  Reaume,   Director,   Division   of  Personnel,   Dept.   of                 
  Administration;    Bob    Cole,   Director,    Division   of                 
  Administrative   Services,   Dept.  of   Corrections;  Karen                 
  Rehfeld,   Director,   Administrative  Services,   Dept.  of                 
  Education;  Mike  Greany,   Director,  Legislative   Finance                 
  Division; Fred Fisher, Virginia Stonkus, Kathryn Daughhetee,                 
  Susan   Taylor,  and   Dave   Tonkovich,  fiscal   analysts,                 
  Legislative Finance Division; and aides to committee members                 
  and members of the legislature.                                              
  SUMMARY INFORMATION                                                          
  FY 96/97 ALL FUNDS FISCAL SUMMARY                                            
       An updated fiscal summary of  FY 96 authorized funding,                 
  FY 97     Legislative expenditures to date, and a comparison                 
            of FY 97 and  FY 96 funding was presented  by Mike                 
  SB 1005 - APPROP: MISCELLANEOUS                                              
       Section-by-section  review of  the  bill  was had  with                 
       representatives of  various departments and  staff from                 
       the Office of Management and Budget.                                    
  Upon convening the meeting, Co-chairman Frank asked that the                 
  Division of Legislative Finance advise  members of "where we                 
  are with the  budget bills that the  legislature passed" (HB
  412, 413, and SB 136) during the regular session.  Committee                 
  review  would then  proceed to SB  1005, the  Governor's new                 
  appropriation request.                                                       
  MIKE GREANY,  Director, Legislative  Finance Division,  came                 
  before committee accompanied by FRED FISHER, fiscal analyst.                 
  Mr. Greany referenced a fiscal summary  (copy on file in the                 
  original  Senate  Finance Committee  file  for SB  1005) and                 
  explained  that it  reflects all appropriations  made during                 
  the regular session.   Total  funding is set  forth in  four                 
       SB 84     - Transfer  of reserve  account funds  to the                 
                   of the permanent fund.                                      
       HB 412    - The state operating budget.                                 
       HB 413    -  The  operating  budget for  mental  health                 
       SB 136    - Capital,  supplemental, and  reappropriated                 
  Funding shown  as FY  96 authorized includes  appropriations                 
  enacted by  law, plus the transfer made by SB 84 (Specials &                 
  Fund Transfers).  FY 97 legislative  action to date is shown                 
  in  the  next  column  by  funding  source and  totals.    A                 
  comparison  of  FY  96  and  97  evidences  a  $73.6 million                 
  decrease  in general funds and constitutional budget reserve                 
  fund expenditures for FY 97.                                                 
  Co-chairman Frank next directed attention  to a summary page                 
  for SB 1005 and  noted that it shows $52.1 million  in total                 
  funding ($30 million in general funds, $7 million in federal                 
  moneys,  $15  million  other  funds,  and  $6.9  million  in                 
  reappropriations).   He  then asked that  representatives of                 
  the administration provide  an analysis  of the 38  sections                 
  within  the  bill.    Senator   Randy  Phillips  voiced  his                 
  understanding that the proposed bill  contains a $30 million                 
  general fund increase over legislation passed in the regular                 
  session.  Co-chairman Frank concurred.                                       
  NANCY  SLAGLE,   Director  of   Budget  Review,  Office   of                 
  Management  and Budget, came  before committee  and provided                 
  the following analysis:                                                      
  Sec. 1.   Contains legislative intent  concerning the  long-                 
  range financial planning  commission, cites past  efforts of                 
  the  commission,  and notes  need  for  long-range financial                 
  planning for  the state.   It identifies items  the ten-year                 
  plan should address.  Mrs. Slagle pointed to intent to close                 
  the fiscal gap by the end of 2001 and referenced tools to be                 
  used  to meet  that goal.   Senator  Donley posed  questions                 
  concerning legislative  support for  the ten-year  plan, the                 
  drafting style used  in setting  forth intent language,  and                 
  the  tools  listed, particularly  the  proposed  income tax.                 
  Senator Rieger asked if findings  and intent language within                 
  Section  1  represents  the Governor's  plan.    Mrs. Slagle                 
  responded affirmatively.                                                     
  Senator  Rieger referenced  language  citing  need to  fully                 
  inflation  proof  the principal  of  the permanent  fund and                 
  asked when the Governor  changed course on the issue.   Mrs.                 
  Slagle voiced her  belief that the Governor's  original plan                 
  fully inflation  proofed the fund.   The difference  was the                 
  source of inflation  proofing moneys.   Senator Rieger  said                 
  that the foregoing reflects a change of course from what the                 
  Governor previously advocated.                                               
  Senator Phillips directed  attention to Page 2, lines 20 and                 
  21, and voiced concern regarding use of an income tax, other                 
  taxes, reserves,  and permanent  fund earnings  as tools  to                 
  accomplish  budget  goals.    Mrs.  Slagle  noted  that  the                 
  foregoing reflects  discussion of  the long-range  financial                 
  planning  commission  report.    The  Senator  advised  that                 
  portions  of  the report  speaking  to use  of  reserves and                 
  permanent fund earnings had been  "resoundingly turned down"                 
  by  his constituents.   He said he  furnished the Governor's                 
  office  the  results of  a survey  on  that issue.   Senator                 
  Phillips  subsequently requested  an  explanation of  "other                 
  Senator Donley  directed attention to  Page 2, line  29, and                 
  asked how the  Governor intended to accomplish  the proposed                 
  $100 million reduction  in fiscal  years 1997-99.   He  took                 
  exception  to  the  administration's  approach  of   showing                 
  increased user fees as a cut in spending.  He suggested that                 
  language within subsection (9)  at the bottom of Page  2 was                 
  deceptive.  Co-chairman Frank agreed that new fees should be                 
  shown as increased revenues.                                                 
  Senator  Rieger  directed  attention  to  Page 3,  line  21,                 
  subsection (21) and  noted the goal of  managing the reserve                 
  to achieve "at  least a  6.5 percent return  in fiscal  year                 
  1997."    He said  the  Senate Finance  Committee considered                 
  management   changes  intended   to   achieve   a  goal   of                 
  approximately  8  percent   by  commingling  reserves   with                 
  permanent fund investments.  He then asked how that proposal                 
  would fit within the Governor's  plan.  Nancy Slagle  voiced                 
  her understanding  that the  Dept. of  Revenue has  reviewed                 
  management methods intended  to increase  return.  She  said                 
  she was  unsure, at this  time, what the  anticipated return                 
  might  be.   The  6.5  percent  is higher  than  the current                 
  return.  That amount was thus used as the threshold.                         
  Co-chairman  Frank  referenced  Page  2,  lines 23  and  24,                 
  subsection (22) which cites need  to fix the reserve's sweep                 
  and payback provisions through constitutional amendment, and                 
  he  inquired concerning  whether the Governor  would support                 
  passage  of   Senator   Rieger's   legislation,   or   other                 
  legislation, to accomplish  that goal.  Nancy  Slagle voiced                 
  support for "taking care of those  provisions."  In response                 
  to a question  from the Co-chairman, Senator  Rieger advised                 
  that his bill  would not  eliminate the three-quarter  vote.                 
  It would eliminate  the sweep and  pay back.  If  the budget                 
  reserve fund is used for  the purpose of increasing spending                 
  from  year  to  year,  the  three-quarter  vote  requirement                 
  Senator  Donley  referenced subsection  (18)  on Page  3 and                 
  voiced disagreement with a  dedicated fuel tax.   The public                 
  policy behind dedicated taxes deserves considerable  debate.                 
  Co-chairman Frank concurred.                                                 
  Co-chairman   Halford   questioned   the   advisability   of                 
  submission of legislation proposing a ten-year plan based on                 
  constitutional  amendments that  might  not  be approved  by                 
  either the legislature or the voters.                                        
  Senator Zharoff  noted that  the Governor  has not  deviated                 
  from his original statements in both  the state of the state                 
  and state of  the budget  messages.  He  suggested that  the                 
  proposed  bill represents a  starting point  for discussion.                 
  The fiscal  gap will  not be  closed by  merely cutting  the                 
  budget and raising revenues.   The state will have  to "look                 
  at starting to  use some  of the earnings  of the  permanent                 
  fund which was the  original intention of setting the  whole                 
  permanent fund  up in  the beginning."   Many  of the  items                 
  suggested  within  Section  1 represent  suggestions  of the                 
  long-range fiscal planning commission.                                       
  Sec. 2.   Contains provisions relating to  sweep and payback                 
  requirements   of   the   constitutional   budget   reserve.                 
  Subsection (b) would draw moneys from the reserve to make up                 
  for revenue shortages next year.                                             
  Secs. 3 and 4.  Relate   to   one-time,   lump-sum   amounts                 
  required under contract  terms for  IBU and Masters,  Mates,                 
  and   Pilots'   agreements.     They   were   part   of  the                 
  administration's  original  budget  submission  for  FY  97,                 
  although the moneys could be paid in FY 96.  Funding is thus                 
  shown as  a supplemental  request rather  than a  new FY  97                 
  amount.  In response to  a question from Co-chairman  Frank,                 
  Mrs.  Slagle acknowledged  that  funding reflects  a signing                 
  Sec. 5.   Reflects the supplemental previously requested for                 
  classified employees at  the University of Alaska.   Funding                 
  would cover amounts not appropriated through contract for FY                 
  95 and 96.  It reflects approximately 3 percent.                             
  Sec. 6.   Contains previously requested supplemental funding                 
  of   approximately  3  percent  for  the  community  college                 
  federation of teachers for FY 96.                                            
  Sec. 7.   Contains  $720,000  for the  Copper  River Highway                 
  settlement.   It includes  remediation, public  notices, and                 
  other requirements of the consent decree in United States v.                 
  State (A92-24CIV).                                                           
  Sec. 8.   Contains a $250,000  general fund appropriation to                 
  the Alaska Marine  Highway System  fund in conjunction  with                 
  Sec. 35 which adds additional moneys  to the FY 97 operating                 
  budget to cover  items not funding by  conference committee.                 
  The  administration believes  there  is need  for additional                 
  funds in this area.                                                          
  Sec. 9.   Provisions  relate  to  the  Dept. of  Health  and                 
  Social Services.   Subsection (a)  provides for an  extended                 
  lapse  date for $1.5  million in Medicaid  funds to continue                 
  them into FY 97 for home and community care for the elderly.                 
  The  extension  continues  a program  begun  in  the present                 
  fiscal year  to develop  alternatives to  nursing homes  for                 
  elderly  care.    An additional  $1.5  million  is contained                 
  within subsection (b), and $250,000 is contained within Sec.                 
  In response to a question  from Co-chairman Frank concerning                 
  the children's trust,  Mrs. Slagle  advised of funding  from                 
  federal Medicaid reimbursements not yet received.                            
  JANET CLARKE, Director, Division of Administrative Services,                 
  Dept. of Health and Social  Services, came before committee.                 
  As background  information,  she advised  that the  Medicaid                 
  program spends $5 to $6 million a week.  When a reduction in                 
  caseload or  costs occurs,  it translates  to "fairly  large                 
  dollars."    Sec.  9  (a)  represents  a  project  currently                 
  underway  through  an  RSA  with   the  division  of  senior                 
  services.    The  division  is  using  the  moneys  to build                 
  infrastructure, provide  grants for  assisted living  homes,                 
  and build up home and community based services.   That is in                 
  conjunction with the two-year  moratorium on the certificate                 
  of need the legislature passed.  The department is concerned                 
  that all  projects will  not be done  by June 30,  hence the                 
  request for extension of the lapse date.                                     
  In  response to a  question from  Senator Sharp,  Ms. Clarke                 
  advised  that  some  of  the  projects  do  not  qualify for                 
  Medicaid reimbursement.   Requests  within Sec.  9 are  thus                 
  general funds.                                                               
  Answering  additional questions  regarding  the building  of                 
  infrastructure,  Ms.  Clarke  explained  that  grants  cover                 
  projects  that  "look  at   assisted  living  homes,"  allow                 
  assisted living  managers to  make improvements  to home  so                 
  they qualify  as assisted living residences  under licensing                 
  requirements,  etc.    These  homes  are an  alternative  to                 
  nursing home care.                                                           
  Senator   Rieger   raised   a    question   concerning   the                 
  reappropriation  listed at  Page  5, line  17.   Ms.  Clarke                 
  explained  that  it relates  to  Medicaid waivers.   Senator                 
  Rieger asked if  the request relates  to a new  item or  one                 
  included in  the Governor's  original budget  request.   Ms.                 
  Clarke acknowledged  that  it represents  a new  item.   She                 
  clarified that the  project was  under consideration by  the                 
  department last fall.  It was  not, however, included in the                 
  FY 97 budget.   Senator Rieger  took exception to a  request                 
  for increased  spending.   He further  questioned where  the                 
  proposed reappropriation  would be  taken from,  saying that                 
  the waivers program  appears to have the most  potential for                 
  de-institutionalizing individuals?   He attested to work  on                 
  behalf of constituents in an effort to get  SED youth out of                 
  institutions.    The  argument has  been that  there is  not                 
  enough money in the  waivers program to cover needs.   There                 
  now appears to be a surplus  of $1.5 million.  Janet  Clarke                 
  noted that  subsection (a) reflects work  actually underway.                 
  The waiver component  consists of  a combination of  waivers                 
  (elderly waivers,  DD waivers).   General  fund dollars  are                 
  primarily for the  elderly.  Funding is not  year-end money.                 
  It relates  to ongoing  activities and  projects within  the                 
  department plan.  Concern  is that the projects will  not be                 
  completed by June 30.                                                        
  Senator Rieger suggested that while  subsections (b) and (c)                 
  appear  to  extend lapse  dates,  subsection (a)  appears to                 
  reappropriate moneys  to a  different purpose.   Ms.  Clarke                 
  said   that  subsection  (b)   and  (c)   are  interrelated.                 
  Subsection   (b)   references   the  Medicaid   Non-facility                 
  component.  Subsection (c) is totally non-general fund.  Ms.                 
  Clarke attested  to concern regarding optional  services the                 
  legislature "stopped funding two years  ago."  Much pressure                 
  was  placed  on the  department  to restore  those services.                 
  While there was a 5 percent growth rate in the budget, there                 
  is no  increment for  Medicaid in FY  97.   That is  why the                 
  funds  are  excess.   The department  did  not "turn  on the                 
  optional  services this year" because it  did not believe it                 
  could sustain them into FY 97.                                               
  In conversation with  the Mental Health Trust  Authority, it                 
  was determined that  many of  the beneficiaries qualify  for                 
  Medicaid.    Beneficiaries  have  attested  to  difficulties                 
  associated with  living without  new eye  glasses or  dental                 
  services.   The Mental  Health Trust  Authority reserved  $1                 
  million of its funds for Medicaid.  The department could not                 
  turn  on these  services  for  mental  health  beneficiaries                 
  alone.  If  the lapse date on Medicaid  non-facility funding                 
  is extended, the department could  turn optional services on                 
  for nine months  for all Medicaid  clients.  Pent up  demand                 
  for  the services  will  require  approximately $5  million.                 
  Subsections  (b)  and  (c) are  thus  interrelated,  and one                 
  cannot be done without the other.                                            
  Senator  Rieger  attested  to  reluctance  of Mental  Health                 
  Authority trustees to expend more than $6 million of the $20                 
  million in Mental Health Trust earnings  for FY 97 and asked                 
  what  changed between debate on  SB 413 and funding proposed                 
  in SB 1005.   Janet Clarke explained that the  Mental Health                 
  Trust  Authority  reserved $1  million  from  Medicaid, last                 
  fall,  in anticipation  of  need  for  transition to  a  new                 
  Medigrant  program.     Since nothing  has  yet happened  to                 
  reform Medicaid at  the national level, the  $1.5 million is                 
  viewed  as  a good  initiative,  on a  short-term  basis, to                 
  assist beneficiaries.                                                        
  Co-chairman  Frank  asked  if funds  within  Sec.  9 reflect                 
  moneys  within  the department  budget  or new  requests not                 
  before seen by committee.  Ms. Clarke  acknowledged that the                 
  request  was  not included  within the  FY  97 budget.   Co-                 
  chairman Frank voiced frustration with the  administration's                 
  special session request for additional  new moneys.  He then                 
  asked if SB  1005 contained  further such  requests.   Nancy                 
  Slagle advised of  direction from  Co-chairs to "find  other                 
  ways of funding things."  She  attested to statements by Co-                 
  chairman Halford that  if the administration wished  to fund                 
  certain projects, it  "needed to find other  funding sources                 
  or get  rid of  projects that  were included  . .  . in  the                 
  capital bill."   Senator Phillips  noted that the  foregoing                 
  comment  was   made  in   the  course   of  capital   budget                 
  deliberations during the regular session.                                    
  Senator Sharp  asked how the  department intends to  pay for                 
  the $5  million reinstated  program next year.   Ms.  Clarke                 
  advised  of  proposed  one-time   restoration  of  services.                 
  Regulations would  be written  in such  a way  that services                 
  would  not  continue.    Restoration is  a  priority  of the                 
  Governor.  Senator  Sharp suggested  that priorities  should                 
  have  been  funded in  the  operating budget  during regular                 
  session.  He voiced resentment  at being faced with requests                 
  for new projects and new money during special session.                       
  Sec. 10.  Contains  the pay  increase for  both covered  and                 
  non-covered  employees  in  the executive  branch.   Numbers                 
  within   subsection  (a)  may   differ  from   the  original                 
  submission since they have been  "adjusted down for the  1.4                 
  percent half of CPI" rather than the original 1.5 percent.                   
  Sec. 11.  Contains monetary terms  for IBEW employees within                 
  the court system.                                                            
  Sec. 12.  Relates to non-covered court system employees.                     
  In response to  a question  by Co-chairman Frank  concerning                 
  total compensation,  Ms. Slagle advised that  amounts within                 
  Secs. 11 through 16 would have to be added.                                  
  END:      SFC-96, FSS #1, Side 1                                             
  BEGIN:    SFC-96, FSS #1, Side 2                                             
  Senator  Randy  Phillips  inquired concerning  general  fund                 
  dollar amounts in contracts for FY 98 and 99.   DAN SPENCER,                 
  Budget Analyst,  Office of  Management  and Budget,  advised                 
  that numbers had  previously been  provided at 1.5  percent.                 
  Those figures have  not been adjusted  to 1.4 percent.   Mr.                 
  Spencer agreed to provide the information.                                   
  Co-chairman  Frank  asked  for the  general  fund  total for                 
  contracts for  FY 97, advising  of his recollection  of $7.3                 
  million.   Mr. Spencer  said he would  provide the  numbers.                 
  Mrs.   Slagle   subsequently   advised   of   a   total   of                 
  Sec. 17.  Contains reappropriation of funding from completed                 
  DOTPF capital projects.  Moneys will  be used to match Corps                 
  of Engineers funding  for Bethel Seawall construction.   The                 
  amount involved is $552,600.                                                 
  Secs. 18 and 19 also contain reappropriations for the Bethel                 
  Seawall.   Sec. 18 provides  $650,000 from the Power Project                 
  Fund,   and   Sec.  19   funds   $400,000  from   the  Rural                 
  Electrification  Revolving  Loan  Fund.     The  request for                 
  seawall funding  was contained  within an  amendment to  the                 
  Governor's capital budget.                                                   
  Discussion of the status of the two funds mentioned in Secs.                 
  18 and  19 followed.  Mrs.  Slagle said that both  funds are                 
  active.  If funding  in Secs. 18 and 19 is not  used for the                 
  seawall, it would  automatically flow to the general fund at                 
  the end of the year.                                                         
  As background information,  Mrs. Slagle explained that  when                 
  statutes  were  passed  to change  the  structure  of energy                 
  programs, the balance  of the Power  Project Fund was to  be                 
  transferred to the  general fund on  an annual basis  during                 
  the  transition  period  before  the  new  statutes   became                 
  effective.   Due to  an administrative error,  that did  not                 
  occur.  Funding  that should have  gone to the general  fund                 
  remains in the Power Project Fund.                                           
  Senator  Sharp  asked  if  applications  from  utilities for                 
  revolving loan fund moneys remained  ungranted.  Mrs. Slagle                 
  advised  of interest  and principal collections  of $411,000                 
  for the general  fund.  She  noted that present  information                 
  does  not show  outstanding  requests.   She said  she would                 
  further review the matter.                                                   
  [The following  comments regarding capture  of lapsed moneys                 
  reflect verbatim transcription from the tape.]                               
  CO-CHAIRMAN FRANK:  Senator Rieger, did you have a question?                 
  SENATOR  RIEGER:    Well,  Mr.  Chairman,  I  think  it  was                 
  partially      answered.  I was curious how they could catch                 
                 money that was subject to lapse several years                 
                 ago.  But I think . . .                                       
  NANCY SLAGLE:   It was  an administrative error,  basically.                 
  It   wasn't something that  was done automatically.   It had                 
       to take actual transactions.   So it was, I  don't know                 
       if you'd say  and employee error, or  an administrative                 
       error,  that  it  did not  happen.    And  it was  just                 
       recently discovered that that was there.                                
  SENATOR RIEGER:  [I'll just] give you a hypothetical.  If it                 
  had  lapsed (let's say on August 11,  1994), if you wrote an                 
       appropriation like this  that said that the  money that                 
       was subject to  lapse on  August 10 is  reappropriated,                 
       would that still be a valid reapprop?                                   
  CO-CHAIRMAN FRANK:  I see Jim Baldwin  back there.  He could                 
       probably  answer that for you.                                          
  NANCY SLAGLE:   He certainly could  answer it better than  I                 
  CO-CHAIRMAN FRANK:  Did you hear the question, Mr. Baldwin?                  
  SENATOR RIEGER:  Mr.  Baldwin, the question is, What  is the                 
  validity  of a  reappropriation measure  which names  moneys                 
            subject  to  lapse  on  a  certain date  that  had                 
            happened in the past?                                              
  JIM BALDWIN:  That's already lapsed?                                         
  SENATOR RIEGER:  Yes.                                                        
  JIM BALDWIN:  If money's lapsed, you can't reappropriate it.                 
  SENATOR RIEGER:   Even  if the appropriation  refers to  the                 
  money     subject to lapse as of that date?  That's fine.  I                 
            just  want  to  know  what  the   administration's                 
            interpretation is of that type of provision.                       
  JIM BALDWIN:  Unless there's some  way we could interpret it                 
  to   revive it--the fact that it  was being reappropriated .                 
       . .    But, generally, if it's lapsed, it's  lapsed.  I                 
       don't know that that's what we've done here.  I don't .                 
       . .                                                                     
  NANCY SLAGLE:  No, not in  this case.  No, the money  hasn't                 
  lapsed.   It's still there.                                                  
  SENATOR RIEGER:  Okay.  But the administration's position is                 
  [that]    if it's lapsed, it's lapsed.  It can't be revived.                 
  JIM  BALDWIN:   If  it's lapsed,  it's  lapsed.   There's no                 
  longer    anything to reappropriate.   The appropriation  is                 
  [End of verbatim transcript.]                                                
  Co-chairman Frank inquired concerning total federal Corps of                 
  Engineers  funds  for  the  Bethel  Seawall.   Nancy  Slagle                 
  advised of $4.5 to $5 million.   Further discussion of Corps                 
  of Engineers' funding followed between Co-chairman Frank and                 
  SAM KITO, III, Legislative  Liaison/Special Assistant, Dept.                 
  of Transportation and Public Facilities.   Mr. Kito attested                 
  to a  general  fund match  requirement  of $1.7  million  to                 
  complete the project.  He further advised of concern that if                 
  the match is  not made in FY 97, the project may be stopped.                 
  The state  would then incur additional  remobilization costs                 
  that would not be federally eligible,  and the total cost of                 
  the project would increase.                                                  
  Senator Zharoff voiced concern on  behalf of rural utilities                 
  regarding funding within Secs. 18 and 19.                                    
  Sec. 20.  Reappropriates $1 million of the anticipated lapse                 
  from  the  AFDC  program  to  construction  of  a  treatment                 
  facility  at the  Johnson Youth  Center.   An additional  $2                 
  million in Sec. 37 funds the full $3 million need.                           
  Co-chairman  Frank  raised  a question  concerning  one-time                 
  items associated with the Governor's welfare program.  JANET                 
  CLARKE again came before committee.   She explained that the                 
  Governor's  welfare  reform reinvestment  proposal primarily                 
  funds ongoing child care  and work programs.  The  only one-                 
  time items  were computer  system investments.     CSSB  136                 
  (Fin) contains $3.5  million for the computer  system.  That                 
  consists  of  $1.6 million  in federal  and $1.9  million in                 
  general funds.   General funds  came from both  the treasury                 
  and case load reductions.  In  CSSB 136 (Fin) $4 million  in                 
  general funds for  AFDC was reduced.   The funding was  then                 
  reappropriated to a  number of one-time items  and then back                 
  to  the  general fund.     Approximately  ten days  ago, the                 
  department re-examined  lapse projections  for Medicaid  and                 
  AFDC and determined that  caseload reductions had continued.                 
  That is where the $1 million within Sec. 20 was derived.                     
  Co-chairman Frank asked  if there  was a connection  between                 
  the  Johnson  Youth  Center  and  the department's  aide  to                 
  families  with  dependent  children  program.    Ms.  Clarke                 
  answered, "Not directly,  no."  Senator Phillips  voiced his                 
  understanding  that  Sec.  20 represents  a  transfer  of $1                 
  million  in  operating   funds  to  capital.     Ms.  Clarke                 
  Senator Sharp voiced concern regarding use of lapsing moneys                 
  that should be saved for other projects.   Co-chairman Frank                 
  agreed, saying that the practice reduces revenues  available                 
  for expenditure in the next budget.                                          
  Sec. 21.  Reflects   the   anticipated   $2.5   million   in                 
  reimbursement  from  the  federal  government  for  Medicaid                 
  matching  funds relating to  education of  Medicaid eligible                 
  students.  Funds would capitalize  the children's trust fund                 
  in addition to  the $6  million already  appropriated.   Co-                 
  chairman  Frank  asked  if  the  request  was  part  of  the                 
  Governor's   original  budget.      Janet  Clarke   answered                 
  negatively.  She  explained that the  section appeared in  a                 
  House version  of the  reappropriation bill.   It  was later                 
  dropped due to questions regarding the funding  source.  Co-                 
  chairman  Frank  voiced  his  understanding  that  the  $2.5                 
  million reflects moneys flowing to the  state.  Sec. 21 thus                 
  requests increased expenditure of new moneys coming into the                 
  treasury,  a  request that  was not  included  in the  FY 97                 
  operating  budget.    Ms.  Clarke  clarified that  the  $2.5                 
  million represents  unrestricted federal  receipts.    Nancy                 
  Slagle advised of  a similar  situation, several years  ago,                 
  relating  to  the  disproportionate share  program  at  API,                 
  wherein  the state received  a large amount  of funding from                 
  the federal government as an overpaid match.  That money was                 
  then  appropriated by the legislature toward construction of                 
  the new API facility.   Ms. Clarke again clarified  that the                 
  foregoing request  is tied  to an  administrative claim  for                 
  activity in school districts.   The department is aggressive                 
  in efforts to ensure  that the state receives it  fair share                 
  of Medicaid funding.  There was concern that Medicaid reform                 
  would  occur  this  year.     That  is  why  the  department                 
  conservatively budgeted these funds.                                         
  Sec. 22.  Reappropriates  anticipated   lapse  moneys   from                 
  longevity bonus grants to a  Dept. of Administration project                 
  to find efficiencies in the personnel system through records                 
  automation and  development.  Co-chairman  Frank voiced  his                 
  understanding  that  the  department just  received  a  $1.6                 
  million  supplemental  and  is  now reappropriating  $300.0.                 
  Mrs. Slagle  explained  that the  supplemental  request  was                 
  based on April figures.  Numbers  for May indicated a $300.0                 
  balance.     ERIC  SWANSON,  Budget   Analyst,  Division  of                 
  Administrative  Services,  Dept.  of   Administration,  came                 
  before committee.   He  said that  the number  of applicants                 
  changes from month to  month.  The initial estimate  of $1.6                 
  million  appears high.  The lapse  is presently estimated at                 
  $300.0.   The actual  number is unknown.   Co-chairman Frank                 
  inquired  concerning  the  number  of  computer  programmers                 
  assigned to the  personnel project.  Mr.  Swanson advised of                 
  one contract position that is not quite full time.                           
  Senator Rieger asked  if the purpose of  the reappropriation                 
  (the  personnel  system  project)   was  contained  in   the                 
  Governor's  operating  budget.     Nancy  Slagle   responded                 
  negatively,  adding that  it  would be  a continuation  of a                 
  current-year  project.    Co-chairman  Frank  asked  why the                 
  request was made in special session.  Mr. Swanson voiced his                 
  understanding that the  project reflects one of  two capital                 
  projects  requested  in  FY  95.    When the  projects  were                 
  combined, a decision was made to  apply funding to the other                 
  of  the  two  projects.    That  left  the  current  project                 
  Co-chairman  Frank inquired  concerning  the  status of  the                 
  project  over the past two years.  BEVERLY REAUME, Director,                 
  Division of Personnel, Dept. of Administration, advised that                 
  the  project  is just  now  starting.   A  pilot  project is                 
  scheduled  for  the  coming  summer.   It  will  explore the                 
  possibility  of examining  applications  via  imaging.   The                 
  original request for $650.0 was funded  in FY 96 at a  total                 
  of $250.0.   There is need  to fundamentally change the  way                 
  the   process   works.     Co-chairman   Frank  voiced   his                 
  understanding that the project was  not sufficiently high in                 
  priority  for inclusion  in the  Governor's  original budget                 
  request.  Ms.  Reaume concurred that  while the project  was                 
  submitted, it was  not selected for inclusion.   She further                 
  advised that it has potential for saving money for all state                 
  agencies.     The  current   examination  process   is  very                 
  Discussion followed regarding  responsibility for  personnel                 
  work  by  the  Division  of  Personnel  versus  transfer  to                 
  individual state agencies.  Ms. Reaume said that the project                 
  would allow personnel  work to be  done more effectively  at                 
  either location.                                                             
  Sec. 23.  Reappropriates   $250,000   of   the   anticipated                 
  Medicaid lapse to the Dept. of Corrections for conversion of                 
  the   Harborview  Development   Center  to   a  correctional                 
  facility.  That  request was before  the legislature in  the                 
  capital budget.                                                              
  BOB  COLE,  Administrative   Services  Director,  Dept.   of                 
  Corrections, came before  committee and  advised of a  total                 
  project cost of $1 million to  convert 50 beds at Harborview                 
  to  a medium  security correctional facility.   The  City of                 
  Valdez is interested in  becoming a partner in the  project.                 
  If the $250,000  is appropriated,  the community will  match                 
  $750,000.  The  cost is  approximately $20,000 a  bed.   Co-                 
  chairman  Frank raised  questions about  the  high operating                 
  cost per  bed.  Mr.  Cole explained that  the purpose is  to                 
  create an intensive alcohol/drug abuse treatment program for                 
  50 inmates  at a time.   Because of the intensive  nature of                 
  the treatment, the $220 per-bed cost per day is considerably                 
  higher than the  average $106 for  confinement in a  regular                 
  detention facility.                                                          
  Further discussion followed regarding  inmate populations to                 
  be involved  in the  program.   Mr. Cole  stressed that  the                 
  intensive program is intended to "shorten the length of time                 
  they would spend in our facilities on their current sentence                 
  and knock down the recidivism rate .  . . ."  In response to                 
  comments by Senator Sharp, Mr.  Cole advised that "the  best                 
  budget we've been able to get for  this so far is about $2.7                 
  million a  year."  Due  to renovation needs,  the department                 
  did not request operating  funding for FY 97 because  it did                 
  not believe  it could  get the  program going  until FY  98.                 
  During  additional discussion  of  benefits  of the  program                 
  versus  costs,  Mr.  Cole  focused  on  avoidance  of  costs                 
  associated  with  reduction of  both incarceration  time and                 
  recidivism for those undergoing intensive treatment.                         
  Additional discussion followed concerning  historically high                 
  operating costs for Harborview versus construction costs  of                 
  a new facility.   Mr.  Cole attested to  ability to  utilize                 
  existing personnel at  Harborview as well benefits  from the                 
  isolated location at Valdez.                                                 
  Sec. 24.  Nancy Slagle explained that  provisions within the                 
  section are new.   It proposes  to utilize $750.0 in  earned                 
  interest on  criminal restitution moneys  from Exxon  Valdez                 
  litigation  for  appropriation  as  a  grant  to  the  Kenai                 
  Peninsula  Borough  for  construction  of  the  Kenai  River                 
  Center.    It  would  provide  for  a  visitor  interpretive                 
  facility in addition to the already established multi-agency                 
  Kenai River Center.  Mrs. Slagle  advised of a memorandum of                 
  understanding between  the Kenai  Peninsula Borough  and the                 
  state on the collaborative effort.                                           
  Senator Rieger inquired regarding the  status of interest on                 
  the $50 million, asking if it  is restricted or general fund                 
  revenue.    Mrs.  Slagle  voiced  her  understanding  it  is                 
  restricted in  use.  In  response to further  questions from                 
  the  Senator,  Mrs.  Slagle advised  that  she  would verify                 
  whether  previous interest  expenditures  had been  made and                 
  whether they were in keeping with restricted use.                            
  Referencing background  information on the  current project,                 
  Mrs. Slagle  noted that  the activities  directly relate  to                 
  restoration of natural resources injured by the Exxon Valdez                 
  oil  spill  and  are  eligible  for  funding  from  criminal                 
  restitution moneys.                                                          
  Sec. 25.  Reappropriates $100,000 in  debt retirement  funds                 
  to the Dept. of Natural Resources  for the state land status                 
  geographic information  system.  Mrs. Slagle  explained that                 
  funds reflect previous G.O. bond  balances that were cleared                 
  out  and  returned  to  the  debt  fund.     The  geographic                 
  information  system was  requested in the  Governor's budget                 
  but removed by the legislature.                                              
  Senator Rieger asked  if funding  had previously been  taken                 
  from the  debt retirement fund.   Mrs. Slagle  answered that                 
  moneys had previously been taken to  offset other debt.  The                 
  state  also  has   the  ability   to  withdraw  moneys   for                 
  construction projects.                                                       
  Co-chairman  Frank voiced  his understanding  that  the debt                 
  retirement fund was generally considered  to be "sacred" and                 
  expressed reluctance to  "start dipping  into debt funds  to                 
  pay capital  projects."  He  referenced cautionary  warnings                 
  regarding  how  rating  agencies  and  the debt,  bond,  and                 
  capital markets would react to withdrawal of funds from AHFC                 
  or AIDEA and suggested that they would "start looking pretty                 
  askance at the  state if we  starting spending money out  of                 
  the debt retirement fund."   Nancy Slagle directed attention                 
  to capital projects within  Sec. 37 and noted that  they are                 
  also  proposed for  funding  directly from  debt retirement.                 
  They relate to deferred maintenance.                                         
  Co-chairman  Frank  said he  could  understand  reduction of                 
  future   appropriations for  debt retirement if  there is  a                 
  change  in  debt service  requirements.   He  questioned the                 
  wisdom of  appropriating directly  from the  debt retirement                 
  fund.  Jim Baldwin again came before committee.  He directed                 
  attention to statutes establishing  the debt retirement fund                 
  and  noted  language indicating  that  if a  surplus balance                 
  occurs, it could  be used to  fund capital projects.   Nancy                 
  Slagle acknowledged that balances  had previously been  used                 
  to  reduce  debt service  needs for  the  coming year.   She                 
  further  advised  that   the  administration  only  recently                 
  determined that amounts  put back  into the debt  retirement                 
  fund  were  not included  in  calculations for  debt service                 
  needs for FY 97.  Co-chairman Frank  expressed reluctance to                 
  establish a precedent  for capital  budget expenditure  from                 
  the debt retirement  fund.  He  voiced his approval of  past                 
  removal of excess moneys from the  account for return to the                 
  general fund.   Mr.  Baldwin noted  that the  administration                 
  could have  first lapsed  the moneys  and then  appropriated                 
  them   to   the   deferred  maintenance   projects.      The                 
  administration merely chose a more direct route.                             
  END:      SFC-96, FSS #1, Side 2                                             
  BEGIN:    SFC-96, FSS #2, Side 1                                             
  In response to a question  from Senator Donley, Nancy Slagle                 
  acknowledged  that  there was  no relationship  between debt                 
  retirement moneys  and the  proposed geographic  information                 
  system.    The $100,000  is  simply  available  money.   Co-                 
  chairman  Frank  attested  to  the  fact that  the  Governor                 
  originally  requested $350.0  and  the legislature  provided                 
  $200.0.  Mrs. Slagle concurred.                                              
  Sec. 26.  The $400,000 in carry-forward funds would  restore                 
  the base  in executive  office operations.   The  conference                 
  committee  effected a $437,700  reduction to  the Governor's                 
  original request.  Co-chairman Frank said that the reduction                 
  was made based  on knowledge that  the Governor had a  carry                 
  forward of $1.4 million.  In making the cut, the legislature                 
  allowed the  Governor $1  million over  his request.   Nancy                 
  Slagle  explained that the  request is intended  to "go into                 
  the  base  of  the Governor's  budget  for  calculations for                 
  future years."  There  is concern that in discussion  of the                 
  Governor's  base versus  the Governor's  carry forward,  the                 
  $400.0  will  get  lost.    Co-chairman Frank  concurred  in                 
  confusion surrounding the issue and cited legislative action                 
  to stop that  type of funding,  saying that it distorts  the                 
  Senator Randy Phillips asked for  a comparison of percentage                 
  cuts to both the Governor's and the legislature's budget for                 
  last fiscal year and  this year.  Co-chairman Frank  said $1                 
  million  was  cut from  both  budgets.   That  was  based on                 
  allowing the Governor the $1.4 million carry forward.                        
  In  response to a  question from Senator  Rieger asking what                 
  the  $400.0 would be expended  upon, Mrs. Slagle referred to                 
  general  office  operations.    The  majority of  the  costs                 
  associated  with  executive  operations relate  to  personal                 
  services costs.                                                              
  Sec. 27.  Provisions are similar to a section within SB 136.                 
  This section changes the language slightly and adds:                         
       to meet its duties under the Federal Telecommunications                 
       Act of 1966 (P.L. 1040104).                                             
  The change  makes the funds capital  so they can  be used to                 
  implement  the  federal act.    Conversion to  capital means                 
  there  would  be  no  effect  on  regulatory  cost  charges.                 
  Senator Sharp noted that  unspent amounts are to be  used to                 
  reduce  regulatory   cost  charges   in  subsequent   years.                 
  Addition of the foregoing language would not allow  for that                 
  use.   It would  earmark the funding  for implementation  of                 
  federal  law.  Mrs. Slagle  concurred.  Senator Sharp argued                 
  that the regulatory  charge is levied  upon and paid by  all                 
  utilities.  The proposed language would earmark expenditures                 
  to telephone services only.                                                  
  Sec. 28.  Relates to  failure of  the effective  date on  HB
  412.    Language says  that  notwithstanding that  vote, the                 
  effective date  is July 1, 1996.   In response to a question                 
  from Senator Rieger, both Mrs. Slagle and Jim Baldwin agreed                 
  that passage would require a two-thirds vote.                                
  Sec. 29.  Deals with  the disparity issue in  the foundation                 
  formula  program.     It  was   included  in  the   original                 
  supplemental.   Since SB  244 did  not make  it through  the                 
  process  to   take  care   of  the   disparity  issue,   the                 
  administration  is  once  again  requesting  a  supplemental                 
  realignment of  funds  to  achieve  a temporary  fix.    Co-                 
  chairman Frank asked if the  fix would apply only to FY  96.                 
  Mrs.  Slagle  responded   affirmatively.    KAREN   REHFELD,                 
  Director, Administrative Services, Dept. of Education,  came                 
  before   committee.     Co-chairman   Frank  asked   if  the                 
  Commissioner or anyone  within the department had  asked the                 
  Governor to put the issue on an amended call for the special                 
  session.   Mrs. Rehfeld attested to  considerable discussion                 
  of  SB  244  and  whether  it   would  be  included  in  the                 
  proclamation.   The Governor decided  to limit the  items in                 
  the special session.  For that reason it was not included on                 
  an amended  proclamation.   Co-chairman Frank  asked if  the                 
  department  requested  that it  be "put  on  a call."   Mrs.                 
  Rehfeld reiterated that it had been discussed.   She further                 
  expressed concern for "the potential for FY 97."  Conference                 
  committee action on foundation formula funding for FY 97 was                 
  based on the assumption that SB 244 would pass.  Co-chairman                 
  Frank agreed.  He acknowledged that if SB 244 is not passed,                 
  the education  budget will be  short funded  for the  coming                 
  year.  He then questioned why it was not added to  the call.                 
  Mrs. Rehfeld said that passage of SB 1005 with existing Sec.                 
  29 would correct the disparity for FY 96.  Absent passage of                 
  SB 244, the administration would come before the legislature                 
  for supplemental  funding for FY 97 for  both the foundation                 
  program and "a disparity fix."                                               
  Discussion followed  regarding funding  contained within  SB
  In response  to further  questions regarding  Sec. 29,  Mrs.                 
  Rehfeld explained  that the  proposal would  use anticipated                 
  lapse moneys  for FY  96 for  named recipient  grants.   Co-                 
  chairman  Frank  voiced his  understanding that  the current                 
  approach would spend approximately $1  million more than the                 
  approach within SB 244.  Mrs. Rehfeld concurred.                             
  Sec. 30.  Contains  provisions   to  take  care   of  failed                 
  effective dates on SB 136.                                                   
  Co-chairman Frank asked if the bill contains a provision for                 
  the  three-quarter  vote  on  budget  reserve  expenditures.                 
  Nancy Slagle referenced Sec. 2.                                              
  Senator Phillips  directed attention  to Page  13, Lines  11                 
  through 16, referenced  respective extension of lapse  dates                 
  to July 1, 1994, and July  1, 1995, and asked what types  of                 
  funds would be involved.  Mrs. Slagle said she would provide                 
  information on funding sources.                                              
  Co-chairman Frank  provided the  following recap  of funding                 
  within SB 1005:                                                              
       1.   $52 million in total funds                                         
       2.   $30 million in general funds                                       
       3.   $6.5 million in new requests                                       
  He noted that the foregoing compares to the administration's                 
  position on adjournment night that it could:                                 
       get by  with $5 million in capital,  $5 million in                      
       operating  [neither  of   which  the   legislature                      
       accepted] and then at issue were the contracts for                      
       $7.3  in  general funds  and a  total of  over $10                      
       million, generally.                                                     
  Mrs. Slagle  explained that  the bill  now presented by  the                 
  administration reflects  "going back  a few  steps [to]  the                 
  starting point  in  your discussions."    Co-chairman  Frank                 
  asked if the  legislature was supposed  to take the  request                 
  seriously  or "start  where  we  left  off."    Mrs.  Slagle                 
       I  don't think that he expects  you to back up.  I                      
       think he wants  you to go  ahead and pick up  from                      
       where you were at a couple of nights ago.                               
  The bill contains all of the items under discussion.                         
  Senator Sharp  directed attention  of Secs.  35  and 36  and                 
  asked  if  the  Dept. of  Fish  and  Game  is requesting  an                 
  additional  $2.6  million  for  new  items beyond  what  the                 
  legislature has  already  passed.   Mrs.  Slagle  responded,                 
  "Yes,  these are all  additional items to  what you passed."                 
  They address specific areas that  were reduced in conference                 
  committee.  Senator Sharp took exception to such requests in                 
  special session, after many months of budget work.                           
  Co-chairman Frank recited individual department requests and                 
  associated amounts  from Pages  14 through  16 of  the bill.                 
  Mrs. Slagle noted  that the  $470.0 for  the Ft.  Richardson                 
  Correctional  Facility  corresponds  to  the  amount  in the                 
  capital budget.   It  was included in  the original  capital                 
  ANNALEE  McCONNELL,  Director,   Office  of  Management  and                 
  Budget,  came  before  committee.   She  clarified  that the                 
  proposed   bill   represents   items   addressed   by    the                 
  administration as  operating  budget  concerns  as  well  as                 
  fiscal notes that  have not been  fully funding.  She  cited                 
  critical  legislation  pertaining  to   joyriding,  domestic                 
  violence, and  welfare reform  as examples.   It also  deals                 
  with  capital  items  still  under  discussion  between  the                 
  administration,   majority,   and   the   minority.      She                 
  acknowledged that perhaps not everyone  was aware of ongoing                 
  discussions but stressed  that these items were  not "simply                 
  sprung on the  committee."  The administration  advised both                 
  Senate President Pearce  and House Speaker Gail  Phillips of                 
  willingness  to  achieve "some  resolution  that would  be a                 
  lower  dollar  amount  than  that  total."    It   was  felt                 
  appropriate to  put something  on the table,  at this  time,                 
  that reflects the administration's concerns.                                 
  Co-chairman  Frank asked if  the Governor wants  to spend an                 
  additional  $50  million.    Ms.  McConnell noted  that  $50                 
  million is not the general fund  total.  It includes federal                 
  funds, international  airport funds,  etc.   She voiced  the                 
  administration's  belief  that  all  the  items  should   be                 
  discussed and considered.  They reflect items upon which the                 
  parties were attempting to reach  resolution.  Ms. McConnell                 
  further stressed that requested funding  would not bring the                 
  total up to the Governor's  amended budget.  The legislature                 
  has  made  reductions  which  the  administration   has  not                 
  The meeting was adjourned at approximately 5:50 p.m.                         

Document Name Date/Time Subjects