Legislature(2015 - 2016)SENATE FINANCE 532

02/15/2016 09:00 AM Senate FINANCE

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Audio Topic
09:05:55 AM Start
09:07:40 AM SB167
10:07:28 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Pat Pitney, Director, Office of Management TELECONFERENCED
& Budget
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 15, 2016                                                                                          
                         9:05 a.m.                                                                                              
9:05:55 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair MacKinnon called the Senate Finance Committee                                                                          
meeting to order at 9:05 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator Lyman Hoffman                                                                                                           
ALSO PRESENT                                                                                                                  
Pat Pitney, Director, Office of Management and Budget,                                                                          
Office of the Governor.                                                                                                         
SB 167    APPROP: SUPP/CAP/OTHER APPROPRIATIONS                                                                                 
          SB 167 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
Co-Chair MacKinnon asked the committee to observe a moment                                                                      
of silence to remember Representative Max Gruenberg, who                                                                        
passed away unexpectedly the previous day.                                                                                      
SENATE BILL NO. 167                                                                                                           
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,   and   other  appropriations;   making                                                                    
     reappropriations;  amending  appropriations;  repealing                                                                    
     appropriations; and providing for an effective date."                                                                      
9:07:40 AM                                                                                                                    
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE OF  THE GOVERNOR,  discussed the  PowerPoint, "FY2017                                                                    
Budget Overview  Senate Finance  Committee FY17  Capital and                                                                    
FY16 Supplemental" (copy on file).                                                                                              
Ms.  Pitney  turned  to  slide  28,  "FY  2016  Supplemental                                                                    
Summary"  stating   that  it  provided  a   summary  of  the                                                                    
supplemental  requests  for  the current  fiscal  year.  The                                                                    
slide   displayed   three   tables:   current   supplemental                                                                    
requests,  prior  appropriations  for  FY 16  from  the  LNG                                                                    
special session  and from the  governor's budget, and  a box                                                                    
enumerating the  total of $251  million. She  drew attention                                                                    
to  the  line  for  fire  suppression,  which  listed  $47.5                                                                    
million  in  costs  incurred  during  the  fire  season  the                                                                    
previous summer and  fall. She pointed out  small amounts in                                                                    
formula items, judgements and claims, and non-formula.                                                                          
Ms.  Pitney   discussed  slide  29,  "FY   16  Supplemental:                                                                    
Administration,"  which enumerated  supplemental items  line                                                                    
by  line  for  each  agency.   She  highlighted  line  2,  a                                                                    
Statewide  Single   Audit  Increase  for  $450   million  in                                                                    
unrestricted general fund (UGF).  She explained that "single                                                                    
audit" was an  audit that the Division  of Legislative Audit                                                                    
performed  for  the  state on  an  annual  basis,  typically                                                                    
costing the  administration $300,000. She detailed  that the                                                                    
administration  had received  a  bill for  $750,000 for  the                                                                    
audit in the current year, and  the request was for funds to                                                                    
cover the remainder of the cost.                                                                                                
9:11:19 AM                                                                                                                    
Vice-Chair Micciche asked if the  state had changed firms or                                                                    
instituted  another  change  to  result  in  a  150  percent                                                                    
increase in  the cost of  the audit. Ms. Pitney  stated that                                                                    
the audit  was a traditional financial  audit, performed in-                                                                    
house;  and  the charge  was  based  on past  practice.  She                                                                    
furthered that as budgets  became tighter, Legislative Audit                                                                    
was billing based on a time  basis. She thought the cost was                                                                    
not egregious  or inappropriate and accounted  for the hours                                                                    
that Legislative Audit was spending on the task.                                                                                
Co-Chair MacKinnon  stated that  the committee  would follow                                                                    
up with Legislative Audit to  ascertain if the charge was as                                                                    
described  with regard  to billing  for  hours spent  rather                                                                    
than a traditional flat charge.                                                                                                 
Vice-Chair Micciche wondered if  the state should consider a                                                                    
request for proposals for a private external option.                                                                            
Co-Chair  MacKinnon  thought  that the  Legislative  Finance                                                                    
Division  (LFD), and  Legislative  Audit specifically,  were                                                                    
going to utilize contractors more.                                                                                              
Ms.  Pitney continued  discussing slide  29, pointing  out a                                                                    
small increase for the Office  of Public Advocacy (OPA). She                                                                    
detailed  that OPA's  caseload was  extraordinarily high  in                                                                    
the fall,  partially due  to the  "Fairbanks Four"  case [in                                                                    
which  convictions  of four  men  in  the  1997 death  of  a                                                                    
teenager in  Fairbanks were overturned]. She  drew attention                                                                    
to  an additional  two  items  for OPA  and  for the  Public                                                                    
Defender Agency.  She explained  that there was  a mechanism                                                                    
for  OPA  and  public   defenders  to  collect  funding  for                                                                    
services.  The agencies  were being  more aggressive  in the                                                                    
collection of  such funding, and  the items  represented the                                                                    
receipt authority necessary for the collection.                                                                                 
Ms.   Pitney  showed   slide   30,   "FY  16   Supplemental:                                                                    
Corrections," and discussed a fund  source swap (from UGF to                                                                    
federal funds)  for the amount  that was estimated  to cover                                                                    
the  number of  federal  man-days in  Alaska state  prisons.                                                                    
There was a provision that  the federal government would pay                                                                    
for federal prisoners in Alaska  prisons. She noted that the                                                                    
administration  was  trying  to   follow  the  principal  of                                                                    
putting in  only the  minimum amount  of items  necessary to                                                                    
manage  through  the year.  She  hoped  the committee  would                                                                    
recognize that it was a small supplemental package overall.                                                                     
9:15:31 AM                                                                                                                    
Ms.  Pitney   moved  to  slide  31,   "FY  16  Supplemental:                                                                    
Education,"  noting that  the item  request was  a technical                                                                    
correction  after  LFD had  noted  a  fiscal note  from  the                                                                    
second special  session the  previous year  had not  made it                                                                    
into the budget process.                                                                                                        
Ms.   Pitney  showed   slide   32,   "FY  16   Supplemental:                                                                    
Environmental   Conservation"  and   discussed  a   one-time                                                                    
funding request  for a federal  grant for the  Department of                                                                    
Environmental  Conservation.   The  funding   would  provide                                                                    
cleaner diesel equipment. There  were no ongoing commitments                                                                    
to the grant, which was for $250,000 in federal funds.                                                                          
Ms. Pitney moved to slide  33, "FY 16 Supplemental: Health &                                                                    
Social  Services,"  noting  that  the  top  two  items  were                                                                    
formula programs; one  in foster care and  one in subsidized                                                                    
adoption. The two supplemental  requests covered the formula                                                                    
amount for  the number  of children in  the programs  for FY                                                                    
16. She  discussed the increased  number of children  in the                                                                    
foster care and subsidized adoption programs.                                                                                   
Senator Dunleavy asked  if the increase was  indicative of a                                                                    
philosophical shift of the administration.                                                                                      
Ms.  Pitney did  not believe  the  increase was  based on  a                                                                    
philosophical change,  and relayed  that there was  a strict                                                                    
checklist of items including more  reports of child abuse or                                                                    
unsafe  situations.  The   criteria  for  children  entering                                                                    
foster  care was  already  established.  She suggested  that                                                                    
staff from  the two programs  could meet with  the committee                                                                    
to discuss the criteria further if needed.                                                                                      
Senator Dunleavy repeated his  question. Ms. Pitney answered                                                                    
in the negative.                                                                                                                
Co-Chair MacKinnon  asked if there was  any legislation that                                                                    
contributed to an increase of  almost $6 million between the                                                                    
two requests. Ms. Pitney answered in the negative.                                                                              
9:19:18 AM                                                                                                                    
AT EASE                                                                                                                         
9:20:42 AM                                                                                                                    
Vice-Chair Micciche noted that  the Department of Health and                                                                    
Social   Services  (DHSS)   budget  subcommittee   would  be                                                                    
examining the requests at a  more detailed level. He thought                                                                    
there may have been a  change in interpretation of the child                                                                    
welfare issues,  and that presently  it was not the  time in                                                                    
which  the state  could dramatically  increase  the cost  of                                                                    
operating its departments.                                                                                                      
Co-Chair Kelly asked  Ms. Pitney if much of  the increase in                                                                    
child abuse  reports was due  to circumstances in  a certain                                                                    
geographic  region of  the state.  Ms. Pitney  thought there                                                                    
had  been a  state-wide increase,  but did  not know  of the                                                                    
Co-Chair  Kelly related  that a  few  years previously,  the                                                                    
legislature  had put  increased  resources  into a  specific                                                                    
part of the state to deal  with the issue of lack of funding                                                                    
for foster care. More social  workers were assigned, as well                                                                    
as court  employees. He wondered  if the action  was related                                                                    
to the current increase.                                                                                                        
Ms. Pitney noted that the  situation had been increasing for                                                                    
the past several years, and  was one of the formula programs                                                                    
that was increasing at a  pace that outstripped the funding.                                                                    
She asserted that there had been a significant increase.                                                                        
Ms.  Pitney  went back  to  slide  33, addressing  lines  11                                                                    
through 13,  which pertained to juvenile  justice facilities                                                                    
staffing  and  health  care  and  totaled  $1  million.  She                                                                    
explained  that   the  juvenile  justice  budget   had  been                                                                    
traditionally  supplemented by  $1  million  each year.  The                                                                    
last  several  years  DHSS had  authority  to  move  funding                                                                    
across  appropriations,  and  money   had  been  moved  into                                                                    
juvenile  justice.   Prior  to  the  authority,   there  was                                                                    
traditionally an amount put in  the supplemental budget. She                                                                    
hoped this  was the  last supplemental request,  and relayed                                                                    
that the administration had requested  an increase in the FY                                                                    
17 budget.                                                                                                                      
9:24:29 AM                                                                                                                    
Senator  Dunleavy  referred  to   line  14,  and  asked  how                                                                    
Medicaid  expansion  had  impacted the  issue  of  increased                                                                    
medical costs for juvenile justice health care.                                                                                 
Ms. Pitney stated that there  was a neutral effect since the                                                                    
individuals were  minors and  had been  covered on  the pre-                                                                    
existing   Medicaid.  She   elaborated   that  the   medical                                                                    
coverage, for  prisoners in  the Department  of Corrections,                                                                    
was only  in place when  outside of the facility  in another                                                                    
medical facility for a 24 hour period of time.                                                                                  
Senator  Dunleavy asked  Ms. Pitney  to provide  more detail                                                                    
about the increase.                                                                                                             
Ms.  Pitney stated  that the  medical costs  associated with                                                                    
minors  in  the  juvenile  justice system  was  higher  than                                                                    
anticipated,  and  had  been  traditionally  under-budgeted.                                                                    
There had been supplemental  requests and/or transfers every                                                                    
year previously in the areas being discussed.                                                                                   
Co-Chair Kelly asked  if the amount rose  and fell according                                                                    
to specific medical events.                                                                                                     
Ms. Pitney answered in the  affirmative, and stated that the                                                                    
cost depended  upon the experiences of  the individuals that                                                                    
were in custody.                                                                                                                
Co-Chair MacKinnon  clarified that lines 11  through 13 were                                                                    
for  staff. She  asked  Vice-Chair Micciche  to provide  the                                                                    
committee  with  an analysis  of  why  the budget  from  the                                                                    
previous year did not contain  enough staffing. She wondered                                                                    
if the Senate  or combined legislature had  cut staffing, or                                                                    
if the administration had not requested enough.                                                                                 
Vice-Chair   Micciche  agreed   to  provide   the  requested                                                                    
information,  and furthered  that the  Office of  Children's                                                                    
Services  (OCS)  would  be  before  the  committee  when  it                                                                    
considered SB 226.                                                                                                              
Co-Chair Kelly  asked Ms.  Pitney if  the ability  to cross-                                                                    
appropriate was enacted in the FY 16 budget.                                                                                    
Ms. Pitney  answered in the affirmative,  and indicated that                                                                    
in FY  16, FY 15, and  FY 14 there were  transfers. Prior to                                                                    
that time, there was record of supplemental requests.                                                                           
Co-Chair  Kelly  asked  if  some of  the  costs  were  being                                                                    
covered by the ability to cross-appropriate.                                                                                    
Ms. Pitney answered in the affirmative.                                                                                         
9:28:46 AM                                                                                                                    
AT EASE                                                                                                                         
9:30:07 AM                                                                                                                    
Co-Chair MacKinnon  referred to lines  11 and 12,  and asked                                                                    
for the specifics of the requests.                                                                                              
Ms.  Pitney   clarified  that  lines  11   through  13  were                                                                    
associated   with   staffing    at   particular   facilities                                                                    
(McLaughlin,  Kenai Peninsula,  and Nome);  and line  14 was                                                                    
associated to health care in the juvenile justice system.                                                                       
Co-Chair MacKinnon  highlighted line 11, which  noted that a                                                                    
$470,000 increment  was included  in the  FY 17  budget, and                                                                    
the   supplemental  request   was  for   $520,000;  with   a                                                                    
difference  of $50,000.  She asked  for  explanation of  the                                                                    
$50,000, and wondered if it was due to the unallocated cut.                                                                     
Ms. Pitney  explained that  the $50,000 was  not due  to the                                                                    
unallocated cut;  rather, the  line was  an analysis  of the                                                                    
staffing cost  for the  facility to get  through FY  16. She                                                                    
was  not anticipating  juvenile justice  to absorb  the DHSS                                                                    
portion  of the  salary  increase. She  reiterated that  the                                                                    
requests were  actual staffing costs  for the  facility, and                                                                    
juvenile  justice  could not  staff  their  facilities at  a                                                                    
lower cost.                                                                                                                     
Co-Chair MacKinnon  asked for clarification on  the increase                                                                    
in staffing authority. She thought  Ms. Pitney had indicated                                                                    
earlier that the  increase had to do  with increased medical                                                                    
costs. She  thought it seemed  as though the items  were for                                                                    
increased staff  costs in addition  to increased  wage cost,                                                                    
because the $50,000  was not for new staff,  and appeared to                                                                    
be the difference in cost between two items.                                                                                    
Ms.  Pitney  restated   that  lines  11,  12   and  13  were                                                                    
associated with the  cost of staffing in  place necessary to                                                                    
cover  the facilities;  and line  14 had  to do  with health                                                                    
care costs.  Lines 11,  12, and 13  totaled $700,000  in UGF                                                                    
and  was the  cost that  the juvenile  justice system  would                                                                    
incur based on the staffing in  place in FY 16. The $470,000                                                                    
was  anticipated  as  necessary  in  addition  to  what  the                                                                    
administration had requested in FY 17.                                                                                          
Co-Chair MacKinnon asked if there was any new staff.                                                                            
Ms.  Pitney  stated  that  the  requested  funding  was  for                                                                    
existing  necessary facility  staff  that traditionally  had                                                                    
not been covered by the budget.                                                                                                 
Co-Chair  MacKinnon  mused  that  if  the  supplemental  was                                                                    
examined, it would not have  to do with medical expenses; it                                                                    
would reflect that the administration  either didn't ask for                                                                    
enough staff  funding, didn't  respond to  cuts that  it was                                                                    
given, or needed money for wage increases.                                                                                      
Ms. Pitney  stated that the  administration did not  ask for                                                                    
enough funding in FY 16, because in  FY 15, FY 14, and FY 13                                                                    
a  provision had  been  in  place to  move  money. The  DHSS                                                                    
commissioner  could exercise  the  provision  to move  money                                                                    
across appropriations. In FY 16,  the commissioner no longer                                                                    
had the authority.                                                                                                              
9:35:05 AM                                                                                                                    
Co-Chair MacKinnon  thought that lines  11, 12, and  13 were                                                                    
misleading.  She wondered  if  there had  been  a work  rule                                                                    
change  negotiated inside  of a  contract that  necessitated                                                                    
the  additional   staff  expenditures  for   secure  minimum                                                                    
Ms.  Pitney responded  in the  affirmative, and  stated that                                                                    
the facilities were currently staffed  to meet the need. The                                                                    
cost  associated with  the  request was  the  cost that  the                                                                    
facilities  would  incur  in  the  current  fiscal  year  to                                                                    
achieve the required minimum staffing level.                                                                                    
Vice-Chair   Micciche  referred   to  Co-Chair   MacKinnon's                                                                    
inquiry about increased staffing  authority, and stated that                                                                    
he would  address the question  in subcommittee. He  did not                                                                    
expect  Ms. Pitney  to have  expertise  pertaining to  every                                                                    
position in the administration.                                                                                                 
Co-Chair  MacKinnon  clarified  that  she  wondered  if  the                                                                    
positions  were contract  increases  that  should have  been                                                                    
responded to  inside of the  existing budget. She  asked LFD                                                                    
to  review  the  supplemental  request  to  clarify  if  the                                                                    
increase  was  for  staffing   or  increases  in  unexpected                                                                    
medical costs.                                                                                                                  
Ms. Pitney addressed line 15  on slide 33, which was receipt                                                                    
authority for funds from care  providers. She furthered that                                                                    
the funds were  additional to what was  required for claims,                                                                    
and that  the state would be  collecting reimbursements from                                                                    
various programs within DHSS.                                                                                                   
Co-Chair  MacKinnon asked  if the  authority to  collect the                                                                    
receipts  was  needed  because of  Medicaid  expansion.  Ms.                                                                    
Pitney  stated  that  the receipt  authority  necessary  was                                                                    
irrespective of  Medicaid expansion, and clarified  that she                                                                    
was referring to past claims prior to the expansion.                                                                            
9:38:11 AM                                                                                                                    
Ms. Pitney  showed slide 34,  "FY16 Supplemental:  Law." She                                                                    
explained that there had been  a multistate arbitration with                                                                    
the tobacco  industry, and the state  was requesting $50,000                                                                    
in  tobacco receipts  to offset  costs for  participating in                                                                    
the arbitration.  She addressed lines  17 and 18,  a request                                                                    
to  replace  previously collected  fees-for-service  between                                                                    
agencies with  a direct appropriation with  the two agencies                                                                    
specified.  The  Department  of  Law  (DOL)  provided  legal                                                                    
services to  the Alaska Oil and  Gas Conservation Commission                                                                    
(AOGCC), which was  a non-GF fee supported  service; as well                                                                    
as for  the Regulatory  Commission of  Alaska (RCA),  also a                                                                    
fee supported service. She furthered  that Department of Law                                                                    
did work on behalf of  both agencies, which were 100 percent                                                                    
Co-Chair MacKinnon  wondered if AOGCC had  communicated that                                                                    
it did  not want the services  from DOL. Ms. Pitney  had not                                                                    
heard,  and   believed  that  there   was  a   statute  that                                                                    
stipulated the commission received legal services from DOL.                                                                     
Co-Chair MacKinnon relayed that  she would address the issue                                                                    
in the  DOL budget  subcommittee. She understood  that there                                                                    
had been a question pertaining  to billable hours, and using                                                                    
commission receipts for billable hours.                                                                                         
Ms. Pitney  moved to slide  35, "FY16  Supplemental: Natural                                                                    
Resources,"  and addressed  line  19,  relating to  wildland                                                                    
fire  protection.  She  clarified  that  the  amount  listed                                                                    
represented  the cost  incurred  through FY  16  to date  on                                                                    
wildfires,  and  the state  had  a  particularly large  fire                                                                    
season  the previous  fall. She  mentioned a  fire that  had                                                                    
been  in the  Wasilla and  Houston area,  and she  confirmed                                                                    
that the cities had a sales tax.                                                                                                
Senator Dunleavy wondered if the  state could anticipate any                                                                    
reimbursement from the federal  government for any aspect of                                                                    
the fires  included in the supplemental  request. Ms. Pitney                                                                    
indicated that  the state was expecting  some reimbursement,                                                                    
and   the  amount   request  was   above   and  beyond   the                                                                    
reimbursement. She  pointed out  that she could  obtain more                                                                    
detailed   expense   information   per  fire   incident   if                                                                    
Co-Chair  MacKinnon  inquired  as  to the  amount  that  had                                                                    
originally been budgeted for  fire suppression activity. Ms.                                                                    
Pitney was  not aware  of the  amount budgeted,  but thought                                                                    
that  there was  a ratification  for FY  15 as  part of  the                                                                    
language section in the supplemental.                                                                                           
Co-Chair MacKinnon  stated that  LFD had suggested  that the                                                                    
amount originally budgeted was $6.6 million.                                                                                    
9:42:38 AM                                                                                                                    
AT EASE                                                                                                                         
9:42:48 AM                                                                                                                    
Co-Chair  MacKinnon  communicated   that  she  had  received                                                                    
confirmation  from LFD  that a  supplemental request  of the                                                                    
size indicated in the presentation was typical.                                                                                 
Vice-Chair Micciche referred  to cuts that had  been made to                                                                    
the  area  of  wildland  fire protection  and  thought  that                                                                    
consequently  there  would  be  a  greater  differential  in                                                                    
funding  needs  after  a  big fire  season  if  the  funding                                                                    
remained at the same level.                                                                                                     
Senator Bishop  mentioned that he chaired  the Department of                                                                    
Natural Resources (DNR) budget  subcommittee and stated that                                                                    
the committee  had added  back funding  for a  position that                                                                    
would apply for federal funding offsets.                                                                                        
Senator  Dunleavy  asked  if   the  amount  requested  would                                                                    
reimburse  for actual  expenses, or  if there  were any  new                                                                    
expenses   included.   Ms.    Pitney   detailed   that   the                                                                    
supplemental request  was only  for reimbursement  of actual                                                                    
Co-Chair MacKinnon  asked Ms. Pitney  to address line  18 on                                                                    
slide 34.  Ms. Pitney  expanded that  the civil  division of                                                                    
DOL did  work on behalf  of RCA,  and the request  of direct                                                                    
funding from the RCA was for the amount of work done.                                                                           
Co-Chair  MacKinnon  asked  if  line  18  pertained  to  RCA                                                                    
receipts and  if line  17 had been  for AOGCC  receipts. Ms.                                                                    
Pitney answered in the affirmative.                                                                                             
Vice-Chair Micciche asked  if there had been  a decrement in                                                                    
the AOGCC section, or if  the workload had been shifted. Ms.                                                                    
Pitney stated  that DOL had traditionally  billed the AOGCC,                                                                    
and the  direct appropriation  would provide  direct funding                                                                    
that  would come  in immediately  rather than  billing after                                                                    
the work was completed.                                                                                                         
Co-Chair MacKinnon mentioned  that she was the  chair of the                                                                    
DOL  budget  subcommittee, and  thought  that  DOL wanted  a                                                                    
direct  appropriation  so  that  it would  have  to  do  the                                                                    
billing.  She  wondered  if  individual  agencies  might  be                                                                    
challenging what  DOL stated  it was  doing on  the agencies                                                                    
behalf. She  considered that the subcommittee  would examine                                                                    
it further.                                                                                                                     
Vice-Chair  Micciche thought  there had  been a  work shift,                                                                    
and  wanted   to  ensure  that  the   funding  was  adjusted                                                                    
Co-Chair  MacKinnon  thought  the previous  year  AOGCC  had                                                                    
requested  the administration  approve spending  of its  own                                                                    
designated  receipts. The  administration  had not  advanced                                                                    
the request,  and she restated  that the  subcommittee would                                                                    
reexamine the issue.                                                                                                            
9:47:52 AM                                                                                                                    
Ms. Pitney moved to slide  36, "FY16 Supplemental: Revenue,"                                                                    
which  addressed  costs  incurred  for  external  investment                                                                    
counsel  on  three  different   funds:  the  Retiree  Health                                                                    
Insurance Fund, the Public School  Trust Fund, and the Power                                                                    
Cost Equalization  Endowment Fund. She explained  that there                                                                    
were external management fees associated with the funds.                                                                        
Co-Chair  MacKinnon  related  that   she  also  chaired  the                                                                    
Department  of   Revenue  (DOR)  budget   subcommittee,  and                                                                    
pointed out  that two  or three  fund managers  had recently                                                                    
been hired. She thought that  the management fees would have                                                                    
been  reduced, and  advised that  the subcommittee  would be                                                                    
examining the topic further.                                                                                                    
Ms.  Pitney  stated  that  the   management  fees  had  been                                                                    
incurred;  however, the  new  investment  officers would  be                                                                    
coming on  board and the administration  hoped that external                                                                    
investment fees would be reduced in the future.                                                                                 
Ms.   Pitney   reviewed   slide  37,   "FY16   Supplemental:                                                                    
Transportation  &  Public  Facilities," and  explained  that                                                                    
items  23  through 26  pertained  to  components within  the                                                                    
Department  of Transportation  and  Public Facilities  (DOT)                                                                    
that had  (other than GF)  receipt authority to  utilize the                                                                    
amount of  revenues available. She  detailed that  the items                                                                    
would match the  authority with the revenue  capacity in the                                                                    
regions listed.                                                                                                                 
Co-Chair  MacKinnon advised  whichever  member that  chaired                                                                    
the  DOT  budget  subcommittee to  examine  the  items.  She                                                                    
confirmed    that    Vice-Chair   Micciche    chaired    the                                                                    
Ms. Pitney  showed slide  38, "FY16  Supplemental: Capital".                                                                    
She discussed a  capital request for the  Alaska Land Mobile                                                                    
Radio System  (ALMR), which was the  emergency communication                                                                    
system across the  state. She furthered that  the system was                                                                    
used  by DNR,  the Alaska  State Troopers,  and others.  She                                                                    
detailed  a  supplemental request  for  $1  million, plus  a                                                                    
reappropriation  of  approximately   $1.2  million  to  make                                                                    
necessary upgrades to the system.  She noted that the system                                                                    
was costly,  and that  the state  depended upon  the system.                                                                    
She  projected that  in FY  18  through FY  19, the  request                                                                    
would  be  in  the  $5  million to  $6  million  range.  She                                                                    
continued that  the administration  was looking for  ways to                                                                    
mitigate  the   costs  associated   with  the   system,  but                                                                    
characterized it  as the "emergency  communication backbone"                                                                    
for the state.                                                                                                                  
9:51:55 AM                                                                                                                    
Vice-Chair Micciche stated that he  had previously been on a                                                                    
committee that  had reviewed  the funding  for ALMR,  and he                                                                    
recalled that  there had been more  federal matching dollars                                                                    
at the time.  He wondered if the federal  government had not                                                                    
lived up to the original  agreement, and wanted to look into                                                                    
the matter further.                                                                                                             
Co-Chair   MacKinnon  shared   that   she  had   sat  on   a                                                                    
subcommittee that  included the system for  the past several                                                                    
years. She  wanted to  see a  plan from  the administration,                                                                    
because   the  federal   government  had   been  withdrawing                                                                    
funding. She  discussed costs that  had been shifted  to the                                                                    
state,  and thought  that the  federal  government was  only                                                                    
participating  in funding  unlimited transponders  that were                                                                    
perceived as  having national security  value. She  used the                                                                    
example of  a volunteer  fire station  in Chugiak  that used                                                                    
ALMR to  illustrate an  example of  the state  passing costs                                                                    
down  to  the  cities.  She wondered  if  the  state  should                                                                    
consider partnering with land-mobile  operators such as AT &                                                                    
T, Sprint, or GCI. She  wondered how ALMR was different than                                                                    
other  networks used  by private  companies. She  emphasized                                                                    
that the information she had was dated.                                                                                         
Ms.  Pitney  relayed  that   administration  had  looked  at                                                                    
alternatives; the administration  recognized that the system                                                                    
was expansive and was an  ever-growing cost to maintain. She                                                                    
emphasized   the    need   for   a    state-wide   emergency                                                                    
communication system.                                                                                                           
Co-Chair  MacKinnon commented  that  local communities  were                                                                    
finding it  burdensome to access  certain systems,  and used                                                                    
an example of  diminished cell phone coverage in  an area of                                                                    
her community  where it was  possible for ALMR  to function.                                                                    
She  discussed standardization  of communication  systems as                                                                    
additional  carriers  came  into  the  state,  and  pondered                                                                    
alternative emergency systems possible in the future.                                                                           
9:55:51 AM                                                                                                                    
Ms.  Pitney continued  to discuss  slide  38. She  addressed                                                                    
line  30,   water  line  repairs  for   the  Anvil  Mountain                                                                    
Correctional Center.  She discussed  an emergency  repair to                                                                    
the water line  the previous spring, and  specified that the                                                                    
$1.84 million  request was required  to provide  a long-term                                                                    
fix for failing water lines  at the correctional center. She                                                                    
discussed  line 31,  explaining  the  request for  emergency                                                                    
repair of the Eklutna  Overpass. The request represented the                                                                    
amount necessary  to repair the  damages over and  above the                                                                    
insurance settlement.  Ms. Pitney  clarified that  there had                                                                    
been a  settlement reached after  the insurance  company had                                                                    
paid,   and  there   was   further  settlement   information                                                                    
available to members if there was interest.                                                                                     
Co-Chair MacKinnon  asked about  the frequency at  which the                                                                    
bridge had  been damaged, and  wondered if the  state should                                                                    
pay to  raise the  bridge. Ms. Pitney  thought the  idea was                                                                    
possibly a good long-term solution.                                                                                             
Co-Chair  MacKinnon  thought  there  may  be  a  significant                                                                    
cultural  site   that  was  causing  delay   in  fixing  the                                                                    
overpass, and  thought that continued  need for  repairs was                                                                    
difficult for the community and highway users.                                                                                  
Ms.  Pitney   discussed  slide  39,  "FY   16  Supplemental:                                                                    
Language,"  which  covered  the  language  sections  of  the                                                                    
supplemental budget request. She  directed attention to line                                                                    
35,  which  detailed  the  re-appropriation  for  ALMR.  She                                                                    
explained that  line 36 was  a reappropriation  that allowed                                                                    
the  state  to match  federal  transportation  funding at  a                                                                    
90/10 match  for the Alaska  Railroad, which  would complete                                                                    
the  Positive Train  Control  (PTC)  upgrade. She  specified                                                                    
that the  reappropriation was for  the Tanana  Bridge, which                                                                    
equaled  just over  $1.6 million,  and matched  with federal                                                                    
transportation  funds that  went  directly  to the  railroad                                                                    
company. She  reminded the committee  that PTC  had amounted                                                                    
to a  $55 million  project the previous  year, of  which the                                                                    
Alaska Railroad was bonding approximately $17 million.                                                                          
9:59:31 AM                                                                                                                    
Senator Dunleavy  understood that the railroad  was going to                                                                    
deal  with   the  financing  through  bonding.   Ms.  Pitney                                                                    
clarified that the  railroad was able to bond  just short of                                                                    
$35 million,  and the request  was for the  remaining amount                                                                    
to complete the project.                                                                                                        
Senator Dunleavy  asked whether the railroad  could take the                                                                    
amount  out   of  its  assets.  Ms.   Pitney  discussed  the                                                                    
railroad's  bonding   capacity,  and  reiterated   that  the                                                                    
funding   would   be   a   90/10   federal   match   through                                                                    
reappropriation of a completed project.                                                                                         
Senator  Dunleavy did  not understand  why the  railroad was                                                                    
unable  to   finance  the  remaining  portion.   Ms.  Pitney                                                                    
explained that  the companies bonding capacity  was for just                                                                    
over $35  million of  the $50  million cost;  therefore, the                                                                    
funds would  meet the need  of the remaining funds  with the                                                                    
federal matching funds.                                                                                                         
Co-Chair  Kelly rearticulated  Ms.  Pitney's explanation  to                                                                    
check  for understanding  of  the  funding composition.  Ms.                                                                    
Pitney   confirmed  that   he  was   correct  in   that  the                                                                    
supplemental  request was  for  the state's  portion of  the                                                                    
funding match to complete the PTC project.                                                                                      
Senator  Bishop  thought  that the  railroad  companies  had                                                                    
received   an   increase   in  PTC   funds   in   a   recent                                                                    
transportation   act.   [The    Fixing   America's   Surface                                                                    
Transportation  (FAST) Act,  signed  by  President Obama  in                                                                    
2015; authorized $305  billion over FY 16 through  FY 20 for                                                                    
highway,   highway   and   motor  vehicle   safety,   public                                                                    
transportation,  motor carrier  safety, hazardous  materials                                                                    
safety,  rail,  and  research,  technology,  and  statistics                                                                    
10:02:06 AM                                                                                                                   
Ms. Pitney discussed line 37,  which pertained to judgements                                                                    
and  settlements through  January 29,  2016; and  equated to                                                                    
$2.4  million. She  noted that  there was  a placeholder  on                                                                    
line  38   in  the  case  that   additional  judgements  and                                                                    
settlements were to resolve.                                                                                                    
Co-Chair  MacKinnon  asked if  Ms.  Pitney  had referred  to                                                                    
judgements against  the state.  Ms. Pitney responded  in the                                                                    
Co-Chair MacKinnon stated that  the DOL finance subcommittee                                                                    
would  expect a  briefing on  the matter  to understand  the                                                                    
details pertaining to the judgments and settlements.                                                                            
Ms. Pitney discussed  line 40, which showed a  repeal in the                                                                    
language section  of the budget  for the previous  year. She                                                                    
explained that there  had been an error in  the dates within                                                                    
the language  provision detailing  the funds  for the  FY 16                                                                    
Permanent  Fund Dividend  Program  PFD appropriation,  which                                                                    
had  in  fact  been  paid by  previous  years  funding.  She                                                                    
furthered  that the  administration would  be submitting  an                                                                    
amendment the  following day to appropriate  funding for the                                                                    
following  fall dividends,  which would  be consistent  with                                                                    
the governor's plan for a $1000 dividend.                                                                                       
Co-Chair MacKinnon  asked for clarification that  the repeal                                                                    
would  modify the  incorrect language  that  was passed  the                                                                    
previous session. Ms. Pitney answered in the affirmative.                                                                       
Ms. Pitney  noted that lines  41, 42, and 43  were technical                                                                    
items.  She  addressed  line 46,  which  she  explained  was                                                                    
ratification for fire  activity prior to FY 16  that had not                                                                    
been budgeted in FY 13, FY 14, and FY 15.                                                                                       
Senator   Dunleavy   asked   if   the   administration   was                                                                    
considering outsourcing  or privatizing the  bill collection                                                                    
for items such as overdue  child support payments from court                                                                    
settlements  and other  circumstances. Ms.  Pitney explained                                                                    
that the  collection processes were  considered on  a shared                                                                    
service component  rather than an item  for outsourcing. She                                                                    
detailed  that  Commissioner  Sheldon Fisher  had  hired  an                                                                    
individual with significant  success with collection efforts                                                                    
in the  State of Ohio.  To the  degree that the  state could                                                                    
increase its  collections, the funds could  help support the                                                                    
shared  services  division.  She anticipated  a  significant                                                                    
streamlining of some of the  administrative functions of the                                                                    
shared  services area.  She reiterated  that the  collection                                                                    
effort  was  one of  the  funding  possibilities that  would                                                                    
support   the  shared   services  group.   She  hoped   that                                                                    
Commissioner Fisher  would have  the opportunity  to provide                                                                    
the committee with more background on the subject.                                                                              
SB  167  was  HEARD  and   HELD  in  committee  for  further                                                                    
10:07:28 AM                                                                                                                   
The meeting was adjourned at 10:07 a.m.                                                                                         

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