Legislature(1995 - 1996)
01/25/1995 09:07 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
January 25, 1995
9:07 a.m.
TAPES
SFC-95, #1, Side 2 (Malfunction)
SFC-95, #3, Side 1 (000-242)
CALL TO ORDER
Senator Steve Frank, Co-chair, convened the meeting at
approximately 9:07 a.m.
PRESENT
In addition to Co-chair Frank, Co-chair Halford and Senators
Phillips and Sharp were in attendance. Senator Donley and
Senator Rieger arrived soon after the meeting began.
Senator Zharoff arrived as it was in progress.
ALSO ATTENDING: Senator Green and Representative Davies;
Mike Greany, Director, Legislative Finance Division; Kathryn
Daughhetee,
Fred Fisher, Susan Taylor, Virginia Stonkus, and Jetta
Whittaker, fiscal analysts, Legislative Finance Division;
and aides to committee members and other member of the
Legislature.
SUMMARY INFORMATION
Presentation by the Legislative Finance Division
FY 95 Spending Plan Update and Overview
of Significant Changes to Date
Between FY 95 and FY 96 Operating Budgets
(Malfunction on recording on SFC-95, Tape 1, Side 2. This
portion of the meeting was reconstructed from shorthand
notes.)
MIKE GREANY, Director, Legislative Finance Division, began
his presentation by introduction of the division fiscal
analysts who advised of their responsibility for the
following budget areas:
Susan Taylor - Dept. of Health and Social
Services
Dept. of Administration
Kathryn Daughhetee - Court System, Dept. of Law,
Dept. of
Public Safety, Dept. of
Corrections
Jetta Whittaker - Dept. of Commerce and Economic
Development, Dept. of Revenue
Fred Fisher - Dept. of Transportation and
Public
Facilities, Dept. of Natural
Resources, Dept. of Military
and
Veterans' Affairs, Capital
Budget
Virginia Stonkus - Dept. of Fish and Game, Dept.
of
Environmental Conservation,
Operating
Budget Plan
Dana LaTour - University, Dept. of
Education, Dept.
of Labor, Dept. of Community &
Regional Affairs
Mike Greany - Governor and Legislature
(Senator Rieger and Senator Donley arrived at this time.)
Mr. Greany first directed attention to a handout entitled
"FY 95 Legislative Spending Plan." He explained that items
set forth in the column entitled "Adjournment Plan" reflect
the legislative budget, including vetoes by the Governor.
Amounts listing in the right column, "January, 1995,
Update," are based on the most recent Dept. of Revenue
numbers presented by Chuck Logsdon. Items shown in bold
reflect changes following adjournment.
Mr. Greany noted that since oil prices have averaged $16.22
rather than the projected $14.00, the anticipated draw on
the Constitutional Budget Reserve Fund (CBRF) will be
adjusted from $350 million to approximately $129 million.
That figure will change over the coming months in response
to changes in oil prices.
Speaking to supplemental funding for FY 95, Mr. Greany
pointed to requests over the last six years ranging from
$37.7 million (last year) to a high of $145 million (an
average of $83 to $84 million). The list of potential
supplementals totals $78 million. Governor Knowles has
indicated need for at least $59 million. Whatever the
supplemental ultimately totals, it represents another draw
on the CBRF.
Co-chair Frank asked if moneys from AHFC, the investment
loss fund relating to Executive Life, and AIDEA had been
transferred. Mr. Greany said that transfers are on a
quarterly schedule. The first transfer has been made, and
the second is in progress.
In response to a question from Senator Rieger, Mr. Greany
advised that the FY 94 draw on the CBRF totalled $1.4
billion. That is the amount that appears on the FY 94
financial statement as a liability to be repaid from the
general fund. Draws from the CBRF are loans, not grants.
There is an existing $1.4 billion obligation. Senator
Rieger voiced his understanding that, technically, the CBRF
has the first call on available moneys. Mr. Greany
concurred, advising of need for analysis of the issue and
decision making by both the administration and the
legislature. A reading of the judge's decision indicates
that, at some point, certain accounts in the general fund
would be "subject to a sweep" to repay the obligation.
There will probably be need for future legal guidance in
this area. Mr. Greany advised that he and the legislative
auditor are reviewing all funds and accounts and making a
list of what would be subject to the sweep and what would
not. As an example, Mr. Greany indicated that the marine
highway stabilization fund, which funds one-half of the
operation of the ferry system, would be included. For the
former response fund which was broken into a prevention
account and a response account, it appears the prevention
side would be subject while the response side would not.
Determinations such as the foregoing must be made on a case-
by-case basis, and agreements must be achieved.
Senator Rieger inquired concerning the status of the
permanent fund earnings reserve. Mr. Greany voiced his
understanding that the earnings reserve would not be subject
to sweep. He acknowledged a question of consistency
associated with that determination and advised that it
serves as an example of need for clarification.
Directing attention to page 3 of the handout, Mr. Greany
explained that it presents updated numbers for the CBRF. He
pointed specifically to the $1.3 billion in additional
settlements and advised of two additional payments totalling
$700 million, resulting from the British Petroleum
settlement. The division is projecting an FY 95 balance of
$1.6 billion for the fund. That is in addition to the $1.4
billion "IOU" to be paid by the general fund.
Co-chair Frank inquired concerning interest retained by the
CBRF, projected for FY 96. Mr. Greany acknowledged that
there are interest earnings and said he would provide the
requested numbers.
Directing attention to page 4 of the handout, Mr. Greany
noted fund balances for the Mental Health Trust Income
Account, CBRF, Permanent Fund Earnings Reserve, Science &
Technology Endowment Fund, Investment Loss Trust Fund, AETNA
Reserve, Alaska Housing Finance Corporation (AHFC), and
Alaska Industrial Development and Export Authority (AIDEA).
Discussion followed between Co-chair Frank and Mr. Greany
concerning the impact of recent bond market changes on state
revenues. Further discussion followed regarding the
financial difficulties in Orange County California as well
as interest on the part of both Alaska and California in
resolution of finances associated with Executive Life. Mr.
Greany suggested that the Attorney General and those who
administer the state supplemental benefits system be asked
for an update of the situation associated with the
Investment Loss Trust Fund.
(The remainder of the minutes reflect transcription of tape
SFC-95, #3, Side 1)
Speaking to the AETNA Reserve, Mr. Greany explained that the
$12.1 million reflects excess health insurance benefit
contributions. Last year, the legislature appropriated $8
million from the fund. Governor Hickel subsequently vetoed
that appropriation. Senator Frank asked if the Governor
provided an associated veto message. Mr. Greany advised
that he would research the question. Senator Rieger asked
if the balance represents the differences between the
standard accrual per employee per month and claims paid out.
Mr. Greany said that he would consult with the department
and return an answer to committee.
Mr. Greany next pointed to the estimated $335 million AHFC
reserve account. Last year the legislature asked the
Legislative Audit Division to review potential cash
balances--amounts in addition to bond obligations. He
observed that the state has been sensitive to "not wanting
to do or appear to do anything that could affect our bond
rating or how Wall Street perceives our ability to manage
our finances." Legislative Audit advised that $535 million
could be available over the next two to three years. The
legislature appropriated $200 million for FY 95.
Legislative Audit is again reviewing AHFC to update the
available balance. Figures should be available within the
next few weeks.
Speaking to AIDEA, Mr. Greany characterized the $17 million
balance as a "squishy number." He said that AIDEA financial
statements should be read with caution. A $1.50 reserve
must be maintained for every $1.00 loaned by the authority.
In addition, proposals presently "in the works" could impact
the balance sheet.
Mr. Greany next directed attention to an additional handout
entitled "Formula Funded Programs." He explained that it
attempts to lay out major differences apparent in the FY 96
"Hickel" budget. Analysis up to this time has been limited
to formula programs since they are the areas in which the
largest dollar amount increases will appear. Funding is
largely driven by statute. Unless Governor Knowles proposes
underfunding or statutory changes, numbers set forth on the
handout will be accurate since they reflect statutory
requirements. The second page of the handout contains a
more detailed explanation of differences between FY 95 and
96.
Senator Donley referenced the $4 million increase in adult
public assistance and asked if it represents a projection or
actual expenditure. Mr. Greany responded that it reflects a
projection for FY 96. Funding for FY 95 and 96 represents
"a moving number based on caseload estimates. This program
has traditionally received supplemental funding. Senator
Donley suggested that warnings be sent to the department
that it should not expect "business as usual."
In response to a question from Senator Rieger, Mr. Greany
advised of an interim project which made five-year
projections on a program-by-program basis for formula
programs. Those projections include caseloads, inflation,
etc. The division is now comparing FY 96 projections to
budget numbers.
Senator Zharoff inquired concerning the status of the
longevity bonus program. Mr. Greany advised of ongoing
litigation to determine whether legislation phasing out the
bonus is legal. Numbers set forth at this time assume that
the phase out will occur.
Senator Sharp pointed to the $50 million difference for
health, education, and social services between FY 95 and 96
and voiced his understanding that the difference would be
reduced by supplemental funding. Mr. Greany concurred. He
further advised that the supplemental will also raise a
question concerning whether higher FY 95 expenditures will
carry into FY 96 as well.
Senator Rieger inquired concerning the Alaska Debt
Retirement Fund. Mr. Greany advised of a two-step debt
service process for both general obligation and school debt
reimbursement. A general fund appropriation is made into
the debt retirement fund. Subsequent appropriations are
then made from that fund to specific debt service. That
allows the fund to accumulate balances if total amounts
appropriated for debt service are not needed. Last year,
the need for school debt retirement was $2.5 million less
than anticipated. The $2.5 million was then applied as an
offset against the state's general obligation bond
indebtedness.
Senator Zharoff inquired concerning the percentage of
reduction in municipal assistance and revenue sharing.
VIRGINIA STONKUS, fiscal analyst, Legislative Finance
Division, responded "less than 4%."
ADJOURNMENT
There being nothing further to come before committee at this
time, the meeting was adjourned at approximately 9:40 a.m.
| Document Name | Date/Time | Subjects |
|---|