Legislature(2009 - 2010)SENATE FINANCE 532
01/27/2010 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Fy2011 Budget Overview & Fiscal Summary | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
January 27, 2010
9:05 a.m.
9:05:25 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee meeting
to order at 9:05 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Karen Rehfeld, Director, Office of Management and Budget,
Office of the Governor; John Boucher, Senior Economist,
Office of Management and Budget, Office of the Governor.
PRESENT VIA TELECONFERENCE
None
SUMMARY
^FY2011 Budget Overview & Fiscal Summary
9:05:36 AM
Co-Chair Stedman reminded that the revenue prediction by
Commissioner Galvin warranted additional committee time.
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced Steve Hildebrand as the
new Chief budget analyst for the Office of Management and
Budget (OMB). She stated that OMB is willing to work through
the budget process with the legislature. Today's
presentation includes a high level view minus the agency
details via PowerPoint presentation, "FY2011 Budget
Overview" (Copy on File).
9:09:13 AM
Ms. Rehfeld discussed Slide 2: "Budget Guidance"
· The FY2011 budget supports Governor Parnell's number
one mission: "Position Alaska's economy for growth and
Alaska's families for opportunity."
Ms. Rehfeld continued with Slide 3: "Budget Guidelines"
· Focus on the priorities mandated by Alaska's
constitution-Education, Public Safety, and Resource
Development.
· Maintain budget discipline by limiting agency growth
· Focus on results for Alaskans
· Take a long-term view
9:10:27 AM
Ms. Rehfeld discussed Slide 4: "FY2011 Budget Summary." She
highlighted the savings components. Currently "all funds"
equal $10.7 billion including the permanent fund
expenditures and savings components of the spending plan
before the committee.
Co-Chair Stedman requested further discussion regarding
restricted and unrestricted general funds. He asked for
further clarification about restating the general fund
figures.
9:11:41 AM
Ms. Rehfeld communicated that the column identified as
"recast general funds" includes both the unrestricted
general fund and funding identified through the recast
project. She mentioned that Mr. Teal will address the
subject in greater detail for the public tomorrow.
Co-Chair Stedman added that the Legislative Finance
Department will revisit the historic numbers for the $700
million necessitating restate. The process clarifies the
general fund. He explained that the process requires a great
amount of time.
9:14:42 AM
Ms. Rehfeld pointed out the key components of the budget
development that must be refreshed with the new fund code
assignment including the performance framework and the long
range fiscal plan, which were built on the current model as
opposed to the recast.
Ms. Rehfeld returned to the Slide 4 and the expenditures
broken down by agency operations including formula programs,
statewide pieces, capital budget and transfers in savings.
She noted that the formula programs are statutorily
designated including increases in the budget.
9:16:11 AM
Ms. Rehfeld continued with the pie chart on Slide 5. She
explained that education is a significant component of the
budget at $1.1 billion serving approximately 53 school
districts with 130 thousand students. The budget proposal
fully funds the K-12 formula including a $56 million
increase from the prior year.
Ms. Rehfeld informed that the Medicaid component equals 14
percent of the budget. She explained that the state served
over 120 thousand Alaskans with Medicaid in FY09.
Co-Chair Hoffman commented that the largest component of the
increase for education is due to the increase in the Base
Student Allocation (BSA) by $100. Ms. Rehfeld agreed that
the intensive needs portion extends from 11 to 13 times the
BSA.
Ms. Rehfeld addressed the capital budget at fourteen percent
of the total budget. She mentioned that resource development
remains a high priority for the governor, including $150
million for the Alaska Gasline Inducement Act (AGEA)
reimbursement. The proposed spending for the instate gas
project is outlined in the operating budget. She noted that
the governor highlighted $100 million for deferred
maintenance. The governor requested that the legislature
consider moving the $100 million to an immediate effective
date as seen in the supplemental budget due out next week.
Ms. Rehfeld noted the deferred maintenance obligations,
which allow medium and small contractors to continue
working. Examples of these maintenance obligations include a
request for the $75 million crime lab and $109 million for
the University of Alaska life sciences building.
9:20:58 AM
Ms. Rehfeld continued that the capital budget includes the
general fund necessary to capture the federal highway and
aviation programs and continue to maintain the Dalton
Highway, which is important to the efforts on the North
Slope. The governor requested funding to open access to the
Umiat area for resource development. Included is $25 million
for the renewable energy fund.
Co-Chair Hoffman requested further information regarding the
$8 million for Umiat. He wondered about phase funding and
timelines. Ms. Rehfeld responded that the $8 million is half
of the funds required for the road's environmental impact
study. She acknowledged that the funding is phased. Co-Chair
Hoffman asked if the funding is to gain access to the
National Petroleum Reserve-Alaska (NPR-A). Ms. Rehfeld
understood that the desired access was the Gubik oil field.
Senator Huggins asked Ms. Rehfeld to clarify the federal
match. Ms. Rehfeld answered that the federal general fund
match in the budget is $50 million allowing the capture of
$700 million in federal highway and aviation program funds.
She noted the general fund match for the village safe water
program of $23 million.
9:22:26 AM
Co-Chair Stedman discussed the acceleration in time required
to move the $100 million of deferred maintenance into the
FY10 supplemental. He asked if the funds will be deducted
from the 2011 capital budget presentation. Ms. Rehfeld
responded that the governor's interest is to jumpstart the
first installment of the $100 million proposed for FY11. She
noted the due date of February 2 for the supplemental bill
along with another of February 17 for budget amendments.
Co-Chair Stedman requested revisiting Slide 3. He pointed
out the quote "focus on the priorities mandated by Alaska's
constitution-education, public safety, and resource
development." He expressed concern about the operating
budget consuming the entire budget, leaving little money for
water, sewer, roads and bridges. He asked for a definition
of the quoted clause from the administration. He expressed
concern about the impact that the operating budget has in
slowing down economic development in the future.
9:25:35 AM
Ms. Rehfeld responded that the constitutional discussion
about the amount allocated for the capital budget has been
reviewed for several years. She mentioned formula program
increases, debt service components, and unfunded liability
as significant areas of discussion. She noted that debt
service for capital projects is an ongoing portion of the
operating budget.
Senator Olson asked Ms. Rehfeld to address the revenue
sharing aspect. Ms. Rehfeld responded that the revenue
sharing remains in the budget at $60 million. The ten year
planning model includes $60 million for revenue sharing as
well.
9:27:58 AM
Co-Chair Hoffman recalled the governor's State of the State
address and the emphasis on new school construction in rural
Alaska. He expressed particular interest in the resolution
of the Kassayulie case. He requested feedback regarding the
governor's comments in his speech. Ms. Rehfeld replied that
the governor is interested in working with the legislature
on school construction using the potential FY10 surplus.
Co-Chair Hoffman stressed that rural Alaskans are interested
in the resolution of the Kassayulie case. The case is long
standing with political implications. He opined that
ignorance of the case is a mistake. He sought a long term
solution for new school construction. He stressed that all
children in Alaska deserve adequate schools. He opined that
this was a good year to address the problem.
9:30:45 AM
Ms. Rehfeld agreed that the governor was sincere in his
desire to resolve the Kassayulie case. She revisited the pie
chart on Slide 5.
Senator Thomas requested an explanation about certificates
of participation in other types of bonding. He understood
that some provisions in the recovery act allow other types
of bonds that may prove useful for the crime lab and life
sciences building. He encouraged familiarity with all
available options. Co-Chair Stedman agreed that different
methods of financing are available. He requested a
presentation addressing bonding indebtedness of the state,
different mechanisms for financing, and a review of the
state's bond status.
9:32:57 AM
Ms. Rehfeld agreed that Devin Mitchell would welcome the
presentation.
Ms. Rehfeld continued with Slide 5. She explained that the
permanent fund is a key component of the spending plan at
$1.5 billion or 14 percent of the budget. The 14 percent
includes the amount necessary for both Permanent Fund
Dividend (PFD) and inflation proofing based on projections
from the Permanent Fund Corporation. Co-Chair Stedman asked
if OMB used zero for inflation.
JOHN BOUCHER, SENIOR ECONOMIST, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, stated that the FY11
projections have inflation proofing, but the projections for
FY10 do not.
Co-Chair Hoffman commented that Mr. Boucher resembled his
father. Mr. Boucher stated that today would have been his
89th birthday.
9:35:13 AM
Ms. Rehfeld stated that the governor's proposal for $400
million is intended for increasing academic rigor in high
schools and improving graduation rates. The goal is improved
success for Alaskan children.
Ms. Rehfeld discussed Agency Nonformula at 36 percent or
$3.8 billion. The governor did limit growth in the operating
budget. The individual agency budgets show very little
increases. Fixed costs will be absorbed. She explained that
Power Cost Equalization, heating assistance programs, and
public safety including domestic violence prevention are
included in the operating budget.
9:38:11 AM
Ms. Rehfeld discussed the statewide appropriations and the
$881.5 million or 8 percent of the budget. Co-Chair Stedman
asked about the rates of the bonded indebtedness. He
addressed Page 5, Line 22 of the document titled
"Legislative Fiscal Analyst's Overview of the Governor's
FY2011 Request" (Copy on file). The total tax credits equal
over $500 million.
Co-Chair Hoffman asked how much of the $276 million in debt
service is allocated toward school debt service in the 2011
budget. Ms. Rehfeld replied that she would provide the
committee with the debt schedule, which is also published on
OMB's web site.
Co-Chair Hoffman stated that the figures would exceed $100
million. Mr. Boucher clarified $106 million. Co-Chair
Stedman asked about the cost of the prison debt. Ms. Rehfeld
answered that the debt service amount for Goose Creek
Correctional Center is also broken down on the debt
schedule.
9:41:15 AM
Ms. Rehfeld continued with Slide 6 and the FY10 prediction
versus FY2011. She expected even greater surplus available
at the end of FY10. One important part of the long range
plan is to use savings accounts to provide core services.
She highlighted the forecast provided yesterday.
Co-Chair Hoffman asked about the proposal to forward fund
education with the appropriation of $1.15 billion. He asked
if the funds were classified as savings. Ms. Rehfeld
answered that the amount is classified as savings.
9:43:13 AM
Ms. Rehfeld described the pie chart on Slide 7. She
discussed the surplus and the construction. She noted the
savings plan and the surplus were combined in the savings
account. The governor is interested in working with the
legislature on the surplus, with rural school construction
in the forefront.
Co-Chair Stedman remembered that the legislature did not
forward fund education. An opportunity to allow one year of
K-12 funding for the future exists now.
Ms. Rehfeld described Slide 8, "Utilizing the State's
Performance Framework to Measure Results for Alaskans."
· Agency Missions
-Consistent with statutory authority.
· Core Services
-Activities to accomplish the mission
-End Results-planned goals and achievements
-Strategies and Targets-planned actions and targets to
measure success
-Status and Analysis of Results-How are we doing and
what does the data show?
· System Changes
-Align agency and state priorities
-Identify department priority programs and key
performance indicators
-Distribution of current budget capacity (FY10)
-Key performance indicators to reflect progress toward
desired results
-Link proposed budget changes with desired results
System Changes
· Legislative Review
-Part of the annual review and approval of the budget
-Process outlined in AS 37.07.014
-Promote results-based government and method to measure
results for each agency
9:46:20 AM
Co-Chair Stedman remembered a comment by the governor
referencing a request from the agency for a 10 percent
growth factor during a year without inflation. He explained
the challenge for the legislature of maintaining the
operating budget with revenue to prevent future draconian
cuts. Ms. Rehfeld agreed that some challenges include
methods of service delivery. Agencies must modify to an
acceptable level of funding for a greater period of time.
Chair Hoffman pointed out that Commissioner Galvin discussed
the growth of the Constitutional Budget Reserve (CBR) to
approximately $20 billion. He referenced the governor's
comment in the State of the State address that Alaska's
savings account would last more than ten years. He requested
realism in the assumptions, enabling truthful projections.
He opined that the public portrayal was misleading.
9:50:12 AM
Ms. Rehfeld agreed that 10 year predictions are difficult.
She believed that the assumption spoken by the Commissioner
was in the event of a three percent growth. She described
the baseline scenarios, initiative scenarios, gasline
scenarios, etc. The various discussions include investment
timelines for infrastructure. She agreed that the changes
along the way would not lead to a flat three percent growth.
The ten year plan does provide the opportunity to view the
pressure points over a long term horizon. The impacts on the
savings accounts are viewed using the varying scenarios.
Senator Huggins addressed Slide 3 and the focus of
priorities mandated by the constitution. He addressed Slide
8, and the priority of instate gas. He was interested in
alignment of the issues. He requested accountability.
Ms. Rehfeld explained that the instate gasline project does
align with the resource development priority at the state
level. The effort will continue with the new instate gasline
coordinator at approximately $6.5 million. Extension of the
appropriation made last year which expires in February will
be requested in the supplemental bill due next week. Senator
Huggins opined that agency alignment was a key component.
9:53:47 AM
Ms. Rehfeld continued with Slide 9 "Long-Range Fiscal Plan"
· Guiding Principles
-Responsibly develop Alaska's natural resources-oil,
gas and other natural resources.
-Restrain spending-focus on essential services, results
for Alaskans, promote economic growth and fiscal
stability
-Save for the future-build reserves, forward fund when
appropriate, preserve and grow the permanent fund
· Assumptions
-3% annual growth rate in beginning in FY12
-Inflation at 2.75%
-Population growth at 1% annually
-Requires state service delivery to become more
efficient over the 10 year period
· Major Challenges
-Formula program increases-Education and Medicaid
-Infrastructure development
-Unfunded Liability of Retirement Systems
· Planning Tool
-The long-range fiscal plan is a tool for policy and
budget development
-Does not represent a funding commitment by the
Administration or the Legislature in the future.
Co-Chair Stedman referred to the ten year plan as addressed
five years ago. He recalled presentations years ago showing
zero growth. He asked to review the trend lines for
comparison of different risk levels. He requested the
banded range rather than a linear extrapolation.
9:57:03 AM
Mr. Boucher announced the important assumption is that the
fall 2009 forecast is currently utilized. He indicated that
different revenue scenarios exist, which are more important
when viewing the ten year plan.
Co-Chair Stedman pointed out that he and Co-Chair Hoffman
meet regularly and alter the revenue oil price looking at
the targeted price volume and dollar outcome from revenue.
He shared that they use a banded range when working on the
budget. He remarked that the co-chairs of the Senate Finance
Committee generate the data themselves. He encouraged
presenters to stray from the linear projection and begin
providing bands prior to the policy discussions.
Co-Chair Hoffman commented about Alaska's natural resources.
He noted the constitutional mandate to manage fisheries for
the maximum sustainable yield. He informed that the South
Central region of Alaska and the Yukon Province in Canada
both struggle with problems accessing fish. He furthered
that the state must assess the management of fisheries
resources in the state to determine whether the
constitutional obligation is fulfilled. He assumed that if
the obligations were fulfilled, then the problems in South
Central would not occur. He requested funding to "turn the
tide" and reflect Alaskan's desires.
10:02:28 AM
Ms. Rehfeld detailed the specific items proposed in the FY11
budget related to the Yukon River fishery: a sonar pilot
station and salmon management enhancement activities. She
was certain that the department would be interested in
discussing the subject.
Co-Chair Hoffman clarified that the efforts are with good
intention, but they will only identify the problem. He
stressed that his interest is in replenishing the fish
stocks. He explained that funding for sonar would prove the
fact that the runs are low, which a good step in verifying
the problem. He encouraged the legislature to be proactive.
Senator Huggins echoed Co-Chair Hoffman's remarks. He agreed
that the funding provides verification of the trend line
without substantial action.
10:05:48 AM
Co-Chair Stedman elaborated that the committee is discussing
a $70 million operating budget for the Department of Fish
and Game.
Senator Olson agreed with the evaluation provided by Co-
Chair Hoffman and Senator Huggins. He noted the surplus and
the commercial fishery devastation.
10:08:00 AM
Ms. Rehfeld discussed Slide 10, "FY2011 Fund Code Project"
· Three Key Changes to Budget Process
-Reappropriations and Carry Forward
-Fund Transfers
-General Fund and Designated General Funds
· FY2011 Revenues and Expenditures
-Aligned with Legislative Finance on the numbers
-Minor differences in fund transfers
· Implementation Timelines
-Updated to OMB's budget system ongoing
-Enacted budget is the target
-Sooner if possible
Co-Chair Stedman spoke of prior discussions with the OMB
office, Ms. Rehfeld and he commended Legislative Finance for
their good work.
Ms. Rehfeld concluded with Slide 11: "For More Information
on the Budget." She provided the link to more details about
the Governor's FY2011 budget, http://www.omb.alaska.gov.
Co-Chair Hoffman asked to address important alternative
energy issues. The legislature decided to spend $50 million
a year on the alternative energy program. Last year the
governor proposed a reduction in the program due to low
revenue projections. He believed that the legislature should
spend $50 million a year now that the revenue picture has
improved. Alaskans are interested in addressing the high
cost of energy. He opined that the overview should address
this important issue.
10:13:42 AM
Senator Huggins noted the budget guidance and the desire to
position Alaska for growth and opportunity. He noted the
economic challenges around the world. He expressed alarm
about ignorance of the symptoms. He desired partnerships
with agencies in the state because Alaska does not need a
declining economic performance. He preferred that the
committee be proactive. He received calls of concern from
constituents regarding unemployment and other indicators of
a poor economy.
Co-Chair Stedman thanked Ms. Rehfeld and her staff for the
presentation. Co-Chair Hoffman commended the administration
and looked forward to working with them on the operating
budget.
10:16:38 AM
Co-Chair Stedman echoed Co-Chair Hoffman's comments
regarding the capital budget.
ADJOURNMENT
The meeting was adjourned at 10:17 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SFC Budget Overview 01.27.2010.pdf |
SFIN 1/27/2010 9:00:00 AM |
FY11 OMB Overview |
| Teal Fiscal Summary2011.pdf |
SFIN 1/26/2010 9:00:00 AM SFIN 1/27/2010 9:00:00 AM |
FY11 OMB Overview FY11- OMB Ovierview |
| Gov responses to hearing.pdf |
SFIN 1/27/2010 9:00:00 AM |