Legislature(2015 - 2016)SENATE FINANCE 532
03/04/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB27 | |
| Overview: Fy 16 Department of Administration | |
| Overview: Fy 16 Department of Revenue | |
| Overview: Fy 16 Alaska Court System | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 27 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
March 4, 2015
9:12 a.m.
9:12:06 AM
CALL TO ORDER
Co-Chair Kelly called the Senate Finance Committee meeting
to order at 9:12 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 Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Sheldon Fisher, Commissioner, Department of Administration;
John Boucher, Deputy Commissioner, Department of
Administration; Randall Hoffbeck, Commissioner, Department
of Revenue; Dan DeBartolo, Director, Administrative
Services Division, Department of Revenue; Jerry Burnett,
Deputy Commissioner, Treasury Division, Department of
Revenue; Doug Wooliver, Deputy Administrative Director,
Alaska Court System.
SUMMARY
SB 27: APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 27 was HEARD and HELD in committee for further
consideration.
FY 16 BUDGET OVERVIEWS:
DEPARTMENT OF ADMINISTRATION
DEPARTMENT OF REVENUE
ALASKA COURT SYSTEM
9:12:15 AM
SENATE BILL NO. 27
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, making
reappropriations, and making appropriations under art.
IX, sec. 17(c), Constitution of the State of Alaska,
from the constitutional budget reserve fund; and
providing for an effective date."
9:13:18 AM
^OVERVIEW: FY 16 DEPARTMENT OF ADMINISTRATION
SHELDON FISHER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
stated that he would address the previously issued
questions from Senator Dunleavy as he reviewed the
presentation. He turned to Slide 2, "DOA Mission and
Organization." The slide provided the mission of the
department: to provide consistent and efficient support to
state agencies so that they may better serve Alaskans. He
stated that a portion of the departments' efforts were
spent serving the public, and a material portion was spent
serving other state agencies.
9:14:15 AM
Mr. Fisher moved to Slide 3, "DOA Services Across Alaska."
He relayed that the department had a broad geographic reach
across the state, driven primarily by the Division of Motor
Vehicles, and somewhat by the Public Defenders Agency
(PDA).
9:14:30 AM
Mr. Fisher moved to Slide 4, "DOA Services to the Public."
He noted that the undesignated general funds (UGF)
associated with each division was shown on the slide. He
said that as part of the 2015 Management Plan the
department had approximately $88 million in UGF, $50
million of which was associated with PDA and the Office of
Public Advocacy (OPA). He stated that those agencies had a
constitutional mandate to provide certain services and were
already stretched for resources. He furthered that both
agencies had seen an increased workload over the past few
years, which they had been managing with a flat budget; in
the current budget exercise, substantial cuts had not been
made in those agencies. He relayed that not cutting those
agency budgets had resulted in disproportionate cuts spread
across other agencies. He referred to the question as to
whether the department should make cuts to PDA and OPA that
corresponded with cuts that had been made to the Department
of Law (DOL); internal discussions determined that it would
be inappropriate to aggressively cut the departments at
this time. He reiterated that the agencies had been
administering their growing caseload with a flat budget,
and added that as a result the backlog was growing. He
warned that further cutting their budgets in FY 16 would
lead to a greater cost to the state in term of ineffective
assistance of counsel, and other challenges pertaining to
court trials. He believed that funding for the two agencies
needed to stay firmly intact.
9:17:26 AM
Co-Chair MacKinnon asked whether Alaskans could request a
public defender, or was it determined by income.
Mr. Fisher replied that the court made the determination
based on income level.
9:18:20 AM
Mr. Fisher noted that the Division of Motor Vehicles was
funded entirely by program receipts. He continued that the
Division of Retirement and Benefits was funded with a
modest amount of UGF.
9:18:45 AM
Mr. Fisher moved to Slide 5, "DOA Services to the Public."
He categorized the four agencies on the slide: Alaska
Public Broadcasting Commission (APBC) & AIRRES Grants;
Alaska Oil and Gas Conservation Commission (AOGCC); Violent
Crimes Compensation Board (VCCB); Alaska Public Offices
Commission (APOC), as quasi-independent agencies. He said
that APBC was largely funded by UGF, but had no paid
employees. He stated that AOGCC had no UGF in its budget
but was funded by receipts from the industry. He related
that VCCB received a portion of federal funding, and some
funding from the Permanent Fund Dividend (PFD) Felon Fund,
but no UGF. He stated that APOC was mostly funded with UGF.
9:19:47 AM
Mr. Fisher continued to Slide 6, "DOA Services to State
Agencies." He said that in the case of each agency, some
UGF were used to subsidize and reduce the fee that would
otherwise be charged to other agencies. He said that the
Division of General Services (DGS) was responsible for
administering leases, managing state owned buildings and
the centralized portion of departmental purchasing. He
continued with Enterprise Technology Services (ETS), which
administered the centralized information technology (IT)
functions for the state. He noted that the Division of
Personnel and Labor Relations (DOPLR) managed the
centralized human resources (HR) functions, as well as
labor relations and contract bargaining. He spoke to the
Department of Finance (DOF), which managed the statewide
payroll system, financial audits, and various other systems
of financial support.
9:20:50 AM
Mr. Fisher presented Slide 7, "DOA Services to State
Agencies." He noted that the Division of Administrative
Services (DAS) was consistent across agencies. The Division
of Risk Management (DRM) administered the department's
insurance policies and programs and was funded entirely
from interagency transfers. He relayed that the budget for
the Office of Administrative Hearings was largely inner-
agency transfers, but included some GF.
9:21:31 AM
Mr. Fisher explained Slide 8, "DOA Budget by Division,"
which was a diagram that highlighted the DOA budget by
division; the GF only, FY 15 Management Plan was charted in
the thousands. He pointed out to the committee that of the
$88 million budget, $49 million had been associated with
PDA and OPA.
9:22:00 AM
Mr. Fisher presented Slide 9, "DOA Budget by Division,"
which organized by bar graph the percent of UGF changes in
DOA divisions between the UGF FY2015 Management Plan and
the FY2016 Governor Amended UGF totals. He noted that the
budget for OPA and PDA had been held flat from year to year
and costs had been spread across other divisions. He spoke
of the request for information (RFI) that had been sent out
by ETS with respect to maintenance and management of the
State of Alaska Telecommunications System (SATS) and the
Alaska Land Mobile Radio (ALMR) programs and the accepting
of proposals. He stated that financial bids had not been
sought for the RFI. He thought that combining the
management of the two systems would improve efficiencies.
9:23:16 AM
Mr. Fisher continued to Slide 10, "DOA Budget Change by
Division," which showed the DOA budget change by division
and ranked by percentage from highest to lowest. He pointed
out to the committee that GF for ETS, general services, and
personnel labor relations had been reduced by over 20
percent.
9:23:57 AM
Mr. Fisher explained Slide 11, which contained a pie chart
depicting the same percentages illustrated on Slide 10.
9:24:14 AM
Mr. Fisher showed slide 12, "DOA All Funding Sources,"
which contained a bar graph focused on fund sources. He
spoke to the question of forecasting reductions associated
with changes in other departments. He reiterated that a
substantial percentage of DOA services related to services
that were provided to other state agencies.
9:25:15 AM
Vice-Chair Micciche referred to Slide 10, and asked how
Risk Management was funded.
Mr. Fisher explained that the departments that took
advantage of the insurance Risk Management provided paid
for the service through an interagency transfer.
Vice-Chair Micciche suggested that Risk Management was in a
category by itself and was not charged through federal
receipts.
Mr. Fisher stated that he was not aware of any federal
receipts that applied to Risk Management. He continued that
the department actively worked to reduce insurance premiums
and cuts costs wherever possible.
9:26:27 AM
Mr. Fisher referred back to Slide 12, and the question of
how the DOA budget interacted with other departmental
budgets. He explained that as other departments shrank,
their need for space reduced as well. He shared that when
this occurred, the department would attempt to reorganize
and move other groups into the space in order to maximize
the benefit, while recognizing that sometimes the leases
that the department entered into might be multi-year leases
that limited flexibility within the fiscal year.
9:27:38 AM
Mr. Fisher moved to Slide 13, "Position Changes By
Division," which showed the headcount reductions
contemplated by the amended budget. He spoke to the
question of how to think about a vacancy factor. He related
that vacancy factors were typical; if there were 100
position control numbers (PCN), and a vacancy factor of 5
percent were applied, the budget would only need to reflect
funding for 95 PCNs. He said accompanying the vacancy
factor was the need to recognize that there would be some
attrition throughout the year. The positions would need to
be filled slowly in order to achieve the vacancy factor.
9:28:39 AM
Senator Dunleavy asked if the department had budgeted for
PCNs at 95 or 100 percent.
Mr. Fisher shared that OMB had mandated certain vacancy
factors doe every department, which varied by the size of
the organization. He stressed that cutting a vacant PCN had
an effect due to the way that the vacancy factor was
applied.
9:29:40 AM
Senator Dunleavy restated the question.
Mr. Fisher replied that in his example he had budget for 95
percent. He said that the actual vacancy factor varied
depending on the size of the organization.
9:30:07 AM
Co-Chair MacKinnon referred to the negative PCN changes on
Slide 13, she asked whether the number represented people
or positions.
Mr. Fisher replied that it varied throughout the chart. He
said that if there was not a note written into the far
right-hand column for the division, then the position was
vacant. He observed that the majority of the 15 positions
reduced positions had been vacant. He felt that the impact
was real when the vacancy factor was applied.
Co-Chair MacKinnon said that the state required other
communities to perform a termination study to understand
the impact of reducing either positions, or people. She
asked whether reducing positions would affect the state's
ability to meet its obligations under the retirement system
formula and whether the administration would support
elimination of the termination studies. She queried the
state's responsibility, as compared to the responsibility
of municipalities, of the debt within the state's
retirement system, and whether the reductions would impact
future calculations on termination studies of local
communities.
Mr. Fisher responded that when agencies or political
subdivisions eliminated an entire class, a termination
study was required. He said that the cuts that had been
made to date would not implicate the need for a termination
study by the state. He thought that it was unlikely that
there would be a requirement that the department perform a
termination study. He furthered that the elimination of
termination studies was under consideration and an approach
was being sought that would eliminate the need for the
studies while protecting the system. He felt that the
administration recognized that termination studies had, at
times, gotten in the way of good business decisions at the
municipal level, and that a balance between rational
decision making and the sustainability of the system needed
to be struck.
9:34:17 AM
Co-Chair MacKinnon reiterated her question pertaining to
the responsibility of local municipalities for the overall
debt of the retirement system.
JOHN BOUCHER, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, explained that the breakdown was roughly
60/40. He said that it varied from year to year because it
was allocated on the payroll at the time; as the payroll
shifted the number could change.
Co-Chair MacKinnon wondered whether payment was being
shifted onto smaller communities. She asked for further
explanation regarding the elimination of job classes
triggering a termination study.
Mr. Fisher understood that an entire job classification had
to be eliminated before a termination study was required.
Mr. Boucher added that it was unusual to require
termination studies for job classes with minimal positions.
9:36:52 AM
Mr. Fisher moved to Slide 14, which showed that the
department had no FY 16 capital budget requests. He shared
that the department had $3 million in deferred maintenance
in the Public Building Fund.
9:37:28 AM
Co-Chair MacKinnon asked for an update on the Integration
Resource Information System (IRIS) project, and whether it
was on schedule.
Mr. Fisher stated that the current projection was that the
project would go live in July of 2015. He said that the
project was on target.
Co-Chair MacKinnon asked whether simulated models were
being run in expectation of Medicaid expansion.
Mr. Fisher explained that he was very cognizant failed
implementations that had happened in the past. He assured
the committee that extensive testing and modeling was
underway. He expressed optimism that the project would be
smoothly executed.
9:39:28 AM
Mr. Fisher explained slide 15, "Core Initiatives and
Challenges":
Personnel Costs Savings
•Wage Negotiations - remain competitive and balanced
•Improve employee productivity
Mr. Fisher asserted that having a motivated, engaged,
effective workforce was a critical asset to the state.
Co-Chair Kelly said that he had heard complaints that the
business community had experienced trouble retaining
employees because everyone wanted a state job. He thought
that perhaps the state was too competitive and was paying
employees more than the market preferred.
Mr. Fisher intuited that the state started by paying
employees below the market average, but had a steeper
growth in the outer years, which resulted in above market
wages in some cases. He though that the numbers varied
depending on the class of employee; highly skilled people
were paid below market. He felt that it was important to be
fair to the state and to employees.
Co-Chair Kelly shared that when he worked for the
university he saw employees leaving not for the private
sector, but for other governmental agencies. He felt that
the private sector was having difficulty keeping up with
the wages that the state could offer employees.
9:43:21 AM
Vice-Chair Micciche asked if there was a plan for re-
evaluating the continuous COLA increase.
Commissioner Fisher stated that DOA was continuing to
examine all of the pay structures in order to assess where
the state was compared to the market.
Vice-Chair Micciche noted that there did not seem to be a
salary cap for state employees at the higher pay levels.
Commissioner Fisher thought that the issue could be
examined.
Vice-Chair Micciche asked about the results of a recently
completed salary study.
Commissioner Fisher relayed that the last salary study
occurred in 2009. He said he would share the findings with
the committee.
9:45:39 AM
Commissioner Fisher returned to Slide 15:
Reduction of Unfunded Liability
•Health Care Spend - continue to bend the cost curve
Procurement Savings - Lower costs for what we already
buy
•IRIS - updated core statewide administrative systems
Information Technology (IT) - Improved services and
cost
Improve Facility Management
•Utilization of Space - better use our space
Commissioner Fisher spoke to the Unfair Labor Practice that
had been filed against the state with respect to the
implementation of Universal Space Standards. He said that a
number of space standards had been implemented, but work
had paused because the administration needed to determine
what the government would look like moving forward and did
not want to spend money on spaces that would have to be
rebuilt in the future. He said that the pause had provided
the opportunity to review the situation with the bargaining
unit that had filed the claim, which questioned whether the
state was even achieving cost savings, and the
administration had agreed to examine the dozen completed
projects in order to determine any achieved cost savings.
He added that he had received grievances from other
commissioners and was attempting to address those concerns.
He asserted that in a world where the state had a bottom
line, saving on space was necessary.
9:48:26 AM
AT EASE
9:49:16 AM
RECONVENED
Senator Dunleavy asked about consolidation of insurance
plans and whether the administration had looked that the
cost savings of consolidating teacher health care plans.
Commissioner Fisher replied that the Hay Group had done an
estimate in 2013, and the results had indicated a range of
potential savings of $22 million to $33 million. He
understood that the savings were largely driven by a
difference between the employee contributions made in the
teacher plans, versus what the state applied. He stated
that some school districts had managed effectively and
efficiently, and to move to a state plan would increase the
costs to those districts. He added that for other districts
the move could reduce costs. He said that the
administration would be supportive of any political
subdivision that found it beneficial to function under
Alaska Care.
9:51:15 AM
Senator Dunleavy asked what role the teacher bargaining
unit played in collecting premiums, and were the premiums
remitted to the provider or maintained within the financial
accounts of the bargaining unit.
Commissioner Fisher understood that the bargaining until
collected the premiums, which stayed within the health
trust.
9:51:41 AM
Vice-Chair Micciche referred to Slide 4. He queried the
$2.3 million UGF expense for retirement and benefits
stating that, the UGF cost for managing pension funds
should be zero; generally revenue charged the retirement
system for costs.
Commissioner Fisher explained that the number related
largely to two closed retirement systems that had the need
for ongoing support, and was not related to PERS and TRS.
He added that a modest amount of those funds was associated
with actuarial studies that could be required to support
legislation and other things that could not be charges to
the trust.
9:52:55 AM
Co-Chair MacKinnon asked how many retirees were being
managed in the closed plans.
Commissioner Fisher replied that he would get back to the
committee on the numbers.
Co-Chair MacKinnon considered that if the number were under
100, $2 million seemed exorbanent.
Commissioner Fisher thought that the $2 million was for
management and a portion of the benefits that the retirees
revived.
9:53:44 AM
AT EASE
9:54:19 AM
RECONVENED
9:54:28 AM
Co-Chair Kelly noted that the department had received a
list of questions from Senator Dunleavy's office for
subcommittee purposes. He said that the responses would be
distributed to member's offices.
9:54:50 AM
Senator Dunleavy asked when the answers could be expected.
Commissioner Fisher thought within the next week.
9:55:17 AM
AT EASE
9:57:00 AM
RECONVENED
^OVERVIEW: FY 16 DEPARTMENT OF REVENUE
9:57:25 AM
Co-Chair Kelly requested, for the purpose of time, that the
organizational and philosophy slides be skipped
9:58:07 AM
RANDALL HOFFBECK, COMMISSIONER, DEPARTMENT OF REVENUE,
briefly overviewed Slide 2:
Alaska Department of Revenue
The Department of Revenue mission is to collect,
distribute and invest funds for public purposes
Programs, Authorities, and Corporations
Tax Division
Treasury Division
Permanent Fund Dividend Division
Child Support Services Division
Alaska Housing Finance Corporation
Alaska Permanent Fund Corporation
Alaska Mental Health Trust Authority
Alaska Municipal Bond Bank Authority
Commissioner Hoffbeck related that the department also
oversaw: unclaimed property, investments, cash management,
debt management, administrative services, criminal
investigation unit, and the film office.
9:58:31 AM
Commissioner Hoffbeck moved to Slide 3, "Major Department
Accomplishments in 2014":
Collections and Enforcement
taxes on time
Tax Revenue Management System (TRMS). This is an
integrated system for all taxpayers to use for filing
and paying their taxes online. It is scheduled to be
fully implemented in early 2016.
Support Division collects $3.88.
qualified staff, and a growing caseload, the
percentage of child support cases with orders
increased to the target goal of 93.5%.
Department-high 39 Child Support cases for
prosecution. This is up from 35 in FY 13, and 21 in FY
12.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 030415 Alaska Court System Budget Overview.pdf |
SFIN 3/4/2015 9:00:00 AM |
SB 27 |
| 030415 DOA Budget Overview.pdf |
SFIN 3/4/2015 9:00:00 AM |
SB 27 |
| 030415 DOR Budget Overview.pdf |
SFIN 3/4/2015 9:00:00 AM |
SB 27 |