Legislature(2015 - 2016)SENATE FINANCE 532
02/01/2016 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Fy 16 Unallocated and Position Reductions | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
February 1, 2016
9:15 a.m.
9:15:26 AM
CALL TO ORDER
Co-Chair Kelly called the Senate Finance Committee meeting
to order at 9:15 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 (via teleconference)
MEMBERS ABSENT
Senator Donny Olson
ALSO PRESENT
Pat Pitney, Director, Office of Management and Budget,
Office of the Governor.
PRESENT VIA TELECONFERENCE
SUMMARY
^PRESENTATION: FY 16 UNALLOCATED AND POSITION REDUCTIONS
9:16:02 AM
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced her support staff.
9:17:45 AM
Ms. Pitney discussed the presentation "FY 17 Budget
Overview - Unallocated and Position Reductions". She shared
that the unallocated reductions were the result of
negotiations between the administration and the legislature
during the previous legislative session; roughly $38
million would be taken from salary increases in order to
move forward. She addressed Slide 2, "FY16 Unallocated
Reduction by Department", which offered a bar graph
illustrating the amount of the deductions, per state
department. She said that the administration allocated the
$30 million of unallocated reductions, while focusing on
efficiencies and other efforts for savings. She explained
that the efficiency practices that the administration was
working on dealt with contract negotiations; the state has
a range of $1 billion to $2 billion in everyday contracts.
The state had hoped to renegotiate many of the contracts in
order to cover costs. She opined that it had been difficult
to put unallocated reductions against particular contract
savings, but that the reductions had to be taken somewhere
in order to meet the cost. She said that during the 2015
summer months the departments each reviewed their amount of
unallocated reduction and then put forward a number to be
considered.
9:20:03 AM
Ms. Pitney drew attention to a backup document entitled "FY
2016 Unallocated Reduction for Salary/COLA Increases (6)"
(copy on file). The chart showed the magnitude of
unallocated reductions based on the $30 million figure;
additionally, when the legislature left after conference
committee 2015, there were 9 departments with additional
unallocated reductions that were passed out of the budget
totaling $4 million. She spoke to the top row of the
detailed table on Page 1. She noted that the salary
adjustments that made up the unallocated reduction could be
found in the fourth column. She said that if every
department took an unallocated reduction that was equal to
their salary increase, it would follow the fourth column.
9:21:35 AM
Co-Chair Kelly understood that the average was not
weighted, but was a percentage of increase the department
would have experienced, charged against the total.
Ms. Pitney explained that the salary increases had been
funded, which meant that every department received and
equivalent amount for their salary increases, but then the
departments took a corresponding reduction. All if the
executive agencies took a higher reduction because those
agencies had to absorb legislative salary increases and
judicial salary increases. She furthered that savings that
might otherwise be exacted had been taken into account when
moving on the distribution of the unallocated reductions.
9:23:26 AM
Ms. Pitney referred to Page 2 of the unallocated reduction
document, noting that it explained all of the various
reductions that had been taken in an effort to meet the
unallocated distribution. She pointed out to the committee
that the Department of Administration had reduced
unrestricted funds available for lease costs, reduced
positions and enforced furloughs, and reduced unrestricted
funds for facility rental.
9:24:25 AM
Co-Chair Kelly asked whether there had been savings due to
efficiencies in space distribution.
Ms. Piney attempted to answer.
Co-Chair Kelly interjected that he would get back to the
question after the presentation was complete.
9:24:38 AM
Ms. Pitney pointed out the Department Commerce, Community,
and Economic Development had taken an unallocated redcution
in the area of tourism marketing, and outreach for rural
energy programs (Page 3). She highlighted larger
unallocated reductions in the Department of Corrections in
the areas of prisoner transport and physical health care.
She continued to the Department of Environmental
Conservation, which had reduced two engineer positions by
streamlining the Pipeline Integrity Program.
9:26:42 AM
Vice-Chair Micciche wondered who would be most qualified to
discuss the philosophy of the Department of Environmental
Conservation.
Ms. Pitney responded that Larry Hartig, Commissioner,
Department of Environmental Conservation would be the best
person to answer questions concerning that particular
department.
9:27:24 AM
Senator Dunleavy relayed that the Department of Education
and Early Childhood Development had reduced their personnel
services by $200,000, but had maintained 3 vacancies. He
asked whether position control numbers (PCN) were being
eliminated in every department.
Ms. Pitney stated that the present slide was the only slide
in the presentation on unallocated reductions, the rest of
the presentation was on position vacancies. She said that
positions were not being reduced for every agency, but that
880 positions had been reduce since FY 15.
Senator Dunleavy asked how many of the 880 positions that
had been eliminated were PCNs.
Senator Dunleavy understood that state law stipulated that
state school boards should approve education budgets. He
asked whether school boards were, by law, independent in
the preparation, execution, and approval of school budgets.
Ms. Pitney agreed to provide the information at a later
date.
9:30:01 AM
Ms. Pitney discussed Page 4 of the backup document, noting
that the Department of Fish and Game had taken reductions
in personal services and studies. She furthered that the
Department of Health and Social Services (DHSS) had frozen
cost of living increases for various service providers and
programs; bigger cost savings were associated the federal
funds that accompanied Medicaid expansion. She continued
that each department had a listing, and that the number of
transactions that it took to accommodate an unallocated
reduction were many. She asserted that the reductions were
made up of many small reductions, and thought that given
the nature of the budget, the reductions were made to
create the smallest amount of impact on departments. She
stressed that identical savings would no longer be
available in the next round of reductions.
9:32:31 AM
Co-Chair MacKinnon referred to Slide 2. She understood that
only general find dollars were reflected on the slide.
Ms. Pitney responded in the affirmative.
Co-Chair MacKinnon asserted that the current governor's
budget reflected an actual total increase of 1.2 percent in
total spending.
Ms. Pitney asked whether she was speaking to FY 16, or FY
17.
Co-Chair MacKinnon clarified that the FY 17 budget had an
increase in spending of 1.2 percent.
Ms. Pitney replied yes, when considering federal funds.
Co-Chair MacKinnon contended that savings reflected in the
DHSS budget did not represent a reduction in spending, but
the supplanting of UGF with federal funds.
Ms. Pitney replied that there were 2 components at play:
paying for a service with federal funds that would
otherwise be paid for with general funds, and the reduction
in the amount of money that the state would pay for the
staff available.
9:33:57 AM
Co-Chair MacKinnon queried the aforementioned eliminated
880 positions.
Ms. Pitney stated that there were two ways in which to view
the work force: 880 positions had been eliminated from FY
16, 600 fewer full time employees were working in the
agencies that came through the state accounting system;
Department of Labor statistics reflected 1400 fewer
employees on the payroll than in fall of 2014.
9:35:13 AM
Co-Chair MacKinnon opined that the presentation lacked
clarity. She requested a straightforward list of PCNs that
had been eliminated from each department in the FY 16
budget, as well as the dollar value associated with the PCN
number. Additionally, she requested the PCN number
associated with the vacancy factor. She understood that
federal dollars were being used to maintain services, but
felt that any reoccurring operating reductions remained
unclear. She felt that the information would be useful to
the Operating Budget Subcommittees.
9:37:03 AM
Co-Chair Kelly used the analogy of fat cells to illustrate
PCNs that were not associated with employees.
9:37:29 AM
Senator Dunleavy understood that the departmental budgets
were shrinking, but wanted assurances that overall
government was shrinking.
9:38:18 AM
Vice-Chair Micciche pondered efficiency in government. He
said that efficient organizational charts were triangular
shaped, while state governments tended to be bell shaped.
He wondered whether departments were being evaluated for
staff efficiency.
9:40:11 AM
Ms. Pitney responded to Vice-Chair Micciche regarding the
span of control for supervisors and "paper pushers". She
said that merging of director positions was being left to
the discretion of commissioners. She said that the
administration was actively pursuing facilities
consolidation; several departments were exploring how
facility maintenance for Juneau facilities could be
consolidated under one umbrella.
9:41:49 AM
Vice-Chair Micciche felt that an overlaying philosophy
should limit the number of people reporting to each
supervisory position. He wondered whether the
administration planned to streamline organizational charts
for each department.
Ms. Pitney stated that the philosophy was to look at
whether supervisory positions were adequate. She said the
philosophy was not prescriptive, given the diverse nature
of the different operation, but maximizing the span of
control was a clear philosophy across departments.
9:43:13 AM
Vice-Chair Micciche thought that as the subcommittees moved
through the budget process it would be important to
understand the role of labor costs when searching for cost
efficiencies. He said that he would be requesting the
departments of the subcommittees that he chaired to
demonstrate that they had an optimum distribution of labor
across the board.
9:44:30 AM
Co-Chair MacKinnon asserted that it was difficult for the
public, let alone the legislature, to understand the
nuances of the eliminating of positions. She contended that
Ms. Pitney had used several figures when discussion
position reductions, which was confusing and unclear. She
wanted to know how the position counts would affect, long-
term, the FY 17 budget going forward. She mentioned that
the state was facing a budget deficit.
9:46:26 AM
Co-Chair Kelly interjected that in the previous session the
committee had worked to make absolute cuts. He hoped to
come to an agreement with the administration over the
actual number of jobs cut in the current budget.
9:48:29 AM
Senator Bishop added that both the administration and the
legislature needed to be working with the same numbers and
information.
9:49:05 AM
Senator Dunleavy furthered that it would be difficult for
him to support any revenue enhancements if he was not sure
of the baseline in government. He argued that the burden
was on the administration to prove to him that enough
reductions had been made, before seriously discussing
revenue enhancements.
9:50:08 AM
Co-Chair Kelly asked that unallocated reductions be clearly
identified when the administration submitted its budget
amendments in two weeks.
9:50:35 AM
Ms. Pitney discussed Slide 3, "Available Position and
Employee Data":
What position and employee data are available?
· Budgeted positions (all agencies)
· Filled positions (agencies using the state
accounting and payroll system)
· All state employees (Department of Labor and
Workforce Development)
Ms. Pitney stated that significant reductions had been
made. She explained that budgeted positions were "slots"
that could only be filled if there was funding. She said
that some positions had some money, federal or otherwise.
She asserted that the ability for work to get done was
based on the capacity of the workforce; government is
service and service is built on the number of employees
available to provide services. She stated that specific
accounting detail was available for the 600 fewer state
employees, and the number was being tracked on a monthly
basis. She added that budgeted positions from FY15 to FY17
decreased by 871 positions.
9:53:57 AM
Co-Chair MacKinnon wondered why comparisons had not been
limited to FY16 and FY17, when the current administration
took over the governor's office. She warned that if the 600
positions previously mention had gone over to the
retirement system it would result in new costs for state
government. She added that if the reduction in positions
resulted in people claiming unemployment that would also be
of additional cost to the state. She queried where the
people that had held the reduced 600 positions had gone.
9:55:36 AM
AT EASE
9:56:48 AM
RECONVENED
Co-Chair Kelly requested a report that delineated the
different categories for PCN numbers, and a report based on
impacts on the Public Employees' Retirement System (PERS)
and the Teacher's Retirement System.
9:57:33 AM
Ms. Pitney presented Slide 4, "FY2008-FY2017 Budgeted
Positions". She relayed that OMB had compared the numbers
after the election of the current governor. She asserted
that the numbers were from the time of the current
administration and not previous administrations. She said
that budgeted positions had been reduced and deleted out of
the system; the state was down to 24,000 budgeted
positions, which was lower than FY 08 numbers.
9:59:01 AM
Ms. Pitney turned to Slide 5, "State Employees 2008-2015".
She explained that the slide reflected all state employees
that were being paid on a monthly basis, which was also
lower than in FY 08. She said that the number of people
being paid was down to the 2008 level.
9:59:31 AM
Co-Chair MacKinnon asked whether there was a discernable
relationship between the PCNs and private contracts.
Ms. Pitney reiterated that the slide reflected actual
employees and not PCNs. She said that to the degree that
there was a service required that needed a contract, a
contract would be filled. She thought that 1 in 50 of the
deleted PCNs might require the state to seek out a contract
employee. She furthered that funding for contracts was less
than money for actual employees, which mad the practice
uncommon.
10:00:52 AM
Co-Chair MacKinnon asserted that she would like the
Division of Legislative Legal to look over the overall
contract line to see if contract services had increased.
10:01:08 AM
Senator Dunleavy asked whether the increase in employees
from 2013 to 2014 had been related to pipeline activities.
Ms. Pitney replied that she could look into the issue and
provide information at a later date.
10:01:37 AM
Vice-Chair Micciche thought that the charts on Slide 4 and
Slide 5 demonstrated approximately 1000 more employees had
existed on the books than had been covered in the budget.
He wondered about the employee figures for FY16, and the
assumptions for FY17; he speculated that past
administrations had also exceeded their budgets in payroll
costs. He queried why the chart on Page 5 stopped at 2015.
Ms. Pitney replied that 2015 was the calendar year on Page
5, the state had yet to receive January 2016 data from the
Department of Labor and Workforce Development. She said
that the data reflected actual bodies being paid. She added
that often, temporary, non-permanent employees would not be
listen under a PCN.
10:03:13 AM
Ms. Pitney discussed Slide 6, "Filled Positions by Location
2014-2015". She noted that the slide contained the
percentage change in positions from December 31, 2014 to
November 15, 2015. She said that the positions had been
full-time and part-time permanent employees held by people
who had been benefit eligible. She relayed that Anchorage
was down 193 positions, 38 in Fairbanks, 198 in Juneau, 3
in the Lower Kuskokwim, and 15 in Arctic. She offered that
some of the positions may have been vacated by a retiree,
but technically, funding for retirement should have been
collected over the course of the person's employment.
10:04:51 AM
Co-Chair MacKinnon noted that the slide reflected an
increase for out-of-Alaska employment; 9 percent, with a
position count of 2. She furthered that Greater Wasilla had
an increase of 2 as well, while North Kenai had seen an
addition of 1. She queried the nature of the increases.
Ms. Pitney clarified that there was a mix of employees that
constituted the increased positions; programmers and an
accountant in the Department of Administration, and
administrative assistant and a legislative auditor in the
Legislature constituted the 25 positions reflected on the
Outside Alaska line.
10:06:22 AM
Ms. Pitney addressed Slide 7, "Percent of All FY17
Positions 100% UGF", which reflected in a bar graph the
percent of FY17 positions that were budgeted 100 percent on
unrestricted general funds. She noted that the Department
of Transportation and Public Facilities was heavily
federally funded, 98 percent; 86 percent the employees with
the Department of Corrections were 100 percent general
funded. She said that as the administration was working to
reduce unrestricted general fund positions, the starting
base was 50 percent less than the total state employee
base. She stated that every position was not created equal
in terms of funding source.
10:07:51 AM
Senator Dunleavy asked whether the numbers on the chart for
education referred to only the department, and pointed out
that the numbers for the university had to be for the
entire University System; there is no University
Department. He understood that the education numbers on the
graph were for the department and not the 53 school
districts throughout the state.
Ms. Pitney replied in the affirmative. She noted that the
University line reflected all of the positions for all
campuses that were 100 percent UGF.
10:08:48 AM
Co-Chair MacKinnon asked whether the graph on Slide 7
captured employees that were funded by designated receipts.
Ms. Pitney clarified that the chart contained only UGF. She
reiterated that different employees were funded by
different funding sources.
10:09:28 AM
Co-Chair MacKinnon surmised that the graph represented 30
percent of state employees.
Ms. Pitney thought that the percentage was closer to 45
percent. She clarified that 50 percent of the budgeted
salaries were funded by UGF.
10:09:52 AM
Ms. Pitney showed Slide 8, "Nominal Salary and Benefit
Costs FY2000-2016". She pointed out the red bar, which
illustrated average benefits. She said that the rate
increase between 2004 and 2007 was and increase on PERS.
She stated that beyond 2007 the rate increase was mainly
health benefits. She pointed out to the committee that the
average salary level had remained flat, and that the
doubling of costs could be attributed to benefit rates.
10:10:55 AM
Ms. Pitney presented slide 9, "Real Salary and Benefit
Costs FY 2000-2016".
10:11:02 AM
Ms. Pitney discussed Slide 10, "Union Contract Negotiation
Dates". She related that the administration was waiting on
the outcomes of current contract negotiations, which were
hoped to offset some of the unallocated reduction.
10:11:36 AM
Senator Dunleavy asked whether 4-day work weeks or furlough
to reduce personnel costs had been discussed.
Ms. Pitney stated that both ideas had been considered. She
said that the furlough discussion was receiving the most
attention because it would not change the work week
timeframe, but would reduce hours.
10:12:38 AM
Co-Chair Kelly asked whether the administration had studies
what the Court System had dome to reduce employee costs.
Co-Chair Kelly applauded the creative solutions being
discussed by the Court System. He urged the administration
to follow suit.
10:14:19 AM
Ms. Pitney offered that Slide 10, "Union Contract
Negotiation Dates" was for reference.
Ms. Pitney turned to Slide 11, "Additional Information
Available" and relayed that the slide contained a webpage
where all of the detail on every positon that had been cut
from the budget was available.
10:15:35 AM
Ms. Pitney showed Slide 12, which was an image of the
webpage for OMB, on a page titled "FY2017 Governor Personal
Services Reports." She drew attention to page 12 of the
backup document, with a chart entitled "Department Position
Count Summary (10)". She explained that there had been, at
FY 16 Conference Committee, 477 positions deleted. She said
that in order to make the budget balance by management
plan, an additional 214 positions were deleted. She stated
that the current budget proposed by the governor reflected
and additional cut of 181 positions. She spoke to Slide 13,
which offered a personal services filled employee payroll
count two way comparison, FY16 and FY17.
10:17:41 AM
Co-Chair MacKinnon asked whether the graph on Slide 13
could be found on the department's website.
Ms. Pitney replied in the affirmative. She reiterated that
every position for the Department of Administration could
be researched on the site for fund source, range, and
location.
Co-Chair MacKinnon thought that it should be easy for the
administration to email the information on an Excel
spreadsheet to the committee.
Ms. Pitney responded that the information could be emailed.
10:18:54 AM
Ms. Pitney directed the committee's attention to the
document, "Positions, Vacancy Factors and Legislative
Control", which had been published in the Legislative
Finance Division's handbook. She recommended the piece as a
reference document for legislators.
10:20:03 AM
Senator Dunleavy spoke to the concept of reducing overall
government by 16 percent, and wondered whether it remained
a guiding principal for the administration.
Ms. Pitney held that the concept remained a guiding
principal. She shared that the ten-year plan separated
agencies into the areas of health life, and safety. The
Department of Public Safety, Department of Corrections,
Department of Health and Social Services, the Court System,
and agencies related to health life, and safety would not
be reduced to 16 percent without significant impacts to the
overall wellbeing of Alaska residents. She stated that the
second area that could not be cut by 16 percent without
serious repercussions to Alaskans was education: K-12, the
University, and AVTECH. She noted that all other government
was currently at a 27 percent UGF reduction.
10:22:05 AM
Senator Dunleavy asked whether the goal was to shrink the
overall budget by 16 percent.
Ms. Pitney clarified that the ten year plan included a goal
of a 14 percent cut overall, with the cuts in government
agencies that were not responsible for health, life, or
safety bearing the brunt of the cuts.
Senator Dunleavy understood that over the next 10 years the
overall government budget should be reduced by 14 percent.
Ms. Pitney stated that the 14 percent reduction in agency
operations should be realized by FY 19.
10:24:20 AM
Senator Dunleavy asked whether the administration
anticipated increased federal funding over the same time
frame, or to reduce agency operation by 14 percent while
holding federal funding flat.
Ms. Pitney replied that to the degree that the state could
access federal dollars to provide the state services that
were currently being provided on UGF, and every opportunity
for federal funding would be taken. She stated that, beyond
Medicaid expansion, the administration did not expect much
of an increase in federal dollars.
10:25:52 AM
Senator Dunleavy commented on the seeming growing
dependency on the federal government for money. He feared
that federal dollars would come accompanied by mandates.
10:26:56 AM
Co-Chair Kelly harkened back to his liposuction metaphor
and likened federal dollars to additional fat cells.
10:27:59 AM
Co-Chair MacKinnon probed Governor Walker's suggestion to
systematically change education.
Ms. Pitney responded that the Commissioner of Education and
the governor were working together on the issue, inclusive
of school boards. She agreed to provide further information
at a later date.
10:28:40 AM
Co-Chair MacKinnon hoped that the administration would work
collaboratively with the legislature on the matter.
Senator Dunleavy reminded the committee that the
constitution charged the legislature with establishing and
maintaining for education in the state. He lamented that
the legislature would receive a bill to pay for decisions
made by the executive branch of government. He urged the
administration not to make great plans for education
without first consulting the legislature.
10:30:40 AM
Co-Chair Kelly discussed housekeeping.
10:31:29 AM
Co-Chair MacKinnon stated that the subcommittee on Medicaid
reform would meet Monday, Wednesday, and Friday at 1:30PM.
10:31:39 AM
Ms. Pitney relayed that Commissioner Hoffbeck had been held
over in Senate State Affairs Committee. She hoped that the
committee could delay in the morning to accommodate his
schedule.
ADJOURNMENT
10:32:07 AM
The meeting was adjourned at 10:32 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 139 020116 Senate Finance Presentation Submitted 2-1-16.pdf |
SFIN 2/1/2016 9:00:00 AM |
SB 139 |
| SB 139 020116 SFIN Supporting Documents 2 01 16.pdf |
SFIN 2/1/2016 9:00:00 AM |
SB 139 |