Legislature(2017 - 2018)SENATE FINANCE 532
01/18/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
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| Start | |
| Presentation: Overview of the Governor's Fy19 Budget Request and Plans | |
| 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 18, 2018
9:02 a.m.
9:02:25 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Peter Micciche
Senator Donny Olson
Senator Gary Stevens
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
David Teal, Director, Legislative Finance Division
SUMMARY
^PRESENTATION: OVERVIEW OF THE GOVERNOR'S FY19 BUDGET
REQUEST and PLANS
9:02:47 AM
Co-Chair Hoffman relayed that the committee would have an
overview of the governor's proposed budget by the non-
partisan Legislative Finance Division (LFD).
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation "Overview of the Governor's FY19
Budget Request and Plans" (copy on file). Mr. Teal
addressed Slide 2, which showed a table entitled "FY19
Revenue and Appropriations." He shared that in place of the
usual fiscal summary, the presentation would provide a bare
minimum fiscal summary, which was reflected on the slide.
He noted that the full summary was located on Page 8 of the
Legislative Fiscal Analyst's Overview of the Governor's
Request for FY18, which could be found at
www.legfin.akleg.gov. He noted that the slide reflected
undesignated general funds (UGF)only because this was the
only fund category where there could be a deficit. He
related that the slides were not the Governor's budget.
Co-Chair Hoffman interjected that the state constitution
required a balance budget.
Mr. Teal agreed, adding that the state was required to have
a balanced budget and the deficit could be filled from
savings. He said that the state could have a cashflow
deficit if it had reserves, or other sources, to draw from
to fill the deficit. He thought that it was important to
understand where the state stood financially before drawing
from reserves, which was reflected in the slide. The
revenue on the slide showed $2,085.8 in essentially oil
revenue and excluded transfers from the earning reserve
account (ERA). The slide showed only current year cashflow
revenue and did not include a payout from the ERA, which
the Governor had proposed. He spoke to footnote 2,
appropriations excluded dividends and transfers to and from
reserves because the attempt was to show cashflow during
the year and did not want transfers of any kind adding to
revenue.
9:07:44 AM
Mr. Teal stated that the slide showed how much was
appropriated, broken down into agency operations, statewide
items, and capital expenditures. He directed committee
attention to the approximately $4.6 million in total
appropriations. He said that this resulted in a deficit of
$2,495.0. He believed that the exercise was to determine
how much corrective action would be necessary to fill the
deficit to meet the constitutional mandate of balancing the
budget.
9:09:19 AM
Senator von Imhof asked whether the statewide items
included full payments for debt service and retirement, and
whether the agency operations including the supplemental
requests.
Mr. Teal answered in the negative and stated that the slide
reflected the cash flow deficit with the governor's
statewide items. He noted footnote 2:
Appropriations exclude dividends and transfers to/from
reserves
He said that any items that required more than a simple
majority vote had been excluded. He stated that the the
slide reflected where would the state be financially if the
legislature passed the budget with a simple majority vote.
The slide did not include an appropriation to pay for oil
and gas tax credits or to make supplemental appropriations.
He pointed out that the Governor had moved debt service and
other items to a separate section of the operating budget
bill and required a supermajority vote to fund those items.
Senator von Imhof hoped to discuss the other items further
into the presentation.
9:11:34 AM
Mr. Teal mentioned that he would show three versions of the
fiscal summary: cash flow, a version that put in the
Percent of Market Value draw, and the Governor's full plan
(including the supermajority vote). He thought he would
address the questions at a later part of the presentation.
9:12:26 AM
Mr. Teal reiterated that the slide did not represent the
Governor's fiscal plan; this was the Governor's
appropriation bill, without supermajority actions or fiscal
notes. He thought the committee might know about the
Governor's proposal to purchase tax credits through debt,
which required legislation. He said that legislators that
believed that the state much purchase the statutory minimum
of $206 million, then it could be argued that those funds
should be included in the budget. He relayed that if the
Governor wanted to issue a debt plan, and it required
legislation, then savings of $206 million should be
reflected in a fiscal note - which was not what the
Governor had done. He shared that the Governor did not have
to fund the oil credit purchases, despite the statutory
minimum to do so. He related that 2018 was a confusion year
because the budget was usually appropriation bills, but
this year had brought appropriation bills plus a several
fiscal plans that required legislation to implement. He
thought that it could be difficult for the legislature and
the public to separate the budget from the fiscal plan.
9:15:09 AM
Mr. Teal continued discussing Slide 2. He noted that the
deficit had been worse in the past but could be filled from
the CBR through a simple supermajority vote. Unfortunately,
now the CBR balance was too low to fill the gap and balance
the budget.
9:16:11 AM
Mr. Teal turned to Slide 3, "Budget Reserves (CBR & SBR),"
which showed a bar graph from 2015 that had projected that
the CBR would not carry the state through FY19. He felt
that the issue was that the state was out of reserves,
regardless of who was to blame, which meant that
alternative strategies needed to be considered.
9:17:11 AM
Mr. Teal discussed Slide 4, "FY19 Revenue and
Appropriations," which showed a data table that reflected
what the budget would look like if money wore transferred
from the ERA, as proposed by the Governor. He reiterated
that this was not the Governor's entire budget plan but was
a step in the plan. He said that the POMV payout of $2.7
billion; revenue would be twice what it would be on a
cashflow basis. He relayed that of the $2.7 billion payout,
$819 million is for dividends, meaning that the net gain to
the general fund would be $1.9 billion and not the full
$2.7 billion. He noted that the deficit would drop to $600
million and transfers would be small. The scenario excluded
items that required legislative action beyond a simple
majority vote and excluded an appropriation to purchase oil
and gas tax credits. He pointed out at the bottom of the
table that there would be $1,797.0 in reserves, which would
last three years under the scenario.
9:19:54 AM
Mr. Teal continued discussing slide 4. He noted that under
the scenario on the slide, after filling the deficit He
said that some could interpret that the reserves would only
last two years. He said that regardless of which
interpretation the state still had a deficit that would
drain reserves to the point where they were no longer
available.
9:21:31 AM
Senator Micciche wondered about the definition of
"reserves" and whether the definition would change if a
POMV bill were to pass.
Mr. Teal accepted Senator Micciche's idea as one way to
look at it. He countered that the reserve account could
still be considered revenue and not reserves. He thought it
was possible not to count the ERA as a budget reserve. He
stated that the CBR could be used only by spending and was
not invested in a high-risk manner. He stressed that the
only way to make the CBR vanish was to spend it, while the
ERA was very different. He did not consider the ERA to be a
budget reserve.
Mr. Teal offered a hypothetical scenario in which the ERA
could vanish without spending.
9:24:49 AM
Senator Micciche thought it was a quandary that reserves be
defined as only the CBR and the SBR. He said that they
could be secured as a budget reserve but that could
decrease adequate growth in each account.
Mr. Teal agreed that some people would say there were
budget reserves in places such as the PCE and higher
education funds. He thought that counting other funds as
reserves was a matter of opinion.
9:26:32 AM
Senator Stevens asked for more discussion about budget
reserves and the CBR. He referenced Slide 3 and recalled
that the senate had worked in the past to return fund to
the CBR. He asked whether the legislature had an obligation
to replace money borrowed from the CBR.
Mr. Teal replied in the affirmative but noted that a
surplus was necessary to replenish the CBR, if there was
not surplus then the payback was not the priority. He
thought that the target should not be merely filling the
deficit but should also be replenishing the CBR because of
the constitutional requirement. He shared that when there
was money left over int eh general fund at the end of the
year it should be swept over to the CBR; when there were
budget surpluses, deposits should be made into the CBR so
that it could be drawn from in times of deficit. He
lamented that in the past several years the draw from the
CBR had gone beyond using it to fill a short-term deficit,
rather it was filling a structural deficit, drawing from
the reserve year after year. The big question was when did
the legislature plan to pay the CBR back.
9:30:09 AM
Vice-Chair Bishop argued that the deficit was greater than
$600 million. He realized that there were questions of
accounting but considered that it was a matter of the
people's money. He thought there needed to be a line item
to pay the money back, and there should be a structured
payback method. He thought a certain POMV bill had the
payback built in at one point. He expressed concern about
the amount of money that had been spent from the CBR.
9:32:04 AM
Co-Chair MacKinnon referenced the Senate's proposal that
included a spending limit. She discussed the facet of the
proposal that would divert money to replenish the CBR. She
hoped the legislature would work together on the issue.
9:33:35 AM
Mr. Teal spoke to Slide 5, "FY19 Revenue, Appropriation
Bills and Other Items," which included a third column with
additional items, which could also be labelled "the
Governor's plan." The items required more than a simple
supermajority vote and added fiscal notes. There was an
additional $200 million from payroll and motor fuels taxes.
The $200 million made the deficit larger because $309 was
being spent for the fiscal notes. He noted that the
Governor proposed spending $280 million for the Economic
Recovery Act, with only $160 million in revenue in the
first year, which was problematic. He noted that over
expenditures could end up pulling from the general fund. He
stressed that the appropriation had to be counted in full,
not in the amount the administration thought might be
spent, he stressed that counting appropriations in the
latter way would be crazymaking.
Mr. Teal said that if money was appropriated by the
legislature, LFD counted it as spent. He wondered what
happened if the Economic Recovery Act failed to pass. He
said there would be several FY19 projects in that act that
the legislature would move to the Capital Budget, which
would increase capital spending. He relayed that the
deficit under the Governor's plan was approaching $700
million and that the Governor proposed filling the gap with
a firm draw from the CBR, with the SBR as back up. He
thought this was digressive because the Governor wanted to
spend $400 million from the CBR and the LFD fiscal summary
showed $425 million spent from the CBR. He said that the
difference was that the Governor showed savings in the
retirement system, instead of pairing the actuarial
valuations recommended contributions, they would be cut by
$25.5 million. He said that LFD believed that the
retirement system should be counted at $425 million because
the appropriation was contingent upon savings in Medicare.
He said that until the savings were achieved the CBR draw
would not be reduced by the savings amount. He shared that
LFD counted contingent appropriations at their maximum
value, which was $425.5 and assumed that there were no
medical cost savings in the retirement system.
9:38:07 AM
Mr. Teal said that a supermajority vote this year would
limit the draw to $425.5 million; with the CBR there were
total reserves and the potential problem of an unbalanced
budget. He said that the LFD analysis varied from the
Governor's proposal and that the Governor had time to amend
his budget. He felt there was danger in the governor's
approach. He said that the reason for making certain items
dependent on a supermajority vote was that those items were
"less disruptive" and would not hinder an on-time budget,
for core government services being passed. This would leave
these "less disruptive" non-personal service items to be
funded from the CBR, which he pointed out could backfire if
oil revenue did not meet expectations. He thought that the
approach lessened flexibility and was unsustainable. He
thought that the danger could be eliminated with
legislatively added language.
9:44:26 AM
Co-Chair Hoffman relayed that many members thought the
budget reserve was lower than what was comfortable. He
added that the administration had also stated as much. He
asked whether the CBR balance should be higher in case of a
potential emergency.
Mr. Teal opined that reserves were unique to every state,
and if a state had a diversified revenue stream with low
volatility, there was no need for a big reserve. In the
case of Alaska, the revenue stream was not diversified and
was extremely volatile, which meant that the state needed
significant reserves. He argued that a year's worth of
reserves (roughly $5 billion) was needed as a shock
absorber, if there was a POMV payout. He added that it was
not enough to act as a shock absorber if there were
deficits of $2.5 billion because it would be used up, all
in one year. He said that there was a provision in the
budget that had never been used to issue revenue
anticipation notes; short term, low interest notes
specifically designed to cover cashflow shortages. He said
that it depended on whether the CBR was meant to be a shock
absorber or a long-term source of revenue.
9:47:33 AM
Mr. Teal reviewed slide 6, "Comparing FY19 to FY18 (UGF),"
which showed a data table which was intended to provide
perspective on the budget and provided a standard
comparison of the current year to the previous year; UGF
only. He thought the FY18 budget should be known, but it
was problematic in that the governor had released a
"transparent budget report" that showed a reduction from
FY18 to FY19 of $150 million. He related that the OMB
fiscal summary showed a reduction form FY18 to FY19 of $257
million. The LFD fiscal summary showed and increase of $287
million. The spread was troubling. He said that a list of
16 points of differences had been sent to OMB but that
there were two primary differences on the list. One was the
Governor's plan spend the CBR and say that the CBR is not
UGF.
9:50:37 AM
He thought taking $400 million form the CBR and saying it
reduced the deficit was an odd way to count because it
implied that the deficit went away when filled by the CBR;
pulling from reserves to fill a deficit did not eliminate
the fact that there was a deficit. Second, supplemental
requests by the Governor of $170 million were added to the
FY18 base, before comparison. He thought that this approach
allowed for false budget reductions reflected year after
year. He believed that if the supplementals were to be
counted when comparing two years of a budget, the FY18
supplementals should be added to the FY19 costs. He
believed that adding the supplementals to the FY18 base
distorted the numbers in the wrong direction because there
was no accountability for supplementals; counting the FY18
supplementals as FY19 cost would discourage short funding
but would raise the FY19 budget by $170 million. The
current problem was how supplementals were accounted for;
LFD would advise to leave them out because there was no way
to know what supplementals would be in FY19.
Co-Chair Hoffman whether the LFD method of leaving the
supplementals out of the initial Governor's proposal was
common practice.
Mr. Teal replied that the practice had been that
supplementals had not been counted; the comparison had been
from management plan to budget proposal. The Governor's
proposal was a different way of counting.
9:53:33 AM
Senator Micciche thought that both practices should be
considered. He said that in reality there was no
accountability for supplementals, the legislature just paid
for them, and would continue to pay for them as they
increased. He wondered what recommendation could be made
for holding the administration accountable for the lowest
potential supplemental budget going forward.
Mr. Teal thought that the legislature played a role in
supplemental budgets as well. He did not thing that fault
was relevant. He emphasized that the issue was one of
counting, either both year's supplementals were counted, or
neither. Since there was no way to know what the
supplementals would be for FY19, neither should be counted.
He lamented that the unknown budget was a problem. If there
was a $92 million supplemental for Medicaid, higher than
anticipated, the choice was to pay or to not approve the
supplemental. He stressed that the legislative philosophy
was that money was appropriated and the departments were
supposed to function within that appropriation. He stated
that intent language stating that legislative purpose was
written into the budget every year, yet there were still
supplemental requests each year.
Mr. Teal relayed that in the case of the $92 million
supplemental for Medicaid, the legislature could not
approve the supplemental but then the department could come
back and say that the money had already been spent. He
furthered that the constitution states that money cannot
leave the treasury without an appropriation; if the
legislature did not approve the supplemental this became a
constitutional problem because money had been spent without
an appropriation. The following year the supplemental would
come before the legislature as a ratification, and the
legislature would be forced to ratify the expenditures.
Co-Chair Hoffman thought that the problem with including a
supplemental in the FY 18 base was that it had been
historically left out and meant that there would be an
increase in the base of the FY19 budget. He thought that
the past practice was best because it would need to be
agreed upon by the legislature whether the increments would
stay in the base when the FY19 management plan was adopted.
He thought that the way that the Governor's budget was
presented misrepresented some of the numbers.
9:59:26 AM
Co-Chair MacKinnon asked whether the legislature had
encouraged larger supplementals with language that allowed
for the additional $500 million draw from the CBR as a
buffer on the budget. She wondered whether the language
should be removed.
Mr. Teal did not think the language should be removed. He
recalled that the FY17 budget was the first time that the
CBR draw had occurred. The legislature allowed a CBR draw
equal to the budget that was passed and if revenue went
down the CBR draw could go up. He said that the open-ended
draw was then limited to $100 million above the base. The
previous year, the limit was increased to $200 million. He
reiterated that previously, the CBR draw had been
unlimited. The unlimited language would have encouraged
more supplemental than currently. He thought reducing the
$200 million limit would reduce the headroom for agencies,
but also posed other problems. For example, if the ceiling
had been $100 million when the Medicaid supplemental was
requested there would be no room for emergency
supplementals, which could force the legislature to have
another supermajority vote to increase CBR headroom. He
lamented that giving too much headroom to agencies could
result in increased agency spending. He said that in most
cases, the legislature telling departments to spend only
what was appropriated worked, but there were several
programs where that did not work.
10:04:10 AM
Co-Chair MacKinnon asserted that Medicaid was out of
control and difficult to manage. She thought everyone in
the legislature wanted to support healthcare, but the state
could not afford the program.
Mr. Teal concurred that Medicaid costs were out of control,
that it was a significant part of the budget and would
continue to grow. He found it deeply concerning that the
projects had been so poor. He had met with the department
regarding projects and had witnessed the projection
process. The department agreed to meet with multiple
stakeholders in order to elucidate the projection process.
He hoped to get better projections to better understand the
matter.
10:06:46 AM
Co-Chair Hoffman asked Mr. Teal to highlight the steps that
the legislature had taken to make the budget process more
transparent.
Mr. Teal stated that the budget was complicated, and he did
not know if it could be made less so.
Co-Chair Hoffman referred to Senator Bert Stedman and his
efforts to keep revenue measures in order and the "smoke
and mirrors" that had transpired.
Mr. Teal recalled that in the late 90s there had been a
plan to reduce expenditures by $250 million and increased
revenue by an equal amount. He said that the smoke and
mirrors" of that time made the current legislature look
clean. He said that what LFD had done over the years was to
make the budget process as understandable as possible. He
spoke of the "Budget Clarification Project" of 2008, where
an attempt was made to straighten out the classification of
spending. He noted that UGF was not a term then, there was
only general funds. He said that LFD had tried to make the
process clearer by using four fund categories instead of
three. He explained that there were reasons that things
were classified as they currently were and that those
classifications provided greater clarity about how money
was being spent. He shared that there was a time when
billions were repaid to the CBR, which appeared as an
expenditure in the budget. Money leaving the treasury was
different than money being transferred from one fund to
another, the latter of which was not an expenditure. He
said that the split from "agency operations" to "statewide
items" had been made in order to separate out the day to
day operations of government to determine whether agencies
were increasing spending. He related that other things,
like debt service and retirement costs, that were not
associated with any agency but were important and
expensive, were separated out for comparisons to be made of
growth in day to day operations versus growth in overall
government.
10:11:33 AM
Mr. Teal believed that the changes had been an improvement
in the information presented to the legislature and the
public and had facilitated a better understanding of the
process. He lamented that giving people several different
ways to count and compare had led to misuse of the data. He
warned that comparing agency operations from one year to
the total budget from the next was a false comparison. He
stated that presenting better and clearer information did
not always result in said information being used as it
should be.
10:14:05 AM
Senator Micciche wanted to see the CBR trend in relation to
UGF spend since the fund's creation. He thought
supplemental budgets damaged the ability for the
legislature to prioritize spending. He understood that some
of the costs were unavoidable. He felt that there was no
incentive for departments to spend within their means.
Senator von Imhof thought that worst case scenarios should
be considered, and then political plans should be made
about how money would be spent. She said that she had
looked to FY 19, 20, and 21, and had added POMV while
incorporating all supplementals, oil and gas credits
(without bonding), plus the full amount of retirement and
debt service She had come to a total of approximately $858
million deficit. She said that growth over the next two
years in the consumer price index (CPI)would result in a
$900 million deficit over the next few years. She though
that this should be this fiscal framework in which the
political discussion should reside. She elaborated that the
supplemental included $44 million for the Alaska Marine
Highway and if the legislature chose not to fund that
supplemental there would be $44 million less in their
budget. She thought that the true CBR draw for FY19 would
be $858 million, not including the supplementals for FY18.
10:17:56 AM
Co-Chair MacKinnon requested that the room not again refer
to the Governor's bill as transparent. She described the
budget as a maze of potholes that the legislature had to
repair. She asserted that she did not want to be
disparaging but felt that the proposal set up the
legislature to increase the budget to pay for things that
were critical and required in statute.
10:19:23 AM
Mr. Teal displayed Slide 7, "Looking Ahead":
? Both revenue and expenditures are projected to grow
at about the same pace, so deficits are projected to
continue unless action is taken.
? The size of deficit depends on:
? Revenue (more reduces the deficit)
? Spending (more increases the deficit)
? POMV payout (more reduces the deficit)
? Dividends (more increases the deficit)
? And many other variables
Mr. Teal remarked that Senator von Imhof's numbers were
close to accurate; the state's deficit was larger than the
listed $700 million. He stated that the OMB expenditure
plan grew with inflation, the DOR forecast grew with
inflation; when expenditures and revenue grew at the same
rate, deficits would continue unless action was taken. He
explained that revenue and spending both affected the
deficit; the more revenue, the lower the deficit and the
more spending, the higher the deficit. He said that the
POMV payout was critical; the larger the POMV payout, the
lower the deficit. He added that the payout had to be
sustainable or future draws could be limited.
Mr. Teal continued to discuss slide 7. He thought some
might consider that dividends were not government
expenditures. He shared that from the perspective of the
treasury, the larger the dividends the larger the deficit.
He stated that Senator von Imhof was correct that there was
a deficit that could more accurately be calculated at
around $800 million to $900 million, with no change in
sight unless oil prices went up or spending went down.
10:22:17 AM
Mr. Teal showed Slide 8, "What is Missing?":
Community Assistance
? The FY19 distribution will be $30 million if a
proposed $30 million FY18 deposit to the
Community Assistance fund is approved.
? But the FY20 distribution will fall to $20
million unless there is a $30 million deposit in
FY19.
? The Governor did not request a deposit in FY19.
? Without a deposit this session, communities
won't be certain of their FY20 payments.
Mr. Teal stated that the point of Community Assistance was
to give communities a known amount of money well in advance
to aid in preparing a budget. He lamented that communities
were preparing their budgets with no idea of how much money
they would be receiving from the state. He said that the
Governor's proposed supplemental deposit of $30 million did
not help in the long run because there was no FY19 deposit,
which would put communities in the same position for FY 20.
Co-Chair Hoffman interjected that the instability in
community assistance was the fault of the administration.
Mr. Teal continued to address Slide 8:
Retirement Contributions
Actuarial valuations call for state retirement
assistance of $299 million for PERS and TRS.
The Governor proposes appropriations of $238
million, a shortage of $61 million.
Underfunding retirement systems has
consequencesnot just with rating agencies, but
real-world consequences.
Mr. Teal shared that the ARM board had adopted a new model
after the projections came out and had recommended some
reductions on top of the $25 million reduction attributable
potential savings in retiree medical costs. He recalled an
update to the valuation from two years previous when there
was an evaluation that suggested retirement contributions
would be falling. However, when the state tried to take
advantage of the lower contribution it was state that the
state had to pay what the valuation determined. Money was
taken from the higher education fund and when the savings
did not fully realize, money was taken from the fund for a
second year. He said that the valuation was not currently
being used as the basis for contributions, which he
believed underfunded retirement.
Mr. Teal considered that the changes in the ARM board model
and shared that there were actuarial methods to build
changes in savings in, over time, and as they occur. He
considered that counting the benefits before they happened
was essentially underfunding. He thought there was
consequences to underfunding retirement systems that went
beyond rate agencies. He referenced cities that were on the
brink of bankruptcy because of their underfunding of
retirement systems. He warned that $300 million per year,
and growing, would significantly affect the deficit.
10:28:10 AM
Mr. Teal showed Slide 9, "What is New?"
Public Safety Action Plan
? Increase spending by $33.5 million (DPS, DOL,
DOC, HSS).
? $18 million of the total is proposed as a
supplemental appropriation, which reduces the
apparent size of the FY19 budget.
Economic Recovery Plan
? A payroll tax would generate $160 million in
FY19 and $320 million during each of the next two
years.
? The plan would spend the entire $800 million in
revenue on capital projects, leaving no revenue
to fill deficits.
? FY19 appropriations exceed FY19 revenue.
? Will the regular capital grow if the
legislature rejects the plan?
Mr. Teal thought the Economic Recovery plan was deficit
neutral but was struck by the significant change in
philosophy. He recalled the Governor's previous attempt to
persuade the legislature to pass a pay roll tax to close
the deficit. Alternately, this tax would not address the
deficit and all the money generated by the tax was spent.
10:29:44 AM
Mr. Teal turned to Slide 10, "What is New?"
? Direct Appropriations from the
Constitutional Budget Reserve Fund (CBR)
? Conceptually interesting:
Speed the budget process for core services
to avoid inefficiencies.
Only minimally disruptive items would
require a supermajority vote.
? Dangers:
Core services are vulnerable to revenue
failure.
May result in a special session for a
second supermajority vote or a round of
budget cuts.
? Biennial Budgeting
Theoretical advantages include increased
efficiency and reduced uncertainty.
Advantages may be more theoretical than
practical.
Requires legislation.
Mr. Teal thought that the approach of making appropriations
directly from the CBR was a conceptually sound idea; the
approach was supposed to speed the budget process for core
services to avoid inefficiencies. He furthered that the
early funding would, theoretically, avoid pink slips across
all departments. He stressed that early funding for school
districts was great but was not sufficient without early
funding for community assistance programs because
contributions for cities was critical to the operation of
school districts. Mr. Teal thought that the advantages of
biennial budgeting were more theoretical than practical.
10:32:16 AM
Mr. Teal discussed Slide 11, "What is New?":
? Debt Financing for Purchases of Oil and
Gas Tax Credits
? Conceptually interesting, but short on detail.
? Supplemental Appropriations
? The Governor added supplemental items to both
operating and capital bills. ($170 million UGF)
? Supplemental requests are not due for two
weeks.
? No technical or legal reasons preclude "early"
supplemental requests supplementals can go in
any appropriation bill.
Mr. Teal could not speak to debt financing for purchases of
oil and gas tax credits.
Vice-Chair Bishop commented that he did not like the idea
of debt financing for purchases of oil and gas tax credits.
Co-Chair MacKinnon stated that Deven Mitchell, Executive
Director, Alaska Municipal Bond Bank Authority, Department
of Revenue, would be before the committee to discuss the
issue at a later date.
Mr. Teal considered that it was unusual that the governor
had added $170 million in supplemental appropriations to
the operating and capital budgets. He noted that the
supplemental requests from the previous year had been
incorporated into the operating budget. He explained that
it was unusual for budget bills to be introduced in this
incorporated manner. He added that making matters more
unusual was that all the supplemental requests had not been
submitted. He relayed that the Governor's supplemental bill
would not be in committee for several weeks; LFD did not
know how much the bill would cost. He stated that it was
known that the state had $2 million in headroom to spend,
$170 million of which was already spent. He shared Senator
Micciche's concern with the growth in the supplemental. He
concluded that other items in the budget plans were
discussed in the LFD budget overview and encouraged members
to read the narratives for each agency and the language
section of the operating bill.
10:35:36 AM
Vice-Chair Bishop felt confident in the leadership of the
senate.
Senator Stevens remarked on early funding of education and
the benefit of early funding across all state departments.
He agreed that community assistance was important for
districts but wondered how much of that assistance went
toward the funding of school districts.
Co-Chair Hoffman discussed the schedule for following day.
ADJOURNMENT
10:38:20 AM
The meeting was adjourned at 10:38 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 011818 LFD FY19 Budget Overview.pdf |
SFIN 1/18/2018 9:00:00 AM |
FY19 Operating Budget |