Legislature(2019 - 2020)SENATE FINANCE 532
01/28/2020 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Governor's Fy21 Budget | |
| 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 28, 2020
9:02 a.m.
9:02:14 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Donny Olson
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Neil Steininger, Director, Office of Management and Budget,
Office of the Governor; Brian Fechter, Chief Policy
Analyst, Office of Management and Budget, Office of the
Governor; Senator Cathy Giessel.
SUMMARY
^GOVERNOR'S FY21 BUDGET
9:04:15 AM
NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, introduced himself, and discussed
his professional background.
9:04:53 AM
BRIAN FECHTER, CHIEF POLICY ANALYST, OFFICE OF MANAGEMENT
AND BUDGET, OFFICE OF THE GOVERNOR, introduced himself, and
discussed his professional background.
Mr. Steininger discussed the presentation, "State of Alaska
Office of Management and Budget; Senate Finance Committee;
FY 2021 Budget Overview; January 28, 2020" (copy on file).
He highlighted slide 2, "FY2021 Budget by Agency (UGF) -
$Thousands":
K-12 Formula: $1,273,493.2
Medicaid: $644,304.3
Collectively 44 percent of Operating Budget
Co-Chair von Imhof stated that she had her own graph to
distribute to the committee members related to the
Permanent Fund Dividend (PFD) (copy on file).
9:07:46 AM
AT EASE
9:09:51 AM
RECONVENED
9:10:14 AM
Co-Chair Stedman remarked that the chart reflected a
statutory calculation of the PFD, which was $2.005 billion.
He requested comment on the chart, which showed the
relative significance of that addition.
Mr. Steininger remarked that adding the statutory PFD
number would add a column of approximately $2 billion on
the chart. The chart attempted to illustrate the
examination of agency spending. He noted that the
operational decisions revolved around agency spending. The
PFD in statutory calculation was a formula program. He
remarked that a significant portion of his presentation
touched on the large cost drivers to the state. He remarked
that the various formula programs were set out in statute.
He shared that K-12 and Medicaid fell into agency
operations, and were the largest cost drivers. He stressed
that there were large cost drivers that were impacting the
deficits.
Co-Chair von Imhof noted that only looking at agency costs
in the full revenue showed a $450 million surplus before
paying a PFD. She noted that the next slide showed a large
budget deficit, so she assumed that the PFD was
incorporated into the current slide but not the next slide.
She wanted to ensure consistency, because there was no
budget deficit before paying a PFD.
Co-Chair Stedman looked at the chart presented by the
Office of Management and Budget (OMB). He noted the Base
Student Allocation (BSA) under Education, and remarked that
it was difficult to adjust downward. He felt that there had
never been a cut to the BSA. He remarked that the committee
had reduced the Department of Health and Social Services
(DHSS) budget in the year prior by $70 million, and the
governor reduced it by another $50 million. He expected a
supplemental request to add back the $120 million to the
DHSS budget. He felt that the net affect would be near zero
in terms of changes. He stressed that it took 55 percent of
the current struggle and "put it under a microscope that is
very difficult to move." He expected difficulty in the
Department of Corrections (DOC) subcommittee budget, and
controlling the growth of DOC.
9:16:23 AM
Mr. Steininger looked at slide 3, "Alaska's Revenue and
Expenditures: Look back." He stated that the slide showed
that the budget tracked expenditures as revenues spiked.
Senator Wielechowski wondered whether OMB believed that
there could be a $1.5 billion cut from the budget.
Mr. Steininger responded that OMB had not presented a
budget that cut $1.5 billion. He stated that the budget
fully funded the statutory obligations, and the resulting
deficit was $1.5 billion. He felt that OMB could not solve
a $1.5 billion problem through decrements to state budget,
but rather significant change to programs. He stated that
the presentation would show some of the major cost drivers
that were resulting in the deficit. He felt that policy
change and change to those programs that would alleviate
the deficit situation.
Co-Chair Stedman felt that there was a statutory issue
within the debt reimbursement that was 50 percent funded.
Mr. Steininger agreed. He stated that the program had been
flat funded from the 50 percent level that was there the
year prior.
9:19:07 AM
Mr. Steininger highlighted slide 4, "FY2021 Revenue Outlook
- $Millions."
FY2021 Revenue Sources
? ANS West Coast FY2021 Projection: $59.00/Barrel
? Petroleum Revenue: $1,410.0, 28 percent
? POMV Revenue: $3,091.5, 61 percent
? Non-Petroleum and Non-Permanent Fund Investment
Revenues: $557.5, 11 percent
Co-Chair Stedman wondered what "total unrestricted general
fund statutorily available for government use" meant
relative to "totally unrestricted general fund."
Mr. Steininger explained that there was an attempt to
illustrate the amount of general fund revenue that was
available for government operational use. He stated that
those departments that were the basic operations of state
government. He shared that the statutory permanent fund
dividend (PFD) amount was removed to illustrate what would
be left, statutorily, for government operations.
9:20:34 AM
Co-Chair Stedman noted that there many discussions about
plans. He felt that the presentation showed that there
would be roughly $500,000 in the CBR. He queried the
proposal to get to year 2023 and 2024.
Mr. Steininger replied that the deficit in the proposed
budget was not intended to be more than one year. He shared
that the way forward was to make meaningful changes to the
programs, and eliminate some of the statutory pressures
that was forcing the high budget.
Co-Chair Stedman queried the capital draw on the permanent
fund required in 2022. He stressed that next year the state
would be $1 billion short. He noted that he wanted to work
with OMB on a "three-year survival plan", because of the
increasingly shortened time horizon.
Mr. Steininger agreed that the time horizon had been
shortened. He stated that prior budgets were balanced based
on short funded statutory programs, but that could not
solve the problem in the following year. He stated that the
statutory program would still dictate how much should be
spent. He announced that solutions needed to last more than
one year. The solutions could not be made in only a budget
bill.
Co-Chair Stedman agreed. He wanted the Legislative Finance
Division (LFD) to present a five-year or three-year
projection of positions that would occur without addressing
the formula-driven programs.
Co-Chair von Imhof remarked that the governor had
acknowledged a budget deficit, and that certain formula
programs and statutes needed to change. She wondered
whether there were any bills from the administration or
anything in the presentation that gave recommendations how
to decrease the formula and statutory funding that created
the deficit.
Mr. Steininger replied that his presentation did not
directly recommend any change to the program, rather he was
laying out the factors that built the operating budget. He
shared that he was available to discuss the factors in the
formula programs to come to a workable solution for
everyone and the future.
9:25:07 AM
Co-Chair Stedman felt that the legislature and the
administration needed to work together to address the
formula drivers.
Senator Wielechowski wondered whether the structural fiscal
deficit could be solved with cuts alone, or whether the
state needed new revenue.
Mr. Steininger responded that all options needed to be on
the table, but some options required input from the people
of Alaska. He stated that some of the issues were large for
the future of the state.
Senator Hoffman felt that the answer to Senator
Wielechowski's question was evident by the State of the
State from the governor. He felt that the governor came up
with a status quo budget, and in order to pay for the
budget in the long run additional revenue must be found. He
recalled that the governor had addressed his drastic budget
cuts from the year prior, and felt that there may be some
tweaking. He noted that the legislature had passed a draw
from the Permanent Fund Earnings Reserve Account (ERA), and
wondered whether the administration was committed to a
possible draw. He asked whether the governor would be
willing to veto amounts larger than that draw, other than
reinvestments.
Mr. Steininger could not speak to any future veto
considerations.
Senator Hoffman surmised that the governor wanted to follow
the law. The law outlined that there could be a draw of
$5.25 million. He offered that the governor could veto
amounts above that limit.
Mr. Steininger responded that the goal of his office was to
present a budget that did not require draws in excess of
the POMV.
Senator Hoffman wondered how OMB was helping the
legislature without offering any solutions.
Co-Chair Stedman noted the balanced budget concerns.
Senator Wielechowski stressed that the state would be broke
in the next year. He wondered whether the governor would be
proposing legislation to put something on the ballot for
new revenue.
Mr. Steininger responded that he could not speak to any yet
to be proposed legislation.
Co-Chair Stedman stated that there would be work to fix the
precarious budgetary position.
9:30:53 AM
Senator Olson felt that it was incomprehensible to require
the people of Alaska to find budgetary solutions. He
stressed that the people of Alaska did not vote on a
budget, which is why he and others were elected. He felt
that the legislature was within 24 months of facing some
significant issues that could not be overcome without a
plan. He did not hear a plan in the State of the State
message, except for approximately $2 million from a
lottery. He was troubled that the governor did not have a
plan.
Senator Bishop welcomed Mr. Steininger to the committee.
Co-Chair Stedman remarked that it was unfortunate that Mr.
Steininger's first time in committee with his new position
was at a time of serious budgetary issues.
Senator Bishop stressed that the POMV transfer was "a
different shade of ink." He noted that there were less
projected payments of PFDs. He announced that the lightly
shaded box considered a full PFD.
Mr. Steininger agreed.
Senator Bishop wondered whether the ink shades indicated
some amenability to readjusting the formula.
Mr. Steininger replied that the intention was to break out
to a subtotal. He furthered that there should be
consideration of all formula programs.
Co-Chair Stedman appreciated the knowledge of the major
departments and the culture issues within the state.
Mr. Steininger looked at slide 5, "FY2021 Fiscal Summary."
He stated that the slide showed the revenues coming in that
were available for operational costs of the state. He
shared that the slide showed the major categories of those
operational costs, that would lead to the $1.5 billion
deficit in FY 21.
9:35:09 AM
Co-Chair Stedman remarked that the negative $1.5 billion
was for the statutory PFD. He shared that, if the dividend
was not there, there would be a roughly $400 million
surplus. He remarked that there would be a positive of $2
billion if there was an examination of all revenues. He
felt that there were multiple ways of examining the
situation. He stressed that there would be a focus on the
cash flow in order to avoid a continued problem.
Co-Chair von Imhof looked at FY 21 UGF total capital of
$125 million, and believed that it was the minimum to
accept matching funds from the federal government for
highways and airports.
Mr. Steininger agreed. He explained that there was roughly
$65 million dedicated to highway improvement, and another
$10 million in reappropriations from old projects. He
stated that there was a slide with the exact number.
Co-Chair von Imhof recalled the most recent State of the
State address from the governor, which stated that
inexpensive energy, especially electricity, would be the
basis that drove the future economy. She stressed that
investing in cheaper forms of energy cost money. She
wondered how there could be grandiose visions and desires
to be a leader in alternative energy without state money
for that investment.
Mr. Steininger replied that there would be a presentation
on the capital budget that would address the question. He
noted that there were many operational costs that were
"crowding out" spending on capital. The cost pressures from
the formula program took up the bulk of the budget, with
not much room left for the capital budget. He remarked the
there was a focus on projects that would receive a federal
match, but strategic choices needed to be made for
investment in the state.
Co-Chair Stedman stressed that the Alaska Marine Highway
System (AMHS) did not need a state match. He stressed that
there could be federal money for a new fleet.
Senator Wielechowski looked at FY 2020 deficit of $269.7
million, and surmised that there was actually about $200
million that could be added to that deficit.
Mr. Steininger stated that thy FY 2020 management plan plus
supplementals included the items discussed on December 11,
such as Medicaid and firefighting. He shared that there
would be more details on the supplemental items, when the
supplemental budget was released the following week. He
remarked that the $270 million deficit included the bulk of
the supplemental items.
9:40:00 AM
Co-Chair Stedman shared that the committee would be
interested in the supplemental number, and the number
adjusted for paying the statutory oil tax credits that had
not been included in the current budget.
Senator Hoffman wondered what would occur if the
legislature followed the administration's recommended
budget and included no money for the credits with a Court
ruling coming against the state after adjournment.
Mr. Steininger replied that once the Court case was decided
there would be a decision about how to fund the outcome. He
felt that a speculative appropriation would be prudent.
Senator Hoffman felt that it would be prudent for the
administration to explore avenues of direction. He wondered
how the credits would be paid, if the legislature was not
in session.
Mr. Steininger replied that the administration would
address it once there was a decision in the Court case.
Co-Chair Stedman surmised that there were ways of
addressing the issue.
9:45:39 AM
Mr. Steininger addressed slide 6, "Significant Highlights
($Thousands)":
? Public Safety Investment: $84,566.7 UGF
Alaska Development Team: $2,843.6 DGF
? Pilot program through FY2023
? Fully Funded K 12 Formula: $1,273,493.2 UGF
?$19,817.4 UGF increase
? Estimated PFD: $2,005,100.0 UGF ($3,074 per Alaskan
Estimate)
? Full Statutory Amount
? Capital Spending: $135,639.2 UGF
? Leveraging available Federal Funds ($1.1B)
Senator Bishop shared that the Alaska Development Team
would be addressing the committee about possible projects
in the state.
Senator Olson queried the breakdown of the Public Safety
Investment to the Village Public Safety Officer (VPSO)
program. He stressed that the VPSO was currently at an all-
time low of 38 officers, but they had the ability to hire
100 officers.
Mr. Steininger replied that the upcoming slide may address
the question. He did not know the exact number of the rural
and urban breakdown.
Senator Olson felt that it would be minimal at best.
Mr. Steininger agreed to provide further information.
Senator Hoffman recalled that the governor was in support
of compacting in education for Alaska Native Tribes. He
wondered whether the governor saw that support as revenue
neutral, or whether it was not highlighted because the
governor no longer wanted to accomplish that effort.
Mr. Steininger replied that there was nothing in the budget
for Tribal compacting, because that would occur in a fiscal
note for a bill related to Tribal compacting.
Mr. Steininger discussed slide 7, "Significant Changes:
Public Safety Capital and Operating: $84,566.7 UGF." He
stated that $32 million would restore general funds to
items funded through the Power Cost Equalization (PCE)
Fund. He remarked that it would ensure that those
appropriations made the year prior were sustainable in the
long term, and funded from the general fund. He noted the
significant amount of $24.7 million in the Department of
Corrections (DOC). He also relayed some smaller strategic
investments in DOC, such as drug dogs and mail copying
which would stop contraband from entering the correctional
institutions. He noted that in the Department of Public
Safety (DPS), there was a great success was that they had
been filling some long-time vacant State Trooper positions.
9:50:44 AM
Senator Wilson wondered whether the DOC number referred to
the reopening of a closed correctional facility.
Mr. Steininger replied that the money added to DOC was for
inmates and the deferred discussion of inmate management to
the DOC commissioner.
Senator Wilson wondered whether there would be a decrement
or increment to the current number.
Mr. Steininger agreed to provide that information.
9:51:54 AM
Senator Wielechowski recalled that in the year prior the
governor had a policy that all the departments would flow
through the OMB director. He wondered whether that policy
would be the same in the current year.
Mr. Steininger replied that the commissioners had
significantly more input on the budget in the current year,
and would be engaged in the budget process with the
legislature.
Senator Bishop wondered whether there would be anything in
the budget related to the rehabilitative services.
Mr. Steininger could not comment on pending legislation.
Senator Hoffman followed up to Senator Olson's question. He
recalled that the governor had mentioned that it did not
matter where people lived, but he felt that everyone should
be safe in the state. He wondered how the governor would
accomplish the safety of Alaskans without funds for
significant changes to the VPSO program.
Mr. Fechter replied that a number of the items were rural
public safety items, and stated that many trooper positions
would be assigned to rural Alaska.
Senator Hoffman wondered whether there would be a trooper
in Hooper Bay.
Mr. Fechter replied that the trooper would not necessarily
be in the rural area, but would be considered in a
"coverage area."
Senator Hoffman stressed that there was a major issue about
public safety in rural Alaska. He remarked that it could
take a day or two for a trooper to reach the rural areas.
9:55:56 AM
Co-Chair Stedman relayed that there would be a subcommittee
to address the issue, and noted that there were similar
issues that affected rural families across the state.
Mr. Steininger displayed slide 8, "Selected Department
items --$Thousands":
Administration
? Public Defender and Advocacy Support: $1,756.0 UGF
? OIT Capital Investments in Standardized Systems:
$5,370.0 UGF
? OIT and Personnel Consolidation Efficiencies:
($3,728.3) Other
Commerce
? Alaska Development Team Pilot Program (FY20 FY23):
$2,843.6 DGF
? Community Assistance: $28,731.5 DGF
? Deposit per statutory calculation
Fish and Game
? Various Reductions to Research and Stock Assessments
with Minimal Impact to Fisheries:
(($1,329.2) UGF
Senator Wilson asked for more information about the mission
and activities thus far of the Alaska Development Team
pilot program, and how it had interacted with the budget.
Mr. Steininger replied that it was a public/private
partnership. The goal for the end of FY 23 was to
transition it to be an entirely self-sufficient entity,
following the model of tourism management. He stated that
he would provide more details and an update of the program.
Co-Chair Stedman remarked that the capstone issue was that
the project was funded through a program that may
disappear. He remarked that the Department of Fish and Game
(DFG) would be relatively flat for the year, and remarked
that there were some reductions in that budget consumed by
the escalation of employee costs. He remarked that moving
forward while holding the budget flat would show that
issues that research and stock assessments would be "eaten
alive" by step increases of the employee wage structure. He
felt that the committee should examine the wage issue,
because it would "eat the budget alive." He stressed that
the DFG subcommittee would examine the issue, and requested
that the other subcommittees examine the same issue.
10:01:15 AM
Co-Chair von Imhof noted the DGF designations, and looked
at slide 5 that had $972 million in DGF. She wondered
whether there were some holes in the budget in the upcoming
months when the reverse sweep issues were brough to light.
Mr. Steininger replied that some of the DGF was revenue
earned during the year, and some were draws on the funds
that were subject to the sweep provisions of the
Constitution. He shared that the budget included reverse
sweep language. He recalled that the last year showed the
impacts of the sweep, and OMB attempted to understand the
state's ability to continue operations. He hoped that OMB
would not have to deal with the impacts of the sweep.
Co-Chair von Imhof wondered whether the reverse sweep
language was a blanket language for all funds or there
exclusions. She asked whether the provision required a
three-quarter or majority vote.
Mr. Steininger responded that the reverse sweep language
included in the budget was language included in prior years
to cover the entirety of the swept funds. He shared that it
required a three-quarter vote, because it was a draw on the
CBR.
Co-Chair Stedman explained that at the end of the fiscal
year there was a litany of accounts that had a positive
account balance. He stated that, according to the
Constitution, those funds needed to be swept into the
general fund that would then flow into the CBR. He stated
that those accounts would then be left empty, resulting in
severe cash flow problems.
10:05:48 AM
Senator Hoffman remarked that the PCE fund had not been
deemed a sweepable item in years past. He was prepared to
provide documents to the committee that gave strong support
that PCE was not a sweepable item. He stressed that PCE was
located in AEA since its inception in 1984. He shared that
the Supreme Court suggested that the fund was non-
sweepable. He wondered whether PCE was listed as a
sweepable item.
Mr. Steininger replied that the issue of what funds would
be subject to the sweep was something that he had paid
close attention. He shared that he would have a discussion
with OMB to see whether there had been a change in that
position.
Co-Chair Stedman felt that there would be a meeting to
compare the historical methodology to ensure there was no
misunderstanding in the policy of the legislature and the
executive branch.
Senator Hoffman remarked that the governor had expressed
strong support of the program, and that the governor wanted
to clarify the PCE issue. He shared that the governor had
suggested legislation to make it clear that PCE was non-
sweepable; and the other was through a Court process to
determine one way or another whether it was a sweepable
item. He felt that either item for resolution could be
taken, and suggest both routes.
Co-Chair Stedman stated that he wanted to finish the
presentation.
Senator Bishop wondered whether the commissioners would
present to the committee during discussion of the items.
Co-Chair Stedman replied that the commissioners would
defend their budgets in the subcommittee with OMB.
Senator Bishop yielded to the chair for the discussion.
Mr. Steininger looked at slide 9, "Selected Department
items -$Thousands":
Education
-12 Aid to School Districts Fully Funded:
$1,260,501.9 UGF, $29,774.2 Other
?Residential Programs for North Slope Borough School
District and Lower Yukon School District: $900.2 UGF
?Discontinue Online with Libraries Video Conference
System: ($232.9) UGF
?Outsource Federal Family Education Loan Program
Servicing: ($586.3) Other
?Transition Public School Trust Fund to Language
Section to Maximize Investment Returns
?Additional Foundation Funding from Dividend Donations
to the Dividend Raffle: $488.2 Other
?Increase to Support WWAMI Contractual Obligation:
$50.8 DGF
10:11:41 AM
Co-Chair Stedman recalled that in 2010 there were bonds
issued for several projects, and those would be before the
committee in the upcoming weeks. He remarked that there was
roughly $5 million in appropriations to fund the bond
projects in the state. He shared that there was a concern
about $30 million in state subsidy put into the operations
of the other projects, and $500,000 in the Mt. Edgecumbe
pool with half siphoned off for Department of
Transportation and Public Facilities (DOT/PF) for
maintenance. He stressed that the current year's budget had
$650,000 for operations of the pool, but it was all receipt
authority and no cash. He remarked that there were high
drowning rates in the state, so he would be examining the
issue. He expressed concern about using receipt authority.
10:15:32 AM
Mr. Steininger discussed slide 10, "Selected Department
items -$Thousands":
Governor
?Cost of Statewide Primary and General Elections:
$1,847.0 UGF
?Deferred Maintenance: $30,000.0 UGF
Health and Social Services
?Medicaid Services Cost Drivers: $128,273.6 UGF
?Transfer Parents as Teachers from Dept. of Education:
$474.7 UGF
?Pioneer Homes Payment Assistance: $5,000.0 UGF
?Add Authority for Electronic Visit Verification
Maintenance and Operation: $137.5 UGF, $412.5 Federal
?Restore Adult Public Assistance Payment Maintenance
of Effort Requirements: $7,471.2 UGF
?Alaska Psychiatric Institute Projects to Comply with
Corrective Action Plan: $1,619.3 DGF
?Utilize Available Marijuana Education and Treatment
Funds to Offset UGF: ($11,400.0) UGF, $11,400.0 DGF
Co-Chair von Imhof hoped that the commissioner from DHSS
would begin the conversation with what was realized in 2020
and the hope for realization again in 2021. She wondered
whether the supplemental budget had been incorporated in
the FY 21 budget.
Mr. Steininger replied in the affirmative. He furthered
that it was incorporated into the FY 21 budget. He
explained that those savings were continued in the
departments.
Co-Chair Stedman understood that the payment structure of
the Pioneer Home resulted in some people moving out that
were level 1. He remarked that there was a concern about
the rate structure, because people were coming in after
people no longer needed the services. He wanted to examine
the rate structure, to ensure the survival of the Pioneer
Homes. He also wanted to examine the structural differences
between the rural, urban, and privatization issues. He
hoped that the subcommittees would address that subject. He
shared that his mother and his step-mother were both on
public assistance and living in the Pioneer Home.
Mr. Steininger looked at slide 11, "Selected Department
items -$Thousands":
Labor and Workforce Development
percent AVTEC Tuition Increase: $250.0 DGF
?AVTEC: Restructuring Savings: ($226.7) UGF
Military and Veterans Affairs
?Business Process and Contractual Savings: ($523.0)
UGF
?Armory Divestiture Savings: ($50.0) UGF
Natural Resources
?Aquatic Farm Application Processing: $187.3 DGF
?Land Sales Fairbanks Project Development Team: $98.8
SDPR
?Arctic Strategic Transportation and Resources (ASTAR)
-Phase 2: $2,900.0 UGF
?Geological Mapping for Energy Development (USGS):
$600.0 UGF, $600.0 Federal
?Critical Minerals Mapping -Earth MRI (3DEEP): $750
UGF, $200.0 Other, $1,500.0 Federal
?Geologic Materials Center Multispectral Scanning
Equipment: $1,290.0 (UGF, DGF, Other)
Co-Chair Stedman wondered whether there were any imbedded
budget elements to help with the concept presented the
night before on land sales.
Mr. Steininger believed that it would be a separate issue
in the fiscal note.
Mr. Steininger highlighted slide 12, "Selected Department
items -$Thousands":
Revenue
?PFD Division Technology Enhancements: ($527.6) Other
Investment Management Fee Savings (Treasury):
($5,000.0) Other
?Investment Management Fee Savings (Permanent Fund):
($21,098.1) Other
?Move Tax Revenue Management System Costs to Operating
$1,650.0 UGF
?AHFC Homeless Assistance Project: $6,350.0 UGF,
$950.0 Other
Transportation
arine Highway: $3,903.2 UGF, $1,507.0 DGF increase
to increase weeks of service from 254.3 to 263.1 (8.8
week increase)
eposits to the AMHS Fund: $16,088.9 UGF
?AMHS Vessel Certification: $15,000.0 DGF
?Highway and Aviation Match:
?$64,295.1 UGF, $10,858.3 Reappropriations, $1,946.6
DGF: Leverages Federal at 90 percent/10 percent
University
?Reduction per compact: ($25,000.0) UGF
?Single appropriation
10:25:21 AM
Co-Chair Stedman stated that the DOT/PF subcommittee would
examine the Alaska Marine Highway System. He shared that
there was an expectation of 280 weeks of service in the
year prior's budget discussion. He noted that the current
budget showed 254 weeks increased to 263, so that would be
less than anticipated in the current year's budget.
Senator Hoffman noted the DOR, and the management fees. He
recalled that it was suggested by the Board that spending
less on fees would show higher returns. He wondered whether
the Board supported the reductions.
Mr. Steininger agreed to provide that information.
Co-Chair von Imhof looked at the AHFC Homeless Assistance
Project. She wondered whether that was in the Mental Health
budget. She believed that the AMHTA submitted a list of
projects each year to OMB. She wondered how much of their
recommendations were incorporated into the budget.
Mr. Steininger replied that OMB chose which recommendations
to put forward. He shared that there was a letter that went
into detail on every recommendation.
Co-Chair von Imhof requested a copy of that letter.
Co-Chair Stedman requested comments on the Department of
Environmental Conservation (DEC) budget.
Mr. Steininger replied that he had no critical points on
the DEC budget.
Senator Bishop stated that he would ask DEC about the dairy
and mariculture funding in the budget.
Mr. Steininger addressed slide 13, "Budget Drivers
$Thousands":
?Medicaid
?Restore $128,273.6 UGF
-12 Formula
?$19,817.4 UGF increase
?Retirement
?$37,631.3 UGF Increase to a total of $345,567.4 UGF
?Debt
?$12,233.7 UGF increase to a total of $134,987.0
?State Employee Costs (Cost of Living Adjustments and
Health Insurance)
?$9,661.5 UGF, $18,782.9 All Funds increase
?28 percent of Agency Budget
Mr. Steininger looked at slide 14, "Budget Drivers: Formula
Programs Medicaid (UGF)." He shared that OMB changed the
eligibility categories and expanded the covered population.
He stated that new provider types were added, and increased
rates paid to those providers. He declared that the cost of
the Medicaid program in state general funds was almost
triple than what it was in 2004. He stressed that it was a
significant increase to that program. He noted that the
significant increase was also for the number of covered
people.
Co-Chair Stedman wondered the chart showed nominal or real
dollars.
Mr. Steininger replied that they were nominal dollars.
Co-Chair Stedman felt that there could be an additional
view.
Mr. Steininger agreed.
Co-Chair von Imhof felt that the cost per enrollee had
declined, because she noted the differences in the bars.
Co-Chair Stedman agreed that was the case since 2015.
Mr. Steininger discussed slide 15, "Budget Drivers: Formula
Programs K 12 Foundation Formula." He stated that over the
time period, the BSA had increased 42 percent due to other
changes in population demographics of those students. He
shared that there was an almost doubling of the program. He
noted that the line showing the average daily membership
had stayed relatively flat over the time period. He
remarked that there was a significant increase, but did not
serve a much larger average daily membership.
Co-Chair Stedman stated that LFD might come with a
presentation on the issue.
Mr. Steininger highlighted slide 16, "Budget Drivers:
Pension Liabilities." He noted that in 2015, a $3 billion
deposit was made into the funds that was not included on
the graph. He stated that the graph only showed the annual
costs to the operating budget. He explained that the $3
billion deposit could decrease the amount owed by the state
for retirement payments. He noted that, since then, the
amount was increasing.
10:35:05 AM
Co-Chair Stedman wondered why the $3 billion was excluded,
because it was positive for the public to observe.
Mr. Steininger replied that adding the $3 billion would
flatten the upward trend, but agreed that it had made a
significant difference.
Co-Chair Stedman felt that it might be nice to break the
bar with the deposit.
Mr. Steininger displayed slide 17, "Budget Drivers: Debt
Service Obligations." He noted that it was a variable item,
as debt was paid off. He remarked that there was a slight
trend upward, and it was a significant portion of the
operating budget.
Co-Chair Stedman recalled a presentation that showed a
declining debt service going into the future, but remarked
that he would examine that issue later.
Mr. Steininger looked at slide 18, "Budget Drivers: State
Employee Costs." He remarked that the grey line was the
budgeted positions. He noted that it peaked around the time
of the peak revenue.
Mr. Steininger addressed slide 19, "Historical CBR/SBR
Balances." He stated that the slide showed the current
problem that a $1.5 billion was not something that could be
repeated for two years. He stressed that the issues with
the formula programs needed to be addressed in order to
prevent the final column in the graph where the reserve
balances went to zero. He noted that there were difficult
decisions in addressing the formula programs and the cost
drivers in order to move to a more long-term sustainable
budget.
10:39:24 AM
Co-Chair Stedman remarked that most of the discussions
about the minimum balance of the CBR was around $1.5
billion. He stressed that there must be a $500 million to
reduce the deficit to $1 billion in FY 22. He remarked that
the committee would be asking both OMB and LFD the
recommended carry-forward savings for the state.
Co-Chair von Imhof felt that the slide was alarming,
because of the low balance in the CBR. She recalled that
the governor had stated that every decision made in the
year should be made with children and grandchildren in
mind. She stated that she would also be asking LFD for
their recommendation. She stressed that it was critical to
keep a healthy balance in the CBR. She felt that $500
million was "anemic." She remarked that the obvious choice
was to pivot to the ERA to begin raiding the Permanent
Fund. She did not want to see that happen. She wondered
whether the PFD payment lined up along side the formula
programs. She announced that the state had a moral
imperative to provide the best education for every Alaskan
child. She wondered if there would be a cut to education to
pay a PFD.
Co-Chair Stedman stressed that there would be a
concentration on the current year and how to "set the
table" for FY 22 and FY 23. He remarked that most would be
back to deal with the issue raised by Co-Chair von Imhof.
Senator Olson recalled that the governor had proposed a
lottery position to try to enhance the state's treasury. He
noted that that project would require a fair amount of
infrastructure. He did not see any money to pay for that
infrastructure.
Mr. Steininger replied that the money for that
infrastructure would be included in a fiscal note to a bill
creating the lottery.
10:44:56 AM
Senator Olson remarked that the mayor of Nome had been
medevacked out to Anchorage for some medical issues. That
mayor did not currently have a Real ID, and if it was not
obtained by October, the mayor would have a difficult time
returning to Nome. He did not see any money to help those
people, especially the elderly in rural Alaska, who would
require several trips to the Division of Motor Vehicles
(DMV) to acquire a Real ID. He shared that he had written a
letter to the governor, hoping that he would use his
influence with President Trump to attempt to ask for
another waiver to postpone the Real ID deadline. He had not
received a response from the governor. He wondered if there
was no money for Alaskans to obtain the Real ID.
Mr. Steininger replied that there were no specific
appropriation for the Real ID. He furthered that the DMV
was working with existing resources to try to solve the
access to DMV services for rural Alaskans.
Co-Chair Stedman felt that the subcommittee would work on
that issue.
Senator Olson stressed that asking the private sector to
donate to a governmental mandate was "uncalled for."
Co-Chair Stedman thanked the presenters for their comments
and testimony. He discussed the following day's agenda.
ADJOURNMENT
10:49:00 AM
The meeting was adjourned at 10:48 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01282020 SFIN OMB Budget Overview FINAL.pdf |
SFIN 1/28/2020 9:00:00 AM |
SB 152 |
| 1.28.20 SFIN Budget Graph Handout.pdf |
SFIN 1/28/2020 9:00:00 AM |
SB 152 |