CS FOR HOUSE BILL NO. 468(FIN) am "An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date." Alison Elgee, Deputy Commissioner, Department of Administration and Sharon Barton, Director, Division of Administrative Services, Department of Administration were invited to join the committee. Sharon Barton said that the first request was to fund a new attorney in the Bethel office of the public defender. There has been a growing need for additional resources from both the prosecutor's office and the public defender agency in Bethel. Last year several cabinet members went to Bethel to assess that situation and came back with the report that one attorney for both the prosecutor's office and the public defender agency needed to be added. The prosecutor's office has already done so and a delete is proposed from the division of finance based on early implementation of FY 97 reductions to fund $49,000 for the remainder of the year. The second request is the annual supplemental for the public defender agency in the amount of $217,000. This should be funded under Rule 39 Receipts which are available this year. This is a personal services shortfall. Although cost savings measures have been implemented throughout the year the caseload, not only in Bethel, but in Anchorage and the Valley has increased dramatically during 1996 and positions could not be kept vacant as would have been done to live within that authorized budget. The public defender agency handled some 17,300 cases in 1995 and expects to handle over 18,000 in FY 96. That is more than 300 cases per attorney per year. Co-chairman Frank asked that she prepare a report that shows the public defender case load by offense so the committee can see how many felonies and in particular how many misdemeanors and what types. Senator Phillips asked if PFD's were collected to pay for the services requested from the public defender. Sharon Barton indicated that Department of Law does collect PFD's and is proposing that this supplemental be funded from those collections. She said that Rule 39 allows the Court to collect permanent fund dividends of convicted persons both felons and misdemeanants. This has been done for the last three years. She further explained the collection is for services after the fact. Those who do not file for their permanent fund dividend cannot be forced to. Alison Elgee said that permanent funds were only withheld from persons actually convicted of the crime for which they have been charged. Permanent fund dividends are not withheld from everyone because felons who serve any portion of time during the course of the year are not eligible to receive a dividend. The collection is handled by the Department of Law under the court Rules. They file a judgment against the individual at the time of conviction. Co-chairman Frank and Senator Phillips think it is a good idea to collect up front for public defender services but Alison Elgee said that the Court is appointing these individuals to the public defender agency. The dividend comes once a year and people do not hold onto it in anticipation of committing a crime to pay later. There are timing difficulties. Senator Phillips said that the checks could be garnished later after the fact and she said that is what is being done. Senator Donley said the public defender agency was just subject to audits showing they are defending too many people and they are not trying to reduce the inflated budget they have had for years. He stated his concern at seeing a supplemental. Co-chairman Frank asked Senator Phillips to take a look at the audit. Senator Donley said as compared to other states during the last three years none of their cases have been overturned for lack of quality of counsel. There are two public defenders for every one prosecutor in some towns. They need to be cut this year. Sharon Burton explained the situation with the office of public advocacy and noted that they were requesting $356.4 for contractual services for contract attorneys, witnesses, investigative fees and travel costs. They went into FY 96 believing they were close to full funding for OPA, however, they have experienced case load increase. They opened 65% more criminal defense cases in the first three months of 1996 than during the same period of 1995. It is expected the 70 new police officers on the streets of Anchorage will add to this growing case load. She will provide a breakdown on percentages of child-in-need-of-aid versus criminal defense. Alison Elgee said that OPA also does public guardian work and represent parents in child-in-need-of-aid cases through their contract attorneys. Senator Donley asked for a list of costs for the public defender agency and OPA and what their standards are and what quality of defense they provide. Senator Sharp asked the difference in the requirement for criminal defense between the public defender agency and OPA. Sharon Barton explained that if there is a conflict of interest at the public defender agency it was then given to OPA. The public defender cannot refuse any case other than for conflict of interest. Senator Sharp asked about the amount of involvement in criminal procedures by OPA has risen measureably over the last year and does that equate to an equal increase in indictments or prosecution by the DA's office or is this just OPA out hustling clients? Alison Elgee explained that there are a number of factors that are increasing the caseload for both agencies; the new police officers in Anchorage; impacts of newly passed legislation; third DWI felony offense. The fiscal notes were cut in half by this body and if they had been fully funded still understated what in fact is being seen as a result of that legislation. There are more murder felony trials going on. Senator Sharp said that they were told by the Department of Law prosecutors that as the new laws came on they would have to let others drop because they could only handle a certain volume. Has the volume increased dramatically on the number of prosecution cases out of the DA's office? Alison Elgee said that it is the DA's choice whether to bring charges and file against these cases. Senator Sharp asked if there were more indigent people involved on DWI's than on the others? Alison Elgee said the DA's office is seeing the same case load increase in the DWI felony as we are. Co-chairman Frank asked Kathryn Daughhetee to look at the last decade of the public defender and OPA as relates to their criminal defense and how it has compared to the prosecutor's office to see if the growth has been commensurate. Senator Rieger asked if other than DWI cases were there very many misdemeanor cases that resulted in a jail term. Alison Elgee said they would check into it. Sharon Barton referred to leasing and said the request was for $170,000. The conference committee FY 96 budget was $1.2 million short of anticipated lease obligations. It was at the Senate's initiative that $300,000 was put as a last minute supplemental to pre-pay some of the FY 96 costs. In pre-paying we were able to reduce the shortfall for FY 96 obviously and saved the State some $18,000 in discounts for pre-payment. In 1996 there was an unanticipated additional cost of $96,000 arising from the need to enter into leasing on the Juneau Subport land which is now held by the Alaska Mental Health Land Trust. For the first time we were required to pay rental to the Trust. That pushed the shortfall back over $1 million. General Services has done everything possible to reduce FY 96 costs and was able to manage that figure down from over $1 million to $870,000 but has no avenue left to reduce it further in 1996. Senator Sharp said there was a new procurement act that covers leasing and how it allows Department of Administration to enter into new leases or renewal leases that was being looked at in State Affairs without legislative approval if they get over 5% or 10% savings. Has there been any savings in the last twelve months by renewed, replacement or renegotiated leases? Dugan Petty, Director, Division of General Services, Department of Administration was invited to join the committee. He said there had been nothing specifically for lease extensions and returns for rent concessions. This committee made an amendment to legislation to allow us to do that. There was an 18-month window which expired December last year. During this fiscal year period we have been without the opportunity to enter in to lease extensions in return for rent concessions. If we are able to get that ability into law again there are more opportunities that would present themselves for lease extensions in return for rent concessions. Co-chairman Frank asked if OMB has provided any instructions relative to the space considerations in lease renewals? How does this work when the department would like more space or conversely, has OMB told the departments to do with less space? Mr. Petty said that for a number of years a set of space standards has been established within the Department of Administration. Co- chairman Frank asked Mr. Petty to give a break down of the leasing budget by department for over the last several years. Sharon Barton said the request for Retirement & Benefits is $450,000 of benefit receipts. This request is to cover increased cost for investment management and record keeping services for the supplemental benefit annuity plan and the deferred compensation plan. Fees are paid by each member for this purpose and are tied directly to the investment return of the plan. The costs have increased somewhat this year for investment management and record keeping because of our dramatic increase in our investment return in SBS. It has been about 25% this year where we had anticipated and budgeted for about 8% - 10% return. Success in that area has resulted in the need for this supplemental. The other piece that has contributed to the supplemental is the need to educate SBS members about the shift to self-directed investment which has taken place in SBS. Benefit receipts are available to cover this cost because it has already been charged to the members based on the increased value of the assets. Senator Rieger asked if the compensation for the managers is based on the total market value of the assets under management or based on the return. Sharon Barton said it was based on the assets. Co-chairman Frank concurred in reading the book and asked Senator Rieger to look into the matter. Janet Parker from Retirement & Benefits confirmed that it was based on assets. Sharon Barton said that longevity bonus was requesting ratification of $23,100 spent in FY 95 to complete the final payment in FY 95 of longevity bonus grants. Last year the longevity bonus program ended up $23,000 short. That shortfall was covered from the administrative component that has administrative responsibilities over the program but because it is in another appropriation we need to request legislative ratification for that expenditure. Senator Sharp asked if this was clean-up for 1995 and Sharon Barton indicated that it was. He asked if the department had any statistics available for the amount of attrition by debt or loss of eligibility of the $250 per month participants compared to how many new ones are coming in at $100 per month and also has a short term absence from the State the amount they lose when they are out for thirty days or longer has that trended up or down? It seems there should be some dramatic savings here very shortly after the end of this year with no new entrants and natural attrition taking hold at the high end. It would be logical the $250 people would be the highest attrition level. Sharon Barton said what has been discovered is that the national mortality tables are in fact too high and have been overstating mortality in this population. Adjustments are being made. It is correct that the $250 group is realizing the greatest mortality because they are the oldest population group in this program. After the end of this calendar year we will be closed to new participants but we will not see the effects of that down turn until fiscal year 98 because we will continue to bring people on to the program during the first six months of fiscal year 97, only realizing those people in the program for a full year in the fiscal year 98 cycle. Senator Sharp indicated that there would be a bubble of new applicants coming in that far exceed two for one on those that are exiting the program because of one problem or the other. She said there was a new bulge in terms of new applicants and a lot of them could have applied much earlier for one of the higher bonus levels but for whatever reason chose not to and now are getting into the program before that opportunity is closed to them. Co-chairman Frank asked if that is people who have lived here for some time and just had not applied? He asked her to provide a report on the nature of the new applicants and to include a state of origin. She said they must have resided in the state for a year prior to their application for the longevity bonus program. Information as to where they resided prior to that application may not be available. Co-chairman Frank asked how they prove they had been in the state for a year. She said it was through a certification that they had been there for a year and would provide a copy of the application one has to fill out. She felt it is a misconception that we are seeing a lot of in-migration particularly relative to this program. Alaska is a net out-migration state which exceeds the in-migration by about 2% in that population group. There is an aging in place that is quite dramatic for people who have lived here for a number of years and are no longer leaving the State when they reach retirement age. He asked her to provide the committee any information she had regarding this matter and a projection for both years as soon as the information is available. Guy Bell, Director, Administrative Services, Department of Commerce and Economic Development and Tom Garrett, Director, Division of tourism, Department of Commerce and Economic Development were invited to join the committee. Mr. Bell advised that they had one request for $61,200 to cover the cost of combining the tourism and trade offices in Tokyo. This will reduce the annual lease cost by about $50,000 and the general fund will be reimbursed as full amount when the deposit on existing space is returned December 1996. He said the new deposit was $31,000. This request is for an offset to what the general fund will be getting back in December. Senator Rieger asked for the total of the old lease and new lease cost. Mr. Bell said the combined leased cost is $11,000 per month. The new leased space will be approximately $7,000 per month. Co-chairman Frank asked how many square feet the new office was and Mr. Garrett indicated that it was approximately 31 square meters. Nancy Slagle, Director, Office of Management and Budget was invited to join the committee and testified on behalf of Department of Community and Regional Affairs. She said that under section three, the department requested $8,300 be transferred from local government assistance to municipal revenue sharing to cover the expense of an FY 95 revenue sharing payment for the native village of Kluti-Kaah. This is in response to the community misplacing their revenue sharing check. Senator Sharp asked if this village had received municipal assistance previously and she indicated that she believed it had but would find out exactly. Senator Donley voiced concern on behalf of co-chairman Halford regarding sovereignty issues and wondered if this was one of the areas that was recognized as a tribe. Co- chairman Frank highlighted the matter for co-chairman Halford. Nancy Slagle said there were many tribal units that did receive money for unincorporated communities under the revenue sharing program as well as under the capital matching grants program. She said Kluti-Kaah identified itself as a native village rather than a tribal council. Senator Phillips referred briefly to Title 29 (AS 29.61.040). She indicated that the funding agreement resolution and native village council waiver of sovereign immunity had all been taken care of. Senator Rieger asked if the misplaced warrant was for a prior year and why issuing a duplicate check would change the aggregate size of the appropriation that was to cover all the original checks. She indicated that the check could not be re-issued without an appropriation and since it was an FY 95 expenditure there was no access to FY 95 revenue sharing appropriation. Those funds have lapsed. Senator Rieger asked why they could not make use of the old appropriation to do them any good. She indicated that the FY 96 appropriation was being amended not FY 95. The money is being added to this current year so that the expenditure can be paid. Senator Rieger referred to local government assistance and asked what it covered different from what is covered in municipal revenue sharing or state revenue sharing. She said it was the administrative operations of that division. No money is being asked for and it is just being shifted from that appropriation to the revenue sharing appropriation. It will not have any effect on any proration. Nancy Slagle referred to rural development grants, section 3(b). There is a problem every year with the completion of those grants within an annual appropriation. They are basically for small construction projects that go out to local communities. The FY 97 request includes those actually in the capital budget to eliminate this problem in not being able to complete them on an annual basis. She will provide the exact dollar amount to the committee. (tape SFC-96, #49 switch to side 2) Senator Rieger referred to the spread sheet and asked her to explain the extended lapse date and the grey shaded area which says "not accepted in the original bill" and the Governor's amended request line where there are dollar figures re-entered. She said on the rural development initiative loan fund request it had been asked that the fund be capitalized with monies from AIDEA. They wanted to continue this basic loan fund which is running out of money. There are applications outstanding for projects that they would like to be able to fund and continue. The House Finance Committee decided that they would pull this section out to deal with under the capital budget side. It has been requested as an amendment to the capital budget for consideration. Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law was invited to join the committee. She explained subsection (c) and (d) and informed that these would settle up front early pending attorney fees and claims in these three cases. Basically it is set up as a pre-pay so there would be a discount on the amount that the State owes. Two of these cases, since the bill was introduced have been resolved. This proposed settlement for the three would only cover attorney fees and costs, resolving the fee and cost issues between the state and Alaska Legal Services. It does not include co-counsel. With respect to the language saying that no pending issues exist the intent there is that no pending issues exist as of the time of that notification. There is a stipulation pending on two of them which largely vacates the Superior Court judgment and all the items that were a problem for the State and the attorney fees are settled in that case for $60,000. In the "Decker" case, which was a medical assistance case, since this bill has been pending the matter of attorney fees have continued on in motion practice in the Superior Court and an order was received ten days ago for attorney fees and costs in that case in the amount of $3,661. The only one remaining unresolved is the "Quinahak" case and it is more problematic as far as resolving it. At this point a decision was made to wait and see what happened at the Senate Finance level with regard to that. We did not want to enter into a settlement of that case on attorney fees if this appropriation did not come through. "Quinahak" is in litigation and the matter of attorney fees is still pending. Co-chairman Frank asked why this was being done differently than other cases against the state? Why is it not C&RA's budget as opposed to Department of Law's budget for other judgments, claims and settlements. Nancy Slagle advised that Community and Regional Affairs already has a grant agreement with Alaska Legal Services that is included in their annual budget in the commissioner's office. Co- chairman Frank said that his expectation when Alaska Legal Services was funded was so they could represent these people not only in suits against the State but in anything they need. Barbara Ritchie said that this was not the typical way one would see attorney fees issues come forward. The concept was to try and make a proposal to basically pre-pay them either with or without a settlement at a discount and this would constitute the settlement that wasn't otherwise agreed to by the parties. Senator Rieger asked about "Sorenson" and "Decker". Barbara Ritchie said attorney fees and costs were $3,661.68. "Sorenson" is $60,000. The "Decker" case question was whether the Division of Medical Insurance had erred in it's denial of Mr. Decker's request for medical assistance for re-imbursement for dentures. The main issue on attorney fees was whether this was public interest litigation or not and Alaska Legal Services was claiming about $11,600 for full fees. The Court did not order those and that one was resolved against the State. The fee level came in significantly lower than they had asked. "Sorensen" was a class action challenging the Tier 2 subsistence permit system in the regulations for moose hunting in game management unit 16(b). Several of the claims were either abandoned or determined in the State's favour. The Superior Court ruled against the State on the parties' cross-motion for summary judgment. It held the board of game had improperly determined the number of moose needed to provide a reasonable opportunity for subsistence; that the board had improperly permitted sport and Tier 2 subsistence seasons on the same population; and the department of fish and game appeal process was inadequate. What the parties ended up doing because neither side was totally satisfied was coming up with a settlement acceptable to both parties and part of the terms of the settlement was to essentially ask the Superior Court to vacate significant portions of the actual findings in the Superior Court order, leaving it with the bottom line of the final order but taking out the reasoning that was problematic for the board of game. Senator Rieger asked if the $60,000 was stipulated to and she indicated that was correct. In the motions practice Legal Services had requested about $68,000 in attorney fees. It was an agreement of some $8,000 less than had been sought. Senator Phillips referred to the "Decker" case. She will provide further information for the committee. Co-chairman Frank asked Senator Phillips to review matter and give the committee a recommendation. Senator Donley asked what percentage of Alaska Legal Services budget comes from the State and from other sources. Barbara Ritchie said that they are largely federal funded via the Legal Services Corporation which is on the federal level. The state funding is a relatively small percentage of that. It is not a match. Senator Donley said it is pretty illogical for us to be funding an agency and then they use that money to sue us and then we have to pay them for their time that we already paid for in the first place. Co-chairman Frank asked Senator Donley to work with Senator Phillips to come up with a recommendation regarding this matter. Nancy Slagle advised that under section 4, Department of Corrections was $936,600 for "Cleary" fines. That is based on calculations through January of the fines that are due. Co-chairman Frank asked if these were for overcrowding or other violations? He said the fines showed through 1995. Robert Cole, Director, Division of Administrative Services, Department of Corrections was invited to join the committee. Nancy Slagle advised that an amendment to the bill in House Finance included fines calculated through January. Co- chairman Frank asked if we were suffering a fine today? Mr. Cole advised that we were being assessed fines this very day from about seven facilities. Co-chairman Frank asked if those fines were based upon State law or not. Mr. Cole said they were in the "Cleary" order. Senator Donley asked if in the "Cleary" case was there a section that set a time certain or was it something being extended year to year by the State? Mr. Cole said that it is an on-going sanction and believed it was a permanent settlement. It is down to overcrowding and how women are treated in the facilities, including the availability of programs. There is a possibility the Department of Law can basically settle the "Cleary" case with the Court if these two or three issues can be ironed out. Senator Donley said the sooner this was behind us we would be better off negotiating a new deal. There will always be a new lawsuit everyday in the corrections system as long as there is Federal Habeas Corpus. He does have a proposal to amend the State constitution to adopt the same standard for penal administration which would give a much larger body of law to deal with and more solid ground. Senator Zharoff asked where the fines go. Co-chairman Frank said it has not been approved but it should go to the general fund. Mr. Cole said the way the appropriation is written section 4 has a subsection (b) that says the appropriation made by this section is contingent upon the attorney general's notification of the revise of statutes at OMB that no pending issues exist on the status of payment of fines and no Court order has been entered in "Cleary" that precludes the Alaska Court System from depositing the funds collected under (a) of this section in the general funds. The intent is to make sure the fines can only be deposited to the general funds. Nancy Slagle said section 5 deals with the foundation program and utilizes $1,225 million of anticipated lapsed funds to go out to additional districts to support them to deal with the disparity issue. Karen Rehfeld, Department of Education and Eddy Jeans, School Finance were invited to join the committee. Mrs. Rehfeld said since the State of Alaska recognized impact aid in the calculation of State aid for the school foundation program it was required that a federal disparity test be met. Changes to the federal impact aid law reduced that test limit from 25% to 20%. In order to continue to recognize that impact aid the ability to utilize current year funds for named recipient grants to the REAA's that are at the bottom end of the scale for the purpose of the disparity scale to bring them within the 20% is being requested. Mr. Jeans answered technical questions regarding disparity. He said the administrations bill would increase the deductible impact aid for REAA's from 90% to 95% which would offset this cost. The net increase would be approximately $223,000. Co-chairman Frank asked why that wasn't proposed for FY 96 to balance out against this distribution. Mrs. Rehfeld said that because the legislation to deal with FY 97 was prepared they felt they couldn't get the legislation through to count for the current year and that the supplemental approach would give the time for the bill to be reviewed by the legislature and incorporated for FY 97. Co-chairman Frank said his concern was if the disparity problem was going to be cured through this mechanism it seems it should cover both years on the increase and the deduct so there won't be a situation where they will take the money, spend it and then feel like they have a budget cut next year. Senator Rieger asked if this would trigger a hold harmless that exists in the foundation formula for budget cuts. Mr. Jeans said that these funds would not affect the hold harmless within the foundation program. These funds would secure the State's ability to measure impact aid in determining the State allocation. Senator Rieger said that he felt the committee needed to decide as a finance committee policy or legislative policy whether to challenge the Feds on their change from a 25% to 20% and whether to take this head on or just acquiesce when they change the rules and essentially require millions of dollars to be expended because they decide a 20% disparity is better policy than 25%. Mr. Jeans said that the impact aid law was amended in 1994 and was moved into Federal law. There is not much room for negotiation. Senator Rieger said that at some point it must be decided how far we are willing to go to let that $30 million we get from the Feds drive our $600 million program. We are just being tied around in knots. Senator Donley said that this disparity standard is based somewhat on State assessments. Mr. Jeans said under the foundation program municipalities are allowed to contribute local revenue of over and above the four mill required local effort. Disparity is a measurement of equity, a measurement of revenues. Senator Donley said that some of it is driven by how the state statutes are written. Co-chairman Frank asked about dollars per child. If one looks at dollars per student it doesn't seem that we would be out of disparity. Some districts are getting more than Anchorage or Fairbanks per student. Lower Kuskokwim as an example. How many dollars are they getting per student versus Anchorage? Mr. Jeans said that the impact aid law allows disparity to be measured on whatever mechanism is utilized to distribute State aid. Co-chairman Frank said the way State aid was distributed should be changed. Senator Donley said it was a State problem not a Federal problem. Co-chairman Frank said more money was going to the districts that are getting the most dollars per student now. Mr. Jeans said that they would be out of compliance in FY 96 if they did not receive these supplemental payments. Therefore, the State will not be allowed under the Federal law to consider impact aid in our 1998 distribution. Senator Sharp said it is hard to believe that if another $1.2 million is not added to last year's budget this year in June we are going to be out of compliance for next year if we already have passed statute that takes care of the problem that has been proposed by the administration that we would lose next year's $35 million. Mr. Jeans said the way the disparity standard is measured is on the data from two years prior. To meet the 1998 Federal disparity of 20% the measurement must be using FY 96 data. Currently the foundation law allows municipalities to contribute 23% over and above basic need and that is what causes our disparity. The disparity for FY 96 without the supplemental appropriation was anticipated to be over 20%. He said that any revenues allocated to the school districts through the foundation program or other allocations that have happened over the past few years are included in the disparity test. Co-chairman Frank said that disparity was measured based upon how it was sent out. Mr. Jeans clarified that when the revenues were computed per pupil the State of Alaska does not allocate the funds on a per pupil basis. It is allocated on instructional units. All the revenues within the school district's operating funds are taken and they are divided by their instructional units as opposed to their pupils. Co-chairman Frank said that an alternative formula could be devised that did not use the word "instructional unit" but just divided on the basis of how many students they had. Mr. Jeans concurred. Senator Sharp asked how many years the foundation formula was going to be reworked to something everyone understood and is fair. There is no justification for the $1.2 million. Senator Rieger asked as an alternative to changing from an instructional unit to an ADM would the revision of the geographic cost of living differentials also bring the disparity back within bounds? Mr. Jeans said the disparity is computed on adjusted instructional units. If the area cost differentials are adjusted it is just reallocating the monies within the formula. It would not bring disparity down. He said there were a number of ways the disparity test could be run. Adjustments can be made for cost differentials or special needs groups and any other adjusting factor within the foundation program itself. In this state all the adjustment factors are included to run the disparity on the adjusted units. The special education and bilingual are included and the area cost differential is also included when the disparity test is run. Senator Rieger said that to the extent that the area differential is counted it is a matter of dividing by the area differential to adjust downward back to an equivalent base $100. Mr. Jeans concurred but noted the differentials were included in the disparity test. They are not adjusted back out. He said that the formula says, based on the adjusted units, everyone gets the same dollar amount which would be the $61,000 per instructional unit. The area differentials are included in the disparity test. One of the reasons for this would be the additional local contribution that municipalities are allowed to contribute is a product of 23% of basic needs. When basic needs are computed adjusted units are taken times the unit value of $61,000. It provides a higher base for municipalities to contribute their excess local contribution. Karen Rehfeld said there was an original request in the supplemental bill to allow for carrying forward of any unexpended balances of the current year foundation appropriation that would offset the need to utilize the public school fund revenues that had been proposed in the FY 97 budget. The house version of the bill did not include that language. Co-chairman Frank asked how much it was expected to be and Mrs. Rehfeld said that it was the anticipated amount in addition to the $1.2 that is asked for. Senator Phillips said this is $3 million. Nancy Slagle introduced section 6, Department of Environmental Conservation, extending the lab state of the spill prevention and response underground storage tank assistance program. Jim Hayden, Storage Tank Program Manager, Division of Spill Prevention and Response, Department of Environmental Conservation was invited to join the committee. He said the carry forward presented originally requested that FY 96 grant dollars be extended until FY 98 and that was changed in the house version to FY 97. The second part (b) asked that prior year appropriations that are remaining be carried forward to 1997 to give some extra time to close out about forty grants that are currently operating to continue clean- up on some sites from spills. Nancy Slagle introduced section 7, Department of Fish and Game and noted that $32,700 was being requested to allow for the reimbursement of vendor compensation for sale of fish and game licenses and tags. This was an increased need over what was originally appropriated. A title change on a capital appropriation for Arctic-Yukon-Kuskokwim Salmon Fisheries stock assessment was requested. It was taken out by house finance and included as an amendment to the capital budget request. Section 8, Department of Health and Social Services, subsection (a) deals with the use of the anticipated lapsed funds in the public assistance area of $4 million in general funds and $500,000 in other funds. Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services was invited to join the committee. She said the case load for AFDC had declined this year. Originally a budget was predicated on an average of 13,700 families. The case load is actually about 12,500 families. When the supplemental needs for the department were looked at, because there was such a large projected case load reduction, areas in the budget were looked for where it seemed like a good use of additional funds. The $4 million reduction in general funds was originally to be spent for $500,000 in child care benefits because there is an increase demand on the child care program. That is where the $500,000 in the federal receipts is being spent in the next section. The federal authority was not reduced. The funds will be restricted within the AFDC program. Since the reduction of $4 million has been submitted there has been a little change in the thinking of their ability to receive federal receipts. Perhaps if this were to be done again reduction in federal authority could be shown in the AFDC program. Those federal receipts will not be spent because that is a 50/50 match program. Senator Phillips asked why there was a reduction in the AFDC request. She said they feel it has something to do with their efforts in the JOBS program and getting people off AFDC and getting them to work and some of the efforts to change the culture of the eligibility determination office. Economy also plays a big part in any reduction in case load in AFDC. There are a number of other factors that lead to case load reduction. Senator Phillips asked if it had anything to do with welfare reform. She said it had not been investigated but clearly with all the talk about welfare reform it is likely to have some impact on someone choosing to seek assistance. Co-chairman Frank asked what the $1.9 million and $500,000 were being spent on now. She said that was subsection (b) and it is the eligibility information system. There have been a number of appropriations. Co-chairman Frank asked if this was software or hardware. She said it was both. The eligibility information system is a mainframe system and has been for a number of years. It is not very flexible and as the welfare system is being changed in the offices it does not work very well for the current interview techniques. This $3.5 million allows one-time money that would otherwise elapse, allows purchase of front-end PC's that can interphase with the mainframe system, allows contracts with the software developer that can build those systems that the eligibility workers can use that will get people back to work. Co-chairman Frank asked about $1.9 on one line and $500,000 on the other and are they both the same thing? She said there were two subsections, (a) and (b). The first subsection is actually a delete add into the childcare benefit program. Last year the budget was predicated on having an average of 1,400 children in childcare and the case load has increased to about 1,600. This is all good news because there are more people working who need childcare assistance. Part of this assistance is transitional where former AFDC clients are entitled to one year of child care benefits after they get off of AFDC. There are real families and children who are using the child care benefits. Senator Rieger asked about the eligibility information system and asked if the house did not allow the $1.6 million of federal receipts but only $1.9 million of general funds or is the whole thing in there? She said the house did allow the $1.6 million in receipts. There could have been a reduction of the same amount shown of federal receipts in AFDC. Senator Rieger said the required match by the Feds for computer eligibility projects was a more attractive match perhaps 3 to 1. She said that in the past they had been very successful in getting one time federal appropriations for the eligibility information system. It has been about 78% federal funds. That happened to occur with one time federal participation. The typical match rate is about 55% federal participation because only some state programs are run. The eligibility information system manages the adult public assistance program. Federal match cannot be claimed on that part of any change made. She went on to subsection (c) and said that it was a delete add supplemental. Within the division of family and youth services between the regional components where the social workers and juvenile probation officers are funded and into the youth facilities. What happened this year is that unfortunately they were not successful in either one of these areas in getting registers available to hire either social workers or youth counselors. Since there were no registers available overtime had to be paid in order to staff facilities. (tape change to SFC-96, #50, Side 1) She further indicated this was a delete add supplemental. OMB suggested they look for delete add supplementals wherever they could so that it would be a net zero request when they came before the legislature. Senator Donley said the youth counselor excesses were from their own management decisions. She said they spent considerable time with the Division of Personnel suggesting, convincing, justifying, opening up these registers for continuous recruitment. These registers have been closed for about two years. Senator Donley said maybe an adjustment could have been made by closing the facility for one day a week. She indicated that these were 24-hour detention facilities and cannot be closed for a day. Specifically, Johnson and McGlaughlin Youth Centers. The department was requesting delegated authority to do their own examining and recruiting. Co- chairman Frank said the Department of Corrections had authority to do their own registers and perhaps Department of Personnel in the Division of Administration should be gotten rid of and let the departments do their own. Ms. Clarke went on to the medicaid program and said the budget that had been put forward had been predicated upon a growth rate of 10.6% in the medicaid program. The growth rate is reduced to about 6% and this is a reduction of general funds. The federal funds will not be spent but they will be restricted internally. This is a reduction of $7 million totally to the medicaid program and funds that will not be spent. Subsection (d) is a superior court judgment case involving a former employee of the Alaska Psychiatric Institute. The individual was laid off in the summer of 1992 and the individual was able to show the court an incident that occurred six months prior to her layoff involving a sexual harassment case was the reason the department laid her off. Co-chairman Frank wanted to know why the matter was not in the Department of Law. Nancy Slagle said there were no hard and fast rules about what would appear in Department of Law as opposed to the agencies. In the past most of the amounts which appear in the Department of Law's judgments and claims sections deal with attorney fees and costs. Anything else beyond that normally goes into agency requests. That is not always adhered to, however. Co-chairman Frank asked if the person got re-hired. Ms. Clarke indicated no. Co-chairman Frank said if the layoff was proven to be the result of a sexual harassment incident the individual was not asking to be rehired, but rather she just wanted a big settlement. Ms. Clarke concurred and noted that the Superior Court did order punitive damages which are on appeal. That is not included in the supplemental. The actual award was $263,000 in compensatory damages, although the court awarded interest back to the time she was laid off. There are several years of interest plus attorney fees within this dollar amount. A significant part of this is not related to the actual award for the individual. Co-chairman Frank asked how the Court looked at the fact that she did not ask for her job back. How did they determine the appropriate amount for damages? She said it was unusual because this individual took this case to court and did not really go through the normal grievance arbitration process because there was a link to a sexual harassment incident. Senator Rieger referred to the findings and fact of the judgment. He wanted to know if that included an itemization of what added up to the $263,000 of compensatory damages. She said that there was a summary and noted that they were not paying the punitive damage of the award. Senator Phillips asked who made the request for a trial without jury. Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law was invited to join the committee. She said either side could request a trial by court. She referred to a prior sexual harassment case. She clarified a few matters on the judgment saying the $200,000 awarded on punitive damages is not being paid as it is on appeal. The court did cut the punitive damages claim in half. For pain and suffering the individual had claimed $100,000 and the court cut that in half to $50,000. The court denied any relief for future economic losses. The plaintiff has cross- appealed on that issue as to the future damages. The outcome of this trial was well within the assessed risk of going to trial. Prior attempts to settle the case before going to trial had been unsuccessful. The plaintiff had wanted a settlement well in excess of $500,000. Senators Phillips and Rieger asked for a break down of the Court award. Co-chairman Frank indicated that co-chairman Halford would look into the requests and give the committee a recommendation. He put Ms. Ritchie's testimony on hold in order to take up the Department of Transportation. Nancy Slagle introduced section 13(a) dealing with emergency repairs related to southcentral flood disaster highway and bridge repair in the amount of $4 million. $1.10 million is general fund and $3 million are federal funds. Mr. Joseph L. Perkins, Commissioner, Department of Transportation and Public Facilities was invited to join the committee. He indicated he would answer any questions on the Copper Highway Bridge relating to the $1 million bridge work that was going to be done or if there were further questions on the flood portion of this. He said $800,000 of the match money covers about $7.5 million of new federal funds. These are not in the program but rather emergency funds. There is authority in place for $4.5 million so authority is needed for $3 million which makes the total of $7.5 million. Co-chairman Frank indicated there was a question on the over expenditure of DOTPF's prior year ratification noted in section 15. Nancy Slagle indicated that legislative audit has gone through and identified several areas where there are over expenditures or undercollection of revenues in going back to 1983 and has recommended that agencies come forward with ratification requests to take care those if they can not be dealt with administratively. There is a review that was done by the division of audit and management services concerning the ratification process and a response has been provided to the committee. DOT has a request of $5,923,400 which takes care of all ratification problems that they have had and brings them current. There are problems that occur when revenues are collected one year but the expenditures do not take place until the following year or vice versa. Senator Rieger asked if there was anything available in the State's general fund or was there any change. Ms. Slagle indicated there was no change. This was an accounting clean-up as opposed to an additional need for general funds. These expenditures have already taken place. Senator Sharp referred to section 13(b) and asked if the $720,000 was all in restoration or are there legal fees or payments to third parties included. He indicated that he had read in the paper that all the costs basically were to restore and put back into shape any stream crossings or trees that fell off the cliff down in the Copper River or if there were legal fees. Senator Phillips indicated that in the department's back up material it states that not included in the estimate are legal fees due the Department of Law, attorney fees for the Trustees of Alaska or costs incurred by Resources or Fish and Game. Senator Donley said the committee wanted to know what they were getting for $720,000. Commissioner Perkins said that the department had agreed to have public service announcements as far as the wetlands 404 program is concerned. That has been in settlement for the last two years. It is not a big problem and the state will get some benefits if wetland violations can be cut down. Next, environmental training for the department staff. The department is involved in extensive programs in all of the regions with the maintenance and construction people to make them aware of what comprises 404 for wetland violations. A person has been hired to deal with the Corp of Engineers on all permitting matters. This was necessary and should have been done because there are so many cases of disaster type situations where the law can be violated just as easily. He cited the example of the flood in Seward and gave a brief synopsis on the Copper River situation. Senator Sharp asked for clarification on the statement that "these estimates are for the year 1997" and then the second set which says "not included are the following...", which are the Department of Law, Trustees for Alaska, Fish & Game and DNR. Commissioner Perkins said they would like to have the option within the $125,000 for fisheries enhancement and a good project is developed by Fish and Game we would want to RSA them to do the work rather than DOT. Ms. Slagle indicated that although this referred to a FY 97 activity it actually needs to begin this year. There are some bid contracts being opened up now. There are requirements of that settlement that certain things take place within a certain number of days. Senator Sharp asked if there was an estimate for the "future requirements of the consent decree" that must be met? Commissioner Perkins said he did not have a cost estimate on that. Co-chairman Frank asked that a copy of the consent decree be provided. He also asked where the attorney fees for the Trustees for Alaska was coming from. Craig Tillory, Environmental Section, Civil Division, Department of Law testified via teleconference. He indicated that the last item for $125,000 for structural repairs and fish path construction is not a fish and game item. Those are to put in culverts in locations where material filled in previous fish passages to ensure the fish can move back and forth. He said the provision of settlement was to pay $40,000 to the Trustees for Alaska. That is not in this amount. The Court is waiting on the United States Department of Justice to file a motion to approve the settlement which we have been waiting for approximately one and a half months. In addition there will be an environmental project done at a cost of not less than $400,000, something the legislature approves of and will have to be done before the year 2003. There will also be a fisheries enhancement project in the State of Alaska that Fish and Game will be working on for not less than $50,000. Senator Zharoff asked about the highways and the bridges that were damaged during the flood. Can the bridges be relocated? Commissioner Perkins said it had been looked but the capital cost of replacing the bridges or realigning the roads is prohibitive. ADJOURNMENT The meeting adjourned at approximately 11:10 A.M. to reconvene tomorrow at 8:00 A.M.