SB 1005 - APPROP: MISCELLANEOUS Section-by-section review of the bill was had with representatives of various departments and staff from the Office of Management and Budget. Upon convening the meeting, Co-chairman Frank asked that the Division of Legislative Finance advise members of "where we are with the budget bills that the legislature passed" (HB 412, 413, and SB 136) during the regular session. Committee review would then proceed to SB 1005, the Governor's new appropriation request. MIKE GREANY, Director, Legislative Finance Division, came before committee accompanied by FRED FISHER, fiscal analyst. Mr. Greany referenced a fiscal summary (copy on file in the original Senate Finance Committee file for SB 1005) and explained that it reflects all appropriations made during the regular session. Total funding is set forth in four appropriations: SB 84 - Transfer of reserve account funds to the corpus of the permanent fund. HB 412 - The state operating budget. HB 413 - The operating budget for mental health programs. SB 136 - Capital, supplemental, and reappropriated funding. Funding shown as FY 96 authorized includes appropriations enacted by law, plus the transfer made by SB 84 (Specials & Fund Transfers). FY 97 legislative action to date is shown in the next column by funding source and totals. A comparison of FY 96 and 97 evidences a $73.6 million decrease in general funds and constitutional budget reserve fund expenditures for FY 97. Co-chairman Frank next directed attention to a summary page for SB 1005 and noted that it shows $52.1 million in total funding ($30 million in general funds, $7 million in federal moneys, $15 million other funds, and $6.9 million in reappropriations). He then asked that representatives of the administration provide an analysis of the 38 sections within the bill. Senator Randy Phillips voiced his understanding that the proposed bill contains a $30 million general fund increase over legislation passed in the regular session. Co-chairman Frank concurred. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, came before committee and provided the following analysis: Sec. 1. Contains legislative intent concerning the long- range financial planning commission, cites past efforts of the commission, and notes need for long-range financial planning for the state. It identifies items the ten-year plan should address. Mrs. Slagle pointed to intent to close the fiscal gap by the end of 2001 and referenced tools to be used to meet that goal. Senator Donley posed questions concerning legislative support for the ten-year plan, the drafting style used in setting forth intent language, and the tools listed, particularly the proposed income tax. Senator Rieger asked if findings and intent language within Section 1 represents the Governor's plan. Mrs. Slagle responded affirmatively. Senator Rieger referenced language citing need to fully inflation proof the principal of the permanent fund and asked when the Governor changed course on the issue. Mrs. Slagle voiced her belief that the Governor's original plan fully inflation proofed the fund. The difference was the source of inflation proofing moneys. Senator Rieger said that the foregoing reflects a change of course from what the Governor previously advocated. Senator Phillips directed attention to Page 2, lines 20 and 21, and voiced concern regarding use of an income tax, other taxes, reserves, and permanent fund earnings as tools to accomplish budget goals. Mrs. Slagle noted that the foregoing reflects discussion of the long-range financial planning commission report. The Senator advised that portions of the report speaking to use of reserves and permanent fund earnings had been "resoundingly turned down" by his constituents. He said he furnished the Governor's office the results of a survey on that issue. Senator Phillips subsequently requested an explanation of "other taxes." Senator Donley directed attention to Page 2, line 29, and asked how the Governor intended to accomplish the proposed $100 million reduction in fiscal years 1997-99. He took exception to the administration's approach of showing increased user fees as a cut in spending. He suggested that language within subsection (9) at the bottom of Page 2 was deceptive. Co-chairman Frank agreed that new fees should be shown as increased revenues. Senator Rieger directed attention to Page 3, line 21, subsection (21) and noted the goal of managing the reserve to achieve "at least a 6.5 percent return in fiscal year 1997." He said the Senate Finance Committee considered management changes intended to achieve a goal of approximately 8 percent by commingling reserves with permanent fund investments. He then asked how that proposal would fit within the Governor's plan. Nancy Slagle voiced her understanding that the Dept. of Revenue has reviewed management methods intended to increase return. She said she was unsure, at this time, what the anticipated return might be. The 6.5 percent is higher than the current return. That amount was thus used as the threshold. Co-chairman Frank referenced Page 2, lines 23 and 24, subsection (22) which cites need to fix the reserve's sweep and payback provisions through constitutional amendment, and he inquired concerning whether the Governor would support passage of Senator Rieger's legislation, or other legislation, to accomplish that goal. Nancy Slagle voiced support for "taking care of those provisions." In response to a question from the Co-chairman, Senator Rieger advised that his bill would not eliminate the three-quarter vote. It would eliminate the sweep and pay back. If the budget reserve fund is used for the purpose of increasing spending from year to year, the three-quarter vote requirement remains. Senator Donley referenced subsection (18) on Page 3 and voiced disagreement with a dedicated fuel tax. The public policy behind dedicated taxes deserves considerable debate. Co-chairman Frank concurred. Co-chairman Halford questioned the advisability of submission of legislation proposing a ten-year plan based on constitutional amendments that might not be approved by either the legislature or the voters. Senator Zharoff noted that the Governor has not deviated from his original statements in both the state of the state and state of the budget messages. He suggested that the proposed bill represents a starting point for discussion. The fiscal gap will not be closed by merely cutting the budget and raising revenues. The state will have to "look at starting to use some of the earnings of the permanent fund which was the original intention of setting the whole permanent fund up in the beginning." Many of the items suggested within Section 1 represent suggestions of the long-range fiscal planning commission. Sec. 2. Contains provisions relating to sweep and payback requirements of the constitutional budget reserve. Subsection (b) would draw moneys from the reserve to make up for revenue shortages next year. Secs. 3 and 4. Relate to one-time, lump-sum amounts required under contract terms for IBU and Masters, Mates, and Pilots' agreements. They were part of the administration's original budget submission for FY 97, although the moneys could be paid in FY 96. Funding is thus shown as a supplemental request rather than a new FY 97 amount. In response to a question from Co-chairman Frank, Mrs. Slagle acknowledged that funding reflects a signing bonus. Sec. 5. Reflects the supplemental previously requested for classified employees at the University of Alaska. Funding would cover amounts not appropriated through contract for FY 95 and 96. It reflects approximately 3 percent. Sec. 6. Contains previously requested supplemental funding of approximately 3 percent for the community college federation of teachers for FY 96. Sec. 7. Contains $720,000 for the Copper River Highway settlement. It includes remediation, public notices, and other requirements of the consent decree in United States v. State (A92-24CIV). Sec. 8. Contains a $250,000 general fund appropriation to the Alaska Marine Highway System fund in conjunction with Sec. 35 which adds additional moneys to the FY 97 operating budget to cover items not funding by conference committee. The administration believes there is need for additional funds in this area. Sec. 9. Provisions relate to the Dept. of Health and Social Services. Subsection (a) provides for an extended lapse date for $1.5 million in Medicaid funds to continue them into FY 97 for home and community care for the elderly. The extension continues a program begun in the present fiscal year to develop alternatives to nursing homes for elderly care. An additional $1.5 million is contained within subsection (b), and $250,000 is contained within Sec. 23. In response to a question from Co-chairman Frank concerning the children's trust, Mrs. Slagle advised of funding from federal Medicaid reimbursements not yet received. JANET CLARKE, Director, Division of Administrative Services, Dept. of Health and Social Services, came before committee. As background information, she advised that the Medicaid program spends $5 to $6 million a week. When a reduction in caseload or costs occurs, it translates to "fairly large dollars." Sec. 9 (a) represents a project currently underway through an RSA with the division of senior services. The division is using the moneys to build infrastructure, provide grants for assisted living homes, and build up home and community based services. That is in conjunction with the two-year moratorium on the certificate of need the legislature passed. The department is concerned that all projects will not be done by June 30, hence the request for extension of the lapse date. In response to a question from Senator Sharp, Ms. Clarke advised that some of the projects do not qualify for Medicaid reimbursement. Requests within Sec. 9 are thus general funds. Answering additional questions regarding the building of infrastructure, Ms. Clarke explained that grants cover projects that "look at assisted living homes," allow assisted living managers to make improvements to home so they qualify as assisted living residences under licensing requirements, etc. These homes are an alternative to nursing home care. Senator Rieger raised a question concerning the reappropriation listed at Page 5, line 17. Ms. Clarke explained that it relates to Medicaid waivers. Senator Rieger asked if the request relates to a new item or one included in the Governor's original budget request. Ms. Clarke acknowledged that it represents a new item. She clarified that the project was under consideration by the department last fall. It was not, however, included in the FY 97 budget. Senator Rieger took exception to a request for increased spending. He further questioned where the proposed reappropriation would be taken from, saying that the waivers program appears to have the most potential for de-institutionalizing individuals? He attested to work on behalf of constituents in an effort to get SED youth out of institutions. The argument has been that there is not enough money in the waivers program to cover needs. There now appears to be a surplus of $1.5 million. Janet Clarke noted that subsection (a) reflects work actually underway. The waiver component consists of a combination of waivers (elderly waivers, DD waivers). General fund dollars are primarily for the elderly. Funding is not year-end money. It relates to ongoing activities and projects within the department plan. Concern is that the projects will not be completed by June 30. Senator Rieger suggested that while subsections (b) and (c) appear to extend lapse dates, subsection (a) appears to reappropriate moneys to a different purpose. Ms. Clarke said that subsection (b) and (c) are interrelated. Subsection (b) references the Medicaid Non-facility component. Subsection (c) is totally non-general fund. Ms. Clarke attested to concern regarding optional services the legislature "stopped funding two years ago." Much pressure was placed on the department to restore those services. While there was a 5 percent growth rate in the budget, there is no increment for Medicaid in FY 97. That is why the funds are excess. The department did not "turn on the optional services this year" because it did not believe it could sustain them into FY 97. In conversation with the Mental Health Trust Authority, it was determined that many of the beneficiaries qualify for Medicaid. Beneficiaries have attested to difficulties associated with living without new eye glasses or dental services. The Mental Health Trust Authority reserved $1 million of its funds for Medicaid. The department could not turn on these services for mental health beneficiaries alone. If the lapse date on Medicaid non-facility funding is extended, the department could turn optional services on for nine months for all Medicaid clients. Pent up demand for the services will require approximately $5 million. Subsections (b) and (c) are thus interrelated, and one cannot be done without the other. Senator Rieger attested to reluctance of Mental Health Authority trustees to expend more than $6 million of the $20 million in Mental Health Trust earnings for FY 97 and asked what changed between debate on SB 413 and funding proposed in SB 1005. Janet Clarke explained that the Mental Health Trust Authority reserved $1 million from Medicaid, last fall, in anticipation of need for transition to a new Medigrant program. Since nothing has yet happened to reform Medicaid at the national level, the $1.5 million is viewed as a good initiative, on a short-term basis, to assist beneficiaries. Co-chairman Frank asked if funds within Sec. 9 reflect moneys within the department budget or new requests not before seen by committee. Ms. Clarke acknowledged that the request was not included within the FY 97 budget. Co- chairman Frank voiced frustration with the administration's special session request for additional new moneys. He then asked if SB 1005 contained further such requests. Nancy Slagle advised of direction from Co-chairs to "find other ways of funding things." She attested to statements by Co- chairman Halford that if the administration wished to fund certain projects, it "needed to find other funding sources or get rid of projects that were included . . . in the capital bill." Senator Phillips noted that the foregoing comment was made in the course of capital budget deliberations during the regular session. Senator Sharp asked how the department intends to pay for the $5 million reinstated program next year. Ms. Clarke advised of proposed one-time restoration of services. Regulations would be written in such a way that services would not continue. Restoration is a priority of the Governor. Senator Sharp suggested that priorities should have been funded in the operating budget during regular session. He voiced resentment at being faced with requests for new projects and new money during special session. Sec. 10. Contains the pay increase for both covered and non-covered employees in the executive branch. Numbers within subsection (a) may differ from the original submission since they have been "adjusted down for the 1.4 percent half of CPI" rather than the original 1.5 percent. Sec. 11. Contains monetary terms for IBEW employees within the court system. Sec. 12. Relates to non-covered court system employees. In response to a question by Co-chairman Frank concerning total compensation, Ms. Slagle advised that amounts within Secs. 11 through 16 would have to be added. END: SFC-96, FSS #1, Side 1 BEGIN: SFC-96, FSS #1, Side 2 Senator Randy Phillips inquired concerning general fund dollar amounts in contracts for FY 98 and 99. DAN SPENCER, Budget Analyst, Office of Management and Budget, advised that numbers had previously been provided at 1.5 percent. Those figures have not been adjusted to 1.4 percent. Mr. Spencer agreed to provide the information. Co-chairman Frank asked for the general fund total for contracts for FY 97, advising of his recollection of $7.3 million. Mr. Spencer said he would provide the numbers. Mrs. Slagle subsequently advised of a total of $7,303,200.00. Sec. 17. Contains reappropriation of funding from completed DOTPF capital projects. Moneys will be used to match Corps of Engineers funding for Bethel Seawall construction. The amount involved is $552,600. Secs. 18 and 19 also contain reappropriations for the Bethel Seawall. Sec. 18 provides $650,000 from the Power Project Fund, and Sec. 19 funds $400,000 from the Rural Electrification Revolving Loan Fund. The request for seawall funding was contained within an amendment to the Governor's capital budget. Discussion of the status of the two funds mentioned in Secs. 18 and 19 followed. Mrs. Slagle said that both funds are active. If funding in Secs. 18 and 19 is not used for the seawall, it would automatically flow to the general fund at the end of the year. As background information, Mrs. Slagle explained that when statutes were passed to change the structure of energy programs, the balance of the Power Project Fund was to be transferred to the general fund on an annual basis during the transition period before the new statutes became effective. Due to an administrative error, that did not occur. Funding that should have gone to the general fund remains in the Power Project Fund. Senator Sharp asked if applications from utilities for revolving loan fund moneys remained ungranted. Mrs. Slagle advised of interest and principal collections of $411,000 for the general fund. She noted that present information does not show outstanding requests. She said she would further review the matter. [The following comments regarding capture of lapsed moneys reflect verbatim transcription from the tape.] CO-CHAIRMAN FRANK: Senator Rieger, did you have a question? SENATOR RIEGER: Well, Mr. Chairman, I think it was partially answered. I was curious how they could catch money that was subject to lapse several years ago. But I think . . . NANCY SLAGLE: It was an administrative error, basically. It wasn't something that was done automatically. It had to take actual transactions. So it was, I don't know if you'd say and employee error, or an administrative error, that it did not happen. And it was just recently discovered that that was there. SENATOR RIEGER: [I'll just] give you a hypothetical. If it had lapsed (let's say on August 11, 1994), if you wrote an appropriation like this that said that the money that was subject to lapse on August 10 is reappropriated, would that still be a valid reapprop? CO-CHAIRMAN FRANK: I see Jim Baldwin back there. He could probably answer that for you. NANCY SLAGLE: He certainly could answer it better than I could. CO-CHAIRMAN FRANK: Did you hear the question, Mr. Baldwin? SENATOR RIEGER: Mr. Baldwin, the question is, What is the validity of a reappropriation measure which names moneys subject to lapse on a certain date that had happened in the past? JIM BALDWIN: That's already lapsed? SENATOR RIEGER: Yes. JIM BALDWIN: If money's lapsed, you can't reappropriate it. SENATOR RIEGER: Even if the appropriation refers to the money subject to lapse as of that date? That's fine. I just want to know what the administration's interpretation is of that type of provision. JIM BALDWIN: Unless there's some way we could interpret it to revive it--the fact that it was being reappropriated . . . But, generally, if it's lapsed, it's lapsed. I don't know that that's what we've done here. I don't . . . NANCY SLAGLE: No, not in this case. No, the money hasn't lapsed. It's still there. SENATOR RIEGER: Okay. But the administration's position is [that] if it's lapsed, it's lapsed. It can't be revived. JIM BALDWIN: If it's lapsed, it's lapsed. There's no longer anything to reappropriate. The appropriation is void. [End of verbatim transcript.] Co-chairman Frank inquired concerning total federal Corps of Engineers funds for the Bethel Seawall. Nancy Slagle advised of $4.5 to $5 million. Further discussion of Corps of Engineers' funding followed between Co-chairman Frank and SAM KITO, III, Legislative Liaison/Special Assistant, Dept. of Transportation and Public Facilities. Mr. Kito attested to a general fund match requirement of $1.7 million to complete the project. He further advised of concern that if the match is not made in FY 97, the project may be stopped. The state would then incur additional remobilization costs that would not be federally eligible, and the total cost of the project would increase. Senator Zharoff voiced concern on behalf of rural utilities regarding funding within Secs. 18 and 19. Sec. 20. Reappropriates $1 million of the anticipated lapse from the AFDC program to construction of a treatment facility at the Johnson Youth Center. An additional $2 million in Sec. 37 funds the full $3 million need. Co-chairman Frank raised a question concerning one-time items associated with the Governor's welfare program. JANET CLARKE again came before committee. She explained that the Governor's welfare reform reinvestment proposal primarily funds ongoing child care and work programs. The only one- time items were computer system investments. CSSB 136 (Fin) contains $3.5 million for the computer system. That consists of $1.6 million in federal and $1.9 million in general funds. General funds came from both the treasury and case load reductions. In CSSB 136 (Fin) $4 million in general funds for AFDC was reduced. The funding was then reappropriated to a number of one-time items and then back to the general fund. Approximately ten days ago, the department re-examined lapse projections for Medicaid and AFDC and determined that caseload reductions had continued. That is where the $1 million within Sec. 20 was derived. Co-chairman Frank asked if there was a connection between the Johnson Youth Center and the department's aide to families with dependent children program. Ms. Clarke answered, "Not directly, no." Senator Phillips voiced his understanding that Sec. 20 represents a transfer of $1 million in operating funds to capital. Ms. Clarke concurred. Senator Sharp voiced concern regarding use of lapsing moneys that should be saved for other projects. Co-chairman Frank agreed, saying that the practice reduces revenues available for expenditure in the next budget. Sec. 21. Reflects the anticipated $2.5 million in reimbursement from the federal government for Medicaid matching funds relating to education of Medicaid eligible students. Funds would capitalize the children's trust fund in addition to the $6 million already appropriated. Co- chairman Frank asked if the request was part of the Governor's original budget. Janet Clarke answered negatively. She explained that the section appeared in a House version of the reappropriation bill. It was later dropped due to questions regarding the funding source. Co- chairman Frank voiced his understanding that the $2.5 million reflects moneys flowing to the state. Sec. 21 thus requests increased expenditure of new moneys coming into the treasury, a request that was not included in the FY 97 operating budget. Ms. Clarke clarified that the $2.5 million represents unrestricted federal receipts. Nancy Slagle advised of a similar situation, several years ago, relating to the disproportionate share program at API, wherein the state received a large amount of funding from the federal government as an overpaid match. That money was then appropriated by the legislature toward construction of the new API facility. Ms. Clarke again clarified that the foregoing request is tied to an administrative claim for activity in school districts. The department is aggressive in efforts to ensure that the state receives it fair share of Medicaid funding. There was concern that Medicaid reform would occur this year. That is why the department conservatively budgeted these funds. Sec. 22. Reappropriates anticipated lapse moneys from longevity bonus grants to a Dept. of Administration project to find efficiencies in the personnel system through records automation and development. Co-chairman Frank voiced his understanding that the department just received a $1.6 million supplemental and is now reappropriating $300.0. Mrs. Slagle explained that the supplemental request was based on April figures. Numbers for May indicated a $300.0 balance. ERIC SWANSON, Budget Analyst, Division of Administrative Services, Dept. of Administration, came before committee. He said that the number of applicants changes from month to month. The initial estimate of $1.6 million appears high. The lapse is presently estimated at $300.0. The actual number is unknown. Co-chairman Frank inquired concerning the number of computer programmers assigned to the personnel project. Mr. Swanson advised of one contract position that is not quite full time. Senator Rieger asked if the purpose of the reappropriation (the personnel system project) was contained in the Governor's operating budget. Nancy Slagle responded negatively, adding that it would be a continuation of a current-year project. Co-chairman Frank asked why the request was made in special session. Mr. Swanson voiced his understanding that the project reflects one of two capital projects requested in FY 95. When the projects were combined, a decision was made to apply funding to the other of the two projects. That left the current project unfunded. Co-chairman Frank inquired concerning the status of the project over the past two years. BEVERLY REAUME, Director, Division of Personnel, Dept. of Administration, advised that the project is just now starting. A pilot project is scheduled for the coming summer. It will explore the possibility of examining applications via imaging. The original request for $650.0 was funded in FY 96 at a total of $250.0. There is need to fundamentally change the way the process works. Co-chairman Frank voiced his understanding that the project was not sufficiently high in priority for inclusion in the Governor's original budget request. Ms. Reaume concurred that while the project was submitted, it was not selected for inclusion. She further advised that it has potential for saving money for all state agencies. The current examination process is very expensive. Discussion followed regarding responsibility for personnel work by the Division of Personnel versus transfer to individual state agencies. Ms. Reaume said that the project would allow personnel work to be done more effectively at either location. Sec. 23. Reappropriates $250,000 of the anticipated Medicaid lapse to the Dept. of Corrections for conversion of the Harborview Development Center to a correctional facility. That request was before the legislature in the capital budget. BOB COLE, Administrative Services Director, Dept. of Corrections, came before committee and advised of a total project cost of $1 million to convert 50 beds at Harborview to a medium security correctional facility. The City of Valdez is interested in becoming a partner in the project. If the $250,000 is appropriated, the community will match $750,000. The cost is approximately $20,000 a bed. Co- chairman Frank raised questions about the high operating cost per bed. Mr. Cole explained that the purpose is to create an intensive alcohol/drug abuse treatment program for 50 inmates at a time. Because of the intensive nature of the treatment, the $220 per-bed cost per day is considerably higher than the average $106 for confinement in a regular detention facility. Further discussion followed regarding inmate populations to be involved in the program. Mr. Cole stressed that the intensive program is intended to "shorten the length of time they would spend in our facilities on their current sentence and knock down the recidivism rate . . . ." In response to comments by Senator Sharp, Mr. Cole advised that "the best budget we've been able to get for this so far is about $2.7 million a year." Due to renovation needs, the department did not request operating funding for FY 97 because it did not believe it could get the program going until FY 98. During additional discussion of benefits of the program versus costs, Mr. Cole focused on avoidance of costs associated with reduction of both incarceration time and recidivism for those undergoing intensive treatment. Additional discussion followed concerning historically high operating costs for Harborview versus construction costs of a new facility. Mr. Cole attested to ability to utilize existing personnel at Harborview as well benefits from the isolated location at Valdez. Sec. 24. Nancy Slagle explained that provisions within the section are new. It proposes to utilize $750.0 in earned interest on criminal restitution moneys from Exxon Valdez litigation for appropriation as a grant to the Kenai Peninsula Borough for construction of the Kenai River Center. It would provide for a visitor interpretive facility in addition to the already established multi-agency Kenai River Center. Mrs. Slagle advised of a memorandum of understanding between the Kenai Peninsula Borough and the state on the collaborative effort. Senator Rieger inquired regarding the status of interest on the $50 million, asking if it is restricted or general fund revenue. Mrs. Slagle voiced her understanding it is restricted in use. In response to further questions from the Senator, Mrs. Slagle advised that she would verify whether previous interest expenditures had been made and whether they were in keeping with restricted use. Referencing background information on the current project, Mrs. Slagle noted that the activities directly relate to restoration of natural resources injured by the Exxon Valdez oil spill and are eligible for funding from criminal restitution moneys. Sec. 25. Reappropriates $100,000 in debt retirement funds to the Dept. of Natural Resources for the state land status geographic information system. Mrs. Slagle explained that funds reflect previous G.O. bond balances that were cleared out and returned to the debt fund. The geographic information system was requested in the Governor's budget but removed by the legislature. Senator Rieger asked if funding had previously been taken from the debt retirement fund. Mrs. Slagle answered that moneys had previously been taken to offset other debt. The state also has the ability to withdraw moneys for construction projects. Co-chairman Frank voiced his understanding that the debt retirement fund was generally considered to be "sacred" and expressed reluctance to "start dipping into debt funds to pay capital projects." He referenced cautionary warnings regarding how rating agencies and the debt, bond, and capital markets would react to withdrawal of funds from AHFC or AIDEA and suggested that they would "start looking pretty askance at the state if we starting spending money out of the debt retirement fund." Nancy Slagle directed attention to capital projects within Sec. 37 and noted that they are also proposed for funding directly from debt retirement. They relate to deferred maintenance. Co-chairman Frank said he could understand reduction of future appropriations for debt retirement if there is a change in debt service requirements. He questioned the wisdom of appropriating directly from the debt retirement fund. Jim Baldwin again came before committee. He directed attention to statutes establishing the debt retirement fund and noted language indicating that if a surplus balance occurs, it could be used to fund capital projects. Nancy Slagle acknowledged that balances had previously been used to reduce debt service needs for the coming year. She further advised that the administration only recently determined that amounts put back into the debt retirement fund were not included in calculations for debt service needs for FY 97. Co-chairman Frank expressed reluctance to establish a precedent for capital budget expenditure from the debt retirement fund. He voiced his approval of past removal of excess moneys from the account for return to the general fund. Mr. Baldwin noted that the administration could have first lapsed the moneys and then appropriated them to the deferred maintenance projects. The administration merely chose a more direct route. END: SFC-96, FSS #1, Side 2 BEGIN: SFC-96, FSS #2, Side 1 In response to a question from Senator Donley, Nancy Slagle acknowledged that there was no relationship between debt retirement moneys and the proposed geographic information system. The $100,000 is simply available money. Co- chairman Frank attested to the fact that the Governor originally requested $350.0 and the legislature provided $200.0. Mrs. Slagle concurred. Sec. 26. The $400,000 in carry-forward funds would restore the base in executive office operations. The conference committee effected a $437,700 reduction to the Governor's original request. Co-chairman Frank said that the reduction was made based on knowledge that the Governor had a carry forward of $1.4 million. In making the cut, the legislature allowed the Governor $1 million over his request. Nancy Slagle explained that the request is intended to "go into the base of the Governor's budget for calculations for future years." There is concern that in discussion of the Governor's base versus the Governor's carry forward, the $400.0 will get lost. Co-chairman Frank concurred in confusion surrounding the issue and cited legislative action to stop that type of funding, saying that it distorts the budget. Senator Randy Phillips asked for a comparison of percentage cuts to both the Governor's and the legislature's budget for last fiscal year and this year. Co-chairman Frank said $1 million was cut from both budgets. That was based on allowing the Governor the $1.4 million carry forward. In response to a question from Senator Rieger asking what the $400.0 would be expended upon, Mrs. Slagle referred to general office operations. The majority of the costs associated with executive operations relate to personal services costs. Sec. 27. Provisions are similar to a section within SB 136. This section changes the language slightly and adds: to meet its duties under the Federal Telecommunications Act of 1966 (P.L. 1040104). The change makes the funds capital so they can be used to implement the federal act. Conversion to capital means there would be no effect on regulatory cost charges. Senator Sharp noted that unspent amounts are to be used to reduce regulatory cost charges in subsequent years. Addition of the foregoing language would not allow for that use. It would earmark the funding for implementation of federal law. Mrs. Slagle concurred. Senator Sharp argued that the regulatory charge is levied upon and paid by all utilities. The proposed language would earmark expenditures to telephone services only. Sec. 28. Relates to failure of the effective date on HB 412. Language says that notwithstanding that vote, the effective date is July 1, 1996. In response to a question from Senator Rieger, both Mrs. Slagle and Jim Baldwin agreed that passage would require a two-thirds vote. Sec. 29. Deals with the disparity issue in the foundation formula program. It was included in the original supplemental. Since SB 244 did not make it through the process to take care of the disparity issue, the administration is once again requesting a supplemental realignment of funds to achieve a temporary fix. Co- chairman Frank asked if the fix would apply only to FY 96. Mrs. Slagle responded affirmatively. KAREN REHFELD, Director, Administrative Services, Dept. of Education, came before committee. Co-chairman Frank asked if the Commissioner or anyone within the department had asked the Governor to put the issue on an amended call for the special session. Mrs. Rehfeld attested to considerable discussion of SB 244 and whether it would be included in the proclamation. The Governor decided to limit the items in the special session. For that reason it was not included on an amended proclamation. Co-chairman Frank asked if the department requested that it be "put on a call." Mrs. Rehfeld reiterated that it had been discussed. She further expressed concern for "the potential for FY 97." Conference committee action on foundation formula funding for FY 97 was based on the assumption that SB 244 would pass. Co-chairman Frank agreed. He acknowledged that if SB 244 is not passed, the education budget will be short funded for the coming year. He then questioned why it was not added to the call. Mrs. Rehfeld said that passage of SB 1005 with existing Sec. 29 would correct the disparity for FY 96. Absent passage of SB 244, the administration would come before the legislature for supplemental funding for FY 97 for both the foundation program and "a disparity fix." Discussion followed regarding funding contained within SB 244. In response to further questions regarding Sec. 29, Mrs. Rehfeld explained that the proposal would use anticipated lapse moneys for FY 96 for named recipient grants. Co- chairman Frank voiced his understanding that the current approach would spend approximately $1 million more than the approach within SB 244. Mrs. Rehfeld concurred. Sec. 30. Contains provisions to take care of failed effective dates on SB 136. Co-chairman Frank asked if the bill contains a provision for the three-quarter vote on budget reserve expenditures. Nancy Slagle referenced Sec. 2. Senator Phillips directed attention to Page 13, Lines 11 through 16, referenced respective extension of lapse dates to July 1, 1994, and July 1, 1995, and asked what types of funds would be involved. Mrs. Slagle said she would provide information on funding sources. Co-chairman Frank provided the following recap of funding within SB 1005: 1. $52 million in total funds 2. $30 million in general funds 3. $6.5 million in new requests He noted that the foregoing compares to the administration's position on adjournment night that it could: get by with $5 million in capital, $5 million in operating [neither of which the legislature accepted] and then at issue were the contracts for $7.3 in general funds and a total of over $10 million, generally. Mrs. Slagle explained that the bill now presented by the administration reflects "going back a few steps [to] the starting point in your discussions." Co-chairman Frank asked if the legislature was supposed to take the request seriously or "start where we left off." Mrs. Slagle responded: I don't think that he expects you to back up. I think he wants you to go ahead and pick up from where you were at a couple of nights ago. The bill contains all of the items under discussion. Senator Sharp directed attention of Secs. 35 and 36 and asked if the Dept. of Fish and Game is requesting an additional $2.6 million for new items beyond what the legislature has already passed. Mrs. Slagle responded, "Yes, these are all additional items to what you passed." They address specific areas that were reduced in conference committee. Senator Sharp took exception to such requests in special session, after many months of budget work. Co-chairman Frank recited individual department requests and associated amounts from Pages 14 through 16 of the bill. Mrs. Slagle noted that the $470.0 for the Ft. Richardson Correctional Facility corresponds to the amount in the capital budget. It was included in the original capital request. ANNALEE McCONNELL, Director, Office of Management and Budget, came before committee. She clarified that the proposed bill represents items addressed by the administration as operating budget concerns as well as fiscal notes that have not been fully funding. She cited critical legislation pertaining to joyriding, domestic violence, and welfare reform as examples. It also deals with capital items still under discussion between the administration, majority, and the minority. She acknowledged that perhaps not everyone was aware of ongoing discussions but stressed that these items were not "simply sprung on the committee." The administration advised both Senate President Pearce and House Speaker Gail Phillips of willingness to achieve "some resolution that would be a lower dollar amount than that total." It was felt appropriate to put something on the table, at this time, that reflects the administration's concerns. Co-chairman Frank asked if the Governor wants to spend an additional $50 million. Ms. McConnell noted that $50 million is not the general fund total. It includes federal funds, international airport funds, etc. She voiced the administration's belief that all the items should be discussed and considered. They reflect items upon which the parties were attempting to reach resolution. Ms. McConnell further stressed that requested funding would not bring the total up to the Governor's amended budget. The legislature has made reductions which the administration has not contested. ADJOURNMENT The meeting was adjourned at approximately 5:50 p.m.