Legislative Budget and Audit January 13, 1997 9:00 a.m. Senate Finance Committee Room Juneau, Alaska Tapes LBA97#1 Side 1 003-end Side 2 003-152 CALL TO ORDER Chairman Terry Martin convened the meeting of the Legislative Budget and Audit Committee on January 13, 1997 at approximately 9:00 a.m. in the Senate Finance Committee Room in Juneau, Alaska. PRESENT Representatives Senators Chrm. Martin Sen Phillips Rep. Davies Sen. Adams Rep. Bunde Sen. Halford Rep. Davis ALSO PRESENT Mike Greany, Director, Legislative Finance Division; Merrill Jenson, ??; Gretchen Mannix, Legislative Finance Division; Susan Taylor, Legislative Finance Division; Dave Tonkovich, Legislative Finance Division; Ginger Patton, Legislative Finance Division; Virginia Stonkus, Legislative Finance Division; Jim Hauck, Legislative Finance Division; Molly McKennan, ??; Bob Fisher, Court System (by teleconference). OTHER BUSINESS Rep. Bunde pointed out that the Happy Valley airstrip is the only airstrip only the highway between Prudhoe and Annigin Pass. The airstrip would remain in State land. However, the proposal would dispose of all the land adjacent to the airstrip. This would eliminate the airstrip's ability to lease out this adjacent land and essentially be self-supporting. In this case, the airstrip maintenance would be a further drain on the General Fund or it would go into further disrepair. Rep. Bunde stated he would like LB&A to examine the financial impact of maintaining this airstrip if the adjacent land is disposed of. He pointed out that the land to be disposed of would be given to the North Slope Borough. The North Slope Borough has a long history of discouraging non-residents to use or even transit the land up there unless involved in the oil industry. He is concerned that people opposed to public use of these lands would continue this policy if they controlled the land adjacent to the airstrip. This would make it difficult for people in the rest of the State to maintain what little access they currently have to the North Slope area. The North Slope is currently growing in the area of tourism. In addition, the Legislature has requested an expansion of the North Slope Haul Road be expanded and tourist facilities be added. He thought sale of the adjacent lands could go in the reverse of the aforementioned policies. He requested an audit that would indicate how the disposal of this land would impact the viability of the airstrip. Chrm. Martin suggested that it would be faster to put it under Community and Regional Affairs. An audit could take six to nine months, delaying an immediate report. The committee process would likely produce more immediate results. Rep. Bunde re-emphasized that an audit would provide research and back-up that would be useful to Community and Regional Affairs. Chrm. Martin asked Mr. Jenson and Mr. Welker to begin looking into this request. He also asked for a formal written request at a later date. STATE WARRANTS Rep. Bunde raised the concern that while State spending is being reduced, there appears to be a huge increase in Administrative spending. For instance, over $320 million is being transferred to other States in the nation, meanwhile the State is unable to provide eyeglasses to its older citizens. Rep. Bunde stated that Judgment Claims has increased nearly 100% in the last two years to $12 million. Money sent to rural areas has increased from ?? (086) $9351 million to $72 million. Grievance Resolutions have increased from $185,000 in 1983 to $715,000 in 1996. There appear to be conflicts of interest where the State continues to do business with a legal firm a Commissioner has 20% ownership in; with a neighborhood health center that is co-owned by one of the Commissioners. He pointed that $75,000 had been spent with a California winery; $40,000 with the Culinary Institute of America; with the Wildlife Foundation; with Princess Tours; with the Juneau/Bellevue, Washington, and Washington athletic clubs. Rep. Bunde expressed concern over the liquor account, stating that it seemed exorbitant beyond that needed for the ferry system. The Department of Education and the Department of Fish and Game also have large liquor accounts. Finally, the Department of Education also has a rather large account with the espresso bar, the Espresso On The Run. Chrm. Martin agreed with Rep. Bunde's concern with these State Warrants in a time of cut-backs in State spending. He suggested that the Chair of Finance and the Chair of the Senate could bring up the Warrants as administration reports. Rep. Davies asked if the individual agencies had been contacted for explanations. FINAL AUDITS Mr. Jenson summarized that the Committee is in the process of winding up its ??"sink allotted" coverage for FY 96, which is part of the State audit. With only two or three audits pending, the Committee is ready for more audits. He suggested that the Committee work with Rep. Bunde's office to address some of the areas of concern that were raised. AUDIT REQUESTS Chrm. Martin reported that a bill has been introduced to put the Alaska Railroad under the Executive Budget Act. The Alaska Railroad is the only corporation in the whole State that is not under the Executive Budget Act. He suggested that the Legislature should have a closer overview of the Alaska Railroad's annual and monthly expenditures. Chrm. Martin noted that there have been disputes over the allotment of land, particularly regarding costs and availability. He asked the Audit division to look into these complaints. Chrm. Martin state the next concern was an audit into procurement practices requested by the State Ombudsman, Mr. Stuart Hall. The last audit request was concerning the UAA American/Russia Center. This request was presented by both the President of the Senate and the Speaker of the House. Rep. Davis asked about RPL 06-7-0144, Department of Health and Social Services relating to API. He asked rather the change from Medicaid receipts to patient receipts would mean the funds could not be collected from Medicaid. In addition, he was concerned with the increase in services at API. He wondered if this proposal would in any way reduce the ability of the community mental health programs to collect Medicaid receipts. Would this proposal make it harder for the shift from API to community-based mental health programs to occur? Mr. Greany stated that in his opinion the proposal would not impact the shift to community-based mental health services. The shift in funds source was addressed by Susan Taylor. She stated that to a certain extent, the collection of General Fund Program receipts does affect the collection of the Disproportionate Share. This is because the Disproportionate Share Payments are because API is serving a disproportionate share of indigent clients. So General Fund Receipts mean there is a third party payer that is able to pay the cost of a client's care. In theory, if a client is served in the community, they will no be in API. For instance, clients going to API are doing so during times of crisis. Mr. Greany pointed out that there is a long-term program for API and the community mental health programs. There will be a definite budget issue in the future regarding funding for API in relation to the general mental health programs of the State. For this reason, it was recommended in the last meeting that this be deferred to the Finance Sub-committee venue. This would allow the request for the 97 Budget to be reviewed in the context of the upcoming 98 Budget. Mr. Greany felt that the Committee would probably recommend approval of the proposal. However, first the Finance Committees dealing with the 98 Budget need to become aware of the issue and the problem. At that point, a determination could be made to send the proposal back to the Budget and Audit Committee to fix the 97 problem in conjunction with whatever will be happening for 1998. Rep. Davies noted that in early 1996 there was a sharp decline in the average daily census. There was no commentary on what that reduction in the daily census would have on the budget requirements. He asked the budget sub-committees to look at that impact as well. Chrm. Martin also stated concern regarding the University of Alaska Arctic Region. The major concern was the transfer of money not from the Federal, but is now from University Receipts. How will this keep from dramatically increasing the Budget? Mr. Greany stated that this was intended as a one-for-one fund switch. Currently the funds coming in for the operation of the super computer center from the Federal government are budgeted as coming directly from the Federal government to the center. For that reason, the funds were characterized as Federal Funds. Now that funding arrangement has been changed. The funds now come through a defense contractor, the TRW. The intermediate stop means that the money loses its identity as Federal funds. The University feels the proper characterization of those funds would best fit under the University Receipts category. This a one-for- one swap that is not intended to change the overall Budget level, just as a change in resource types. REGULAR SESSION Chrm. Martin called for a MOTION to APPROVE the minutes of the meeting on November 7, 1996. Rep. Davies OBJECTED temporarily with a minor correction. On page 18, Rep. Davis should read Rep. Davies. With that correction, the OBJECTION was REMOVED. No objections being raised, the minutes were APPROVED. Sen. Phillips MOVED to APPROVE the three audits; from the State Ombudsman, from Speaker Phillips and Senate President Pearce, and from for the Alaska Railroad. No objections being raised, the MOTION was APPROVED. Rep. Bunde stated that his office would be working closely with the auditors in an informal request for information. Rep. Bunde MOVED that the Committee allow that process to take place. No objections being raised, the MOTION was APPROVED. Mr. Greany clarified that the information gained in the audit request by Rep. Bunde would be presented to the Finance Committees for inclusion in their review of the agency budgets. It is noted that the several agencies have already responded with explanations of their purchases. In particular, the two agencies have already proffered initial explanations of the liquor purchases noted earlier. REVISED PROGRAMS RPL 05-7-0606 Education $26,000 in GF/Program Receipts for Mt. Edgecumbe - Summer Arts Program and Camp Approval for $4,000. Deferral for $22,000. Mr. Greany stated that this is a new request and is broken down into two separate parts. One is for $4,000 for increased enrollment and one for $22,000 for two summer camps that will be occurring during this upcoming summer. He recommends approval of the $4,000 for increased enrollment at Mt. Edgecumbe and defer the rest temporarily for the Finance Committees to examine. Rep. Bunde asked if all students pay $100 no matter where they come from and if the $100 was for one round trip to the school and back. Virginia Stonkus stated that all students pay the $100 irregardless of where they are from. This is for transportation for one trip. Rep. Davies clarified that this is strictly for the main school period, not the summer camps. Rep. Davis wished to confirm that even if the $22,000 was deferred, that the school could continue to collect interest on the amount. Mr. Greany stated that generally moneys in the General Fund generated interest for the General Funds, not for a specific account unless statutes provided otherwise. He noted that with the Legislature beginning session, the normal Budget process will address the deferred RPLs. The Committee's role is to supplement the Legislature during non-session times and when time issues are critical. Sen. Phillips MOVED for APPROVAL of $4,000 for increased enrollment and MOVED for DEFERRAL of the $22,000 in RPL 05-7- 0606; no objections were raised, the MOTION was APPROVED. RPL 05-7-0626 Education $3 million in Federal Receipts for Special/Suppl. Services - Title I & Migrant Education Deferred. Rep. Bunde MOVED for DEFERRAL of RPL 05-7-0626; no objections were raised, the MOTION was APPROVED. RPL 05-7-0679 Education $603,000 in Federal Receipts for Vocational Rehab/Disab. Determ - Increased Caseload Approved. Sen. Phillips MOVED for APPROVAL of RPL 05-7-0679; no objections were raised, the MOTION was APPROVED. RPL 06-7-0144 Health & Social Services $200,000 in GF/Program Receipts for API - Offset Uncollectable Disproportionate Share Deferred. Rep. Bunde MOVED for DEFERRAL of RPL 06-7-0144; no objections were raised, the MOTION was APPROVED. RPL 06-7-0190 Health & Social Services $845,000 in Federal Receipts for DYFS - Project ORCA (Adoption/ Foster Care) Approved. Rep. Davies MOVED for APPROVAL of RPL 06-7-0190; no objections were raised, the MOTION was APPROVED. Chrm. Martin requested that the Department of Health and Social Services provide the Committee with a report of the adoption process over the last three years. Rep. Bunde stated that the HESS Committee would investigate the whole adoption procedure to see if it could be streamlined to encourage adoptions within the State of Alaska. RPL 06-7-0196 Health & Social Services $99,300 in Federal Receipts for Labs & Radiological Radon, Tuberculosis Grants Deferred. Rep. Bunde MOVED for DEFERRAL 06-7-0196; no objections were raised, the MOTION was APPROVED. Rep. Bunde requested that the Department of Health and Social Services discuss radon and its health concerns in Alaska with the Committee. Rep. Davies asked whether there has been an attempt to coordinate the program with the State Division of Geology and Geophysical Surveys on the subject of radon. RPL 06-7-0197 Health & Social Services $700,000 in GF/Program Receipts for WIC - Nutrition and Education Approved. Rep. Davies MOVED for APPROVAL 06-7-0197; no objections were raised, the MOTION was APPROVED. RPL 10-7-4038 Natural Resources $525,000 in EVOS Trust Funds for EVOS Trustee Council- Horseshoe Bay, Ninilchik Deferred. Rep. Davies MOVED for APPROVAL of RPL 10-7-4038. Rep. Bunde stated he would vote against the proposal and called for a vote. Rep. Davies WITHDREW the MOTION. Chrm. Martin stated that the MOTION would be DEFERRED; no objections were raised, the DEFERRAL was APPROVED. RPL 10-7-4040 Natural Resources $500,000 in Federal Receipts $200,000 in GF/Program Receipts for Geological Development- Airborne Geophys Surveys Approved. Sen. Phillips MOVED for APPROVAL 10-7-4040; no objections were raised, the MOTION was APPROVED. RPL 10-7-4041 Natural Resources $65,000 in GF/Program Receipts for Pipeline Coordinator - DEC Representation Approved. Rep. Davis MOVED for APPROVAL 10-7-4041; no objections were raised, the MOTION was APPROVED. RPL 10-7-4042 Natural Resources $510,000 in Federal Receipts for Mining Development - Abandoned Mine Lands Approved. Rep. Davies MOVED for APPROVAL 10-7-4042; no objections were raised, the MOTION was APPROVED. RPL 12-7-0058 Public Safety $364,100 in Federal Receipts for AST-Narcotics Task Force Program Approved. Sen. Phillips MOVED for APPROVAL 12-7-0058; no objections were raised, the MOTION was APPROVED. Rep. Davies wondered why the issue is not being handled as part of the yearly Budget process. Mr. Greany stated that the Committee has been working with the Department of Public Safety to get their grants built into the regular ongoing Budget process rather than through the Budget and Audit Committee. This particular request had come in previously in a larger amount. It was suggested that they re-evaluate the program needs in view of all their Federal projects. He feels this second response is reasonable. RPL 12-7-0085 Public Safety $129,000 in Federal Receipts for Laboratory Service - Genetic Fingerprinting Approved. Sen. Phillips MOVED for APPROVAL 12-7-0085; no objections were raised, the MOTION was APPROVED. Rep. Davies objected, asking whether the supplies required for the new process would be equivalent in amount to be spent for supplies this year. Mr. Greany stated that the equipment will be a one-time cost and the supplies will depend upon the level of activity. After the initial outlay, the supplies will have to be replenished dependent upon the crime activity levels. RPL 12-7-0095 Public Safety $140,200 in Federal Receipts for Records & Identification - Nat'l Crime History Program Approval. Sen. Phillips MOVED for APPROVAL 12-7-0095; no objections were raised, the MOTION was APPROVED. RPL 12-7-0097 Public Safety $984,700 in Federal Receipts for Highway Safety Planning - Various Federal Grants Approved. Rep. Davis MOVED for APPROVAL 12-7-0097; no objections were raised, the MOTION was APPROVED. RPL 18-7-0240 Environmental Conservation $60,800 in Federal Receipts for Storage Tank - Leaking Under- Ground Tank Investig. Deferred. Mr. Greany asked for a deferral on this RPL until the Committee had time to properly characterize the funds source. It is possible that this may not be truly Federal funds. If they are General Funds, they may not be available to the Committee. Sen. Phillips MOVED for DEFERRAL of RPL 18-7-0240; no objections were raised, the MOTION was APPROVED. RPL 18-7-0241 Environmental Conservation $242,000 in OHSRPR Funds for Contaminated Sites - Alaska Pulp Mill Closure Deferred. Sen. Davis MOVED for DEFERRAL of RPL 18-7-0241; no objections were raised, the MOTION was APPROVED. RPL 18-7-0242 Environmental Conservation $273,100 in GF/Program Receipts for Contaminated Sites - Ketchikan Pulp Ward Closure Approved. Mr. Greany stated that this RPL related to the Department of Environmental Conservation's activities overseeing the shutdown process of the Ketchikan Pulp Mill. This shutdown is to occur toward the end of March. There is a number of things going on, the particulars of the permit for the mill changes as the mill phases out of productions. Apparently different type of contaminants will enter the air and water during shutdown than would be released during 100% operation. Rep. Davis MOVED for APPROVAL of RPL 18-7-0242; no objections were raised, the MOTION was APPROVED. RPL 20-7-0012 Corrections $1,248,453 in Federal Receipts for Institutions - Increase Prison Capacity Withdrawn. Chrm. Martin stated that RPL 20-7-0012 had been withdrawn from the audit process. RPL 21-7-0165 Community & Regional Aff $50,000 in Federal Receipts for Community & Rural Development Head Start Collaboration Deferred. Chrm. Martin announced that the DEFERRAL of RPL 21-7-0165; no objections were raised. RPL 25-7-3284 Transportation/Public Fac $3,000,000 in Federal Receipts for Airports CIP - Gustavus Airport Improvements Deferred. Sen. Phillips MOVED for DEFERRAL of RPL 25-7-3284; no objections were raised, the MOTION was APPROVED. RPL 41-7-0017 Court System $57,842 in Federal Receipts for Race and Ethnic Bias Elimination in Court Grants Approved. Rep. Davies MOVED for APPROVAL of RPL 41-7-0017; no objections were raised, the MOTION was APPROVED. RPL 41-7-0018 Court System $25,107 in Federal Receipts for Computerized Case Management/ Internet Access Approved. Sen. Phillips MOVED for APPROVAL of RPL 41-7-0018; no objections were raised, the MOTION was APPROVED. RPL 41-7-0035 Court System $60,200 in Federal Receipts for Foster Care/Adoptions/Judicial Process Assessment Approved. Rep. Davis MOVED for APPROVAL of RPL 41-7-0035; no objections were raised, the MOTION was APPROVED. Sen. Halford reiterated that the Committee would appreciate being asked to approve a proposal prior to the work being done. RPL 41-7-0033 Court System $7,000,000 in University Receipts for Arctic Region Super Computer - Receipts Accounting Approved. Chrm. Martin asked for clarification of whether the budget would be adjusted by $7 million on the General Fund program receipts. Mr. Greany stated that this does not involve the General Fund program receipts. It involves the University receipts. If approved, the existing Federal authority would be restricted for reduction. In its place, an equal amount of University receipts will be authorized to make a dollar for dollar fund switch. Since the funds are not coming directly from the Federal government, but through a third party, the funds would be characterized as University receipts. Rep. Davis MOVED for APPROVAL of RPL 41-7-0033; no objections were raised, the MOTION was APPROVED. Rep. Davies MOVED that the Committee rescind its action regarding RPL 10-7-4038, EVOS Trust Funds. Rep. Davis MOVED to approve the RPL. A ROLL CALL VOTE was taken: IN FAVOR: Rep. Davies, Rep. Davis, Sen. Adams, Sen. Halford, Sen. Phillips, Chrm. Martin. OPPOSED: Rep. Bunde The MOTION was APPROVED for the EVOS Trustee Council in RPL 10-7- 4038 by a vote of 6 to 2. ADJOURNMENT Chrm. Martin adjourned the meeting at approximately ?? a.m. LBA 1/13/97 Page 12