Legislative Budget and Audit January 16, 1997 8:35 a.m. Senate Finance Committee Room Juneau, Alaska Tapes LBA97#2 Side 1 003-246 CALL TO ORDER Chairman Phillips convened the meeting of the Legislative Budget and Audit Committee on January 16, 1997 at approximately 8:35 a.m. in Juneau, Alaska. PRESENT Representatives Senators Rep. Martin Chrm. Phillips Rep. Bunde Sen. Donley Rep. Croft Sen. Halford Rep. Hanley Sen. Pearce Rep. James Sen. Adams Rep. Therriault ALSO PRESENT Mike Greany, Director, Legislative Finance Division; Randy Welker, Legislative Auditor; Merrill Jenson, Deputy Legislative Auditor. OTHER BUSINESS Mr. Welker introduced himself and brought members' attention to the Legislative Budget and Audit Committee Handbook that contains information about the Finance Division, the Audit Division and copies of the pertinent statutes. Most importantly, on page 27 begins the formal policies and procedures of the Budget and Audit Committee. Typically in the past, these policies were formally brought to the Committee and subsequently adopted at the next meeting. The two most recent changes are first, a policy to bring any new proposals to the Chairman at least 24 hours ahead of the meeting and second, a formal method to have audit requests withdrawn. The remainder of the policies deal with the audit release procedure. For new members, the last page of the handout addresses the confidential report distribution procedures that are in place. All audit reports are confidential until released to the public. If any member has any questions on the procedures, Mr. Welker is available to spend time with the member to clarify the procedures. Mr. Welker stated that a list of the 1996 audits released is also included in the packet. The annual report of the Budget and Audit Committee was previously sent to members' mailboxes. The annual report contains a two page summary of every audit released. The next document is a list of all audits issued as far back as 1990, sorted by department. This will provide a historical list of the audits conducted. The final document is a memo that tells the Committee what special audit requests are currently before it. Rep. Martin thanked Mr. Welker and his staff for the excellent job over the years. He also recommended that the audits are worthless unless the Chairs of the respective Committees review the annual audits, look at the recommendations, and look at the requested legislature. In years past, if work on the audits is not followed-up on with the introduction of the proposed legislation, the audits are worthless. Chrm. Phillips stated that with Sen. Pearce's assistance, there will be an improvement in that department. He also extended an invitation to the members of the Committee to tour the Division of Audit, particularly to Rep. Croft. Mr. Welker introduced the Deputy Legislative Auditor, Merrill Jenson. In December, Mr. Jenson completed 25 years of service to the State of Alaska, all of which were with the Audit Division. Sen. Halford requested a audit of the oil companies' performance under the two bill that were passed in the last Legislature in terms of local hire and local construction of modules. Sen. Donley stated that he would like to explore the way the Executive Branch responds to Legislative intent language. He has noticed that in the past almost all Legislative intent is vetoed. Due to the archaic veto override system, the Legislature only gets to address the vetoes at least half of the time. He would like to see a system that forced the Executive Branch to explain to the Legislature in the consecutive year the reasons for the prior year's veto. Rep. Martin felt that it was the burden of the Committee to go to the Governor for explanation of his intent or policy. Sen. Phillips requested the at the next meeting Sen. Donley submit a proposal on how to go about receiving an explanation from the Executive Branch on intent. Sen. Donley stated that he did not wish to put the burden on the LB&A personnel. He wished to see the burden placed on the Executive Branch. The budget does not have that much Legislative intent. He felt it would not be that complicated to have the Executive Branch provide an explanation at the beginning of each budget section. Sen. Pearce stated that each Commissioner has been asked to go through each of last year's Legislative intent and explain which are or are not being followed. She stated that prior to the Overview presentations by the Commissioner, the Legislative analysts and the Legislative auditors will meet to discuss the departments that will be reviewed. These analysts should be able to provide some insight into Legislative intent. Sen. Halford felt that waiting until the next meeting would not be a good idea. He requested that the Finance pull all the intents and distribute them to every Committee member. He felt that the Committee members have begun to accept that Legislative intents are relatively meaningless. Mr. Greany stated that records have been kept of the intents adopted by the Conference Committee whether it was vetoed or not. The report can be reproduced and made available to the Committee. He added that the Legislature expresses intent in other ways than Legislative intent itself. For example, the Legislature may structure a budget for appropriations and allocations in the manner that the Legislature wants it. In some cases, when the Governor brings back a Budget the next year, the budget may be restructured or put back the way it was before. The Legislature then has an opportunity to re-adjust the Budget to reflect its intent. Mr. Greany stated that the Committee's primary responsibility is the audit process. However, the Committee also has budget responsibilities of reviewing interim Budget adjustments as they relate to Program Receipts and Federal Funds. The Committee gets the authority to make these changes through the front section of the Appropriation Bill each year. This section states that any additional Program Receipts or Federal Funds that come into the State are appropriated subject to the review process of this Committee. The Revised Program Legislature (RPL) is the term for this process. The RPLs are reviewed by the Legislative Finance office and recommendations are made to the Committee. The other purpose of the Legislative Finance write-ups is to capsulize what the issue is about, addressing technical or legal matters that may arise. Mr. Greany reminded the Committee that it takes an eight member quorum and requires agreement from six members of that quorum to release audits and approve RPLs. Of the six members who agree, at least one of the members must be from the other Legislative body. Each House has five regular members and one alternate. When all the regular members from a House are present, the alternate may not vote. However, when a regular member is absent, then the alternate may vote. Rep. Martin noted that often when the Final Audit comes out, usually on August 31st, the numbers are usually higher than what the Committee passed. While the LB&A Committee may feel that it has cut the budget, however, afterwards it may seem that the Budget was actually raised again. He hoped that the Committee does not get used like that. Chrm. Phillips requested Mr. Greany set up a tour of his division to allow the members to refresh their memories. Mr. Greany stated that he felt the Committee is the most effective oversight tool the Legislative Branch has over the Executive and Judicial branches. Chrm. Phillips suggested that the tour be tentatively planned for a week from this Saturday. FINAL AUDIT Sen. Adams MOVED that the special audit request submitted by himself be APPROVED. No objections being raised, the MOTION was APPROVED. ADJOURNMENT Chrm. Phillips adjourned the meeting at approximately 9:30 a.m. LBA 1/16/97 Page 1