Legislative Budget and Audit February 26, 1997 12:00 Noon House Finance Committee Juneau, Alaska Tapes LBA97#3 Side 1 001-end Side 2 001-186 CALL TO ORDER Chairman Phillips convened the meeting of the Legislative Budget and Audit Committee on February 26, 1997, at approximately 12:00 Noon in the House Finance Committee Room in Juneau, Alaska. PRESENT Representatives Senators Rep. Croft Chrm. Phillips Rep. Therriault Sen. Pearce Rep. James Sen. Halford Rep. Bunde Sen. Adams Rep. Martin ALSO PRESENT Mike Greany, Director, Legislative Finance Division; Bruce Johnson, Mt. Edgecumbe School; Sharon Devoe, Manager of the Planning and Programming Branch, FAA; Virginia Stonkus, Legislative Finance Division; Barbara Thompson, Assistant Director of the Division of Teaching and Learning Support; Nancy Slagle, Director of Administrative Services, Department of Transportation and Public Facilities; Mary Lou Burton, Director of Budget for the University. REVISED PROGRAMS RPL 05-7-0680 Education Mr. Greany stated that the recommendations on each request must be considered in view of the venue, whether by this Committee or in the normal Budget process. Keeping in mind that the Committee's jurisdiction over the RPLs is derived from two sources. The first is the statutes that provide for this type of review. Second is that the appropriations authority is outlined in the front of the appropriation bills. Therefore, the Committee does not have original jurisdiction as far as appropriation powers go. So while in session, when a recommendation is made subject to the appropriate Finance committees determining whether to take up the proposal in the regular budget process through a supplemental. That is why the write-up may recommend approval, but subject to review by the Finance committees. Mr. Greany addressed RPL 05-7-0680, Department of Education, Vocational Rehabilitation. He recommended the Committee defer action on this RPL. The history is that at first look the Voc/Rehab may have sufficient or excess Federal Funds authority to cover part of this cost. He suggested that this request be deferred until later in the year when it will be easier to assess the remaining Federal Funds. Rep. Martin MOVED to DEFER the RPL to the regular Budget process. No objections being raised, the MOTION was APPROVED. RPL 05-7-0681 Education Mr. Greany made the same recommendation on the next Department of Education RPL. Rep. Martin MOVED to DEFER RPL RPL 05-7-0681 to the consideration of the Legislative body. No objections being raised, the MOTION was APPROVED. Sen. Adams raised concern about timing and the Federal Funds if the proposals had to go through the regular Legislative process. Mr. Greany stated that there was not a critical time element involved that would mean the loss of Federal Funds. He also stated that there would be sufficient Committee meetings later in the Fiscal Year during which this proposal could be re-evaluated. RPL 05-7-0699 Education Mr. Greany recommended that the Committee approve this RPL. Their review of the expenditure history is that the Federal authority has been managed very carefully. Also, over 90% of the funds on the agenda will go directly to school districts. For that reason, it seems relatively straightforward to approve the request. Rep. Martin stated that a major increase in technology like this should be explored. Since a supplemental appropriation is in hand with a Capital Budget coming soon, he felt that it would be better to wait and see where the new technologies money is coming from. Sen. Pearce asked if the charter school bill the Committee passed would fit under the Federal government's criteria for charter schools. She also asked if that would be a direct pass through to any charter schools. Virginia Stonkus (inaudible) Sen. Pearce asked if the GOS 2000 Technology Program would entail buying equipment. If so, are there any ongoing operating costs that will be accrued to any division of the State government beyond the Foundation formula. Virginia Stonkus (inaudible over the background noises). Sen. Adams asked if Ms. Stonkus could explain where the grant money actually goes to out of the $1 million. Virginia Stonkus ( inaudible) Barbara Thompson, Assistant Director of the Division of Teaching and Learning Support, answered where the grant funds would go. An application process is being developed at this time. Currently an application for the Technology Fund is resting with the US Department of Education for approval. The funds are not targeted for any specific school district at this time. Rep. Martin asked how many schools have been approved as charter schools. Ms. Thompson stated that there have been four charter schools approved. These schools have nothing to do with the grant funds under discussion. Rep. Martin asked the location of the charter schools. Ms. Thompson stated that one is out of Galena, one is out of Fairbanks, one is out of Delta/Greeley and there is a fourth one out of. MOVED that RPL 05-7-0699 be APPROVED; no objections being raised, the MOTION was APPROVED. RPL 05-7-0700 Education Mr. Greany recommended approval of the school to work program. The majority of the funds in this proposal will go out to local school districts. Rep. Martin asked if it was realistic to give money to the school district this late in the school year. He suggested that it might be more beneficial to wait and give the money at the beginning of the next school year. Mr. Greany noted that this is a rolling request. Moneys have been previously approved and not spent. He responded that if the funds are not spent at the end of Fiscal Year 97, any unspent balance would have to come back to the appropriation process in the next Fiscal Year. Rep. Bunde wished to clarify that this program is for existing school to work programs and to confirm the statement that no new programs would be added was accurate. Mr. Greany stated that his understanding is that the funds would be to continue the current work program. Ms. Thompson stated that existing programs are ongoing. A new grouping of programs have been funded. The timing of receiving the Federal grant in November has sort of set a cycle that is a bit different from the normal State Fiscal Year program year. Those funds would be directed toward the ongoing activities that have been stated in the Plan of Service that was approved by the Department of Labor. Sen. Halford asked the meaning of "approval is recommended subject to the in-session opportunity for the Finance committees to consider the request in the regular Budget process." He stated that that sentence is a circle. Mr. Greany stated that the intention was that while the Legislature is in session, the preferred venue for increases such as this would be through the regular appropriation process. The Finance committees, whether Capital or Operating Budget, must have the opportunity to first assert their jurisdiction. If they feel that it is appropriate for the Committee to go ahead with the proposal, then that would give the Committee leave to do this. The recommendation here is based first on the merits of the proposal. Then determining which process should handle the request is necessary. Sen. Halford suggested such a proposal should always be handled in the regular Finance committee process unless there is a time constraint that makes it necessary for the Committee to deal with the request. He felt that the Committee gets used to go around the Finance committees. Mr. Greany stated that he fully agreed with Sen. Halford. Rep. Martin asked if the potential grants had already been incorporated into the Budget as a line item. He felt that the Committee would be approving money that had already been spent. Ms. Thompson disagreed, stating that the Federal grant award in November of 1995. It took several months to get the grant awards out. Consequently, the grant program is several months behind a normal program fiscal year cycle. In the first year, the Department of Education had budgeted full authority in the first year though the full amount of the first year grant was not expended. Therefore, there was a sizable amount of carry-over that was not anticipated. Therefore, the Department of Education finds itself with the authority for the second year's award in Fiscal Year 97 with a sizable carryover. The Department requests that all the funding go out to keep things moving. Rep. Martin asked if any line items were in the budget that would allow the Committee to elaborate on what the grant will be next year. Mr. Greany stated that Department does have a Federal Funds increment request in their FY 98 Budget for the next phase of this particular program. Rep. Bunde MOVED for APPROVAL of RPL 05-7-0700. Sen. Adams asked if he was correct that if a motion was made and not approved, then the 45 day rule kicks in allowing the Administration to go ahead and spend the money. If the RPL is on the agenda, however, no action or motion is made, then the Administration cannot spend the money. Mr. Greany stated that is was not that cut and dried in meaning in terms of when it was submitted by the Committee for consideration. The 45 day rule has only been actually invoked three times. In all three instances, the request had been specifically turned down. There is no actual experience of the Committee failing to consider a proposal and then the 45 day rule being invoked. Sen. Adams felt that it was vital that all members be clear on the fact that if a motion is made for any type of action, the Administration can go ahead and spend the money. However, if the proposal is on the agenda and no action or motion is taken, then it is not in force. Rep. Martin asked if it was logical that supplemental appropriation would be something that could be used if the total Legislative body is involved. Mr. Greany stated that supplemental process is always the alternative for these kinds of in session requests. The only real question is whether time was a critical factor in the decision. Rep. Bunde MOVED for APPROVAL of RPL 05-7-0700. One objection was raised by Sen. Halford who clarified that he did not oppose the program. He stated that he opposed the Committee approving anything that does not have an emergency nature and have to be approved. If the proposal can go in a month from now in a supplemental and the whole Legislature can look at the proposal, then the Committee is abrogating its duty to defend the process by approving the proposal here. Rep. Martin also objected for the same reasons. He hoped that the Administration would consider the current budget before to make sure that tentative approval is in that budget. Rep. Therriault was concerned about the matter that Sen. Adams had raised that since action had been taken on the proposal, the Administration will still go ahead. However, Sen. Halford advocates that the Committee force it into the regular budgetary process, then the Committee should not even be considering the proposal. Rep. Bunde stated that his motivation for the motion was that he strongly supported the school to work program. After hearing the support expressed by other members of the Committee for the program and knowing that the funds will be addressed in another venue, he WITHDREW the MOTION; no further objections being raised, the RPL was WITHDRAWN for further consideration. Sen. Pearce asked Mr. Greany if he felt that any of the RPLs before the Committee today would fit in the emergency category. She stated that there were active supplemental bills on both the House and Senate side and felt that both bodies planned to move the bills expeditiously. She agreed with Sen. Halford that it is more appropriate that the full Legislature have an opportunity to look at the programs. She added that the body is in the process of working with Legal on some changes to the Executive Budget Act that can perhaps clarify the whole system a little better. Sen. Halford suggested that the agencies offering the programs to the Committee explain why the program is important on a timeline that will not fit into a supplemental. Mr. Greany responded to Sen. Pearce that there were only two items on the agenda that immediately come to mind as time critical. One was carried over from the last meeting; the DEC Contaminated Site Cleanup at Alaska Pulp Mill site. This was an ongoing project and at the time of the last meeting, it was represented that they were close to running out of authority. The Finance Committee had checked with the sub-Committee chairs of DEC and no problem was seen if the Committee went ahead and took jurisdiction on this request. Mr. Greany stated that the other program that was time critical was the Gustavus project. That first came to the Committee at the November meeting. At that time, the proposal was deferred to the regular Capital process as at that time the Committee was told that it would take a reallocation of the Federal Airport money from other already appropriated and approved projects. That would mean robbing Peter to pay Paul situation. The RPL was resubmitted to the January meeting in the same circumstances. Again, the Finance Committee recommended that it be deferred to the regular Appropriation process. It was again resubmitted to this meeting with some new information that it would not take away from the regular airport allocations from the Federal government. It was stated that this project would be using some new discretionary authority that the FAA had access to. As recently as yesterday, a representative of the FAA submitted a letter saying that if the Legislature does not authorize this project by early March, the project would off the list and would not even be forwarded to Washington, DC That particular representative from FAA called Mr. Greany yesterday and clarified that early March meant March 3rd. Mr. Greany still felt that requests, particularly of a Capital nature, go through the regular appropriation process. On the other hand, he would hate to see Alaska lose out on money that was available for a project that we would like to see happen. So he suggested that the Committee might consider an alternative of approving the proposal, but subject to the stipulation that this is in fact new, additional project-specific money that would in no way detract or impair already Legislatively approved projects. RPL 18-7-0241 Environmental Conservation Alaska Pulp Mill Site Mr. Greany stated that upon review the recommendation was for approval. Sen. Halford MOVED for APPROVAL of RPL 18-0241; no objections being raised, the MOTION was APPROVED. RPL 25-7-3284 Transportation/Public Fac. Airports- Gustavus Airport Rep. Martin stated he was suspicious of the FAA being pushy for one particular project. He stated that he would rather give up an opportunity for Federal funds than succumb to a threat that circumvents the Legislative budget process. Sharon Devoe, Manager of the Planning and Programming Branch, FAA is responsible for the airport improvement program. Sen. Pearce noted that the memorandum stated that the airport personnel in Anchorage felt that the runway had a very good chance of receiving discretionary funding. She questioned if there were other authorizations already approved in this Fiscal Year for discretionary funding. With the highway and possibly with the airport funds, the Legislature always over-authorizes. This has been a successful strategy for acquiring extra Federal funds at the end of the year when left-over funds are redistributed to states with bid-ready projects. She asked what other projects have already been authorized that would fit in the discretionary category that would be in the mix as with the Gustavus project. Mr. Greany stated that this is the only request that he is aware of that has come to the Committee for Legislative action. Sen. Pearce asked if Sen. Halford remembered if the FAA side had been over-authorized on in the two years. Sen. Halford stated that last year, the proposals were way over- authorized and that situation was reversed later in the year. He stated that he unsure what over projects are on that list and that perhaps the Gustavus project is unique in some other qualifying way. Rep. Bunde brought up Sen. Halford's concern about setting a precedent of people circumventing the regular Finance Committee process. He asked if the process that the RPL application went through would be such timing-wise so as to push the deadline so that the people submitting the request could avoid the full Finance Committee process and come directly to LB&A. Mr. Greany stated that this first came to his committee's attention through the RPL request in November. At that time, the project required a reallocation of funds within the existing allocation. He felt that that was the red flag that the full Legislature needed to consider this proposal since it would affect already appropriated approved projects. Nancy Slagle, Director of Administrative Services, Department of Transportation and Public Facilities, stated that one of the reasons the State has done so well in receiving discretionary funds for the airport improvement programs is due to the relationship the State has with the Alaska Region of the FAA. They have been extremely supportive of efforts to improve the airports. The original RPL submitted in October asked for $3.7 million in additional authorization of top of an existing project on apron work that is going on at the Gustavus airport. In June of last year, an inspection of the airport determined that the runway was sorely in need of resurfacing and was a safety problem. The safety aspect was the reason the FAA was interested to get discretionary funds to apply to the resurfacing project. She said her understanding was that the other projects being funded from discretionary funds are already authorized. This proposal would not displace the funds for any of those projects. Sharon Devoe stated that she felt that it was important to stay with the process. This particular Gustavus runway rehab project was supposed to be scheduled for next summer, not this summer. It would have been included in the Legislative session this year, to happen next year. Unfortunately, as a result of that airport inspection, it was determined that the runway is deteriorating a lot faster than originally projected. Since it had become urgent to resurface the runway this year, it made sense to do it as the same time as the apron project was happening. The only way to get additional funding was to pursue discretionary funding. At this point, without the authority, the FAA may not have an opportunity to attain the additional $3 million. Ms. Devoe pointed out that the projects are being addressed with two different types of funding. The first is the ?? dollars which are here is Alaska and the amount designated is already set. The discretionary funding is a different source of money for which projects compete on a national basis. It is a different process that has a much shorter time frame in which to work. Sen. Halford asked if there are any other projects in Alaska that are funded with this same money and could compete within the Federal system for the same money. Ms. Devoe stated that unfortunately discretionary money is project specific. A project is described and then it must compete with airports of the same size across the country for similar type of projects. There are no substitutions. Sen. Halford asked if there were no other projects in Alaska that could be advanced to compete in that process. Ms. Devoe stated that no other project would meet the criteria for this set of discretionary funds. Sen. Halford stated that he is not opposed to work on the Gustavus airport. However, it is a very small community with a very large airport. There are many other communities in Alaska that are quite a bit larger whose airports are small. There are a lot of needs in aviation across the State. If there is no other way to capture the Federal funds, he is not against it. However, by the same token, he questioned why the choice of the Gustavus airport is ahead of communities who have much less in terms in airport and more in terms of population and need. Ms. Devoe (answered while the tape was being turned over. Her answer was not recorded) Sen. Pearce stated that she felt that the question revolved around who originally selected the project, the DOT or the FAA. Ms. Devoe stated that the choice comes from the users, from the FAA inspections, and from DOT in a combined effort. Sen. Pearce asked if there are forms to be filled out or how does this happen? Ms. Devoe stated that there is a process for meeting with users. In addition, there is also a process referred to as the Aviation Project Evaluation Board with members from each region who work with State-wide Aviation to go through all the projected needs and rank them in order of priority. Rep. Martin MOVED for APPROVAL of RPL 25-7-3284 subject to the availability of new, additional project-specific Federal funds which will in no way affect projects currently authorized by the Alaska Legislature through the normal Capital appropriation process. Mr. Greany explained that the approval would be subject to the condition that these are truly new, additional, project- specific funds that will in no way impair currently authorized projects that have been authorized by the Legislature through last year's appropriations. Sen. Halford then further clarified that the Department of Transportation can go ahead and apply for these funds. If unsuccessful in getting these funds, the approval is void and the proposal must come back and compete in the in-state process. The proposal does not become an approval that sits on the books at the head of the lists for next year's dollars. Mr. Greany confirmed that the project would be specific to the new found fund source. No further objections being raised, the MOTION was APPROVED. Rep. Martin asked that Mr. Greany keep the Committee advised on this particular project. RPL 05-7-0711 Education $7 million in Federal Receipts Rep. Martin stated that this reimbursement to the school districts where the money has already been appropriated for approximately $3 per meal. He MOVED for APPROVAL; no objections being raised, the MOTION was APPROVED. RPL 45-7-0158 University of Alaska $550,00 in University Funds for Partial Renovation of Sitka Campus Sen. Adams stated that $300,000 would be received from the City of Sitka and the balance of the money would borrowed. The timing is critical for construction completion for classrooms for classes on village sanitation. Sen. Adams MOVED for APPROVAL of RPL 45-7-0158. Sen. Halford OBJECTED, asking if the Committee was approving funds that have yet to be borrowed. Mary Lou Burton, Director of Budget for the University, stated that the funds have not been borrowed yet. The Board has authorized the campus authority to borrow up to $250,000 conditional upon getting Legislative authority to do that. She stated that the Committee was not approving a loan, but the ability to receive and expend the proceeds from that loan. That is normal procedure to come to the Legislature for that authority. In the past, this type of request is through the Operating Budget. However, it is not uncommon for the University to borrow funds for long-term equipment purchases. Mr. Greany concurred that there would not be any problem with this proposal. He said that concerns would arise if there was not a complete financing package. ?? Sen. Halford stated a concern that while the Committee has additional expenditure authority, if it is authorizing approval of the "other funds" such as the proceeds of a loan how would that go forward in large numbers. Mr. Greany stated that the time to be concerned is if there was not a complete financing package, which is not the case with this proposal. Sen. Halford stated that he had no objection so long as the Committee's vote is considered to be approval of a $550,000 expenditure. He did not wish to be on record as approving a loan that he did not know anything about. Sen. Adams AMENDED the original MOTION to APPROVE RPL 45-7-0158 to include the stipulation provided by Sen. Halford. No further objections being raised, the MOTION was APPROVED. Sen. Pearce MOVED that the Director of ?? OMB submit to the House and Senate Finance Committees as Supplemental requests the RPLs that were not dealt with by the Committee in this session. No objections being raised, the MOTION was APPROVED. SPECIAL AUDIT REQUESTS Sen. Halford MOVED for an audit of the performance of the oil industry following the Legislation of the last two years with regard to local hire, local procurement and local construction. Sen. Pearce asked if the MOTION focused on the things that have been improved in the last two years, or if the entire industry would be examined. Sen. Halford stated that he wished to examine the promise of improvement made by the oil industry in hire, procurement and contract construction. Sen. Halford MOVED to APPROVE the audit request; no objections being raised; the MOTION was APPROVED. Rep. Bunde MOVED for an audit of the compliance with the one percent Art and Public places, particularly by the University of Alaska, Anchorage, as well as the entire University program. No objections being raised, the MOTION was APPROVED. Chrm. Phillips reminded members that an audit request should be submitted to the Committee office at least 24 hours prior to the meeting. Mr. Welker stated that there were four other audit requests before the Committee. Rep. Martin MOVED that the Committee accept a report from the Task Force pertaining to facility charges for the airport and allow that report to be made public. Sen. Adams clarified that the airport IS NOT charging an extra $3.00 for landing fee. ?? Mr. Welker stated that the report indicates that there has been a great deal of discussion and opposition to a PFC. It states that it is the recommendation of the sub-Committee that this proposal go before the entire Legislature and through the Legislative process. Hearing no objections, Chrm. Phillips stated that the sub- Committees report would be released to the public. Sen. Pearce MOVED that the Committee APPROVE and ask Legislative Budget ?? to do the following audits: request by Sen. Donley for the Department of Law; request by Rep. Therriault for the Department of Commerce and Economic Development; Sen. Green for the Department of Natural Resources; Sen. Sean Parnell for the Department of Commerce and Economic Development. No objections being raised, the MOTION was APPROVED. EXECUTIVE SESSION Rep. Martin MOVED that the Committee enter into EXECUTIVE SESSION for a short review of confidential audits. No objections being raised the Committee then met in EXECUTIVE SESSION. REGULAR SESSION The Committee resumed REGULAR SESSION. FINAL AUDITS Sen. Adams MOVED for unanimous consent that the regular audit for DCED Board of Education Records be released to its respective agent. Upon response from the agent, the audit would be released to the public. No objections being raised, the MOTION was APPROVED. Sen. Adams MOVED for unanimous consent that the two audits of the Department of Labor, Determination of Prevailing Wages and the Department of Transportation, Alaska Marine Highway Inter-Port Differential Issues be released to their respective agents. Upon response from the agent, the audit would be released to the public. No objections being raised, the MOTION was APPROVED. ADJOURNMENT Chrm. Phillips adjourned the meeting at approximately 1:45 p.m. LBA 2/26/97 Page 12