HOUSE FINANCE COMMITTEE March 8, 1993 1:34 p.m. TAPE HFC 93-39, Side 2, #000 - end. TAPE HFC 93-40, Side 1, #000 - end. TAPE HFC 93-40, Side 2, #000 - 516. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 1:34 p.m. PRESENT Co-Chair Larson Co-Chair MacLean Representative Martin Vice-Chair Hanley Representative Navarre Representative Brown Representative Parnell Representative Foster Representative Therriault Representative Grussendorf Representative Hoffman was absent from the meeting. ALSO PRESENT Representative Barnes; Representative Ulmer; Representative Vezey; Representative Davidson; Mike Greany, Director, Legislative Finance Division; Darrel J. Rexwinkel, Commissioner, Department of Revenue; Lloyd F.Hames, Commissioner, Department of Corrections; Mel Krogseng, Legislative Staff, Representative Barnes; Joan Kasson, Fiscal Analyst, Legislative Finance Division; Michael Dindinger, Criminal Justice Planner, Department of Corrections. SUMMARY INFORMATION HB 55 "An Act making appropriations for the operating and loan program expenses of state government and to capitalize funds; and providing for an effective date." SUBCOMMITTEE CLOSEOUTS: REVENUE CORRECTIONS Co-Chair Larson announced that the Legislative Council has proposed cutting the contract for the Legislative Reporting Service unless a portion of the contract is paid for by the House and Senate. The total cost of the current contract is $80,000 thousand dollars. He asked that members contact his 1 in regards to their utilization of the report. DEPARTMENT OF REVENUE The Department of Revenue, House Finance Subcommittee consists of Chair Representative Martin with members Representatives Vezey, Kott, Grussendorf and Brown. Representative Martin provided members with a summary sheet of the Department of Revenue, House Finance Subcommittee's closeout recommendations (Attachment 2). Representative Martin observed that the Department of Revenue receives the least general fund monies but is the "lifeline of revenues for the whole state." Representative Martin MOVED to INCORPORATE the House Finance Subcommittee's recommendations for the Department of Revenue. Representative Navarre OBJECTED. Representative Martin reviewed the Subcommittee's recommendations. He reflected that the FY 93 authorized budget was $101,489.7 million dollars. Representative Martin noted that Charitable Gaming is being transferred to the Department of Revenue from the Department of Commerce and Economic Development. The Department's budget will be inflated by $681.4 thousand dollars by this transfer. Representative Martin discussed decrement recommendations by the Subcommittee: * Treasury Management - <5,690.4 million dollars> This would reduce the Department's program receipt authority by $5,690.4 million dollars. This represents excess authority for investment management fees. Representative Martin argued that the Department can present a request for increased program receipt authority from the Legislative Budget and Audit Committee if the need arises. He asserted that the reduction gives a truer picture of the cost of government. * Travel - 7 percent across the board reduction * Child Support Enforcement - <44.6 thousand dollars> This reduction would result in the closure of the 2 Juneau and Fairbanks offices. There would be an additional $86.6 thousand dollar reduction in matching federal funds. * Oil and Gas Litigation Audit - <$114.8 thousand dollars> This reduction would be taken from the front section of the budget. * Letter of Intent - Administration and Support "It is the intent of the legislature that the Department of Revenue delete all unfunded PCN's." Representative Martin noted that the Subcommittee received a request to reinstate five positions deleted from the FY 93 Operating Budget. The Subcommittee did not consider the request. Representative Martin explained that he felt the entire House Finance Committee should consider the request. He observed that there is a request in the supplemental to begin implementation of the positions. Representative Martin pointed out that other amendments by Representative Brown were not considered by the Subcommittee. Representative Navarre asked that Commissioner Rexwinkle comment on reductions to the Division of Oil and Gas Litigation Audit. DARYL REXWINKLE, COMMISSIONER, DEPARTMENT OF REVENUE explained that the Department of Revenue requested $414.5 thousand dollars in the front section of the budget to offset the reduction taken in the back section of the budget. He stressed that the Department needs "every dollar" to continue with the audit function and collection of back taxes. The Department also submitted a budget amendment to restore the back section of the budget to the FY 93 funding level. The amendment would reduce the front section of the budget by $149.0 thousand dollars. He stressed that the Division of Income and Excise Audit and Oil and Gas Audit collect the majority of the State's revenues. He emphasized that there are still a lot of back taxes on the books. He pointed out that the Department of Revenue needs appropriate staff in order to aggressively pursue back taxes. Representative Hanley asked for further clarification of the budget amendments. Commissioner Rexwinkle explained that the amendment would: 3 * Add $297.0 thousand dollars - Income and Excise Audit This would include five positions. * Add $338.0 thousand dollars - Oil and Gas Audit This would add 4 positions and contractual services of $68.5 thousand dollars. * The front section would be reduced by $149.5 thousand dollars * This would result in a net increase of $485.5 thousand dollars. In response to a question by Representative Hanley, Commissioner Rexwinkle explained that the front section would only contain contractual costs. Representative Hanley wondered why contractual costs are not contained in the main section of the budget. Commissioner Rexwinkle stated that the contractual costs are on an annual basis. He noted that the Department has also submitted a supplemental request. Co-Chair Larson summarized that the Department transferred $414.0 thousand dollars from the back section to the front section of the operating budget. He noted that the Subcommittee is recommending that this amount be reduced by $114.0 thousand dollars and transferred to the back section of the budget. He suggested that the Committee would need an amendment to transfer the funding. Representative Martin agreed that the contractual should remain in the front section. Representative Brown maintained that the Divisions of Income and Excise Audit and Oil and Gas Audit have been seriously under-funded. She asserted that every dollar cut from these divisions cost the State $10 dollars in uncollected revenues. She reminded members that testimony by the Department indicated that the Divisions are near the statute of limitations in bring cases to court. She emphasized that the Department would need an additional $1 million dollars to bring cases to current. She observed that the Subcommittee did not consider the Department's amendment for $485.0 thousand dollars. She summarized that the Department needs an additional $1.5 million dollars in order to collect taxes owed to the state and to keep the programs current. She stressed that money should not be reduced from the "bread butter" of the State. 4 Representative Martin spoke in support of the Subcommittee's decision to bring amendments before the full committee. He asserted that the State has made money from settlements because of the current administration. Representative Brown noted that current settlements were initiated in previous years. Representative Brown reiterated that the Subcommittee did not take up the Administration's amendments. Representative Brown referred to the Subcommittee's proposed reduction to Child Support Enforcement. She noted that the Subcommittee's proposed reduction will result in the loss of federal receipts in excess of the reduction. She asserted that the State of Alaska will pay more in AFDC payments as a result of payments that will not be collected. Representative Brown spoke against the reduction of program receipt authority and travel in the Treasury Management component. She observed that the new investment boards need to educate their members. She pointed out that the value of the portfolio determines investment management fees. She asserted that it will cost the State to pay for staff to petition the Legislative Budget and Audit Committee. Representative Grussendorf spoke against the closure of Juneau and Fairbanks Child support offices. He emphasized that the program is a service that is difficult to replace by mail. Representative Navarre discussed the subcommittee closeout process. Co-Chair Larson explained the subcommittee closeout process. Representative Therriault asked for a clarification of reductions to the Child Support Enforcement component. Commissioner Rexwinkle explained that the federal government pays the majority of the program's costs. Two positions will be eliminate; one from Juneau and one from Fairbanks. The offices will be closed. The caseloads will be transferred to Anchorage without additional positions. Co-Chair Larson reiterated the motion to INCORPORATE the Subcommittee's recommendations for the Department of Revenue into HB 55. Representative Navarre OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Foster, Hanley, Grussendorf, Martin, Parnell, Therriault, MacLean, Larson OPPOSED: Navarre, Brown 5 The MOTION PASSED (8-2). DEPARTMENT OF CORRECTIONS The House Finance Subcommittee on the Department of Corrections consists of Chair Representative Barnes with members Representatives Green, Parnell, Ulmer and Brown. Representative Barnes provided members with backup materials on the Subcommittee's recommendations and findings (copy on file). Representative Barnes noted that the Governors proposed FY 94 budget for the Department of Corrections is $123,963.0 millon dollars. The Subcommittee's recommendation is $115,831.8 million dollars. She observed that the Subcommittee's proposed budget is $4.571.6 million dollars above FY 93 authorized (without supplementals). Representative Barnes discussed the FY 93 reduction plan. She referred to the Alaska Department of Corrections' FY 93 Budget Reduction Plan (Attachment 2). She asserted that the documentation demonstrates that department officials attempted to circumvent the legislative process. She alleged that there was not an attempt to carry out the FY 93 budget agreement as agreed upon by the Conference Committee. She observed that the original plan agreed to by the House was that the 6th Avenue, Anchorage and Palmer facilities be closed. Representative Barnes noted that the plan was changed in the Senate. She referenced a memorandum by Richard Franklin. She observed that the memorandum states that, "Wildwood is our oldest facility in terms of age of buildings. Considerable upgrade is needed. The Master Plan will, it appears, recommend increasing the core capacity of the facility to enable us to take advantage of additional bed space potentially available there." Representative Barnes alleged that the State of Alaska could reduce the daily cost of housing prisoners from $122.87 hundred dollars to $45.00 dollars a day, by sending prisoners out-of-state. She noted that health care is included in the out-of-state cost. Representative Barnes was informed that the State of Alaska owns the Wildwood facility. She stated that she was not aware that legislative approval was given for the purchase of the facility. She asserted that the Legislature never adopted the Master Plan. Representative Barnes noted that the Department of 6 Administration managed the Wildwood lease. The lease was transferred to the Department of Natural Resources. The lease was latter transferred to the Department of Natural Resources. (Tape Change, HFC 93-40, Side 1) Representative Barnes observed that the purchase of the Wildwood facility was over $10.7 million dollars. According to AS 36.30.080 leases of over $10 million dollars must obtain legislative approval. She noted that the sale of Wildwood was divided into two bond issues. An additional 117 acres of land was purchased for $2.2 million dollars. The Department of Environmental Conservation and the Department of Law warned that the site is contaminated and that purchased buildings contained asbestos. She asserted that the purchase of Wildwood is a clear circumvention of the legislative process. Representative Barnes emphasized that Department of Corrections Finance Subcommittee has maintained that no new facilities be constructed. She stressed that a 20 bed wing is being built on to the Spring Creek facility. The addition to Spring Creek will be used to house misdemeanor offenders that will perform maintenance work on the facility. Representative Navarre felt that the Department was justified in their actions. He urged members to read the provided documents. He reiterated that a memorandum by Richard Franklin stated that: "The Master Plan will, it appears, recommend increasing the core capacity of the facility to enable us to take advantage of additional bed space potentially available there... At a latter date, then, Wildwood can be reopened as an enlarged, more efficient operation and other facilities downsized accordingly if state wide population allow." Representative Barnes emphasized that the legislative branch must be aware of what is being done in its name. She directed members to materials provided in backup packages. Representative Barnes informed members that inmate health care has been separated into its own BRU. She discussed inmate health care. She noted that in some instances inmate health care is performed through contract. She asserted that one contractor does not have an Alaska business licence. She alleged that the State is not receiving 50 cents on the dollar for inmate health care. She gave examples of health care costs. Representative Barnes directed members to backup material on 7 out-of-state placement. She reiterated that the State of Alaska spends $122.87 dollars per day for in-state prisoner placement. She maintained that the State would spend $45.00 dollars a day for prisoners out-of-state. She added that $45.00 dollars a day includes transportation and health care costs. MEL KROGSENG, LEGISLATIVE STAFF, REPRESENTATIVE BARNES provided members with a component summary of the Department of Corrections and a Subcommittee Transaction Summary for the House (Attachment 3). She reviewed Attachment 3. * Office of the Commissioner - <$361.9 thousand dollars below the Governor's proposed> New positions were deleted. Travel was reduced by 50 percent. The Special Assistant position was deleted. A Special Assistant position was transferred from Statewide Programs to administer Project Hope. Contractual was reduced to FY 93 CC level. * Parole Board - <$28.3 thousand dollars below the Governor's proposed> * Correctional Academy - $325.8 thousand dollars This is the same funding level as the FY 93 level funded in the Department of Administration. . * Administrative Services - $2,728.9 million dollars Several new positions were denied. The Directors position was deleted. The Efficiency Analyst position was moved from the Office of the Commissioner to oversee the Division of Administrative Services. * Data and Word Processing - $3,347.7 million dollars Computer equipment requests were denied. They will be looked at in the capital budget. * Statewide Programs - $7,078.0 million dollars * Inmate Health Care - $14,205.6 million dollars This includes funding for personnel in institutions. * Correctional Industries Administration - $975.1 8 thousand dollars In response to a question by Co-Chair MacLean, Ms. Krogseng clarified that Inmate Health Care includes an increase of $104.2 thousand dollars for 204 outside inmates at a cost of $1.4 per day. She added that the cost of inmate care per day in the State of Alaska was over $6 a day in 1988 or 1989. * Institution Director's Office - $521.8 thousand dollars * Out-of-state Contractual - $4,558.1 million dollars * Transportation - $679.9 thousand dollars * Facilities Capital Improvement Unit - $135.2 thousand dollars Ms. Krogseng outlined appropriations for facilities as listed on Attachment 3. She noted that there will be an increase in institutional facilities of just under $1 million dollars over FY 93 Authorized. * Community Corrections Director - $726.8 thousand dollars * Northern Region Probation - $2,505.1 million dollars * Southcentral Region Probation - $3,979.3 million dollars * Southeast Region Probation - $674.4 thousand dollars Ms. Krogseng noted that the Department's total budget is $115,831.8 million dollars. Co-Chair Larson asked where the chaplin program is funded. Ms. Krogseng noted that the Department requested a new program coordinator for chaplin services in the amount of $67.0 thousand dollars. The request was denied. Co-Chair MacLean noted that the House Transaction Summary lists the reopening of the Wildwood facility. Ms. Krogseng explained that the amount listed was the Governor's request to reopen the facility. The Subcommittee has reduced the budget by more than this amount. The Subcommittee is recommending that the facility be used for pretrial only. 9 Co-Chair MacLean questioned the type of offender that would be transferred out-of-state. Representative Barnes replied that medium security offenders would be transferred. She added that the State of Alaska classification system is higher than other parts of the country. High risk offenders in the State of Alaska may be classified as medium risk in other States. The Minnesota State classification system would be used in determining which prisoners would be transferred as medium security. Representative Martin asked if federal prisoners would be given first priority for transfer. Representative Barnes noted that there are approximately 90 federal prisoners. She thought that the majority of prisoners transferred would be state prisoners. She alleged that 40 percent of the inmate population is from out-of-state. Representative Martin asked how much the Cleary case has contributed to the health care cost of prisoners. He questioned if the Cleary Case should be challenged. Representative Barnes referred to Russ vs. State. The case states that the standard to be used for medical care in institutions, essential care. She pointed out that the Governor vetoed the language. She added that the State's standards go beyond Cleary. She felt that the State should go back to court to challenge Cleary. Representative Parnell MOVED to INCORPORATE in to HB 55, the Department of Corrections Subcommittee report as outlined in the Transaction Summary, dated March 7, 1993. Representative Navarre OBJECTED. Representative Ulmer provided members with a memorandum to the Co-Chairs, dated March 8, 1993 (Attachment 4). She reviewed her memorandum. She maintained that the Department of Corrections was under-funded in FY 93. Representative Ulmer disputed statements that the Department did not try to comply with legislative directives. She felt that the Department tried to adjust to a more realistic level of expenditures, make more use of community corrections and find efficiencies. She asserted that the former Commissioner's departure and delay in appointment hindered the Department's ability to implement programs. Representative Ulmer felt that the Subcommittee's proposed reductions are based on assumptions that are not good public policy. She referred to the proposal to send inmates out- of-state. She noted that the average daily cost per inmate at Wildwood is $76 dollars. The average daily out-of-state cost is $52 dollars. She noted that the institution that the Subcommittee proposes to send inmates to is in 10 Minnesota. The facility is not yet open. She asserted that the cost of operation at the new facility is unknown. Representative Ulmer asked whether it is good state policy to export jobs. She noted that the decision to export fundamental public services to other states is a major public policy question. She noted that transferring inmates will cause hardship to inmate families. She emphasized the impact of jobs lost in the Kenai area. Representative Ulmer addressed the Training component. She noted that the Alaska Police Standards Council has strict requirements in regards to correctional, probation and parole officers. She felt that this component was under- funded in FY 93. Representative Ulmer felt that the Administration Component is being under-funded. She emphasized that the budget is below the FY 93 level. She stressed that management problems will be worsened by the lack of support services. Representative Ulmer expressed concern that rehabilitation programs are not being emphasized. She stressed that inmates must get job training and education in order to assure that they will not reoffend. She observed that recommendations made in a study to the Department of Corrections have been ignored. Representative Ulmer asserted that the Subcommittee's proposed budget will worsen the current problems. Representative Barnes clarified that the average cost of inmate care in the State of Alaska is $122.87 dollars a day. The Appleton, Minnesota facility is a public facility. The Subcommittee has been assured by the Minnesota facility that a contract for $45 dollars a day can be reached. (Tape Change, HFC 93-40, Side 2) Representative Barnes emphasized that the Minnesota facility is well built, up to date, with educational and recreational facilities. She reiterated that the Department of Corrections' budget is almost $5 million dollars above FY 93. She noted that the previous Commissioner had closed Wildwood and was making an attempt to implement the community correction programs. Representative Barnes restated issues and concerns regarding the direction of the FY 93 budget. She alleged that, "money is not an object, became the call word of the day." Representative Brown agreed that there has been a lack of 11 leadership in the Department of Corrections. She spoke in support of the current leadership. Representative Brown referenced, "Department of Corrections, Briefing Paper on the Transfer of Prisoners to out-of-state facility," (copy on file). She pointed out that population figures which the charts were based on are incorrect. MICHAEL DINDINGER, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF CORRECTIONS agreed that the charts were compiled with incorrect assumptions. He emphasized that the Department is over emergency caps in 10 of 12 facilities. Representative Barnes pointed out that inmate placements are mixed. Misdemeanor, maximum and medium security inmates are housed together. The use of guards could be more efficient if misdemeanor offenders were not housed with high security offenders. Representative Navarre stressed that the overall administrative cost should include out-of-state offenders in order to be more accurate. He added that the daily average cost of Wildwood would be $59 if it housed 204 inmates. He pointed out that the pretrial facility is the most expensive. He asserted that it does not make sense to close Wildwood. He agreed that the Department of Corrections has been mismanaged. He emphasized the need to concentrate on current obligations to assure that the Department is run efficiently. He spoke in support of legislative oversight but emphasized that management of government is the prerogative of the executive branch. He spoke in support of the changes made by the Department. He pointed out that the Department is attempting to accomplish a mission that was put to them within budget constraints. He noted that sentencing changes that could ease some of the problems of the Department have not been changed. He asserted that the Legislature, in some cases, forced the Department into making decisions more hurriedly than they would like. He felt that the Department tried in good faith to accomplish their directives. Representative Barnes emphasized that the State has reached the point that necessitates the proposals of the Subcommittee. She asserted that the Legislature must build on what it can afford in the future. She felt that the Subcommittee's proposed budget is built on what the State can afford in the future. Representative Martin spoke in support out-of-state placements. He thought that some inmates that are out-of- state residents would be closer to families. 12 Representative Navarre questioned data that concluded that 40 percent of the inmates are from out-of-state. He asked if the inmates were residents at the time they committed their crime. He agreed that inmates born out-of-state may account for 40 percent. Representative Barnes noted that a inmate survey listed the Fairbanks facility as the favored place of incarceration. Representative Ulmer asked for substantiation of statistics stating that 40 percent of Alaskan inmates are from out-of- state. She noted that the statistics are not consistent with those of the Alaskan Sentencing Commission. Representative Grussendorf suggested that the Wildwood facility will be needed within a couple of years. He emphasized that state employees at the Wildwood facility will be adversely affected by the closure. He thought that the State will probably have to send prisoners out-of-state as well as open Wildwood. Representative Navarre asked that Commissioner Hames address the problems of contamination at Wildwood, cost savings that will result from the purchase of Wildwood and the per day cost of the Wildwood facilities as compared to other facilities of the State. He asserted that Wildwood would not be the most appropriate facility for closure. He noted that the facility was partially closed in 1992 for repairs. He also asked that the Commissioner address the effect of the Subcommittee's proposed budget on the Department. LLOYD J. HAMES, COMMISSIONER, DEPARTMENT OF CORRECTIONS expressed his appreciation for the work of the Subcommittee. Commissioner Hames stated that he will provide cost comparisons to the Committee. Co-Chair MacLean asked why contaminated property was purchased. Commissioner Hames could not answer. He mentioned the possibility of federal indemnification. Representative Barnes explained that the Core of Engineers has been charged with clean up of old military sites in the State of Alaska. Four to seven hundred sites have been identified. Due to funding no sites have been completely cleaned. Representative Navarre asked the assessment of the current Wildwood facility and what the cost would be to replicate Wildwood with a new facility. Commissioner Hames stressed that the cost of Wildwood is difficult to ascertain since the purchase of the Wildwood facility was accompanied by additional buildings. Representative Navarre asked that the 13 Commissioner supply the Committee with justification of the purchase. Representative Brown asked if the Commissioner will be able to implement community alternatives with the current budget proposal. Commissioner Hames admitted that it will be difficult but assured her that it is his intention to stress community alternatives. He referenced statistics of inmate population contained in the master plan. He emphasized that alternative punishments are vital to combat a growing inmate population. Representative Martin asked if Alaska pampers inmates. He asked if medical coverage should be reduced. Commissioner Hames replied that he shares concerns over the cost of medical care. He stated that all states feel that prisoners are too well cared for. He noted that he must comply with the law. He emphasized that bootcamps could be used for appropriate offenders. Alternatives such as bootcamps would not have to have all the apparatus of other facilities. Representative Grussendorf asked if the State would be responsible for extra major medical care for out-of-state placements. Representative Barnes replied that inmate care within the facility would be covered. Major medical care would be the responsibility of the State of Alaska. She emphasized that medical care in Minnesota is less expensive. Co-Chair Larson reiterated the motion to INCORPORATE into HB 55 the Department of Corrections Subcommittee's recommendation. Representative Navarre reiterated his OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Brown, Grussendorf, Hanley, Martin, Parnell, Therriault, Larson, MacLean. OPPOSED: Navarre The MOTION PASSED (8-1). HB 55 was HELD in Committee. ADJOURNMENT The meeting adjourned at 3:43 p.m. 14