HOUSE FINANCE COMMITTEE JANUARY 23, 1995 1:35 P.M. TAPE HFC 95 - 2, Side 2, #000 - end. TAPE HFC 95 - 1, Side 1, #000 - end. TAPE HFC 95 - 2, Side 2, #000 - end. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:35 P.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Mulder Representative Navarre Representative Brown Representative Parnell Representative Grussendorf Representative Therriault Representative Kelly ALSO PRESENT Mark Boyer, Commissioner, Department of Administration; Sharon Barton, Director, Division of Administrative Services; Margaret Pugh, Commissioner, Department of Corrections; Bob Cole, Director, Division of Administrative Services; Jerry Covey, Commissioner, Department of Education; Karen Rehfeld, Director, Division of Administrative Services; Nancy Slagle, Director, Division of Budget Review, Office of Management and Budget; Mike Greany, Director, Legislative Finance Division; Representative Irene Nicholia; Representative Ivan Ivan; Representative Con Bunde; Senator Lydia Green; Representative John Davies; Annalee McConnell, Director, Office of Management and Budget; Duane Guiley, Director, School Finance, Department of Education; Joe McCormick, Director, Postsecondary Education Commission, Department of Education; Representative Rokeberg; Jack Fargnoli, Policy Analyst, Office of Management and Budget; Jack Kreinheder, Policy Analyst, Office of Management and Budget; Brad Pierce, Policy Analyst, Office of Management and Budget. SUMMARY AGENCY OVERVIEWS: Office of Management and Budget Department of Administration Department of Corrections 1 Department of Education (*Copies of log notes, meeting tapes and handouts are on file with the Legislative Finance Division. Contact #465- 3795). Log # DISCUSSION OFFICE OF BUDGET AND MANAGEMENT Committee meeting to order at 1:35 P.M. MANAGEMENT AND BUDGET, introduced herself and provided the Committee with a brief overview of her experience. Ms. McConnell introduced staff who would be working with her through the Office of Management and Budget. BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, introduced the budget analysts and explained their agency assignments. with a handout which explained the preliminary draft of the fiscal model being developed by Office of Management and Budget (OMB). [Copy on file - Attachment #1]. reflect decisions made by the Knowles Administration. The Department would illustrate the potential fiscal gap in the absence of budget or revenue adjustments, and the fiscal effects of relying on reserve funds to balance the budget. deadline for the FY96 budget was February 14, 1995. approved last spring plus the estimated supplementals totaling approximately $80 million dollars. The proposed FY96 operating budget is the Hickel proposed. 2 That projection would be updated when the Knowles Administration amendments are presented. budget proposed by the Hickel administration had included an inflation percentage and would it be carried forward into Governor Knowles proposed budget. Ms. McConnell responded that the inflation rate would be determined by the Department of Revenue. She added that Attachment #1 established a $3.85 inflation rate. information regarding the proposed FY95 supplementals. Discussion followed regarding the Executive Budget Act. Management and Budget was completed. DEPARTMENT OF ADMINISTRATION ADMINISTRATION, provided the Committee with a handout explaining the functional organization of that Department. [Copy on file - Attachment #2]. The FY96 major issues facing the Department of Administration are labor contract negotiations, citizen's foster care review sunset, state cash flow, statewide telecommunications network, 40 hour workweek, Kenai microwave, participant directed supplemental benefits system, public employee's retirement system (PERS), labor relations staffing level and the RATNet funding. organized work force of 20,000 employees. Department of Administration (DOA) would support the labor agreements from the previous Administration and the Early Retirement Incentive (RIP) program. 3 would support the labor agreements. He added that Governor Knowles would review the past RIP program to determine if future consideration would be profitable to the State. HFC 3 - I Commissioner Boyer added that a profitable RIP #000 program would need to be appropriately managed. Representative Mulder advised that such a program would work if jobs were eliminated. was the plan of DOA to implement the 40 hour work week. Commissioner Boyer advised that the cost would exceed $6 million dollars although the concept was being reviewed by the Administration. members regarding labor contracts. with a copy of the Departmental Subcommittee Chair assignments. [Copy on file - Attachment #3]. of Administration was completed. DEPARTMENT OF CORRECTIONS OF CORRECTIONS, distributed a handout providing fiscal facts from the Department of Corrections. [Copy on file - Attachment #4]. She added that current problems in the Department are occurring nationwide as incarceration rates and crime rates have soared. Department has temporarily bought time with the out-of-state transfers. decision for out-of-state transfers would be a temporary or long term 4 remedy. Representative Mulder asked the intent for Operation Hope (Pt. McKenzie). of beds at Pt. McKenzie would provide a stop-gap measure for current overcrowding. out-of-state prisoners included coverage for the operation and debt service. Commissioner Pugh pointed out that cost for the out-of-state prisoners would not include large medical costs. Discussion followed. prisoners with major medical problems have been screened out of the transfer program. thousand dollar supplemental proposed by Governor Hickel for the Department. Commissioner Pugh stated that the authorization to spend those funds for community residential cites had been approved. BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, provided information regarding past year funding allocations determined by the Hickel Administration. classification policies would be changed. Commissioner Pugh replied they would be reviewed and adjusted by the Department. Representative Parnell recommended that classification be liberalized to make adjustments for overcrowding. HFC 3 - II Commissioner Pugh responded to Committee emergency capacity of state prisons. concern with the aging prison population 5 and the costs associated with them. the FY96 agency overview. DEPARTMENT OF EDUCATION EDUCATION, distributed the overview for the Department of Education (DOE). [Copy on file - Attachment #5]. He discussed the significant issues of the Department. school districts; funding for school construction and maintenance projects; potential liability to pollution at REAA school sites; development and implementation of student performance standards and assessment to coincide with national Goals 2000 school reform initiative; non-public pupil transportation; access to education through technology; Alaska Youth: School to work transition; and the "Healthy Start" for all children entering school. Committee with information regarding the non-pupil transportation costs. [Copy on file - Attachment #6]. to the State for non-pupil transportation and private versus public school controversy. DEPARTMENT OF EDUCATION, spoke to the reauthorization of the Federal Education Act, established in federal statute, October, 1994. Commissioner Covey noted that reauthorization intent would be to force states to discontinue federal funding by narrowing the funding gap. EDUCATION COMMISSION, DEPARTMENT OF EDUCATION, explained that the Post Secondary Division was responsible for the Alaska Student Loan Program and 6 Alaska Post Secondary Program. Both of the programs are funded through appropriated receipts. long term loan program and pointed out that it is currently suffering from the past "forgiveness" clause which was eliminated in 1986. other states have addressed the problem. Mr. McCormick replied that most other states provide student loan funding through the federal government. members regarding the liability of the student loan program. testimony on the FY96 Agency Overview. Finance Committee at 3:45 P.M. ADJOURNMENT The meeting adjourned at 3:45 P.M.