HOUSE FINANCE COMMITTEE FEBRUARY 16, 1995 1:45 P.M. TAPE HFC 95 - 22, Side 1, #000 - end. TAPE HFC 95 - 22, Side 2, #000 - end. TAPE HFC 95 - 23, Side 1, #000 - #075. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:45 P.M. PRESENT Co-Chair Hanley Representative Kohring Representative Martin Representative Therriault Representative Brown Representative Kelly Representatives Grussendorf, Parnell, Mulder, Foster and Navarre were not present for the meeting. ALSO PRESENT Mike Greany, Director, Legislative Finance Division; Nancy Slagle, Director, Division of Budget Review, Office of Management and Budget; Representative John Davies; Michael Nizich, Director, Division of Administrative Services, Office of the Governor; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Mike McMullen, Acting Director, Division of Personnel, Department of Administration; Eric Swanson, Budget Analyst, Division of Administrative Services, Department of Administration; Brant McGee, Director, Office of Public Advocacy, Department of Administration, (Testified Via Teleconference); John Salemi, Director, Public Defender, Public Defender Agency, Department of Administration, (Testified Via Teleconference); Richard Pegues, Director, Division of Administrative Services, Department of Law; Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law; Robert Baratko, Director, Division of Administrative Services, Department of Revenue; Mary Sutton, Finance Officer, Division of Administrative Services, Department of Revenue. SUMMARY HB 137 An Act making supplemental appropriations for operating expenses of state government for fiscal year 1995; and providing for an effective date. 1 HB 137 was HELD in Committee for further discussion. HOUSE BILL 178 "An Act making supplemental and special appropriations for the expenses of state government; making and amending capital and operating appropriations; and providing for an effective date." Following comments by Co-Chair Hanley, Representative Brown asked if it was procedurally correct for the Committee to consider HB 178. She pointed out no public notice had been given and that the public should be given the opportunity to testify. Co-Chair Hanley reassured the Committee that the public would be given the opportunity to comment on that legislation. HOUSE BILL 137 "An Act making supplemental appropriations for operating expenses of state government for fiscal year 1995; and providing for an effective date." Co-Chair Hanley provided the Committee with a copy of the Governor's FY95 Supplemental Requests update, 2/15/95 (2:45 P.M.). [Attachment #1]. NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, advised that Office had received confirmation on federal participation for the flood disaster in the amount of an 85% federal share toward the public assistance portion. OFFICE OF THE GOVERNOR MICHAEL NIZICH, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, OFFICE OF THE GOVERNOR, addressed Section #1, Division of Elections request in the amount of $212.2 thousand dollars to cover additional costs resulting from the Governor's race in the amount of $77 thousand dollars. Also unbudgeted was overtime costs in the amount of $48 thousand dollars. He added, the primary request resulted from an in-house ballot tabulation system request in the amount of $170 thousand dollars. Mr. Nizich noted that at the beginning of the fiscal year, the in-house tabulation system began from a request through the Office of the Lt. Governor. The system network was run in an effort to achieve better functioning of the mainframe for ballot counting. Representative Brown voiced that the system had not been an improvement and asked for a break- 2 down of the system costs. Representative Therriault asked the impact to that component without supplemental funding. Mr. Nizich replied, that the Division has a current court order to oversee two REA elections and there is a $30 thousand dollar need for mailings due by the end of the year for which the Division is obligated. DEPARTMENT OF ADMINISTRATION Ms. Slagle addressed Section #2, the Department of Administration's request in the amount of $36.7 thousand dollars for RATNET to maintain full-year service. She noted that the Legislative Budget and Audit Committee (LBA) has given approval in the amount of $20 thousand dollars. Co- Chair Hanley asked if there would be an update on the status of the three week layoff due to the cable break. SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, explained that the breakdown will save the State money, although the figure is not currently available. The rebate will reduce the supplemental request. Without the supplemental approval, RATNET would be off the air approximately two weeks. Representative Kohring asked if RATNET was an essential service. Ms. Barton advised that RATNET is a critical service which keeps rural Alaska informed. Representative Brown added, RATNET is a portion of the emergency broadcasting system available to village Alaskan communities. BRANT MCGEE, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, OFFICE OF PUBLIC ADVOCACY, DEPARTMENT OF ADMINISTRATION, testified in support of Section #3 supplemental request in the amount of $530 thousand dollars for the Office of Public Advocacy (OPA) to maintain services. The request will be exclusive to cover supplemental costs for the current caseload in that Office. JOHN SALEMI, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, PUBLIC DEFENDER, PUBLIC DEFENDER AGENCY, DEPARTMENT OF ADMINISTRATION, testified in support of Section #4 supplemental request in the amount of $125 thousand dollars for the Public Defender Agency to maintain services. Last year, FY94, the Agency represented 17,000 cases with fifty- eight lawyers on staff. He pointed out that many of the expert witnesses required to be used in serious felony cases must come from out-of-state. Also, there are no labs in Alaska that can provide DNA testing. Mr. Salemi asserted that the State's high case load requires additional funding. Representative Brown asked if the FY95 budget was underfunded. Mr. Salemi emphasized that it had been. 3 Ms. Barton spoke to Section #5 supplemental request in the amount of $37.5 thousand dollars for Elective Public Office Retirement System (EPORS), retirement of one legislator and increased insurance costs. That person was eligible on February 1, 1995 and that request would cover costs for that person. The remaining funds would cover the increased 3% health insurance costs covered for the program. Representative Therriault requested further information on that program. ERIC SWANSON, BUDGET ANALYST, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, noted that the edibility for the 3% health insurance increase would be negotiated on a month by month basis. Ms. Barton added, the cost for the retiree would amount to $2500 dollars per month, which would include health insurance costs. Mr. Swanson reiterated, $26 thousand dollars of the request would go toward health insurance costs; the remainder would cover the newly retired person. Ms. Barton spoke to Section #6 supplemental request in the amount of $93.0 thousand dollars for leasing and those increased costs with current leases. She added, the long term revenue generated for the State would be $19 million dollars cost savings. This year was a $1.7 million dollar cost savings. Ms. Barton proceeded with Section #7 supplemental request in the amount of $49.5 thousand dollars, Alaska Public Offices Commission (APOC) costs for a full APA hearing in the case, State versus Gravo. That hearing must be accomplished by June 14, 1995, and the cost estimates for the hearing officer was provided by the Department of Law. Representative Brown questioned if those costs could be absorbed by a current employed attorney addressing the case. Ms. Barton replied that APOC has no one qualified on staff to direct that hearing. APOC has been advised by the Department of Law that a professional attorney should be hired; this case will establish a precedent in that area. Ms. Barton concluded, Section #8 of the supplemental request for the amount of $139.6 thousand dollars, Division of Personnel/Labor Relations which would reduce backlogged arbitrations. The Division has currently been challenged by the courts to deal with the arbitration backlog. The Division has developed a five point plan. Additional staff and funds are needed to address with the current crisis. Six new positions are being requested. Ms. Barton stated the claims are labor contract issues by employees against their employer. 4 MIKE MCMULLEN, ACTING DIRECTOR, DIVISION OF PERSONNEL, DEPARTMENT OF ADMINISTRATION, advised that some of the cases date back to FY89. He added, the cases have been prioritized according to State liability. Representative Brown asked if the requested positions would be temporary hires. Mr. McMullen responded that based on the volume of work during the past eleven years, six new positions appear to be needed in order for the Department to function adequately, henceforth. Representative Kelly asked why the request was placed in the supplemental budget rather than the FY96 operational budget. Mr. McMullen replied that there are currently more cases than the division can process. The supplemental appropriation could allow the division to start the process by April 1, 1995 rather than waiting until July 1, 1995. Ms. Barton pointed out that the Division has been criticized by the State court for not addressing the issue earlier. (Tape Change, HFC 95-22, Side 2). DEPARTMENT OF LAW BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW, testified in support of Section #9 in the amount of $1.8 million dollars for the Weiss versus the State of Alaska case. This amount would cover projections for the plaintiff costs in the Mental Health Lands Trust case. Co-Chair Hanley asked if the State was paying for both sides of the case. Ms. Ritchie stated that the cost request are anticipated on the basis that the court will uphold the settlement. RICHARD PEGUES, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF LAW, noted that the amount at the time of appeal was $893 thousand dollars. The amount that has been approved for the non settling plaintiffs was $872 thousand dollars; the amount for the settling plaintiffs was $312 thousand dollars. [Attachment #2]. Ms. Ritchie testified in support of Section #10 in the amount of $500 thousand dollars to be used for the U.S. Department of Health and Human Services to fund judgments to settle outstanding claims for FY93 & FY94 resulting from inappropriate charges made for cost allocation plans. Ms. Ritchie spoke to Section #11 in the amount of $494 thousand dollars for Judgments and Claims for various cases before the State with the exception of the Weiss case. Ms. 5 Ritchie provided a breakdown of judgments to the Committee. [Attachment #3]. Ms. Ritchie explained Section #12 in the amount of $50 thousand dollars litigation costs associated with the challenge to the '94 elections. This request would cover attorney fees resulting from recent litigation. Representative Therriault questioned the hourly rate paid to the attorneys in question. Mr. Pegues advised that rate varied between $80 per hour - $106 per hour. DEPARTMENT OF REVENUE ROBERT BARATKO, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE, spoke to Section #13, in the amount of $33.8 thousand dollars for the Charitable Gaming task force meetings. The request is dictated by the requirement of the Department to support a thirteen member task force appointed by Governor Knowles to address Charitable Gaming. The expenses include the travel, per diem, and the administrative support system. Co-Chair Hanley pointed out that the new Governor had appointed the task force to address this concern. Mr. Baratko noted that the task force was organized to survey charitable gaming in the State in order to insure that the charities received the appropriate amount of revenues from the amount generated from gaming. Representative Brown asked if a task force was the most appropriate way to gather the needed information. Mr. Baratko advised that there are a number of regulations that are in court at this time pertaining to audit capabilities and requests for information from the operators. He added, the function of the task force will be to review the regulations. Mr. Baratko continued, the members of the task force have been named and the meeting dates are firm. Co-Chair Hanley stated that he will encourage members of the Committee to vote against these type of policy calls. Representative Kohring recommended that the money be deducted from the Commissioner's travel budget. Mr. Baratko replied that funds can not be transferred across the lines within the Department. Mr. Baratko spoke to Section #14 in the amount of $15 thousand dollars for the Alcohol Beverage Control (ABC) Board hearing on a license denial. He added, that ABC denied an application and an individual appealed that decision; now the ABC Board has appointed an hearing officer who wants to hold a hearing request. Representative Martin stressed that $15 thousand dollars was too much for one 6 hearing. He suggested that the hearing could occur by teleconference. Mr. Baratko reiterated that the Division does not have the money to pay for the scheduled hearing. Mr. Baratko continued, Section #15 supplemental request in the amount of $259.5 thousand dollars for the debt management and custodial fees previously netted against earnings and bond sales. Co-Chair Hanley asked which fund pays for those accounts. Mr. Baratko understood that they would be general funds, coming to the State as surplus after payments from the bond portion. Representative Therriault asked if this was a funding source change. MARY SUTTON, FINANCE OFFICER, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE, explained that the security lending portion originates where funds are invested and then further borrowed by someone else. The State then receives 102% return on the loan. In the above case, the desire for that borrowing has not existed, therefore, there is not income that has been attributed to funds yet and the amount of debt that has been issued has been minimized. Therefore, the costs that might have been absorbed by the debt issuance is not existing. This was not a budgeted item; it was removed from the budget several years ago. She added, the request would change a mechanism in the report budgeting. Ms. Sutton spoke to Section #16 supplemental request in the amount of $91.1 thousand dollars for the Permanent Fund Division (PFD) data processing. She pointed out that the PFD anticipated a shortfall for data processing charge back fees. These fees are to be paid to the Department of Administration. The cost would cover the conversion of programs, following the conversion, a savings for FY96 would exist. Representative Brown asked for further backup material on the request. Ms. Sutton offered to provide that material to the Committee. Mr. Baratko testified on Section #17 in the amount of $283.1 thousand dollars for the Alaska Mental Health Trust Authority in order to implement costs not in the fast-track supplemental. Representative Kohring remarked that HB 173 would allocate $300 thousand dollars for establishing the Authority and the supplemental requests an additional amount of $283 thousand dollars for implementing the Authority. (Tape Change, HFC 95-23, Side 1). Mr. Baratko pointed out that those would be funds taken from the interest of the corpus, and if those funds are not used they would be returned to the Authority. 7 Co-Chair Hanley provided a copy of a letter sent to Annalee McConnell, Director, Office of Management and Budget, requesting a list of the projected surplus' projects anticipated to reduce the net impact of the proposed budget supplemental. [Attachment #4]. HB 137 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:15 P.M.