HOUSE FINANCE COMMITTEE FEBRUARY 27, 1995 1:40 P.M. TAPE HFC 95 - 31, Side 1, #000 - end. TAPE HFC 95 - 31, Side 2, #000 - end. TAPE HFC 95 - 32, Side 1, #000 - end. TAPE HFC 95 - 32, Side 2, #000 - #165. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:40 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 Nancy Slagle, Director, Division of Budget Review, Office of Management and Budget; Mike Greany, Director, Legislative Finance Division; Annalee McConnell, Director, Office of Management and Budget; Tina Kobayashi, Assistant Attorney General, Department of Law; Barbara Ritchie, Deputy Attorney General, Department of Law; Susan Cox, Assistant Attorney General, Department of Law; Arthur Snowden, II, Administrative Director, Alaska Judicial Council, Alaska Court System; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Margaret Pugh, Commissioner, Department of Corrections; Jeff Morrison, Director, Division of Administrative Services, Department of Military and Veterans Affairs; Bob Baratko, Director, 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. HB 137 was HELD in Committee for further discussion. 1 HB 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. HB 178 was HELD in Committee for further discussion. HOUSE BILL 137 "An Act making supplemental appropriations for operating expenses of state government for fiscal year 1995; and providing for an effective date." 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." Co-Chair Hanley provided the Committee with a copy of the letter received from the Office of Management and Budget (OMB) regarding the supplemental funding requests of the Governor. [Attachment #1]. Representative Grussendorf remarked that the supplemental funding request from the Department of Transportation and Public Facilities (DOTPF) for the Alaska Marine Highway in the amount of $739 thousand dollars for repairs and maintenance to the Columbia ferry was not included. He warned that the ferry would not be ready for the summer season without the requested funding. Representative Grussendorf reminded Committee members that the ferry generates revenue and that summer schedules have been published. Co-Chair Hanley noted that at the recommendation of the DOTPF Subcommittee, that line item was deleted from the supplemental funding request. Co-Chair Hanley presented an overview of the letter submitted from OMB and provided a work draft for HB 137. A new section for the Citizens' Foster Care Review was added in the amount of $48 thousand dollars appropriated from the general fund to the Department of Administration (DOA). The additional appropriation would provide for the continuation of the program through June 30, 1995. Also, the sum of $1,315,780 was requested from the Office of the Governor, Division of OMB, in order to pay the costs resulting from salary adjustments compliance with 29 U.S.C. 201-219 (Fair Labor Standards Act) for the fiscal year ending June 30, 2 1993, and FY93, moving from capital improvements project receipts and general fund. Representative Mulder MOVED that the committee substitute for HB 137, 9-GH0036\F, Crammer, 2/27/95, be the version before the Committee. Representative Brown OBJECTED explaining that the draft had just been distributed to the Committee and that no one had the opportunity to review the material. Representative Brown WITHDREW THE OBJECTION. There being NO FURTHER OBJECTIONS, CS HB 137 (FIN) was adopted as the version before the Committee. DEPARTMENT OF LAW TINA KOBAYASHI, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, spoke to Section #1, Page 1, Attachment #2, reduction of $500 thousand dollars for the oil and gas litigation. She indicated that the budget had been planned based on the $18 million dollar request being fully funded and that the reduction would handicap the litigation process. Representative Parnell explained that the Joint House and Senate Committee had requested from the Department additional information in order to review the need for further funding. NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, reminded Committee members that the $18 million dollar request had been a reduction from the original request of $20.8 million dollars. Representative Brown interjected that it would be a mistake not to fully fund the litigation effort indicating that the funding would address many cases and that funding would cover costs for a six month period. DEPARTMENT OF REVENUE Co-Chair Hanley noted that Section #2, Page 1, Governor's amended request for the Mental Health Trust Authority start up costs in the amount of $298.3 thousand dollars would be reduced by the House Subcommittee request. The total House request would be in the amount of $155 thousand dollars. Ms. Slagle commented that the trustees for the Mental Health Authority would be appointed next week. She requested when those trustees are appointed, if additional needs exist, the trustees could return to the Legislature for additional funding. Co-Chair Hanley advised the situation would be considered. 3 DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Co-Chair Hanley referenced Section #3, Page 1 of the supplemental appropriation, for the fall flooding and the Disaster Relief Fund. The Governor's amended request was in the amount of $45.7 million dollars, whereas, the House Subcommittee request was in the amount of $43.9 million dollars which would cover costs to date. Co-Chair Hanley advised that the costs accruing at this time should be placed in the FY96 operating budget. JEFF MORRISON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, requested further information regarding the Committee's intent for further funding. Co-Chair Hanley explained that the Subcommittee had concern with providing 100% state funding for projects with costs yet undetermined. Mr. Morrison clarified that traditionally, the interpretation given to disaster funding, was that once the fund has been allocated from, that project remains open until the disaster is financially closed out. He concluded, any funds remaining would be returned to the Disaster Relief Fund. Mr. Morrison added, the only reimbursement received from the federal government has been the 75/25% portion. The federal government determines eligibility for the 100% funding, following completion of an audit. The audit will be completed when the disaster is closed out. Co-Chair Hanley recommended waiting to pay until the audit was completed. DEPARTMENT OF CORRECTIONS Representative Mulder, Department of Corrections Subcommittee Chair provided supplemental appropriation budget overview. Representative Mulder began, Section #4(a), Page 1, the Governor and House Subcommittee recommend $67 thousand dollars be funded for the court appointed Cleary monitor. Section #4(b) request to establish and staff the Office of the Commissioner in Juneau. The Governor recommended $44.5 thousand dollars, the House Subcommittee recommended zero funding. Representative Mulder reminded the Committee that the Subcommittee recommendations reflected court ordered items, resulting from increased capacity or outside unanticipated contracts. Representative Mulder referenced Section #4(c), Page 1, request in the amount of $98 thousand dollars to the Commissioner's Office for the estimated cost resolution for two personnel legal actions, with funding recommended by both the Governor and the House. Section #4(d) funding in 4 the amount of $9.8 thousand dollars for the Board of Parole was recommended by the Governor, whereas, the House Subcommittee recommended zero funding. Representative Mulder referenced Section #4(e), the supplemental funding request for the Correctional Officers Training Academy. The Governor's supplemental request was in the amount of $366.3 thousand dollars which would cover both a fall and spring training; the House subcommittee recommended that amount be changed to $172 thousand dollars in order to cover the cost of the fall training only. Section #4(f), Page 1, increased costs for inmate health package, supplemental appropriation request by the Governor was in the amount of $2.1 million dollars; the House Subcommittee recommendation was in the amount of $2 million dollars. He continued, Section #4(g), Page 1, supplemental request by the Governor for statewide operations/correctional industries was requested in the amount of $293.3 thousand dollars, whereas, the House Subcommittee recommended funding in the amount of $99 thousand dollars. Representative Mulder explained that Section #4(h) was recommended for full funding as requested by the Governor and the House Subcommittee on Corrections in the amount of $2.35 million dollars which would cover costs associated with the Arizona prison contract. Section #4(i) supplemental request would provide funding for the Department to hire three additional Administrative Clerk II positions for the remainder of FY95. The hire would free up Correctional Officers for safety and security tasks at the Sixth Avenue Correctional Facility in Anchorage. The Governor recommended that section be funded at $51.9 thousand dollars, whereas, the House Subcommittee recommended zero funding of that component. Section #4(j), Page 1, request would provide two additional adult Probation Officers plus housing, feeding and clothing for increased inmate capacity at the Spring Creek facility. The Governor and the Subcommittee agreed on funding at the requested amount of $156.6 thousand dollars. Section #4(k) supplemental request in the amount of $772.3 thousand dollars was recommended by both the Governor and House Subcommittee in order to add ten additional positions plus housing, feeding, and clothing to reduce the vacancy factor and would also provide for up sizing of 59 beds at the Wildwood Correctional Center. Representative Mulder pointed out that Section #4(l), Page 2, supplemental request would reduce the prison vacancy factor. The Governor's amended request was in the amount of 5 $3.1 million dollars, whereas, the House Subcommittee recommended zeroing out the funding. Section #4(m), Page 2 request was fully funded in the amount recommended by the Governor and the House Subcommittee for increased CRC capacity for statewide operations in the amount of $726.3 thousand dollars. Section #4(n), Page 2, would request to provide an increase for probationary visits to smaller towns and communities under the Department's supervision for statewide operations. The Governor's amended request was in the amount of $31.8 thousand dollars, whereas, the House Subcommittee requested zero funding. Section #4(o), Page 2, supplemental request in the amount of $52 thousand dollars for funding for transferred positions from Wildwood and would also include food, clothing, and gratuities for prisoners at Point MacKenzie. Full funding was recommended by both the Governor and the House Subcommittee. Representative Navarre pointed out that all the Subcommittee members did not agree on the deletion of Section #4(d), Page 1, the personal services component. He felt the impact would result in not implementing the Board's decisions. He added, that action would keep prisoners in prisons for a much longer period of time, costing the State more than funding Section #4(d). (Tape Change, HFC 95-31, Side 2). Representative Brown advised without additional funding for the spring academy, the public's safety could be at risk. Representative Martin disagreed, stressing that the current budget for the Department has funds to operate adequately. MARGARET PUGH, COMMISSIONER, DEPARTMENT OF CORRECTIONS, responded to the discussion of Representative Brown and Representative Martin. She spoke to the spring academy need, emphasizing the necessary standards which the Department must have for the participating troopers. The State is obligated to provide the training. Co-Chair Hanley emphasized that the spending pattern must end. He added, if the request is not critical to the life, health and safety of the correctional officers or inmates, it will be denied. ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, commented on the impact to each program and the ramifications of all the changes needing to be absorbed by the Administration for the next three months. She strongly recommended that the current Administration can not change those choices done in the prior Administration. The current Administration is willing to work in the future with the funding level established by the Legislature and the amount spent. She reiterated to ask the Knowles Administration to 6 reduce spending established by the Hickel Administration will create difficulty for the Departments and undue public safety. Commissioner Pugh noted that there are currently 207 prisoners housed in Arizona; prison growth continues and limits are being pushed with those prisoners having left the state. She added, the Cleary maximum capacity for our current system is 2,665 prisoners. Beyond that point, the State would be fined. Currently, the system is immediately below that figure. Commissioner Pugh commented on the need for additional funding for the correctional activities. She explained that service teaches the prisoners basic life skills, how to keep a job, how to go back and forth to work, when to get up and when to go bed. With the increased population in prisons, the need for increased prison operation jobs expands as a management tool. Representative Grussendorf his voiced concern on the cut to Section #4(n), Page 2. Commissioner Pugh remarked that the S.E. Region received unallocated cuts in prior years and without the requested supplemental funding, probation officers will not be able to travel to the smaller communities in Alaska particularly in the Southeast region. Commissioner Pugh noted the Department's most serious repercussions would result from the zero funding for Section Committee to reconsider funding a portion of that request. Representative Mulder pointed out that each facility within the FY95 budget was fully funded through the Governor's requested amount, except for the Spring Creek and Wildwood Centers. He emphasized the amount funded by the Legislature was the amount requested by the last Administration. Representative Brown disagreed with Representative Mulder, stating that there was a divergence between what the Governor was asking for and what the Legislative budget actually funded. Representative Navarre noted that if the spending exceeded the amount given in the first eight months of the fiscal year, the Department can not make up that funding in the remaining four months of that fiscal year. Representative Martin interjected that the Legislature controls the budget and that spending over and above the amount allocated should not result in a supplemental appropriation. Representative Brown stated that some of the supplemental requests are due to underfunding of the last budget. Those 7 funds were spent because the Department felt that public safety would be jeopardized as the prison population continued to grow. Representative Mulder responded that the numbers he used were those generated by the Legislative Finance Division. He understood that the shortfalls had been addressed through the use of fiscal notes. The actual Governor's FY95 Governor's amended amounts compared to the FY95 Operating Authorized matches line by line. Representative Brown argued that those were one time fiscal notes authorized on a bill and not the base of the budget funding. She added that the base of the budget was not adequate to fund the necessary level of employees in order to maintain safety. DEPARTMENT OF PUBLIC SAFETY Co-Chair Hanley pointed out that Section #5, Page 2, the request to fill ten vacant positions for the Alaska State Troopers was zeroed out. He indicated that the request had been a policy call of the Governor and should be included in the FY96 Operating Budget. OFFICE OF THE GOVERNOR Co-Chair Hanley explained Section #1, Page 3, supplemental request for the Division of Elections for unanticipated overtime and costs associated with recounts. The Governor's amended request in the amount of $212.2 thousand dollars was decreased by the House Subcommittee request of $170 thousand dollars. (Tape Change, HFC 95-32, Side 1). DEPARTMENT OF ADMINISTRATION Representative Kohring, Chairman of the Department of Administration Subcommittee provided an overview of the supplemental recommendations for that Department. Section deleted. Section #3, Page 3, Office of Public Advocacy/OPA, Governor's request in the amount of $530 thousand dollars to cover operational shortfalls, was reduced by the House Subcommittee in the amount of $200 thousand dollars. He continued, Section #4, Page 3, Public Defender request to cover the operational shortfalls, the Governor's amended request was in the amount of $125 thousand dollars, whereas, the House Subcommittee recommended reducing the request to $50 thousand dollars. Representative Kohring advised that Section #5, Page 3, Retirement and Benefits/EPORS system request would cover the operational shortfall for one legislator. The Governor requested supplemental funding in 8 the amount of $37.5 thousand dollars, whereas, the House Subcommittee recommended funding of $27.5 thousand dollars which would provide funding for the insurance portion of the request. Section #4, Page 3, the leasing and facilities request by the Governor and the House Subcommittee for full funding supplemental request in the amount of $93 thousand dollars to cover operational shortfalls. Representative Kohring added, Section #7, Page 3, the Alaska Public Officers Commission, the Governor's amended supplemental request in the amount of $49.5 thousand dollars, whereas, the House Subcommittee recommended $35 thousand dollars to address the hearing for the Gravo case. He admitted that hearing funds were justified although he felt that the amount requested was too high. Section #8, Page 3, Personnel EEO/Personnel EEO supplemental request funding to be used for labor arbitration costs, the Governor's requested $139.6 thousand dollars, whereas, the House Subcommittee recommended zeroing the amount out. Representative Kohring ascertained that the need was not emergency in nature and that those costs should be addressed in the FY96 Operating Budget. Representative Grussendorf questioned the recommended cut to Section #8, Page 3, advising that the FY96 Operating Budget request would include program receipts generated from negotiations of the contract requests. Ms. Slagle stated that Section #8 were arbitration costs dealing with employee grievances. The courts have made a determination that the State has failed in the efforts to deal with clearing up the arbitrations. The supplemental request was a portion of the effort of the current Administration to comply with the court ruling. SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, explained to Representative Grussendorf that there was not a direct connection between the labor negotiations and the arbitration costs. She added, although the request establishes the States credibility with the Unions. Representative Brown noted her concern with the decreased funding of Sections #3 and #4, Office of Public Advocacy and the Public Defender. She asserted that these issues are not discretionary, they are constitutional rights. Ms. Barton added, these costs must be paid, either now or later. Both programs have been managed tightly and not funding the supplemental request fully will not save the State money. The result will end in a court appeal in order to defer the case. 9 DEPARTMENT OF LAW Co-Chair Hanley stated that in Section #9, Page 3, supplemental request for the Mental Health Lands, the amount recommended to be funded would be the amount due. The additional amount of $435 thousand anticipated costs for the non settling plaintiffs for the court of appeals was not considered by the Subcommittee. Those costs have not been reduced to judgments to date. Ms. Slagle pointed out that the Governor's request included estimated costs for the fiscal year. Historically, those costs were funded in the supplemental request. Representative Martin questioned the increased departmental costs during the last six months. BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, DEPARTMENT OF LAW, advised that there were many substantial costs at the end of the procedure resulting from a large booklet mailing throughout the State and an appeal file. Co-Chair Hanley referenced Section #10, Page 3, Legal Service operations request amount to repay the federal government for inappropriate cost allocations in the amount of $500 thousand dollars as recommended by the Governor and the House Subcommittee. Section #11, Page 3, Legal Service operations request for judgments and claims request by the Governor in the amount of $4.3 million dollars, whereas, the House Subcommittee request in the amount of $494 thousand dollars be funded. Ms. Ritchie provided the Committee with a handout listing the current judgments in the Department of Law. [Attachment #3]. Co-Chair Hanley directed the Department of Law to testify regarding the supplemental requests not contained in the handout. He stated that an amendment would be drafted to include the amount requested by the Department. SUSAN COX, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, explained the statutes which specifically govern commercial fishing and regulations. The Courts had been applying a general statute, Title XVI, which provided that courts could fine people up to $5 thousand dollars. Many fines were ordered. In 1987, the Court of Appeals determined that the ceiling for violations was in effect until the Legislature enacted the law in 1988 which passed a statute regarding penalties for commercial fishing violations. In the meantime, there have been four court of appeal decisions. The class actions have consisted of three subsections. Co-Chair Hanley stated that the House Subcommittee did not recommend funding Section #12, Page 3, the Gubernatorial 10 election lawsuit which the Governor requested in the amount of $50 thousand dollars. ALASKA COURT SYSTEM ARTHUR SNOWDEN, II, ADMINISTRATIVE DIRECTOR, ALASKA JUDICIAL COUNCIL, ALASKA COURT SYSTEM, testified to Section #60, Page 7, the Court System for the North Slope Royalty case and grievance settlement. The Governor's amended request was in the amount of $158.6 thousand dollars, whereas, the House Subcommittee request was in the amount of $120 thousand dollars. He pointed out that the $40 thousand dollar disparity will short the oil and gas litigation fund. He urged the Committee to reconsider the reduced allocation to that Department's supplemental funding. Co-Chair Hanley asked if one judge would be shifted for the trial. Mr. Snowden replied that Judge Carpenetti from Juneau would be trying the case for six months. It was the intent of the Court System to bring a retired judge in order to handle the Juneau case load. The entire Juneau caseload will increase for the next six months by sixty percent. At this point, the back log is over a year and a half. DEPARTMENT OF REVENUE Representative Martin, Subcommittee Chair, overviewed the Department of Revenue proposed supplemental budget. Section Gaming Task Force meetings was zeroed out by the House Subcommittee. Section #14, Page 3, the Governor's supplemental request in the amount of $15 thousand dollars was also zeroed out by the House Subcommittee for the license denial appeal costs in the Alcohol Beverage Control Board (ABC) Egegik hearing. Section #15, Page 3, treasury management for additional safekeeping and debt management advisor fees was initially zeroed out by the House Subcommittee, although, Representative Martin asked for reconsideration of that component. The Governor's requested amount of funding is $259.5 thousand dollars. Representative Martin continued, Section #16, Page 4, supplemental request of the Governor's amended for the Permanent Fund Dividend for additional data processing costs in the amount of $91 thousand dollars was zeroed out by the House Subcommittee. Section #17, Page 4, supplemental request by the Alaska Mental Health Trust Authority for additional costs requested by the Governor in the amount of $283.1 thousand dollars was also zeroed out by the House Subcommittee. BOB BARATKO, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, 11 DEPARTMENT OF REVENUE, replied that the deletion of Section enforcement component of the division. Also, he continued, the deletion of Section #14 in which the ABC Board will not be able to have the appeal in accordance with the statute will be difficult, pointing out that the budget for appeals has currently been expended. The community has a right to request a hearing within their community. This request is for a non issuance of a license, a local option, therefore, that population has the right to testify. Co-Chair Hanley recommended testifying via teleconference. Mr. Baratko emphasized how important funding of Section #15 was. Those fees were removed from the budget three years ago and made an off budget item. The two functions of that division are tied together; currently, there exists a lack of management capabilities. The substance of the bond account is not changeable and the accounts need to be separated, whereas, volatility exists and the State will be vulnerable without funding this request. Representative Martin suggested approving the request. Representative Grussendorf recommended better educating the public and the legislators about charitable gaming with the growing increase to that industry. The task force as recommended by the Governor would be able to provide education to interested parties. He affirmed that the supplemental request was minimal in relationship to the profits which could be made for the State by funding that request. Representative Martin agreed that the amount of money generated through charitable gaming was large. He added, with the legalization of pull tabs, the increase has quadrupled. His major concern is the choice of persons chosen for that task force. Representative Navarre stressed that removing funding from the audit portion of charitable gaming would be unacceptable; the State is required to perform that function. Co-Chair Hanley agreed that the task force was a beneficial idea, although, that funding should be contained in the FY96 Operating Budget. Mr. Baratko clarified that the first meeting of the task force has been scheduled and public noticed given for March 16, 1995. Co-Chair Hanley urged that the Governor not take the funds necessary for the task force out of the audit function of the Department. Representative Martin recommended that the high revenue generating vendors pay the costs of the task force. (Tape Change, HFC 95-32, Side 2). DEPARTMENT OF EDUCATION 12 Co-Chair Hanley explained Section #18, Page 4, K-12 Support/Foundation Program for increased student enrollment as requested by the Governor in the amount of $2 million dollars, House Subcommittee recommended zero funding. He thought that the Department should adjust the units to illustrate the difference between the fall and spring student count. Ms. Slagle advised that the districts do have a drop in the spring count. Although, those districts do have hired staff on contract for the level of students they had in the fall. A reduction can not be made in the middle of the year. Representative Kohring, House Subcommittee Chair for Education, explained Section #19, Page 4, education program support for the federal vocational education grants was recommended to be zeroed out by the House Subcommittee. He understood that it was a temporary request. Section #20, Page 4, additional funding for the WAMI program for Alaska Postsecondary Education, Governor's supplemental request in the amount of $22.2 thousand dollars was zeroed out by the House Subcommittee. Representative Kohring recommended that those funds be taken from another account. Representative Kohring concluded, Section #21, Page 4, supplemental request in the amount of $1.8 million dollars was accepted at the Governor's request by the House Subcommittee. He pointed out the emergency nature of the request. Many children have experienced ill effects by the contaminated water. He added that the clean up costs should come from the Oil and Hazardous Waste Clean Up Response Fund. HB 178 and HB 137 were HELD in Committee for further discussion. ADJOURNMENT The meeting adjourned at 3:55 P.M.