HOUSE FINANCE COMMITTEE FEBRUARY 12, 1996 1:35 P.M. TAPE HFC 96 - 31, Side 1, #000 - end. TAPE HFC 96 - 31, Side 2, #000 - end. TAPE HFC 96 - 32, Side 1, #000 - end. TAPE HFC 95 - 32, Side 2, #000 - #438. 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 Martin Representative Mulder Representative Kohring Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representatives Foster and Therriault were not present for the meeting. ALSO PRESENT Representative Con Bunde; Annalee McConnell, Director, Office of Management and Budget, Office of the Governor; Nancy Slagle, Director, Budget Review, Office of Management and Budget, Office of the Governor; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Allison Elgee, Deputy Commissioner, Department of Administration; Dugan Petty, Director, Division of General Services, Department of Administration; Brant McGee, (Testified via teleconference), Office of Public Advocacy, Department of Administration; Guy Bell, Director, Division of Administrative Services, Department of Commerce and Economic Development; Remond Henderson, Director, Division of Administrative Services, Department of Community and Regional Affairs; Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law; Dean Guaneli, Chief Assistant Attorney General, Criminal Division, Department of Law; Karen Rehfeld, Director, Administrative Services, Department of Education; Eddy Jeans, School Foundation-School Finance, Department of Education; Jim Hayden, Program Manager, Underground Storage Tank Program, Division of Spill Prevention & Response, Department of Environmental Conservation; Kevin Brooks, Director, Division of Administrative Services, Department of Fish and Game; Janet Clarke, Director, Division of 1 Administrative Services, Department of Health and Social Services; Jim Nordlund, Director, Public Assistance, Department of Health and Social Services; Margo Nash, EIS Redesign Program Officer, Division of Public Assistance, Department of Health and Social Services. SUMMARY HB 468 An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date. HB 468 was HELD in Committee for further consideration. HOUSE BILL 468 "An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date." Co-Chair Hanley congratulated the Administration for keeping the supplemental budget under $20 million dollars, although reminded departments that the supplemental should be allocated only for unexpected expenditures. Co-Chair Hanley pointed out that the Governor's budget includes areas for new programs. He thought those issues would be more appropriately handled within next year's operating budget. ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, discussed the current Administration's intent to have the full budget funded at the beginning of the fiscal year. She advised that the Administration did hold the departments to tight scrutiny in the supplemental. Ms. McConnell explained two solutions which were used in the supplemental process. The first being internal shifting within a department and the other, shifted BRU's. Ms. McConnell addressed two items which entered into the supplemental. The first was created by the fire and disaster condition; the second budget was for leasing. She added that $1.5 million dollars had been designated in Section #16 for fire and disasters and recommended that there be a fund established to address those concerns to end the continual "cash flow crisis". Ms. McConnell agreed that this concern could be addressed in next years operating budget. The fire season is expected to 2 be particularly bad this year because of a minimal snow cover in the Interior. Ms. McConnell noted the anticipated lapse in the school foundation revenue. The current Administration is proposing that a portion of that money be used to fix the federal disparity. She recommended extending the lapse date to deal with the concern of accumulated back interest. Ms. McConnell suggested using savings from the Welfare and Medicaid balance for specific investments in child care and for the management information system updating. Co-Chair Hanley commented that language on Page 17, Lines 1 & 2, creates a unique way to fund a fiscal note. He recommended there be a fiscal note on the bill rather than pre-funding the bill through a supplemental. Ms. McConnell agreed, although pointed out that this year the Legislature is on a fast track supplemental. She emphasized that the supplemental funding would provide an opportunity to more quickly finance an important concern. Co-Chair Hanley interjected that designation would have an impact on the overall fiscal plan. The funding would address one time surplus education formula money, showing a much larger increase the following year. He concluded, the less money spent this year, the less money taken out of the Capital Budget Request (CBR). Ms. McConnell asserted that this was an expenditure which must be made eventually and encouraged Committee members to choose "good planning" and "good operational sense". Additional information relating to these requests are available to the Legislature from the Office of Management and Budget (OMB). Ms. McConnell urged the Committee to consider and pass the proposed supplementals. DEPARTMENT OF ADMINISTRATION NANCY SLAGLE, DIRECTOR, BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET (OMB), OFFICE OF THE GOVERNOR, provided Committee members with a letter listing technical corrections to the bill. [Attachment #1]. Section #1(a) addresses the reduced centralized administrative, Division of Finance services shift to the Bethel Public Defender Office to meet the increased caseloads in the amount of $49 thousand dollars. SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, explained that the Public Defender is currently in the process of hiring. 3 ALLISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION, added that recruitment for that position has just began. The case load growth in Bethel has always been bad, although, this past summer the case load "ballooned". Both offices have suffered a tremendous turnover due to the extreme caseload responsibilities. Representative Martin recommended moving public defenders from a less busy area. Ms. Elgee agreed if there was an area with an "under" utilized public defender, noting that the Anchorage section is also growing. Ms. Slagle spoke to Section #1(b) supplemental budget request in the amount of $217 thousand dollars to cover the operating costs shortage for the Public Defender agency (Rule 39 receipts for representation). There has been a large increase added to the Anchorage lease concern. Ms. Elgee clarified that Rule 39 money was that collected from felons Permanent Fund Dividends (PFD). Ms. Barton pointed out the 600 case increase this year, greater than anticipated. Ms. Elgee stated that the fiscal note added to the past legislation was for Driving While Intoxicated (DWI) legislation. The case load projections prepared for that bill were underestimated and created a serious impact. All agencies impacted by the passage of that bill are experiencing short funding. Ms. Slagle continued, Section #1(c) would provide for $356.4 thousand dollars for operating costs for the Office of Public Advocacy (OPA). She remarked that budget is case load driven, and the Administration has little control over it. Ms. Slagle spoke to the increased case loads resulting from increased police enforcement. BRANT MCGEE, (TESTIFIED VIA TELECONFERENCE), OFFICE OF PUBLIC ADVOCACY (OPA), DEPARTMENT OF ADMINISTRATION, agreed that the continual increased need of services has resulted from criminal convictions and from "children in the need of aid" conditions. He emphasized that the level of increase is dramatic. Co-Chair Hanley asked if the Governor intended to provide an amendment to increase that Office's FY97 request. Ms. Barton replied that there has not been any discussion regarding an increase to the OPA FY97 budget. Co-Chair Hanley pointed out that the combination of last year's funding and the supplemental request would result in $20 thousand dollars greater budget than last year. Ms. Slagle continued, Section #1(d) would provide $870 4 thousand dollars to fully fund the leasing budget. A $1.2 million dollar shortfall was anticipated during Conference Committee with a reduced need of $700 thousand dollars; an additional $96 thousand dollars was allocated to pay the lease for the Juneau support from the Mental Health Trust Authority. Representative Martin suggested cutting that request back from the Mental Health Trust Authority. Ms. Slagle noted that the $96 thousand dollars was not money from the Mental Health budget or an additional cost to the Mental Health. That money is a payment due by the State to the Mental Health Trust Fund for leasing their property. (Tape Change, HFC 96-31, Side 2). Co-Chair Hanley asked if any leases are prepaid. DUGAN PETTY, DIRECTOR, DIVISION OF GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION, responded that in FY96, the Department prepaid $312 thousand dollars for four leases. He added, the Department has tried to "manage down" the shortfall by offering a prepay incentive approach. Mr. Petty concluded that whatever leverage is available, the Department will take advantage of it. Representative Kohring asked why the prepaid are not paid until the end of the fiscal year. Mr. Petty replied that at that point, the Department knows if there are funds available to drive discounts. He explained that the $312 thousand dollar prepay was made through an additional appropriation received for FY96. Co-Chair Hanley questioned if the FY97 leasing budget was at the full level. Ms. Barton stated it was the same as FY96 with the addition of this years supplemental budget request. Mr. Petty summarized that the Division has a "challenge" to manage down the existing leases. Ms. Slagle continued, Section #1(e) supplemental budget request in the amount of $450 thousand dollars would address needs for the Retirement and Benefits Program to cover investment management fees resulting from a higher than expected asset growth. Section #1(f) supplemental budget request to ratify a FY95 over expenditure of $23.1 thousand dollars for the longevity bonus grants from Senior Services. Ms. Slagle indicated that there was adequate lapse money in other BRU's. DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT 5 Ms. Slagle explained Section 2 of the supplemental budget request in the amount of $61.2 thousand dollars which would cover FY96 and FY97 costs for office space in Tokyo. The security deposit plus interest for an existing lease will be refunded and deposited into the general fund. GUY BELL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, advised that FY97 budget proposal has budgeted for the reduced cost office space. The refund deposit will be returned by December, 1996, and then deposited into the general fund. Representative Kohring questioned the emergency nature of the appropriation. Mr. Bell responded that there are two offices in Tokyo; one for the Division of Tourism and the other, the Division of Trade and Development, in operation since 1965. The supplemental would provide funding to co- locate the two offices, saving $50 thousand dollars per year. Co-Chair Hanley advised that the Legislature has suggested closing that office. DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS Ms. Slagle spoke to Section #3(a) which would provide a decrease in training and development funds to cover revenue sharing costs for the Native Village of Kluti Kaah in northern Alaska. That warrant has been misplaced and the money continues to be due that village. Ms. Slagle advised that Section #3(b) would provide a lapse date extension for Rural Development Grants. She noted that for FY97, the Administration has requested that these grants be included in the CBR. These are construction grants for smaller communities. This type of project is often extended past a single fiscal year. Co-Chair Hanley questioned how much money would be carried forward. REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS, noted that the appropriation would be $906 thousand dollars. He stated that he would provide information on the carry forward amount to the Committee. Ms. Slagle commented that Sections 3(c,d & e) were requested for capitalization of the Rural Development Initiative Loan Fund (RDILF). AIDEA would provide $650 thousand dollars to capitalize that fund. Currently, there are over 400 thousand loan applications. Mr. Henderson added, the amount of FY97 loan payments estimated to be returned is $115 thousand dollars and the average loan is approximately $35 thousand dollars. The demand for the program has always exceeded what is available. The supplemental appropriation 6 would allow for the continuation of loans to be issued for that program. Representative Martin remarked that there will always be a demand for "free" money. Ms. Slagle replied that the supplemental request would provide funding to start programs early, weather permitting. Mr. Henderson responded to a query of Representative Mulder's regarding the types of loans funded through the program. He stated that the loans only go to communities of less that five thousand people. The loan funds are used to leverage other funds from banking institutions and private industry. The loans are for those small business-type operations that can create economic development and jobs. He emphasized that these are small scale projects with a competitive bid process. Mr. Henderson summarized that AIDEA does support the loans. Mr. Henderson pointed out the interest rate on the loans was 9.5%; and that to date the default rate has been zero. The original appropriation in FY92 was for $300 thousand dollars with an additional deposit from AIDEA of $650 thousand dollars. Ms. Slagle continued, Sections 3(f&g) supplemental request for $200 thousand dollars for the Alaska Legal Service grant in lieu of pending legal fees. The request provides funding in anticipation of a federal dollar shortage. Mr. Henderson noted that funding would cover the costs for a settlement of a suit. BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW, stated that the request would provide payment of attorneys fees forward funding for three cases. The request would only resolve the issues between the State of Alaska and Alaska Legal Services. Ms. Ritchie clarified these are cases against the State. Co-Chair Hanley inquired if Alaska Legal Services receives money other than State money. Ms. Ritchie noted that they receive mostly federal money through the Legal Services Corporation Act. Representative Mulder questioned why the State would fund Alaska Legal Services in order that they then bring a trial forth against the State, and then the State pay those legal fees. Ms. Ritchie agreed that does happen. Representative Brown inquired if the amount requested in the supplemental was the Department's best estimation of the amount which would be due to Alaska Legal Services. Ms. Ritchie stated it was, given the settlement negotiations resulting from 7 those three cases. Representative Brown stressed that Alaska Legal Services exists primarily to provide low income citizens access to the civil courts. She emphasized the importance of that service. DEPARTMENT OF CORRECTIONS Ms. Slagle indicated that Section 4(a & b) supplemental request would cover the Cleary court fines for FY95 and FY96 contempt case. DEAN GUANELI, CHIEF ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, DEPARTMENT OF LAW, stated that the requested amount would only cover fines through the month of October, 1995. The Department of Corrections has been unable to comply with the population limits established in the Cleary order for the past three months; fines have resulted from that also. Mr. Guaneli noted that the appropriation would be contingent on the money being placed back into the general fund. The plaintiffs believe that the fines should be made available so as to improve the condition of prisoners statewide. The court has yet to rule on that issue. Ms. Slagle commented that the bill only covers the period through October because of the time when it was drafted. The amount of fines due are not always agreed upon. Mr. Guaneli pointed out that each month there is uncertainty regarding the amount due. He noted that the fines fluctuate widely. Representative Mulder requested clarification of the amount fined the Department of Corrections for overfilling. Mr. Guaneli provided him that amount. (Tape Change, HFC 96-32, Side 1). Representative Martin commented on the comfortable services offered offenders. Mr. Guaneli emphasized that the numbers which drive the fines are the number of prisoners entering the system not the services. He concluded, regardless of the fines due, the State needs to have adequate space to contain the number of prisoners. DEPARTMENT OF EDUCATION Ms. Slagle outlined that Section #5 (a & b) supplemental budget request identifies excess funds in the foundation program and then appropriates those funds as grants to school districts in order to address the disparity problem. Co-Chair Hanley requested further information regarding that 8 condition. KAREN REHFELD, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF EDUCATION, commented that last year the Department was aware of changes on the federal level which would affect the impact aid program and the disparity test. The dollar amounts were not available at that time. Changes on the federal level resulted from the percentages of disparity between the wealthiest district and the poorest district. Disparity has been reduced to a 20% margin level. Co-Chair Hanley requested a written explanation from the Department of how disparity works. He thought that there could be numerous options to deal with that concern. The federal government has kept decreasing the amount appropriated with the intention of discontinuing the program. Representative Mulder asked if the State would loose the impact aid funds without the disparity test. EDDY JEANS, PROGRAM SPECIALIST, SCHOOL FOUNDATION, SCHOOL FINANCE, DEPARTMENT OF EDUCATION, explained that the school districts would not loose the impact aid funds, but rather, the State would loose the ability to measure those funds in the State distribution plan. Mr. Jeans commented that in FY96, there would be $35 million dollars in the foundation formula. Impact aid funds come in for military dependent students and students who reside on Indian lands. Race is not an factor. Representative Mulder questioned the net impact should the disparity test not be in compliance. He was curious if more money would then go to the above mentioned locations. Mr. Jeans replied if the impact aid funds are not recognized in the foundation formula, a $35 million dollar gap would exist resulting in a proration of the unit value of approximately $2500 dollars per instructional unit. Representative Brown requested that a "break down" be provided by the Department indicating how each school district would be affected if disparity was not met. DEPARTMENT OF ENVIRONMENTAL CONSERVATION Ms. Slagle referenced Section #6(a & b) in the supplemental budget request noting that the first change indicated in Attachment #1 reflects this concern. There is need to change language so that the lapse funds would go to the Prevention Mitigation Account. The request would provide for an extension of the funding for the storage tank assistance program. Co-Chair Hanley asked the amount of money to be carried forward. 9 JIM HAYDEN, PROGRAM MANAGER, UNDERGROUND STORAGE TANK PROGRAM, DIVISION OF SPILL PREVENTION & RESPONSE, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, responded that $10 million dollars has been appropriated over the past years, and that $2.5 million dollars would need to be extended. Currently, there are 800 applications in waiting, a demand of nearly $50 million dollars. The Department is working on ways to extend the available money which averages around $2 million dollars per year for clean up. The FY96 grant appropriation was $2 million dollars. Representative Brown questioned the delay of implementation. Mr. Hayden pointed out that the program was fairly new to the State. It would be used to provide grants and loans to local government and private sector for the upgrade of storage tanks and for spill clean up at tank sites. The Department wants to create a "fair" and conservative way to determine grant allocation. DEPARTMENT OF FISH AND GAME Ms. Slagle stated that Section #7 supplemental budget request for the Exxon Valdez Oil Spill Trustee Council would extend the lapse date for approved EVOS projects to the end of FY97. These lapse dates have been approved by the Legislative Budget and Audit (LBA) Committee. Representative Martin stated that there would be an adjustment to the FY96/FY97 expenditure. Ms. Slagle continued, Section #8(a) supplemental budget request in the amount of $32.7 thousand dollars to pay for increased vendor compensation in increased sales of fish and game licenses. KEVIN BROOKS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF FISH AND GAME, advised that late in the Session last year, the Department knew that sales would be "off the chart". The Division has been limited with many restrictions. This request indicates increased license sales. Ms. Slagle noted that Section #8(b) supplemental budget request would provide for a language change addressing the scope of the Arctic-Yukon-Kuskokwin salmon fisheries stock assessment for "equipment" to "projects", thus allowing for public participation. Mr. Brooks noted that the original language of the appropriation was broader. It has always been the intent of the Department to include all the above mentioned groups and to encourage public meetings. Co-Chair Hanley asked if to date any of the funds had been spent. Mr. Brooks replied 10 that a large portion of the money would be spent this spring and summer to implement equipment on the streams. DEPARTMENT OF HEALTH AND SOCIAL SERVICES Ms. Slagle introduced the Department of Health and Social Services (DHSS) Section #9(a/1) supplemental budget request which would reduce Aid to Families with Dependent Children (AFDC) in order to fund other welfare reform programs (Public Assistance eligibility tracking system $3.5 thousand dollars; child care benefits, Jobs Program for $1 thousand dollars). JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, explained that the case loads for AFDC were less than anticipated when the FY96 budget was put together. FY96 was authorized at $130 million dollars; in FY95, the Department spent $120 million dollars total funds. Conservatively estimating, changes will bring this year's program down to a $122 million dollar projection. Ms. Clarke noted that Section 9(a/2) for $500 thousand dollars would be an investment to increased child care benefits and would be shifted from AFDC. She pointed out that there has been greater use of child care dollars than previously anticipated. "Transitional" child care is used for people who go off of AFDC, but need to continue their entitlement to child care benefits. She thought that change reflected "good news" with more people going off of welfare. Co-Chair Hanley clarified that "transitional" child care was an entitlement. Day care for the Jobs Program would also provide monthly "transitional" child care supplements. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the State is above the federal requirement number of the people who need to be in the Jobs Program. Co-Chair Hanley asked if expenditures were being increased in other portions of the Jobs Program. Ms. Clarke advised that the Department is "living" within the entire appropriation, although, the child care portion of that appropriation surpassed what the Department was capable of handling. Mr. Nordlund noted that there has been an increased draw in both the Department's Job Program and Natives Job Program for child care monies. 11 Mr. Nordlund spoke to the reduced case load to the AFDC program. He suggested that it could have resulted from the higher economy within Alaska or from the rate of success in the Jobs Program. (Tape Change, HFC 96-32, Side 2). Ms. Clarke addressed Section #9(b) supplemental budget request for $3.5 million dollars for the Eligibility Information System (EIS) which would provide changes to the main frame system to meet federal welfare reform requirements. The funds would be shifted from AFDC. Ms. Clarke provided the Committee with a handout "Department of Health and Social Services Capital Eligibility Information Systems Appropriations". [Attachment #2]. Ms. Clarke interjected that some federal funds would be reimbursable for the project. Ms. Clarke spoke to the system currently in use. It was created in 1984 and currently is not capable of producing necessary data to keep the Department abreast of essential information. She noted that the Department has been successful in receiving appropriations and money from the federal government to implement changes to the system to make it more appropriate for the current load. To date, the Department has received $4 million dollars to upgrade the system. Ms. Clarke advised that the total cost would be $10 million dollars. MARGO NASH, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, spoke to the Department's specific plans to implement the EIS program. She provided the Committee with a handout "Welfare Reform Information Systems" and provided an overview of that document. [Attachment #3]. Representative Mulder proposed tracking individuals in the system using electronic finger printing. Ms. Nash noted that currently the Department uses the Eligibility Information System data base with the intent to program that system to identify when benefits were paid. Representative Mulder questioned the propriety of the overall appropriation. He compared other departments capital project needs, specifying particularly the Department of Corrections. He argued that this was an appropriation and not a supplemental request item. Ms. Clarke pointed out that there are not any requests in the FY97 Capital Budget for this project. In response to Representative Martin, Mr. Nordlund discussed the current tracking system. Ms. Nash concluded testimony, 12 providing contracting information. HB 468 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:10 P.M. HOUSE FINANCE COMMITTEE FEBRUARY 12, 1996 1:35 P.M. TAPE HFC 96 - 31, Side 1, #000 - end. TAPE HFC 96 - 31, Side 2, #000 - end. TAPE HFC 96 - 32, Side 1, #000 - end. TAPE HFC 95 - 32, Side 2, #000 - #438. 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 Martin Representative Mulder Representative Kohring Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representatives Foster and Therriault were not present for the meeting. ALSO PRESENT Representative Con Bunde; Annalee McConnell, Director, Office of Management and Budget, Office of the Governor; Nancy Slagle, Director, Budget Review, Office of Management and Budget, Office of the Governor; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Allison Elgee, Deputy Commissioner, Department of Administration; Dugan Petty, Director, Division of General Services, Department of Administration; Brant McGee, (Testified via teleconference), Office of Public Advocacy, Department of Administration; Guy Bell, Director, Division of Administrative Services, Department of Commerce and Economic Development; Remond Henderson, Director, Division of Administrative Services, Department of Community and Regional Affairs; Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law; Dean Guaneli, Chief Assistant Attorney General, Criminal 13 Division, Department of Law; Karen Rehfeld, Director, Administrative Services, Department of Education; Eddy Jeans, School Foundation-School Finance, Department of Education; Jim Hayden, Program Manager, Underground Storage Tank Program, Division of Spill Prevention & Response, Department of Environmental Conservation; Kevin Brooks, Director, Division of Administrative Services, Department of Fish and Game; Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services; Jim Nordlund, Director, Public Assistance, Department of Health and Social Services; Margo Nash, EIS Redesign Program Officer, Division of Public Assistance, Department of Health and Social Services. SUMMARY HB 468 An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date. HB 468 was HELD in Committee for further consideration. HOUSE BILL 468 "An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date." Co-Chair Hanley congratulated the Administration for keeping the supplemental budget under $20 million dollars, although reminded departments that the supplemental should be allocated only for unexpected expenditures. Co-Chair Hanley pointed out that the Governor's budget includes areas for new programs. He thought those issues would be more appropriately handled within next year's operating budget. ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, discussed the current Administration's intent to have the full budget funded at the beginning of the fiscal year. She advised that the Administration did hold the departments to tight scrutiny in the supplemental. Ms. McConnell explained two solutions which were used in the supplemental process. The first being internal shifting within a department and the other, shifted BRU's. Ms. McConnell addressed two items which entered into the supplemental. The first was created by the fire and 14 disaster condition; the second budget was for leasing. She added that $1.5 million dollars had been designated in Section #16 for fire and disasters and recommended that there be a fund established to address those concerns to end the continual "cash flow crisis". Ms. McConnell agreed that this concern could be addressed in next years operating budget. The fire season is expected to be particularly bad this year because of a minimal snow cover in the Interior. Ms. McConnell noted the anticipated lapse in the school foundation revenue. The current Administration is proposing that a portion of that money be used to fix the federal disparity. She recommended extending the lapse date to deal with the concern of accumulated back interest. Ms. McConnell suggested using savings from the Welfare and Medicaid balance for specific investments in child care and for the management information system updating. Co-Chair Hanley commented that language on Page 17, Lines 1 & 2, creates a unique way to fund a fiscal note. He recommended there be a fiscal note on the bill rather than pre-funding the bill through a supplemental. Ms. McConnell agreed, although pointed out that this year the Legislature is on a fast track supplemental. She emphasized that the supplemental funding would provide an opportunity to more quickly finance an important concern. Co-Chair Hanley interjected that designation would have an impact on the overall fiscal plan. The funding would address one time surplus education formula money, showing a much larger increase the following year. He concluded, the less money spent this year, the less money taken out of the Capital Budget Request (CBR). Ms. McConnell asserted that this was an expenditure which must be made eventually and encouraged Committee members to choose "good planning" and "good operational sense". Additional information relating to these requests are available to the Legislature from the Office of Management and Budget (OMB). Ms. McConnell urged the Committee to consider and pass the proposed supplementals. DEPARTMENT OF ADMINISTRATION NANCY SLAGLE, DIRECTOR, BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET (OMB), OFFICE OF THE GOVERNOR, provided Committee members with a letter listing technical corrections to the bill. [Attachment #1]. 15 Section #1(a) addresses the reduced centralized administrative, Division of Finance services shift to the Bethel Public Defender Office to meet the increased caseloads in the amount of $49 thousand dollars. SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, explained that the Public Defender is currently in the process of hiring. ALLISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION, added that recruitment for that position has just begun. The case load growth in Bethel has always been bad, although, this past summer the case load "ballooned". Both offices have suffered a tremendous turnover due to the extreme caseload responsibilities. Representative Martin recommended moving public defenders from a less busy area. Ms. Elgee agreed if there was an area with an "under" utilized public defender, noting that the Anchorage section is also growing. Ms. Slagle spoke to Section #1(b) supplemental budget request in the amount of $217 thousand dollars to cover the operating costs shortage for the Public Defender agency (Rule 39 receipts for representation). There has been a large increase added to the Anchorage lease concern. Ms. Elgee clarified that Rule 39 money was that collected from felons Permanent Fund Dividends (PFD). Ms. Barton pointed out the 600 case increase this year was greater than anticipated. Ms. Elgee stated that the fiscal note added to the past legislation was for Driving While Intoxicated (DWI) legislation. The case load projections prepared for that bill were underestimated and created a serious impact. All agencies impacted by the passage of that bill are experiencing short funding. Ms. Slagle continued, Section #1(c) would provide for $356.4 thousand dollars for operating costs for the Office of Public Advocacy (OPA). She remarked that budget is case load driven, and the Administration has little control over it. Ms. Slagle spoke to the increased case loads resulting from increased police enforcement. BRANT MCGEE, (TESTIFIED VIA TELECONFERENCE), OFFICE OF PUBLIC ADVOCACY (OPA), DEPARTMENT OF ADMINISTRATION, agreed that the continual increased need of services has resulted from criminal convictions and from "children in the need of aid" conditions. He emphasized that the level of increase is dramatic. Co-Chair Hanley asked if the Governor intended to provide an 16 amendment to increase that Office's FY97 request. Ms. Barton replied that there has not been any discussion regarding an increase to the OPA FY97 budget. Co-Chair Hanley pointed out that the combination of last year's funding and the supplemental request would result in $20 thousand dollars greater budget than last year. Ms. Slagle continued, Section #1(d) would provide $870 thousand dollars to fully fund the leasing budget. A $1.2 million dollar shortfall was anticipated during Conference Committee with a reduced need of $700 thousand dollars; an additional $96 thousand dollars was allocated to pay the lease for the Juneau support from the Mental Health Trust Authority. Representative Martin suggested cutting that request back from the Mental Health Trust Authority. Ms. Slagle noted that the $96 thousand dollars was not money from the Mental Health budget or an additional cost to the Mental Health. That money is a payment due by the State to the Mental Health Trust Fund for leasing their property. (Tape Change, HFC 96-31, Side 2). Co-Chair Hanley asked if any leases are prepaid. DUGAN PETTY, DIRECTOR, DIVISION OF GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION, responded that in FY96, the Department prepaid $312 thousand dollars for four leases. He added, the Department has tried to "manage down" the shortfall by offering a prepay incentive approach. Mr. Petty concluded that whatever leverage is available, the Department will take advantage of it. Representative Kohring asked why the prepaid are not paid until the end of the fiscal year. Mr. Petty replied that at that point, the Department knows if there are funds available to drive discounts. He explained that the $312 thousand dollar prepay was made through an additional appropriation received for FY96. Co-Chair Hanley questioned if the FY97 leasing budget was at the full level. Ms. Barton stated it was the same as FY96 with the addition of this years supplemental budget request. Mr. Petty summarized that the Division has a "challenge" to manage down the existing leases. Ms. Slagle continued, Section #1(e) supplemental budget request in the amount of $450 thousand dollars would address needs for the Retirement and Benefits Program to cover investment management fees resulting from a higher than expected asset growth. 17 Section #1(f) supplemental budget request to ratify an FY95 over expenditure of $23.1 thousand dollars for the longevity bonus grants from Senior Services. Ms. Slagle indicated that there was adequate lapse money in other BRU's. DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT Ms. Slagle explained Section 2 of the supplemental budget request in the amount of $61.2 thousand dollars which would cover FY96 and FY97 costs for office space in Tokyo. The security deposit plus interest for an existing lease will be refunded and deposited into the general fund. GUY BELL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, advised that FY97 budget proposal has budgeted for the reduced cost office space. The refund deposit will be returned by December, 1996, and then deposited into the general fund. Representative Kohring questioned the emergency nature of the appropriation. Mr. Bell responded that there are two offices in Tokyo; one for the Division of Tourism and the other, the Division of Trade and Development, in operation since 1965. The supplemental would provide funding to co- locate the two offices, saving $50 thousand dollars per year. Co-Chair Hanley advised that the Legislature has suggested closing that office. DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS Ms. Slagle spoke to Section #3(a) which would provide a decrease in training and development funds to cover revenue sharing costs for the Native Village of Kluti Kaah in northern Alaska. That warrant has been misplaced and the money continues to be due that village. Ms. Slagle advised that Section #3(b) would provide a lapse date extension for Rural Development Grants. She noted that for FY97, the Administration has requested that these grants be included in the CBR. These are construction grants for smaller communities. This type of project is often extended past a single fiscal year. Co-Chair Hanley questioned how much money would be carried forward. REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS, noted that the appropriation would be $906 thousand dollars. He stated that he would provide information on the carry forward amount to the Committee. Ms. Slagle commented that Sections 3(c,d & e) were requested 18 for capitalization of the Rural Development Initiative Loan Fund (RDILF). AIDEA would provide $650 thousand dollars to capitalize that fund. Currently, there are over 400 thousand loan applications. Mr. Henderson added, the amount of FY97 loan payments estimated to be returned is $115 thousand dollars and the average loan is approximately $35 thousand dollars. The demand for the program has always exceeded what is available. The supplemental appropriation would allow for the continuation of loans to be issued for that program. Representative Martin remarked that there will always be a demand for "free" money. Ms. Slagle replied that the supplemental request would provide funding to start programs early, weather permitting. Mr. Henderson responded to a query of Representative Mulder's regarding the types of loans funded through the program. He stated that the loans only go to communities of less that five thousand people. The loan funds are used to leverage other funds from banking institutions and private industry. The loans are for those small business-type operations that can create economic development and jobs. He emphasized that these are small scale projects with a competitive bid process. Mr. Henderson summarized that AIDEA does support the loans. Mr. Henderson pointed out the interest rate on the loans was 9.5%; and that to date the default rate has been zero. The original appropriation in FY92 was for $300 thousand dollars with an additional deposit from AIDEA of $650 thousand dollars. Ms. Slagle continued, Sections 3(f&g) supplemental request for $200 thousand dollars for the Alaska Legal Service grant in lieu of pending legal fees. The request provides funding in anticipation of a federal dollar shortage. Mr. Henderson noted that funding would cover the costs for a settlement of a suit. BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW, stated that the request would provide payment of attorneys fees forward funding for three cases. The request would only resolve the issues between the State of Alaska and Alaska Legal Services. Ms. Ritchie clarified these are cases against the State. Co-Chair Hanley inquired if Alaska Legal Services receives money other than State money. Ms. Ritchie noted that they receive mostly federal money through the Legal Services Corporation Act. 19 Representative Mulder questioned why the State would fund Alaska Legal Services in order that they then bring a trial forth against the State, and then the State pay those legal fees. Ms. Ritchie agreed that does happen. Representative Brown inquired if the amount requested in the supplemental was the Department's best estimation of the amount which would be due to Alaska Legal Services. Ms. Ritchie stated it was, given the settlement negotiations resulting from those three cases. Representative Brown stressed that Alaska Legal Services exists primarily to provide low income citizens access to the civil courts. She emphasized the importance of that service. DEPARTMENT OF CORRECTIONS Ms. Slagle indicated that Section 4(a & b) supplemental request would cover the Cleary court fines for FY95 and FY96 contempt case. DEAN GUANELI, CHIEF ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, DEPARTMENT OF LAW, stated that the requested amount would only cover fines through the month of October, 1995. The Department of Corrections has been unable to comply with the population limits established in the Cleary order for the past three months; fines have resulted from that also. Mr. Guaneli noted that the appropriation would be contingent on the money being placed back into the general fund. The plaintiffs believe that the fines should be made available so as to improve the condition of prisoners statewide. The court has yet to rule on that issue. Ms. Slagle commented that the bill only covers the period through October because of the time when it was drafted. The amount of fines due are not always agreed upon. Mr. Guaneli pointed out that each month there is uncertainty regarding the amount due. He noted that the fines fluctuate widely. Representative Mulder requested clarification of the amount fined the Department of Corrections for overfilling. Mr. Guaneli provided him that amount. (Tape Change, HFC 96-32, Side 1). Representative Martin commented on the comfortable services offered offenders. Mr. Guaneli emphasized that the numbers which drive the fines are the number of prisoners entering the system not the services. He concluded, regardless of the fines due, the State needs to have adequate space to contain the number of prisoners. 20 DEPARTMENT OF EDUCATION Ms. Slagle outlined that Section #5 (a & b) supplemental budget request identifies excess funds in the foundation program and then appropriates those funds as grants to school districts in order to address the disparity problem. Co-Chair Hanley requested further information regarding that condition. KAREN REHFELD, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF EDUCATION, commented that last year the Department was aware of changes on the federal level which would affect the impact aid program and the disparity test. The dollar amounts were not available at that time. Changes on the federal level resulted from the percentages of disparity between the wealthiest district and the poorest district. Disparity has been reduced to a 20% margin level. Co-Chair Hanley requested a written explanation from the Department of how disparity works. He thought that there could be numerous options to deal with that concern. The federal government has kept decreasing the amount appropriated with the intention of discontinuing the program. Representative Mulder asked if the State would loose the impact aid funds without the disparity test. EDDY JEANS, PROGRAM SPECIALIST, SCHOOL FOUNDATION, SCHOOL FINANCE, DEPARTMENT OF EDUCATION, explained that the school districts would not lose the impact aid funds, but rather, the State would lose the ability to measure those funds in the State distribution plan. Mr. Jeans commented that in FY96, there would be $35 million dollars in the foundation formula. Impact aid funds come in for military dependent students and students who reside on Indian lands. Race is not a factor. Representative Mulder questioned the net impact should the disparity test not be in compliance. He was curious if more money would then go to the above mentioned locations. Mr. Jeans replied if the impact aid funds are not recognized in the foundation formula, a $35 million dollar gap would exist resulting in a proration of the unit value of approximately $2500 dollars per instructional unit. Representative Brown requested that a "break down" be provided by the Department indicating how each school district would be affected if disparity was not met. DEPARTMENT OF ENVIRONMENTAL CONSERVATION Ms. Slagle referenced Section #6(a & b) in the supplemental 21 budget request noting that the first change indicated in Attachment #1 reflects this concern. There is need to change language so that the lapse funds would go to the Prevention Mitigation Account. The request would provide for an extension of the funding for the storage tank assistance program. Co-Chair Hanley asked the amount of money to be carried forward. JIM HAYDEN, PROGRAM MANAGER, UNDERGROUND STORAGE TANK PROGRAM, DIVISION OF SPILL PREVENTION & RESPONSE, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, responded that $10 million dollars has been appropriated over the past years, and that $2.5 million dollars would need to be extended. Currently, there are 800 applications in waiting, a demand of nearly $50 million dollars. The Department is working on ways to extend the available money which averages around $2 million dollars per year for clean up. The FY96 grant appropriation was $2 million dollars. Representative Brown questioned the delay of implementation. Mr. Hayden pointed out that the program was fairly new to the State. It would be used to provide grants and loans to local government and private sector for the upgrade of storage tanks and for spill clean up at tank sites. The Department wants to create a "fair" and conservative way to determine grant allocation. DEPARTMENT OF FISH AND GAME Ms. Slagle stated that Section #7 supplemental budget request for the Exxon Valdez Oil Spill Trustee Council would extend the lapse date for approved EVOS projects to the end of FY97. These lapse dates have been approved by the Legislative Budget and Audit (LBA) Committee. Representative Martin stated that there would be an adjustment to the FY96/FY97 expenditure. Ms. Slagle continued, Section #8(a) supplemental budget request in the amount of $32.7 thousand dollars to pay for increased vendor compensation in increased sales of fish and game licenses. KEVIN BROOKS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF FISH AND GAME, advised that late in the Session last year, the Department knew that sales would be "off the chart". The Division has been limited with many restrictions. This request indicates increased license sales. Ms. Slagle noted that Section #8(b) supplemental budget request would provide for a language change addressing the scope of the Arctic-Yukon-Kuskokwin salmon fisheries stock 22 assessment for "equipment" to "projects", thus allowing for public participation. Mr. Brooks noted that the original language of the appropriation was broader. It has always been the intent of the Department to include all the above mentioned groups and to encourage public meetings. Co-Chair Hanley asked if to date any of the funds had been spent. Mr. Brooks replied that a large portion of the money would be spent this spring and summer to implement equipment on the streams. DEPARTMENT OF HEALTH AND SOCIAL SERVICES Ms. Slagle introduced the Department of Health and Social Services (DHSS) Section #9(a/1) supplemental budget request which would reduce Aid to Families with Dependent Children (AFDC) in order to fund other welfare reform programs (Public Assistance eligibility tracking system $3.5 thousand dollars; child care benefits, Jobs Program for $1 thousand dollars). JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, explained that the case loads for AFDC were less than anticipated when the FY96 budget was put together. FY96 was authorized at $130 million dollars; in FY95, the Department spent $120 million dollars total funds. Conservatively estimating, changes will bring this year's program down to a $122 million dollar projection. Ms. Clarke noted that Section 9(a/2) for $500 thousand dollars would be an investment to increased child care benefits and would be shifted from AFDC. She pointed out that there has been greater use of child care dollars than previously anticipated. "Transitional" child care is used for people who go off of AFDC, but need to continue their entitlement to child care benefits. She thought that change reflected "good news" with more people going off welfare. Co-Chair Hanley clarified that "transitional" child care was an entitlement. Day care for the Jobs Program would also provide monthly "transitional" child care supplements. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the State is above the federal requirement for the number of the people who need to be in the Jobs Program. Co-Chair Hanley asked if expenditures were being increased in other portions of the Jobs Program. Ms. Clarke advised that the Department is "living" within the entire appropriation, although, the child care portion of that 23 appropriation surpassed what the Department was capable of handling. Mr. Nordlund noted that there has been an increased draw in both the Department's Job Program and Natives Job Program for child care monies. Mr. Nordlund spoke to the reduced case load to the AFDC program. He suggested that it could have resulted from the higher economy within Alaska or from the rate of success in the Jobs Program. (Tape Change, HFC 96-32, Side 2). Ms. Clarke addressed Section #9(b) supplemental budget request for $3.5 million dollars for the Eligibility Information System (EIS) which would provide changes to the main frame system to meet federal welfare reform requirements. The funds would be shifted from AFDC. Ms. Clarke provided the Committee with a handout "Department of Health and Social Services Capital Eligibility Information Systems Appropriations". [Attachment #2]. Ms. Clarke interjected that some federal funds would be reimbursable for the project. Ms. Clarke spoke to the system currently in use. It was created in 1984 and currently is not capable of producing necessary data to keep the Department abreast of essential information. She noted that the Department has been successful in receiving appropriations and money from the federal government to implement changes to the system to make it more appropriate for the current load. To date, the Department has received $4 million dollars to upgrade the system. Ms. Clarke advised that the total cost would be $10 million dollars. MARGO NASH, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, spoke to the Department's specific plans to implement the EIS program. She provided the Committee with a handout "Welfare Reform Information Systems" and provided an overview of that document. [Attachment #3]. Representative Mulder proposed tracking individuals in the system using electronic finger printing. Ms. Nash noted that currently the Department uses the Eligibility Information System data base with the intent to program that system to identify when benefits were paid. Representative Mulder questioned the propriety of the overall appropriation. He compared other departments capital project needs, specifying particularly the 24 Department of Corrections. He argued that this was an appropriation and not a supplemental request item. Ms. Clarke pointed out that there are not any requests in the FY97 Capital Budget for this project. In response to Representative Martin, Mr. Nordlund discussed the current tracking system. Ms. Nash concluded testimony, providing contracting information. HB 468 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:10 P.M. 25