HOUSE FINANCE COMMITTEE FEBRUARY 14, 1996 1:40 P.M. TAPE HFC 96 - 36, Side 1, #000 - end. TAPE HFC 96 - 36, Side 2, #000 - end. TAPE HFC 96 - 37, Side 1, #000 - end. TAPE HFC 96 - 37, Side 2, #000 - #094. 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 Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Nancy Slagle, Director, Budget Review, Office of Management and Budget, Office of the Governor; Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services; Jim Nordlund, Director, Division of Public Assistance, Department of Health and Social Services; Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law; Richard Pegues, Director, Administrative Services, Department of Law; Laurie Otto, Deputy Attorney General, Criminal Division, Department of Law; Carol Carol, Director, Division of Administrative Services, Department of Military and Veterans Affairs; Nico Bus, Director, Division of Administrative Services, Department of Natural Resources; Craig Tillery, (Testified via teleconference), Assistant Attorney General, Environmental Section, Department of Law, Anchorage; Christopher Kennedy, (Testified via teleconference), Assistant Attorney General, Environmental Section, Civil Division, Department of Law, Anchorage; Vincent Usera, Assistant Attorney General, Commercial Section, Civil Division, Department of Law; Bill Church, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration; John Bitney, Legislative Liaison, Alaska Housing Finance Corporation, Department of Revenue; Marylou Burton, Budget Director, University of Alaska; Boyd Brownfield, Deputy Commissioner, Department of Transportation and Public Facilities; Carol Taylor, Planning, Department of Transportation and Public 1 Facilities. 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." NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, provided Committee members with a letter addressing the Governor's supplemental legislation and amendment changes. [Attachment DEPARTMENT OF HEALTH AND SOCIAL SERVICES JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, provided the Committee with a handout addressing timing and funding acquisitions for professional services for the information system which would implement welfare reform. [Attachment become effective October 1, 1996. Nevertheless, the use of the FY96 supplemental budget request in the amount of $3.5 million general fund dollars was necessary to implement welfare reform in a timely way. The procurement process, if successful can take anywhere from 90 to 160 days. It is urgent that the Department make the changes as soon as possible. Ms. Clarke added that when welfare reform passes at the federal level, every state will be making automated system changes. Because most states do not have existing resources to modify or build new systems, most will be competing for limited contractual support. Ms. Clarke emphasized, federal rule indicates that money must be spent to receive the grant match. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the 2 greatest part of the request was for $1.5 million dollars, which would be used for a software developer to implement welfare reform changes. The supplemental funding would "buy" the Department four months of critical time. Mr. Nordlund agreed that uncertainty exists with federal changes to the welfare reform system, although, he stressed that the Eligibility Information System (EIS) needs change regardless. The proposal would allow a system to track recipients, create a diversion program with additional sanctions on recipients, shelter cost reductions and seasonal benefits. The Department must implement these changes with or without a welfare reform. Co-Chair Hanley pointed out that a lot of money has already been spent on the EIS system, and he questioned the cost projection of the system enhancement. Ms. Clarke noted that there has been $1 million general fund dollars spent over the past six years, matched by $3.5 million federal fund dollars. The requested $3.5 million dollars would cover charges for a new system with PC front-end capabilities, using the old mainframe for a data warehouse. Co-Chair Hanley inquired if the Legislature should allocate the supplemental request and the federal government provides the match, how much general fund dollars would be required. Ms. Clarke offered to make that information available. Representative Brown voiced caution in upgrading an old system and trying to make it flexible enough to deal with future needs. She acknowledged that the Department has scrutinized various plans and choose the least expensive one available. Mr. Nordlund replied that the option chosen by the Department takes advantage of the current mainframe. He noted that there is a tremendous amount of data stored on that system. Mr. Nordlund stressed that the concept chosen was a "forward looking" design. Ms. Slagle addressed Section #9(c)(1&2) supplemental budget request transfer of $250 thousand dollars, a decrease to Family and Youth Services to fund Youth Facilities. These funds would be used for the McLaughlin and Johnson Youth Centers. Ms. Clarke pointed out that these two services are currently in separate appropriations within Family and Youth Services, which causes continual problems in program management. The Division of Family and Youth Services has had difficulty in adapting to the vacancy base recruitment program that the Division of Personnel began using a few years ago. 3 Ms. Clarke referenced Section #9(c)(3)(d) supplemental budget request for a $3.5 million dollar reduction in the Medicaid program in order to fund the welfare reform proposal for the Alaska Family Independence (AFI) program. Growth rate for the Medicaid program is down. Co-Chair Hanley was not comfortable placing a specific dollar amount to this category based on legislation which sets guidelines in that account. Representative Brown asked if the account currently exists or if it was part of the welfare reform package. Ms. Clarke stated that it is part of that package, and that the section would be conditioned with passage of the legislation. Ms. Clarke continued, Section 9(e) supplemental budget request in the amount of $426.9 thousand dollars would be used for the judgement in Helmuth v. State - API employee social services settlement. Co-Chair Hanley asked why the Department of Health and Social Services would be handling the financing for those charges. Ms. Slagle pointed out that the Department of Law would have been claiming it if the request for the concern was for attorney fees. She indicated that unless the judgement was large or specific to a department, there are no "hard and fast" rules and that it could be addressed by one or another of the two departments involved. BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW, provided information regarding the case referenced in Section 9(e), resulting from a hostel work environment. Ms. Clarke added that the case resulted from lay-offs at Alaska Psychiatric Institute (API) in FY92. Representative Parnell and Ms. Ritchie discussed the date of each judgement and settlement. Ms. Clarke responded to Representative Brown's question regarding the climate at API which created the charge. She noted that new policies and staff training have currently been implemented so as to avoid future problems. DEPARTMENT OF LAW Ms. Slagle spoke to Section #10(a) supplemental budget request in the amount of $369.3 thousand dollars to be used for judgments and claims. CHRISTOPHER KENNEDY, (TESTIFIED VIA TELECONFERENCE), ASSISTANT ATTORNEY GENERAL, ENVIRONMENTAL SECTION, CIVIL DIVISION, DEPARTMENT OF LAW, spoke to the Toksook Bay versus State of Alaska judgement in the amount of $1.2 million dollars. 4 Ms. Ritchie explained the Burger versus State judgement, a case based on the sale of Permanent Fund Dividend (PFD) checks. Mr. Burger was doing business as Frontier Financial Services, and entered into transactions with three thousand PFD recipients, selling them an amount per dividend check in exchange for assigning their rights to his company. The Department of Revenue began to investigate the number of change of address forms they received, following research, they adopted a regulation clarifying that the State would decline to honor a PFD assignment other than to a governmental agency. The action resulted in Mr. Burger filing a law suit. The plaintiff is represented in the case by the attorney Mark Sandburg. (Tape Change, HFC 96-36, Side 2). Representative Mulder suggested the repay come from the Permanent Fund account. Ms. Slagle advised that effect would pro-rate that amount from the dividend fund, showing as a reduction to next year's dividend checks. Representative Mulder inquired if the Permanent Fund Corporation held a fund for previous years escrow claims. Ms. Slagle stated that there was some money held, but did not know the net effect of the holding. Ms. Ritchie clarified that the individuals sold their dividend to Frontier Financial Services for $325 dollars and then signed a confession of judgement. Later, the State of Alaska, Department of Revenue determined that the assignment was invalid and in violation of the small loan act. The State would not honor that assignment, and at that point, they sent the Permanent Fund Dividend check back to the dividend recipient. Co-Chair Hanley asked if the individuals receiving the dividend back were being held responsible. Ms. Ritchie noted that the State of Alaska has not gone after these people. She suggested that would be a different case from the one before the Committee. Representative Navarre pointed out that all the legal possibilities regarding the case had been exhausted. He asked if the only scenario left would be to settle with Mr. Burger. Ms. Ritchie advised that the Department of Law has requested the Supreme Court to reconsider; they declined. Currently, it is back in the Superior Court for calculation of what is due Mr. Burger. Representative Navarre questioned how the obligation of the State could be reduced. Ms. Ritchie advised that the supplemental request reduces what the State has to pay in negotiation efforts. 5 Co-Chair Hanley recommended removing the item from the supplemental budget request until a "solid" figure had been determined by the courts. Ms. Slagle referenced Section #10(b)(c) supplemental budget transfer in the amount of $66.6 thousand dollars, reducing FY96, oil and gas litigation in order to fund an additional prosecutor in Bethel resulting from increased case loads. LAURIE OTTO, DEPUTY ATTORNEY GENERAL, CRIMINAL DIVISION, DEPARTMENT OF LAW, provided an overview of the critical situation currently existing in Bethel. The prosecuting attorneys in that area work three times as much as other ones around the State and the area has the highest crime rate in Alaska. She emphasized that the region is grossly under staffed. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Ms. Slagle spoke to Section #11(a) supplemental budget request in the amount of $1.4 million dollars for increased costs for the National Guard Retirement Fund based on updated actuarial reports. The current liability is funded at only 17%. BILL CHURCH, RETIREMENT SUPERVISOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, pointed out that over the years there have been changes to the National Guard system. The 1988 change had the greatest impact, when a retirement option was introduced and passed for lump sum payout value to those retiring from the National Guard or the Militia retirement system. Currently, 70% of those retiring, are opting for this service, creating an unusual condition for the funding ratio in that system. Mr. Church responded to Representative Brown's question noting that the option was only applicable to this system and no other State retirement systems. Representative Brown suggested that the pay out option was not "supportable". CAROL CAROL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, explained that the Department has considered options to "fix" the fund. One of the options would be to eliminate the "lump sum". The Department decided that option would not be appropriate until meeting with those persons who would be the most affected by that decision. Representative Brown asked the additional amount of liability which would accrue next year. Mr. Church 6 responded that in the next two fiscal years, the Department will be required to contribute $2.5 million dollars. The current unfunded liability is $11 million dollars. For the year ending 1994, it would be $1.8 million dollars distributed, whereas, total contributions received would be $1.1 million dollars. Representative Mulder recommended "fixing" the system and making it like the State's retirement system which would also provide greater accountability. Mr. Church commented that everyone in the National Guard, currently, is eligible for the lump sum payment. If the law is changed, it would act prospectively. Discussion followed among Committee members, Mr. Church and Ms. Carol regarding the retirement incentive program in the National Guard. Mr. Church pointed out that most people in the Guard program do not expect to live on their sum for retirement. The average amount of an individuals retirement in the fund is between $10-$12 thousand dollars. Once an individual has completed 20 "good" years within the guard system, either active service, reserve time or guard time, they can retire and have access to that fund, regardless of their age. Mr. Church was not aware of any other states offering similar programs. (Tape Change, HFC 96-37, Side 1). Ms. Slagle referenced Section #11(b) supplemental request in the amount of $557.3 thousand dollars for payment relief from disasters which have already been declared. Co-Chair Hanley requested a breakdown of each disaster and the corresponding costs. Ms. Carol explained an allocation would also be granted to the Fort Yukon mitigation. When the flood disaster occurred last year, the Department borrowed money from every relief fund. Co-Chair Hanley asked if that allocation would be reimbursed by the federal government. Ms. Carol stated that the requested amount was the State's portion. DEPARTMENT OF NATURAL RESOURCES Ms. Slagle noted Section #12 supplemental request in the amount of $5.258 million dollars would be allocated for fire suppression covering spring fire contracts and anticipated fire activity through the end of the fiscal year. NICO BUS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES, noted that the FY96 fire suppression budget was allocated $3.5 million dollars. The 7 Department has spent $3 million dollars of that allocation from July 1, 1995 through January, 1996. Currently, contracts exist for the spring fire season. DEPARTMENT OF REVENUE Ms. Slagle referenced Section #13(a) supplemental budget request in the amount of $198.2 thousand dollars unanticipated lease costs for AHFC. She noted those funds should be corporation receipts, not general fund receipts. JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE CORPORATION (AHFC), DEPARTMENT OF REVENUE, advised that Section 8 vouchers were currently in place; AHFC needs a new lease center. The intent would be to continue leasing headquarter space in a new location. The Department of Law informed AHFC that they would need legislative approval for the new lease space. Ms. Slagle continued, Section #13(b) would transfer $67 thousand dollars between fund sources in the Alaska State Pension Investment Board. DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES Ms. Slagle advised that Section #14(a) supplemental budget request in the amount of $4 million dollars would be used for highway and bridge repair costs related to Southcentral flood disasters. She pointed out that $1.1 million would originate from the general fund with the remainder federal fund receipts. BOYD BROWNFIELD, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES (DOTPF), explained that the request resulted from two distinctive parts: 1. Emergency repair match for the federal aid money. 2. Additional requirement in the amount of $201 thousand dollars to be used to repair the facilities. He noted that damage amounted to $8 million dollars. The federal government has provided the State, $7.5 million dollars in emergency relief. Through prior authorization, the Department currently has $4.5 million dollars of unobligated authority, requiring an additional $3 million dollars authority to match what is needed for federal receipts. Co-Chair Hanley questioned how much money was intended for the Copper River Bridge project. Mr. Brownfield responded 8 that the bridge was in Phase 1, correcting flood damage. That cost would be in the amount of $2.1 million dollars, including a $2.6 million dollar state-match which would create a stable condition. Co-Chair Hanley stated that he would not support spending the allocation on repair of that project. Mr. Brownfield advised that the money requested would only stabilize the bridge and would not repair it for transportation use. He stressed that another flood in that area will create significant environmental problems. Mr. Brownfield explained that the total estimated cost of repairing the bridge would be $6.9 million dollars. Emergency funds are available and can be used only to repair the damage. Representative Brown asked how much money would be needed eliminate the bridge. Mr. Brownfield replied that cost would be $441 thousand dollars state matching money. The State would not need the additional authorization of $4 million dollars federal funds. He added, if that portion of the bridge is not repaired, a domino effect could occur and that part of the pier could create an additional span fall across the river. Co-Chair Hanley asked if the stabilization would prevent another flood of that magnitude creating the same extensive damage. Mr. Brownfield stated that it would. Mr. Brownfield remarked that he was not aware of costs associated with removal of the entire bridge. Representative Brown referenced Section #14(b) supplemental budget request in the amount of $720 thousand dollars for the Copper River Highway restoration recent settlement. Mr. Brownfield replied that the request resulted from a lawsuit with the federal government. CRAIG TILLERY, (TESTIFIED VIA TELECONFERENCE), ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, concurred that the decree was filed with the Court and would require certain rectifying activities. Representative Brown asked why the appropriation was deemed an emergency. Mr. Brownfield responded that the Department has specific items which must be addressed and that will not be a matter of negotiation for the State. UNIVERSITY OF ALASKA Ms. Slagle addressed Section #15(a) supplemental budget request in the amount of $455 thousand dollars for the 1995 monetary terms agreement with Classification Employee Association (CEA). Section #15(b) request in the amount of 9 $473 thousand dollars would be used for the 1995 monetary terms agreement with Alaska Community College Federation of Teachers (ACCFT). MARYLOU BURTON, BUDGET DIRECTOR, UNIVERSITY OF ALASKA, responded that Section #15(b) had not yet been before the Committee. The request resulted from an arbitration ruling that occurred late last Session. The Legislature had not acted on the 1995 portion, whereas, the 1996 portion did not come to the Legislature because it was too late in the Session to submit it. Ms. Burton clarified that the request language should read: "To satisfy the FY96 monetary terms of the collective bargaining agreement" for both Sections 15(a)(b). Representative Martin reminded Committee members that the Legislature did turn down the 1995 monetary terms. Ms. Burton clarified that the Legislature did not turn down the contracts. Last year, there were two vehicles before the Legislature, HB 305 which covered FY95 & FY96 costs for the classified positions. In addition, the FY95 costs for teachers came as part of the supplemental request of the Governor which was not acted upon by the Legislature. Ms. Burton commented that both the contract terms and the practice has been appropriated and that the monetary terms for contracts require separate action from the Legislature. Representative Navarre asked if there were increases given to non-covered employees. Ms. Burton stated that no University employee received increases in FY95 or FY96. She added, that the arbitration ruling has come down and that the University is in the middle of a lawsuit regarding payment of the funds without separate appropriation. Ms. Burton clarified that the request deals with two different categories, one being the Classified Employees Association. That arbitration ruling applied only to the community college teachers. Discussion followed between Ms. Burton and Committee members regarding negotiations and the compensation plan put forth for other faculty. Representative Navarre asked when the contracts were negotiated. Ms. Burton replied that they were negotiated and went into effect Spring, 1995. No request was made for employees last year. The Board had suspended the 3% provision, hence, it did not apply to that particular group. Representative Navarre pointed out that in FY91 & FY92, the Legislature did not provide the University the requested increase, although the University did provide that increase to non-covered employees. 10 (Tape Change, HFC 96-37, Side 2). Ms. Burton explained that the collective bargaining agreement has language which specifies separate legislative appropriation. HB 468 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:55 P.M. HOUSE FINANCE COMMITTEE FEBRUARY 14, 1996 1:40 P.M. TAPE HFC 96 - 36, Side 1, #000 - end. TAPE HFC 96 - 36, Side 2, #000 - end. TAPE HFC 96 - 37, Side 1, #000 - end. TAPE HFC 96 - 37, Side 2, #000 - #094. 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 Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Nancy Slagle, Director, Budget Review, Office of Management and Budget, Office of the Governor; Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services; Jim Nordlund, Director, Division of Public Assistance, Department of Health and Social Services; Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law; Richard Pegues, Director, Administrative Services, Department of Law; Laurie Otto, Deputy Attorney General, Criminal Division, Department of Law; Carol Carol, Director, Division of Administrative Services, Department of Military and Veterans Affairs; Nico Bus, Director, Division of Administrative Services, Department of Natural Resources; 11 Craig Tillery, (Testified via teleconference), Assistant Attorney General, Environmental Section, Department of Law, Anchorage; Christopher Kennedy, (Testified via teleconference), Assistant Attorney General, Environmental Section, Civil Division, Department of Law, Anchorage; Vincent Usera, Assistant Attorney General, Commercial Section, Civil Division, Department of Law; Bill Church, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration; John Bitney, Legislative Liaison, Alaska Housing Finance Corporation, Department of Revenue; Marylou Burton, Budget Director, University of Alaska; Boyd Brownfield, Deputy Commissioner, Department of Transportation and Public Facilities; Carol Taylor, Planning, Department of Transportation and Public Facilities. 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." NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, provided Committee members with a letter addressing the Governor's supplemental legislation and amendment changes. [Attachment DEPARTMENT OF HEALTH AND SOCIAL SERVICES JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, provided the Committee with a handout addressing timing and funding acquisitions for professional services for the information system which would implement welfare reform. [Attachment become effective October 1, 1996. Nevertheless, the use of the FY96 supplemental budget request in the amount of $3.5 million general fund dollars was necessary to implement welfare reform in a timely way. The procurement process, if successful can take anywhere from 90 to 160 days. It is 12 urgent that the Department make the changes as soon as possible. Ms. Clarke added that when welfare reform passes at the federal level, every state will be making automated system changes. Because most states do not have existing resources to modify or build new systems, most will be competing for limited contractual support. Ms. Clarke emphasized, federal rule indicates that money must be spent to receive the grant match. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the greatest part of the request was for $1.5 million dollars, which would be used for a software developer to implement welfare reform changes. The supplemental funding would "buy" the Department four months of critical time. Mr. Nordlund agreed that uncertainty exists with federal changes to the welfare reform system, although, he stressed that the Eligibility Information System (EIS) needs change regardless. The proposal would allow a system to track recipients, create a diversion program with additional sanctions on recipients, shelter cost reductions and seasonal benefits. The Department must implement these changes with or without a welfare reform. Co-Chair Hanley pointed out that a lot of money has already been spent on the EIS system, and he questioned the cost projection of the system enhancement. Ms. Clarke noted that there has been $1 million general fund dollars spent over the past six years, matched by $3.5 million federal fund dollars. The requested $3.5 million dollars would cover charges for a new system with PC front-end capabilities, using the old mainframe for a data warehouse. Co-Chair Hanley inquired if the Legislature should allocate the supplemental request and the federal government provides the match, how much general fund dollars would be required. Ms. Clarke offered to make that information available. Representative Brown voiced caution in upgrading an old system and trying to make it flexible enough to deal with future needs. She acknowledged that the Department has scrutinized various plans and choose the least expensive one available. Mr. Nordlund replied that the option chosen by the Department takes advantage of the current mainframe. He noted that there is a tremendous amount of data stored on that system. Mr. Nordlund stressed that the concept chosen 13 was a "forward looking" design. Ms. Slagle addressed Section #9(c)(1&2) supplemental budget request transfer of $250 thousand dollars, a decrease to Family and Youth Services to fund Youth Facilities. These funds would be used for the McLaughlin and Johnson Youth Centers. Ms. Clarke pointed out that these two services are currently in separate appropriations within Family and Youth Services, which causes continual problems in program management. The Division of Family and Youth Services has had difficulty in adapting to the vacancy base recruitment program that the Division of Personnel began using a few years ago. Ms. Clarke referenced Section #9(c)(3)(d) supplemental budget request for a $3.5 million dollar reduction in the Medicaid program in order to fund the welfare reform proposal for the Alaska Family Independence (AFI) program. Growth rate for the Medicaid program is down. Co-Chair Hanley was not comfortable placing a specific dollar amount to this category based on legislation which sets guidelines in that account. Representative Brown asked if the account currently exists or if it was part of the welfare reform package. Ms. Clarke stated that it is part of that package, and that the section would be conditioned with passage of the legislation. Ms. Clarke continued, Section 9(e) supplemental budget request in the amount of $426.9 thousand dollars would be used for the judgement in Helmuth v. State - API employee social services settlement. Co-Chair Hanley asked why the Department of Health and Social Services would be handling the financing for those charges. Ms. Slagle pointed out that the Department of Law would have been claiming it if the request for the concern was for attorney fees. She indicated that unless the judgement was large or specific to a department, there are no "hard and fast" rules and that it could be addressed by one or another of the two departments involved. BARBARA RITCHIE, DEPUTY ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF LAW, provided information regarding the case referenced in Section 9(e), resulting from a hostel work environment. Ms. Clarke added that the case resulted from lay-offs at Alaska Psychiatric Institute (API) in FY92. Representative Parnell and Ms. Ritchie discussed the date of each judgement and settlement. Ms. Clarke responded to Representative Brown's question regarding the climate at API which created the charge. She noted that new policies and 14 staff training have currently been implemented so as to avoid future problems. DEPARTMENT OF LAW Ms. Slagle spoke to Section #10(a) supplemental budget request in the amount of $369.3 thousand dollars to be used for judgments and claims. CHRISTOPHER KENNEDY, (TESTIFIED VIA TELECONFERENCE), ASSISTANT ATTORNEY GENERAL, ENVIRONMENTAL SECTION, CIVIL DIVISION, DEPARTMENT OF LAW, spoke to the Toksook Bay versus State of Alaska judgement in the amount of $1.2 million dollars. Ms. Ritchie explained the Burger versus State judgement, a case based on the sale of Permanent Fund Dividend (PFD) checks. Mr. Burger was doing business as Frontier Financial Services, and entered into transactions with three thousand PFD recipients, selling them an amount per dividend check in exchange for assigning their rights to his company. The Department of Revenue began to investigate the number of change of address forms they received, following research, they adopted a regulation clarifying that the State would decline to honor a PFD assignment other than to a governmental agency. The action resulted in Mr. Burger filing a law suit. The plaintiff is represented in the case by the attorney Mark Sandburg. (Tape Change, HFC 96-36, Side 2). Representative Mulder suggested the repay come from the Permanent Fund account. Ms. Slagle advised that effect would pro-rate that amount from the dividend fund, showing as a reduction to next year's dividend checks. Representative Mulder inquired if the Permanent Fund Corporation held a fund for previous years escrow claims. Ms. Slagle stated that there was some money held, but did not know the net effect of the holding. Ms. Ritchie clarified that the individuals sold their dividend to Frontier Financial Services for $325 dollars and then signed a confession of judgement. Later, the State of Alaska, Department of Revenue determined that the assignment was invalid and in violation of the small loan act. The State would not honor that assignment, and at that point, they sent the Permanent Fund Dividend check back to the dividend recipient. Co-Chair Hanley asked if the individuals receiving the dividend back were being held responsible. Ms. Ritchie 15 noted that the State of Alaska has not gone after these people. She suggested that would be a different case from the one before the Committee. Representative Navarre pointed out that all the legal possibilities regarding the case had been exhausted. He asked if the only scenario left would be to settle with Mr. Burger. Ms. Ritchie advised that the Department of Law has requested the Supreme Court to reconsider; they declined. Currently, it is back in the Superior Court for calculation of what is due Mr. Burger. Representative Navarre questioned how the obligation of the State could be reduced. Ms. Ritchie advised that the supplemental request reduces what the State has to pay in negotiation efforts. Co-Chair Hanley recommended removing the item from the supplemental budget request until a "solid" figure had been determined by the courts. Ms. Slagle referenced Section #10(b)(c) supplemental budget transfer in the amount of $66.6 thousand dollars, reducing FY96, oil and gas litigation in order to fund an additional prosecutor in Bethel resulting from increased case loads. LAURIE OTTO, DEPUTY ATTORNEY GENERAL, CRIMINAL DIVISION, DEPARTMENT OF LAW, provided an overview of the critical situation currently existing in Bethel. The prosecuting attorneys in that area work three times as much as other ones around the State and the area has the highest crime rate in Alaska. She emphasized that the region is grossly under staffed. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Ms. Slagle spoke to Section #11(a) supplemental budget request in the amount of $1.4 million dollars for increased costs for the National Guard Retirement Fund based on updated actuarial reports. The current liability is funded at only 17%. BILL CHURCH, RETIREMENT SUPERVISOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, pointed out that over the years there have been changes to the National Guard system. The 1988 change had the greatest impact, when a retirement option was introduced and passed for lump sum payout value to those retiring from the National Guard or the Militia retirement system. Currently, 70% of those retiring, are opting for this service, creating an unusual condition for the funding ratio in that system. Mr. Church responded to Representative Brown's question 16 noting that the option was only applicable to this system and no other State retirement systems. Representative Brown suggested that the pay out option was not "supportable". CAROL CAROL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, explained that the Department has considered options to "fix" the fund. One of the options would be to eliminate the "lump sum". The Department decided that option would not be appropriate until meeting with those persons who would be the most affected by that decision. Representative Brown asked the additional amount of liability which would accrue next year. Mr. Church responded that in the next two fiscal years, the Department will be required to contribute $2.5 million dollars. The current unfunded liability is $11 million dollars. For the year ending 1994, it would be $1.8 million dollars distributed, whereas, total contributions received would be $1.1 million dollars. Representative Mulder recommended "fixing" the system and making it like the State's retirement system which would also provide greater accountability. Mr. Church commented that everyone in the National Guard, currently, is eligible for the lump sum payment. If the law is changed, it would act prospectively. Discussion followed among Committee members, Mr. Church and Ms. Carol regarding the retirement incentive program in the National Guard. Mr. Church pointed out that most people in the Guard program do not expect to live on their sum for retirement. The average amount of an individuals retirement in the fund is between $10-$12 thousand dollars. Once an individual has completed 20 "good" years within the guard system, either active service, reserve time or guard time, they can retire and have access to that fund, regardless of their age. Mr. Church was not aware of any other states offering similar programs. (Tape Change, HFC 96-37, Side 1). Ms. Slagle referenced Section #11(b) supplemental request in the amount of $557.3 thousand dollars for payment relief from disasters which have already been declared. Co-Chair Hanley requested a breakdown of each disaster and the corresponding costs. Ms. Carol explained an allocation would also be granted to the Fort Yukon mitigation. When the flood disaster occurred last year, the Department borrowed money from every relief fund. 17 Co-Chair Hanley asked if that allocation would be reimbursed by the federal government. Ms. Carol stated that the requested amount was the State's portion. DEPARTMENT OF NATURAL RESOURCES Ms. Slagle noted Section #12 supplemental request in the amount of $5.258 million dollars would be allocated for fire suppression covering spring fire contracts and anticipated fire activity through the end of the fiscal year. NICO BUS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES, noted that the FY96 fire suppression budget was allocated $3.5 million dollars. The Department has spent $3 million dollars of that allocation from July 1, 1995 through January, 1996. Currently, contracts exist for the spring fire season. DEPARTMENT OF REVENUE Ms. Slagle referenced Section #13(a) supplemental budget request in the amount of $198.2 thousand dollars unanticipated lease costs for AHFC. She noted those funds should be corporation receipts, not general fund receipts. JOHN BITNEY, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE CORPORATION (AHFC), DEPARTMENT OF REVENUE, advised that Section 8 vouchers were currently in place; AHFC needs a new lease center. The intent would be to continue leasing headquarter space in a new location. The Department of Law informed AHFC that they would need legislative approval for the new lease space. Ms. Slagle continued, Section #13(b) would transfer $67 thousand dollars between fund sources in the Alaska State Pension Investment Board. DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES Ms. Slagle advised that Section #14(a) supplemental budget request in the amount of $4 million dollars would be used for highway and bridge repair costs related to Southcentral flood disasters. She pointed out that $1.1 million would originate from the general fund with the remainder federal fund receipts. BOYD BROWNFIELD, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES (DOTPF), explained that the request resulted from two distinctive parts: 1. Emergency repair match for the federal aid money. 18 2. Additional requirement in the amount of $201 thousand dollars to be used to repair the facilities. He noted that damage amounted to $8 million dollars. The federal government has provided the State, $7.5 million dollars in emergency relief. Through prior authorization, the Department currently has $4.5 million dollars of unobligated authority, requiring an additional $3 million dollars authority to match what is needed for federal receipts. Co-Chair Hanley questioned how much money was intended for the Copper River Bridge project. Mr. Brownfield responded that the bridge was in Phase 1, correcting flood damage. That cost would be in the amount of $2.1 million dollars, including a $2.6 million dollar state-match which would create a stable condition. Co-Chair Hanley stated that he would not support spending the allocation on repair of that project. Mr. Brownfield advised that the money requested would only stabilize the bridge and would not repair it for transportation use. He stressed that another flood in that area will create significant environmental problems. Mr. Brownfield explained that the total estimated cost of repairing the bridge would be $6.9 million dollars. Emergency funds are available and can be used only to repair the damage. Representative Brown asked how much money would be needed eliminate the bridge. Mr. Brownfield replied that cost would be $441 thousand dollars state matching money. The State would not need the additional authorization of $4 million dollars federal funds. He added, if that portion of the bridge is not repaired, a domino effect could occur and that part of the pier could create an additional span fall across the river. Co-Chair Hanley asked if the stabilization would prevent another flood of that magnitude creating the same extensive damage. Mr. Brownfield stated that it would. Mr. Brownfield remarked that he was not aware of costs associated with removal of the entire bridge. Representative Brown referenced Section #14(b) supplemental budget request in the amount of $720 thousand dollars for the Copper River Highway restoration recent settlement. Mr. Brownfield replied that the request resulted from a lawsuit with the federal government. CRAIG TILLERY, (TESTIFIED VIA TELECONFERENCE), ASSISTANT 19 ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, concurred that the decree was filed with the Court and would require certain rectifying activities. Representative Brown asked why the appropriation was deemed an emergency. Mr. Brownfield responded that the Department has specific items which must be addressed and that will not be a matter of negotiation for the State. UNIVERSITY OF ALASKA Ms. Slagle addressed Section #15(a) supplemental budget request in the amount of $455 thousand dollars for the 1995 monetary terms agreement with Classification Employee Association (CEA). Section #15(b) request in the amount of $473 thousand dollars would be used for the 1995 monetary terms agreement with Alaska Community College Federation of Teachers (ACCFT). MARYLOU BURTON, BUDGET DIRECTOR, UNIVERSITY OF ALASKA, responded that Section #15(b) had not yet been before the Committee. The request resulted from an arbitration ruling that occurred late last Session. The Legislature had not acted on the 1995 portion, whereas, the 1996 portion did not come to the Legislature because it was too late in the Session to submit it. Ms. Burton clarified that the request language should read: "To satisfy the FY96 monetary terms of the collective bargaining agreement" for both Sections 15(a)(b). Representative Martin reminded Committee members that the Legislature did turn down the 1995 monetary terms. Ms. Burton clarified that the Legislature did not turn down the contracts. Last year, there were two vehicles before the Legislature, HB 305 which covered FY95 & FY96 costs for the classified positions. In addition, the FY95 costs for teachers came as part of the supplemental request of the Governor which was not acted upon by the Legislature. Ms. Burton commented that both the contract terms and the practice has been appropriated and that the monetary terms for contracts require separate action from the Legislature. Representative Navarre asked if there were increases given to non-covered employees. Ms. Burton stated that no University employee received increases in FY95 or FY96. She added, that the arbitration ruling has come down and that the University is in the middle of a lawsuit regarding payment of the funds without separate appropriation. Ms. Burton clarified that the request deals with two different categories, one being the Classified Employees 20 Association. That arbitration ruling applied only to the community college teachers. Discussion followed between Ms. Burton and Committee members regarding negotiations and the compensation plan put forth for other faculty. Representative Navarre asked when the contracts were negotiated. Ms. Burton replied that they were negotiated and went into effect Spring, 1995. No request was made for employees last year. The Board had suspended the 3% provision, hence, it did not apply to that particular group. Representative Navarre pointed out that in FY91 & FY92, the Legislature did not provide the University the requested increase, although the University did provide that increase to non-covered employees. (Tape Change, HFC 96-37, Side 2). Ms. Burton explained that the collective bargaining agreement has language which specifies separate legislative appropriation. HB 468 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:55 P.M. 21