HOUSE FINANCE COMMITTEE March 24, 1997 1:44 P.M. TAPE HFC 97-73, Side 1, #000 - end. TAPE HFC 97-73, Side 2, #000 - end. TAPE HFC 97-74, Side 1, #000 - #301. CALL TO ORDER Co-Chair Hanley called the House Finance Committee meeting to order at 1:44 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Moses Representative Foster Representative Grussendorf Representative Mulder was absent from the meeting. ALSO PRESENT Wilson Condon, Commissioner, Department of Revenue; Arbe Williams, Director, Division of Administrative Services, Department of Labor; Larry La Bolle, Staff, Representative Foster; Carol Caroll, Special Assistant, Department of Military and Veterans Affairs. SUMMARY HB 75 "An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; and providing for an effective date." HB 75 was HELD in Committee for further consideration. HB 76 "An Act making appropriations for the operating expenses of the state's integrated comprehensive mental health program; and providing for an effective date." HB 76 was HELD in Committee for further consideration. HOUSE BILL NO. 75 "An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; and providing for an effective date." AMENDMENTS DEPARTMENT OF LABOR DEPARTMENT OF MILITARY AND VETERANS AFFAIRS ALASKA COURT SYSTEM DEPARTMENT OF REVENUE DEPARTMENT OF LABOR Representative Grussendorf MOVED to adopt Amendment Labor-1 (copy on file). Therriault OBJECTED. Representative Grussendorf explained that Amendment Labor-1 would add $47.8 thousand dollars to the Department of Labor, Workers' Compensation. He emphasized that reductions in this component would result in delays. He stressed that the state could be liable for delays. Co-Chair Therriault questioned if the request would add money to the grants line. Representative Grussendorf clarified that the amendment would transfer from the grant line approximately $27.0 to personal services and $20 thousand dollars to contractual. Co-Chair Therriault summarized that the requested increment for FY 98 was denied. The subcommittee reduced the grant line. The Department recommended that the grant line be reduced and the funding shifted to allow the increment. Representative Davies expressed concern with the ability of the Department to respond to workers' needs in a timely manner. He noted that there has been an increase in demand over time. Representative Grussendorf clarified that the intent of the amendment is to address a backlog in cases. ARBE WILLIAMS, DIRECTOR, DIVISION OF ADMINISTRATION, DEPARTMENT OF LABOR noted that the grants line was established in 1988 to grandfather in certain persons for workers' compensation benefits. Grant funding becomes available for use in the Workers' Compensation component as these recipients die. She emphasized that grant funding has been transferred to personal services in order to maintain operations. She observed that two full-time clerical positions or one professional position would return to part-time if the funding is not approved. She stated that the Department had intended to use some of the money to investigate workers' compensation fraud. Co-Chair Hanley summarized that the grant money was transferred in FY 97. Ms. Williams explained that the funding is needed to support the current staffing level. Representative Davies noted that the state has lost lawsuits because it did not meet its statutory requirement for processing orders. A roll call vote was taken on the MOTION to adopt Labor-1. IN FAVOR: Davies Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Mulder, Therriault, Hanley The MOTION FAILED (3-7). Representative Grussendorf MOVED to adopt Amendment Labor-2 (copy on file). Co-Chair Therriault OBJECTED. Representative Grussendorf noted that Amendment Labor-2 would add $75 thousand dollars for Occupational Safety and Health. He maintained that the reduction would result in 100 less enforcement inspections. He emphasized that a half-million dollars in fines has been collected in the last 10 years. Co-Chair Therriault acknowledged that there would be a $75 thousand dollar overall general fund reduction. He emphasized that the Subcommittee tried not to jeopardize federal funds. He stressed that a portion of the leasing cost can be used to match federal funds. Representative Grussendorf maintained that programs should be considered based on their impact on Alaskans. Representative Davis noted that an inspector position would be lost. He stressed that there has been an increase in activity. A roll call vote was taken on the MOTION to adopt Labor-2. IN FAVOR: Davies Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Mulder, Therriault, Hanley The MOTION FAILED (3-7). DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Representative Foster MOVED to adopt Amendment MVA-1 (copy on file). Amendment MVA-1 would add $191 thousand dollars to the Alaska National Guard and delete the same amount from National Guard retirement benefits. LARRY LA BOLLE, STAFF, REPRESENTATIVE FOSTER explained that the amendment represents the additional actuarial amount that should have been placed into the Veterans' Retirement Program to hold it harmless and to keep from depleting the corpus of the fund. Co-Chair Hanley recalled that funding was added to the retirement fund in the previous year to capitalize the Fund. CAROL CAROLL, SPECIAL ASSISTANT, DEPARTMENT OF NATURAL RESOURCES stated that the Department is working with the Office of the Governor on legislation to resolve the problem. The Department of Military and Veterans Affairs supports Amendment MVA-1. Representative Foster noted that facility closures have been discussed for Fairbanks, Wasillia and Juneau. Ms. Caroll stated that when the Department first saw the $341 thousand dollar reduction, it was to the National Guard BRU. The Department determined that if $341 thousand dollars were reduced from the National Guard BRU, that facilities would be impacted. The Department did not reduce the Air National Guard because it is so highly leveraged with federal funds that one of the bases would become shaky. The Army National Guard support was the primary area to take the reduction. Facilities have a higher fixed cost for operation than the discretionary amount available for maintenance. The Department provided a schedule demonstrating fixed costs versus maintenance costs. At the proposed level of reduction the Department anticipates that one of the closures will have to take place. She emphasized that the amendment would benefit active guard members that have jobs. She maintained that there will be no short term impact on retirees. Representative Foster stated that he supports the amendment. He clarified that the amendment was at the request of the Department of Military and Veterans Affairs. Representative Davies questioned if the amendment would reduce the unallocated reduction. Mr. LaBolle stated that the unallocated reduction would be reduced to $150 thousand dollars in the National Guard Armory component. He stressed that this is the only area that is not tightly leveraged. Representative Davies expressed concern that National Guard retirement benefits are being shortfunded. Co-Chair Hanley stated that legislation would solve approximately $200 thousand dollars of the problem. He added that the Governor's budget is $200 thousand dollars underfunded in this item. He noted that if the unallocated reduction is applied that there will still be a $150 thousand dollar shortfall. He observed that a $1 million dollar endowment would generate approximately $120 thousand dollars a year. He spoke in support of fully endowing the fund. Mr. LaBolle noted that $191 thousand dollars was transferred into the retirement system. He clarified that Amendment MVA-1 would restore the Alaska National Guard Fund to the level of the Governor's budget. He observed that there would still be a $150 thousand dollar reduction. There being NO OBJECTION, Amendment MVA-1 was so ordered. ALASKA COURT SYSTEM Representative Grussendorf MOVED to adopt Amendment Court-1 (copy on file). Co-Chair Therriault OBJECTED. Representative Grussendorf observed that the Chief Justice of the Alaska Supreme Court asked that the legislative body consider the Court as a third branch of government in regards to security problems in court buildings throughout the state. Amendment Court-1 would add $1,431,8 million dollars to the Alaska Court System. Representative Grussendorf spoke in support of the amendment. He maintained that security officers should be available to respond to problems. He emphasized that the safety of jurors and witnesses should be considered. Co-Chair Therriault noted that the Alaska Court System's request was reduced by the Subcommittee. He emphasized that the additional funding approved by the Subcommittee was granted in a lump sum. He stated that the Court System has the flexibility to fund this request. He observed that the Court System could look at contractual possibilities. Representative Grussendorf stressed that caseloads have increased. He maintained that the Court System has to use additional money to handle increased caseload. He cautioned that litigation could occur from the under-funding of security needs. A roll call vote was taken on the MOTION to adopt Amendment Court- 1. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Foster, Kelly, Martin, Therriault, Hanley Representatives Davis, Mulder and Kohring were absent from the vote. The MOTION FAILED (3-5). DEPARTMENT OF REVENUE Co-Chair Hanley MOVED to adopt Amendment Rev-1 (copy on file). He explained that the amendment would expand asset allocation to allow the Constitutional Budget Reserve Fund (CBR) portfolio to include equities. He stated that the additional $100 thousand dollars could be funded through general funds or the Constitutional Budget Reserve Fund. He noted that the additional appropriation would fit within the Department of Revenue's target. Representative Martin suggested that the appropriation be dedicated from the CBR account. He MOVED to AMEND Amendment Rev-1 to reflect a CBR funding source. There being NO OBJECTION, it was so ordered. There being NO OBJECTION, Amendment Rev-1 was adopted. Co-Chair Hanley MOVED to adopt Amendment Rev-2 (copy on file). He explained that the original reduction to Gaming of $198.2 thousand dollars was dependent upon the passage of legislation. He stated that the restoration of $198.2 thousand dollars into Gaming and $36 thousand dollars into Income and Excise Audit would allow management regardless of the passage of legislation. He observed that there would still be a $300 thousand dollar reduction in Gaming. There being NO OBJECTION, Amendment Rev-2 was adopted. Representative Martin MOVED to adopt Amendment Rev-3 on behalf of Representative Williams (copy on file). (Tape Change, HFC 97-73, Side 2) Representative Williams explained that the amendment would add $143,822 thousand dollars to the Department of Fish and Game, ComFish Management and Development. He noted that the amendment would fund the management of the sea urchin fisheries. Without the amendment, this fishery would not be managed. He observed that legislation has been introduced to support the fisheries in the next year. He added that the amendment will also add $50 thousand dollars to the Department of Natural Resources, Forest Management and Development. He stressed that this addition would assist the forest industry. The amendment would delete $100 thousand dollars from the Department of Law, Civil Division and $93,822 thousand dollars from the Department of Revenue, Income Excise and Audit. Representative Grussendorf spoke in support of the amendment. He expressed concern with the reductions. WILSON CONDON, COMMISSIONER, DEPARTMENT OF REVENUE stressed that the decision to reduce the Income Excise and Audit Division would have ramifications in years to come. He pointed out that this division generates revenue. Representative William noted that 500 hundred jobs in Southeast Alaska will be protected through the amendment. Co-Chair Hanley clarified that there is no funding for the sea urchin fishery in the Department of Fish and Game's budget. Representative Davies MOVED to Divide Amendment Rev-3. Representative Moses suggested that the deletion be taken from the Legislative Operating Budget. Representative Davies WITHDREW his motion. Representative Moses MOVED to AMEND Amendment Rev-3 by doubling the additions and changing the funding source to the Legislative Operating Budget. Co-Chair Therriault spoke against the amendment to the amendment. A roll call vote was taken on the MOTION to adopt Amendment Rev-3 as amended. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley Representative Mulder was absent from the vote. The MOTION FAILED (3-7). Representative Davies MOVED to Divide Amendment Rev-3. The motion to divide would separate the vote on the additions and deletions. A roll call vote was taken on the MOTION to divide Amendment Rev-3. IN FAVOR: Davies, Grussendorf, Kelly, Martin, Moses OPPOSED: Davis, Foster, Kohring, Therriault, Hanley Representative Mulder was absent from the vote. The MOTION FAILED (3-7). Representative Davis MOVED to AMEND Amendment Rev-3, by deleting the reduction to the Department of Revenue and the addition to the Department of Natural Resources and reduce the amount added to the Department of Fish and Game to $100 thousand dollars. Representative Martin objected. Representative Grussendorf expressed concern with the funding source. Representative Davis WITHDREW the amendment to Amendment Rev-3. A roll call vote was taken on the MOTION to adopt Amendment Rev-3. IN FAVOR: Davies, Grussendorf, Foster, Moses OPPOSED: Davis, Kelly, Kohring, Martin, Therriault, Hanley Representative Mulder was absent from the vote. The MOTION FAILED (4-6). Representative Grussendorf MOVED to adopt Amendment Rev-4. Representative Martin OBJECTED. Representative Grussendorf noted that the amendment would capture $476 thousand dollars in federal funds to the Child Support Enforcement Division. The general fund addition would be $145.4 million dollars. He spoke in support of the amendment. He noted that 9 positions were reduced due to vacancies. He pointed out that 5 of these positions were vacant for only 45 days. Two positions were vacant for less than 6 months. Representative Martin maintained that the Child Support Enforcement Division has been treated well by the Legislature. He spoke in support of maintaining the present level of funding. Representative Davies spoke in support of the amendment. He observed that welfare reform legislation has increased the task of the Child Support Enforcement Division. Representative Grussendorf stressed that the amendment would aid children of the state of Alaska. He observed that collections have increased. He asserted that greater collections will help reduce the welfare rolls. Representative Martin stated that collections have increased because all cases go through the Department of Revenue. Co-Chair Hanley summarized that the Department of Revenue's budget has been reduced $45.4 thousand dollars beyond the cap set by the leadership. Representative Martin acknowledged that the caseload has increased, but added that staff has increased by 200 percent. He stated that financial support from the state and federal governments have increased by 400 percent. Representative Grussendorf MOVED to AMEND Amendment Rev-4 by reducing the general fund match from $145.4 to $45.4 thousand dollars. He noted that the federal match would be $278.7 thousand dollars. There being NO OBJECTION, it was so ordered. A roll call vote was taken on the MOTION to Adopt Amendment Rev-4 as amended. IN FAVOR: Davies, Grussendorf, Moses, Therriault, Hanley OPPOSED: Davis, Foster, Kohring, Martin, Mulder Representative Kelly abstained from the vote. Representative Mulder was not present for the vote. The MOTION PASSED (5-4). Representative Grussendorf MOVED to adopt Amendment Rev-5 (copy on file). He clarified that the amendment would add $1.4 thousand dollars in corporate receipts. He explained that the amendment would upgrade a secretary I position to an executive secretary II position. He observed that the position would accept greater responsibilities due to the elimination of the executive director's position. Representative Martin express support for the amendment. There being NO OBJECTION, Amendment Rev-5 was adopted as amended. Representative Grussendorf MOVED to adopt Amendment Rev-6 (copy on file). He explained that Amendment Rev-6 would provide administrative support to the Permanent Fund Corporation investment officer. He stressed that the investment officer should be able to concentrate on investment and assets of the Permanent Fund. He stated that the position should not be tied up with administrative aspects of the Department. Amendment Rev-6 would add $109.6 thousand dollars in permanent fund corporate receipts. Representative Martin spoke against the amendment. (Tape Change, HFC 97-74, Side 1) A roll call vote was taken on the MOTION to adopt Amendment Rev-6. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley Representative Mulder was absent from the vote. Representative Grussendorf MOVED to adopt Amendment Rev-7 (copy on file). Amendment Rev-7 would add $198.2 thousand general fund dollars to the Department of Revenue, Oil and Gas Audit. The amendment would restore 5 positions that are schedule to take early retirement. Representative Martin noted that an early retirement program is being instituted in the same year that there is an increase in benefits. He stated that the reduction will encourage early retirement. Representative Davies summarized that the Department announced a retirement incentive program (RIP) and set some guidelines for the program. Employees volunteered to RIP. He maintained that the Subcommittee changed the terms of the program. He asserted that some of the employees may not decide to RIP. A roll call vote was taken on the MOTION to adopt Amendment Rev-7. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley Representative Mulder was absent from the vote. The MOTION FAILED (3-7). Representative Grussendorf WITHDREW Amendment Rev-8 (copy on file). Representative Grussendorf MOVED to adopt Amendment Rev-9 (copy on file). Amendment Rev-9 would delete $100 thousand dollars in interagency receipts and add $100 thousand dollars in general fund dollars, Department of Revenue, Administrative Support. He observed that the appropriation would fund a study of cost allocation of interagency receipts. Representative Martin noted that all agencies would benefit from the study. He observed that the study was recommended by the Legislative Budget and Audit Committee. Representative Davies spoke in support of the amendment. He suggested that the allocation of interagency receipts is too high. A roll call vote was taken on the MOTION to adopt Amendment Rev-9. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Therriault, Hanley Representative Mulder was absent from the vote. The MOTION FAILED (3-7). Representative Grussendorf MOVED to adopt Amendment Rev-10 (copy on file). Representative Martin OBJECTED. Amendment Rev-10 would add $93 thousand dollars from the Permanent Fund to restore two permanent fund dividend specialist I positions. Representative Martin spoke against the amendment. He maintained that appeals have been reduced. Representative Grussendorf observed that there is still a backlog in appeals. Representative Martin explained that the amendment was introduced in subcommittee. Representative Davis noted that the Department of Revenue supports the amendment. A roll call vote was taken on the MOTION to adopt Amendment Rev-10. IN FAVOR: Davies, Davis, Grussendorf, Moses OPPOSED: Foster, Kelly, Kohring, Martin, Therriault, Hanley Representative Mulder was absent from the vote. The MOTION FAILED ( 4-6). Representative Grussendorf MOVED to adopt Amendment Rev-11 (copy on file). Amendment Rev-11 would add $51 thousand dollars in mental health trust program receipts to the Mental Health Trust Authority for an administrative position. Representative Martin expressed support for the amendment. There being NO OBJECTION, it was so ordered. HB 75 and HB 76 were as HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:02 p.m.