HOUSE FINANCE COMMITTEE March 10, 1998 1:45 P.M. TAPE HFC 98 - 61, Side 1. TAPE HFC 98 - 61, Side 2. TAPE HFC 98 - 62, Side 1. TAPE HFC 98 - 62, Side 2. CALL TO ORDER Co-Chair Hanley called the House Finance Committee meeting to order at 1:45 P.M. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative J. Davies Representative Martin Representative G. Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Dan Spencer, Chief Budget Analyst, 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; Percy Frisby, (Testified via Teleconference), Director, Division of Energy, Department of Community and Regional Affairs, Anchorage; Barbara Brink, (Testified via Teleconference), Director, Public Defender Agency, Department of Administration, Anchorage; Brant McGee, (Testified via Teleconference), Director, Office of Public Advocacy, Department of Administration, Anchorage; Tom Lawson, Director, Division of Administrative Services, Department of Commerce and Economic Development; Remond Henderson, Director, Division of Administrative Services, Department of Community and Regional Affairs; John Bitney, Alaska Housing Finance Corporation, Anchorage; Dwayne Peeples, Director, Division of Administrative Services, Department of Corrections; Nico Bus, Budget Coordinator, Department of Military and Veterans Affairs; Karen Rehfeld, Director, Education Support Services, Department of Education; Kevin Brooks, Director, Division of Administrative Services, Department of Fish and Game; Gary Pederson, Director, Alaska National Guard Youth Corp, Ft. Richardson, Department of Military and Veterans Affairs; Bob Labbe, Director, Division of Medical Assistance, Department of Health and Social Services; Ron Super, Administrative Officer, Department of Health and Social Services; Mary Lou Burton, Director, University Statewide Budget Development, University of Alaska, Fairbanks; Keith Gerken, Architect, Facilities, Division of General Services, Department of Administration. SUMMARY HB 325 An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; making appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date. HB 325 was HELD in Committee for further consideration. HOUSE BILL NO. 325 "An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; making appropriations under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." Co-Chair Hanley distributed a spreadsheet prepared by the Legislative Finance Division. [Copy on File]. DEPARTMENT OF ADMINISTRATION Co-Chair Hanley pointed out that an excess of $1 million dollars from the Longevity Bonus would be reallocated to the Office of Public Advocacy (OPA), the Public Defender Agency and leasing. SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATION SERVICES, DEPARTMENT OF ADMINISTRATION, noted that Section 2(a) requests supplemental funding for leases which need to be in place by April 23, 1998, in order that May lease payments are made timely. Ms. Barton addressed the OPA shortfall. OPA recently completed it's middle of the fiscal year analysis for expenditures and caseload trends. The projected need is $265.4 thousand dollars to be used to pay contractors and the other court appointed State professionals. The estimate is lower than the one done in June, 1997. The Public Defender request has been reduced to $351 thousand dollars. These projections have been reduced in the face of increased caseloads through tight management in staffing resources. Co-Chair Hanley asked if the $215 thousand dollar increment for the Public Defender would be used for one specific defense. KEITH GERKEN, ARCITECT, FACILITIES, DIVISON OF GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION, explained that there has been an ongoing $13 million dollar dispute. Last year, the State attempted mediation to resolve the issue with no effect. The current expense request covers those costs associated with the appeal process. Ms. Barton added, of the $75 thousand dollars appropriated last year, the Department spent only $36.1 thousand dollars. The remainder lapsed to the general fund. BARBARA BRINK, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, PUBLIC DEFENDER AGENCY, DEPARTMENT OF ADMINISTRATION, noted that the Public Defender agency has a projected shortfall of $351 thousand dollars. The supplemental request is necessary in order to continue service through the end of FY98. While reported crime is on the decrease, arrests and prosecutions and therefore Public Defender assignments are substantially increasing. Federal dollars continue to support community policing, although, she added that in the child protection arena, recent policy changes by Division of Family and Youth Services (DFYS) have dramatically increased the number of new cases. Representative Grussendorf asked if passage of new legislation during the past two years had affected the Public Defender caseload. Ms. Brink replied that even though there has not been an analysis undertaken, caseloads have dramatically increased. Currently, there has been in excess of 500 new felony cases per year. BRANT MCGEE, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, OFFICE OF PUBLIC ADVOCACY (OPA), DEPARTMENT OF ADMINISTRATION, noted that OPA requests a FY98 supplemental in the amount of $441.1 thousand dollars. The estimate was subject to potential revision after the agency evaluated the FY97 caseload and cost data. The OPA supplemental need is based on a $197.4 thousand dollar shortfall from FY97. Ms. Barton explained Section 2(b), Elected Public Officers Retirement System (EPORS) supplemental request. As of January, 1998, EPOS has 43 members; 33 are currently receiving a monthly pension benefit. Two members retired in FY98. The $59.7 identified in this supplemental budget request includes all known costs as of 1/01/98. Ms. Barton addressed Section 2(c), the Pioneers' Home component. The Division of Alaska Longevity Programs, Pioneers' Homes component, has requested supplemental funding in the amount of $250 thousand general fund dollars, with an offsetting decrease in program receipts due to an unanticipated shortfall in general fund program receipts. Additionally, there is a need to underwrite the creation and operation of a central pharmacy. Co-Chair Therriault asked if the Longevity Bonus calculation was determined through a formula. He pointed out that it is usually over funded. Ms. Barton responded that the Department uses a model which takes into account prior history and mortality rates. During the Longevity phase out, people are no longer behaving as they did in the past. Much of the cost reduction has resulted because more people are taking advantage of their allocated time out of the State. When out of State, they do not receive the bonus. DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT DAN SPENCER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, explained that this Department's supplemental budget request is an attempt to undo an error which occurred in FY96 & FY97. TOM LAWSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, spoke to Sections 3(a)(b). The Department has requested supplemental funding in the amount of $50.3 thousand dollars. The request would be used for Hearing Examiners for the Division of Insurance and the Division of Banking, Securities and Corporations. The Division of Occupational Licensing was providing the support to those two divisions. In FY96 & FY97, the amount allocated for those divisions was insufficient to cover actual costs. The Division of Occupational Licensing absorbed the amount which should have been paid by the other divisions. Co-Chair Hanley asked if the Division of Occupational Licensing was in need of supplemental funding this year. Mr. Lawson noted they did not, stating that it would be an accounting fix. Representative J. Davies suggested that it could be "fixed" by rolling the money forward. Co-Chair Hanley believed such action would be more difficult to identify in the long-term. DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS Mr. Spencer noted that Section 4(a) should indicate federal receipt not corporate receipts. REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS (DCRA), spoke to Section 4(a)(b). He noted that if a supplemental appropriation is not forthcoming, the Power Cost Equalization (PCE) payment level should be reduced below 85% as soon as possible. If the payment level is not reduced, the available funds will run out and no PCE payments would be issued for the last months of FY98. If payment level was reduced effective 4/01/98, PCE would be reimbursed at 54.1% for the remainder of FY98. Co-Chair Hanley asked the restrictions placed on the use of the stripper well receipts. JOHN BITNEY, ALASKA HOUSING FINANCE CORPORATION (AHFC), ANCHORAGE, commented that there had been a series of settlements which occurred in 1980. The restrictions on the program are tied to the approval of the State Department of Energy (DOE). DOE has established criteria for programs in which the money could be used. It was intended that any program use of the funds was to be distributed to the consumers for petroleum product overprice restitution. Co-Chair Hanley asked if this would be a one-time pool of money. Mr. Bitney advised that AHFC periodically receive small amounts from federal DOE settlements held in escrow and which accrues interest. These are not one-time funds. (Tape Change HFC 98- 61, Side 2). PERCY FRISBY, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF ENERGY, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS, ANCHORAGE, stated that the Division had underestimated last year's need by $1.7 million dollars. The FY99 request is $17 million dollars plus the supplemental request of $1.7 million dollars. Mr. Henderson pointed out that $17 million dollars had been calculated when the legislation passed in 1993. At that time, funding was determined at the 85% level, which also furthered capitalized the fund. At present time, the demand has increased and prices have gone up. Therefore, the $17 million dollars per year will not last as long as anticipated. Co-Chair Hanley inquired what time of year do retailers buy their bulk fuel. Mr. Frisby replied that most bulk fuel purchasing is done June through September. There is a lag period of 8 to 12 months. DEPARTMENT OF CORRECTIONS DWAYNE PEEPLES, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF CORRECTIONS, addressed the Department's four supplemental request items. With the increased prisoner population, FY98 has required significant prisoner transports be done by the five Prison Transportation Officers, Section 5(d). To be able to accomplish this requires the use of overtime and increased transport expenses. Mr. Peeples noted that in order to make it through this fiscal year an additional $230 thousand dollars would be needed. He pointed out that the proposed cost had been cut by $10 thousand dollars. Section 5(c) request was reduced to $1.6 million dollars to cover prisoner health care costs. In addition, the Department has reduced Section 5(b) for staff overtime costs associated with inmate population management. Judge Hunt's order to bring down the maximum caps should result in decreased overtime use. Mr. Peeples noted that Section 5(a) would be supplemental funding in the amount of $50 thousand dollars to be used for an additional 18 days of correctional hearings. These meetings will address all in-State institutions and the Arizona sites and will consider how to lower the number of inmates while at the same time responding to the increased population. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS NICO BUS, BUDGET COORDINATOR, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, explained that Section 6 is a request for $2 million dollars supplemental funding to capitalize the Disaster Relief Fund so that it can meet projected obligations for the next 12 months. The average annual State disaster expenditure for the past five years has been $3 million dollars. DEPARTMENT OF EDUCATION KAREN REHFELD, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT OF EDUCATION, explained that Section 7 is a request for the Alaska Vocational Technical Center (AVTEC) in Seward in the amount of $75 thousand dollars generated from federal receipts. The PELL grant program has no impact on the general fund. She emphasized that there are no requirements for matching funds. DEPARTMENT OF FISH AND GAME KEVIN BROOKS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF FISH AND GAME, noted that Section 8(a) supplemental request would cover lease costs for the Situsuilaq Hatchery. The hatchery has been closed, although, a leaking fuel line was detected, and a resulting spill must be cleaned up. During the clean up period, the landlord has not been able to lease the property; the appropriation will pay the landlord for lease costs. Mr. Brooks spoke to Section 8(c) supplemental budget request which would cover costs for a Fairbanks indoor shooting range. The initial request was made for 50% federal aid dollars and 50% state dollars. Following a decrease in federal funds, the proposed request shifted the funding ratio to 25% federal funds and a 75% state match. Co-Chair Hanley questioned if this need was time sensitive. Mr. Brook commented that without the requested funding, there are not enough federal funds to make it happen, although, agreed that it could wait another month to be placed in the Capital Budget Request. Mr. Brooks spoke to Section 8(d) supplemental budget request in the amount of $56 thousand dollars for the Subsistence Division. He pointed out that the Division's general fund budget has been reduced by nearly 40% since FY94. This need comes at a time when subsistence is heating up, becoming one of the most critical issues facing Alaska. The supplemental will cover the shortfall and enable the Division to carry out their statutory required functions. Mr. Brooks acknowledged Representative Hanley's concern that the Department had not worked within the budget allocated in FY98. Mr. Brooks spoke to the extenuating circumstances surrounding Subsistence in the State Of Alaska. Mr. Brooks noted Section 8(e) supplemental budget request in the amount of $80 thousand dollars to be used for the study of harbor seals in Prince William Sound. In response to Representative Martin, Mr. Brook commented that the Department has printed all results from previous oil spill studies. Mr. Brooks addressed Section 8(f) supplemental budget request in the amount of $25 thousand federal dollars for participation in bilateral discussions with the Russian government on Bering Sea "Doughnut Hole" issues, Russian Maritime boundary, and the pollack conservation. He noted that the request would cover mostly travel costs. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS GARY PEDERSON, DIRECTOR, ALASKA NATIONAL GUARD YOUTH CORP, FT. RICHARDSON, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS, spoke to Section 12(d.15) supplemental budget funding request in the amount of $230 thousand dollars for repairs and upgrades to the Alaska National Guard Youth Corps facility at Camp Carroll. The funding would allow for the replacement of 12 furnaces and 16 roofs as well as adding siding and insulation. The barracks were intended to be temporary training facilities for the military and are now used on a year-round basis by the Youth Corps. The repairs and upgrades would be used in lieu of rent. (Tape Change HFC 98- 62, Side 1). Mr. Bus spoke to Section 12(c.5) supplemental budget funding request which will ensure a two-class per year program. Although the funding would be for FY99, it is needed now to plan future classes. DEPARTMENT OF HEALTH AND SOCIAL SERVICES Mr. Spencer noted that Section 9(b) supplemental budget request would be withdrawn. JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, spoke to Section 9(a), a delete of $1.5 million general fund dollars in the Alaska Temporary Assistance Program (ATAP). She noted that the program has experienced a dramatic caseload decline. Co-Chair Hanley asked if those funds could be used for costs not related to maintenance of effort. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that these funds were above and beyond what was required for maintenance of effort and could be spent for any other purpose without violating the requirements. Co-Chair Hanley asked if there were additional funds over and above the $1.5 million anticipated in that category. Ms. Clarke stated that there could be but because it is a new program, the Department is not confident to yet calculate additional funds. Ms. Clarke spoke to the supplemental budget request listed in Section 9(c) in the amount of $180 thousand statutory design program receipt dollars for activity costs associated with the public health laboratory. Ms. Clarke commented that the program receipts would result from certificates of participation. Ms. Clarke continued, Section 9(d) supplemental budget request in the amount of $1.4 million dollars would be used for total program costs to the General Relief Medical Program which provides emergency medical care for low income Alaskans. Co-Chair Hanley requested a guideline breakdown of eligibility for the program. Representative Martin voiced concern with the amount of funds being used to provide abortions. RON SUPER, ADMINSTRATIVE OFFICIER, DEPARTMENT OF HEALTH AND SOCIAL SERVICES stated that the Department would prepare a letter addressing the concerns of Representative Martin. Ms. Clarke spoke to Section 9(e) supplemental budget request in the amount of $1.3 million dollars from the School Based Claims fund from which the Department receives in order to administrate the activities which school districts undertake. The Legislative Budget and Audit Committee (LBA) recommended that this request come before the full Legislative Body. She noted that LBA Committee approved $433 thousand dollars. The grants have already been awarded. There has been a subsequent request in the amount of $866 thousand dollars. Ms. Clarke continued, Section 9(f) is a supplemental budget request in the amount of $12.018 million federal receipts dollars for the FY98 Medicaid Program. The appropriated federal funding authority available to the Medicaid program was not adequate to meet the program's projected need. Because this program is 100% federally funded, the Department uses the component as a source of funds for transferring within the Medicaid program. BOB LABBE, DIRECTOR, DIVISION OF MEDICAL ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, explained that the Department's effort to increase the federal 100% reimbursement to Natives has been successful. With limited federal authority, the Department "bumped" up against the cap. Ms. Clarke noted Section 9(g) was a supplemental budget request in the amount of $886 thousand dollars for the Medicaid school-based services costs related to the adoption caseload backlog. Those funds will lapse 6/30/99. The request would address a backlog of 400 children identified available for adoption, 40% which are Native. Most of these children have special needs. Ms. Clarke spoke to Section 9(h) supplemental budget request deduction in the amount of $1 million dollars to Yukon Kuskokwin Health Corporation (YKHC), State Community Health Services building for design and construction. Staff are currently located in two facilities. Having separate regional and health center facilities reduces the effectiveness of support staff and skilled professionals whose services need to be optimized. Combining the regional office and health center will provide an economy of scale sharing common areas. She stressed that there is not adequate space available for lease in Bethel and that the public health service needs of those residents must be met in an effective and efficient way. Co-Chair Hanley requested more back up on the project. UNIVERSITY OF ALASKA MARY LOU BURTON, DIRECTOR, UNIVERSITY STATEWIDE BUDGET DEVELOPMENT, UNIVERSITY OF ALASKA, FAIRBANKS, addressed Section 19(a) requesting supplemental funding in the amount of $606 thousand dollars to cover the settlement of certain liability claims. As directed by the Court, the details of the settlement are to remain confidential. She offered to answer questions in an Executive Session. Co-Chair Hanley noted following discussion on Section 19(b), the House Finance Committee would go into Executive Session to discuss Section 19(a). Ms. Burton stated that Section 19(b) was a supplemental budget request in the amount of $1.7 million dollar university receipts to be used for planning and design costs for a multi-agency fishery facility to be located in Juneau. Representative Martin MOVED that the House Finance Committee convene into Executive Session at 3:50 P.M. (Tape Change HFC 98- 62, Side 2). The House Finance Committee reconvened at 4:10 P.M. Following discussion of the agenda, Co-Chair Hanley adjourned the meeting. HB 325 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:10 P.M. H.F.C. 11 3/10/98 PM