HOUSE FINANCE COMMITTEE February 26, 1999 8:05 A.M. TAPE HFC 99 - 31, Side 1. TAPE HFC 99 - 31, Side 2. CALL TO ORDER Co-Chair Mulder called the House Finance Committee meeting to order at 8:05 A.M. PRESENT Co-Chair Mulder Representative Foster Co-Chair Therriault Representative Grussendorf Vice-Chair Bunde Representative Kohring Representative Austerman Representative G. Davis Representative J. Davies Representative Williams Representative Moses was not present for the meeting. ALSO PRESENT Dan Spencer, Chief Budget Analyst, Office of Management and Budget; David Teal, Director, Division of Legislative Finance; John Bitney, (Testified via Teleconference), Alaska Housing Finance Association (AHFC), Anchorage; Peter Bushry, Chief Financial Officier, Permanent Fund Corporation (PFC), Department of Revenue; Kevin Brooks, Director, Division of Administrative Services, Department of Fish and Game; Ginger Blaisdell, Fiscal Analyst, Legislative Finance Division; Tom Lawson, Director, Division of Administrative Services, Department of Commerce and Economic Development; Virginia Stonkus, Financial Services, Administrative Services, Department of Environmental Conservation. SUMMARY HB 50 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. 17c, Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date. HB 50 was HELD in Committee for further consideration. HOUSE BILL NO. 50 "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. 17c, Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." DAN SPENCER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND BUDGET (OMB), provided Committee members with two pieces of information on the front section of the Governor's budget: (Copies on File) ? A letter OMB provided to the Senate Finance Committee (SFC) as a result of their hearings. ? A summary provided by the Legislative Finance Division. SECTION #1 - ALASKA HOUSING FINANCE CORPORATION Mr. Spencer noted that Section #1 was referred to as the Alaska Housing Finance Corporation dividend. He pointed out that this year these funds are being placed into the Debt Retirement Fund as opposed to the general fund. Subsection (a) transfers the unexpected and unobligated amount of AHFC unrestricted revenue available for appropriation by the direction of the Board for fiscal years ending June 30, 1999 and June 30, 2000. Subsection (b) appropriates earnings related to AHFC as corporate receipts. The receipts are then allocated to the AHFC revolving fund, housing assistance loan fund and senior housing revolving fund in accordance with procedures adopted by the AHFC board of directors. Subsection c identifies the amount of corporate receipts within the revolving loan fund to be used by AHFC for housing loan programs not subsidized by AHFC corporate receipts which would equal $472 million and housing loan programs and projects subsidized by AHFC corporate receipts derived from arbitrage earnings. SECTION #2 - ALASKA PERMANENT FUND CORPORATION Mr. Spencer explained that Section #2 was standard language used from year to year authorizing payments for dividends and inflation proofing. Representative Bunde asked for more information on the amounts being disbursed to the Department of Corrections, Department of Public Safety, Department of Health and Social Services, and the Department of Revenue. Mr. Spencer noted that the Department of Health and Social Services amounts would be used for hold harmless situations. The amount allocated to the Department of Corrections would be used for probation and parole in lieu of dividends for felons and additionally for sexual abuse counseling. The amount allocated to Department of Public Safety will be issued to the Council on Domestic Violence. PETER BUSHRY, CHIEF FINANCIAL OFFICIER, PERMANENT FUND CORPORATION, DEPARTMENT OF REVENUE, noted that the Department would use the appropriation for the Dividend Division to cover administrative costs. Representative Bunde commented that those costs should be reflected in the back section of the budget. Mr. Spencer noted that the other amounts are specified in the back section except for these. SECTION #3 - ALASKA PUBLIC UTILITIES COMMISSION Mr. Spencer explained that Section #3 indicates balances carried forward, to be used for next year's appropriations. He noted that this is standard carry-forward language. SECTION #4 - ALASKA SCIENCE & TECHNOLOGY FOUNDATION Mr. Spencer acknowledged that Section #4 was carry forward language for balances to be used by Alaska Science and Technology Foundation (ASTF) during the following year. Representative Bunde questioned a memo written by Tom Lawson, Department of Commerce and Economic Development, regarding an incorrect analysis provided by Legislative Finance Division. TOM LAWSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, explained that this would be difficult information to understand. The figure that Legislative Finance provided was $9.539 million dollars. That figure is the sum of the FY2000 budget for aerospace as well as ASTF. The roll-forward language exists because over the course of the years, it has been difficult to estimate how much will be received. Additionally, it has been difficult to estimate how much money ASTF will pay out. The proposed clause will provide a safety in the back section of the budget, in which there will be an estimate of how much exists for the operation of ASTF. He commented that at the end of the year, there is often an excess of funds in the earnings reserve. He concluded that at the bottom of the memo, a formula had been included of how to determine what the balance will be. GINGER BLAISDELL, FISCAL ANALYST, LEGISLATIVE FINANCE DIVISION, explained her understanding of the front section portion as discussed. She advised that all of the earnings were made up of a $100 million dollar endowment, which are earned in the prior year and must be carried forward to be spent in the year budgeted. The use of the front section is provided in order that all the earnings be used. The problem is the wording "for grant awards", which does not allow for the rest of the money to be used. She recommended removing that language which would provide for the full use of those funds. Co-Chair Therriault asked if the other dollar amounts had been appropriated elsewhere in the budget. Ms. Blaisdell advised that there was $2.5 million dollars in the University budget. Co-Chair Therriault pointed out that specific dollar amounts could create problems without proposed generic language. Ms. Blaisdell agreed that front section language was needed, however, that section would require that all earnings be used during that fiscal year. She compared the proposition to a duplicated expenditure and recommended that the language be very broad so that it initially would all initially go to ASTF, and at which time, they would make the specific appropriation. Representative J. Davies questioned why that language should be broader than it currently is. He believed that all which was appropriated would be obligated. He asked if that was intended. Co-Chair Mulder recommended that the Department and Legislative Finance Division should work together with Office of Management and Budget to create consensus language. SECTION #5 - ALASKA SEAFOOD MARKETING INSTITUTE Mr. Spencer stated that this section provided carry forward language of revenues received for the purpose of the Alaska Seafood Marketing Institute (ASMI). SECTION #6 - BUDGET REDUCTION REQUIRING LEGISLATION LONGEVITY BONUS ELIGILBILITY Mr. Spencer noted that Section #6 refers to the Governor's proposal for an income limit cap. He acknowledged the action could have been accomplished with a fiscal note. The language was added to the front section to make clear that if that legislation were passed, there would be significant savings to the general fund. The estimated proposed amount was provided December 15, 1998. Co-Chair Therriault asked why there was a saving indicated on the hold harmless. Mr. Spencer replied that the hold harmless payments resulted from the dividend. He did not understand the indication and offered to provide that information. SECTION #7 - CONSTITUTIONAL BUDGET RESERVE FUND Mr. Spencer stated that Section 7 indicates a difference from last year not including a $7.1 million dollar cap. SECTION #8 - DISASTER RELIEF Mr. Spencer noted that Section #8 was standard, appropriating federal receipts received for disaster relief to the disaster relief fund. It has been included in federal funds for the Department of Military and Veterans Affairs in the back section of the bill. SECTION #9 - FEDERAL AND OTHER PROGRAM RECEIPTS Mr. Spencer pointed out that Subsection (a) is standard language that provides for additional funding authority for federal and other program receipts through the Legislative Budget and Audit (LBA) Committee process. The approach would limit LBA to a particular funding source consideration. He reminded members that there is proposed legislation speaking to this concern of the 45-day Rule, although, Section #9 provides different language from that bill, not restricting it to particular program receipt funding sources. Co-Chair Mulder commented that the language in Section #9 was broader than the proposed legislation and that language would be examined in more depth during the legislative process. He emphasized that the final decision would be a "policy call". Representative J. Davies remarked that the language proposed in this section was as it had been in previous years. SECTION #10 - FEDERAL SUBSISTENCE FUNDS Mr. Spencer stated that Section #10 addresses the subsistence issue for funding to be made available either to the State or the federal government. SECTION #11 - FISH AND GAME ENFORCEMENT Mr. Spencer advised that Section #11 has been in existence for 2 years. The language takes the amount of the criminal fines for fish and game violations and places them into a fund to be used by the Department of Public Safety and Department of Law for enforcement costs. Subsection (b) indicates that the amounts are explicitly appropriated back for enforcement, investigation and prosecution of State fish and game laws. Representative J. Davies inquired how the funds would be used if they amounted to more than those received in the front section. Mr. Spencer replied that there would then be the option of creating a RPL or supplemental. SECTION #12 - FOUR DAM POOL TRANSFER FUND Mr. Spencer noted that Section #12 would make the necessary appropriation from the Four Dam Pool transfer fund to the Southeast Energy fund, the Power Cost Equalization & Rural Electric fund and the Power Project fund. The amount transferred in FY97 was zero. Representative J. Davies asked the amount available for appropriation. Mr. Spencer replied that $3.8 million dollars is estimated available by Power Cost Equalization (PCE), the Southeast Energy fund has about $8 million dollars and the Power Project fund has about $9 million dollars. Representative Bunde pointed out the handout addressed to Senator Parnell, included in the packet, which speaks to these concerns. SECTION #13 - INFORMATION SERVICES FUND Mr. Spencer commented that Section #13 would appropriate statutory designated program receipts to the Information Services fund for the Department of Administration, Division of Information Services, for telecommunication services. These would be inter-agency receipts. SECTION #14 - INSURANCE AND BOND CLAIMS CATASTROPHE RESERVE ACCOUNT Mr. Spencer stated that Section #14 references the statute that allows up to $5 million dollars to be swept from lapsing general fund appropriations for the Catastrophe Reserve account. At that time, funds would be appropriated from that account to the Department of Administration for: ? Insurance; ? To establish reserves for the self-insurance programs, and ? To satisfy claims or judgements. SECTION #15 - INSURANCE FEES - REAPPROPRIATION Mr. Spencer stated that Section #15 was carry forward language for the Department of Commerce and Economic Development, Division of Insurance. SECTION #16 - LAND DISPOSAL Mr. Spencer noted that this section would make an appropriation to the Department of Natural Resources which would allow them to undertake actives needed to prepare for a land sale. Section #16 is accompanied with a two-year lapse date, as the receipt timing is unknown. SECTION #17 - MARINE HIGHWAY SYSTEM FUND Mr. Spencer commented that Section #17 would make a general fund appropriation to the Alaska Marine Highway System fund in the amount of $27.5 million dollars. The Legislative Finance Division has indicated an increase from the prior year. Mr. Spencer noted that there was an additional $151 thousand general fund appropriation that went into that fund last year to meet salary adjustments. Currently, the amount requested is the same as that from last year. SECTION #18 - MOTOR FUEL TAX Mr. Spencer stated that Section #18 was not an appropriation, but rather, indicates the amount received from the Special Highway Tax and the Special Aviation Fuel Tax. Both these taxes will be spent. The income was based on the existing 8 cents per gallon tax. SECTION #19 - OCCUPATIONAL LICENSING-REAPPROPRIATION Mr. Spencer noted that Section #19 was carry forward language for the operations of that program. SECTION #20 - OIL AND HAZARDOUS SUBSTANCE RELEASE PREVENTION ACCOUNT Mr. Spencer deferred any questions on Section #20 to Department of Environmental Conservation. The language would appropriate the balance of the unreserved special accounts in the general fund to this account. SECTION #21 - OIL AND HAZARDOUS SUBSTANCE RELEASE RESPONSE ACCOUNT Mr. Spencer deferred any questions on Section #21 to the Department of Environmental Conservation. The language would appropriate the balance of the unreserved special accounts in the general fund to this account. SECTION #22 - PERFORMANCE MEASURES Mr. Spencer noted that Section #22 was the Governors intent language, requesting that goals, strategies, and performance measures be stated in a separate resolution. Mr. Spencer emphasized that the Governor does support performance measures. SECTION #23 - REAL ESTATE SURETY FUND Mr. Spencer noted that Section #23 indicates that the balance of the Real Estate Surety fund, which exceeds $500 thousand dollars, be appropriated to Department of Commerce and Economic Development for purposes relating to that fund for the fiscal year. Representative Bunde asked if the amount rolled forward was $500 thousand dollars. Mr. Spencer replied that Section #23 would provide that the excess funds over $500 thousand dollars be appropriated as established in statute. SECTION #24 - RETAINED FEES Mr. Spencer stated that the language of Section #24 does address the need to appropriate vendor compensation and/or bankcard service fees that are not directly appropriated by the State for vendors or banking institutions that collect fees on behalf of the State. Mr. Spencer provided an example of fish and game licenses. Representative Bunde asked why no amount had been included. Mr. Spencer advised that it is not known what that figure will be in advance. (Tape Change HFC 99 - 31, Side 2). SECTION #25 - SAFETY ADVISORY COUNCIL-REAPPROPRIATION Mr. Spencer pointed out that Section #25 would allow program receipts not expended in FY99 to be carried forward into FY00 for the Governor's Safety Conference. SECTION #26 - SALARY AND BENEFIT ADJUSTMENTS Mr. Spencer noted that Section #26 would allow for FY00 pay increases for University of Alaska employees. The net unknown amount would be used for three items: ? Salary adjustments; ? Health benefit adjustments; ? Changes in contribution rates for the Public Employees Retirement System (PERS). SECTION #27 - SALMON ENHANCEMENT TAX Mr. Spencer noted that Section #27 would make an appropriation to the regional association. Funds have been collected for that purpose. SECTION #28 - SHARED TAXES AND FEES Mr. Spencer stated that the programs indicated Section #28 are statutorily designated. This section would appropriate general fund dollars to Department of Revenue to refund local governments their share of taxes and fees collected for payment in FY99. SECTION #29 - STATE DEBT AND OTHER OBLIGATIONS Mr. Spencer noted that Section #29 indicates where the state pays for CLP bonds. Following this payment, all general obligation bonds will be paid off. The formula used to determine the general fund appropriation going to the debt retirement fund, is made by calculating all other funding sources, determining the amount of known debt, subtracting funding sources from that number, and leaving the remainder amount to be taken from the general fund. SECTION #30 - STATE TRAINING & EMPLOYMENT PROGRAM Mr. Spencer commented that Section #30 would take the lapsed funding balance from the account and place it into the Unemployment Compensation fund. He noted that there had been discussion by the Governor's Office to add an amendment to restore this language as it previously was. SECTION #31 - STATUTORY BUDGET RESERVE Mr. Spencer stated that Section #31 reserve fund was established some time ago, and that there is no money in it and no funds dedicated for it. He acknowledged that a couple of years ago, it was recommended that the fund be removed but no action has been taken. SECTION #32 - STORAGE TANK ASSISTANCE FUND Mr. Spencer deferred questions regarding Section #32 to the Department of Environmental Conservation. Representative Bunde asked if fees were still being collected for storage tank assistance. VIRGINIA STONKUS, FINANCIAL SERVICES, ADMINISTRATIVE SERVICES, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, understood that as of December, 1998, the program would be adjusted and that there would be an option for the fees. She did not know which piece of the program the adjustment would be applicable to. Ms. Stonkus offered to research that and provide information to the Committee. Representative J. Davies noted that the registration fees are still collected and that the revenues received from those fees are placed back into the Prevention Account. SECTION #33 - STUDENT LOAN PROGRAM Mr. Spencer noted that the fees collected from the Student Loan Program are used to cover any defaults from death or disability of the borrowers. SECTION #34 - TEACHER CERTIFICATION-REAPPROPRIATION Mr. Spencer pointed out that Section #34 was carry forward language and would keep teacher certification fees with that program. SECTION #35 - TEST FISHERY RECEIPTS Mr. Spencer deferred questions on Section #35 to the Department of Fish and Game. He noted that this language would allow taking receipts received during the current fiscal year and make them available to the Department for the Shell-Fish Onboard Observer Program. Representative Austerman noted that Section #9 also took in test fishery receipts. Mr. Spencer replied that Section #9 clarifies that if the State receives test fishery receipts that exceed the appropriated amount, the Department can then go to the LBA Committee with an Revised Program Receipt (RPL) instead of spending the receipts. The scope of the test fishery is not always known in advance. Representative Bunde asked where receipts for "other" fisheries outside of shell fish go. KEVIN BROOKS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF FISH AND GAME, stated that there is over $5 million dollars in test fish receipts in the Department's commercial fisheries budget. Section #35 resulted from a timing issue, and is included also in the back section. The Observer Program funding is used for two different crab fisheries and for salmon projects around the State. He summarized, the Department will match receipts to regions where the revenues are generated. SECTION #36 - VALUE-ADDED TIMBER SALES Mr. Spencer stated that Section #36 indicates an appropriation not to exceed $250 thousand dollars general fund receipts generated in fiscal years ending June 30, 2000 and 2001 from value-added timber sales in Southeast and in the Tanana Valley to the Department of Natural Resources. He noted that this appropriation amount had not been included in the total of the Governors appropriation bill. SECTION #37 - LAPSE DATE-FEDERAL SUBSISTENCE FUNDS SECTION #38 - NONLAPSE OF APPROPRIATIONS SECTION #39 - RETROACTIVITY Mr. Spencer noted that Sections #37, #38 and #39 address lapse dates, going into funds or capitalized funds to appropriate the money. He added that Section #39 would make an appropriation retroactive to June 30, 1998. Representative Austerman asked if Section #18 would include the marine fuel. Mr. Spencer offered to check into that, although, believed that marine fuel had a separate account. Representative Foster objected to Section #6 being included in the front section analysis. Further discussion on the objection was postponed to a later date. HB 50 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 9:10 A.M. H.F.C. 11 2/26/99