HOUSE FINANCE COMMITTEE March 4, 1999 1:40 P.M. TAPE HFC 99 - 34, Side 1. TAPE HFC 99 - 34, Side 2. TAPE HFC 99 - 35, Side 1. TAPE HFC 99 - 35, Side 2. TAPE HFC 99 - 36, Side 1. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:40 P.M. PRESENT Co-Chair Therriault Representative Foster Co-Chair Mulder 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; Annalee McConnell, Director, Office of Management and Budget; David Teal, Director, Legislative Finance Division; Representative Lisa Murkowski; Representative Ethan Berkowitz; Janet Seitz, Staff, Representative Norman Rokeberg; Catherine Reardon, Director, Division of Occupational Licensing, Department of Commerce and Economic Development; Alison Elgee, Deputy Commissioner, Department of Administration; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services; Dwayne Peeples, Director, Division of Administrative Services, Department of Corrections; Percy Frisby, Director, Division of Energy, Department of Community and Regional Affairs; Theresa Tanoury, Administrator, Division of Family and Youth Services, Department of Health and Social Services; Bob Labbe, Director, Division of Medical Assistance, Department of Health and Social Services; Barbara Miklos, Director, Child Support Enforcement Services, Department of Revenue; Ken Bischoff, Director, Division of Administrative Services, Department of Public Safety; Nancy Slagle, Director, Division of Administrative Services, Department of Transportation and Public Facilities; Karen Rehfeld, Director, Division of Administrative Services, Department of Education; Nico Bus, Director, Division of Administrative Services, Department of Natural Resources; Kathryn Daughetee, Director, Division of Administrative Services, Department of Law; Denny DeWitt, Staff, Representative Eldon Mulder; Mary Marchburn, Acting Director, Division of Administrative Services, Department of Commerce and Economic Development. SUMMARY HB 68 An Act extending the termination date of the Board of Pharmacy to June 30, 2005; and providing for an effective date. HB 68 reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Commerce and Economic Development dated 2/26/99. HB 77 An Act relating to the Joint Armed Services Committee, a permanent interim committee of the Alaska State Legislature; and providing for an effective date. CS HB 77 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the House Finance Committee. HB 100 An Act making and amending capital, supplemental, and other appropriations, and appropriations to capitalize funds; ratifying certain expenditures; and providing for an effective date. HB 100 was HELD in Committee for further consideration. HOUSE BILL NO. 77 "An Act relating to the Joint Armed Services Committee, a permanent interim committee of the Alaska State Legislature; and providing for an effective date." Co-Chair Therriault requested Representative Murkowski to refresh members on changes made to the draft committee substitute. He pointed out that the in House Finance Committee fiscal note, expenses of the Commission would be covered through the Legislative Council's budget. REPRESENTATIVE LISA MURKOWSKI noted that the proposed Commission would be started with newly appointed members in order that the Speaker of the House could appoint them. Additionally, the committee substitute has added a section with a 10-year sunset clause. Representative Bunde MOVED to adopt work draft 1-LS0413\D, Cook, 2/24/99, as the version before the Committee. There being NO OBJECTION, it was adopted. Representative Foster MOVED to report CS HB 77 (FIN) out of Committee with individual recommendations and with the accompanying zero fiscal note. There being NO OBJECTION, it was so ordered. CS HB 77 (FIN) was reported out of Committee with a "do pass" recommendation and with the House Finance Committee zero fiscal note. HOUSE BILL NO. 68 "An Act extending the termination date of the Board of Pharmacy to June 30, 2005; and providing for an effective date." JANET SEITZ, STAFF, REPRESENTATIVE NORMAN ROKEBERG, stated that the proposed legislation would extend the termination date of the Board of Pharmacy to June 30, 2005. CATHERINE REARDON, DIRECTOR, DIVISION OF OCCUPATIONAL LISCENSING, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, noted that the Department of Commerce and Economic Development strongly supports extending the license of the Board of Pharmacy. A follow-up audit scrutinized results and recommendations of the previous audit. In doing so, they found that the initial audit had recommended eliminating photographs from the applications in order that discrimination would not be involved. The Board, however, did not endorse that requirement. They believe it is important to know who is being licensed in a pharmacy profession. Representative Foster MOVED to report HB 68 out of Committee with individual recommendations and with the accompanying zero fiscal note. There being NO OBJECTION, it was so ordered. HB 68 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Commerce and Economic Development dated 2/26/99. HOUSE BILL NO. 100 "An Act making and amending capital, supplemental, and other appropriations, and appropriations to capitalize funds; ratifying certain expenditures; and providing for an effective date." DEPARTMENT OF ADMINISTRATION SECTION 6 Section (g & h) ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION, noted that these two sections were designed to provide funding to the Department for replacement of the boiler in the Fairbanks Pioneer Home. The total cost of the boiler would be approximately $1.3 million dollars. Section (g) will generate $700 thousand dollars from Pioneer Home receipts and Section (h) will generate approximately $500 thousand dollars, with a reallocation of existing capital appropriations for maintenance to provide the difference. Representative J. Davies asked if there was a back up system if the boiler system should fail. Ms. Elgee replied that there is an evacuation plan, which would include some residents being returned to family members for a short-term basis; those in convalescent would be transferred to Denali and there is an arrangement with a local hotel to relocate other residents in the home. At this time, there are 100 residents in that center. In response to a query of Co-Chair Therriault regarding the scope of the project, Ms. Elgee explained that the boiler would be replaced with a new design that would be capable to use either oil or gas. Representative Austerman asked how old the facility was. Ms. Elgee replied that Fairbanks Pioneer Home was built in 1967. SECTION 20 - MISCELLANEOUS CLAIMS SHARON BARTON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, noted that Section 20 included miscellaneous claims for the Department in the amount of $15,640 thousand dollars. She explained that these claims resulted from stale dated warrants presented for payment after the year-end books were closed. The State's liability for paying these warrants extends indefinitely. SECTION 22 - RADIFICATIONS Sections 22(a, b, & c) Ms. Barton continued, Section 22(a) is a request for telecommunication services in the amount of $32,269 dollars. She noted that sufficient authorization existed for the expenditure, although, insufficient revenues exist. Ms. Barton pointed out that Section 22(b) would provide for an adjustment associated with a computerization project for the Office of Public Advocacy in the amount of $19.02 dollars. Ms. Barton spoke to Section 22c request in the amount of $193,562 thousand dollars for central duplicating. The facility was closed because revenues were falling short of keeping the operation open. She advised that Sections (a) & (b) would be funded by the Information Services fund (ISF) and Section (c) would be included as a general fund expenditure. Ms. Barton advised that ISF is funded each year in the front section of the budget. In response to Representative Bunde, Ms. Elgee explained that the central duplicating office was closed because the State was not meeting the expenses of operation. The net request reflects the cost after incorporating all revenues received. In order to continue the operation, the prices would have had to been raised to something that was well beyond what would have been charged in the public sector. Representative G. Davis asked if the ISF had been calculated in the formula. Ms. Barton replied that funds are available in the ISF. When sufficient revenues are collected, it is rolled into the rate for the upcoming years. Co-Chair Therriault questioned why the front section of the budget was being used for program receipts. Ms. Barton replied that the source of those receipts were generated from municipalities and sources other than state agencies. In response to Representative Austerman, Ms. Barton spoke in more detail of the closure of the Central Duplicating Office. There had been a decline in the print shop business over the last three years due to increased use of Internet, the Legislative interest in reducing the kinds of documents issued, and the availability of high-speed copiers. For each month the operations were open, there were multiple fixed costs. Ms. Elgee added that agencies were not requesting enough jobs to recoup the fixed costs. The Court ordered that employees be rehired at salaries that they were paid at central duplicating. At which point, the remaining 1/3 unhired employees were then rehired and their salaries have been made whole. The arbitrators ruling will be in effect until June 30, 1999. DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS SECTION 7 - Power Cost Equalization Co-Chair Therriault asked if there had been discussion to pro rate the subsidy down in order that the Department could finish the year with the amount budgeted. PERCY FRISBY, DIRECTOR, DIVISION OF ENERGY, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS, replied that the Division was funded at 85%. He added that if the supplemental was not approved, there would be 43% of the 100% demand available. Representative Austerman asked if at this time, the request had reached $1.7 million dollars. Mr. Frisby advised that the $1.7 million dollar request had been reduced to $1.4 million dollars due to reduced fuel costs in rural Alaska. DEPARTMENT OF HEALTH AND SOCIAL SERVICES SECTION 11 JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, pointed out that the Department had a couple of large supplemental requests this year and that the Department had worked diligently to provide reductions to off set the supplemental requests. Sections 11(a, b, c, & d) Ms. Clarke noted that these sections were included in the capital appropriations authorized for in FY99. Program managers were requested to find areas which would not impact the program progress. 11(a) - Emergency Medical Service equipment Ms. Clarke noted that this section would defer some equipment purchases for the next 18 months. Representative J. Davies asked what services would not happen with movement of these funds. Ms. Clarke replied that some radios and small equipment that would not impact the Division would not be purchased until a later date. In response to Representative Austerman, Ms. Clarke noted that in the FY2000 budget, there would not be a request for equipment replacement. 11(b) - Reduce Vital Statistics Archive Imaging Ms. Clarke explained this subsection would provide a $20 thousand dollar reduction for some vital statistics imaging replacement. Last year, the Legislature authorized $340 thousand dollars for Phase I of this project. Phase II was to be requested in the FY2000 budget, however, it has not been authorized in the Governor's Capital Budget. Some of the Phase I money had been set aside to purchase a server for Phase II. The purchase of the server will be delayed. She explained that the Phase I portion of the project continues to be useable. 11c - Reduced Welfare Reform Information System Ms. Clarke noted that over the last several years, the Legislature has authorized the Department funding to upgrade the Welfare Reform system. At this time, the Department is spending more time on the Y2K concerns to be able to address eligibility problems. The Department lost the contractor. At this time, there is $200 thousand dollars to be spent in the next 18 months, and has been categorized as a spending reduction. Representative J. Davies asked about the 18 months welfare reform upgrades. Ms. Clarke emphasized that no information would be delayed. Representative J. Davies asked if this would impact the State's ability to stay in compliance with federal law. Ms. Clarke assured Representative Davies that this would not affect any federal law requirements. 11(d) - Reduce Client Data Integration Ms. Clarke stated that this project would establish a data warehouse within the Department. The data warehouse allows the Department to match data between systems so duplication of clients can be caught. The $25 thousand dollars, which has been, set-aside for contractors work will not be used. 11(e) - Formerly General Relief Medical Ms. Clarke explained that Section 11(e) was a request for $120 million dollars for the catastrophic acute medical assistance (CAMA) program. This is the program that the Legislature authorized last year to replace the General Relief Medical (GRM) Program. The difference between the programs is that in CAMA, State funded abortions are not paid for. Funds for this program expired two weeks ago. She referenced the back up material included in member's packets. Ms. Clarke pointed out that pharmacy services are a significant portion of service rendered. Many pharmacies have discontinued funding prescriptions because the program is out of money. (Tape Change HFC 99 - 34, Side 2). BOB LABBE, DIRECTOR, DIVISION OF FAMILY AND YOUTH SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, reiterated that the funds for that service have been exhausted. The Division has had discussions with various hospitals, doctors and pharmacy groups about continued services. The primary area of concern is the pharmacies because of the retail nature of that business. He admitted that the request was large and that the Department has hopes to be able to adjust it to a lower amount. Co-Chair Therriault acknowledged that this supplemental request was justified, although, hoped that the amount could be adjusted down. In response to Representative Austerman, Ms. Clarke explained that the original appropriation was $1.9 million dollars and that the supplemental request was for $1.2 million dollars. She pointed out that the GRM program which replaced CAMA, last year spent about $4.2 million dollars, including abortion services in the amount of about $1 million dollars. She emphasized that this program is the "payer of last resort" and that a straight money projection would be impossible. Each line needs to be addressed separately. Sections 11(f,g,& h) - Mental Health Grants Ms. Clarke spoke to departmental reductions in the grant programs with intent to use them to offset proposed supplemental costs. In a normal year, the Department would redistribute any grant funds not spent. Section 11(f) - Rural Services Grants Ms. Clarke continued, Section 11(f) would be a reduction of $84 thousand dollars to an alcohol and drug abuse program in the rural service areas. Section 11(g) Ms. Clarke stated that Section 11(g) would provide a series of reductions to various components in the mental health grant areas. Section 11(h) Ms. Clarke continued that Section (h) indicates the total of Section (g) - $55 thousand dollars (psychiatric emergency services), $100 thousand dollars (chronically mentally ill) and $69.6 thousand dollars (seriously emotionally disturbed youth) from the reduction to community mental health grants. Section 11(i) Ms. Clarke noted that Section (I) would provide for a $10 thousand dollar reduction in public health nursing. Section 11(j) Ms. Clarke continued, Section 11(j) would be a $20 thousand dollar reduction to the Bethel Healthy Families program. Section 11(k) Ms. Clarke commented that Section 11(k) was a $20 thousand dollar reduction to an anticipated grant award to St. George. Section 11(l) Ms. Clarke pointed out that the Department through Public Assistance awards grants for food banks and teen parent programs. At the time of this review, there exist $30 thousand dollars remaining in that account balance. Section 11(m) Ms. Clarke spoke to the increase request of $656.9 thousand general fund dollars and $164.3 federal fund dollars contributing to the request of Section 11(m) for the subsidized adoption and the guardianship program. The program provides subsidy to parents who enter into adoption. The program serves mostly children who have been in foster care and who have high special needs. The requested funding will off set the care in their permanent homes. This funding allows for the child to get out of the foster care system and into permanent homes. She noted that back up information included in the packet explains how in the subsidized adoption program, the State pays less than in foster care. In response to Co-Chair Therriault, Ms. Clarke explained that care continues in the adoptive home until the child reaches the age of 18. Section 11(n) Ms. Clarke spoke to Section 11(n) which would reduce the community developmental disabilities grants by $387 thousand dollars. Co-Chair Therriault noted that he understood that recipients of that grant were "unsettled" with the proposed reduction. Ms. Clarke reiterated that if this had been a normal budget year, the Department would have directed those funds out to the grantees. Those funds are available because in the past, the Department has used some of that money to match federal Medicaid dollars which allows more developmentally disabled (DD) persons to qualify for the Medicare waiver program. This year that was not required, as Medicaid had more money which allowed the State to serve an additional 60 people this year. Representative J. Davies spoke to Section 11(m) reminding members that the "qualified" children represented have at least four or more special needs. He inquired the types of services needed for these children to help the prospective parents. THERESA TANOURY, ADMINISTRATOR, DIVISION OF FAMILY AND YOUTH SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that adoptive parents rely on this funding to help with the daily care of these children. The services for the programs vary greatly and include services from respite care to therapy and counseling. Section 11(o) Ms. Clarke advised that Section 11(o) would be withdrawn. Co-Chair Therriault asked if at the end of the fiscal year, if there were excess Medicaid funds, would they be carried forward into the child care function. Ms. Clarke explained that Medicaid is a cash system, based on when the bill is received, not when the service was performed. If there are excess funds, they are lapsed at the end of the year. If the State is short, the claims are paid and the claims are "pushed" to the next fiscal year. SECTION 20 - Miscellaneous Claims Ms. Clarke stated that Department of Health and Social Services request for miscellaneous claims was in the amount of $16,612 dollars to be used for six different claims. These are late bills received by the Department. Three of the bills were for foster children who had medical needs. The largest items are to cover one of the reports performed under contract relating to DFYS and the problems in their offices. There was money encumbered to pay those charges, but based on accounting rules, the Division of Finance would not allow carrying that encumbrance forward. DEPARTMENT OF EDUCATION SECTION 10 Section 10(a) - Marine Vessel Simulator receipts KAREN REHFELD, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF EDUCATION, stated that Section 10(a) request was in the amount of $2.5 million federal dollar receipts to be used for replacing the marine vessel simulator at the Alaska Vocational Technical Center (AVTC) in Seward. The Department is seeking authorization for these funds. Section 10(b) - Foundation formula reduction Ms. Rehfeld noted that Section 10(b) would be a reduction of $1.5 million dollars to the above program. She referenced the memo from Deputy Commissioner Cross to Annalee McConnell, Director, Office of Management and Budget. [Copy on File]. The number was revised to $4 million dollars. She explained that this was a transitional year to the new funding formula, and after review, an additional $2.5 million reduction was found. Representative Grussendorf asked if it was anticipated that additional monies would need to be placed into the summer school tutoring programs as a result of the new graduation requirements. Ms. Rehfeld advised that the correspondence program is currently looking at restructuring their summer program to provide tutoring help to those kids that need additional assistance. Section 10c - Funding Change Source Ms. Rehfeld stated that this would be a funding source change for the Vocational Rehabilitation Business enterprise program which serves Alaskans who are blind or severly disabled. In the FY99 budget, the Department requested a funding source change to statutory designated receipts because of the contractual nature of the program. Statutory designated program receipts would only allow them to access funds generated in the current year. There are two revenue funds in the accounting system, federal and state receipts. This change would allow the business enterprise system to access those funds. SECTION 20 - Miscellaneous Claims Ms. Rehfeld noted that the Department requests $2,976 dollars in miscellaneous claims to cover invoices which are over two years old. SECTION 22 - Ratifications Ms. Rehfeld stated that Section 22 would ratify the expenditures by the Department from Adak School District assets for legal services related to that closure. Co-Chair Mulder voiced concern with the issue of ratification's. He suggested that it would appear that the State was spending money which was not authorized. Representative Grussendorf responded that issue must be determined on a case by case basis. Ms. Rehfeld emphasized that was money had already been spent. The Department used Adak School district funds on behalf of that district and did not have resources to pay the legal costs at that time. DEPARTMENT OF CORRECTIONS SECTION 5 Section 5(a) - Cook Inlet DWAYNE PEEPLES, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF CORRECTIONS, explained that the Department had submitted a supplemental request for the Cook Inlet facility for staffing vacancies needed to assist and address overcrowding at that institution. Due to the declining trend, the request has been modified. He referenced a memo dated 3/03/99. [Copy on File]. The request was reduced to $170 thousand general fund dollars. Section 5(b) - Inmate Health Care Mr. Peeples spoke to the Department's request in the amount of $500 thousand general fund dollars to address the "drastic" increase in cost for contract medical services and pharmaceutical supplies in FY99. Pharmaceutical costs for HIV prescriptions have increased by 190% over the FY98 budget. Without this supplemental funding, the Department can not provide required minimal medical care necessary to support existing prisoner levels. (Tape Change HFC 99 - 35, Side 1). Section 5c - Alternative housing for May & June Mr. Peeples continued, last year, the Department placed tents around the State to handle the high prison population. Due to declining populations and trends in the institution, the Department is requesting a modification of that request. The total requested amount would be $100 thousand general fund dollars. The request would provide funding for two tents in Fairbanks, each of which would hold 20 inmates. Co-Chair Mulder asked why tents would be located in Fairbanks. Mr. Peeples replied that the Fairbanks area has a history of peak prisoner population during the summer months. Section 5(d) - Out-of-State contracts Mr. Peeples stated that the Department is requesting $3,130 thousand general fund dollars to cover transportation and per diem costs for contract prison services in Arizona. Last year's budget was determined, based upon an assumption of $45 dollars per day per bed; the cost of beds came in at $53.50 dollars for the first 853 inmates, with additional beds at $52.50 dollars. The Legislature appropriated the lower rate as the Department was in the process of a competitive solicitation. Mr. Peeples pointed out that last year, the Department requested two probation officers and that the Legislature provided funding for one officer. Co-Chair Mulder asked where the Administrative Clerk position came from. Mr. Peeples replied that a vacant PCN was hired to address the volume load in the Anchorage office. All inmates going to Arizona are sent to the Anchorage central office, which tracks all packages for each inmate. He emphasized that there are approximately 30 prisoners per month that are being moved in and out of Arizona. Arizona is currently the State's largest facility. He emphasized that sentence lengths are getting shorter, and that some inmates are place at Arizona for only six to eight months. He offered to provide further information regarding that number. Section 5(e) - Transportation and Classification Mr. Peeples commented that Section 5(e) was a general fund request in the amount of $365 thousand dollars, a combination of two requests. The Department transports offenders among state facilities under delegation from the Department of Public Safety. The request would provide funding to both departments under one umbrella. The increased prisoner population levels have required that significant transports be accomplished, both in State and out-of-state by five Prisoner Transportation Officers. Section 5(f, g & h) - Existing CRC's Section 5(f) Mr. Peeples advised that the Department originally had not incorporated the unanticipated delays in the building of the Nome Culturally Relevant Community Residential Center (CRC). Due to the delays, more beds have been procured in the Anchorage area. The new cost is $50 thousand dollars. Section 5(g) The Department issued an RFP to secure 30-40 new CRC beds at Nome with an emphasis toward culturally relevant services being provided. An award was made, however, another bidder tied up the building permit issued by the City of Nome and then filed a protest. The protest was lifted after the protester purchased the business of the successful bidder. The new beds will not be available before June 1, 1999. The delay has increased the original delete to $480 thousand dollars. Section 5(h) Mr. Peeples continued, the Department had delays in implementing culturally relevant program services at the existing Bethel Tundra Community Center and has a one time general fund delete of $50 thousand dollars to help offset supplemental requests. Mr. Peeples added that CRC contracts have been issued for services and due to the contract start date, a one-time delete of $35 thousand dollars is available to offset the supplemental request. Mr. Peeples reiterated that savings were due to delays in opening. Co-Chair Mulder noted that a new program the Village Probation Safety Officer (VPSO) program had been added for parole and probation concerns. Mr. Peeples replied that the location had not yet been defined, although, was brought into the Bristol Bay area. At this time, there exists a draft contract, needing final negotiations. Co-Chair Mulder asked the consequences if the program did not go forward. Mr. Peeples stressed that probation officers are currently managing greater workloads and that enhanced supervision in the small villages would be lost. Section 5(I) Mr. Peeples spoke to the CRC offender supervision. He noted that contracts had been issued for these services and due to the contract start dates, a one-time delete of $35 thousand dollars had been made available to offset the supplemental request. Section 5(j) Mr. Peeples stated that the Department is requesting $750 thousand dollars in correctional industry funds, separate from the general fund. Under a work-training program, the prisoners develop products with money from the sales going into that account. Money is withdrawn from the account to purchase materials to develop the products. Previously, the Department made requests for funding through the Legislative Budget and Audit Committee (LBA). Now requested funding must be received as an appropriation. The account currently has $85 thousand dollars in it, although, the amount varies from day to day. Representative J. Davies voiced support of LBA's continued authority to handle this account. DEPARTMENT OF NATURAL RESOURCES SECTION 12 - Insert Performance Bond Language NICO BUS, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES, stated that Section #12 would allow all the departments to utilize performing bonds to claim land left by the land use permitees. He pointed out that this section would be revenue neutral. SECTION 14 - Recorder's Office Mr. Bus informed members that the recorder's office generates revenue. The office has been busy with refinancing mining claims and as a result, $5 million dollars revenue will be generated. The requested amount is $92 thousand dollars to be used for increased workload. The funding source is general fund program receipts. In response to a question by Representative Bunde, Mr. Bus clarified that $35 thousand dollars of the request would be used for new film for mortgage companies, $30 thousand for personal services, and the remainder for miscellaneous costs. He noted that member's files contained a detailed graph of this expenditure. [Copy on File]. Representative Bunde asked if the volume was similar to that in FY94. Mr. Bus replied that documentation has exceeded the FY94 level with three less staff working. In FY94, additional part time staff was hired. Representative Bunde addressed copying expenses. He pointed out that the average size of copied documents slightly went up. Mr. Bus replied that the number of pages increased by nearly 90,000 copies, which would account for raised supply costs. He emphasized that the average number of pages has increased. In response to comments by Representative Bunde, Representative J. Davies stressed that this was a request for supplemental, indicating temporary positions. Mr. Bus commented in the proposed FY2000 budget, the Department has requested seven new positions because of workload requirements. He recommended indicating an agreed maximum number of documents per employee; if that number is exceeded, then hiring a seasonal person. If the workload increased, then staff would be hired and if the workload decreased, staff would be reduced. Co-Chair Mulder commented that an alternative would be to privatize the endeavor. Mr. Bus replied that the Department has investigated that possibility. He recommended further discussion should be addressed regarding concerns that the title companies have. Representative Kohring supported the idea of privatization of the recorder's office. Following comments by Representative Kohring, Mr. Bus indicated that the recorder's office generates more money than it costs the State to maintain. Representative Austerman asked how far the Legislature had gone in the discussion to privatize these functions. Representative Kohring asked if the addition of the requested funds would increase the BRU beyond $90 thousand dollars. Co-Chair Mulder believed it would not. Mr. Bus replied that supplemental funding does not automatically add to the base. He reiterated that it was frustrating for the Department not have this number connected to the workload. He reiterated that this issue should be a stand-alone allocation. Representative Kohring suggested that such a proposal creates the pretense of a "yo yo" game of the budget. He recommended just removing the requested amount from the $535 thousand dollar operating budget request. Co-Chair Mulder noted that the $535 thousand dollars was a straight general fund request and that the request before the Committee was general fund program receipts. Representative Bunde pointed out that the recorder's office is not only a profit generator for the State but it is also a "hidden tax" vehicle. It keeps the State in the business of making a profit off of someone who is refinancing their home. The State is charging more than it costs. He suggested that it would do a better service to the public to privatize the service. Representative Bunde asked why there was an increase in charge-back fees. Mr. Bus explained that the memo referenced addresses network costs. The Department is attempting to work with Department of Administration. The data processing charge back was computed on a number of terminals for the mainframe network. Each department has been asked to contribute to those charges according to the number of employees using terminals. The total cost in FY99 was $23 thousand dollars. (Tape Change HFC 99 - 35, Side 2). SECTION 22 - Ratifications Mr. Bus spoke to the Department's fire suppression expenditure request the amount of $5.391 million dollars. He reiterated that the supplemental approved for 1998 was not sufficient to address the fire damage. The proposed number is the final accounting for the Department. Co-Chair Mulder questioned the State's agreement with the feds. Mr. Bus explained that the ultimate cost of the fire is born by the owner of the land. DEBT SERVICE SECTION 9 - Debt Retirement Fund DAN SPENCER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND BUDGET, noted that Alaska Housing Finance Corporation's (AHFC) original projection was about $9 million dollars to pay debt service for bonds being issued. The current projection is an approximate $1.2 million dollar decrease in debt service for FY99. For that reason, the general fund amount can be reduced. He continued, in Section 1 of the operating budget, there is a retro section for AHFC. It is bringing the unused AHFC money for FY99 into the Debt Retirement Fund, which originally was appropriated to be used. The operating budget must make sure that the AHFC dividend is taken into account. The proposed supplemental request rests on that. Co-Chair Mulder suggested that if it was not used in the proposed allocation, then that amount would be used to help close the gap. He questioned where in the budget the remaining balance of the dividend was located. Mr. Spencer pointed out that in the front section of the operating budget, the AHFC dividend had been placed into retirement. Last year, the dividend was used for debt retirement. He added that if the funding had not been used there, it would have required a general fund reduction. ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, replied that the $33 million dollars which was going to initially go for debt service, and it appeared that would be the full payment needed. If the general fund appropriation is not reduced for FY99, the remainder of debt service will go into the general fund. The supplemental wording makes it clear that the actual spending for FY99 will drop by $1.143 million dollars, so that the expenditure level is brought down to meet the actual need of the debt service. Co-Chair Mulder asked if this was denied, with an intent to reduce the overall supplemental by $5.2 million dollars, would it then have to be reduced by an additional $1.1 million dollars. He believed that the net result would be that the gap would be closed by $1 million additional dollars. Ms. McConnell replied that if debt service is not brought down, an advantage would be missed of recognizing that the spending level was $1 million dollars less than that indicated on the books. DEPARTMENT OF ADMINISTRATION SECTION 22 - Ratifications Co-Chair Mulder referenced the Department of Administration's request for $193,563 dollar for the closure of the central duplicating station. Mr. Spencer explained that those costs resulted from the shut down of that office. The shut down expenses were greater than the revenue that had been generated. Mr. Spencer advised that settlement monies were not represented in this figure. Ms. McConnell noted that the expenditures had been reduced from what was authorized. Co-Chair Mulder asked at what level of requested funding would reciprocate a letter to the presiding officer. Ms. McConnell replied that historically, this process addressed would be through the supplemental. She acknowledged that the books to date are not fully closed out. The intent is that the Legislature ratify this in order that the State does not end up with audit exceptions. DEPARTMENT OF LAW SECTOIN 13 - Oil and Gas Litigation KATHRYN DAUGHETEE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF LAW, advised that Section 13 indicates moving $100 thousand dollars back into the budget as a result from case work not materializing from outside counsel. She emphasized that there was not an off setting request for the Department's operating budget. SECTION 20 - Miscellaneous Claims Ms. Daughetee stated that the Department has a $300 dollar request amount for an accounts payable received after the allocated payment time. DEPARTMENT OF PUBLIC SAFETY SECTION 15 Section (a & b) - Alaska State Troopers KEN BISCHOFF, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF PUBLIC SAFETY, noted that Section 15 speaks to the Division of Alaska State Troopers. Subsections (a & b) resulted from a change of budget structure which the Legislature implemented last year. There is now a separate appropriation level set up for trooper detachments. The request would reduce "other" components within the State Troopers by $200 thousand dollars and increase trooper detachments by that amount. Section c - AST Detachments Mr. Bishchoff commented that Section c was a straightforward general fund request in the amount of $312.7 thousand dollars for completion this year. Representative Austerman requested an itemization of the request. Mr. Bischoff replied that the amount was comprised of $103 thousand dollars for academy costs, $112 thousand dollars for helicopter repair in Fairbanks, communication costs from combining the dispatch with the Department of Military and Veterans Affairs and an additional $63.1 thousand dollars from trooper turnover. SECTION 16 - Fish & Wildlife Protection Mr. Bishchoff stated that Section 16 provided a technical amendment. The Legislature has worked with the Department's Fish and Wildlife Division, to sell surplus vessels and planes, using the proceeds to purchase replacements. Last year, it was allowed but was not classified as a capital project and therefore, it has a lapse date. Section 16 would retroactively designate it as a capital project. Co- Chair Mulder noted that capital projects have a lapse date of five years. He questioned why that amount of time would be needed. Mr. Bischoff replied that selling used vessels is difficult and requires much energy. Co-Chair Mulder asked which vessels were being replaced. Mr. Bishchoff replied that to date one boat had been sold which realized $130 thousand dollars and that there are three 38' boats still need to be sold. The capital budget plan contains a vessel replace schedule. Co-Chair Mulder inquired if five years was needed. Mr. Bischoff suggested that two years would be a reasonable time. SECTION 20 - Miscellaneous Claims & Warrants Mr. Bishcoff stated that the Department also was requesting $793 dollars for a miscellaneous claim. Co-Chair Mulder requested more back up for Section 15c. DEPARTMENT OF REVENUE SECTION 17 - Child Support Enforcement MARY MARSHBURN, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE, discussed that more than 80% of the Child Support Enforcement Division (CSED) budget comes from the federal government. A portion of that federal money came from incentive payments. The amount of those payments, which the division receives, is based upon the amount of money which the division collects on behalf of the obligor parent in public assistance cases. The recent success of the Welfare Reform program has meant that there are fewer families receiving public assistance. She emphasized that means less Alaska Temporary Assistance Program (ATAP) money collected by CSED for government. In the fall of 1998, CSED found that their projected ATAP collections would be less than projected. That meant a decrease in federal incentive payments of $900 thousand dollars. Ms. Marshburn translated that as CSED facing a $2.7 million dollar shortfall in the FY99 budget. When that was discovered, the CSED Director, Barbara Miklos, cut all line items and maintained a 10% vacancy factor in CSED positions in an attempt to save money. Ms. Marshburn suggested that action has become a double-edged sword. FY99 expenditures were reduced for FY99. The shortfall currently facing that division is $2.4 million dollars. Ms. Marshburn continued, CSED will collect on behalf for the State for FY99 some $8.6 million dollars. Of that $7.3 goes to Department of Health and Social Services, and the remainder goes into the general fund. CSED is requesting supplemental funding in the amount of $880 thousand dollars. That money is eligible for a 2 for 1 federal match. Co-Chair Mulder asked if additional authority was needed to expend federal funds. BARBARA MIKLOS, DIRECTOR, CHILD SUPPORT ENFORCEMENT DIVISION, DEPARTMENT OF REVENUE, replied no, because in the original budget the Division had projected $3.5 million in incentives and had already added on the match. Ms. Miklos spoke to the advantages and disadvantages of the new computer system. The new computer can do electronic transfers, which helps to get monies in and out quickly. Eventually, it will help automate systems not capable in the old system. At this time, there is still much work to do. She projected that it would take two years before the system will run smoothly. DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES SECTION 18 Section 18(a & b) NANCY SLAGLE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVCIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, commented that these two sections are basically the same, a fund source switch for the Anchorage International Airport capital project, terminal upgrade approved in the FY97 Capital Budget. Those funds were originally appropriated from the International Airport revenue fund and would be used to upgrade the terminal's electrical system. Since that time, it has been determined that the system is old and non-Y2K compliant. The federal government has indicated that they will assist in funding the project. It is anticipated that there will be additional monies forthcoming in the FY2000 budget. The switch would be in the amount of $1.051 million dollars from the International Airport revenue funds to federal receipts. In response to Representative Austerman, Ms. Slagle commented that costs would not be covered in rate development. Section 18c - Scope Change Ms. Slagle continued, Section 18c would be a scope change. The appropriation was originally for the Anchorage International Airport south terminal ramp program. It was determined that project could actually be included in the redevelopment project currently underway at the airport. The Department is requesting a name change to allow them to expand and do work on the north terminal. Representative Williams commented that last year, the small airline companies asked to have a vote in what was occurring at the airport. He asked if they were now in agreement. Ms. Slagle acknowledged that the capital budget items need to be presented to the Air Carriers Association for their approval. She noted that this was on the agenda for the Executive Committee meeting scheduled on March 8th. Co-Chair Mulder asked if it would be sufficient to include the item request in the reappropriation bill. Ms. Slagle doubted that would be a problem. Funding needs to be available by the end of session. Section 18(d) - Design & Engineering Ms. Slagle noted that Section 18(d) would provide an increase of $100 thousand dollars general fund program receipts for the Division of Design and Engineering services. The funding would be used to assist in the area of utility inspections and administrative costs related to utility permits. Over the past few years, the area has continued to increase in demand because of all the activity in communications technology. In previous years, the Department was able to deal with the problem by transferring numbers within, which can no longer be done because of the way the budget structure was provided. She emphasized that flexibility for moving money internally no longer exists. (Tape Change HFC 99 - 36, Side 1). Section 18(e & f) - Harborview Development Center Ms. Slagle noted that these subsections are both related to the Harborview Development Center. One is the allocation level and the other is the appropriation level. The Department is requesting $235 thousand dollars in general funds for maintenance. The Department of Health and Social Services maintained that area. Over the last several years, they have been in the process of closing it down. When the FY99 budget was submitted, the Department had eliminated all the money that supported the center. Ms. Slagle continued, last session, the Department of Corrections offered a bill which allowed them to use Harborview for an alcohol and drug therapy center. That bill did not pass. Consequently, there was not money in either the Department of Corrections or the Department of Health and Social Services budget to maintain the facility. The Department of Transportation and Public Facilities was handed the facility to maintain, although, had no money to do that either. There was an agreement made between the City of Valdez and the State, that the State maintains the facility for the year, because it now houses the City Hospital. The agreement outlined that the State would provide up to $265 thousand dollars to maintain the facility. The Department was able to reduce that amount to $235 thousand dollars from the original amount. Ms. Slagle noted that it is a State owned facility and that the City of Valdez is using a portion of it as their hospital. The City of Valdez is providing for costs over the $265 thousand dollars as agreed upon. She emphasized that Department of Transportation and Public Facilities can not absorb these costs. The agreement between that City and the State runs through the end of June 1999. Co-Chair Mulder asked if there was an ongoing agreement with the City of Valdez. Ms. Slagle replied that the agreement will lapse this year. Discussion continues between the State and the City. Co-Chair Mulder observed that the Valdez had intended to build a hospital and then decided to put it in the Harborview facility. The cost is greater now than it would have been if it were a separate facility. Ms. Slagle noted that the $235 thousand dollars would cover maintenance and fuel costs, snow removal, electrical costs and contract repairs for the building. Section 18(g) Ms. Slagle stated that Section 18(g) was a reduction to measurement and standards in the amount of $364 thousand dollars. She explained, during last session, HB 404 passed, which gave the Department authority to collect out-of-state vehicle permits on trucks. The Department has found that a large number of the truckers were registering their vehicles with the Division of Motor Vehicles (DMV) rather than purchasing a permit from Department of Transportation and Public Facilities and consequently, less revenue was collected than expected. She suggested that this could offset other requests. Representative Bunde asked if the recreational vehicle (RV) rentals were considered commercial rentals. Ms. Slagle thought they were not. Section 18 (h & i) - Receipt Shortfalls Ms. Slagle pointed out that Sections (h & i) were reductions to the highways and aviation budget and program receipts specific to the Title 17 regulations which have not yet been formulated. Co-Chair Mulder mentioned the Taylor Highway. Ms. Slagle noted that the Department of Transportation and Public Facilities was not plowing those roads. An agreement has been made with some mining companies to open a portion of the highway in order to bring in fuel needed by the miners. Co-Chair Mulder asked how much would it cost to open the highway. Ms. Slagle replied that just to open the Taylor Highway would cost $145 thousand dollars. UNIVERSITY OF ALASKA Representative Grussendorf noted that the University of Alaska was requesting $7 million dollars for the Arctic Research Center. He asked if they were planning to reduce student services. DENNY DEWITT, HOUSE FINANCE COMMITTEE STAFF, REPRESENTATIVE ELDON MULDER, read a memo from the Statewide Office of Budget and Institutional Research regarding that concern. [Copy on File]. Representative Grussendorf commented that the University is claiming a net zero by taking $3.5 million dollars from student tuition. He noted that he would support research but recommended that it not be taken from student tuitions. Co-Chair Mulder understood that the University was projecting $3.5 million dollars less receipts from student tuition. Mr. DeWitt understood that the net zero figure was achieved by taking from two unrelated accounts, neither which have received anticipated receipts. They have projects from another area which appear to be about the same amount, so they have distributed a net zero. Mr. DeWitt pointed out that these are all non-general fund issues. He concluded that the net zero was a mystery. Representative Austerman commented that $7 million dollars would be coming from grants. Co-Chair Mulder pointed out that the total spending requested from the University of Alaska has increased but the general funds have been reduced. HB 100 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 5:25 P.M. H.F.C. 25 3/04/99