HOUSE FINANCE COMMITTEE March 5, 1999 1:40 P.M. TAPE HFC 99 - 37, Side 1. TAPE HFC 99 - 37, Side 2. CALL TO ORDER Co-Chair Mulder called the House Finance Committee meeting to order at 1:40 P.M. PRESENT Co-Chair Mulder Representative G. Davis Co-Chair Therriault Representative Grussendorf Vice-Chair Bunde Representative Foster Representative Austerman Representative Kohring Representative J. Davies Representative Williams Representative Moses absent from the meeting. ALSO PRESENT Nancy Slagle, Director, Division of Administrative Services, Department of Transportation; Dan Spencer, Chief Budget Analyst, Office of Management and Budget, Office of the Governor; TESTIFIED VIA TELECONFERENCE Andree Mcleod, Anchorage. SUMMARY 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. 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." ANDREE MCLEOD, ANCHORAGE testified via teleconference. She maintained that the Department of Health and Social Services has an accounting problem. She referred to a letter dated 11/12/98 from Dana Owens, Office of Management and Budget to Senator Phillips (copy on file). She maintained that the Office of Management and Budget could only account for $380 thousand dollars of the $8,051,775 million dollars they received from the Center of Disease Control and Prevention (CDC) for 22 grants to the state of Alaska. Co-Chair Mulder stressed that the House Finance Committee tries to identify needs and how efficient money is being spent. Ms. McLeod suggested that she address the House Finance Subcommittee for the Department of Health and Social Services. Co-Chair Therriault encouraged Ms. McLeod to submit her recommendations to his office so that he could review them. He indicated that he would be willing to discuss her recommendations at a later date. Co-Chair Mulder discussed efforts with the Office of Management and Budget to reduce and prioritize expenditures. The Office of Management and Budget identified $6.4 million dollars that could be saved by "belt tightening". These savings are included in the supplemental request. The Committee is reviewing the supplemental request to determine which requests are absolutely necessary. Co-Chair Therriault pointed out that the letter from Mr. Owen was sent to Senator Randy Phillips. He questioned if Senator Phillips had had time to review the letter. He noted that there are grant agreements between the CDC and the state Department of Health and Social Services. There is a scope of work that must be done under each grant. Representative J. Davies questioned how Ms. McLeod reached the conclusion that the money is not accounted for. Ms. McLeod responded that the letter from Mr. Owen states that: "Two grants, numbers 13 and 21... are noted only as being received by the state of Alaska. The Department of Health and Social Services administers both grants." She concluded that the state only received funding for these two grants. Representative J. Davies pointed out that there might be a lagtime between when the grant is awarded and the money transferred to the state. Co-Chair Mulder observed that there is some discrepancy between state and federal fiscal years, which could account for the discrepancy in accounting. Co-Chair Therriault noted that most of the grants were to two different divisions. In order for the Department of Health and Social Services to receive and expend the funding they must receive authority from the legislature. Ms. McLeod observed that funding is scarce and that everything needs to be looked at. DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES Co-Chair Mulder asked for more information on reductions to Northern District roads. NANCY SLAGLE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF TRANSPORTATION clarified that the majority of general fund dollars provided to the Department of Transportation and Public Facilities are in maintenance and operation of the highways and airports and the Alaska Marine Highway System. There are set amounts in the department's maintenance and operations budget that must be expended every year. Supplies are ordered months in advance. The department's utility costs are fixed. Most of the department's non-personal service costs are non- discretionary fixed costs. The department's ability to make cuts in the end of the fiscal year is limited due to these fixed costs. She noted that the department has flexibility in its spring schedule of road openings. Co-Chair Therriault acknowledged that fixed costs reduce the department's ability to make reductions. He questioned if the Governor was aware of which roads would have their opening deferred to later in the year. Ms. Slagle did not know if the Governor knew the identity of the roads that were scheduled for delayed openings. Co-Chair Therriault asked if the Department of Transportation and Public Facilities utilized a list to prioritize the roads and identify savings from particular roads. Ms. Slagle stated that a list was not created, but that they could provide one. She explained that the department would provide information regarding the number of people utilizing a road or the type of industry that uses a road. Co-Chair Therriault asked if the Department of Transportation and Public Facilities evaluated savings and prioritized the roads. He emphasized that discussion should occur regarding which roads can be delayed. Representative Bunde complimented the Department of Transportation and Public Facilities for their efforts to reduced spending with minimal impact. He observed that some residents prefer not to pay taxes and not to have service provided. He questioned if money should be added back to maintain services. Co-Chair Mulder noted that three of the roads are in the Nome area, which does pay for services. Representative Austerman observed that there are state roads in the Kodiak area that are not plowed in the winter. Co-Chair Mulder noted that the roads in question are normally opened on May 1st. The department proposes to allow the roads to be open when the snow melts. Representative J. Davies questioned what cost is being deferred. Representative Foster observed that plugged culverts can lead to road erosion and may cost more then the cost of opening up the drainage. Co-Chair Mulder asked if the reductions in service are accepted would they be annualized. Ms. Slagle did not know if the reductions would be annualized. Representative Foster suggested that if the reductions are annualized that different areas be selected. DAN SPENCER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR clarified that there has not been a decision in regards to annualizing the reduction. He pointed out that the reductions were selected in part because of the lateness in the fiscal year. He observed that if there had been time to plan for the reductions, the department might have made other choices. Co-Chair Mulder recalled that there were $15 million dollars of unspecified reductions in the Governor's proposed FY00 budget. He asked if the reductions in the supplemental would be annualized toward the $15 million dollar savings. Mr. Spencer responded that the Administration anticipated working with the Legislature to identify $15 million dollars worth of reductions. He acknowledged that annualizing the reductions identified in the supplemental is an option but emphasized that there are several policy questions. The Administration has not decided to proceed in that manner. Co-Chair Mulder asked for additional information regarding the utility and usage of the roads in question. Representative Foster observed that there would also be reductions to the Alaska Marine Highway System. Ms. Slagle agreed that ferry service would be reduced. She discussed plans to reduce service in order to realize savings. The Columbia would be left in lay-up a couple of weeks longer. Representative Foster questioned if expenditures for supplies were at the expense of the Northern District and Alaska Marine Highway System. Ms. Slagle noted that the majority of the budget is committed in the first part of the year for fixed costs. Representative Foster observed that service for May and June is being reduced to pay for the fixed costs. In response to a question by Representative Foster, Ms. Slagle noted that chemicals are used throughout the state. Co-Chair Mulder noted that the department has indicated that the use of calcium chloride and other chemicals would be reduced due to the austerity program. Representative Foster questioned if the FY99 budget was short-funded. Ms. Slagle noted that the reduction is part of the overall belt tightening that is being requested to reduce the FY99 budget. Co-Chair Mulder noted that the Governor asked for a $1 million dollar reduction from the Department of Transportation and Public Facilities after the FY99 budget was approved. Representative Bunde observed that similar discussions will be necessary to understand the impact of budget reductions. Mr. Spencer emphasized that there is not such thing as a cut or asperity program without impacts. He emphasized that the attempt is being made to make impacts those that can best be lived with in the short-term and will not worsen the situation. Representative Austerman stressed the need to set priorities. Representative Foster observed that ISTEA funding, over the last 11 years, has resulted in over $2 billion dollars of new road construction that the state now maintains. Co-Chair Mulder referred to disaster funds. He noted that $1 million dollars is coming from the federal government for road washouts. Ms. Slagle explained that the Department of Transportation and Public Facilities has submitted a request to the federal Highway Administration for $1,513,800 million dollars as part of the Southeast disaster. This would pay for repair of roads in the Juneau and Haines area. The federal Highway Administration will not pay for $141 thousand dollars of the request. They approved the remaining funds. The payment has been delayed due to a shortage of funds in the Emergency Response Fund. The state cannot receive the federal funds until there is a congressional appropriation to the Emergency Response Fund. DEPARTMENT OF NATURAL RESOURCES Co-Chair Mulder referred to the request for Perseverance Trail repairs. (Tape Change, HFC 99 - 37, Side 2) Representative Grussendorf pointed out that the state is liable until the city and borough of Juneau accepts the Perseverance Trail. Co-Chair Mulder noted that the legislature approved funding for trail repairs in FY99 that was subject to the city taking title to the trail. The Governor deleted this conditional language. Mr. Spencer explained that the court subsequently struck down the conditional language. Representative Foster noted that there are reductions in the Northern Region and the Alaska Marine Highway System. He questioned if the million-dollar reduction in the Department of Transportation and Public Facilities is being spread across the state. Ms. Slagle noted that reductions are also occurring in the Central Region. She noted that positions are being held vacant and supplies are being reduced. Representative Foster asked if airports would be impacted. Ms. Slagle noted that the international airports are not impacted. The only impact to rural areas would be if vacancies in the Central area were not filled. She observed that there are safety issues that must be met. Representative Foster questioned if deferred maintenance and painting would be impacted by the reduction. Ms. Slagle did not know if that area would be impacted. HB 100 was HELD in Committee for further consideration. RECESSED The meeting was recessed at 2:40 p.m. HFC 6 3/05/99