HOUSE FINANCE COMMITTEE April 8, 1999 1:55 P.M. TAPE HFC 99 - 69, Side 1 TAPE HFC 99 - 69, Side 2 TAPE HFC 99 - 70, Side 1 CALL TO ORDER Co-Chair Mulder called the House Finance Committee meeting to order at 1:55 p.m. PRESENT Co-Chair Therriault Representative Foster Co-Chair Mulder Representative Grussendorf Vice-Chair Bunde Representative Kohring Representative Austerman Representative Moses Representative J. Davies Representative Williams Representative G. Davis ALSO PRESENT David Teal, Director, Division of Legislative Finance; Denny Dewitt, Staff, Representative Mulder; Tom Lawson, Director, Division of Administrative Services, Department of Commerce and Economic Development; Jeff Bush, Deputy Commissioner, Department of Community and Regional Affairs; Pat Poland, Director, Division of Municipal Assistance and Regional Assistance; Wendy Redman, Vice President, Statewide Programs, University of Alaska. 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. 17(c), 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. Amendments for the following budgets were discussed: Department of Commerce and Economic Development Department of Community and Regional Affairs University of Alaska HB 51 "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; and providing for an effective date." HB 51 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. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." Co-Chair Therriault MOVED to ADOPT Amendment CED-1. Representative J. Davies OBJECTED for the purpose of discussion. Delete: Department of Commerce and Economic Development Tourism Alaska Tourism Marketing Council Department of Commerce and Economic Development Tourism Tourism Development 3235.3 General Funds 1299.9 Other Funds 2050.7 General Funds 127.2 Other Funds Co-Chair Therriault explained that the amendment removes all funding for the Alaska Tourism Marketing Council. Legislation is pending to restructure the Alaska Tourism Marketing Council marketing effort. A fiscal note would be attached to legislation (HB 136/SB 107) affecting these functions. The fiscal note would address the budgetary needs of both components. Representative J. Davies stated that he would be more comfortable if the Division of Tourism remained funded. Representative J. Davies MOVED to AMEND Amendment CED-1 by retaining $286 thousand dollars in Tourism Development component. Co-Chair Therriault OBJECTED. He stressed that restructuring should be looked at as a whole package. He stated that he had considered restoration of the Division of Tourism director's position, but stated that he would prefer to address the issue through other legislation. Representative J. Davies stressed that the intent is not to eliminate the Division of Tourism. Co-Chair Mulder spoke against the amendment to Amendment CED-1. A roll call vote was taken on the motion to amend. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Bunde, Austerman, G. Davis, Foster, Kohring, Williams, Therriault, Mulder The MOTION to amend FAILED (3-8). There being NO OBJECTION, Amendment CED-1 was adopted. Representative J. Davies expressed concern that the pending legislation regarding the Division of Tourism might not be enacted. Co-Chair Therriault reassured him that the intent is to address the issue. He acknowledged that there is a function that needs to be performed. He noted that the contract with a private trade organization would need to be overseen and administered. Vice-Chair Bunde Withdrew Amendment CED-2 (copy on file.) Representative J. Davies Withdrew Amendment CED-3 (copy on file.) Representative J. Davies Held Amendment CED-4 (copy on file.) Representative Grussendorf Withdrew Amendment CED-5 (copy on file.) Representative Grussendorf MOVED to ADOPT Amendment CED-6. Co-Chair Therriault OBJECTED. Department of Commerce and Economic Development BRU: Banking, Securities and Corporations Component: Banking, Securities and Corporations $114.0 GF/PR I PFF Position Purpose: This restores the increments requested in the Governor's amended budget for the Securities Examiner position and funding (1 PFT, $74.0), and additional hearing examiner contractual services ($40.0). Discussion Representative Grussendorf spoke in support of the amendment. He emphasized that the examiner is only able to respond to complaints and violations. Additional funding could prevent problems. Co-Chair Therriault noted that the department's request for data processing positions was prioritized. He recommended that a fee be reviewed for work that the department does regarding ANSCA proxies. Representative J. Davies pointed out that the program currently generates $7 million dollars. A roll call vote was taken on the motion. IN FAVOR: Davies, Grussendorf, Moses, Foster OPPOSED: Bunde, Austerman, G. Davis, Kohring, Williams, Therriault, Mulder The MOTION FAILED (4-7). Representative Grussendorf or Representative J. Davies MOVED to ADOPT Amendment CED-7: ADD: Department of Commerce and Economic Development BRU: Occupational Licensing Component: Occupational Licensing $86.3 GF/PR Purpose: Restore funding and position for the Nurse Aide Investigator. Position and funding were included in a Fiscal Note for SB 152 last session, and inadvertently omitted from the appropriation bill. Representative J. Davies spoke in support of the amendment. He observed that the funding was included in a fiscal note attached to SB 152, which was enacted in 1998. He maintained that the funding was inadvertently omitted from the budget. Program receipts from nurse aides would cover the cost. Co-Chair Therriault agreed that the funding was inadvertently removed, but noted that it would be a general fund increase. DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION agreed that funding was allocated in a fiscal note that was not brought forward. Co-Chair Mulder stated that he did not object to the amendment. Co-Chair Therriault observed that the item should have been included in the FY99 base for the Department of Commerce and Economic Development. DENNY DEWITT, STAFF, REPRESENTATIVE MULDER clarified that the Department of Commerce and Economic Development's FY99 base was not adjusted to include the item. Mr. Teal stated that it should have been included as a fiscal note. The position was hired out of program receipts that were rolled forwarded. TOM LAWSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT stated that the nurse aide investigator position was included in the calculations of department personnel. There being NO OBJECTION, Amendment CED-7 was adopted. Representative Grussendorf MOVED to ADOPT Amendment CED-8. Co-Chair Therriault OBJECTED. BRU: Tourism Component: Alaska Tourism Marketing Council Purpose: This restores the Executive Director position and funding. I PT Position $102.3 GF Representative Grussendorf noted that the effective date of HB 136 (tourism reorganization) is not until July 1, 2000. He suggested that the executive director position be retained to assist in the transition period. Co-Chair Therriault responded that the bill could be structured to take care of the timing issue. He preferred that the entire switch be reviewed together. A roll call vote was taken on the motion. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Bunde, Austerman, G. Davis, Foster, Kohring, Williams, Therriault, Mulder The MOTION FAILED (3-8). Representative J. Davies MOVED to ADOPT Amendment CED-9 (copy on file). Co-Chair Therriault OBJECTED. Amendment CED- 9 would: Delete: World Trade Council Grant $135 thousand dollars Northern Forum Grant $60 thousand dollars Add Trade and Development $195 thousand dollars Representative J. Davies explained that the amendment would restore funding for two of three positions that were deleted from the Division of Trade and Development. The department would identify which positions would be funded. Co-Chair Therriault spoke against the amendment. JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS clarified that the budget as presented eliminates the northern issue coordinator position. He added that the amendment also eliminates the only timber specialist position. He noted that one person is currently acting in both positions. The timber specialist position was not hired due to budget discussions regarding the elimination of the position. Co-Chair Therriault pointed out that the department indicated that the data processing positions were of a higher priority. Representative J. Davies emphasized that it does not make sense to have a Northern Forum grant if the northern issues coordinator position is not funded. He maintained that $135 thousand dollars is a small amount of the World Trade Council's funding. The Council is primarily funded through program receipts. He stressed that the Council could operate completely from receipts and noted that the timber industry needs assistance. Co-Chair Therriault spoke against the amendment. He spoke against the use of World Trade Council grant funding. A roll call vote was taken on the motion. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Bunde, Austerman, G. Davis, Foster, Kohring, Williams, Therriault, Mulder The MOTION FAILED (3-8). Representative J. Davies MOVED to ADOPT Amendment CED-4 as amended by the sponsor: Add: Division of Trade and Development Forest Products Specialist $59.0 Delete: Northern Forum grants $60.0 Co-Chair Therriault questioned what level of funding is needed for state participation in the Northern Forum. Mr. Bush explained that the $60 thousand dollars pays the state's membership fee. He anticipated that the state would drop out of the Forum without the $60 thousand dollars contained in the amendment. He pointed out that the department was reduced by $350 thousand dollars in previous action. He observed that the Northern Forum would not be priority for international trade activities that would be continued in the face of reductions. Co-Chair Mulder asked if other Alaskans participate in the Forum. Mr. Bush noted that the last meeting was held in Alaska and that other Alaskans were present, but emphasized that (outside of a brief visit by the Governor) that he was the only state representative at the table. Co-Chair Mulder asked if the state would cease its participation if there were not a dedicated position to work with the Forum. Mr. Bush did not anticipate that the state would send anyone to the next meeting, which is in Finland, if there is not a dedicated position. Representative Williams asked for more information regarding the function of the forest specialist position. Mr. Bush explained that the position works with the timber industry to produce more value for the product. Representative Williams maintained that there is no longer a timber industry in Southeast Alaska. He observed that environmental interests are blocking timber sales in court. He spoke against funding the position. Representative Grussendorf observed that the position would assist smaller operators. (Tape Change, HFC 99 - 69, Side 2) Representative Williams noted that two small operators in Saxmon went broke. He agreed that there needs to be assistance for the small operators. He maintained that the amendment would only throw good money after bad. Representative J. Davies observed that there is a growing timber industry in other areas of the state. Representative Austerman clarified that the position is not new. The position had been held vacant. A roll call vote was taken on the motion. IN FAVOR: Davies, Grussendorf, Moses OPPOSED: Bunde, Austerman, Foster, Kohring, Williams, Therriault, Mulder Representative Davis was absent from the vote. The MOTION FAILED (3-7). DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS Representative Austerman MOVED to ADOPT Amendment CRA-1A (copy on file). Amendment Department of CRA-1A would rename the Training and Development component to the Local Government Management component. He noted that the department requested the amendment. There being NO OBJECTION, it was so ordered. Representative Austerman MOVED to ADOPT Amendment CRA-1 (copy on file). Amendment CRA-1 would add $200 thousand general fund dollars to the (newly titled) Local Government Management component. PAT POLAND, DIRECTOR, DIVISION OF MUNICIPAL ASSISTANCE AND REGIONAL ASSISTANCE spoke in support of the amendment. He noted that the amendment is a partial restoration of a $400 thousand dollar reduction. Without the amendment the reduction would result in the loss of six positions that provide assistance as consultant managers to rural municipalities. He noted that rural communities are also facing reductions in municipal assistance and revenue sharing. Representative Austerman WITHDREW Amendment CRA-1 in favor of Amendment CRA-2. Representative Austerman MOVED to ADOPT Amendment CRA-2 (copy on file). Co-Chair Mulder OBJECTED. Amendment CRA-2 would restore $400 thousand dollars in general funds to the Training and Development component. Mr. Poland noted that the reduction would result in a 20 percent loss in staff if the amendment were not funded. He stressed that the reduction would limit the ability of the department to provide services to rural communities. Representative Grussendorf pointed out that many of the communities are very small with limited staff. He stated that it is important for the state to continue to assist local governments. Mr. Poland stressed that in addition to helping local communities improve their economies that the state assists communities in administrative functions such as the payment of employee taxes. The state has assisted communities with management of their debts to the Internal Revenue Service and has attempted to avoid similar problems. The focus of the Department is helping to manage the financial affairs of communities and helping communities to provide basic services. For example, the department helps communities to assure that utility bills are collected and fuel is delivered on time. Co-Chair Mulder explained that the department is above their budget objective with the addition of childcare adjustments. A roll call vote was taken on the motion. IN FAVOR: Austerman, J.Davies, Foster, Grussendorf, Moses OPPOSED: Williams, Bunde, G. Davis, Kohring, Mulder, Therriault The MOTION FAILED (5-6). Amendment CRA-3 was a duplicate of Amendment CRA-2. Representative J. Davies MOVED to ADOPT Amendment CRA-4 (copy on file). Co-Chair Mulder OBJECTED. Amendment CRA-4 would add $300 thousand general fund dollars to the Renters' Equivalency Rebate program. He explained that the program assists seniors, disabled and veteran renters. He spoke in support of the amendment. Co-Chair Mulder stressed that although it is difficult to reduce programs that support veterans and seniors that it is a necessary budgetary decision. Representative Austerman agreed with remarks by Co-Chair Mulder and pointed out that the longevity bonus program helps to offset the reduction. Representative Grussendorf spoke in support of the amendment. He noted that seniors that own their homes are given a break on the first $150 thousand dollars of value on their home. He stressed that the renters' rebate program was an attempt to equalize municipal property taxes. Vice-Chair Bunde pointed out that the program is not based on need. He observed that the legislature has attempted to make the program needs based. Representative J. Davies stressed that most people that are wealthy own their home. He noted that it is a small subsidy that would mean a lot to those on a fixed income. He indicated that he would support a needs based program. Representative J. Davies MOVED to AMEND Amendment CRA-4 to change the funding source to the Permanent Fund Earnings Reserve Account. He noted that the cost to Alaskans in terms of their permanent fund dividend check would be .50 cents. Representative Austerman OBJECTED. He spoke against the funding source. Co-Chair Mulder stated that the Permanent Fund Earnings Reserve Account could be used in place of general funds. Representative J. Davies and Co-Chair Mulder debated the use of the Permanent Fund Earnings Reserve Account and the fiscal crisis. A roll call vote was taken on the motion to amend. IN FAVOR: Davies, Grussendorf, Moses, Therriault OPPOSED: Bunde, Austerman, G. Davis, Foster, Kohring, Williams, Mulder The MOTION FAILED(4-7). A roll call vote was taken on the motion. IN FAVOR: Davies, Grussendorf, Moses, Williams OPPOSED: Bunde, Austerman, G. Davis, Foster, Kohring, Therriault, Mulder The MOTION FAILED(4-7). Representative J. Davies MOVED to AMEND Amendment CRA-5, delete $26,256.3 million and insert $18,379.410 million dollars. There being NO OBJECTION, it was so ordered. Representative J. Davies MOVED to ADOPT Amendment CRA-5. Amendment CRA-5 adds $18,379.410 million dollars in general funds to municipal assistance. This would fund municipal assistance at 70 percent. He spoke in support of the amendment. He stressed that other reductions would also affect municipal budgets. Co-Chair Mulder stressed the affect of local community actions on state expenditures. Representative Austerman stated that the intent is to find reductions that do not downgrade departments to the point where they are worthless. He stressed the difficulty of finding an additional $18 million dollar reduction within the departments. Vice-Chair Bunde observed that one of the most frequent complaints for the expense of state government is municipal assistance. Representative G. Davis maintained that the reduction would get the public's attention. He acknowledged the difficulty of the reduction and emphasized that the budget process is not over yet. (Tape ended) Co-Chair Therriault observed that every reduction is met by comments. He expressed a willingness to discuss the issue with the mayors. He noted that to generate the same amount through a sales tax, the tax would have to be 17 percent on top of what is already charged by the local communities. Municipal governments can help to bring an understanding of the seriousness of the issue. Co-Chair Mulder add that the intent is to be fair. He pointed out that rural Alaska has borne the brunt of small reductions. A reduction to municipal assistance affects all of the state. Representative J. Davies pointed out that the elimination of municipal assistance would result in a reduction of 7 percent to Anchorage's budget, while it would be a 50 percent reduction to rural areas. A roll call vote was taken on the motion. IN FAVOR: Foster, Grussendorf, Moses, Davies OPPOSED: Davies, Kohring, Williams, Austerman, Bunde, Therriault, Mulder The MOTION FAILED (4-7). Representative Grussendorf MOVED to ADOPT Amendment CRA-6 (copy on file). Amendment CRA-6 would add $21,583.8 million general fund dollars for state revenue sharing. Co-Chair Mulder OBJECTED. Representative Grussendorf spoke in support of Amendment CRA-6. Representative J. Davies observed that many small villages have already instituted the maximum sales tax of 5 percent. He pointed out that the two largest towns in the state, Anchorage and Fairbanks, have the ability to raise their sales tax. He maintained that the reduction is inequitable. Vice-Chair Bunde expressed frustration that there are approximately 30 rural communities that spend in excess of $1 million dollars a year on gambling. He suggested that there is money in local areas to support local government. Co-Chair Mulder pointed out that any reduction to education, transportation, or public safety would affect local communities. He emphasized that revenue sharing is not a mandated program. Representative J. Davies disagreed that there is a major fiscal problem. He observed that a statewide income tax is a possibility and maintained that it would be more equitable. He pointed out that a portion of the proceeds from gambling go to local assistance. Representative G. Davis stated that he is concerned about the reductions to municipal assistance and revenue sharing. He noted that other measures are being discussed. Representative Grussendorf noted that the decline in revenue is based on the decline of oil. He pointed out that there are other sources of revenue. He stressed that the reduction to revenue sharing could worsen the problem. He observed that many municipalities are up to their tax cap. He noted that some of these tax caps are self-imposed. He maintained that elimination of the program would hurt rural areas. He stressed that there needs to be transitional funding. Representative Kohring stated that it would be difficult for him to vote against the amendment. He noted that revenue sharing affects road maintenance. He expressed support for an endowment to support road maintenance. Representative J. Davies emphasized that a state that has $30 billion dollars does not need to be burning the furniture. Representative Austerman stressed that the state is not as rich as it once was. He pointed out that the state is not going to dip into the corpus of the Permanent Fund. He noted that the population of the state has grown 50 percent, while state government has grown 200 percent. He maintained that the corpus of the fund would be spent unless income is stabilized. Representative Moses stated that revenue sharing should be increased. He maintained that the people should decide how their money should be spent. He asserted that the Legislature "made their own bed" by promising that they would cut the budget without capping permanent fund dividends or instituting taxes. He stated that the day of reckoning is here. Vice-Chair Bunde observed that his district would agree that you can't get something for nothing. He observed that the Legislature does not have $30 billion dollars, the people of Alaska have $30 billion dollars. He stressed that the people of Alaska need to decide how the money should be spent. The Legislature's task is to get the best value for the money that is spent. Co-Chair Therriault expressed frustration that municipalities do not want to provide programs that support local services. He pointed to sanitation services. Representative Moses maintained that there are large numbers of people that come to Alaska in order to earn money and then return to their own state. He felt that large permanent fund dividends would encourage more transients. Representative Grussendorf spoke in support of the amendment. Representative Kohring maintained that prosperity is getting government off the back of the private sector. (Tape Change, HFC 99 -70, Side 1) A roll call vote was taken on the motion to adopt Amendment CRA-6. IN FAVOR: Davies, Grussendorf, Moses, Foster OPPOSED: Bunde, Austerman, G. Davis, Kohring, Williams, Therriault, Mulder The MOTION FAILED(4-7). UNIVERSITY OF ALASKA Representative J. Davies WITHDREW Amendment UA-1. Representative J. Davies MOVED to adopt UA-2. Co-Chair Mulder OBJECCTED. Representative J. Davies stated that Amendment UA-2 would add $10.689 million general fund dollars to the University of Alaska. He explained that this amount would bring the University of Alaska to a one-percent growth rate based on the FY96 budget. This was the year that the University of Alaska "basically ran into the wall." It was the year of diminishing returns. Prior to FY96 the university was able to help itself. Representative J. Davies observed that other states have increased their university budgets by about 6-8% while the University of Alaska's budget has only increased by 2%. There is a high demand to meet fixed cost increases. Fixed costs for FY00 total $8.9 million dollars. He stressed the benefits of full support to the university and maintained that the university would not be competitively equal to major schools throughout the United States without support. There is a tremendous need for vocational training. The state needs to increase the university's budget for rural parts of the state. The economy of the 21st Century will be based on the ability to use information systems. He asserted that most Alaskans would put education at the top of the list. He stressed that the university is provided for in the State Constitution. The university needs stable funding and a strong commitment from the Legislature. Vice-Chair Bunde asked the number of laid off employees. WENDY REDMAN, VICE PRESIDENT, STATEWIDE PROGRAMS, UNIVERSITY OF ALASKA clarified that there were 250 employees that were laid off. The majority of these took advantage of early retirement opportunities. There were approximately 20 positions laid off in conjunction with a program reduction. She stated that there has been enrollment decline since 1996. Representative Austerman voiced support of full funding for the university. It is an intricate link for the state of Alaska's growth. Co-Chair Mulder voiced support for the university system, but emphasized that it would be imprudent to increase spending while there is a $1 billion dollar deficit. Representative Grussendorf spoke in support of the amendment. He questioned the funding source. He noted that amendments 2 - 4 use different funding sources. He spoke in support of using general fund dollars. Vice-Chair Bunde agreed that the university does provide a vital role in the state. He acknowledged that the university's budget has absorbed inflation. He pointed out that HB 115 would provide a 2% increase a year for the university's budget over future years. Representative J. Davies spoke in support of the amendment. He emphasized that part of the solution to Alaska's fiscal problems is to fully fund the university. A roll call vote was taken on the motion. IN FAVOR: Austerman, Davies, Moses, Grussendorf, Therriault OPPOSED: Kohring, Williams, Bunde, Davis, Foster, Mulder The MOTION FAILED (5-6). Representative J. Davies WITHDREW Amendments UA-3 & UA-4. He spoke to the amendment. Amendment UA-3 would add $10.689 million dollars from the permanent fund earnings reserve to the University of Alaska. HB 50 and HB 51 were HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 5:05 p.m. House Finance Committee 14 4/08/99 p.m.