MINUTES SENATE FINANCE COMMITTEE 7 April 1997 9:12 a.m. TAPES SFC-97, #84, Side 1 (000 - 592) 84, Side 2 (592 - 000) CALL TO ORDER Senator Bert Sharp, Co-chairman, convened the meeting at approximately 9:12 a.m. PRESENT In addition to Co-chairman Sharp, Senators Phillips, Torgerson, Parnell and Adams were present. Senators Pearce and Donley arrived shortly thereafter. ALSO ATTENDING: Brett Huber, staff to Senator Halford; Larry Wiget, Director, Government Relations, Anchorage School District; Annalee McConnell, Director, Office of Management and Budget; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Jim Baldwin, Assistant Attorney General, Department of Law; and aides to committee members and other members of the legislature. SUMMARY INFORMATION CS FOR SENATE BILL NO. 11(HES) "An Act relating to state aid for school construction debt; and providing for an effective date." Senator Sharp convened the session and outlined the schedule for the morning. He first called SB 11. He noted the session was to be on teleconference but there were no available operators this morning. However, the bill will not be moved out of committee today and there will be further opportunity for teleconference. Brett Huber, staff to Senator Halford was invited to join the committee. This bill was introduced to re-establish a program for the state to share in the cost of school construction in the municipal school district. AS 14.11.100 provides the mechanism for local government to be re- imbursed for a portion of the debt service they pay on school construction projects, providing they have received Department of Education approval and have been approved by a local vote. In unorganized areas it is usually done by capital appropriation. Municipal districts and their taxpayers have been left with virtually no state assistance for school construction. Passage of this bill would re-open the debt re-imbursement program to new projects and allow municipal school districts and their taxpayers help in meeting the demands of growing student population. He further described the operative sections of CSSB 11(HES) for the benefit of the committee at the request of Senator Parnell. Senator Phillips referred to section 9, page 4 and noted the original bill did not have anything. Mr. Huber said the original bill was at a prospective re-imbursement of 50%. He said there was an amendment offered by the sponsor that both opened the retroactive window of the bill and set the prospective re-imbursement level at 70%. The HES committee further amended and adjusted the amount to 75%. Senator Phillips said he would wait to pose further questions until the department could be present and would propose amendment at that time. Senator Adams said that he supported the bill but that it had inequities. He noted that the fiscal note had errors. Mr. Huber said he also had a question regarding the operating expenditure in FY '99. This was attributed because of the local bond package that was passed in the Mat-Su for the schools in October 1995. The bonds have not been sold, the funds would not be encumbered and the district would not have the opportunity to make a debt service in time to meet the qualifications for FY '99. In speaking with the school district he said they advised the first year the bill would have a determinable fiscal impact would be FY 2000. Senator Adams further noted there was a retroactive clause. This would go back and pick up something the voters had already voted for. A new fiscal note would show the debt service. Mr. Huber noted a new fiscal note of 24 March 1997. While he understood the problem with certain areas of the State that did not have local bonding capacity that was something the sponsor, Senator Halford, chose to address. This related only to the municipal school districts. Co-chair Sharp noted the 24 March 1997 fiscal note. He voiced concern over who the retroactive clause would affect by municipality, by school and by the amount of the bond issue. He assumed the allocation to those municipalities on the previous legislation several years ago was all used up and then additional bonding was passed where it was agreed to pay 100%. Information would be needed to see what the impact was on the retroactive part of it and also what did this legislation propose to do. He wanted to make sure there would be no recreation facilities or administrative facilities allowed under this legislation. Mr. Huber said the only bond package passed with prior Department of Education approval and with 70/30 reimbursement language was the Mat-Su package passed in October 1995. The fiscal note did reflect what the cost of that bonding package and reimbursement would be. He further noted the Mat-Su package was a 70% state share. He said there was some concern for the Anchorage packages that would not qualify because of no prior Department of Education approval and no specific state share language on the ballot. That would be a policy call for the committee to address. Anchorage school district was discussing the matter with the Department of Education. Senator Adams asked about Sitka and the North Slope Borough schools. Mr. Huber said only the Mat-Su school would qualify retroactively. Senator Phillips noted for the record that the Department of Education was not present. He felt major efforts had been made throughout the State and there should be adequate discussion of the bill. Co-chair Sharp indicated that he would not move the bill today. Senator Phillips referred to page 4, subsection 9 and wanted to know if this would be reduced in the future. Mr. Huber noted that it was the reimbursement rate. They will balance what rate will make sense. Again Senator Phillips requests the bill be held in committee or at least until the arrival of Senator Halford, sponsor of the bill. Senator Adams also felt there were questions that needed to be posed to the Department of Education. However, he did say the questions could be answered in writing by the department. Co-chair Sharp requests that the department be notified. Senator Adams went on further to voice his concern about rural Alaska being left out and that this was a statewide problem. He thought the bill should be merged with Senator Duncan's package. Larry Wiget, Anchorage School District was invited to join the committee. He said he would rather wait to testify regarding the bill but would be happy to answer any questions he could. He explained their position regarding retroactive status. Anchorage was able to obtain a matching state grant. Senator Parnell commented on more school facilities in Anchorage. Senator Phillips interrupted asking the co-chair about tort reform. Co-chair Sharp said that HB 58 would not be heard and the afternoon meeting scheduled for 6:00 p.m. was cancelled. He advised those waiting to testify were free to leave. Further, Co-chair Sharp held SB 11 in committee. Co-chair Sharp called SB 55. SENATE BILL NO. 55 "An Act relating to the definition of certain state receipts; and providing for an effective date." Annalee McConnell, Director, Office of Management and Budget was invited to join the committee. She said this bill was to provide clean-up on last year's bill. She further referred to the childrens' trust and fiscal note summary. Senator Parnell asked about designated program receipts. Ms. McConnell further testified regarding pioneer homes. With proper supervision and management they have brought down the amount of general fund. She also offered comments on the Department of Fish and Game and the Department of Public Safety paying for their own housing. Senator Phillips commented on the rental receipts. He then moved amendment #1. Senator Adams objected, asking how it affected AHFC. Ms. McConnell responded. Co-chair Sharp referred to page 2, line 11. Ms. McConnell said that reference would come under rental receipts. She explained housing and corporate receipts and noted what would specifically be listed under corporate receipts, i.e. AHFC. They were listed in this manner for accounting purposes. Senator Pearce said at this time she would not support amendment #1. She referred to the commercial fisheries test fishing operations that had a very restrictive grants and gifts as referred to on page 3, lines 12 and 13. With reference to housing and rental receipts, while she was somewhat sympathetic with the pioneer homes' situation, what happens when program receipts are put off of the budget the Legislature tends to not look as closely at the program during the budget process. Then it is not noted as the program receipts are increased. She did not want to see the pioneer homes raise their fees even higher without the Legislature being a part of that decision making process. There is a large subsidy at this time and she would like to see that brought down. She said Mr. Mike Greany, Director, Legislative Finance and Mr. Randy Welker, Legislative Auditor had real concerns about pushing too many program receipts off budget. They would prefer program receipts be brought back in as straight general fund receipts and not try to account for them separately. Before the bill is moved from committee and before there is further consideration of amendment #1 she would prefer to have further conversation with Legislative Finance and in particular with LB&A and audit staff. Senator Phillips said the only reason he brought the amendment up was because he was testing water. Senator Phillips said he did have concerns about the pioneer home receipts and wanted the issue flushed out. He felt the appropriate place was before this committee. Ms. McConnell said she appreciated the comments raised by Senator Pearce about whether this gets left to scrutiny. In talking to AHFC staff or the board or over at occupational licensing one would find even though those have not been in the same GF category, the Administration very much scrutinized those and actually turned down some of the requests for increments in both the operating and capital budget. It was felt even though those areas in AHFC and some of the other corporations are not part of the GF picture, money was money and the non-GF areas should not have less scrutiny than others. However, unless one is careful, they will get less scrutiny. Senator Phillips withdrew his amendment #1. Senator Adams asked about the total amount of program receipts to date and what would the effect of this particular piece of legislation be. Ms. McConnell said the total designated program receipt amount was $53.4 million in the budget as amended. She did not have the GF figures. She indicated, however, she would have a tally for the next meeting. Co-chair Sharp asked that she also include total housing receipts. Ms. McConnell referred to amendment #1 and said according to Jim Baldwin, Assistant Attorney General, if it were adopted the AHFC receipts would still come under the AHFC portion because it clarified all of them. Co-chair Sharp further referred to the pioneer home and said he wanted further information. Since the escalation of rates in the pioneer homes and the estimate in the FY '97 budget, the total estimated program receipts that were loaded into the budget for the pioneer homes did not materialize, thereby resulting in a shortfall for the pioneer homes. It had been running close to $700 thousand shortfall. He did not know if this had been narrowed down. He did not what ramifications this would now have to further exacerbate the present problems. Sharon Barton, Department of Administration was invited to join the committee. She said that though it looked early on in the fiscal year the pioneer homes' revenue would be short, during the last half of the year revenues have been coming in much better. It is looking much better now and the full amount may be achieved as projected for this fiscal year. She offered her comments on the proposal for the pioneer homes and asked the committee to take another look at it and said the department would be happy to provide any background information that helped. They do work with the residents, families of residents and staff of the homes to achieve full cost of care. Full cost of care means that full cost of care is charged, but full cost of care will never be collected because many can not pay it. It is difficult to sell the proposal because the money is just considered as general funds. They believe they are paying for their cost in the home and it makes the job of selling the full cost of care a very difficult one. General fund program receipts are now $9.9 million in the '98 budget out of a proposed total $31 million budget. She believed that with a remaining $20 million in straight general funds the program would receive a very close scrutiny both from the Administration and from the Legislature for years to come. She felt the scrutiny issue was therefore moot. Co-chair Sharp referred to the screening process and what about those who cannot pay or can only partially pay. He felt the reference to full cost of care would put extreme pressure on those screened for admittance and screening those out that do not have the funds to meet the increased rates. That would force those not being able to pay anything or in the least not the full rate to end up in facilities that would cost twice as much as the pioneer home. The State would not win in that situation. The screening process has been very fair, he noted, at least from his district. It would seem, however, the pressure would get a little greater on the screening people as the responsibility of the full cost of care fell on new people coming in. Ms. McConnell said this had been a valid concern and the department had been careful to be very clear in their policy that full cost care was for those who could afford it and if full cost of care could not be afforded still no one would be denied admission or kicked out. Senator Pearce again referred to page 3, line 13. Language would be added that would include contracts. Gift, grants and bequests were already included. She asked for an example of contracts or dollars restricted by federal law. Ms. McConnell indicated that the best example under federal law was the WIC program. They are not actually a federal fund but they come restricted by federal law as to how they can be used. They must be used for the WIC nutrition program. There are very few examples under federal law. In the attachment to the fiscal note they are broken down by category and one can see what is listed under each category. She also noted contractual arrangements with local governments. They would also be covered under that portion of the bill. Contracts with private industry, specifically AVTECH, and other training courses to be paid for by an employer that has requested specifically the training be held at AVTECH. Other contracting could be done with departments, i.e. a local road project contracted to the Department of Transportation who is already doing a road project in the community. She continued on with restricted fees which included teacher certificates, followed by state and federal law restrictions. Most of those were in the Department of Commerce or Department of Health and Social Services. Senator Donley referred to page 2, line 11 of the bill, corporate fees, and asked if Alaska Tourism Marketing Council was included under that. Ms. McConnell said they were listed under contractual arrangements. It was shown as a designated program receipt rather than a corporate receipt. The corporate receipts would cover AHFC, permanent fund corporation and AIDEA. Senator Adams referred to the last page of the bill and asked what would happen if the Alaska Railroad Corporation were to be deleted so that the program receipts would come to the Legislature and then they could be reappropriated. Jim Baldwin, Assistant Attorney General, Department of Law was invited to join the committee. He said that just to take the Alaska Railroad out would not change the section. Senator Adams asked what would happen then if a new section were added. Mr. Baldwin continued saying that under the present section it only defines program receipts. Using Senator Adams suggestion, the Railroad's income would be considered unrestricted general funds. He said that was similar to another bill moving through the Legislature in both the House and the Senate, which would accomplish that purpose. The Legislature has the power of appropriation over all funds in the state treasury. There had never been a definition of what the term "state treasury" included. Nor a court case defining it. It would be legally possible to do that, but he was not sure the title in this bill was broad enough. Senator Torgerson also referred to page 3, line 13. Ms. McConnell said funds were restricted by federal law. WIC was not federal funds but its' use was federally restricted. Senator Adams referred to legislative oversight. Ms. McConnell concurred and said there would still be legislative oversight. In response to a previous question by Senator Parnell, Ms. McConnell said the police standards academy was added back in when it was reevaluated this year. Co-chair Sharp asked committee members and the administration to be ready with additional information and amendments. He held the bill in committee. There was no one available in the audience, either from agencies or the public that wished to offer any testimony. He reviewed the schedule for tomorrow, including tomorrow morning at 9:00 a.m. full closeouts for the University and the Department of Natural Resources. He further reminded committee members the 6:00 p.m. meeting tonight was cancelled. Senator Pearce indicated that if the closeouts moved quickly tomorrow morning the evening ones would be moved up accordingly. ADJOURNMENT Co-chair Sharp adjourned the meeting at 10:22 a.m. until tomorrow morning at 9:00 a.m.