GENERAL SUBJECT: Overview of Governor's Proposed FY00 Operating Budget Annalee McConnell, Director, Office of Management and Budget The following overview was taken in log note format. Tapes and handouts will be on file with the Senate Finance Committee through the 21st Legislative Session, contact 465-2618. After the 21st Legislative session they will be available through the Legislative Library at 465-3808. Time Meeting Convened: 9:01 AM Tape(s): SFC-99 # 2, Side A & B SFC-99 # 3, Side A PRESENT: x Senator Parnell x Senator P. Kelly x Senator Torgerson x Senator Leman x Senator Phillips x Senator Green x Senator Donley x Senator Adams x Senator Wilken ALSO PRESENT: Annalee McConnell, Director, Office Of Management And Budget; Dan Spencer, Chief Budget Analyst, Office Of Management And Budget; David Teal, Director, Division Of Legislative Finance; Phil Okeson, Ginger Blaisdell, Fiscal Analysts, Division Of Legislative Finance; LOG SPEAKER DISCUSSION TAPE SFC-99 #2, SIDE A 0 CO-CHAIR SEAN PARNELL Call to order and Introduction 22 ANNALEE MCCONNELL Referred to Governor's State of the State address Budget cut to general fund since FY95: $247million All agree should be more. However, demands have gone up Noted areas where increases have not been made for many years Cut for FY00 GOV is $13.5 million Referred to handout: Balancing the FY00 Budget 80 ANNALEE MCCONNELL Still $13 million less than last year Proposed cuts to child support enforcement Proposed increase to University of Alaska of 5.6 million Lost fed. Funds to child care enforcement due to success in welfare reform Lead with AHFC for bonds - flag that this was not converted to general funds 111 ANNALEE MCCONNELL Two areas of funds not GENERAL FUND - proposing new names of funds: fed matching funds ( motor fuel tax) Funding source could be created as non- general fund and still be non- constitutionally directed funds Cigarette tax and motor fuel tax 133 ANNALEE MCCONNELL Refer to 2nd page chart: Investing Alaska's Tobacco Settlement Sustainable revenue source - predictable - not likely to change GOV proposed to use for child support programs And child protection 155 ANNALEE MCCONNELL Fortunate to have tobacco settlement Plan to use for child protection and for smoking deterrent programs. 163 ANNALEE MCCONNELL Area of reductions - debt service Will have an increase in year 2001 173 ANNALEE MCCONNELL These are tough times - need to figure out long term plan We hope to take full advantage of transportation dollars Will see increased in fed funds for programs like village safe water Sen. Stevens successful in giving more fed dollars for fewer state dollars 189 ANNALEE MCCONNELL Personnel count - numbers of positions Important to keep in mind some positions funded with other sources - fed, airport. 202 ANNALEE MCCONNELL Youth Corp program several staff went from temp. to permanent Nursing Asst. staff in pioneers homes Plan to use those from housing receipts Asking residents to pay more of their share of the costs 212 ANNALEE MCCONNELL Higher level of care needed - most patients are Alzheimer's**** patients 223 ANNALEE MCCONNELL Department of Community and Regional Affairs 8 new full time positions because of new functions 230 ANNALEE MCCONNELL Department of Corrections increase in prison population Department of Education some positions non- general fund positions - now will be shown as general fund 240 ANNALEE MCCONNELL Department of Health and Social Services - do have some new positions - part of plan from several years ago 40 new positions for youth facilities 28 new child protection positions to reach 0 tolerance Positions for Malaspina - new positions Recorders Office - new positions 255 ANNALEE MCCONNELL Summarize new positions 265 ANNALEE MCCONNELL Department budgets - half are now in electronic format Interdepartmental working groups for many cross-department programs Offer to work with committee to show what they are doing 295 ANNALEE MCCONNELL $700million limit on CBR 303 CO-CHAIR SEAN PARNELL When will supplemental be to us? ANNALEE MCCONNELL Not due until Feb. we could meet to work on timing 313 ANNALEE MCCONNELL Will only have half-dozen items needing immediate attention 319 SENATOR GARY WILKEN How to read handout? Looking for summary ANNALEE MCCONNELL That is part of back-up material SENATOR GARY WILKEN Is there a sheet that will show 25? Reduction 330 ANNALEE MCCONNELL We could prepare separate sheet showing 332 SENATOR GARY WILKEN 334 ANNALEE MCCONNELL Note longevity bonus proposal to limit allowed income 338 CO-CHAIR SEAN PARNELL Is there legislation for this? ANNALEE MCCONNELL In next couple days - we've submitted before and Legislature has not adopted 346 SENATOR DAVE DONLEY Other than longevity, proposing any other reductions or program elimination's ANNALEE MCCONNELL Number of areas talked about Will probably need to propose other reductions as we go along 362 SENATOR DAVE DONLEY Want examples of reductions 365 ANNALEE MCCONNELL Some on statutes but may be no longer necessary and we'll propose to eliminate the statute requirements List other potential areas - scaling down operations in some departments - might be services we'll no longer deliver People say they want budget cuts but also want increased services 379 SENATOR DAVE DONLEY Today any examples? 381 ANNALEE MCCONNELL Plan to consolidate with some departments SENATOR DAVE DONLEY SENATOR PETE KELLY Northstar Borough takeover by the state 395 ANNALEE MCCONNELL Would not increase state funding requirements - only fed fund directions SENATOR PETE KELLY Position changes from last year reflected in fiscal notes? ANNALEE MCCONNELL Malaspina authorized by Legislature 415 SENATOR PETE KELLY Further 419 ANNALEE MCCONNELL Child protection positions - no surprise - we knew increased services SENATOR PETE KELLY Further comments on new positions and fiscal notes ANNALEE MCCONNELL 439 SENATOR PETE KELLY If you took out everything - what would general fund be? 443 ANNALEE MCCONNELL New Certified Nurses Aides for pioneers homes needed Won't worsen the budget gap situation Residents know of impending raises in fees Could use those funds to replenish general fund - have to ask if that is right thing to do 457 ANNALEE MCCONNELL Recorder's Office overwhelmed with activity - low interest rates They more than pay for operations with their revenues Want to speed up level of activity to generate more revenue 465 SENATOR PETE KELLY Not disputing addition of positions covered program receipts. 472 ANNALEE MCCONNELL We're working on identifying those areas 477 DAN SPENCER Could have left pioneers home positions out of budget and included in fiscal notes 483 SENATOR JOHN TORGERSON Return to Senator Dave Donley's question - will we have a timeline for getting info from Gov.'s speech? 488 ANNALEE MCCONNELL GOV has asked dept.'s for further areas of cuts Would like to work with Legislature early on to find areas Haven't set a specific timeline Want to look at a blend of approaches 508 SENATOR JOHN TORGERSON Without timeline means nothing - understand we will work together but need dealing 515 SENATOR JOHN TORGERSON Does budget reflect any increased labor costs - union negotiations ANNALEE MCCONNELL Vague answer - reflect PERS increases. Nothing currently in budget for labor increases except University of Alaska SENATOR JOHN TORGERSON Leadership letter to GOV suggesting hiring freeze. Have you looked at? 530 ANNALEE MCCONNELL We are discussing Some departments keep positions open even when funded to cover other costs CSED did hiring freeze because of reduced federal funding - has put them in a pinch Not on a formal basis, some depts. have done to meet budget cuts We've told dept. to make all efforts possible Some areas unavoidable - disasters 547 ANNALEE MCCONNELL Other cost increases - told dept. to come to us with a plan 550 SENATOR JOHN TORGERSON Plan to continue to fund PCE 552 ANNALEE MCCONNELL SENATOR JOHN TORGERSON Does your budget fund? ANNALEE MCCONNELL SENATOR JOHN TORGERSON Around 10 million? SENATOR AL ADAMS Should be around ** SENATOR JOHN TORGERSON New proposed highway tax - would that match entire highway funds? Or just increase AK plans to receive? ANNALEE MCCONNELL Propose to increase to total $50 million to secure all fed funds Still getting info re federal matches 570 ANNALEE MCCONNELL Already special highway account in general fund - appropriate to put tax fund in that account to be used to match fed funds 574 SENATOR JOHN TORGERSON Not really reduction - just reappropriation of ISTEA funds 579 ANNALEE MCCONNELL In the end still a reduction We will not have a capital budget to match what done last year Legislature last year 585 SENATOR RANDY PHILLIPS Reason why motor fuel tax not stipulated in constitution to guarantee funds used for highway? TAPE SFC-99 #2 SIDE B 9:49 AM 587 ANNALEE MCCONNELL SENATOR RANDY PHILLIPS Special election ANNALEE MCCONNELL Can't to constitutional amendment in a special election Other areas where legislature not chosen to do constitutional amendment 569 SENATOR SEAN PARNELL Total funds from FY99 to FY00? 567 ANNALEE MCCONNELL $6.5 in 00 and $6.* in FY99 - detailed CO-CHAIR SEAN PARNELL About $300 million total? ANNALEE MCCONNELL Yes also included permanent fund 557 ANNALEE MCCONNELL Assumption that as budget goes up everything is expanding 555 CO-CHAIR SEAN PARNELL Reclassification from other sources to general fund Motor fuel, pioneers homes, tobacco settlement Request go through why not treated as general fund 547 ANNALEE MCCONNELL Pioneers homes - new bill CO-CHAIR SEAN PARNELL Ask clarification ANNALEE MCCONNELL Treat as apple to apples comparison If approved, entire pioneers home receipts would be in this category - like the University of Alaska 537 CO-CHAIR SEAN PARNELL Base is treated as general fund and increase treated as other - if legislation passed all would be treated as other ANNALEE MCCONNELL Would treat as separate receipts and growth would be adjusted accordingly CO-CHAIR SEAN PARNELL Motor tax ANNALEE MCCONNELL Would be treated as a match revenue and expenditure - we propose to treat as non general fund category CO-CHAIR SEAN PARNELL Collecting motor fuel tax now and deposit into general fund Can have policy argument later - want to understand know ANNALEE MCCONNELL AK Public Utilities Commission example Detailed discussion 487 CO-CHAIR SEAN PARNELL Bill introduced yet on motor fuel increase? ANNALEE MCCONNELL Not yet - soon CO-CHAIR SEAN PARNELL Tobacco settlement? ANNALEE MCCONNELL Don't think has to be legislation - settlement still in court CO-CHAIR SEAN PARNELL Question of clarification on last page of handout - compare budget increases for all states - is this just AK general funds? ANNALEE MCCONNELL Information is supposed to be general funds 462 DAN SPENCER Usually compared equally 458 CO-CHAIR SEAN PARNELL Proposed $15million reduction - where do you plan to make reductions? ANNALEE MCCONNELL Working on - can't tell you know Told departments they would have to absorb all cost increases Formula programs Can't do cost comparison on K-12 under current set-up CO-CHAIR SEAN PARNELL So you figure enough room to realize $15million savings? ANNALEE MCCONNELL No. there is no fluff - need to re-do how we do certain services 428 ANNALEE MCCONNELL Some can be very controversial We'll go back and do another round of looking at cuts Nickel and dime cutting doesn't work Not a six billion dollar budget - explain When you focus on where cuts can be taken it is a whole lot smaller 405 SENATOR LOREN LEMAN Longevity bonus $8million reduction in your earlier proposal included in your $15? ANNALEE MCCONNELL No - in addition SENATOR LOREN LEMAN Consolidations - Is that really going on? ANNALEE MCCONNELL Yes - not prepared to go into here SENATOR LOREN LEMAN Request come back to go into detail 388 SENATOR GARY WILKEN When do you think we will have breakdown info on employee contracts and fed transportation grants ANNALEE MCCONNELL Personnel count hopefully early next week SENATOR GARY WILKEN Fed transportation numbers? ANNALEE MCCONNELL SENATOR GARY WILKEN How will that be effected by increased motor fuel tax? ANNALEE MCCONNELL Varies 369 ANNALEE MCCONNELL Are some areas in ISTEA Rule of thumb is 9 to 1 SENATOR GARY WILKEN Confirm 9-1 SENATOR RANDY PHILLIPS I just checked with DOT and GOV office and got different figures - bring in a little over $4.5 million 353 ANNALEE MCCONNELL Clarify we have put in more money in fed matching funds than motor tax If new proposal - we would go into more 345 SENATOR AL ADAMS Cuts not in my lingo Think committee needs to come up with number to work with - budget reductions SENATOR AL ADAMS Even with cuts doesn't solve the whole picture of deficit Want committee to have number for subcommittee to work with Want to debate issues I won't vote for motor fuel tax unless something for my constituents - saying community paying over $1.79 is exempt. 316 SENATOR AL ADAMS Willing to debate income tax 310 SENATOR AL ADAMS I will look at approvals made by LB&A this year to address 305 SENATOR JOHN TORGERSON Y2K - separate piece - legislation? 300 ANNALEE MCCONNELL Good idea to have separate since even fast track not very fast - will get to you this week SENATOR JOHN TORGERSON So this budget doesn't include Y2K? 292 ANNALEE MCCONNELL Explain why separate - think good for you to see all Y2K as one unit 282 SENATOR AL ADAMS Supplemental Y2K and another supplemental for deficit FY99 - another supplemental - any others? 274 ANNALEE MCCONNELL 3 supplementals: Y2K, regular, and fast track - explain 267 CO-CHAIR SEAN PARNELL One area close to my heart - performance measures Hours spent last year GOV vetoed for constitutional reasons - understand What efforts have been made to comply by depts? 253 ANNALEE MCCONNELL Many measures in place already 0 tolerance - one example All departments continued to be very conscience You'll see that in the budget documents 237 CO-CHAIR SEAN PARNELL Look forward to that in subcommittee - opened good dialog Reiterate Senator Pete Kelly concern - total number of positions - we'll need itemization of those Department of Administration 110 new - 60 pioneers home - where are the others? Give other examples 217 ANNALEE MCCONNELL Have one in draft stage - working on to make less technical Many are already on payroll just listed differently 202 CO-CHAIR SEAN PARNELL When will we have firm proposal from the Gov.? ANNALEE MCCONNELL Happy to work with you Working to have discs available - actual program to be available Some complicated drafting details to work on 170 CO-CHAIR SEAN PARNELL Spreadsheet as I understand - when will disk be ready? ANNALEE MCCONNELL Within a week CO-CHAIR SEAN PARNELL OK when will the legislation be ready? 159 ANNALEE MCCONNELL CAN'T say - spreadsheets available have interactive model with Gov.'s proposal 150 CO-CHAIR SEAN PARNELL Important - we can't make assumption on proposals we don't understand Gov.'s speech some people exempt from income tax - need to know numbers 136 ANNALEE MCCONNELL Presentation does include a lot of substance Doing for House Finance - can do for SFC also Discs available after that 128 CO-CHAIR SEAN PARNELL ANNALEE MCCONNELL Willing to give presentation 116 SENATOR JOHN TORGERSON Normally get a list of RIP - can we get a list this year 110 ANNALEE MCCONNELL Just done report for you 104 SENATOR JOHN TORGERSON Spending by state handout - would like to see adjusted per capita 98 ANNALEE MCCONNELL Could show some things differently however, some areas not taken into account - AK no counties for court systems, transportation, prisons + education - AK spends more for schools 78 SENATOR JOHN TORGERSON Realize - want breakdown by capita - you can make adjustments for those areas education etc. Think this handout shows distortion also 63 ANNALEE MCCONNELL Can try to do that - many distortions elsewhere: per person tax very high because included oil taxes 49 SENATOR JOHN TORGERSON Important to show Alaskans per capita 41 CO-CHAIR SEAN PARNELL Thank Annalee McConnell Introduce Jayne Marie Severin, JD High School Student doing intern work Correct schedule - PFD meeting 4pm instead of 4am SENATOR AL ADAMS 12 SENATOR DAVE DONLEY Comment on Administration presentation Want further discussion - explain 10:36 AM - TAPE MALFUNCTION SENATOR DAVE DONLEY Ways and means to facilitate budget - want committee to draft a constitutional amendment to reflect 50 CO-CHAIR SEAN PARNELL Recess at 10:39 AM SENATE FINANCE COMMITTEE LOG NOTES 1/21/99 Page 10