SENATE FINANCE COMMITTEE March 26, 2013 9:21 a.m. 9:21:46 AM CALL TO ORDER Co-Chair Kelly called the Senate Finance Committee meeting to order at 9:21 a.m. MEMBERS PRESENT Senator Pete Kelly, Co-Chair Senator Kevin Meyer, Co-Chair Senator Anna Fairclough, Vice-Chair Senator Click Bishop Senator Mike Dunleavy Senator Lyman Hoffman Senator Donny Olson MEMBERS ABSENT None ALSO PRESENT Karen Rehfeld, Director, Office of Management and Budget, Office of the Governor; James Armstrong, Staff, Senator Pete Kelly. SUMMARY CSHB 65(FIN) APPROP: OPERATING BUDGET/LOANS/FUNDS SCS CSHB 65(FIN) was REPORTED out of committee with a "do pass" recommendation. CSHB 66(FIN) APPROP: MENTAL HEALTH BUDGET SCS CSHB 66(FIN) was REPORTED out of committee with a "do pass" recommendation. CS FOR HOUSE BILL NO. 65(FIN) "An Act making appropriations for the operating and loan program expenses of state government and for certain programs, capitalizing funds, and making reappropriations; and providing for an effective date." CS FOR HOUSE BILL NO. 66(FIN) "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program and making a reappropriation; and providing for an effective date." 9:22:08 AM Senator Dunleavy noted that the concept of funding education at the district level would still occur and explained that "this" was the department's budget. Co-Chair Kelly observed that Senator Olson was absent for a medical issue. Co-Chair Meyer MOVED to ADOPT Amendment 1. FY 14 OPERATING BUDGET AMENDMENT 1 OFFERED BY: Senator Kelly LANGUAGE Amend the SALARY AND BENEFIT ADJUSTMENTS subsection (a) as follows: SALARY AND BENEFIT ADJUSTMENTS. (a) The operating budget appropriations made in sec. 1 of this Act include amounts for salary and benefit adjustments for public officials, officers, and employees of the executive branch, Alaska Court System employees, employees of the legislature, and legislators and to implement the terms for the fiscal year ending June 30, 2014, of the following collective bargaining agreements: (1) Alaska Vocational Technical Center Teachers' Association, National Education Association, representing the employees of the Alaska Vocational Technical Center; (2) International Organization of Masters, Mates, and Pilots, for the masters, mates, and pilots unit; (3) Inlandboatmen's Union of the Pacific, Alaska Region, for the unlicensed marine unit; (4) Marine Engineers' Beneficial Association, representing licensed engineers employed by the Alaska marine highway system; (5) Public Safety Employees Association, representing the regularly commissioned public safety officers unit; (6) Public Employees Local 71, for the labor, trades and crafts unit; (7) Teachers' Education Association of Mt. Edgecumbe; (8) Alaska Correctional Officers Association, representing correctional officers; (9) Alaska Public Employees Association, for the supervisory unit; (10) Alaska Public Employees Association, for the confidential unit; (11) Alaska State Employees Association, for the general government unit; EXPLANATION: The State of Alaska Department of Administration has reached agreements on three-year successor contracts with the Alaska Public Employees Association representing the Supervisory Unit, Alaska Public Employees Association representing the Confidential Unit, and the Alaska State Employees Association representing the General Government Unit, covering the period of July 1, 2013 through June 30, 2016. DEPARTMENT: Various DEPARTMENT: Various DEPARTMENT: Various (See table on the second page of Amendment 1 for a copy on file.) EXPLANATION: The State of Alaska Department of Administration has reached agreements on three-year successor contracts with the Alaska Public Employees Association (representing the Supervisory Unit), Alaska Public Employees Association (representing the Confidential Unit), and the Alaska State Employees Association (representing the General Government Unit), covering the period of July 1,2013 through June 30, 2016. This amendment provides funding to implement the terms of the agreements in FYI4. DEPARTMENT: Branch-wide Unallocated APPROPRIATION: Branch-wide Unallocated ALLOCATION: Branch-wide Unallocated LANGUAGE Amend: Sec. 21. OFFICE OF THE GOVERNOR., by adding a new subsection to read: (f) The amount necessary, estimated to be $9,328,500, is appropriated to the Office of the Governor for distribution to state agencies to pay for a lump sum payment as negotiated in the collective bargaining agreement between the State and the Alaska State Employees Association (representing the General Government Unit) from the following fund sources: (see copy on file for the table of fund sources) EXPLANATION: Under the new contract negotiated between the State of Alaska and the Alaska State Employees Association (representing the General Government Unit), employees in pay status on July 1,2013, will receive a lump sum payment of$755 in the second pay period in August 2013. The estimated amounts listed in the amendment are based on 9,488 employees being in pay status on that date (which is the budgeted number of General Government Unit employees in FY20 14). The Department of Administration will issue payments based on the fund sources used to pay regular paychecks to eligible employees. Funding amounts have been adjusted for vacancy and include the following employer charges: SBS- 6.13% PERS- 22.00% Terminal Leave- 1.14% Leave Cash in- 2.30% Medicare tax- 1.45% Unemployment- 0.50% Workers Compensation % varies by department For DEC, leave/holiday pool- 26.50% Co-Chair Meyer OBJECTED for the purpose of discussion. Co-Chair Kelly related that Amendment 1 represented the contracts that were just negotiated. KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, discussed Amendment 1 and shared that it was a request for three bargaining-unit agreements that were negotiated by the Department of Administration (DOA) for the general government unit, the supervisory unit, and the confidential employees unit. She stated that DOA had been able to negotiate a 1 percent cost-of-living adjustment (COLA) for FY14, as well as 1 percent increase in FY15 and a 2.5 percent increase for FY16. She pointed out that the amendment also included a one-time, lump-sum payment for the general government unit. JAMES ARMSTRONG, STAFF, SENATOR PETE KELLY, related that later in the process there would be a motion for conforming language and that Amendment 1 would be the target of that motion. 9:25:05 AM Vice-Chair Fairclough expressed appreciation for the presentation on state employee contracts that Co-Chair Kelly had put together and observed that there had also been a presentation on fiscal policy and the direction of the budget. She was thankful for the efforts of the negotiation teams that were representing state employees in the bargaining contract. She also appreciated the administration's effort to hold cost controls down. She mentioned that some of the information under "contracts 101" had indicated that there had been a 28 percent increase in wages that were negotiated in the past; she offered that the committee needed to "hold those numbers" as tight as possible. She explained that the current revenue stream had fiscal shortfalls and that the state could be reaching into its savings account as early as the current year. She expressed a need to maintain a tight rein on the budget in order to insure that Alaska could manage the cost increases. Co-Chair Kelly stated that he did not have his notes from "contracts 101" in front of him, but believed that the figure Vice-Chair Fairclough had referenced was actually 38 percent and not 28 percent. He pointed out that the system not only had contract increases, but also had automatic increases. He expressed appreciation for what the administration had done regarding leave accrual. He concluded that "it" was a topic that the committee would have to discuss throughout the session and possibly over the interim. Vice-Chair Fairclough related that she had talked to members of the Alaska State Employees Association (ASEA) and other unions and restated that their leave would be "grandfathered" in. She furthered that even though there was a $164 million debt inside the budget, the legislature would make sure the leave was "held harmless" and would be available to the people that had served Alaska. Co-Chair Meyer WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment 1 was ADOPTED. 9:27:55 AM Co-Chair Meyer MOVED to ADOPT Amendment 2. FY 14 OPERATING BUDGET AMENDMENT 2 OFFERED BY: Senator Kelly DEPARTMENT: Fish and Game APPROPRIATION: Commercial Fisheries ALLOCATION: Southeast Region Fisheries Management ADD: $150,000, Unrestricted General Fund Receipts (1004) EXPLANATION: This amendment adds $150,000 Unrestricted General Fund Receipts (UGF) to the Southeast Regional Fisheries Management allocation to continue salmon stock identification projects expiring under the Federal Alaska Sustainable Salmon Fishery Grants, restoring the FY14 Governor's Request. Vice-Chair Fairclough OBJECTED for the purpose of discussion. Co-Chair Kelly discussed Amendment 2 and inquired if the amendment reflected something that was removed in the House. Mr. Armstrong replied that the increment had not been funded in the "other body," but that $400,000 had been funded in the subcommittee process. Amendment 2 would restore the governor's request of $550,000 for this particular southeast fisheries issue. Co-Chair Kelly stated that there had been public testimony regarding southeast regional fisheries management and related that former State Representative Bill Thomas had made a compelling case to put the funding back in the budget. He offered that most of the people at the committee table were on record as supporting efforts to create more fish. Vice-Chair Fairclough WITHDREW her OBJECTION. There being NO further OBJECTION, Amendment 2 was ADOPTED. Co-Chair Kelly stated that Amendment 3 had been offered by Senator Hollis French. He recalled telling Senator French that he would gladly consider ideas to ameliorate the $19,000 cut to the advertising budget. Co-Chair Meyer MOVED to ADOPT Amendment 3. FY 14 OPERATING BUDGET AMENDMENT 3 OFFERED BY: Senator Kelly DEPARTMENT: Alaska Court System APPROPRIATION: Judicial Council ALLOCATION: Judicial Council ADD: $19,000 Unrestricted General Fund 1004 ADD: It is the intent of the legislature that no funds allocated to the Alaska Judicial Council may be used for advertising in response to campaigns for or against a specific judge. Explanation: Restores funds used by the Judicial Council for public advertising, with the recommended intent language. Vice-Chair Fairclough OBJECTED for the purpose of discussion. Co-Chair Kelly continued explaining Amendment 3 and stated that it added the $19,000 and gave clarification language that the legislature did not want judicial council being involved in campaigns. Vice-Chair Fairclough WITHDREW her OBJECTION. There being NO further OBJECTION, Amendment 3 was ADOPTED. Co-Chair Meyer MOVED to ADOPT Amendment 4. FY14 OPERATING BUDGET AMENDMENT 4 OFFERED BY: Senator Kelly DEPARTMENT: Natural Resources APPROPRIATION: Parks & Outdoor Recreation ALLOCATION: Parks Management and Access ADD: It is the intent of the legislature that the Department of Natural Resources negotiate with the Office of the Governor to establish the House of Wickersham State Historic Site as lodging for the Lieutenant Governor while in the capital; that the house remain accessible to the public for tours and special events as scheduled by the Office of the Lieutenant Governor; and that the site be managed within the existing budgets of the Office of the Lieutenant Governor and the Division of Parks & Outdoor Recreation. Vice-Chair Fairclough OBJECTED for the purpose of discussion. Co-Chair Kelly related that Amendment 4 had been offered by Senator Egan. Vice-Chair Fairclough WITHDREW her OBJECTION. There being NO further OBJECTION, Amendment 4 was ADOPTED. 9:31:22 AM Co-Chair Meyer MOVED to ADOPT Amendment 5. FY 14 OPERATING BUDGET AMENDMENT 5 OFFERED BY: Senator Kelly DEPARTMENT: Department of Health and Social Services ADD INTENT: It is the intent of the legislature that the Department of Health and Social Services submit a quarterly report to the legislature of transfers of funding between appropriations. EXPLANATION: Because the Senate Finance Committee has provided language allowing transfers of up to $50 million across appropriations, the legislature would like quarterly reports indicating where the transfers occur. Vice-Chair Fairclough OBJECTED for the purpose of discussion. Co-Chair Kelly observed that the subcommittee had given broad authority in this appropriation and that intent language would be added that required the Department of Health and Social Services to report back to the legislature on a quarterly basis regarding the transfer activity. Vice-Chair Fairclough WITHDREW her OBJECTION. There being NO further OBJECTION, Amendment 5 was ADOPED. Co-Chair Meyer MOVED to ADOPT Amendment 6. FY 14 OPERATING BUDGET AMENDMENT 6 DEPARTMENT: Department of Education and Early Development APPROPRIATION: N/A ALLOCATION: N/A ADD CONDITIONAL LANGUAGE: A school district may not receive state education aid for K-12 support appropriated under this section and distributed by the Department of Education and Early Development under AS 14.17 if the school district (1) has a policy refusing to allow recruiters for any branch of the United States military, Reserve Officers' Training Corps, Central Intelligence Agency, or Federal Bureau of Investigation to contact students on a school campus if the school district allows college, vocational school, or other job recruiters on a campus to contact students; (2) refuses to allow the Boy Scouts of America to use school facilities for meetings or contact with students if the school makes the facility available to other non-school groups in the community; or (3) has a policy of refusing to have an in school Reserve Officers' Training Corps program or a Junior Reserve Officers' Training Corps program. EXPLANATION: Support our troops and the agencies critical to the security of our country. Vice-Chair Fairclough OBJECTED for the purpose of discussion. Co-Chair Kelly noted that this increment had been in the budget for some time and inquired how many years it had been included. Mr. Armstrong replied that the increment had probably been in the budget for eight or nine years. Co-Chair Kelly stated that Amendment 6 sent a message to the school districts that the state was not in the business of keeping military recruiters and boy scouts out of schools. He observed that the amendment's language was self-exclamatory and was "good" language. Vice-Chair Fairclough WITHDREW her OBJECTION. There being NO further OBJECTION, Amendment 6 was ADOPTED. Co-Chair Meyer MOVED to ADOPT Amendment 7. FY 14 OPERATING BUDGET AMENDMENT 7 OFFERED BY: Senator Meyer DEPARTMENT: Commerce, Community & Economic Development APPROPRIATION: Alaska Seafood Marketing Institute ALLOCATION: Alaska Seafood Marketing Institute LANGUAGE: Amend section 12(h)(3), page 59, lines 15-17, to read: (3) the sum of $7,772,200 [$7,286,400] from the general fund, for the purpose of matching industry contributions collected by the Alaska Seafood Marketing Institute for the fiscal year ending June 30, 2012; EXPLANATION: This amendment adds $485,800 Unrestricted General Fund Receipts (UGF) to the Alaska Seafood Marketing Institute's appropriation, restoring the FY14 Governor's Request for UGF. Vice-Chair Fairclough OBJECTED for the purpose of discussion. Co-Chair Meyer stated that Amendment 7 clarified language and that the change would be better explained by Co-Chair Kelly's staff. 9:33:34 AM Mr. Armstrong related that in the other body, the tourism marketing funding had been cut from the Department of Commerce, Community and Economic Development's (DCCED) budget from $16 million to $15 million. He stated that the joint House and Senate Finance Committee had made a conforming reduction to the Alaska Seafood Marketing Institute (ASMI), which was also within DCCED's budget; ASMI's funding had been reduced by one-sixteenth, which was $485,800. He stated that when HB 65 had come over to the Senate, the Senate Labor and Commerce Subcommittee, which was chaired by Senator Meyer, had requested that the ASMI funding be restored; the amendment conformed to the wishes of the subcommittee. Co-Chair Meyer noted that Mr. Armstrong had done a good job expressing the intent of the committee to keep ASMI and tourism marketing at the governor's proposed funding levels. Vice-Chair Fairclough WITHDREW her OBJECTION. There being NO further OBJECTION, Amendment 7 was ADOPTED. 9:34:50 AM Senator Bishop MOVED to ADOPT Amendment 8. FY 14 OPERATING BUDGET AMENDMENT 8 OFFERED BY: Senator Olson DEPARTMENT: Commerce, Community & Economic Development APPROPRIATION: Community and Regional Affairs ALLOCATION: Community and Regional Affairs ADD: $400,000, general funds, fund code 1004 EXPLANATION: Add back the operating funds for Ilisagvik College. These funds were removed so they could be requested through the capital budget. However, they are not capital in nature. These are the regular, ongoing, operating funds that the College relies on to run its programs, similar to what the operating budget funds for K-12 and the University system. Because they are not a part of the University, they must go through the Department for their funding. Co-Chair Kelly OBJECTED for the purpose of discussion. Senator Bishop related that Amendment 8 contained language that added back funds to Ilisagvik College; these funds had been removed, so that they could be requested through the capital budget. He related that the funds were not capital in nature, but were day-to-day operating funds to help with the college's career and technical education (CTE) programs. He recalled that he had toured Ilisagvik College eight times and that it performed a good service. He stated that with the increase in offshore, outer continental shelf (OCS) work, the college was doing a lot more "with that program." He concluded that adding the $400,000 back into the CTE programs at Ilisagvik College would help further train Alaskan's for jobs on land and offshore. Co-Chair Kelly clarified that the original amount for the Ilisagvik College was $600,000. He stated that it was not Senator Olson's intent to cut $200,000, but that the intent was to transfer $200,000 to the capital budget. He added that there needed to be discussion in the future on the issue, but that Senator Olson had talked to the committee and expected full funding. He added that he had made a commitment to Senator Olson that he would work to make sure the other $200,000 was picked up during Conference Committee or "somewhere else." Co-Chair Kelly WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment 8 was ADOPTED. 9:36:52 AM Vice-Chair Fairclough MOVED to ADOPT Amendment 9. FY 14 OPERATING BUDGET AMENDMENT 9 OFFERED BY: Senator Fairclough DEPARTMENT: Commerce, Community & Economic Development APPROPRIATION: Alcoholic Beverage Control Board ALLOCATION: Alcoholic Beverage Control Board ADD: $189,500, General Fund/Program Receipts, (1005) EXPLANATION: This amendment adds $189,500 General Fund/Program Receipts to the Alcoholic Beverage Control Board allocation to meet allocated administrative support costs ($127,000) and to maintain Department of Law legal assistance ($62,500), restoring the FY14 Governor's Request. Co-Chair Kelly OBJECTED for the purpose of discussion. Vice-Chair Fairclough related that a previous legislature had moved the Alcoholic Beverage Control (ABC) Board from the Department of Public Safety to the DCCED. She explained that during the budget process, the funding did not follow the positions and that Amendment 9 would reestablish the $189,500 in general funds and program receipts. Co-Chair Meyer stated that funding had been removed from the DCCED's budget because the intent was that the funding would follow the ABC Board when it was transferred to DCCED; however, "for some reason" the funding did not follow the ABC Board. He related that the amendment was acceptable because it would still be a "conferenceable" item. Co-Chair Kelly WITHDREW his OBJECTION. Senator Hoffman pointed out a technical correction and opined that the comma after the $189,500 should be a period instead. There being NO further OBJECTION, Amendment 9 was ADOPTED. 9:38:28 AM Vice-Chair Fairclough MOVED to ADOPT Amendment 10. FY 14 OPERATING BUDGET AMENDMENT 10 OFFERED BY: Senator Fairclough DEPARTMENT: Education and Early Development APPROPRIATION: Teaching and Learning Support ALLOCATION: Early Learning Coordination ADD: $37,500 General Fund (l004) EXPLANATION: This amendment restores $37,500 to the Best Beginnings program. Best Beginnings is a public private partnership that works to ensure children in Alaska begin school ready to learn in communities statewide. Co-Chair Kelly OBJECTED for the purpose of discussion. Vice-Chair Fairclough indicated that during the public testimony, Best Beginnings had received significant support. She stated that there had been comments that 20,000 books per month were being delivered to children across Alaska. She offered that the money would serve the program well and that it required very little management; she urged the committee's support. Co-Chair Kelly WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment 10 was ADOPTED. Vice-Chair Fairclough requested that Amendment 11 be distributed to committee members. Co-Chair Kelly related that Amendment 11 was a result of public testimony. He stated that during the public testimony, funding for the Southeast Region's fish management, Best Beginnings, and AVTEC had been testified for fairly consistently. Vice-Chair Fairclough MOVED to ADOPT Amendment 11. FY 14 OPERATING BUDGET AMENDMENT 11 OFFERED BY: Senators Fairclough and Bishop DEPARTMENT: Department of Labor and Workforce Development APPROPRIATION: Alaska Vocational Technical Center ALLOCATION: Alaska Vocational Technical Center ADD: $200,000 GF (1004) Inc OTI EXPLANATION: This increment gives A VTEC $200,000 for increased program costs Co-Chair Kelly OBJECTED for the purpose of discussion. Vice-Chair Fairclough stated that she had visited AVTEC, which was requesting $200,000. She related that there had been testimony in support of AVTEC's programs and that the funding would enable AVTEC to not increase its tuition. She concluded that it was her intent that Amendment 11 would be a one-time increment (OTI), but that the amendment represented an opportunity to stave off the increase in tuition for one more year. Senator Bishop concurred with Vice-Chair Fairclough in her analogy and explanation of Amendment 11. Co-Chair Meyer inquired if Amendment 11 was one-time increment. 9:40:55 AM AT EASE 9:41:57 AM RECONVENED Co-Chair Meyer stated there had been confusion regarding which amendments were before the committee and which ones would be the "amendments of record." He related that Vice- Chair Fairclough had the correct amendment. Vice-Chair Fairclough stated that the public was handed the proper amendment, which was for $200,000 in General funds as an OTI; the increment gave AVTEC $200,000 for program costs. Co-Chair Meyer WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment 11 was ADOPTED. Mr. Armstrong reminded the committee of conforming language that needed to be read before the committee recessed. Co-Chair Kelly requested Co-Chair Meyer to read the conforming language section. Co-Chair Meyer MOVED to direct the Legislative Finance Division and the Legislative Legal Division to make any appropriate, conforming, or technical changes to HB 65 and HB 66. There being NO OBJECTION, it was so ordered. Co-Chair Kelly thanked the committee for its hard work on the operating budget. He related that the Senators had worked with each other and the public in order to make sure that the bill before the committee was about as "good of a bill" that the state could afford. He shared that he had nine years of experience on the House and Senate Finance Committee's and that he had never worked with a better group of people. He added that the current Senate Finance Committee was the best Finance Committee that he had ever seen. He relayed that the subcommittee work, in particular, was excellent, clear, and had good justifications. 9:44:51 AM RECESSED 4:22:57 PM RECONVENED 4:23:06 PM Co-Chair Kelly stated that the committee had amended the operating budget earlier in the day and that the polished committee substitute was before the committee. He stated that a lot of people had assisted with the formulation of the budget and relayed thanks to members of the committee, their staff, and the Legislative Finance Division. He discussed the magnitude of the work that the administration had done on the operating budget before it reached the legislature and thanked Karen Rehfeld, the administration, and Governor Parnell. He expressed thanks to the Senate Finance Committee staff, the drafter of the legislation, as well as the committee's "counterparts in the other body." He stated that the work could be hectic in a 90-day session. Co-Chair Meyer MOVED to ADOPT SCS CSHB 65(FIN) (28- GH1799\G) as amended as a working document. There being NO OBJECTION, SCS CSHB 65(FIN) was ADOPTED. 4:26:33 PM Co-Chair Meyer MOVED to ADOPT SCS CSHB 66(FIN) (28- GH1797\Y) as amended as a working document. There being NO OBJECTION, SCS CSHB 66(FIN) was ADOPTED. Mr. Armstrong related that there were three documents from the Legislative Finance Division that could walk members through the bill. He stated that the documents were labeled 1, 2, and 3. Document 1 represented the numbers and language section and detailed all the funds that were spent in current version of the two operating budgets. Document 2 showed how the funds were dispersed throughout agencies. Document 3 was the same as document 1, but only identified the general fund spending. He stated that all three documents were on the Legislative Finance Division's website. He shared that the Senate Finance Committee's version of the operating budget spent $5,809,202,500 in unrestricted general funds, $748,674,100 in designated general funds, $1,282,770,100 of other state funds, and $2,033,674,100 in federal receipts; the total budget was $9,874,320,800. Co-Chair Kelly stated that the difference between the Senate numbers for the operating budget and the governor's numbers was $61 million and that $36 million of that funding was receipt authority. Co-Chair Kelly inquired what the total reduction in general funds was. Mr. Armstrong replied that if one took away the "hollow" university receipts, the reduction was roughly $25,000,878. Co-Chair Meyer MOVED to REPORT SCS CSHB 65(FIN) out of committee with individual recommendations. There being NO OBJECTION, it was so ordered. 4:29:50 PM SCS CSHB 65(FIN) was REPORTED out of committee with a "do pass" recommendation. Co-Chair Meyer MOVED to REPORT SCS CSHB 66(FIN) out of committee with individual recommendations. There being NO OBJECTION, it was so ordered. 4:30:09 PM SCS CSHB 66(FIN) was REPORTED out of committee with a "do pass" recommendation. Co-Chair Kelly inquired if the conforming language was in the committee substitute for HB 65 and HB 66. Mr. Armstrong replied that he believed it was. ADJOURNMENT 4:30:43 PM The meeting was adjourned at 4:30 p.m.