SENATE FINANCE COMMITTEE February 25, 2015 9:10 a.m. 9:10:10 AM CALL TO ORDER Co-Chair Kelly called the Senate Finance Committee meeting to order at 9:10 a.m. MEMBERS PRESENT Senator Anna MacKinnon, Co-Chair Senator Pete Kelly, Co-Chair Senator Peter Micciche, Vice-Chair Senator Mike Dunleavy Senator Lyman Hoffman Senator Donny Olson MEMBERS ABSENT Senator Click Bishop ALSO PRESENT Ron Taylor, Commissioner, Department of Corrections; Remond Henderson, Deputy Commissioner, Department of Corrections; Sam Cotten, Commissioner, Department of Fish and Game; Kevin Brooks, Deputy Commissioner, Department of Fish and Game; Kelly Howell, Director, Division of Administrative Services, Department of Public Safety; Gary Folger, Commissioner, Department of Public Safety. SUMMARY SB 27 APPROP: OPERATING BUDGET/LOANS/FUNDS SB 27 was was HEARD and HELD in committee for further consideration. FY 16 BUDGET OVERVIEWS: DEPARTMENT OF CORRECTIONS DEPARTMENT OF FISH and GAME DEPARTMENT OF PUBLIC SAFETY SENATE BILL NO. 27 "An Act making appropriations for the operating and loan program expenses of state government and for certain programs, capitalizing funds, making reappropriations, and 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." 9:11:32 AM ^OVERVIEW: FY 16 DEPARTMENT OF CORRECTIONS 9:12:03 AM RON TAYLOR, COMMISSIONER, DEPARTMENT OF CORRECTIONS, presented Slide 2, "Mission": The Alaska Department of Corrections enhances the safety of our communities. We provide secure confinement, reformative programs, and a process of supervised community reintegration. Commissioner Taylor joked that the department was good at secure confinement. He added that the department had been working diligently at helping people be successful at community reintegration. 9:12:48 AM REMOND HENDERSON, DEPUTY COMMISSIONER, DEPARTMENT OF CORRECTIONS, referred to Slide 2, "Corrections Comparison - FY2015 Management Plan to FY2016 Work In Progress", which reflected the adjustments that were made between the FY 15 management plan and the Work In Progress budget submitted by the governor. He shared that the department had taken an overall 6 percent reduction between FY2015 and the amended budget. He made note of the individual reductions, pointing out that the first was the Physical Health Care/PFD Fund Change, the reduced GF would be replaced with PFD criminal funds and totaled approximately $9.5 million. He explained that under AS 43.23.005(d), individuals were not eligible for a permanent fund dividend if they had been incarcerated, convicted of a felony, or convicted of a misdemeanor with a prior history of a felony. He continued that the slide reflected and increase in the vacancy factor; historically, throughout the institutions there had been carried a zero percent vacancy factor, a 2 percent vacancy factor had been allocated throughout each component in the institutions, totaling roughly $3 million. He pointed to the next deduction, which was a $601.2 million reduction in the Fairbanks Community Residential Center. He said that the contract that the department had with the center had been reduced by 20 beds to more appropriately reflect actual usage. He spoke to the reduction in regional and community jail contracts, which had been reduced to the FY 14 level of $283.2 million, removing the CPI and the geographical increase that had been received in FY 15. 9:15:59 AM Co-Chair Kelly asked whether the residential center was Northstar Center in Fairbanks. Mr. Henderson replied in the affirmative. 9:16:09 AM Mr. Henderson stated that the bottom of Slide 2 listed the allocation from the Governor's Budget in secure confinement, supervised release, and reformative programs. The slide reflected a 3.8 percent reduction in UGF. 9:16:42 AM Mr. Henderson moved to Slide 3, which moved from the Work In Progress budget to the FY2016 Governor's Budget, prior to amendments. He said that the first reduction was for $316,000 and would reduce excess authority that the department had in agency receipts. The next reduction was $28.4 million and would eliminate CIP receipts. The department no longer had capital dollars in the budget for prison expansion. 9:17:22 AM Senator Dunleavy asked about the 3.8 percent reduction reflected at the bottom of Slide 2. Mr. Henderson responded that the 3.8 reduction was in the UGF; the $11,423.0, divided by the beginning balance was equal to 3.8 percent. Senator Dunleavy clarified that the overall reduction was 0.5 percent, as reflected at the bottom of the slide. Mr. Henderson replied yes. 9:18:27 AM Mr. Henderson returned to Slide 3. He said that the $339.9 reduction in GF program receipts would more accurately reflect what was actually being collected. He identified the GF reduction for Medicaid expansion; citing a nationwide study that estimated that 80 to 90 percent of the inmates within the institutions would be eligible for Medicaid; the department had conducted research using its own facility numbers and discovered the possible savings through the expansion. 9:20:47 AM AT EASE 9:21:32 AM RECONVENED 9:21:36 AM Senator Dunleavy surmised that the slide worked under the assumption that the state would be choosing Medicaid expansion. Mr. Henderson responded in the affirmative. Senator Dunleavy asked whether there would be legislation that would explain the whole concept of Medicaid expansion. Mr. Henderson replied that the Department of Health and Social Services (DHSS) would offer a broad perspective on the entire Medicaid expansion during that department's budget overview. 9:22:16 AM Senator Hoffman asked whether the department anticipated the expansion to be implemented on July 1, 2015, or a later date. Mr. Henderson he said that the numbers on the slide spoke to what the department projected over the course of one year. He deferred further explanation to DHSS. He did not believe that the savings would begin on July 1, 2015. Senator Hoffman surmised that if the expansion began in January of 2016, half of the projected savings could be expected. Mr. Henderson understood that even if the expansion did not begin on July, 1, 2015, the department had the ability to bill for services 90 days retrograde once the expansion took effect. 9:23:37 AM Co-Chair MacKinnon understood that there had been a legal challenge concerning the department billing Medicaid. She felt that, beyond the Medicaid expansion discussion there was the issue of whether DOC could even bill, and recoup any money from, Medicaid. She requested a legal opinion on the matter. Mr. Henderson understood that it had not been the federal regulations or Alaska Statutes that had been preventing DOC from billing Medicaid, rather it was the regulations of DHSS. He relayed that DOC had been working with DHSS and the Department of Law (DOL) in order to change the regulations to enable DOC to become eligible for the Medicaid expansion. He noted that regulations had been drafted but had not yet been put out for public comment. He offered to provide further information on the issue. 9:25:19 AM Co-Chair Kelly queried whether the department any alternative plan if the state failed to expand Medicaid. He asked whether a supplemental request would be made by the department. Mr. Henderson replied that if the department took the reduction, and the state failed to expand Medicaid, a supplemental request would be imminent. 9:25:54 AM Mr. Henderson continued to the next item on Slide 3, which he characterized as the most difficult reduction in the budget: Regional & Community Jail Contracts. He said that the roughly 10.3 million reduction was not intended to close community jails, but to eliminate contracts. He opined that what had been discovered was that the reduction would cause major issues with community jails. He said that all of the contracts were under scrutiny and that the funds had been intended to fund a portion of the operations of those jails. He stated that the funding had been used to pay for up to 20 percent of police officers and dispatchers, as well as utilities and clothing for the facilities. He explained that the department had discovered, while intending to reduce the portion that it was providing to operate the jails, that the reduction had caused a significant strain on the communities. He revealed that this was what had led to the Governor's Amendment to put $7 million back into the budget to address community contracts. He stressed that the department had looked at simply closing institutions, but that closing institutions was not easy. 9:28:29 AM Co-Chair Kelly requested a brief overview of community jails and how they operated. Commissioner Taylor said that community jails were where people were held at the point of arrest; local police departments and communities had contracts with the department for people arrested for state crimes. He furthered that people were brought into custody and held for up to 30 days, depending on the location, and then transferred to one of the larger institutions. He disclosed that half of the beds were underutilized and there were a number of communities outside of the community jails structure that the Department of Public Safety (DPS) used as emergency guard services. 9:30:00 AM Senator Hoffman felt that the problem was with the cost shift; the question was what happened when people were arrested and could not be detained in a community jail. He related that Kotzebue had closed their community jail, which led to an increase in the overall state budget through DPS because troopers had to transport individuals back and forth from city to city. He added that members of the courts had required travel as well, in order to ensure due process for offenders. He concluded that cuts in the DOC budget would often become additions to the DPS budget. He reiterated that the judicial system needed to be able to represent in all communities. 9:32:16 AM Mr. Henderson returned to Slide 3. He pointed out to the committee the $1 million increase, which had been made necessary because the 24 hour utility component funding for fuel trigger had been eliminated. He asserted that there had not been a reduction in community jails to fund the line item, although it was listed as a Regional & Community transfer to 24-hr. Utility Component. He explained that the listing was a technical way of showing what had happened without the allowance of increments. 9:32:59 AM Senator Olson contended that energy costs were higher for community jails in rural areas. He wondered how much of the $1 million was for the heating of community jails. Mr. Henderson replied that he did not know. 9:33:57 AM Senator Dunleavy asked whether the department had discussed the idea of a 25 percent overall reduction in the DOC budget within the next three years. Commissioner Taylor responded that it had been discussed. He lamented that a 25 percent overall reduction in the department would most likely result in the closing of institutions and the shipment of inmates out-of-state. 9:34:52 AM Co-Chair Kelly requested a projected timeline that could plot when the state would reach capacity and need to either build a new facility or begin shipping inmates out-of- state. Commissioner Taylor responded that the projected timeline was 2016-2017. He opined that 128 beds had been taken offline at Point MacKenzie. He said that the department was working toward shifting some minimum security inmates from the institutions and into halfway houses and electronic monitoring situations. He thought that by the next legislative session the department would be able to report back with solid numbers. He assumed that legislative recommendations would impact how the department served its population. 9:36:13 AM Senator Hoffman asked which facility was the most overcrowded and what the department was doing to rectify any issues of overcrowding at facilities. Commissioner Taylor said that he would need to check the most recent counts sheet and get back to the committee with the information. Senator Hoffman confirmed that the state's most crowded facility was the Yukon Kuskokwim Correctional Facility in Bethel. He shared that he had toured the facility with the previous commissioner and had been told that the overcrowding would be rectified with the Goose Creek Correctional Facility. He asserted that Goose Creek was online and the problem had still not been rectified. He bemoaned that Goose Creek had not been the "magic bullet" that many people had thought that it would be. 9:37:42 AM Vice-Chair Micciche suggested that the daily cost for institutions was less than half at the community jail level. Mr. Henderson responded in the affirmative. Vice-Chair Micciche surmised that the daily cost of out-of- state institutions was 30 percent less than in-state. Mr. Henderson replied that that was correct. Vice-Chair Micciche asked whether an overall evaluation of the cost efficiency of running the state's correctional system could be made available. He understood that there had been support in the past to bring home Alaskan's that were incarcerated out-of-state, but that it was an expensive proposition. He presumed that a 25 percent reduction in the department's budget would make the community jails and in-state institutions an unattractive expense. 9:39:23 AM Mr. Henderson returned to Slide 3 to explain that the $1.5 million reduction in the center in Palmer was the first of several steps required to close an institution. He noted that if DOC was going to achieve a 25 percent reduction in 4 years as previously mentioned, it would result in multiple facilities being closed. 9:40:59 AM Co-Chair Kelly queried the cost of switching some inmates to electronic monitoring. Commissioner Taylor estimated that the daily cost of electronic monitoring was approximately $24 to $25 per day. This service was contracted out and was not a capital expenditure. 9:41:24 AM Co-Chair MacKinnon asserted that a huge cost driver in the DOC budget was labor. Commissioner Taylor answered in the affirmative. Co-Chair MacKinnon asked for a comparison of labor costs in-state to labor costs out-of-state. Commissioner Taylor replied that such a comparison had never been done. Co-Chair MacKinnon requested the comparison. She said that there had to be a reason that out-of-state facilities could offer incarceration at lower cost value that made it beneficial for Alaska to ship people out of state. Commissioner Taylor contended that the department was dealing with older facilities that required costly maintenance and that out-of-state-facilities enjoyed newer technologies unavailable to in-state facilities. Co-Chair MacKinnon said that she hoped for a percentage comparison number. 9:43:16 AM Vice-Chair Micciche spoke to Slide 11. He asked whether it had been a policy call by the legislature to drive toward the most expansive option, or had the decision been departmental. Commissioner Taylor replied that the department did not have the ability to make policy decisions; the decision had been made through a combination of the legislature and the governor's office. 9:44:04 AM Co-Chair Kelly noted that it had been a legislative issue in the 1990's. Vice-Chair Micciche lamented that there was a 400 percent difference in cost between out-of-state incarceration and in-state community jails. He encouraged the department to look into options that would make incarceration costs manageable into the future. He felt that the legislature could offer suggestions. Co-Chair Kelly agreed. He suggested that low-risk prisoners should be put on electronic monitoring. Commissioner Taylor stated that DOC did have the ability for electronic monitoring; however, it would mean an increased risk to the public. He warned that reentry management required a delicate balance. 9:46:10 AM Senator Olson recognized that the issue of privatization of correctional facilities was contentious. He shared that the desire to bring down the recidivism rate in Alaska had driven policy decisions in the past concerning in-state incarceration. He believed that it would be short-sighted to ignore that past work. He spoke of the comparison between community jails and the cost of in-state incarceration. He stated that two different functions were at work; community jails were intended to hold people temporarily until the next step in the legal process, a holding facility would be cheaper to run day-by-day, but rural areas needed community jails to use as temporary holing cells to protect their residents. He feared for the safety of rural communities that lacked community jails. Senator Olson spoke if the $7 million that had been reinstated in the budget, and wondered whether his district would benefit from it. He said that communities in his district were on hold with developing their budgets for the next year because they did not know whether they were going to receive the necessary supplemental funding to continue to stay open. 9:50:50 AM Commissioner Taylor replied that the department had examined the FY 11 numbers with the understanding of what the rural communities were facing. He explained that the FY 11 budget numbers were the baseline for what was awarded to the communities; $6.4 million. He stated that those communities would receive the funding. 9:51:38 AM Co-Chair Kelly hoped that the department could come before the committee again in the future. 9:52:50 AM AT EASE 9:54:49 AM RECONVENED ^OVERVIEW: FY 16 DEPARTMENT OF FISH and GAME 9:55:24 AM SAM COTTEN, COMMISSIONER, DEPARTMENT OF FISH AND GAME, commented that the department faced challenging relationships with several different federal agencies whose mission statements differed from that of the Department of Fish and Game (DF&G). He shared that DF&G's biggest challenge was the ability to have adequate management information through stock assessment and research in order to allow the public access to the resources. He felt that the department benefited through their ability to raise funds through user fees. He believed that a lot of user groups were realizing and accepting responsibility that pay-as-you-go might be something that would be common in the future. 9:56:58 AM Senator Dunleavy suggested the department begin their presentation on Slide 6. 9:57:13 AM KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF FISH AND GAME, referred to Slide 6, "FY2016 Budget By Division ($214,975.5)". He pointed out to the committee the three largest management divisions illustrated on the slide: Commercial Fisheries, Wildlife Conservation, and Sport Fisheries, constituted 80 percent of total funding. He said that smaller divisions and entities made up the remaining budget balance. He turned to Slide 7, "FY2016 Budget By Funding Source ($214,975.5)". He stated that GF dollars constituted $71,245.6 million (40 percent), federal funds were $66.853.9 (30 percent), and Fish and Game funds derived from hunting and fishing licenses totaled $24,287.7 (11 percent). 9:58:29 AM Senator Dunleavy queried the $109.7 million for IA/Oil Haz reflected on the slide. Mr. Brooks replied that the funds were a small inner-agency agreement with the Department of Environmental Conservation (DEC), and came in through the Division of Habitat. Senator Dunleavy asked whether the funds came out of the Spill Prevention and Response (SPAR) budget. Mr. Brooks replied in the affirmative. 9:59:04 AM Mr. Brooks moved to Slide 8, "FY2016 Budgeted Positions". He explained that DF&G had a very seasonal workforce; 922 full-time positions, 1683 total positions. He stated that the department doubled in size during the busy field season, and the majority of the positions resided in the aforementioned three large management divisions. 9:59:33 AM Mr. Brooks presented Slide 9, "FY2016 Operating Budget by Division," noting the negotiated salary increases had grown the budget by $2.7 million overall and were a mixture of funding sources, half of which was UGF. He highlighted the small reduction in healthcare costs and the $810 thousand UGF reduction for three temporary increments that had been added in previous years and were scheduled to roll off at the end of 2015; $300 thousand of which was in sport fisheries, and $510 thousand in commercial fisheries. 10:00:44 AM Senator Dunleavy understood there was an increase over the previous year's budget. Mr. Brooks replied that the increase was only in the adjusted base. 10:00:53 AM Senator Hoffman asked why the health insurance rate reductions were not proportionate to the amount of money that the department received in general, federal and fish and game funds. He asked about the increases in contracts; over 50 percent of the increases were from general funds, but general funds was only one-third of the charted funding sources. Mr. Brooks explained that the adjustments were tied to the detailed budget put out by the Office of Management and Budget (OMB) and that each specific position control number (PCN) had a funding source ratio. 10:02:18 AM Mr. Brooks moved to Slide 10, which took the numbers from the previous slide and adjusted them to reflect the governor's endorsed budget. He pointed out small reductions in commercial and sport fisheries, and in the smaller divisions of administrative services, habitat, and subsistence research. He summarized that there was approximately $7.3 million in UGF reductions and some proposals to off-set with available revenue from the Commercial Fisheries Entry Commission, as well as some federal receipts. 10:03:15 AM Mr. Brooks presented slide 11, "Highlights in Operating Budget":