SENATE LABOR AND COMMERCE COMMITTEE February 4, 1997 1:34 P.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Tim Kelly Senator Lyman Hoffman MEMBERS ABSENT Senator Mike Miller COMMITTEE CALENDAR SENATE BILL NO. 55 "An Act relating to the definition of certain state receipts; and providing for an effective date." - MOVED SB 55 FROM COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 55 - See Labor and Commerce Committee minutes dated 1/30/97. WITNESS REGISTER Ms. Annalee McConnell, Director Office of Management and Budget Office of the Governor P.O. Box 110020 Juneau, AK 99811-0020 POSITION STATEMENT: Supported SB 55. Mr. Royce Weller, Budget Analyst Office of the Governor P.O. Box 110020 Juneau, AK 99811-0020 POSITION STATEMENT: Supported SB 55. Mr. Guy Bell, Director Division of Administrative Services Department of Commerce P.O. Box 110803 Juneau, AK 99811-0903 POSITION STATEMENT: Commented on SB 55. ACTION NARRATIVE TAPE 97-4, SIDE A Number 001 SB 55 AMEND DEFINITION OF "PROGRAM RECEIPTS"  CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order at 1:34 p.m. and announced SB 55 to be up for consideration. MS. ANNALEE MCCONNELL , Director, Office of Management and Budget, said this bill is intended to deal with an accounting catch 22. Some items in their budget expenditures could grow and actually are in the economic development area and are seen as a real positive. Yet that increase in the expenditures counts as an increase in the total budget. Either those activities get held back a little bit because of the concern with increasing the State budget or other areas take cuts to allow for the expansion in these "designated program receipts." The bill proposed last year started as a measure to look at test fisheries and recognizeD the fact that there are many places where the industry is very interested in getting a test fishery started. The fishermen realize the State doesn't have unlimited resources and are willing to pay for the costs of doing the test fisheries, but they realize it's important for the State to be the one to actually conduct the test so there's the proper kind of oversite. Number 90 MS. MCCONNELL said that many of these "designated programs" are in the economic development area ranging from test fisheries to permitting or licensing. This bill proposes not to take this off budget, but to show much more consistently through the budget process all of the fund sources whether they are federal funds, fees, or any other source of money so people can get the full picture of what State revenues and expenditures are. It would not treat them as part of the unrestricted general funds category but set them into a different category acknowledging that the cost of the service will equal the revenue that's collected for it. This is being done on the basis of some criteria that are outlined in the fiscal note. One of the groupings is contracts and in this case there are a number of areas where there would be an increase between '97 and '98. This ranges from training classes and specialized training. There are approximately $1.8 million worth of increases between the two years' budgets. The next category is restricted fees where they charge for a particular service, for instance for the criminal background check that's part of the teacher's certification process, and then they have a category where by statute the legislature has determined the cost of service should be fully borne by the users (mostly in the commerce area). There are a couple of examples where federal law restricts use of funds, like the WIC program. MS. MCCONNELL said they would continue to show these in the budget so everyone was well aware of them. The key point in all of this is that you can have an increase in these arenas, mostly economic development, without increasing the fiscal gap. She said these receipts would still be treated as a revenue source to the State. The legislature would still appropriate the revenues so there would be no difference with legislative control. It would make the process easier to understand. MR. ROYCE WELLER said he was available to answer their questions should they have any. CHAIRMAN LEMAN said his problem with this approach is shifting from general program receipts to non-general fund program receipts. There are times when that is appropriate and there are other times when that can be done as a way to make it look like we're reducing spending, when in reality we're not. He thought it made sense, though, if it wasn't abused. Another concern he had was that it really was increasing State spending. He asked how they adjusted the expenses and receipts if they weren't exactly the same. MS. MCCONNELL replied to his first concern that they have taken that into account by taking an apples to apples comparison. It is true that changing the terminology does not indicate a cut in total State spending, but they are still showing both years with and without designated program receipts. They have made a point in the last few years in letting agencies know they are scrutinizing the areas funded by means other than general fund as stringently as regular general fund items. Number 244 SENATOR KELLY asked how this affects the fiscal gap. MS. MCCONNELL explained that increases in these fees don't affect the fiscal gap and the reason is, using the Badami Pipeline as an example, that industry wanted to get the permitting for Badami and they were going to pay the full cost of doing that. Although the total expenditure of the Department went up, basically the Department and industry entered into a contractual relationship saying they would pay for all of the State's work. AS expenditures go up revenues increase by the same amount. Therefore, there is no increase in the fiscal gap. SENATOR KELLY asked if they would increase the program receipts and take them off budget. MS. MCCONNELL said they wouldn't be off budget; they would still be appropriated by the legislature. Instead of being in the column along with unrestricted general funds, there is a separate category for designated program receipts. MS. MCCONNELL noted that SB 55 also contains some clean-up items that weren't in last year's bill. It codifies corporate receipts and clarified that the Children's Trust and the Public School Fund are not part of the unrestricted general funds. Number 310 SENATOR KELLY asked if they go to this approach the difference between the amount from the general fund and the new program receipts? MS. MCCONNELL replied that between '97 and '98 it's about a $3 million increase. She said there is a small increase in the category of restricted fees; much of it is in the economic development area. SENATOR KELLY asked if this accounting method were to be used in the next fiscal year, did they have to pass this legislation this session. She answered that they already use this approach, but passing SB 55 would enable them to show it more clearly. Number 328 MR. GUY BELL, Director, Administrative Services, Department of Commerce, said his division sets professional licensing fees on a bi-annual basis. This requires a lot of work aggregating the licenses and projecting into the future. It is a cyclical operation and they try to balance the number of professionals renewing in any fiscal year by license category. Another approach that has been successfully used with the legislature allows the division to carry forward excess receipts collected in one year into the next year. This is so that the receipts collected in one year exceeding the amount spent by the division are allowed to be carried over into the next fiscal year. CHAIRMAN LEMAN asked if there was a substantial carry over each year. MR. BELL said the division carried-over about $1 million from FY 96 to FY 97, but '96 was a high year. He offered to get the projected carry-over from '97, although, he noted, they are new at doing projections. SENATOR KELLY said he thought the bill had merit and moved to pass SB 55 from committee with individual recommendations. There were no objections and it was so ordered. Number 382 CHAIRMAN LEMAN adjourned the meeting at 2:00 p.m.