Legislature(2009 - 2010)HOUSE FINANCE 519

03/02/2009 01:30 PM House FINANCE

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01:39:04 PM Start
01:39:12 PM HB81
02:40:24 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Testimony <Invitation Only> --
Heard & Held
-- Testimony <Invitation Only> --
+ Adopt Subcommittee reports / general TELECONFERENCED
+ Contract for budget support services TELECONFERENCED
HOUSE BILL NO. 81                                                                                                             
     "An  Act making  appropriations  for  the operating  and                                                                   
     loan program  expenses of state government,  for certain                                                                   
     programs, and  to capitalize funds;  making supplemental                                                                   
     appropriations;  and  making appropriations  under  art.                                                                   
     IX,  sec. 17(c),  Constitution of  the State of  Alaska;                                                                   
     and providing for an effective date."                                                                                      
Co-Chair   Hawker  reported  on   last  year's   professional                                                                   
services  contract with  Janet Clarke  for $25,000  regarding                                                                   
health and social services issues,  especially Medicaid.  Co-                                                                   
Chair Hawker stated a wish to extend that contract.                                                                             
1:42:24 PM                                                                                                                    
Co-Chair  Stoltze  MOVED  that the  House  Finance  Committee                                                                   
authorize  the Co-Chair  to amend  the professional  services                                                                   
contract with Janet  Clarke for an additional  amount, not to                                                                   
exceed  $25,000.    There  being  NO  OBJECTION,  it  was  so                                                                   
Co-Chair Hawker clarified the meeting's agenda.                                                                                 
1:43:50 PM                                                                                                                    
Co-Chair  Stoltze MOVED  to ADOPT  the work  draft to HB  81,                                                                   
labeled 26-GH1002\P, Bailey, 3/1/09.                                                                                            
Co-Chair Hawker OBJECTED for discussion purposes.                                                                               
Co-Chair  Hawker   referred  to   the  packet  of   materials                                                                   
supporting the  new Committee Substitute (CS),  which include                                                                   
subcommittee  reports.   He  termed the  work  draft (CS)  an                                                                   
admirable  product,  a  refining of  the  governor's  initial                                                                   
frugal  proposal.   He emphasized  that  the official  budget                                                                   
documents are those published  by Legislative Finance and are                                                                   
posted  on  their  website.   In  addition  to  the  official                                                                   
finance  documents, there  are  closeout  narratives by  each                                                                   
subcommittee.   He explained the transactional  abstracts and                                                                   
described the format used.  He  stated that the abstracts are                                                                   
working documents, not official documents.                                                                                      
1:47:54 PM                                                                                                                    
Co-Chair   Hawker  turned  to   four  sequentially   numbered                                                                   
documents.   He focused  on Document  #1 and  pointed to  the                                                                   
total  funds column,  which  depicts agency  operations  that                                                                   
total about  $50 million  less than  the governor's  proposed                                                                   
budget.  He reported a minor change  in debt service funding.                                                                   
The  fund  capitalization of  a  negative  $32 million  is  a                                                                   
change in approach.   The House Finance  Committee recommends                                                                   
fully  funding Power  Cost Equalization  (PCE) regardless  of                                                                   
any  legislative action  to  increase or  decrease  benefits.                                                                   
The  method  of  funding  directly   through  the  Department                                                                   
requires less capitalization of PCE.                                                                                            
1:50:54 PM                                                                                                                    
Co-Chair  Hawker  pointed to  a  special appropriation  of  a                                                                   
negative $200 million, which is  due to not being required to                                                                   
fund  the  oil and  gas  tax  exploration  credits.   At  the                                                                   
beginning of the  legislative session, $400 million  had been                                                                   
appropriated  to  those  credits  the  prior year.    In  the                                                                   
supplemental  budget, the administration  proposed  to reduce                                                                   
that appropriation  by $200  million and appropriate  another                                                                   
$200  million  in  the  FY10   budget.    The  House  Finance                                                                   
Committee proposes  to get to the same amount  by leaving the                                                                   
original $400  million appropriation in place,  letting it go                                                                   
forward, and not  adding any more funding to  the budget this                                                                   
1:52:13 PM                                                                                                                    
Co-Chair  Hawker  observed  that  there  is  a  shortfall  in                                                                   
anticipated revenues to operations.                                                                                             
Co-Chair Hawker stated  that at this point in  time, the only                                                                   
item  from  the  federal  stimulus   money  included  in  the                                                                   
operating  budget  is  the  change  in  the  Federal  Medical                                                                   
Assistance  Percentages   (FMAP)  rate  for  Medicaid.     He                                                                   
reported on  the history  of changes in  the FMAP rate.   The                                                                   
intent language  in the federal economic stimulus  program is                                                                   
to take pressure  off of state budgets, so  it is appropriate                                                                   
to include  it in the operating  budget.  That resulted  in a                                                                   
general fund savings of $74 million in the FY10 budget.                                                                         
1:55:04 PM                                                                                                                    
DAVID   TEAL,   DIRECTOR,   LEGISLATIVE   FINANCE   DIVISION,                                                                   
clarified  that   the  $74  million   was  included   in  the                                                                   
governor's amended  budget, which results in a  net zero when                                                                   
comparing the budget versions.                                                                                                  
Representative Gara requested  clarification on the amount of                                                                   
federal stimulus  money coming to Alaska.   Mr. Teal reported                                                                   
that the stimulus  package is a separate bill  not before the                                                                   
committee.   The $74 million FMAP  change is a  known entity,                                                                   
retroactive  to October,  and also affects  the FY09  budget.                                                                   
Beyond that, the components are not known.                                                                                      
1:57:23 PM                                                                                                                    
Co-Chair Hawker clarified that  the FMAP change was effective                                                                   
October 1, 2008,  and extends through December of  2011.  The                                                                   
$74 million  amount applies  to the FY10  budget.   About $45                                                                   
million of  that is allocable back  to the FY09 budget.   The                                                                   
remainder will carry  over into the FY11 budget.   There is a                                                                   
bonus  calculation   of  additional  FMAP  money,   based  on                                                                   
unemployment  numbers, for  which Alaska  does not  currently                                                                   
Representative  Gara  asked  if  more  information  would  be                                                                   
forthcoming.  Co-Chair Hawker said it would.                                                                                    
1:59:34 PM                                                                                                                    
Mr. Teal pointed out that the  CS for HB 81 and the CS for HB
83 will be posted on BASIS this year.                                                                                           
Mr. Teal  referred to  the agency summary,  Document #2.   He                                                                   
said he would describe the changes  made in the House Finance                                                                   
subcommittee  reports, plus  the chairman's  recommendations,                                                                   
which resulted  in the CS.   He explained that column  one is                                                                   
the  actions the  subcommittees took  and column  two is  the                                                                   
chairman's actions.   Those added together result  in the CS.                                                                   
The focus is on agency operating budgets.                                                                                       
Mr. Teal reported that what is  in the CS is a combination of                                                                   
subcommittee  reports  and  other actions  by  the  chairman,                                                                   
which are contained in Document #3.                                                                                             
Mr. Teal  turned to Document #3  to note that the  new method                                                                   
of dealing with PCE - the $28  million "reduction" - occurred                                                                   
in  the  chairman's  office.       Mr.  Teal  referred  to  a                                                                   
transaction  on page 2,  labeled "cap  to op".   It's  one of                                                                   
many in  the report  with that  label.  Legislative  Finance,                                                                   
OMB,  and  the  chairman  determined   that  some  items  the                                                                   
governor  had proposed  as capital budget  items were  better                                                                   
placed in  the operating  budget.   An example in  Commercial                                                                   
Fisheries is on page 2; another  from the Department of Labor                                                                   
and Workforce Development is on  page 3.  On page 4, a number                                                                   
of Department  of  Natural Resources  projects better  suited                                                                   
for the operating budget are listed.                                                                                            
2:04:09 PM                                                                                                                    
Representative  Gara asked  about the  proposed changes  from                                                                   
the  capital to  the operating  budget.   Mr. Teal  clarified                                                                   
where those  changes were.   Representative  Gara asked  what                                                                   
the subcommittee  action entailed.   Mr. Teal  explained that                                                                   
the  subcommittee action  began  with the  adjusted base  and                                                                   
then reviewed all of the governor's amendments.                                                                                 
Representative  Gara inquired  if any  columns represent  the                                                                   
governor's   proposal.    Co-Chair   Hawker  explained   that                                                                   
Document #1  is the reconciliation  of the governor's  budget                                                                   
proposal, with amendments, to the subcommittee proposals.                                                                       
Mr.  Teal  reiterated  that  his  discussion  began  with  an                                                                   
explanation  of  the  differences  between  the  subcommittee                                                                   
action and the CS.                                                                                                              
Representative Gara requested further clarification.                                                                            
2:06:43 PM                                                                                                                    
Representative  Austerman  requested more  information  about                                                                   
Document #2.                                                                                                                    
Mr.  Teal  clarified  that  the  governor's  budget  was  the                                                                   
starting point  for the subcommittees'  reports.   Column one                                                                   
represents the  subcommittees' actions.   In some  cases, the                                                                   
governor's requests  were accepted,  in other cases,  changes                                                                   
were made.  Co-Chair Hawker pointed  out that the information                                                                   
has been on the web since Friday.                                                                                               
Mr. Teal  continued  to explain  the first  column.  In  most                                                                   
cases,  the subcommittees  accept  or reject  the  governor's                                                                   
amendment,  but they  can also  modify  it or  add their  own                                                                   
items.   They can also  make reductions.   Column two  is the                                                                   
chairman's  prerogative to  change the  bill, especially  the                                                                   
language  section of  the  bill.   Document  #3 contains  the                                                                   
detailed changes  made to the  subcommittees' reports  by the                                                                   
chairman.   He used PCE  as an example  and commented  on the                                                                   
advantages  and  disadvantages  of  the  proposed  method  of                                                                   
funding PCE.                                                                                                                    
2:10:32 PM                                                                                                                    
Mr. Teal  referred to  capital items that  were moved  to the                                                                   
operating budget, as shown in  Document #3.  The last item on                                                                   
page 5, Marine  Highway System, Marine Vessel  Operations, is                                                                   
the  addition of  a very  late amendment  for the  bargaining                                                                   
unit  contract  terms.   Co-Chair  Hawker  related  that  the                                                                   
bargaining unit  settlement was included  in the CS  in order                                                                   
for it to be as comprehensive as possible.                                                                                      
Mr.  Teal pointed  out  that all  items  are  subject to  the                                                                   
amendment process.   Capital project  detail is  available on                                                                   
Legislative Finance's website and on OMB's website.                                                                             
Co-Chair Hawker  commented that the purpose of  the documents                                                                   
is to disclose  changes to the CS.  Page 6  shows a change to                                                                   
the University of Alaska budget.                                                                                                
2:13:39 PM                                                                                                                    
Mr. Teal referred  to changes to the language  section of the                                                                   
bill.    On page  58  of  HB  81, Sections  4-6  show  intent                                                                   
language  that was  in  the FY09  operating  bill.   Co-Chair                                                                   
Hawker  offered   that  the  language  section   analysis  is                                                                   
available in a booklet for the public to read.                                                                                  
Representative  Austerman  requested   clarification  of  the                                                                   
language section  changes.  Mr. Teal explained  that Sections                                                                   
4-6 consists of intent language  from last year's bill, which                                                                   
the  chairman wishes  to  reinstate.   It  says that  program                                                                   
receipts will  be used  before general funds  are used.   The                                                                   
costs of  job reclassifications  are already included  in the                                                                   
budget.    Transfers  should not  be  made  between  personal                                                                   
services and other line items without filing a report.                                                                          
Mr. Teal  referred to  page 60,  Section 10, subsections  (d)                                                                   
and  (e), the  changes to  the PCE  program.   The money  now                                                                   
flows directly to  the Department of Commerce,  both from the                                                                   
endowment and  from the general fund.   The amount in  (e) is                                                                   
the amount needed to fully fund the program.                                                                                    
2:16:45 PM                                                                                                                    
Mr. Teal referred  to a fuel trigger on page  62, Section 16,                                                                   
Office  of the  Governor.    Last year  it  was  down to  one                                                                   
Representative  Salmon asked for  an explanation of  the fuel                                                                   
trigger.   Mr. Teal  explained that  it is  a method  used to                                                                   
attempt to avoid  building short-term, high fuel  prices into                                                                   
the base  budget of  the agencies.   He recalled  last year's                                                                   
experience when  the fuel trigger  occurred in  August during                                                                   
high prices  and then  prices fell.   Some agencies  may have                                                                   
gotten more money  than they needed to pay fuel  costs.  This                                                                   
year  there  are two  triggers,  one  in  August and  one  in                                                                   
December,  with half  of the amount  given  with each of  the                                                                   
triggers.  The trigger is the  year-to-date ANS price of oil.                                                                   
Co-Chair  Hawker  added  that the  administration  has  total                                                                   
latitude  in   allocating  the   fuel  triggers   within  the                                                                   
parameters  provided in  the  bill.   Mr.  Teal informed  the                                                                   
Committee that 75  percent goes to DOT and most  of that goes                                                                   
to the Alaska Marine Highway System.                                                                                            
Mr. Teal  explained that  the fuel  trigger was removed  from                                                                   
the  Office  of  the Governor  and  a  pseudo  agency  called                                                                   
"Branchwide  Unallocated"   was  created  because   the  fuel                                                                   
trigger distorted annual budget comparisons.                                                                                    
2:19:33 PM                                                                                                                    
Mr. Teal  related that a  section of  the bill was  missing -                                                                   
Section  16.    Included  in Section  16  were  a  number  of                                                                   
transactions for  oil and gas  development.  Co-Chair  Hawker                                                                   
reported that the section was  omitted until more information                                                                   
was received from the administration.                                                                                           
Co-Chair Hawker reported that  a great deal of money has been                                                                   
spent on  oil and  gas through  various budgets and  spending                                                                   
authorities.  He  said that in order to evaluate  the current                                                                   
requests for additional funding  for oil and gas projects, he                                                                   
has  requested a  summary  of appropriations  from  OMB.   He                                                                   
hoped to get that  analysis in the next few days  and work up                                                                   
an amendment to address Section 16.                                                                                             
2:22:04 PM                                                                                                                    
Representative Austerman  asked how far back  the information                                                                   
request went.  Co-Chair Hawker said FY04.                                                                                       
Mr. Teal referred to a change  on page 69, Section 22.  It is                                                                   
a large change  from the governor's original budget.   The CS                                                                   
now  matches  the governor's  amended  contributions  to  the                                                                   
retirement  system funding,  which  is roughly  $170  million                                                                   
less than  originally proposed.   The amount covers  the full                                                                   
actuarial recommendations;  however, it does not  include the                                                                   
additional  $170 million.   Co-Chair  Hawker reiterated  that                                                                   
the   budget  includes   full   funding   of  all   actuarial                                                                   
2:23:53 PM                                                                                                                    
Mr.  Teal  turned to  page  70,  Section  23.   There  is  an                                                                   
addition for the Inland Boatmen's  Union and for the Masters,                                                                   
Mates, and  Pilots, due  to new  contract negotiations.   The                                                                   
terms of the contracts are funded in Section 1 of the bill.                                                                     
Mr.  Teal explained  Section  26, the  Constitutional  Budget                                                                   
Reserve  Fund (CBR).   He noted  that subsection  (d) is  the                                                                   
FY09 CBR  draw.  Standard CBR  language says when there  is a                                                                   
shortage  of  unrestricted  revenue  to  cover  general  fund                                                                   
expenditures, the money comes  from the CBR.  Co-Chair Hawker                                                                   
offered that during  the course of the previous  budget year,                                                                   
the legislature  appropriated almost $5 billion  into the CBR                                                                   
when oil  prices were high.   Since the market  decline, some                                                                   
of those funds will be removed from the CBR.                                                                                    
Mr. Teal reported that subsection  (e) states that the amount                                                                   
going to  revenue sharing is  appropriated directly  from the                                                                   
CBR.  Normally, that account is  funded from revenue from the                                                                   
progressive portion of the petroleum tax.                                                                                       
2:26:29 PM                                                                                                                    
Representative  Gara  referred  to last  year's  formula  for                                                                   
municipal  revenue sharing.    He wondered  what that  amount                                                                   
was.  Co-Chair  Hawker replied that the fund  was capitalized                                                                   
at $180  million.  One-third of  the amount in the  fund each                                                                   
year  is  committed  to  revenue  sharing.    The  fund  gets                                                                   
refilled each  year by progressivity earnings  and depends on                                                                   
the  price of  oil.    There is  an  expectation  to put  $60                                                                   
million back  into the revenue  sharing fund out of  the FY10                                                                   
budget in order to forward fund the next year's amount.                                                                         
Representative  Gara asked if  there is another  provision in                                                                   
the bill related to the $60 million  appropriation.  Co-Chair                                                                   
Hawker replied that in FY10 the  $60 million is fully funded.                                                                   
Mr. Teal  clarified that there  is not another  appropriation                                                                   
in  the bill;  this  section  obligates  the $60  million  to                                                                   
revenue sharing.  He described  different scenarios depending                                                                   
on if this appropriation passes or not.                                                                                         
Representative  Gara  wanted  assurance  of  revenue  sharing                                                                   
regardless of the price of oil  and the progressivity factor.                                                                   
Mr. Teal  emphasized that the  $60 million that flows  out of                                                                   
the fund to the communities does not require appropriation.                                                                     
2:29:54 PM                                                                                                                    
Mr.  Teal explained  subsection  (f) where  the  sum of  $1.1                                                                   
billion is appropriated from the  CBR to the public education                                                                   
fund.   Without  further appropriation,  the  balance of  the                                                                   
fund  is  available  and  probably would  be  used  for  FY10                                                                   
education.  The $1.1 billion would  fund FY11 education.  The                                                                   
governor  requested $1.06  billion,  about  $50 million  less                                                                   
than was required to fund FY11  education.  The governor used                                                                   
a  $50  million  cushion  in   the  reserve  account.    This                                                                   
appropriation adds  an additional  $50 million more  than the                                                                   
governor requested.  It will not impact the CBR until 2011.                                                                     
Mr.  Teal stated  that subsection  (g)  is the  CBR draw  for                                                                   
2:31:40 PM                                                                                                                    
Mr.  Teal  referred  to  Document  #4,  the  "language  only"                                                                   
section, and  explained three items  that have changed.   One                                                                   
change  is $32  million that  appears in  the agency  budgets                                                                   
column  under  the  Department  of  Commerce,  Community  and                                                                   
Economic Development.   That amount is offset  by a reduction                                                                   
in fund caps "because  we are now going direct".   The second                                                                   
change  is  the  removal  of $200  million  in  oil  and  gas                                                                   
credits.   That  amount is  being  kept in  the FY09  budget,                                                                   
which results  in a  net zero.   The third change  encompases                                                                   
all  the oil  and gas  appropriations  in Section  16 of  the                                                                   
governor's bill.                                                                                                                
Co-Chair  Hawker summarized  that the  CS was  the result  of                                                                   
subcommittee  work  and  chairman  input.    Co-Chair  Hawker                                                                   
preferred not  to have a second  CS.  He related that  he was                                                                   
still   looking  at   FY09  supplemental   requests,   agency                                                                   
requests, and amendments.                                                                                                       
2:34:27 PM                                                                                                                    
Mr.  Teal  clarified   that  BASIS  contains   the  bill  and                                                                   
subcommittee  reports,   but  not  the  Legislative   Finance                                                                   
technical  reports,  which  are on  the  Legislative  Finance                                                                   
Representative  Gara  requested   further  information  about                                                                   
Document  #4.   Mr. Teal  reviewed  that column  one was  the                                                                   
governor's  amended requests.    Co-Chair Hawker  interjected                                                                   
that Document #4 is exclusively  language section components.                                                                   
2:36:50 PM                                                                                                                    
Co-Chair  Hawker WITHDREW  his  objection to  adopt the  work                                                                   
draft  for HB  81.    There being  NO  OBJECTION,  it was  so                                                                   
HB  81   was  heard  and   HELD  in  Committee   for  further                                                                   
2:37:35 PM                                                                                                                    

Document Name Date/Time Subjects
Subcommittee Narratives.pdf HFIN 3/2/2009 1:30:00 PM
HB 81
LFD Subcommittee Reports.pdf HFIN 3/2/2009 1:30:00 PM
HB 81
Work Draft HB 81 Version P -0301.pdf HFIN 3/2/2009 1:30:00 PM
HB 81
Work Draft HB 83 Version R-0228.pdf HFIN 3/2/2009 1:30:00 PM
HB 83