Legislature(2009 - 2010)HOUSE FINANCE 519

03/01/2010 01:30 PM FINANCE


Download Mp3. <- Right click and save file as

Audio Topic
01:38:07 PM Start
01:39:08 PM HB300 || HB302
02:30:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 300 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 302 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
1:30 - 3:30pm Adopt Subcommittee
Reports/HFC CS/General Discussion
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 300                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan program expenses of  state government, for certain                                                                    
     programs, and to  capitalize funds; making supplemental                                                                    
     appropriations;  making appropriations  under art.  IX,                                                                    
     sec. 17(c),  Constitution of the  State of  Alaska; and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
HOUSE BILL NO. 302                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
1:39:08 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker explained  that  the committee  substitutes                                                                    
for HB 300 and HB 302  represented the work completed by the                                                                    
House Finance Committee subcommittees  and stated his intent                                                                    
to have a high-level discussion of the changes.                                                                                 
                                                                                                                                
Vice-Chair Thomas  MOVED to  ADOPT CS  for HB  300(FIN) (26-                                                                    
GH2823\M, Bailey,  3/1/10) as a working  document before the                                                                    
committee. There being NO OBJECTION, it was so ordered.                                                                         
                                                                                                                                
Vice-Chair Thomas MOVED to ADOPT CS HB 302(FIN), (26-                                                                           
GH2825\P, Bailey, 2/27/10) as  a working document before the                                                                    
committee. There being NO OBJECTION, it was so ordered.                                                                         
                                                                                                                                
1:42:10 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker  described the Mental Health  Trust bill (HB
302) as a  derivative of the transactions in HB  300 and did                                                                    
not expect further discussion.                                                                                                  
                                                                                                                                
Co-Chair  Hawker  noted  that   the  governor's  office  had                                                                    
introduced  operating  budgets  involving  "austere"  agency                                                                    
operations,  including  a  modest 5.6  percent  increase  in                                                                    
general  funds  for  agency  operation  spending  and  a  13                                                                    
percent  increase  in  state-wide spending.  He  added  that                                                                    
approximately  43  percent  of the  agency  operations  bill                                                                    
represented  formula changes,  largely increases  related to                                                                    
Medicaid  programs,  the  Department of  Health  and  Social                                                                    
Services,  the education  funding formula,  and implementing                                                                    
statutory cost differentials.                                                                                                   
                                                                                                                                
Co-Chair  Hawker   continued  that  that  the   other  major                                                                    
components in  HB 300 included increases  for replacing one-                                                                    
time items such as the fuel  requester based on the price of                                                                    
petroleum products, accounting  for approximately 26 percent                                                                    
of the growth. He explained  that $68 million (30 percent of                                                                    
the governor's request) were in discretionary categories.                                                                       
                                                                                                                                
1:45:35 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker informed  the committee  that a  summary of                                                                    
the  work of  the subcommittees  to  date was  found in  the                                                                    
handout, "Agency  Summary, House Structure" (copy  on file).                                                                    
The upper  left-hand corner  indicates fund  groups, general                                                                    
funds (a  numbers and language aggregate).  The first column                                                                    
includes  the  governor's   amendments  and  the  right-hand                                                                    
column   (column   four)   has    the   House   Finance   CS                                                                    
recommendations. He  added that  the right-hand  column gave                                                                    
the  appearance of  reducing the  governor's  budget by  $43                                                                    
million;  he warned  that the  numbers could  be misleading.                                                                    
The subcommittees had removed from  the budget and set aside                                                                    
the  governor's   requests  for   additional  oil   and  gas                                                                    
increments. He noted  that the oil and  gas increments would                                                                    
be considered in committee as a separate issue.                                                                                 
                                                                                                                                
Co-Chair Hawker  continued that the second  report (a single                                                                    
page  distributed by  his office)  details the  oil and  gas                                                                    
requests (particularly  the gasline request) that  have been                                                                    
removed from  the budget  pending further  committee hearing                                                                    
and  determinations.  The  incremental requests  are  broken                                                                    
into  two significant  categories;  the top  half are  those                                                                    
that  occurred  in  the  original  budget  in  the  language                                                                    
section, and  the bottom half  are additional  items removed                                                                    
by  the  subcommittee  on  the Department  of  Law  for  the                                                                    
numbers  section requests.  He reminded  listeners that  the                                                                    
process  was   procedural;  the   issues  are   still  being                                                                    
considered and no final judgment has been made.                                                                                 
                                                                                                                                
1:48:45 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  pointed out  that  the  detail behind  the                                                                    
reductions proposed in  the CS is encompassed  in the budget                                                                    
subcommittee  closeouts,  which  are  available  online.  He                                                                    
acknowledged   the  work   done   to  establish   consistent                                                                    
formatting of the subcommittee work.                                                                                            
                                                                                                                                
Co-Chair  Hawker addressed  column  two.  The committee  has                                                                    
tried  to bring  expenditures "back  on budget";  earlier in                                                                    
the  process,   zero-change  CSs   had  been   adopted  that                                                                    
converted the governor's initial  budget document to the new                                                                    
roll-up  format.   The  subcommittees  worked   through  the                                                                    
detailed budget  requests and Legislative Finance  aides had                                                                    
a chance  to study each  agency at a transaction  level; the                                                                    
last  round  of  fund-source  changes  were  identified.  He                                                                    
called  the  process  "properly  classifying  by  consistent                                                                    
definition" of items  that had been categorized  in the past                                                                    
as  general fund  program  receipts, statutorily  designated                                                                    
program  receipts,   and  receipt-supported   services.  The                                                                    
detail  about the  fund-source shift  transactions found  in                                                                    
the column is available  on the Legislative Finance website.                                                                    
He   commented  that   "receipt-supported  services"   is  a                                                                    
category used  for programs  intended to  be self-sustaining                                                                    
and operate entirely on self-generated funds.                                                                                   
                                                                                                                                
1:52:52 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  provided  the example  of  the  Regulatory                                                                    
Commission  of  Alaska,  which   exists  solely  within  its                                                                    
authority  to  generate  its   own  revenues  separate  from                                                                    
general fund program receipts. An  agency bills for services                                                                    
not  intended  to  be  the   sole  funding  source  for  the                                                                    
operation  (such as  in the  Department of  Motor Vehicles).                                                                    
Both  categories   (self-sustaining  programs   and  program                                                                    
collections)  are  still  in   the  category  of  designated                                                                    
general funds,  which are designated for  specific purposes,                                                                    
as opposed to  the fund source that remains  in other funds,                                                                    
or  "off budget."  Statutorily  designated program  receipts                                                                    
reflect contractual  arrangements that  the state  may have.                                                                    
The legislature  does not have discretionary  authority over                                                                    
how the funds are used. He  gave the example of a bequest to                                                                    
the  state that  is  limited to  certain  uses and  specific                                                                    
service contracts.                                                                                                              
                                                                                                                                
Co-Chair Hawker  summarized that  the purpose of  column two                                                                    
was to clarify the distinctions  across the budget. He noted                                                                    
a  net change  of $479,000  of monetary  consequence on  the                                                                    
budget;  the remaining  transactions  are zero  net. In  the                                                                    
past, funds being appropriated out  of the Alaska Industrial                                                                    
Development   Authority  were   used  for   other  unrelated                                                                    
purposes, which was contrary to legislative intent.                                                                             
                                                                                                                                
Co-Chair  Hawker  turned  to  agency  summary  reports  with                                                                    
language  and  numbers.  The last  detailed  summary  report                                                                    
addresses financial  changes that  occurred in  the language                                                                    
section,  especially  the  changes   removing  oil  and  gas                                                                    
appropriations.  There  is  about  a  $297,000  differential                                                                    
between the total  amount removed and the amount  of the oil                                                                    
and gas transactions;  the amount relates to  FY 09 stimulus                                                                    
money left  in the  governor's budget  in the  Department of                                                                    
Revenue  for Child  Support  Enforcement  Services that  was                                                                    
moved into the language section from the numbers section.                                                                       
                                                                                                                                
1:58:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker directed attention to  page 59, Section 4 of                                                                    
the HB 300  CS. He explained the findings  section as saying                                                                    
that the  stimulus money  had been used  the year  before to                                                                    
help the state.                                                                                                                 
                                                                                                                                
Co-Chair Hawker turned to Section  5, "Ratification of Small                                                                    
Amounts in the  State Accounting System." He  stated that he                                                                    
was proposing  the idea  for the  committee's consideration.                                                                    
The concept  was developed with Legislative  Finance and the                                                                    
Office   of   Management    and   Budget   (OMB)   regarding                                                                    
ratifications   in   supplemental    budgets.   He   thought                                                                    
ratifications of significant  amounts should be scrutinized,                                                                    
but since  each ratification  costs a  lot to  implement, he                                                                    
did not think  very small ones were  necessary. The proposed                                                                    
mechanism would allow agencies  to absorb ratification items                                                                    
of less  than $500  into the on-going  agency budget,  and a                                                                    
list  of  the  items  absorbed  would  be  provided  to  the                                                                    
legislature.  He   believed  the  proposal   would  increase                                                                    
efficiency and lower costs as well as frustration.                                                                              
                                                                                                                                
2:01:23 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze asked  the reason  for the  cut-off number                                                                    
of $500.  Co-Chair Hawker  responded that  the number  was a                                                                    
judgment  call. He  did  not see  anything  under $500  that                                                                    
raised questions.                                                                                                               
                                                                                                                                
Co-Chair  Stoltze   asked  whether  unclaimed   property  or                                                                    
uncashed checks would show up  in the ratifications numbers.                                                                    
Co-Chair   Hawker  replied   that  the   unclaimed  property                                                                    
division would  continue to operate  independently. Co-Chair                                                                    
Stoltze  asked   about  uncashed  checks.   Co-Chair  Hawker                                                                    
believed  they  would show  up  in  another section  of  the                                                                    
budget.                                                                                                                         
                                                                                                                                
Co-Chair Hawker remarked that the  language used was similar                                                                    
to that in previous budgets.  He highlighted a few programs,                                                                    
beginning with  page 62,  items (e)  and (f)  providing full                                                                    
funding  for  the  state's  Power  Cost  Equalization  (PCE)                                                                    
program.                                                                                                                        
                                                                                                                                
Co-Chair  Hawker pointed  to page  63, item  (a) related  to                                                                    
management practices in the Department  of Health and Social                                                                    
Services. The department is subject  to a penalty or fine of                                                                    
$1.2  million each  year for  three years;  the item  is the                                                                    
first installment. He highlighted  item (b), noting that the                                                                    
legislature is operating through the  end of the fiscal year                                                                    
on  a stimulus  funds  enhanced  Federal Medical  Assistance                                                                    
Percentage (FMAP).  Unless additional federal law  is passed                                                                    
extending the  increased FMAP, the  budget expects  that the                                                                    
enhanced rate  remains in effect.  The language  states that                                                                    
the  legislature will  revert back  to the  original general                                                                    
funds allocation if the FMAP does not remain in effect.                                                                         
                                                                                                                                
2:05:20 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  emphasized  that the  committee  does  not                                                                    
traditionally prepare a budget  based on speculation, but he                                                                    
was confident about the assumption in the item.                                                                                 
                                                                                                                                
Co-Chair  Hawker noted  that page  65, Section  21 contained                                                                    
language  related to  the "fuel  trigger."  Agencies have  a                                                                    
base  level  of  funding  in  their  budgets  for  fuel  and                                                                    
utilities; the  agencies would  receive additional  money if                                                                    
the  price  of  oil  reached  a  certain  level  during  two                                                                    
benchmark dates  during the  year. He  stated that  the fuel                                                                    
trigger  has  worked  well.   The  language  was  originally                                                                    
brought into  the budget in  2007. He noted that  the market                                                                    
is currently fairly stable.                                                                                                     
                                                                                                                                
Co-Chair  Hawker  flagged  an   upcoming  amendment  to  the                                                                    
section that would  trip the fuel trigger at  $50 per barrel                                                                    
instead of $35  and take the base level below  that into the                                                                    
base budget of agencies.                                                                                                        
                                                                                                                                
Representative Gara referenced page  68, line 15, related to                                                                    
the  8 percent  of  the  fuel trigger  amount  going to  the                                                                    
University  of Alaska.  He pointed  out that  the university                                                                    
had asked  for $2 million  in extra fuel  cost reimbursement                                                                    
in subcommittee; because of the  fuel trigger they would get                                                                    
around $1.2 million. He queried the analysis.                                                                                   
                                                                                                                                
2:08:50 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker clarified that the  mechanism would give the                                                                    
university approximately $4 million  extra. He recalled that                                                                    
previous  conversation with  the university  had established                                                                    
that the fuel trigger would  work for them. He recalled that                                                                    
the  university  had  asked   for  a  budget  amendment  the                                                                    
previous  year increasing  their  fuel, in  addition to  the                                                                    
fuel  trigger  amounts.  He noted  that  the  Department  of                                                                    
Corrections needed $2 million more in base funding.                                                                             
                                                                                                                                
Co-Chair Stoltze  questioned the fuel  trigger at $35.   Co-                                                                    
Chair  Hawker  spoke  to  the   proposed  change  of  a  $50                                                                    
threshold.                                                                                                                      
                                                                                                                                
2:12:36 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  believed  that  the  budget  clarification                                                                    
project had brought the separate  fund sources back into the                                                                    
rollup and  review. The language  accounts for  the receipts                                                                    
by source  so that people  know where the money  comes from.                                                                    
The  money  can  be  seen  moving  out  of  the  funds.  The                                                                    
subcommittees are exploring the items in detail.                                                                                
                                                                                                                                
Co-Chair Hawker pointed out item  (n) on page 71, related to                                                                    
full forward funding of the  FY 12 public education fund. He                                                                    
underlined  significant items  on  page  72, beginning  with                                                                    
line 14. The  Department of Revenue estimates  that the $180                                                                    
million would need to be deposited  into the oil and gas tax                                                                    
credit  fund in  order to  meet  the tax  credit claims  for                                                                    
exploration incentive credits. He  explained that the amount                                                                    
had been looked at the year  prior and the amount in the oil                                                                    
and gas  credit fund was in  excess of what was  needed. The                                                                    
balance  was lowered  by $200  million; this  year $180  was                                                                    
proposed  to   be  replaced.  He  thought   the  number  was                                                                    
reasonable.                                                                                                                     
                                                                                                                                
Co-Chair Hawker moved to line  16 (e) regarding full funding                                                                    
of  the  state's  revenue-sharing program.  The  item  would                                                                    
replace  $60  million   distributed  for  municipal  revenue                                                                    
sharing.  Page  73 has  the  retirement  system funding.  He                                                                    
emphasized  that  the  funding amounts  are  statutory;  the                                                                    
municipalities had a maximum fixed  rate and the state would                                                                    
pick  up  the balance  of  the  addition retirement  funding                                                                    
rates;   Public    Employees   Retirement    System   (PERS)                                                                    
contributions from communities are  maintained at 22 percent                                                                    
and Teachers  Retirement System  (TRS) contributions  are at                                                                    
12.56 percent. The state picks  up the continually inflating                                                                    
service-cost liability.                                                                                                         
                                                                                                                                
2:16:37 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze interjected that  the item was another form                                                                    
of  revenue  sharing  though more  substantial  than  actual                                                                    
statutory revenue sharing.                                                                                                      
                                                                                                                                
Representative  Gara asked  whether  the  number was  bigger                                                                    
than last  year and  if it was  by formula.  Co-Chair Hawker                                                                    
answered in the affirmative.                                                                                                    
                                                                                                                                
Co-Chair Hawker noted that  there were collective bargaining                                                                    
units currently working on  settlements. Section 29 provides                                                                    
broad  authority  to take  care  of  the settlements,  which                                                                    
would be brought specifically into the budget as needed.                                                                        
                                                                                                                                
Co-Chair  Hawker mentioned  routine payment  of debt-service                                                                    
costs for  the state and  the various bond  obligations that                                                                    
are  statutory.  He highlighted  Section  32,  page 79,  the                                                                    
coverall provision in which  the Constitution Budget Reserve                                                                    
(CBR)  will be  fully repaid  after the  FY 10  supplemental                                                                    
budget passes. Next  year, there will be an  ability to turn                                                                    
to  the  statutory  budget  reserve  (SBR)  to  meet  budget                                                                    
requirements.                                                                                                                   
                                                                                                                                
Co-Chair  Hawker relayed  that Section  33 has  the one  CBR                                                                    
provision  in  the bill.  He  emphasized  that there  is  no                                                                    
appropriation  from the  CBR in  the  bill, but  there is  a                                                                    
section about  the CBR. He  detailed that since  the state's                                                                    
money is managed under combined  management authority in the                                                                    
treasury  division, the  division has  authority to  utilize                                                                    
funds that  belong in the  CBR to meet  temporary shortfalls                                                                    
in  state cash  flow.  The provision  stipulates that  money                                                                    
used  from the  CBR for  cash-flow needs  will be  paid back                                                                    
with  interest in  order  to keep  the  CBR whole.  Interest                                                                    
earned  on general  fund balances  is appropriated  into the                                                                    
CBR.  The middle  section  addresses  fund compensation  for                                                                    
lost  earnings  caused by  use  of  the fund's  balance  for                                                                    
general  fund principals;  at the  end there  is a  limiting                                                                    
factor  stipulating  that  the amount  appropriated  by  the                                                                    
section may not exceed an  amount equal to the earnings lost                                                                    
on  the   CBR.  He  thought   the  section  might   be  more                                                                    
understandable  if it  addressed  the rule,  the limit,  and                                                                    
then the intent.                                                                                                                
                                                                                                                                
2:21:16 PM                                                                                                                    
                                                                                                                                
Representative Doogan  asked why  temporary loans  for cash-                                                                    
flow purposes did not come out  of the SBR, as the money was                                                                    
theoretically  easier to  get to.  Co-Chair  Hawker did  not                                                                    
know.                                                                                                                           
                                                                                                                                
Co-Chair Stoltze called  one of the funds  a savings account                                                                    
and the  other a checking account.  Co-Chair Hawker's theory                                                                    
was that money  has been in the CBR for  25 years, while the                                                                    
SBR  has  only  existed  for  two  years.  Co-Chair  Stoltze                                                                    
recalled short-lived SBRs that  were not paid back. Co-Chair                                                                    
Hawker noted that [David Teal  from Legislative Finance] was                                                                    
nodding.                                                                                                                        
                                                                                                                                
Co-Chair  Hawker turned  to a  language change  on page  80,                                                                    
paragraph (b). He  stated that in the past when  there was a                                                                    
debt to the CBR, the state  paid the CBR management fees out                                                                    
of  the CBR.  Since there  is  a general  fund surplus,  the                                                                    
management fees would be taken out of general funds.                                                                            
                                                                                                                                
Co-Chair   Hawker   explained   that  Section   34   (lapsed                                                                    
extensions)  would re-enact  a 2007  provision scheduled  to                                                                    
lapse in  2010 that  still has money.  The item  extends the                                                                    
lapse date and is part of  a $5 million Department of Public                                                                    
Safety  appropriation  that  has   been  used  for  domestic                                                                    
violence and sexual assault programs.  He commented that the                                                                    
language in the  item above in 18 (b) was  the $600,000 from                                                                    
the state to bail out the Matanuska Maid dairy.                                                                                 
                                                                                                                                
Co-Chair Hawker turned to lines  12 through 23, the spending                                                                    
authority  for  federal  stimulus money  appropriations.  He                                                                    
explained that the original bill  passed was budgeted for FY                                                                    
10;  the $82  million in  aggregate  is the  amount that  is                                                                    
currently estimated to  not be expended by the  end of 2010;                                                                    
not lapsing the provision would  allow the money to still be                                                                    
available for FY 11.                                                                                                            
                                                                                                                                
Co-Chair Hawker  remarked that item  (d) on line  24 affects                                                                    
the  2009  budget. The  governor  was  given money  to  work                                                                    
towards  redistricting. He  noted that  little of  the money                                                                    
has  been  spent and  the  money  was extended;  another  $1                                                                    
million was added in the governor's budget as well.                                                                             
                                                                                                                                
2:26:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker  reported that the budget  would take effect                                                                    
July 1, 2010 except for lapsed extensions.                                                                                      
                                                                                                                                
Representative Austerman  pointed to  page 80  regarding the                                                                    
management  fees being  paid  out of  the  general fund  and                                                                    
asked why  the item was  for only one year.  Co-Chair Hawker                                                                    
replied that  every appropriation  is for one  year. Another                                                                    
option would be moving items into the agency number budget.                                                                     
                                                                                                                                
Representative  Austerman  asked   whether  there  would  be                                                                    
consideration  of moving  the  appropriation  to the  agency                                                                    
budget.  Co-Chair Hawker  had concerns  about having  to re-                                                                    
make the decision in future budget cycles.                                                                                      
                                                                                                                                
Co-Chair  Hawker  noted  one large  appropriation  that  was                                                                    
missing:  $400   million  for  the   governor's  scholarship                                                                    
program. He explained  that the item would be  a fiscal note                                                                    
item if passed, and should not be in the budget.                                                                                
                                                                                                                                
Co-Chair  Hawker reviewed  the current  plan for  the budget                                                                    
process in committee.                                                                                                           
                                                                                                                                
2:30:06 PM                                                                                                                    
                                                                                                                                
Co-Chair   Hawker   provided   an   overview   of   expected                                                                    
amendments:                                                                                                                     
                                                                                                                                
   · Oil and gas language appropriation: how much and how                                                                       
     funded                                                                                                                     
   · Fuel trigger                                                                                                               
   · Common budget location for therapeutic courts                                                                              
   · Governor's domestic violence/sexual assault plan: he                                                                       
     believed the committee had come to the conclusion that                                                                     
     the plan must be broader                                                                                                   
   · Medicaid: increased funding and the policy change at                                                                       
     the federal level; an Department of Health and Social                                                                      
     Services amendment to increase prescription drug                                                                           
     benefits                                                                                                                   
   · Other items from members                                                                                                   
                                                                                                                                
Representative   Doogan,  Co-Chair   Hawker,  and   Co-Chair                                                                    
Stoltze appreciated the work of staff on the budget.                                                                            
                                                                                                                                

Document Name Date/Time Subjects
HB 300 HB302 Operating Budget Summary.pdf HFIN 3/1/2010 1:30:00 PM
SFIN 3/23/2010 9:00:00 AM
SFIN 3/24/2010 9:00:00 AM
HB 300
HB 302
CSHB 300(FIN) DRAFT VERSION M.pdf HFIN 3/1/2010 1:30:00 PM
HB 300
HB 302 WORK DRAFT CS 26-GH2825 P.pdf HFIN 3/1/2010 1:30:00 PM
HB 302