Legislature(2015 - 2016)HOUSE FINANCE 519

02/23/2015 01:30 PM House FINANCE

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Audio Topic
01:41:00 PM Start
01:41:59 PM HB71 || HB72 || HB73
01:41:59 PM Overview of the Governor's February 17th Budget Amendments Including Supplemental/capital/other Appropriations
03:33:50 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Heard & Held
+ Overview of the Governor's February 17th Budget TELECONFERENCED
Amendments Including FY15
Supplemental/Capital/Other Appropriations by Pat
Pitney, Director, Office of Management & Budget
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 71                                                                                                             
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations   and   other   appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
HOUSE BILL NO. 72                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations, and making  appropriations under art.                                                                    
     IX, sec.  17(c), Constitution of  the State  of Alaska,                                                                    
     from  the  constitutional   budget  reserve  fund;  and                                                                    
     providing for an effective date."                                                                                          
HOUSE BILL NO. 73                                                                                                             
     "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."                                                                                                        
1:41:59 PM                                                                                                                    
^OVERVIEW OF THE GOVERNOR'S  FEBRUARY 17TH BUDGET AMENDMENTS                                                                  
INCLUDING SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS                                                                           
1:41:59 PM                                                                                                                    
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE  OF THE  GOVERNOR,  began her  presentation with  the                                                                    
FY15 Supplemental  Amendments handout:  "FY2015 Supplemental                                                                    
Requests 2-17-15".  She referred  to the  request on  line 4                                                                    
for  Department of  Natural Resources  (DNR)  in the  amount                                                                    
$896 thousand for  the emergency repair of  the state forest                                                                    
road systems in  the Tanana Valley State  Forest. The repair                                                                    
was necessary due to the  rain the previous summer. The road                                                                    
was impassable.  The Department of Natural  Resources earned                                                                    
about  $250 thousand  from the  products in  the forest  and                                                                    
there were  many wood  uses and  community aspects  of being                                                                    
able  to use  the  wood  in the  Tanana  Valley Forest.  The                                                                    
request came in  on multiple occasions and  was pushed back.                                                                    
However,  the funding  was currently  necessary. The  repair                                                                    
request was not new, but  the administration had hoped there                                                                    
was  another  option  rather  than  the  repairs  suggested;                                                                    
however, there was not but found that there was not.                                                                            
Co-Chair Thompson acknowledged  Representative Guttenberg at                                                                    
the committee table.                                                                                                            
Ms.  Pitney continued  to  the  request on  line  8 for  The                                                                    
Department of  Law (LAW)  in the  amount of  $121.5 thousand                                                                    
for  judgements  and settlements.  The  next  line 9  was  a                                                                    
reappropriation from  two projects for DNR  [DOT] to address                                                                    
its injection wells. Previously,  in DNR's [DOT] maintenance                                                                    
facilities,  oil would  be dropped  through the  floor which                                                                    
was a  perfectly acceptable practice  at the  time. However,                                                                    
it was  no longer practiced. Therefore,  injection wells had                                                                    
to  be installed.  Funding from  two projects,  the Core  of                                                                    
Engineers Harbor Program, and  the Glenn Highway Repair. The                                                                    
Harbor Program was  not going to use  the money appropriated                                                                    
because funding came in the form  of geo bond monies for the                                                                    
same project.  The Glenn Highway  repair was  completed with                                                                    
additional federal funds.                                                                                                       
1:46:18 PM                                                                                                                    
Vice-Chair  Saddler asked  where on  Glenn Highway  the ruts                                                                    
were  that needed  repair. Ms.  Pitney  responded she  would                                                                    
have to get back to  him with the information. She furthered                                                                    
it  was  within  the  Statewide  Transportation  Improvement                                                                    
Program (STIP).                                                                                                                 
Vice-Chair Saddler added  that it was a long  highway but it                                                                    
went right through his home town.                                                                                               
Representative   Gattis    answered   Vice-Chair   Saddler's                                                                    
question.  She stated  that the  ruts were  essentially from                                                                    
Wasilla to  Anchorage. There had  been a  significant amount                                                                    
of  rain and  some  snow. She  had  constituents calling  in                                                                    
about hydroplaning in to work each day.                                                                                         
Ms.  Pitney moved  to  the  item on  line  10  for DOT.  She                                                                    
explained that  it was an  exchange of a  reappropriation of                                                                    
project monies  for the Ted Stevens  Anchorage International                                                                    
Airport. She continued with line  11, also within DOT, for a                                                                    
reappropriation  for  the  replacement  of  the  Kalsin  Bay                                                                    
maintenance   station.  The   request  was   to  replace   a                                                                    
maintenance  station  on  Kodiak Island  that  burned  down.                                                                    
Although risk management funds were  available they were not                                                                    
enough to cover the full project.                                                                                               
Ms. Pitney  reported that line  12 referenced a  repeal. The                                                                    
Alaska Gasline Inducement Act (AGIA)  project was closed out                                                                    
leaving  $2.8   million  in  the  account.   The  money  was                                                                    
available for repeal.                                                                                                           
Ms. Pitney  reported that lines  13 and 14 were  included to                                                                    
bring  attention  to  two  appropriations   made  in  FY  15                                                                    
exceeding  the  revenue  and  replacing  the  accounts  with                                                                    
general funds  to meet the  level of  appropriation approved                                                                    
by the legislature in the  previous year. If the legislature                                                                    
did not  want to approve  the GF transfers into  the account                                                                    
it  would take  time  to review  the  projects to  determine                                                                    
which projects would  not be funded from the  prior year and                                                                    
then repeal those  projects. They were included  to make the                                                                    
funds whole.                                                                                                                    
Co-Chair Thompson  asked about  line 14. Ms.  Pitney replied                                                                    
that  13  was from  the  capital  income  fund. Line  14,  a                                                                    
nuance,  denoted  the  cruise   ship  tax.  There  were  two                                                                    
accounts within the  cruise passenger tax; the  head tax and                                                                    
the gambling tax.  Instead of putting the  gambling tax into                                                                    
the GF  the gambling tax  would be  placed in the  fund that                                                                    
was over-appropriated.  If the  gambling tax was  not enough                                                                    
the GF  would be used to  make the account whole.  There was                                                                    
reasonable   comfort  that   the  gambling   tax  would   be                                                                    
sufficient to cover the appropriations.                                                                                         
1:50:29 PM                                                                                                                    
Vice-Chair  Saddler  asked  about the  thinking  behind  not                                                                    
placing the  funds in  GF first and  then making  a separate                                                                    
transfer. He wanted  to understand the thought  of cutting a                                                                    
Ms.  Pitney   explained  that  in  the   previous  year  the                                                                    
legislature  appropriated   several  projects  to   use  the                                                                    
particular  funds.  They  appropriated  more  projects  than                                                                    
available funds. She continued that  the cruise ship tax and                                                                    
the gambling tax fell under  a similar account. Actually the                                                                    
cruise ship tax  did not go to GF but  the gambling tax did.                                                                    
The administration  was suggesting  that instead  of running                                                                    
the  gambling  tax  to  the   GF,  backfill  the  particular                                                                    
shortfall. It  was only to  correct an error from  the prior                                                                    
session.  If  the  situation was  not  corrected,  it  would                                                                    
result in some project repeals.                                                                                                 
Representative Gattis  asked to  refer back  to the  fire at                                                                    
the  maintenance station  near  Kodiak. She  wanted to  know                                                                    
about risk  management and  how the  state intended  to make                                                                    
sure another incident did not occur.                                                                                            
Ms.  Pitney  provided an  example  in  order to  attempt  to                                                                    
answer her  question. The state  had 2500  facilities listed                                                                    
on   the  state   books.  Each   facility  was   assigned  a                                                                    
replacement value.  If the value  was based on  the facility                                                                    
as it existed  rather than a facility that  would be desired                                                                    
if  starting from  scratch. The  replacement value  would be                                                                    
undervalued   in  comparison   to   a  desired   replacement                                                                    
Representative  Gattis  made  the point  that  sometimes  in                                                                    
tough times  the state would  not be  able to build  what it                                                                    
wanted. She  struggled with the particular  line of thinking                                                                    
Ms.  Pitney was  suggesting. She  reiterated that  the state                                                                    
was  experiencing tough  times and  would not  get to  build                                                                    
what it wanted, but what it could afford.                                                                                       
Co-Chair   Thompson  acknowledged   Representative  Wilson's                                                                    
Representative  Gara wanted  clarity about  whether she  was                                                                    
talking about  accounts within the  GF. The  designated fund                                                                    
prohibition in  the constitution did  not allow funds  to be                                                                    
taken  out  of  the  GF.  They were  all  GF  that  she  was                                                                    
referring to. In  otherwise, the state could  reach into any                                                                    
of the GF accounts and place  any of the money into anything                                                                    
the state  wanted. He  asked if she  was only  talking about                                                                    
the GF. Ms. Pitney responded affirmatively.                                                                                     
1:54:56 PM                                                                                                                    
Ms.  Pitney tuned  to the  handout  titled: "FY2016  Capital                                                                    
Amendments Spreadsheet  2-17-15". She reviewed line  1 which                                                                    
amended  Alaska Housing  Finance  Corporation (AHFC)  energy                                                                    
programs. It  was pointed out  to her by  Vice-Chair Saddler                                                                    
that there  was $50  million proposed  in the  out-years for                                                                    
energy programs.  She replied that  it was an  oversight and                                                                    
not the  position of the administration.  The administration                                                                    
reduced  the   out-year  program   amount  for   the  energy                                                                    
Ms. Pitney reviewed lines 2  and 3 indicating that they also                                                                    
addressed  the same  out-year  amounts.  She explained  that                                                                    
line 4  addressed an oversight  where there was  $22 million                                                                    
in  federal  funds  that   were  available.  Therefore,  the                                                                    
federal funds were not included in the capital budget.                                                                          
Ms. Pitney moved  on to line 5, restoration  of the homeless                                                                    
assistance program. It  was an $8 million  grant program the                                                                    
previous year and was reduced  slightly to $7.7 million. The                                                                    
appropriation was missed in the  striped down capital budget                                                                    
and needed restoring.                                                                                                           
Representative Gara asked about  the AHFC out-year money. He                                                                    
stated that  the legislature was not  appropriating any out-                                                                    
year  money.  He  asked  Ms.   Pitney  to  explain  it  more                                                                    
thoroughly.  He  was under  the  impression  that the  prior                                                                    
year's  AHFC  Homeless  Assistance Program  money  was  $9.2                                                                    
million rather than $8 million.                                                                                                 
Ms.  Pitney  responded that  there  were  two programs;  the                                                                    
homeless  assistant program  and the  special needs  housing                                                                    
program which together totaled $9.2  in funding. It was $500                                                                    
thousand the  prior year totaling  $9.7 million.  Going back                                                                    
to the topic  regarding the out-year. She  explained that it                                                                    
was only a correction of  intent. The administration did not                                                                    
say on record that there  was $50 million for weatherization                                                                    
and  energy  programs  when the  expectation  was  that  the                                                                    
amount  would be  much smaller,  closer to  $11 million.  It                                                                    
corrected the  out-years. The administration could  have let                                                                    
it  go but  thought  to  change it  to  be  clear about  its                                                                    
1:57:59 PM                                                                                                                    
Representative Wilson asked if it  was $7.7 million and $1.5                                                                    
million totaling  approximately $9.7  was the amount  in the                                                                    
previous year.  Ms. Pitney responded  that the  two homeless                                                                    
assistance  programs added  up  to $9.2  million versus  the                                                                    
$9.7 million in the prior year.                                                                                                 
Representative  Wilson asked  why the  appropriation was  in                                                                    
the  capital budget  rather than  the operating  budget. She                                                                    
thought  it  belonged  in  the  operating  budget  based  on                                                                    
testimony received in Fairbanks.                                                                                                
Ms.  Pitney  answered  that  it  was,  to  some  degree,  an                                                                    
operating  expense. It  was operating  at a  community grant                                                                    
level, though, more like a  grant program similar to how the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED)  had2 its  community grant  programs set  up. Grants                                                                    
were going  out to community  providers. It could be  in the                                                                    
operating  budget. The  nice  part about  having  it in  the                                                                    
capital  budget was  that the  timing  was not  tied to  the                                                                    
fiscal  year. Programs  could  span  multiple fiscal  years.                                                                    
Some programs were 3-year grants.                                                                                               
Representative  Wilson  was  wondering if  the  grants  were                                                                    
competitive grants.  She wondered  if there were  checks and                                                                    
balances in  place to determine  how many people  were being                                                                    
helped  and   whether  the  program  remained   viable.  She                                                                    
wondered  who  checked  on the  program  to  make  necessary                                                                    
changes  for the  communities because  of  less funding  for                                                                    
capital projects.                                                                                                               
Ms. Pitney  responded that  AHFC had  a robust  program that                                                                    
analyzed  the  priority  of housing  opportunities  and  the                                                                    
distribution  of   funds  to  different  agencies.   Once  a                                                                    
particular  housing project  proved itself,  there would  be                                                                    
ongoing support.  Each of the grantee's  performance numbers                                                                    
were  reviewed. She  suggested that  AHFC could  provide any                                                                    
additional information.                                                                                                         
2:00:29 PM                                                                                                                    
Co-Chair Thompson remarked  that there seemed to  be quite a                                                                    
few agencies  that received AFHC  grants. He was  also aware                                                                    
of  different funding  sources including  mental health.  He                                                                    
asked if  AHFC was  the administrator. Ms.  Pitney responded                                                                    
Ms.  Pitney referred  to lines  7 through  12 and  explained                                                                    
that  they  were  fund  source  changes  from  international                                                                    
airport construction funds  to international airport revenue                                                                    
funds.  She  explained that  it  was  a fund  source  change                                                                    
within the same  airport fund. It was  airport fees allowing                                                                    
use of funds versus construction funds.                                                                                         
Co-Chair  Thompson  commented  that there  were  no  general                                                                    
funds involved.                                                                                                                 
Ms.  Pitney  continued  with  lines  13,  14,  and  15.  She                                                                    
elaborated  that when  the Juneau  Access Improvements  Road                                                                    
and the  Knik Arm Crossing  Project were paused  the funding                                                                    
associated  with   these  projects   were  placed   into  an                                                                    
unallocated line item. The  amendment placed the unallocated                                                                    
line item into the  Non-National Highway System Pavement and                                                                    
Bridge Reconstruction and Refurbishment line.                                                                                   
Representative Pruitt asked whether  it was decided that the                                                                    
money  that was  allocated  for the  two  projects would  be                                                                    
spent but not on the two projects.                                                                                              
Ms. Pitney replied that in  the budget that was forwarded by                                                                    
the Parnell  administration there  were two  projects named,                                                                    
the  Juneau Access  Improvements  Project and  the Knik  Arm                                                                    
Crossing  Project.  She  continued   that  when  the  Walker                                                                    
administration placed a pause  on the projects and submitted                                                                    
the  stripped-down  capital budget  to  include  all of  the                                                                    
federal transportation match funding,  the money for the two                                                                    
projects  was placed  in an  unallocated account.  The money                                                                    
the state received  for transportation was based  on a 90/10                                                                    
match.  The  administration  was changing  where  the  money                                                                    
could be spent in FY 16.                                                                                                        
2:03:57 PM                                                                                                                    
Representative  Pruitt understood  that the  legislature did                                                                    
not  specify   the  use  of   the  money  but   the  Parnell                                                                    
Administration  had  targeted  the two  projects.  He  asked                                                                    
whether  moving the  funding would  hinder the  two projects                                                                    
from moving forward.                                                                                                            
Ms. Pitney  confirmed that is  did slow the progress  of the                                                                    
projects in  FY 16. However,  funding could be  allocated to                                                                    
the projects in FY 17.                                                                                                          
Vice-Chair  Saddler asked  if  the administration  evaluated                                                                    
the effects of pulling money  back from the two projects and                                                                    
the long term consequences of their success.                                                                                    
Ms.  Pitney  responded  that the  department  was  still  in                                                                    
active  analysis of  the projects.  She  furthered that  the                                                                    
intent  for the  Juneau Access  Improvements Project  was to                                                                    
reach a record of  decision. The funding currently available                                                                    
for  the  project  would  get   the  state  to  that  point.                                                                    
Regarding the  Knik Arm Crossing  Project there  was funding                                                                    
for  the  project  but  the project  remained  on  hold  and                                                                    
continued being evaluated.                                                                                                      
Vice-Chair Saddler  asked if  money was  being spent  on the                                                                    
active evaluation process. Ms.  Pitney stated that money was                                                                    
being spent  to pay for  staff time for the  commissioner of                                                                    
DOT, Ms. Pitney, and the chief of staff.                                                                                        
Vice-Chair   Saddler   clarified   that  monies   were   not                                                                    
specifically set aside for the  projects but to absorb other                                                                    
duties. Ms. Pitney responded, "Correct".                                                                                        
Vice-Chair Saddler  wondered about the most  recent activity                                                                    
concerning the evaluation of the  Knik Arm Crossing Project.                                                                    
Ms. Pitney  reported that the  commissioner of DOT  had been                                                                    
spending  a  significant  amount  of time  on  the  project,                                                                    
reviewing the  existing documents and reporting  back to the                                                                    
legislative  finance subcommittee.  She  would  be happy  to                                                                    
provide additional information.                                                                                                 
Vice-Chair  Saddler confirmed  that  he would  like to  know                                                                    
about the most recent work performed.                                                                                           
Representative Gattis  suggested that,  since the  state was                                                                    
uncertain  about whether  to move  forward with  the project                                                                    
and the  commissioner was  still reviewing  documents, maybe                                                                    
the state should  hold off on any fund changes  until it was                                                                    
more  informed about  the  project. She  also  asked if  the                                                                    
funds  were  allocated  specific  to  the  two  projects  of                                                                    
discussion and  asked if  the state would  have to  pay them                                                                    
Ms.  Pitney  responded that  where  the  federal funds  were                                                                    
spent was  determined by state  priorities. The  funds could                                                                    
be  adjusted to  the priorities  decided upon  collectively.                                                                    
The  amendment would  allow for  programing  of the  related                                                                    
funds in  FY 16.  The evaluation  took into  account whether                                                                    
payback  would be  required  for the  two  projects. It  was                                                                    
determined that  payback would  not be  necessary currently.                                                                    
The state had  up to an estimated 20 years  to continue with                                                                    
the project before the state would be liable for the funds.                                                                     
Co-Chair  Thompson  acknowledged  that Co-Chair  Neuman  had                                                                    
joined the meeting.                                                                                                             
2:09:31 PM                                                                                                                    
Representative Gattis  mentioned the record of  decision and                                                                    
the  environmental impact  study  that she  did not  believe                                                                    
could  last  20  years.  There were  things  the  state  was                                                                    
looking  for such  as a  record of  decision for  the Juneau                                                                    
Access Improvements Project and  which the Knik Arm Crossing                                                                    
Project had already received.  She believed more information                                                                    
was needed.                                                                                                                     
Representative  Munoz  asked  if  monies  allocated  to  the                                                                    
National Highway System (NHS) to  projects within the NHA be                                                                    
redirected to  non-highway system  projects as  indicated in                                                                    
the  amendment. She  was under  the  impression that  monies                                                                    
allocate   or  intended   for  NHS   could  not   simply  be                                                                    
reallocate. Ms. Pitney responded that  she would get back to                                                                    
her regarding  on her question.  She reiterated that  it was                                                                    
her impression that it was based on the state's priorities.                                                                     
Representative Munoz stated that  her understanding was that                                                                    
the $70 million was allocated  to the two projects, and that                                                                    
in  order to  be reallocated  they had  to be  reassigned to                                                                    
project-ready NHS projects. She  relayed that what was shown                                                                    
on  the  amendment indicated  that  was  not completely  the                                                                    
case. She asked Ms. Pitney to get clarity on the point.                                                                         
Ms. Pitney  responded that the  funding was  never allocated                                                                    
to the  two projects  because it was  the current  bill that                                                                    
set the priorities. She relayed  that when the first capital                                                                    
budget was  submitted as  unallocated. The  amendment pushed                                                                    
the funding into  a project line item on  the priority list.                                                                    
However, the priority  list was longer than  there was money                                                                    
available  to allow  for  changes and  to  utilize the  full                                                                    
2:12:11 PM                                                                                                                    
Representative Guttenberg asked about  the NHS money and its                                                                    
allocation. He understood that in  anticipation of the money                                                                    
being  received   for  a  specific  project   the  Statewide                                                                    
Transportation Improvement Program  (STIP) list was amended.                                                                    
He  thought it  was  reflected  in amendment  11  or 12.  In                                                                    
expectation  of  the  Juneau  Access  Improvements  Project,                                                                    
other projects had been moved  down the list and out several                                                                    
years  or off  of the  list  entirely. He  wanted to  better                                                                    
understand what had changed due  to all of the federal money                                                                    
being allocated  for specific projects  rather than  being a                                                                    
statewide  allocation. He  asked if  the sideboards  changed                                                                    
when the fund source  changed from the International Airport                                                                    
Revenue  Fund  to  the International  Airports  Construction                                                                    
Fund. In  other words, he  wondered if the  requirements and                                                                    
specifications  of the  use of  monies  changed because  the                                                                    
funding source had been shifted from one source to another.                                                                     
Ms.  Pitney asked  for Representative  Guttenberg to  repeat                                                                    
his question.                                                                                                                   
Representative  Guttenberg referred  to  line  12 under  the                                                                    
fund source  column. He pointed  out that  the International                                                                    
Airports  Revenue  Fund  was changed  to  the  International                                                                    
Airports Construction  Fund. He wondered with  the change if                                                                    
the sideboards changed as well.  Ms. Pitney replied that she                                                                    
would get back to him.                                                                                                          
Representative Gara  asked whether  the move of  $70 million                                                                    
was a  reallocation of funding  that was allocated  in prior                                                                    
years. He  wanted to  confirm that  she was  establishing FY                                                                    
16's budget and changing what  the previous governor had put                                                                    
in  his placeholder  budget outlining  where  the money  was                                                                    
going to be used. He wanted  to confirm that she was not re-                                                                    
appropriating money from previous years.                                                                                        
Ms. Pitney  indicated that Representative Gara  was correct.                                                                    
The  funding had  never been  attached to  the two  projects                                                                    
being  discussed because  the only  capital budget  that was                                                                    
submitted was a significantly  stripped down budget that did                                                                    
not include specifics.                                                                                                          
2:15:41 PM                                                                                                                    
Co-Chair  Neuman  asked  about the  potential  consideration                                                                    
taken  with infrastructure  projects  around  the state.  He                                                                    
indicated  his   understanding  was   that  the   state  had                                                                    
approximately $4 billion which would  last about 3 years for                                                                    
major  projects in  the  state. Some  of  the projects  were                                                                    
scheduled to  initiate in years, 4,  5, and 6 so  that there                                                                    
were jobs  in communities.  He relayed that  he had  had Mr.                                                                    
Gunnar  Knapp  of  the  Institute  of  Social  and  Economic                                                                    
Research (ISER)  do some work  on reductions to  the budget.                                                                    
In terms of capital budget  reductions, about 950 jobs would                                                                    
be  reduced  for  every  $100   million  in  decrements.  He                                                                    
believed  there  would  be  substantial  reductions  in  the                                                                    
state's  operating budget  in the  current year,  accounting                                                                    
for several jobs.  He stressed that in years 4,  5, and 6 if                                                                    
there  were  not  jobs in  the  areas  doing  infrastructure                                                                    
projects,   it   would   have  a   detrimental   effect   on                                                                    
communities.  He  opined that  DPS,  DOC,  and DHSS  budgets                                                                    
would skyrocket.  He furthered  that when people  lost their                                                                    
jobs they often turned to  drugs and alcohol. There were bad                                                                    
things that happened to people  on drugs and alcohol. He was                                                                    
concerned  whether the  department had  looked at  the cause                                                                    
and effect  of on the size  of the capital budget  and years                                                                    
4, 5,  and 6 to ensure  the state had a  stable economy when                                                                    
looking at projects.                                                                                                            
Ms. Pitney  responded that one  of the key criteria  for the                                                                    
budget  submitted in  the current  year  was moderating  the                                                                    
spending  reduction  to  ensure   the  state  had  a  stable                                                                    
economy. It  was a step  down and maximized  federal capital                                                                    
funding. The  first capital  budget submission  was strictly                                                                    
leveraged  with  federal   funds  seeking  maximum  external                                                                    
funding. It was  also a section in the  overall state budget                                                                    
where  reductions could  be  applied  most expediently.  She                                                                    
maintained that  the capital  budget was  very thin  and was                                                                    
anticipated  to   be  thin  in  the   following  years.  She                                                                    
furthered that  the addition of  the homeless  grant program                                                                    
through  Alaska Housing  Finance Corporation  (AHFC) totaled                                                                    
under  $200  million,  of  which  $35  million  was  through                                                                    
reappropriations. She  added that  there was just  over $150                                                                    
million  net  funding for  the  capital  budget. The  future                                                                    
state  capital budgets  would also  be  fairly limited.  The                                                                    
state   would  likely   have  to   turn  to   public/private                                                                    
partnerships or external  resources for project investments.                                                                    
She  explained  that  if  a project  did  not  have  revenue                                                                    
potential  it would  be very  difficult to  make investments                                                                    
from the  administration's view.  Project priorities  of the                                                                    
legislature   would   be    well   considered   within   the                                                                    
2:19:52 PM                                                                                                                    
Co-Chair Neuman  believed that the  monies for  AHFC related                                                                    
projects  were 100  percent federal  pass-through funds,  as                                                                    
reported by Mr. Butcher.  He noted that pass-through funding                                                                    
would not affect  the state's capital budget.  He added that                                                                    
the Federal  Highway Department  [Administration] considered                                                                    
Alaska  a  net  positive   state.  In  other  words,  Alaska                                                                    
received  more in  funding for  STIP  than what  it paid  in                                                                    
taxes  associated with  buying  fuel. Instead  of a  10-to-1                                                                    
ratio for  Alaska's dollars it  was likely Alaska  would see                                                                    
12, 13, or 15 to 1 on  the match projects. He thought it was                                                                    
exceptional  that the  state had  the opportunities  to take                                                                    
advantage    of   accessing    the   funds    for   building                                                                    
infrastructure.  He  asked  whether  she  had  analyzed  the                                                                    
Ms. Pitney indicated she was  unclear of the potential for a                                                                    
1 to  12 or  13 match.  She agreed that  the ratio  would be                                                                    
exceptional.  She understood  the match  to  be a  90 to  10                                                                    
match.  She continued  that  there were  two  pieces to  the                                                                    
housing  program. The  first was  $22 million  federal pass-                                                                    
through dollars.  The second was  $9.2 million  for homeless                                                                    
assistance funded by the state.                                                                                                 
2:21:43 PM                                                                                                                    
Co-Chair Thompson  recognized that  Speaker Chenault  was in                                                                    
the audience.                                                                                                                   
Vice-Chair Saddler asked  about Governor Walker's intentions                                                                    
for  the Knik  Arm Crossing  Project and  the Juneau  Access                                                                    
Improvements  Project.   If  the  answer  was   to  continue                                                                    
studying them, he wanted to  know about how long the studies                                                                    
would take.                                                                                                                     
Ms. Pitney  responded that in  regards to the  Juneau Access                                                                    
Improvements  Project  the  administration's intent  was  to                                                                    
proceed  to  the record  of  decision.  The funding  of  the                                                                    
project took  the state to  that point without  delaying the                                                                    
Vice-Chair Saddler asked how long it  would take to get to a                                                                    
record of decision. Ms. Pitney  responded that the record of                                                                    
decision would  be about  a year from  the current  day. She                                                                    
would  double check  the timeline  but noted  it was  a ways                                                                    
off.  In  regards to  the  Knik  Arm Crossing  Project,  she                                                                    
reported the  goal was  to get  as much  value for  the work                                                                    
that   had  been   completed  to-date   in  getting   to  an                                                                    
environmental  impact study  (EIS). She  added that  the EIS                                                                    
was the  next major piece  of the project, a  time consuming                                                                    
part of the project.                                                                                                            
Vice-Chair  Saddler   asked  if  Ms.  Pitney   estimated  it                                                                    
happening  more  than a  year  from  the current  date.  Ms.                                                                    
Pitney  thought   so.  She  added   that  there   were  many                                                                    
components to the EIS.                                                                                                          
Vice-Chair  Saddler  asked  Ms.   Pitney  for  a  best-guess                                                                    
estimate  on  how  long  it  would take  for  the  state  to                                                                    
complete the EIS.  Ms. Pitney responded that  she would have                                                                    
to get back to him.                                                                                                             
Vice-Chair  Saddler wondered  about  the  intentions of  the                                                                    
administration  following the  completion  of  the EIS.  Ms.                                                                    
Pitney   stated   that  the   EIS   was   critical  to   the                                                                    
administration's intention.                                                                                                     
Vice-Chair Saddler  asked if the administration  intended to                                                                    
proceed.  Ms. Pitney  suggested that  if the  state received                                                                    
the EIS there  would be an opportunity  to proceed depending                                                                    
on the timeframe.                                                                                                               
Vice-Chair  Saddler asked  whether Ms.  Pitney could  answer                                                                    
the  question as  to whether  the state  would proceed.  Ms.                                                                    
Pitney answered, "No".                                                                                                          
Co-Chair  Neuman  commented  that  regarding  the  Knik  Arm                                                                    
Crossing Project the current funding  mechanism set in HB 23                                                                    
[Legislation  passed in  2014 -  Title:  Knik Arm  Crossing]                                                                    
allowed for a  total of $5 million additional  costs to move                                                                    
on the project. The rest of  the funding would come from the                                                                    
states  revenue for  the STIP  match grants.  Currently, the                                                                    
state's  capital costs  totaled $5  million to  complete the                                                                    
2:24:49 PM                                                                                                                    
Ms.  Pitney discussed  line 16.  The  amendment was  another                                                                    
federal   pass-through  of   funding  this   time  for   the                                                                    
maintenance and operations of the  Adak Airport. The funding                                                                    
was  overlooked  in the  first  version  of the  budget  and                                                                    
needed to  be corrected.  She moved on  to the  amendment on                                                                    
line  17   which  was  a  project   list  update  containing                                                                    
additional  information  than   what  the  previous  capital                                                                    
budget included. It was a priority list of projects.                                                                            
Ms.  Pitney  turned to  the  4-page  handout containing  the                                                                    
Operating  budget amendments.  She began  with line  1 which                                                                    
restored   funding  through   reallocation  for   the  named                                                                    
recipient grant for Alaska Native  arts marketing. It was in                                                                    
the  same  Commerce,   Community  and  Economic  Development                                                                    
component as tourism and seafood  marketing. It was the only                                                                    
program within  the component that was  entirely eliminated.                                                                    
The request  was for  one additional year  in order  to move                                                                    
into a more privatized approach.                                                                                                
Vice-Chair  Saddler  asked if  the  $300  thousand in  funds                                                                    
would  mark the  final year  of the  marketing program.  Ms.                                                                    
Pitney responded  that DCCED  had hoped  they were  ready to                                                                    
privatize in the  current year but one more  year was needed                                                                    
to make the transition.                                                                                                         
Vice-Chair Saddler  asked if it  would be the final  year of                                                                    
state support. Ms. Pitney answered  that it might come in at                                                                    
a slightly lower or largely  lower amount. The intent was to                                                                    
see it privatized.                                                                                                              
Vice-Chair Saddler asked  if it was possible  that a request                                                                    
would  be  submitted in  FY  17  for additional  funds.  Ms.                                                                    
Pitney answered that it was possible.                                                                                           
Vice-Chair  Saddler  asked if  her  answer  was, "Yes".  Ms.                                                                    
Pitney stated, "Yes, it is possible."                                                                                           
2:28:09 PM                                                                                                                    
Representative  Wilson  asked  why  it was  not  a  one-time                                                                    
increment. Ms. Pitney was just learning about the caveats.                                                                      
Representative Wilson  asked how  long the project  had been                                                                    
operating. Ms. Pitney believed it  had been ongoing for over                                                                    
8 years.                                                                                                                        
Co-Chair Neuman asked Ms. Pitney  if the project was part of                                                                    
the Silver Hand Program.                                                                                                        
Representative Munoz thought  it was a grant  that helped to                                                                    
promote cottage  industries including  the fur  industry and                                                                    
native crafts.  Sea Alaska  Heritage Institute  was involved                                                                    
with the grant.                                                                                                                 
Co-Chair  Thompson asked  Representative Munoz  if she  knew                                                                    
how long it had been going on.                                                                                                  
Representative Munoz believed it had  been around for 4 or 5                                                                    
Ms.  Pitney moved  to line  4 which  partially restored  the                                                                    
Regional and  Community Jails Program.  In 2011  the program                                                                    
was funded  at $6.5  million and  in 2015  it was  funded at                                                                    
$10.5  million. The  request would  restore the  program but                                                                    
reduced  the   amount  which   allowed  The   Department  of                                                                    
Corrections  (DOC)   to  renegotiate  the   community  jails                                                                    
contracts based on  the usage needed for  each community and                                                                    
to address any transportation impact for public safety.                                                                         
Ms. Pitney  continued to line  6 to an  amendment addressing                                                                    
an accounting need.  Interagency receipts and post-secondary                                                                    
receipts would be assigned.  It was post-secondary reporting                                                                    
that  would  make  separation   and  transparency  of  their                                                                    
accounts. There  were no funding  changes. Rather, it  was a                                                                    
double counting through interagency receipts.                                                                                   
Representative  Guttenberg asked  about how  much of  actual                                                                    
student   loan  money   or  interest   was  being   used  or                                                                    
transferred within  the department.  He was aware  of things                                                                    
that  might come  up as  part of  the administration  of any                                                                    
program. However, he  had a significant issue  with the high                                                                    
cost of student loans.                                                                                                          
Ms. Pitney answered that it had  nothing to do with the cost                                                                    
of  doing business  or the  number of  loans or  interest on                                                                    
student loans.  The amendment set  up a separate  account in                                                                    
order  that the  post-secondary  receipts showed  up in  one                                                                    
account. There was an inner agency receipt for the post-                                                                        
secondary  receipts   to  be  posted.   It  was   merely  an                                                                    
accounting exercise  in order  to capture  all of  the post-                                                                    
secondary receipts and all of the spending within post-                                                                         
secondary education.  It was a  net zero impact in  terms of                                                                    
the   cost.   She   could  follow-up   with   Representative                                                                    
Guttenberg's question regarding how  much was going into the                                                                    
administration of  student loans  including the  loan totals                                                                    
and volume over time.                                                                                                           
Representative  Guttenberg  understood   it  was  net  zero.                                                                    
However,  he wondered  what  part of  the  funds were  being                                                                    
used. He  suggested that it could  still be a net  zero even                                                                    
when some of the funds were being used.                                                                                         
Ms. Pitney  responded that  there was  no difference  in the                                                                    
use of funds because of the accounting exercise.                                                                                
2:33:08 PM                                                                                                                    
Representative Munoz  wanted to  return to the  reduction in                                                                    
the  tourism  and marketing  activities.  She  asked if  the                                                                    
amount  that  was  restored  for   the  Alaska  Native  arts                                                                    
marketing was taken from tourism  and seafood marketing. Ms.                                                                    
Pitney responded in the affirmative.                                                                                            
Representative  Munoz  asked  for the  balance  for  tourism                                                                    
marketing  and for  the Alaska  Seafood Marketing  Institute                                                                    
(ASMI).  Ms. Pitney  responded that  $18.7 million  was left                                                                    
for tourism marketing and $24 million was left for AMSI.                                                                        
Representative Munoz  was under  the impression that  in the                                                                    
prior year  tourism marketing was  approved at  $16 million.                                                                    
It appeared that the amount was increasing.                                                                                     
Ms. Pitney replied  that it was total funds.  She added that                                                                    
of  the  $18  million  $16  million  would  be  unrestricted                                                                    
general funds. She was  providing unrestricted general funds                                                                    
as well as other funds.                                                                                                         
Representative  Munoz asked  for  the  state's portion.  Ms.                                                                    
Pitney would provide the information later.                                                                                     
Representative Munoz  requested the  numbers on  tourism and                                                                    
seafood marketing.  Ms. Pitney  continued with line  7 which                                                                    
was  an additional  decrement for  reform  for the  Medicaid                                                                    
program.   Through   discussions    with   DHSS   concerning                                                                    
additional  reforms that  could  be  implemented beyond  the                                                                    
cost shift from expansion, there  was a $20 million decrease                                                                    
for components expected from Medicaid reform.                                                                                   
Representative  Wilson commented  that reform  and expansion                                                                    
were blended together. She asked  whether the $20 million on                                                                    
line  7 came  from just  reform within  the division  rather                                                                    
than taking any expansion for the savings.                                                                                      
Ms. Pitney stated  that there were components  in the reform                                                                    
that required a waiver from  the Federal Center for Medicaid                                                                    
Services. The waivers had a  higher success possibility with                                                                    
expansion. The amount was based  on the existing population.                                                                    
The amendment  reflected the potential  cost savings  to the                                                                    
state. Some components  were waiver dependent and  had to be                                                                    
approved by the Federal  Government. Assuming the waiver was                                                                    
approved the  state would realize  the savings.  Approval of                                                                    
the waivers could require the state to expand.                                                                                  
2:37:25 PM                                                                                                                    
Representative  Wilson  asked  for   the  details  from  the                                                                    
division  for   the  $20  million.  She   wanted  to  better                                                                    
understand  which services  would  take  expansion and  what                                                                    
regulations would have to be  evaluated to make the waivers.                                                                    
She was divided.  She was also concerned with  the law suits                                                                    
associated  with the  current  waiver system  and wanted  to                                                                    
avoid additional lawsuits.                                                                                                      
Co-Chair  Thompson commented  that  he  and Co-Chair  Neuman                                                                    
were looking  for additional  information and  would provide                                                                    
it to the committee.                                                                                                            
Vice-Chair  Saddler  asked  about components  that  required                                                                    
waivers.  He  wondered what  she  meant  when she  said  the                                                                    
waivers had  higher success.  He asked if  she meant  a high                                                                    
reimbursement  rate,  a  higher Federal  Medical  Assistance                                                                    
Percentage  (FMAP),   or  a   higher  likelihood   of  being                                                                    
approved. Ms. Pitney  answered that she meant  that it would                                                                    
be a higher likelihood of being approved.                                                                                       
Ms. Pitney discussed lines 8  and 9. She explained that with                                                                    
the  zeroing  out  of  monies  from  the  GF  for  aerospace                                                                    
operations the  Department of Military and  Veterans Affairs                                                                    
(DMVA) had  requested that  aerospace receipts  be increased                                                                    
to have  the opportunity to earn  additional funding through                                                                    
privatization or efforts working with industry.                                                                                 
2:39:20 PM                                                                                                                    
Ms. Pitney looked at lines  10 through 14. She reported that                                                                    
combined  was an  internal reallocation  in  DOT to  restore                                                                    
ferry service.  It represented a one-time  reduction in each                                                                    
region of the  highways to restore the ferry  service due to                                                                    
the reduction. She suggested that  it would allow the people                                                                    
with  ferry  tickets  to  utilize  them  with  uninterrupted                                                                    
schedules.   She  emphasized   that   it   was  a   one-time                                                                    
Co-Chair  Thompson   asked  about  the  $6.29   million.  He                                                                    
understood that it reduced highways  and airports but was an                                                                    
unallocated amount.  He was concerned  with the  funds being                                                                    
unallocated.  He   also  understood   that  the   number  of                                                                    
reservations  that would  be impacted  only generated  about                                                                    
$70  thousand in  revenues  but would  cost  the state  $3.5                                                                    
[million]  and $2.7  million of  that was  the fuel  trigger                                                                    
which did  not take effect unless  the price of oil  was $70                                                                    
per barrel.                                                                                                                     
Ms.  Pitney  explained that  the  fuel  trigger funding  was                                                                    
eliminated. The  fuel prices had not  come down commensurate                                                                    
to the loss  in funding from the fuel  trigger mechanism. In                                                                    
other words,  the cost savings  were below the  savings that                                                                    
the price  of fuel allowed.  She continued that  the revenue                                                                    
reduction from  the loss of  the fuel trigger was  more than                                                                    
the  cost savings  AMHS  realized from  the  lower price  of                                                                    
fuel.  The  revenue reduction  from  the  loss of  the  fuel                                                                    
trigger was more than the  cost saving AMHS would have based                                                                    
on the  price of fuel. The  price of fuel had  not come down                                                                    
as quickly as  the price of a barrel of  oil. Another factor                                                                    
was  that the  ferry  schedule was  posted  in the  previous                                                                    
October. The schedule that would  be posted in the following                                                                    
October would be less robust reflective of the reduction.                                                                       
Co-Chair  Thompson   did  not  think  the   legislature  was                                                                    
eliminating services completely. He  opined that it would be                                                                    
more  frugal  to contact  the  people  with reservations  to                                                                    
reschedule. He did not believe  the state would lose revenue                                                                    
and expressed  his concerns about  shifting money  away from                                                                    
highways and airports.                                                                                                          
2:42:54 PM                                                                                                                    
Representative  Wilson wanted  to know  why one  service was                                                                    
more  important than  another. She  explained that  the haul                                                                    
road consumed  funding for the  Northern region  taking away                                                                    
from   the  rest   of  the   region.  She   asked  for   the                                                                    
justification that  any of  the areas  could go  without the                                                                    
funds for 1 year.                                                                                                               
Ms. Pitney explained  that it was intended to  be a one-time                                                                    
allocation.  She  thought  there   would  be  slightly  less                                                                    
maintenance especially if Alaska had  a similar snow year as                                                                    
the previous year. It was understood  that it could not be a                                                                    
long-term  appropriation   because  of  the   importance  of                                                                    
maintaining   roads,  but   the  state   could  handle   the                                                                    
reallocation for 1 year.                                                                                                        
Representative Wilson  commented on complaints  she received                                                                    
about  the  condition  of  the  haul  road  and  it  needing                                                                    
additional  maintenance. She  mentioned the  savings to  the                                                                    
state  in  using  brine  on   the  roads  in  Fairbanks  and                                                                    
potentially in  Anchorage. However,  she felt  it was  not a                                                                    
savings  on vehicles.  She  furthered  that priorities  were                                                                    
being established by  taking funds from one  area and moving                                                                    
them  into  another.  She  was  not  in  favor  of  delaying                                                                    
maintenance to  the haul road,  the state's lifeline  to the                                                                    
oil  fields.  Additionally,  she   was  concern  about  what                                                                    
message  was  being  sent.  She   reiterated  that  she  was                                                                    
uncertain  about the  savings  the state  incurred by  using                                                                    
brine versus the cost to vehicle owners.                                                                                        
Representative Munoz  agreed that  it was difficult  to take                                                                    
from  one  area  to  give to  another.  However,  she  asked                                                                    
committee members to keep in  mind that AMHS was the highway                                                                    
system in coastal  Alaska. It was how  people were connected                                                                    
to  the   urban  centers.  She  opined   that  anything  the                                                                    
legislature  could  do  to maintain  or  support  the  ferry                                                                    
system was  vital to a portion  of the state. She  asked Ms.                                                                    
Pitney if the agencies had  looked at efficiencies for shore                                                                    
side operations. She  was aware that the shore  side part of                                                                    
AMHS had grown a great deal  in the previous 10 to 15 years.                                                                    
She  wondered  if  Ms.  Pitney had  looked  for  shore  side                                                                    
operation efficiencies so that  the legislature did not have                                                                    
to  cut   the  actual  service   of  the  ferry   system  so                                                                    
Ms.  Pitney  said she  would  talk  with the  Department  of                                                                    
Transportation  and   Public  Facilities  (DOT)   about  its                                                                    
operation savings.                                                                                                              
Representative Gara understood from  the prior document that                                                                    
there  would be  $12.5  million for  tourism and  marketing.                                                                    
However the  current document showed  $18 million.  He asked                                                                    
if the difference  of about $6 million was  a federal match.                                                                    
He wanted to better understand  how the federal match worked                                                                    
and asked  if the state would  lose the federal match  as it                                                                    
moved the state portion up  or down. Ms. Pitney would follow                                                                    
up with Representative Gara.                                                                                                    
2:46:44 PM                                                                                                                    
Vice-Chair Saddler  referred to the ferry  reallocations. Of                                                                    
the reservations made that the  administration was hoping to                                                                    
avoid  disrupting,  he wanted  to  know  how many  were  for                                                                    
Alaskans  and  how  many  were   for  visitors.  Ms.  Pitney                                                                    
responded that she would provide the information.                                                                               
Vice-Chair  Saddler  asked  if   there  were  any  financial                                                                    
penalties  associated with  not  honoring the  reservations.                                                                    
Ms. Pitney answered  that she did not know  of any financial                                                                    
Representative Pruitt asked about  what kind of cost savings                                                                    
would be  seen. He  wondered if certain  roads would  not be                                                                    
repaired  or snow  removal services  would be  curtailed. He                                                                    
was  concerned  with the  potential  impact  to the  central                                                                    
Ms.  Pitney   responded  that  there  would   be  less  road                                                                    
clearing,  less  pothole  maintenance,  and  generally  less                                                                    
Representative Pruitt concluded that  in order to place more                                                                    
money  into AMHS  it would  mean less  services. Ms.  Pitney                                                                    
responded affirmatively.                                                                                                        
Representative  Gattis relayed  that while  working for  the                                                                    
airlines  the   airline  schedule  changed   frequently  and                                                                    
passengers  would adjust  accordingly. She  did not  believe                                                                    
maintaining the ferry schedule was  a strong enough argument                                                                    
and asked the chairman to  make sure the committee looked at                                                                    
the issue more tightly.                                                                                                         
Co-Chair  Thompson mentioned  as  a  point of  clarification                                                                    
that he  was looking at  it. He explained that  $6.2 million                                                                    
reduced 39  weeks of ferry  service. In 2007 and  2008 there                                                                    
were 74  weeks of  ferry service added.  He reported  he was                                                                    
looking  at the  amount of  service being  offered, in  what                                                                    
areas, and how the state was benefiting.                                                                                        
2:50:00 PM                                                                                                                    
Ms. Pitney  reported that  line 17  incorporated flexibility                                                                    
language, a request from the  administration. It allowed for                                                                    
a 5 percent unrestricted  general fund (UGF) transfer within                                                                    
a department  and a 2  percent transfer  across departments.                                                                    
She  stated that  the depth  of reductions  was going  to be                                                                    
very difficult  and there would be  unintended consequences.                                                                    
The administration  was requesting the flexibility  of being                                                                    
able  to  move  within  and across  departments  to  address                                                                    
certain  items.  She added  that,  with  the potential  cuts                                                                    
anticipated,  it   would  be   helpful  in   addressing  any                                                                    
unintended consequences that might arise.                                                                                       
Co-Chair   Neuman  acknowledged   being   provided  with   a                                                                    
percentage amount  but wondered  about a dollar  figure. Ms.                                                                    
Pitney replied  that if  there was a  $100 million  budget 2                                                                    
percent  would  equal  $2 million.  She  reported  that  the                                                                    
highway  portion of  DOT was  approximately $114  million, 5                                                                    
percent  of  which would  equal  just  over $5  million.  It                                                                    
depended on  the amount of funding  within the appropriation                                                                    
being discussed.                                                                                                                
Co-Chair  Neuman noted  $10 million  that  the governor  was                                                                    
requesting   to   be  placed   in   his   budget  to   cover                                                                    
unanticipated  costs resulting  from  budget reductions.  He                                                                    
asked if  he was accurate.  Ms. Pitney responded  that given                                                                    
the reception  that the $10  million of  unallocated funding                                                                    
had it was a back-up flexibility approach.                                                                                      
Co-Chair  Neuman asked,  "So  that was  a  yes?" Ms.  Pitney                                                                    
responded, "That is a yes."                                                                                                     
Representative  Guttenberg remarked  that  with the  current                                                                    
budget exercises the governor was  clearly going to need the                                                                    
ability to manage the state's  accounts. He recalled that in                                                                    
the previous  year the commissioner of  Department of Health                                                                    
and Social Services (DHSS) talked  about the department only                                                                    
working  because of  the governor's  flexibility to  balance                                                                    
numbers and  shift things around temporarily.  He believed a                                                                    
certain  amount  of flexibility  to  move  money around  was                                                                    
necessary. He wondered if the  legislature was adding to the                                                                    
Ms.  Pitney replied  that  the  administration preferred  to                                                                    
have  $10  million  available   in  addition  to  individual                                                                    
appropriations. She emphasized that  the ability to transfer                                                                    
was not additional money, rather,  it was having the ability                                                                    
to move money within and across departments.                                                                                    
2:54:43 PM                                                                                                                    
Representative  Guttenberg   asked  if  the   provision  was                                                                    
expanding the authority to transfer  money within and across                                                                    
departments. Ms.  Pitney stated  that it  expanded authority                                                                    
and raised it to the appropriation level.                                                                                       
Representative  Pruitt  wanted  the committee  to  readdress                                                                    
line  15   and  16.   He  wanted   an  assurance   that  the                                                                    
administration would not move  money from something that was                                                                    
important to  the legislature. He stressed  that the purpose                                                                    
of  the appropriation  process was  for  the legislature  to                                                                    
direct and the  governor to agree or  disagree. He commented                                                                    
that it  seemed like  the legislature  would be  providing a                                                                    
blank check.                                                                                                                    
Ms. Pitney responded  that there were tight  sideboards of a                                                                    
2  percent limit  and a  5 percent  limit that  applied. She                                                                    
asserted   that  the   assumption   had  to   be  that   the                                                                    
administration was  operating for Alaskans and  had the best                                                                    
interest of  Alaskans in mind. It  had to be clear  that the                                                                    
provision was  available to  be able  to address  the things                                                                    
that  through  the  budget   process  were  acknowledged  as                                                                    
important.  If there  was a  situation in  which there  were                                                                    
unintended  consequences   providing  for  the   ability  to                                                                    
address them. There  would not be any  guarantees about what                                                                    
decisions would  be made  but the  assumption would  be that                                                                    
whatever decisions were made would  be on behalf of the best                                                                    
interest of Alaskans.                                                                                                           
Representative Pruitt  agreed with Ms. Pitney  about looking                                                                    
out for  the best  interest of Alaskans  and that  the state                                                                    
would have  to live under  the new budget  circumstances. He                                                                    
believed  that  one  of  the   challenges  in  the  previous                                                                    
administration   was  that   there  were   items  that   the                                                                    
legislature  did not  want to  continue funding  but somehow                                                                    
money  was applied  to those  items. He  suggested that  the                                                                    
administration was  asking for  the same type  of authority.                                                                    
He  did   not  suppose   the  legislature  liked   the  idea                                                                    
currently,  as it  did not  like it  previously. He  was not                                                                    
implying that such a scenario  would occur but unfortunately                                                                    
there was history of it happening.                                                                                              
Ms.  Pitney thought  that the  state's budget  situation was                                                                    
very  different  with  the significant  downturn  versus  an                                                                    
ever-increasing  budget  over  the previous  15  years.  The                                                                    
choices, decisions,  and personnel  actions that  would have                                                                    
to be  made because of  the reductions that would  be passed                                                                    
by the  legislature were  going to be  felt. She  thought it                                                                    
allowed  for  a  timely  resolution when  going  beyond  the                                                                    
intent of both the legislature and the administration.                                                                          
2:59:15 PM                                                                                                                    
Vice-Chair  Saddler   understood  that   the  administration                                                                    
already  had  broad  authority   to  transfer  money  across                                                                    
allocations.  He suggested  the  supplemental  budget was  a                                                                    
vehicle  for addressing  unanticipated consequences  as well                                                                    
as RPL's [Revised Program  Legislative Notices]. He wondered                                                                    
why the  current authority was  insufficient and  also asked                                                                    
how Ms. Pitney arrived at 2  and 5 percent. He asked why she                                                                    
did not ask for 10 percent  or 4 percent. If flexibility was                                                                    
good, more was better.                                                                                                          
Ms.   Pitney   answered   that   in   operating   in   large                                                                    
organizations  1 and  2  percent  changes corrected  several                                                                    
missteps. She thought that across  departments the 2 percent                                                                    
was  very low  and that  within departments  it was  at a  5                                                                    
percent  level.  The idea  was  to  keep the  percentage  as                                                                    
minimal  as  possible  but  still  create  flexibility.  She                                                                    
furthered that  in looking  at what  other states  and found                                                                    
that not  every state had  flexibility but several  did. She                                                                    
devised  the percentage  levels based  on the  range of  the                                                                    
capacity of other states.                                                                                                       
Vice-Chair Saddler  was reminded of the  word usurpation. He                                                                    
thought it was fair to say  that she was correct in assuming                                                                    
committee members  would not be receptive  to the percentage                                                                    
Representative Gara indicated he  was open to something more                                                                    
creative.  He also  understood  Ms.  Pitney's reluctance  in                                                                    
waiting  for a  supplemental in  the following  year because                                                                    
supplementals typically  did not pass  until the end  of the                                                                    
session.  He reminded  members that  they were  making large                                                                    
budget cuts  and she  was trying  to find  a way  to address                                                                    
mistakes  without  waiting a  year.  He  suggested doing  it                                                                    
through the supplemental.                                                                                                       
Co-Chair Thompson asked  Ms. Pitney to return  to line items                                                                    
15 and  16. Ms. Pitney  explained that between  the endorsed                                                                    
budget  and the  current  set of  amendments the  university                                                                    
settled  on its  UAFT  [University of  Alaska Federation  of                                                                    
Teachers] bargaining.  The monetary  terms of  that contract                                                                    
equaled  $1.5  million  of  which   $754  thousand  were  GF                                                                    
dollars.  Line  16  was  supposed  to  read,  "To  meet  the                                                                    
administration's  target  for  the  university  this  is  an                                                                    
additional  reduction in  GF." Essentially  it would  offset                                                                    
and have zero  general funds. It was not  intended to reduce                                                                    
the  GF   portion  of  the   contract  but  to   reduce  the                                                                    
university's allocation  by that amount. The  net effect was                                                                    
to  include  the  appropriation  of  $1.5  million  for  the                                                                    
negotiated  contract but  reduce the  overall allocation  to                                                                    
meet the governor's target amount.                                                                                              
3:03:10 PM                                                                                                                    
Representative Wilson  relayed that private  businesses were                                                                    
not  receiving 2  percent  every year.  She  was hoping  Ms.                                                                    
Pitney  was  sending a  message  that  the state  would  not                                                                    
accept the $754 thousand and  that other agencies would have                                                                    
to find money from within their  own. It was the only agency                                                                    
to come back  asking for money. She wondered  why Ms. Pitney                                                                    
would not ask the university  to find the money from within.                                                                    
She thought  negotiations should be based  on current income                                                                    
rather than potential income.                                                                                                   
Ms.  Pitney  informed  the  committee  that  all  state  and                                                                    
university   negotiated    contracts   went    through   the                                                                    
legislature and  each negotiated  contract was  addressed in                                                                    
the  language section  of the  operating bill.  The language                                                                    
stated that a certain appropriation  covered the cost of the                                                                    
negotiated contract  for a particular  collective bargaining                                                                    
unit.  If   language  was  in   the  operating   budget  all                                                                    
negotiated  contracts had  to be  paid and  honored. If  the                                                                    
legislature took the specific  language section and detailed                                                                    
that  the  appropriation did  not  include  funding for  the                                                                    
collective bargaining  units, the  university and  the state                                                                    
would not be authorized to  pay for those provisions for the                                                                    
contracts. The only  way the state and  university could pay                                                                    
the provisions would be if  it was specifically addressed in                                                                    
the operating language.                                                                                                         
Representative  Wilson responded,  "That is  not true."  She                                                                    
stated  that the  university could  determine to  carry less                                                                    
staff at  2 percent. The  university might not want  to take                                                                    
such a step but  to say that they had to,  was not the clear                                                                    
intent of  the legislature. Her  concern was not just  the 2                                                                    
percent currently being discussed  but 2 percent every year.                                                                    
She was  not sure how  the $900  lump sum payment  went into                                                                    
effect and  for whom, and how  much the total cost  would be                                                                    
to the state. She  was uncomfortable negotiating an increase                                                                    
at a time when the state  was in a fiscal crisis and thought                                                                    
it sent the wrong message.                                                                                                      
Representative Wilson disagreed that  the legislature had to                                                                    
accept the  terms. She suggested  the department  could have                                                                    
negotiated  differently  potentially  resulting  in  reduced                                                                    
employees based on budget constraints.                                                                                          
Ms. Pitney agreed with Representative  Wilson. She noted two                                                                    
components;  language  and appropriations.  The  legislature                                                                    
had  full  prerogative  to appropriate  whatever  amount  it                                                                    
chose. If the language in  the operating bill specified that                                                                    
a certain  appropriation covered the provisions  for certain                                                                    
collective bargaining units, the  provisions had to be paid.                                                                    
The  language  was  separate  from  the  appropriation.  The                                                                    
funding  amount  included  the  amount  for  the  collective                                                                    
bargaining units  and the state honored  its agreements. She                                                                    
furthered   that   if   the   language   stated   that   the                                                                    
appropriation  covered  the  provisions  of  the  bargaining                                                                    
units, then  the state and  the university had to  pay based                                                                    
on the  collective bargaining units. She  suggested that the                                                                    
legislature  could  appropriate  an amount  of  funding  and                                                                    
specify  that  it  did  not   include  the  bargaining  unit                                                                    
provisions. The legislative body  appropriated money and the                                                                    
language defined  whether it covered  the provisions  of the                                                                    
collective bargaining unit.                                                                                                     
Representative   Wilson  clarified   that  the   legislature                                                                    
appropriated  monies  and  provided language  regarding  the                                                                    
collective  bargaining unit,  but the  university determined                                                                    
how many employees it could  afford based on budget numbers.                                                                    
Ms. Pitney stated that she was correct.                                                                                         
3:08:57 PM                                                                                                                    
Representative  Wilson   asked  if  $754  thousand   was  an                                                                    
unallocated  reduction  and  if   the  university  would  be                                                                    
determining specific reductions.                                                                                                
Ms. Pitney responded  in the positive. She  explained it was                                                                    
in order  to match  the university's  UGF to  the governor's                                                                    
original target.                                                                                                                
Vice-Chair Saddler asked if the  change proposed a 2 percent                                                                    
raise  in FY  16, .5  percent  increase to  the base  before                                                                    
applying  another 2  percent increase  in FY  17, another  2                                                                    
percent increase  in FY 18,  and a  900 lump sum  per person                                                                    
per  year. He  wanted to  know when  the contracts  had been                                                                    
negotiated and  if it had been  prior to the decline  in oil                                                                    
Ms.  Pitney  answered  that the  contract  negotiations  had                                                                    
started about the same time  in the previous year. She added                                                                    
that  the  contract  was  completed  between  the  time  the                                                                    
endorsed  budget was  submitted  and the  submission of  the                                                                    
current amendment.                                                                                                              
Vice-Chair  Saddler asked  if it  was  around December.  Ms.                                                                    
Pitney stated, "Yes."                                                                                                           
Vice-Chair  Saddler   asked  if  the  endorsed   budget  was                                                                    
finalized after  oil prices had  dropped. Ms.  Pitney nodded                                                                    
in the affirmative.                                                                                                             
Representative  Gattis  stated  that based  on  the  state's                                                                    
current  fiscal  crisis she  was  stunned  that raises  were                                                                    
being given to people in  certain areas while people working                                                                    
in other areas were losing  their jobs. She stressed that it                                                                    
sent  an extremely  poor  message. In  the  budgets she  was                                                                    
responsible  for there  was  not enough  money  to give  out                                                                    
raises. She opined  that the last thing she was  going to be                                                                    
a part  of was giving  out raises  when some folks  would be                                                                    
faced with losing their jobs.                                                                                                   
Ms. Pitney noted  that there would also be  an amendment for                                                                    
AHMS regarding  the master  mates' contract  recently signed                                                                    
containing increases. She would  supply the specifics to the                                                                    
Representative Pruitt asked Ms. Pitney  if the raise for the                                                                    
master  mates had  to  be approved  by  the legislature  and                                                                    
whether the  raises were  set in  stone. Ms.  Pitney replied                                                                    
that it  would come  before the  legislature an  included in                                                                    
the  operating  budget   as  a  provision  of   one  of  the                                                                    
negotiating units.                                                                                                              
Representative Pruitt  asked if  the administration  had had                                                                    
discussions with  people that the  state had a  $3.5 billion                                                                    
deficit. The state needed to  be talking with people because                                                                    
the state did not have  money. He believed that everyone had                                                                    
to play a part in a  solution. He wondered how he would tell                                                                    
his constituents  that the  state had  to provide  raises to                                                                    
other people and  take money out of their  pockets. He hoped                                                                    
the administration was having  discussions about the state's                                                                    
financial situation.                                                                                                            
3:13:17 PM                                                                                                                    
Co-Chair  Neuman asked  about line  18 regarding  a response                                                                    
fund. It assumed  that the department would  receive a large                                                                    
settlement  for  a  response  site in  Aniak  for  about  $5                                                                    
million. He asked if he  was reading the item correctly. Ms.                                                                    
Pitney responded, "Correct."                                                                                                    
Co-Chair Neuman  asked if  it was  for Spill  Prevention and                                                                    
Response (SPAR). Ms. Pitney explained  that the funds needed                                                                    
to be received and in the  bank in advance of June 30, 2015,                                                                    
in  order to  be transferred  to the  Prevention account  as                                                                    
part  of   the  department's  FY  16   appropriation.  If  a                                                                    
settlement agreement  was not signed  by all parties  by the                                                                    
end of February 2015, it  was highly unlikely that the funds                                                                    
would be  received by the state  in time to be  available to                                                                    
transfer to  the prevention account for  FY 16 expenditures.                                                                    
At present, the department felt  that it would be prudent to                                                                    
assume this  settlement would  not be  received in  time for                                                                    
use in  FY 16, increasing  the prevention  account shortfall                                                                    
to an estimated $6.9 million.                                                                                                   
Co-Chair Neuman  returned to the subject  of spill response.                                                                    
He   commented   that   he    would   have   preferred   the                                                                    
administration  to  have  offered new  legislation.  He  was                                                                    
aware  that  the  Department of  Environmental  Conservation                                                                    
(DEC) knew the  SPAR fund was going to run  out in the prior                                                                    
year. There was not enough money  and not enough flow of oil                                                                    
through the  Trans-Alaska Pipeline to cover  costs. He asked                                                                    
Ms.  Pitney  if  she  believed   it  was  the  duty  of  the                                                                    
departments  to assure  that  funds  were available  through                                                                    
legislation and asked about a plan.                                                                                             
Ms. Pitney  indicated that it was  the administration's plan                                                                    
to introduce an agreed upon  piece of legislation that would                                                                    
fix the problem. The amendment was a back-up.                                                                                   
3:16:00 PM                                                                                                                    
Ms.  Pitney  reviewed lines  19  and  20. She  informed  the                                                                    
committee  that there  were  updated projections  available.                                                                    
The  two amendments  updated the  amount of  money projected                                                                    
that would  be transferred from the  Permanent Fund Earnings                                                                    
Reserve account.  The numbers reflected a  correction of the                                                                    
amount  projected in  the market.  The  number was  slightly                                                                    
lower   than   what   the  administration   had   originally                                                                    
projected, the $3 million and $11 million figures.                                                                              
Co-Chair Thompson commented  that they were the  only 2 nice                                                                    
numbers  in the  amendments. Ms.  Pitney responded  that the                                                                    
market was not producing very well.                                                                                             
Co-Chair Neuman  asked if there  had been any  requests from                                                                    
the  governor   for  agencies  such  as   Alaska  Industrial                                                                    
Development and  Export Authority  (AIDEA) or  the Permanent                                                                    
Fund Corporation to reduce their  budgets moving forward. He                                                                    
remarked that  every other state department  was being asked                                                                    
to make reductions. He asked  her to comment on his question                                                                    
and explain  the reasoning behind  why the agencies  have or                                                                    
have not been asked to decrease their budgets.                                                                                  
Ms. Pitney reported  that all of the agencies  were asked to                                                                    
look   for  cost   efficiencies,  not   necessarily  revenue                                                                    
reductions.  The administration  was  looking for  operating                                                                    
efficiencies,  and   ways  in   which  units   could  offset                                                                    
operating costs of other units.  She cited an offset example                                                                    
within  the Permanent  Fund Corporation.  There  could be  a                                                                    
reduction of positions but the  state would have to contract                                                                    
out more. The  division's position had a  much higher return                                                                    
on  investment then  contracting out  with management  firms                                                                    
due to the  expense. There was a trade-off.  The state could                                                                    
reduce  positions   but  would  ultimately  spend   more  on                                                                    
contracting the  work out.  She added  that each  agency was                                                                    
asked to do a review.                                                                                                           
Co-Chair  Neuman asked  her to  provide the  information she                                                                    
had on the  matter. He mentioned the Budget  Control Act. He                                                                    
also  asked about  railroad facility,  a  train depot  built                                                                    
several years  previously that went through  the Ted Stevens                                                                    
Anchorage International Airport. He  asked if fees were paid                                                                    
for the  property like everyone  else that  leased property.                                                                    
He commented that it had a  huge building not being used. He                                                                    
wondered  if  there  were  plans to  do  anything  with  the                                                                    
building  or whether  there were  any  discussions that  had                                                                    
occurred with  the administration. He thought  the state was                                                                    
losing money  by keeping the  building insured and  warm. He                                                                    
was aware  that the  space had been  rented on  occasion for                                                                    
weddings and  other events but he  felt it was a  big issue.                                                                    
Ms. Pitney  was unaware  of any  discussions and  would look                                                                    
into the matter further.                                                                                                        
3:20:16 PM                                                                                                                    
Co-Chair  Neuman asked  if she  was  aware of  any plans  to                                                                    
change  the facility's  operations  and if  the state  would                                                                    
continue to  absorb its  costs. He  supposed the  money came                                                                    
out of  the airport's  budget. Ms.  Pitney replied  that she                                                                    
did not know the status.                                                                                                        
Representative  Wilson  referenced  a   list  of  law  suits                                                                    
provided in the back of  the presentation. She wondered what                                                                    
was being done to ensure the  state would not be sued in the                                                                    
future. She asked if there  were any additional law suits on                                                                    
the  specific  issues  that had  been  settled.  Ms.  Pitney                                                                    
responded that she would follow up on the question.                                                                             
Vice-Chair  Saddler  referred  to  page 2,  line  7  of  the                                                                    
"FY2016   Operating  Amendments"   spreadsheet  related   to                                                                    
Medicaid cost  containment initiatives. He wondered  how the                                                                    
administration had arrived  at the GF savings  of $1 million                                                                    
for durable medical equipment (DME).  He asked for the total                                                                    
Medicaid  expenditure  associated  with DME.  He  asked  for                                                                    
additional  information and  wondered how  quickly the  cost                                                                    
containment  measures would  be  implemented. He  referenced                                                                    
language about the necessity to meet narrow timelines.                                                                          
Ms.   Pitney   responded   that  she   would   provide   the                                                                    
information. She relayed that the  intent was to collect the                                                                    
savings in FY 16 since the budget would be reduced.                                                                             
3:22:30 PM                                                                                                                    
Co-Chair  Neuman  stated  that   there  were  areas  in  the                                                                    
operating budget where the governor  had only forward funded                                                                    
the education  fund at 90  percent. He believed  some people                                                                    
may  assume that  the action  saved the  state approximately                                                                    
$126  million.  He  reasoned  that   the  decrease  was  not                                                                    
actually a budget reduction because  the state would have to                                                                    
pay  the funds  in  the following  year.  He expounded  that                                                                    
someone could  introduce legislation  to change  the funding                                                                    
formula  for the  Base Student  Allocation  (BSA), but  that                                                                    
would  require  starting  over "ground  zero,"  which  would                                                                    
include  the $126  million. He  asked if  the administration                                                                    
intended to clarify the issue for the public.                                                                                   
Ms.  Pitney   responded  that   given  the   current  budget                                                                    
environment,  the administration  did  not  want to  forward                                                                    
fund the entire amount. She noted  that a law had passed the                                                                    
previous session that  would look at the  formula funds. She                                                                    
detailed that  requests for proposals had  been solicited to                                                                    
make  studies on  the topic  available the  following summer                                                                    
[2015].  The administration  wanted  to  have the  education                                                                    
funding  discussion for  FY 17  during the  2016 legislative                                                                    
session.  She reiterated  that  the  administration did  not                                                                    
feel that  the state was  in the  position to fund  the full                                                                    
amount at present. She noted  that the decision did not mean                                                                    
that the  full formulas  amount would not  be funded  in the                                                                    
governor's FY 17 budget.                                                                                                        
Co-Chair Neuman  remarked that  there was  significant angst                                                                    
within the  education community  due to  the removal  of the                                                                    
one-time  funds   that  had  been   added  outside   of  the                                                                    
foundation  formula. He  believed  that  the legislation  in                                                                    
2014  had  been created  to  provide  school districts  with                                                                    
increased budget certainty, given  that the state and school                                                                    
district budget  cycles were  not in  alignment. He  did not                                                                    
believe the  funding increment would  have been  approved by                                                                    
the legislature  if a steep  decline in oil prices  had been                                                                    
predicted. He  believed there would be  significant pressure                                                                    
on the  legislature to  increase the  funds. He  referred to                                                                    
the amount as "ghost money"  that the legislature would have                                                                    
to pay in  the current or following  year unless legislation                                                                    
was introduced.                                                                                                                 
Co-Chair Neuman  referenced other appropriations  within the                                                                    
operating budget  such as a  $4.1 million decrement  to DOC.                                                                    
He detailed that  the expansion of Medicaid  was expected to                                                                    
reduce DOC  costs. Additionally, there were  impacts to DHSS                                                                    
as well. He  opined that the situation made  it difficult to                                                                    
create a true budget. He remarked  that the FY 16 DOC budget                                                                    
had  received substantial  reductions; however,  he believed                                                                    
that  the  overall  budget  reductions  would  increase  the                                                                    
workload for DOC and the  Department of Public Safety (DPS).                                                                    
He believed the  figures had come from  the Evergreen report                                                                    
on Medicaid  expansion. He continued  that he was  trying to                                                                    
ascertain the  best way to  compile a budget  on anticipated                                                                    
funds based  on the report.  He stressed that  if department                                                                    
budgets were not fully funded  based on the expectation that                                                                    
funds  would be  received  through  Medicaid expansion,  the                                                                    
departments  may be  confronted with  significant decrements                                                                    
they may  not have the  ability to withstand  if anticipated                                                                    
funds from Medicaid  expansion did not come  to fruition. He                                                                    
wondered how the  committee was supposed to  create a budget                                                                    
on money  that had not  been received. He believed  it would                                                                    
be more prudent to have increased clarity in the budget.                                                                        
3:28:16 PM                                                                                                                    
Ms.  Pitney replied  that the  budget proposal  submitted by                                                                    
the   administration   included  Medicaid   expansion.   She                                                                    
detailed  that if  the budget  was approved  there would  be                                                                    
savings  exceeding  $4  million   in  the  DOC  budget.  She                                                                    
continued  that if  the legislature  opted  out of  Medicaid                                                                    
expansion, it  would be the  administration's hope  that the                                                                    
decrements  would   be  restored.  The   administration  was                                                                    
proposing Medicaid expansion, which  would allow for savings                                                                    
in  DOC and  DHSS,  and  the offsets  were  included in  the                                                                    
proposed  budget.  She   stated  that  it  was   up  to  the                                                                    
legislature  to   make  a  choice  on   Medicaid  expansion.                                                                    
Likewise,  it  would be  up  to  the legislature  to  decide                                                                    
whether  to   restore  the  decrements.  She   implored  the                                                                    
committee to provide the flexibility  proposed in the budget                                                                    
amendments if the decrements were not restored.                                                                                 
Co-Chair Neuman communicated that  the legislature had asked                                                                    
the   administration  to   propose  a   separate  piece   of                                                                    
legislation  [on Medicaid  expansion] because  the operating                                                                    
budget had  to be  approved within  several weeks'  time. He                                                                    
stated  that   the  legislature   had  been   given  limited                                                                    
information   on   Medicaid   expansion   and   reform.   He                                                                    
highlighted  the need  for information  on healthcare  costs                                                                    
and  different waiver  programs. He  was concerned  that the                                                                    
legislature  was expected  to  approve $145  million in  the                                                                    
operating budget  without knowing where the  money was going                                                                    
and  without knowing  about the  program.  He stressed  that                                                                    
Medicaid expansion  was a  huge policy  issue. He  asked for                                                                    
further information.                                                                                                            
Ms.   Pitney  replied   that  DHSS   had  provided   several                                                                    
presentations in hearings and would  be happy to discuss the                                                                    
entire plan  with the committee.  She agreed that  the issue                                                                    
was a  policy call that  the administration had  included in                                                                    
the operating  budget. She  relayed that  the administration                                                                    
was  prepared  to  present  in as  many  committees  as  the                                                                    
legislature wanted  on how  the budget  worked and  what was                                                                    
included in relation  to Medicaid. She noted  that there had                                                                    
been  several hearings  to-date and  offered to  provide the                                                                    
committee with a list of the hearings.                                                                                          
Co-Chair Neuman rebutted that as  an appropriating body, the                                                                    
legislature could  accept, not  accept, or amend  the funds.                                                                    
Additionally,  the  legislature could  establish  sideboards                                                                    
that  would enable  the state  to  back out  if the  federal                                                                    
funding  dropped  below  90 percent.  He  stressed  that  no                                                                    
guarantees on the issue had been provided.                                                                                      
Co-Chair Thompson  thanked Ms. Pitney for  her presentation.                                                                    
He asked  her to  provide any  requested information  to Co-                                                                    
Chair  Neuman  for  distribution to  committee  members.  He                                                                    
reviewed the schedule for the following day.