Legislature(2015 - 2016)HOUSE FINANCE 519

03/09/2016 09:00 AM House FINANCE

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09:09:00 AM Start
09:09:27 AM HB256 || HB257
11:36:44 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time --
Moved CSHB 256(FIN) Out of Committee
Moved CSHB 257(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 256                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations,  making supplemental  appropriations,                                                                    
     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. 257                                                                                                            
     "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."                                                                                                        
9:09:40 AM                                                                                                                    
Co-Chair  Neuman  explained  that  the  committee  would  be                                                                    
taking  up  the   committee  substitutes  incorporating  the                                                                    
amendments adopted from the previous  day into HB 256 and HB
Co-Chair  Thompson  MOVED to  report  CSHB  256(FIN) out  of                                                                    
Committee with individual recommendations.                                                                                      
Co-Chair Neuman OBJECTED for the purpose of discussion.                                                                         
PETE ECKLUND,  STAFF, REPRESENTATIVE MARK  NEUMAN, explained                                                                    
that  the committee  substitutes for  both bills  before the                                                                    
committee, HB  256 and HB  257, incorporated  the amendments                                                                    
made in the previous day.  He directed members' attention to                                                                    
the handout of the summaries.  He referred to the first page                                                                    
on  LFD   Spreadsheet  A  and   explained  that   after  the                                                                    
amendments  were incorporated  in  the committee  substitute                                                                    
for HB 256 the total reflected  a decrease of $8.6 down from                                                                    
the total  in the  previous version.  In other  words, after                                                                    
all  of  the  amendments   were  calculated,  the  Committee                                                                    
Substitute  reflected  $8.6  million  less  in  unrestricted                                                                    
general  funds (UGF)  than in  the previous  version of  the                                                                    
committee substitute.  He pointed to column  5 titled: "2016                                                                    
House".  The  agency   operations  formula  and  non-formula                                                                    
totaled $3.813  billion. Next, he  turned to the  third page                                                                    
on LFD  Spreadsheet B and  highlighted that  UGF non-formula                                                                    
funds,  often referred  to as  day-to-day state  government,                                                                    
equaled   $1.835  billion   incorporating  a   $447  million                                                                    
reduction or a 19.6 percent reduction from 2015.                                                                                
9:11:38 AM                                                                                                                    
AT EASE                                                                                                                         
9:12:00 AM                                                                                                                    
Mr. Ecklund returned to LFD  Spreadsheet A on the first page                                                                    
of the summary  reports. He pointed to the  -$8.6 million in                                                                    
the  very  last  column  where  it  stated  "between  CS's."                                                                    
Following  the adoption  of the  amendments  in the  current                                                                    
version  of  the  bill  the agency  budget  total  was  $8.6                                                                    
million lower  in UGF  than in the  previous version  of the                                                                    
committee substitute.                                                                                                           
Representative Gara  clarified that it was  $8 million less.                                                                    
However, the FY  16 appropriations that really  went into FY                                                                    
17  and FY  18  were not  included. He  wondered  if he  was                                                                    
Mr. Ecklund  pointed to  the middle column  6 that  showed a                                                                    
$30  million appropriation  in  FY 16  for  filling gaps  in                                                                    
substance  abuse services,  $1.8  million  for elections  in                                                                    
order to  flatten out elections expenses  between years, and                                                                    
$932 million for a single year  audit which started in FY 15                                                                    
or FY 16  for the Department of Health  and Social Services.                                                                    
The LFD  Spreadsheet compared the  FY 16 Management  Plan to                                                                    
the current  committee substitute. It was  $8.6 million less                                                                    
in FY 17.                                                                                                                       
Representative  Gara   did  not   think  the   $8.6  million                                                                    
difference included  the $32 million  addition. He  asked if                                                                    
he was correct.                                                                                                                 
Mr.  Ecklund replied  that Representative  Gara was  correct                                                                    
because it  was comparing FY  17 to  FY 17 in  the committee                                                                    
substitutes. It was  $8.6 million less in FY  17 between the                                                                    
committee  substitutes. The  supplemental column  was not  a                                                                    
part of the comparison.                                                                                                         
Representative  Gara  referred  to  the  previous  evening's                                                                    
meeting and the  last amendment addressed at the  end of the                                                                    
meeting  having to  do with  education.  He understood  that                                                                    
most of the  related money came out of the  general fund. He                                                                    
stated  that  about  $150  million   came  from  the  public                                                                    
education fund. He  wondered if that money  was reflected as                                                                    
a general funds spend for  FY 17. Mr. Ecklund responded that                                                                    
the $145  million coming from  the public education  fund in                                                                    
FY 17 was shown as a  negative fund cap on LFD Spreadsheet C                                                                    
which showed the formula fund programs.                                                                                         
Representative  Gara pointed  to  the circled  column 5.  He                                                                    
asked about  the $3.8 million  of UGF spending  and wondered                                                                    
if it  included $150  million from public  education funding                                                                    
and  the $30  million  alcoholism and  drug abuse  treatment                                                                    
Mr. Ecklund answered  that the $145 million  from the public                                                                    
education fund  was not reflected  in the $3.8  million. The                                                                    
supplemental  FY  16  appropriations  were  in  a  different                                                                    
fiscal year and were not in that number either.                                                                                 
9:16:26 AM                                                                                                                    
Representative Wilson  asked where  she would find  the fund                                                                    
source changes  done in the  previous day on the  forms. She                                                                    
noted $1.4  million in the Department  of Transportation and                                                                    
Public  Facilities (DOT)  monies  from the  general fund  to                                                                    
$1.4 million in vehicle rental tax.                                                                                             
Mr. Ecklund  responded in LFD Spreadsheet  D reflecting "All                                                                    
Representative  Wilson  asked  what  page  Mr.  Ecklund  was                                                                    
referring to.                                                                                                                   
Mr. Ecklund responded LFD Spreadsheet D.                                                                                        
Representative Wilson asked if the column was circled.                                                                          
Mr. Ecklund explained  that it was in LFD  Spreadsheet D and                                                                    
was  "All  Funds". He  directed  her  to  the DOT  line  and                                                                    
mentioned  that the  vehicle rental  tax would  not be  seen                                                                    
explicitly  but  could  be  found in  the  changes  in  "All                                                                    
Representative Wilson asked about  the $7 million in federal                                                                    
funding that was removed on  LFD Spreadsheet D. She wondered                                                                    
if it would  be reflected as part of the  savings of the UGF                                                                    
seen on LFD Spreadsheet A.                                                                                                      
Mr. Ecklund asked if she  was referring to the aviation fuel                                                                    
Representative  Wilson   clarified  that  in   the  previous                                                                    
evening the  finance committee added  $7 million  in federal                                                                    
funds  and  deleted  $7  million  in  general  funds  before                                                                    
putting in  $275,900 into general funds.  She understood the                                                                    
general funds would show up  on LFD Spreadsheet A because it                                                                    
was an addition. The decrease  of $7 million would also show                                                                    
up on LFD  Spreadsheet A. She wondered if the  $7 million in                                                                    
federal funds would show up  on LFD Spreadsheet D all funds.                                                                    
Mr. Ecklund responded, "That is correct."                                                                                       
Representative  Wilson wondered  about undesignated  general                                                                    
funds from the state's savings  accounts. She was not asking                                                                    
about  federal   transfers,  tax   receipts,  or   a  higher                                                                    
education fund. She thought those  funds would still be paid                                                                    
keeping government the same size.  She thought it would look                                                                    
as though  there were less  government services  because the                                                                    
state was spending less of its savings.                                                                                         
Mr.   Ecklund  disagreed   with  her   characterization.  He                                                                    
explained that  the reason  the legislature  concentrated on                                                                    
UGF  was  because the  difference  between  UGF revenue  and                                                                    
expenditures  equaled the  state's fiscal  gap. If  a person                                                                    
wanted  the total  size or  total spend  of government  they                                                                    
would have to look at all funds not just UGF.                                                                                   
Representative  Wilson understood.  She wanted  to find  out                                                                    
each  piece  of the  transfer.  She  knew  how to  find  the                                                                    
federal fund  transfers. She wondered  where she  could find                                                                    
money from the  higher education fund or the  rental tax and                                                                    
whether she  could find them under  designated general funds                                                                    
Mr.  Ecklund stated  that the  specific funds  she mentioned                                                                    
were  DGF. There  were many  different funds  including DGF,                                                                    
federal, and other.  She was correct about the  two that she                                                                    
Representative Wilson  spoke of  doing a LFD  Spreadsheet to                                                                    
match her numbers.                                                                                                              
Mr. Ecklund responded affirmatively.                                                                                            
9:21:03 AM                                                                                                                    
Co-Chair Neuman  explained that there  was an effort  to use                                                                    
funds left  over from FY 16  to decrease the amount  of draw                                                                    
on the  Constitutional Budget Reserve  (CBR). He  thought it                                                                    
was a very important fact and  added that he did not believe                                                                    
it would  be a good  idea to take  money left over  from the                                                                    
previous year  from some other  unused funds that  came from                                                                    
CBR  draws and  some  left over  from  the Statutory  Budget                                                                    
Reserve (SBR). The  effort was to try to use  those funds to                                                                    
pay the following  year's bills. He thought the  state had a                                                                    
long ways  to go  but acknowledged  the committee's  work in                                                                    
cutting  about  $300  million  more   from  the  budget.  He                                                                    
remarked  that some  of FY  16 funds  were used  to pay  the                                                                    
following  year's  bills so  they  would  not get  used  for                                                                    
anything other than paying bills.                                                                                               
Representative  Gattis agreed  that  the legislature  should                                                                    
not  place money  back into  the CBR  because of  the three-                                                                    
quarter  vote requirement  to access  it.  She struggled  to                                                                    
understand why the  FY 16 budget was  being discussed rather                                                                    
that the  FY 17  budget. More  importantly, she  asked about                                                                    
the  total  spend  amount.  She   received  calls  from  her                                                                    
constituents   who   were   concerned  with   trusting   the                                                                    
legislature  to impose  taxes or  to  spend their  Permanent                                                                    
Fund  Dividend (PFD).  They  felt  legislators were  playing                                                                    
shell  games.  She thought  it  was  important to  note  the                                                                    
government's total spend for those watching on television.                                                                      
Co-Chair  Neuman interjected,  "Representative Gattis,  this                                                                    
is not  a shell game!  This is  using last year's  funds and                                                                    
Mr. Ecklund can answer your questions."                                                                                         
Representative Gattis  rebutted that constituents  could not                                                                    
follow the  numbers and legislators were  having a difficult                                                                    
time following  as well.  She thought  it was  imperative to                                                                    
discuss the total  spend, how it was broken out,  and how it                                                                    
Co-Chair Neuman responded that that was fine.                                                                                   
Representative Gattis  thought her constituents  were asking                                                                    
a fair  question. The legislature  spent a  significant time                                                                    
talking about UGF  and DGF. However, she wanted  to know the                                                                    
total  spend   of  government,  what  the   legislature  was                                                                    
spending,  and  how  did  the  legislature  make  government                                                                    
smaller. She thought they were fair questions to ask.                                                                           
Co-Chair  Neuman stated  that it  was fine,  but he  was not                                                                    
ready  for  accusations. The  committee  would  work on  the                                                                    
budget.  He  asked  Mr.  Ecklund  for  the  total  spend  of                                                                    
Mr.  Ecklund  responded  that the  total  funds  for  agency                                                                    
operations,  formula,  non-formula, and  state-wide  equaled                                                                    
$8.659 billion.                                                                                                                 
Co-Chair Neuman  asked how much  of the total  was statewide                                                                    
formula and non-formula.                                                                                                        
Mr. Ecklund referred  to the House [column 5]  in the middle                                                                    
of LFD  Spreadsheet D. The total  spend in FY 17  for agency                                                                    
operations   (formula   and  non-formula)   equaled   $8.169                                                                    
billion.  Statewide   operating  items   totaled  $490,478.5                                                                    
million. The  two figures  together totaled  $8.659 billion.                                                                    
He  also  pointed  to the  2016  House  Supplemental  column                                                                    
[column 6].                                                                                                                     
Co-Chair  Neuman indicated  that  in the  previous year  the                                                                    
state had just under a  $5.2 billion budget. The legislature                                                                    
reduced  the budget  by  about $274  million  in the  budget                                                                    
finance  subcommittees  which  left   the  budget  at  $4.85                                                                    
billion. He asked where the number could be found.                                                                              
Mr. Ecklund pointed  to LFD Spreadsheet A  which showed UGF.                                                                    
He  derived the  total of  $4.084895 billion  by adding  the                                                                    
agency total and the statewide total.                                                                                           
Co-Chair Neuman  stated that some  FY 16 funds were  used to                                                                    
help cover the costs for FY 17.                                                                                                 
Mr. Ecklund  responded that Co-Chair Neuman  was correct. He                                                                    
reported  $145 million  was used  from the  public education                                                                    
fund  and $77  million was  used from  the higher  education                                                                    
Co-Chair  Neuman asked  for the  total without  using FY  16                                                                    
Mr. Ecklund needed a moment to do some calculations.                                                                            
Co-Chair   Neuman  instructed   Mr.  Ecklund   to  run   the                                                                    
calculations later.                                                                                                             
9:26:48 AM                                                                                                                    
Vice-Chair  Saddler  responded  to  the  Wasilla  legislator                                                                    
regarding  her  comment  about "Shell  games."  He  did  not                                                                    
believe it was  a shell game that was being  played and that                                                                    
referring to  it as such  was a disservice to  the committee                                                                    
and to the complexity of  the process. He used the analogies                                                                    
of a  household budget and  a stock portfolio  to illustrate                                                                    
the  complexity of  the budgeting  process. He  stressed the                                                                    
importance of  explaining the  process to  constituents that                                                                    
did  not  understand   the  system.  He  felt   it  was  the                                                                    
obligation  of  legislators  to understand  and  convey  the                                                                    
process. He  wanted people at home  to know that it  was not                                                                    
simple, but  complicated. It was  not dishonest nor  a shell                                                                    
game, but rather, a complex state budget.                                                                                       
Co-Chair Neuman did  not believe anyone was saying  it was a                                                                    
shell game.  He reiterated that  the legislature used  FY 16                                                                    
funds to  cover FY 17 costs.  He spoke of how  to explain it                                                                    
to his constituents. He gave an  example of putting on a new                                                                    
deck and  a new  roof on  his house.  He explained  that the                                                                    
legislature  took money  left over  from  FY 16  to pay  for                                                                    
expenses in FY  17. Co-Chair Neuman expounded  that the left                                                                    
over  funds could  have been  used for  other items  such as                                                                    
capital projects. However, he felt  it was a priority to use                                                                    
the extra  funds to reduce  the state's operating  costs and                                                                    
the amount  of money that had  to be drawn from  the CBR. He                                                                    
spoke  of other  items  that  would need  to  be dealt  with                                                                    
before  the end  of the  session.  He relayed  that only  40                                                                    
percent  of the  budget represented  the state's  day-to-day                                                                    
operations. He mentioned formula  programs in Medicaid equal                                                                    
to  $600 million  or more.  He also  mentioned the  Medicaid                                                                    
reform  bill and  gave kudos  to Co-Chair  Thompson's office                                                                    
and his staff  for his efforts towards  that legislation. He                                                                    
mentioned  having   meetings  with  the  governor   and  the                                                                    
commissioner  on Medicaid  as well.  He noted  education and                                                                    
the related  formula programs and reported  that the budgets                                                                    
for  Department  of  Health  and  Social  Services  and  the                                                                    
Department of  Education and Early Development  were the two                                                                    
largest in the  state. Both budgets would  likely be further                                                                    
reduced.  He   specified  that  legislation  in   the  works                                                                    
regarding  education  and  oil   and  gas  tax  credits.  He                                                                    
commented that  money was  not allocated  in the  budget for                                                                    
tax  credit  payments. He  relayed  that  from the  Senate's                                                                    
report he gleaned there would  be considerable reductions in                                                                    
the  amount  of  oil  tax  credits  owed  in  future  years.                                                                    
However, there  were still  outstanding credits.  He offered                                                                    
that the state  had yet to deal with the  obligations of the                                                                    
Teacher Retirement  System (TRS)  and the  Public Employees'                                                                    
Retirement System (PERS) as part  of the budget process. His                                                                    
goal was  to reduce  the overall state  spend down  to about                                                                    
$4.5 million within 2 years.  He referred to experts such as                                                                    
Institute  of  Social  and   Economic  Research  (ISER)  who                                                                    
suggested  that  it  would  take  3 years  to  make  such  a                                                                    
reduction.  In order  to arrive  at a  reduction in  a short                                                                    
time period  he surmised it  was important to use  the money                                                                    
left over  from FY 16  to lower the  costs to the  state. He                                                                    
posed the  question about what  it cost in the  current year                                                                    
to pay the  following year's bills. He  speculated that $2.1                                                                    
billion would  have to be taken  out of the CBR  to meet the                                                                    
budget  demands, considerably  less  than  he expected.  His                                                                    
goal had been to reduce the  amount of draw from the CBR. It                                                                    
did not  lower the amount  of state spending. He  thought he                                                                    
had  tried to  make  things  very clear.  He  felt that  the                                                                    
legislature had a long way to go.                                                                                               
9:34:38 AM                                                                                                                    
Representative Gattis  asked if the  state had added  to the                                                                    
total  spend for  government by  using the  left over  FY 16                                                                    
funds. She  asked for the  prior year's total spend  as well                                                                    
as  the current  year spend.  She asked  if the  legislature                                                                    
added to the total spend by  using the FY 16 funds that were                                                                    
being discussed.  She was talking  about total  spend versus                                                                    
Co-Chair Neuman  asked if she  was asking about  total spend                                                                    
including  federal   funds  or  funds  that   came  in  from                                                                    
Representative Gattis  reiterated that  she was  speaking of                                                                    
funds from  UGF or DGF  - funds  collected by the  state and                                                                    
spent by the state.  Constituents were watching legislator's                                                                    
every  move  and how  Alaskans'  personal  pockets would  be                                                                    
affected. She opined that it  was incumbent upon legislators                                                                    
to be clear so that constituents could trust them.                                                                              
Co-Chair Neuman agreed.                                                                                                         
Representative Gattis  asked if the state  had increased the                                                                    
previous  year's budget  that  the legislature  voted on  by                                                                    
using FY 16 funds.                                                                                                              
Co-Chair Neuman responded, "No."                                                                                                
Mr. Ecklund  referred to  LFD Spreadsheet  D, all  funds. He                                                                    
wondered if she was interested in all state funds.                                                                              
Representative Gara responded in the affirmative.                                                                               
Mr. Ecklund pointed to the  second page of LFD Spreadsheet D                                                                    
noting the different categories  under funding summary: UGF,                                                                    
DGF, other state funds, and federal receipts.                                                                                   
Co-Chair Neuman stated  that in the previous  year the state                                                                    
budget was  under $5.2 billion.  He asked Mr. Ecklund  if he                                                                    
was correct.                                                                                                                    
Mr. Ecklund  clarified that the  figure was UGF and  did not                                                                    
include  DGF and  other  state funds.  It  depended on  what                                                                    
categories of funds he wanted to compare.                                                                                       
Representative Gattis  would no longer burden  the committee                                                                    
with her questions  but hoped to get together  to review the                                                                    
Co-Chair  Neuman interrupted  the representative  indicating                                                                    
that the  legislature could  not use FY  16 funds.  The only                                                                    
thing the legislature  could use the FY 16 funds  for was to                                                                    
continue  the amount  of draw  that would  have to  be taken                                                                    
from the  CBR. However, the  cost to the state  remained the                                                                    
9:38:38 AM                                                                                                                    
Co-Chair Thompson  commented on the state's  total spend. He                                                                    
thought the  figure would vary significantly.  The state was                                                                    
receiving  additional  money  in   highway  dollars  in  the                                                                    
current year shown  as $2.184 billion. Every  time the state                                                                    
received  additional funds  it  would  increase the  state's                                                                    
total spend for  the year which he thought  was important to                                                                    
Representative Gara  agreed that the total  budget reduction                                                                    
was approximately $300 million. He  wanted to move away from                                                                    
how everything  was accounted for  and focus on what  was in                                                                    
the  budget.  His  major  complaints had  to  do  with  what                                                                    
happened to folks with  disabilities, seniors, and children.                                                                    
He  wanted  to  have  accurate  numbers  and  he  wanted  to                                                                    
understand what the legislature was  doing in the future. He                                                                    
remarked that  the legislature had typically  measured year-                                                                    
to-year  spending by  UGF. In  the current  year things  had                                                                    
changed.  He suggested  that if  the  legislature wanted  to                                                                    
have an UGF  amount equal to the previous  year's figure, it                                                                    
would  require the  legislature  to cut  an additional  $220                                                                    
million. To  reach the same  UGF amount several  other funds                                                                    
would have  to be  spent such  as the  $80 million  from the                                                                    
higher  education  fund and  $145  million  from the  public                                                                    
education fund.  These funds were  not reflected  in general                                                                    
funds.  He mentioned  that  next  year he  did  not want  to                                                                    
compare UGF  to UGF because otherwise  the legislature would                                                                    
have to  come up with  $220 million  cuts to reach  the same                                                                    
UGF number. He  thought the legislature would  have to start                                                                    
considering DGF and  UGF in order to have a  true picture of                                                                    
statewide  spending. He  did  not  want to  have  to cut  $2                                                                    
million to  say that the state  was at the same  level as it                                                                    
was in the previous year.                                                                                                       
9:41:28 AM                                                                                                                    
Co-Chair Neuman  agreed that the  budget needed  to continue                                                                    
to be  reduced. He noted  funds were used to  supplement the                                                                    
UGF. The  intent was to  demonstrate to the public  that the                                                                    
legislature planned to have a  lower budget in the following                                                                    
Representative Gara  suggested that last year's  cuts in the                                                                    
amount of  about $700 million  and the proposed cuts  for FY                                                                    
17  in the  amount of  about $300  million equaled  about $1                                                                    
billion in  reductions over the  past two years.  He thought                                                                    
the  cuts  that  were  being   proposed  were  terrible.  He                                                                    
suggested  that the  state was  spending much  less than  30                                                                    
years  ago  (if adjusted  for  inflation)  on a  per  capita                                                                    
basis. The problem the public  had was that there was always                                                                    
someone  in   the  legislature   that  spent   unwisely.  He                                                                    
explained  to Mr.  Ecklund that  he was  having a  difficult                                                                    
time  difficult  time  reconciling  the  numbers.  He  cited                                                                    
several  numbers  and  asked Mr.  Ecklund  for  clarity.  He                                                                    
wondered if there had been roughly $270 million in cuts.                                                                        
Mr. Ecklund  explained that he  was correct that  looking at                                                                    
agency  operations  in   the  current  committee  substitute                                                                    
compared to the FY 16  Management Plan the legislature would                                                                    
be cutting $282 million  in agency operations. The additions                                                                    
for  the public  education fund  and retirement  occurred in                                                                    
the statewide section. He pointed  to the bottom of the page                                                                    
showing a  total of $4.084  billion. By adding  $145 million                                                                    
and $80 million the number totaled $4.31 billion.                                                                               
Representative  Gara stated  that there  was a  $280 million                                                                    
cut in UGF.  He wondered how he could explain  that it was a                                                                    
$280  million  cut  when  $220  million  was  added  to  the                                                                    
statewide number.                                                                                                               
Mr. Ecklund  responded that  it would  be better  to compare                                                                    
agency  operations to  agency operations,  statewide numbers                                                                    
to statewide  numbers, and  then come up  with a  total. The                                                                    
legislature had cut $282 million from agency operations.                                                                        
9:48:15 AM                                                                                                                    
Representative Pruitt wondered how  things would look in the                                                                    
following   year  regarding   the  budget.   Currently,  the                                                                    
committee was hearing  about how much was  spent in previous                                                                    
years.  He understood  that the  current total  spend amount                                                                    
for  FY  16 was  about  $5.2  billion.  He wondered  in  the                                                                    
following  year  if that  number  would  be closer  to  $5.7                                                                    
billion or whether the $5.2  figure include the $475 million                                                                    
being used to pay for other things.                                                                                             
Mr. Ecklund  replied that  the FY  16 management  plan would                                                                    
stay constant.                                                                                                                  
Co-Chair Neuman  clarified that the amounts  needed were for                                                                    
agency  operations:  formula,   non-formula,  and  statewide                                                                    
Representative  Pruitt wanted  to know  about the  total UGF                                                                    
spend in the following year.  He was not necessarily talking                                                                    
about the  management plan. He  was referring  to PowerPoint                                                                    
slides provided  by the Office  of Management and  Budget as                                                                    
to how much was actually spent in FY 16 of total UGF spend.                                                                     
Mr. Ecklund answered that the  management plan represented a                                                                    
fixed point in  time and would not change.  He surmised that                                                                    
Representative  Pruitt was  interested  in the  supplemental                                                                    
budget for FY 16 and how it would be reflected.                                                                                 
Representative Pruitt  replied in the affirmative.  He asked                                                                    
if  the  supplemental  numbers were  included  in  the  $5.2                                                                    
million. In  other words,  he wanted to  know if  the actual                                                                    
numbers would  be shown on  the PowerPoint and  whether they                                                                    
would be closer to $5.2 billion or $5.7 billion.                                                                                
Mr.  Ecklund  deferred  to Mr.  Teal  from  the  Legislative                                                                    
Finance Division (LFD).                                                                                                         
Co-Chair Neuman  reported that  the legislature  had started                                                                    
out  at $5.2  million  to run  government  in the  following                                                                    
year. There  were monies that  were taken out of  the budget                                                                    
under UGF. He asked what the number dropped to.                                                                                 
9:52:23 AM                                                                                                                    
DAVID  TEAL, DIRECTOR,  LEGISLATIVE FINANCE  DIVISION, asked                                                                    
Representative Pruitt to repeat his question.                                                                                   
Representative  Pruitt discussed  that  OMB provided  charts                                                                    
showing the total  amount of UGF spending and  how the state                                                                    
had  decreased  total spending.  For  the  previous year  it                                                                    
showed  $5.2 billion  as the  total spend.  However, he  was                                                                    
aware that  FY 16  was not  done. He  wondered if  the total                                                                    
spend would  remain around the  $5.2 billion level or  if it                                                                    
would increase with a supplemental budget to $5.7 billion.                                                                      
Mr. Teal confirmed that because  it was currently the middle                                                                    
of the  fiscal year  the management  plan numbers  were used                                                                    
and they did not  include supplemental figures. When showing                                                                    
the fiscal  summary it also included  capital spending equal                                                                    
to an additional  $200 million. In looking at  the number on                                                                    
LFD Spreadsheet A  in column 5 it showed  spending of $4.084                                                                    
billion.  In  answer  to  Representative  Pruitt's  question                                                                    
about what  FY 16 would  show, he  offered that FY  16 would                                                                    
show FY 16 final which would include supplemental spending.                                                                     
9:55:01 AM                                                                                                                    
Mr.  Teal continued  that by  the time  the information  was                                                                    
available the  legislature would already be  looking at FY17                                                                    
and FY  18 in  the following session.  He understood  how it                                                                    
might appear  that there were  shell games. The  extra money                                                                    
totaling  $288  million  resulted  from  revenue  coming  in                                                                    
higher than  expected and expenditures coming  in lower. The                                                                    
legislature did  not empty the  SBR as anticipated.  In most                                                                    
states, it would  simply be an unspent  balance that carried                                                                    
forward  into the  following fiscal  year and  was available                                                                    
for spending in the same  fiscal year. Essentially, it would                                                                    
reduce  the states  revenue  in the  next  fiscal year.  The                                                                    
state did not operate in such  a way because money got swept                                                                    
into the  CBR. The state  spent the money  in FY 16.  He did                                                                    
not  understand  why  people  referred  to  spending  FY  16                                                                    
revenue in FY  16 as a shell game. Spending  the money in FY                                                                    
16 in  some ways  reduced FY 17  expenditures. If  the money                                                                    
was carried forward into FY  17 the legislature would end up                                                                    
in the same position; the  legislature would have more money                                                                    
available in  FY 17 reducing  the state's deficit.  He urged                                                                    
members to focus  less on comparing what the  state spent in                                                                    
a particular  year. He relayed he  would be in front  of the                                                                    
committee over the next few  days discussing models. In that                                                                    
discussion  he would  emphasis that  trying to  separate one                                                                    
fiscal  year  from  another would  be  more  confusing  than                                                                    
helpful. He stressed the importance  of focusing on what was                                                                    
happening to the  reserve balance. It would be  a major gage                                                                    
as  to how  the  state  was doing  without  a  whole lot  of                                                                    
confusion. The  state would have deficits  across the fiscal                                                                    
years  which   meant  the   reserve  balances   would  fall.                                                                    
Ultimately, people could  see how they were  doing by simply                                                                    
looking at  what was happening  to the reserves in  the long                                                                    
run. He  pointed to  LFD Spreadsheet A  at the  reduction in                                                                    
column  5-2.  At  the  bottom  of the  column  there  was  a                                                                    
reduction  from  the FY  16  Management  Plan to  the  House                                                                    
number  of   $993  million.  It  would   indicate  that  the                                                                    
legislature reduced FY 16 to  the current budget by about $1                                                                    
billion. He reminded members that  the budget in its current                                                                    
form  did not  fund oil  and gas  tax credits.  He suggested                                                                    
subtracting  $500 million  leaving  a  reduction of  roughly                                                                    
$493 million.  He also mentioned  the $145 million  from the                                                                    
public  education fund  added to  the  $80 million  totaling                                                                    
$225 million. He continued that  by subtracting $225 million                                                                    
from  $493 million  the true  savings ended  up being  about                                                                    
$270 million  - the number he  thought Representative Pruitt                                                                    
was looking for. Currently the  legislature did not have the                                                                    
tax credits funded. He posed  the question about whether the                                                                    
legislature would  fund them. There  was money  that carried                                                                    
forward.  He  wondered if  the  legislature  would bump  the                                                                    
budget up in  the following year by $225  million because FY                                                                    
16 money  was used in FY  17. He reminded members  that $145                                                                    
million  of the  $225 was  a  three year  carry forward.  He                                                                    
thought that the  budget might increase by  $80 million from                                                                    
the   higher   education   fund.   He   thought   that,   as                                                                    
Representative Neuman  was trying to convey,  the budget was                                                                    
an ongoing process without ever  having a really firm number                                                                    
for a starting  place. The state would not  be spending $5.7                                                                    
billion. If  oil and  gas tax credits  of $500  million were                                                                    
added as well  as a capital budget of  $200million to $4.084                                                                    
billion the  total would  be $4.7  billion. He  relayed that                                                                    
even with accounting for adjustments  the figure would still                                                                    
be under $5 billion.                                                                                                            
10:01:31 AM                                                                                                                   
Representative Pruitt thought that Mr.  Teal had given out a                                                                    
significant amount  of information. It was  important to him                                                                    
to be able to convey  the happenings regarding the budget to                                                                    
his  constituents  in a  manner  they  could understand.  He                                                                    
talked about  $500 million being withdrawn  from savings. He                                                                    
believed that for the first  time the governor had asked the                                                                    
legislature to look to the people  of Alaska to help to fund                                                                    
government. He spoke of the  difference between spending the                                                                    
state's money  versus constituents'  money. He wanted  to be                                                                    
very  clear about  what they  should expect  as far  as them                                                                    
helping  to   fund  state  expenditures   including  keeping                                                                    
education  funded at  a  steady level.  He  wanted to  fully                                                                    
understand  the actual  spend in  FY 16.  He also  wanted to                                                                    
have  a clear  understanding  of what  legislators would  be                                                                    
looking for  in the future. He  wanted to be able  to return                                                                    
to  his constituents  and be  prepared  to answer  questions                                                                    
about the budgetary process.                                                                                                    
10:06:03 AM                                                                                                                   
Mr. Teal  offered to update  the graphs the LFD  provided at                                                                    
the  beginning  of  the year  which  showed  final  spending                                                                    
through  FY  15.  The  numbers   for  FY  16  would  reflect                                                                    
appropriated numbers, and the  governor's request for FY 17.                                                                    
He could also  update the chart with the  FY 16 supplemental                                                                    
numbers added to the anticipated  FY 16 expenditures and the                                                                    
budget as it was passed out of the committee.                                                                                   
Representative Pruitt thanked Mr. Teal.                                                                                         
Co-Chair Neuman asked about the budgets  for FY 17 and FY 18                                                                    
and  forward  funding  for education.  He  wondered  if  the                                                                    
budgets would be lower or higher.                                                                                               
Mr. Teal responded that it  made the budget lower. The state                                                                    
set aside $145 million per year  to pay for education for FY                                                                    
17, FY 18,  and FY 19 which reduced the  amount of money put                                                                    
into  education in  those  same years  by  $145 million  per                                                                    
year. There will be  a jump in the budget for  FY 20 of $145                                                                    
million  to  bring   education  to  the  level   it  was  at                                                                    
Co-Chair  Neuman commented  that  he  hoped the  legislature                                                                    
would have things figured out by that time.                                                                                     
Representative  Guttenberg asked  how legislators  accounted                                                                    
for  multi-year funding.  He wondered  if  the column  would                                                                    
ever  change or  if it  would  show up  in the  supplemental                                                                    
budget. He further asked if  the column would ever change if                                                                    
there were unrealized earnings or unrealized losses.                                                                            
Mr. Teal explained that it  would change. He suggested using                                                                    
the chairman's amendment  of $30 million for  health care as                                                                    
an  example.  It  would  show   as  $30  million  of  FY  16                                                                    
expenditures or appropriations. A  calculation would have to                                                                    
be done at the time books were  closed for FY 16 to know how                                                                    
much of  the $30  million was  actually spent  in FY  16. He                                                                    
suggested  that it  was $5  million for  FY 16.  The unspent                                                                    
money, $25  million, would  carry forward  into FY  17. When                                                                    
the books were  closed at the end of FY  17, and for example                                                                    
$10 million  was spent,  only $10 million  would show  as an                                                                    
expenditure. The next  year, FY 18, another  $10 million was                                                                    
spent,  and only  $10  million  would show  for  FY 18.  The                                                                    
numbers constantly  adjusted. Currently,  he could  not tell                                                                    
how much would be spent in FY 16,  FY 17, or FY 18. It could                                                                    
only be  determined at the  end of  each year. In  answer to                                                                    
Representative Guttenberg's questions  the numbers could and                                                                    
would change.                                                                                                                   
10:10:20 AM                                                                                                                   
Representative Gara wanted to talk  about the budget and its                                                                    
contents.  He  completely  disagreed  with  the  Chamber  of                                                                    
Commerce telling the legislature  what the budget should be.                                                                    
He had oil  industry folks tell him their  opinion about the                                                                    
budget. They wanted to make  sure that there was no pressure                                                                    
on them to  have to pay a fair share  towards revenue in the                                                                    
state.  He furthered  that the  lower the  budget, the  less                                                                    
pressure   on  the   oil  industry.   He  listened   to  his                                                                    
constituents  and disliked  the idea  that the  oil industry                                                                    
knew  what   the  state's  budget  should   be.  The  budget                                                                    
reflected the  state's values.  He did  not feel  anyone did                                                                    
anything dishonest.  He thought  that from the  present into                                                                    
the future legislators needed to  look at state spending. He                                                                    
did  not want  to  look  at an  artificial  category of  UGF                                                                    
because  he believed  much  of state  spending  was DGF.  He                                                                    
stressed that the budget was  about what the state stood for                                                                    
in  society.  He was  not  happy  with  the results  of  the                                                                    
previous day's  meeting and  the results  of the  budget. He                                                                    
reviewed  a   number  of  effects  of   the  previous  day's                                                                    
reductions.  He  did  not  feel  the  budget  reflected  any                                                                    
compassion or his version of  compassion and did not believe                                                                    
the state  was that poor.  He agreed with the  governor that                                                                    
the budget  needed to be  cut, but  he thought the  line had                                                                    
been  crossed   away  from  compassion.  The   governor  had                                                                    
proposed $100 million  in cuts in the current  budget on top                                                                    
of $700 million in cuts  from the previous year's budget. He                                                                    
spoke  of cutting  things seniors  relied  on. He  mentioned                                                                    
that $350 thousand was cut  for emergency housing for senior                                                                    
citizens. He  provided additional examples of  reductions to                                                                    
senior services from the previous  day including cuts to the                                                                    
Pioneer Home. He  was aware that people would not  pay a fee                                                                    
to remain  on a waiting  list. He cited  additional examples                                                                    
of cuts that would affect the senior population in Alaska.                                                                      
10:16:28 AM                                                                                                                   
Representative Gara spoke about the  need for money for Pre-                                                                    
Kindergarten  (Pre-k).  He  noted that  the  state  provided                                                                    
among the  worst level of  Pre-K in  the nation. All  of the                                                                    
state funded Pre-K  had been eliminated from  the budget. He                                                                    
specified that low income children  that had the opportunity                                                                    
to attend Pre-K graduated  in higher numbers. Ultimately, it                                                                    
saved the state  money and built a  better economy. However,                                                                    
Pre-K  funding  was cut.  He  was  disappointed in  the  $50                                                                    
million reduction to the University  budget. He talked about                                                                    
the  potential  loss  of  students  and  teachers  from  the                                                                    
university. He  thought the best chance  at diversifying the                                                                    
economy  and providing  people opportunity.  He opined  that                                                                    
the university  was the  best shot  for kids  to be  able to                                                                    
receive a proper education. He  mentioned that there was $20                                                                    
million less in K through 12  funding than there was 2 years                                                                    
prior.  Grant  money had  disappeared  from  the budget.  He                                                                    
spoke  of  losing 67  teachers  in  the following  year.  He                                                                    
questioned  what  the legislature  was  doing  for the  next                                                                    
Representative  Gara  opined that  the  budget  was a  moral                                                                    
compass of sorts. He felt  that the state was cutting things                                                                    
that made people's lives better  or gave them dignity rather                                                                    
than  cutting  waste.  He  was tired  of  being  the  person                                                                    
talking  about abused  children in  the foster  care system.                                                                    
There  were  450  additional children  in  the  foster  care                                                                    
system in  the current year  than in the previous  year. The                                                                    
case-workers  the  state  had   were  helping  children  and                                                                    
families and had nothing to do  with the rise in foster care                                                                    
numbers.  Caseworkers were  overloaded  and  unable to  work                                                                    
with children  and families  to get kids  out of  the system                                                                    
into an adoptive family or  back with their family. Although                                                                    
the  state was  good at  taking children  out of  abusive or                                                                    
neglectful  homes,  it  was  poor  at  supporting  the  same                                                                    
children  once  they  were displaced.  They  were  the  next                                                                    
generation of  17 percent of kids  who ended up in  jail. He                                                                    
furthered that 40  percent of foster kids  ended up homeless                                                                    
including those  that couch surfed  - 20 percent  were couch                                                                    
surfing and  20 percent were actually  homeless. Caseworkers                                                                    
took on twice  the caseloads then they  could really handle.                                                                    
As a  result foster parents were  lost because of a  lack of                                                                    
proper  follow-through.  He  suggested that  it  would  save                                                                    
money to do  the right thing, transitioning  children out of                                                                    
foster care  quickly into  a loving  home. An  amendment was                                                                    
offered  to try  to assist  with the  issue and  it did  not                                                                    
pass. He  had been told  by the  person who hired  the state                                                                    
child advocates that Alaska had  among the highest caseloads                                                                    
in  the  country. Caseloads  had  gone  up 58  percent.  The                                                                    
amount of child abuse currently  would be greater unless the                                                                    
legislature did something to help.  He reiterated being very                                                                    
unhappy about the budget.                                                                                                       
10:22:46 AM                                                                                                                   
Representative Gara continued that  the state faced the risk                                                                    
of losing  federal funding such as  Temporary Assistance for                                                                    
Needy Families  (TANF) money because  of the way  the budget                                                                    
was written. He  relayed that in order to  maintain the pool                                                                    
of  federal  TANF money  the  state  had to  contribute  $36                                                                    
million.  The state  would  be below  that  amount with  the                                                                    
current budget.  He spoke about  having worked  across party                                                                    
lines in  prior years to come  up with a budget  that people                                                                    
were satisfied with  enough to support. He  thought that the                                                                    
current year  was very different because  every amendment to                                                                    
address the  things he had  talked about got voted  down. He                                                                    
advised members to  vote the way they believed.  He spoke of                                                                    
hearing comments  in the hallway  which he did not  like. He                                                                    
cited that for  every $100 million of cuts  between 1200 and                                                                    
1600  jobs  would be  lost.  With  a  proposed cut  of  $300                                                                    
million the state  stood to lose roughly 4500  jobs. He felt                                                                    
the budget  was a pathway  to a  recession. He did  not want                                                                    
the legacy of  the legislature to be a recession  or to have                                                                    
turned its  back on people  with disabilities.  He suggested                                                                    
that the  best shot of  educating a  child was to  invest in                                                                    
their  early  childhood  education.  He  was  not  happy  at                                                                    
present, nor was  he happy about all of  the amendments that                                                                    
failed. He tried but would  have lost all amendments even if                                                                    
he had  been Mother Theresa.  He did  not want it  spun that                                                                    
the  legislature  tried to  increase  the  budget, when  the                                                                    
legislature agreed to  budget cuts of over  $100 million. He                                                                    
emphasized  he  would not  be  an  easy  vote to  give  $500                                                                    
million to the oil industry and  for oil tax credits if that                                                                    
came up  during the  session. He  remarked that  Alaska, for                                                                    
the  third year  in a  row,  was giving  oil companies  more                                                                    
money  in oil  tax credits  than it  received in  production                                                                    
taxes.  He conveyed  that  the statute  stated  there was  a                                                                    
limit on what  the state had to pay in  oil tax credits when                                                                    
it did not have revenue, about  $70 million. He did not like                                                                    
the budget  at all. He relayed  that a member had  said that                                                                    
they wanted to hear his  arguments so that they could oppose                                                                    
him. He felt  it was a "sick" response of  which he was very                                                                    
10:29:12 AM                                                                                                                   
Representative Wilson asked Mr.  Teal about something he had                                                                    
said  about paying  attention to  reserve balances.  She was                                                                    
concerned  that   the  legislature  had  only   been  paying                                                                    
attention to  the CBR  and prior  to that  the SBR,  and now                                                                    
potentially  the  Earnings  Reserve Account  (ERA).  In  the                                                                    
current budget process other pockets  of money had been used                                                                    
such as the higher education fund.  She wondered if he had a                                                                    
presentation  showing all  of the  available pots  of money.                                                                    
She assumed that Mr. Teal had  been referring to all pots of                                                                    
money, not just the CBR.                                                                                                        
Mr. Teal  referred to page  2 of  the fiscal summary  in the                                                                    
governor's overview which listed  all of the various savings                                                                    
or   reserve  accounts.   Some  of   them  were   considered                                                                    
designated  reserves such  as some  of the  higher education                                                                    
funds.  The Earnings  Reserve Account  was  included in  the                                                                    
list. Normally, when  doing the model, the  LFD was counting                                                                    
only the SBR  and CBR funds as reserves along  with the ERA.                                                                    
The  balances of  the other  smaller funds  were known.  The                                                                    
balance of the Power Cost  Equalization (PCE) fund was about                                                                    
$1 billion and  the higher education fund  balance was about                                                                    
$400 million.  There were  some smaller  funds, but  the PCE                                                                    
fund and  the higher  education fund  were the  two largest.                                                                    
None  of the  remaining  smaller funds  contained more  than                                                                    
about $2 million.                                                                                                               
Representative  Wilson asked  about  the  last page  titled:                                                                    
"Multi Year Agency  Summary" [Page 2 of  LFD Spreadsheet D].                                                                    
She  drew attention  under funding  summary at  "Other State                                                                    
Funds". She  noted that in FY  15 [column 1] it  listed over                                                                    
$4  million and  in column  5  it listed  $1.4 million.  She                                                                    
wondered about the difference between the two numbers.                                                                          
Mr. Teal replied that she was  looking at the change from FY                                                                    
15, the  year in which the  state made a $3  billion deposit                                                                    
from  the  CBR  account  into the  retirement  account.  The                                                                    
Constitutional  Budget  Reserve   was  classified  as  other                                                                    
funds. The  large change was  due to  the $3 billion  use of                                                                    
the CBR.                                                                                                                        
Representative  Wilson mentioned  that in  using the  higher                                                                    
education fund  and the PCE fund  to fill the budget  gap it                                                                    
also served  as a  warning to agencies  that there  would be                                                                    
further reductions  to the  budget and  that they  needed to                                                                    
prepare for those in the following year.                                                                                        
Co-Chair Neuman responded affirmatively.                                                                                        
10:33:23 AM                                                                                                                   
Representative Wilson had no problem  using other funds as a                                                                    
stair step down  to decreased budgets. She  wanted to ensure                                                                    
that  the  message  regarding   the  decrease  of  available                                                                    
funding into the  future was clear. She  was very frustrated                                                                    
being  accused of  not  having good  values  because of  her                                                                    
votes from  the previous  evening. She  thought there  was a                                                                    
difference between  reducing the size of  government and how                                                                    
much  was  spent  out  of  state  savings  to  keep  certain                                                                    
departments  functioning.  She  was uncomfortable  with  the                                                                    
possibility of a large supplemental  budget in the following                                                                    
year. She  thought the  state was  counting on  many federal                                                                    
funds  which it  might or  might  not receive.  She did  not                                                                    
believe the budget  process was as difficult  as it appeared                                                                    
to be. However, she thought  it was important to convey that                                                                    
funds  were limited.  She  expressed  concerns about  hiring                                                                    
positions at  a time  of a budget  crisis. She  understood a                                                                    
significant  amount  of scrutiny  had  been  applied to  the                                                                    
budget. She  relayed that the legislature  had decreased the                                                                    
budget by about  $320,184 all funds, a  4 percent reduction.                                                                    
It included  the state's  DGF, UGF,  and federal  funds. She                                                                    
thought everyone in the state  would feel the effects of the                                                                    
reductions to  the budget. She  reasoned that  reductions to                                                                    
the  budget  needed  to happen  prior  to  her  constituents                                                                    
having  to pay  additional costs.  She wanted  to make  sure                                                                    
government was  the right size prior  to asking constituents                                                                    
to pay  taxes or  part with  their PFD.  She wanted  to keep                                                                    
prices down for constituents.  She reiterated the difficulty                                                                    
of  the budget  processes. She  felt every  subcommittee had                                                                    
done a good job of  making reductions. She was supportive of                                                                    
the budget in its current form.                                                                                                 
10:38:18 AM                                                                                                                   
Vice-Chair  Saddler rejected  the  insinuation  made by  his                                                                    
colleague from Anchorage that members  of the committee were                                                                    
being told  by the Chamber  of Commerce or the  oil industry                                                                    
what  the  budget should  be.  It  was untrue,  unfair,  and                                                                    
indecent.  It  would not  be  any  more fair,  accurate,  or                                                                    
decent to say  that the public employee  unions were telling                                                                    
members of  the committee what  the state budget  should be.                                                                    
That  kind  of  rhetoric   did  nothing  more  than  inflame                                                                    
passions  and  did not  build  bridges  of understanding  or                                                                    
cooperation  as  they  met  to  try  to  solve  the  state's                                                                    
Vice-Chair Saddler  commented that  there had been  a litany                                                                    
of  objections as  to how  the budget  was put  together and                                                                    
about  the  morality  of the  document.  He  had  difficulty                                                                    
understanding  how paying  $12.5 million  for a  program was                                                                    
compassionate  but  providing  $12   million  for  the  same                                                                    
program  was  heartless and  cruel.  He  heard that  it  was                                                                    
illegitimate to include  money in the budget  that could not                                                                    
be guaranteed and locked down.  He also heard criticism that                                                                    
the  state  was seeking  to  access  federal TANF  money  by                                                                    
matching  the   maintenance  of  effort  for   the  homeless                                                                    
programs and  that it  was illegitimate  to count  the money                                                                    
unless  it   was  solidified.  During  the   discussions  of                                                                    
Medicaid expansion and reform  the state heard promises that                                                                    
there  would be  tremendous  savings  in expanding  Medicaid                                                                    
that were  not guaranteed,  but hoped  for. He  believed the                                                                    
rhetoric and snark that had been used was not helpful.                                                                          
Representative Gara objected.                                                                                                   
Vice-Chair Saddler  withdrew the  word, "snark." He  did not                                                                    
appreciate the inflammatory language  that had been used. He                                                                    
did not think  it was helpful and did not  believe it helped                                                                    
in building  bridges. He continued that  the legislature had                                                                    
asked  the administration  to  be  creative, energetic,  and                                                                    
innovative  in  finding  efficiencies  and  in  finding  new                                                                    
sources of revenue in order  to accomplish their mission and                                                                    
serve the people of Alaska  in the state's current financial                                                                    
situation. He  cited that the administration  had responded.                                                                    
He  expressed  his  frustration   that  a  very  complicated                                                                    
subject like the state's budget  and finances was reduced in                                                                    
the public media  to 144 character tweets.  He quoted Thomas                                                                    
Jefferson  who stated  that democracy  depended  on a  fully                                                                    
informed public. He hoped the  public took every opportunity                                                                    
to become  fully informed. He  believed that it was  the job                                                                    
of the legislature to balance  its unlimited needs and wants                                                                    
to  serve   people  with   the  state's   limited  financial                                                                    
resources.  He wanted  to take  care of  peoples' needs  but                                                                    
could not  wish for more money  to do it all.  The situation                                                                    
was  unpleasant   for  legislators  and  all   Alaskans.  He                                                                    
reminded  committee members  that Alaskans  pride themselves                                                                    
for  being able  to  overcome adversity.  He  felt that  the                                                                    
state's  problems  could  be   solved  in  part  by  working                                                                    
together  and  building  bridges,  avoiding  making  enemies                                                                    
along the way.                                                                                                                  
10:42:46 AM                                                                                                                   
Representative Edgmon felt that  if all eleven House Finance                                                                    
members walked away  without some dispute over  items in the                                                                    
budget then  the committee would  not have  accomplished its                                                                    
objective. He  agreed that  it was  just the  beginning with                                                                    
revenues coming down the pike.  He suggested that if members                                                                    
thought  the  budget  process   was  difficult,  he  thought                                                                    
implementing revenue measures  and the accompanying pressers                                                                    
from    legislators'    constituencies   would    be    more                                                                    
exasperating.  As  a  rural  legislator  he  could  complain                                                                    
mightily about  certain reductions that took  place and some                                                                    
injustices delivered  in the budget. He  would not complain,                                                                    
because his  constituents were  beginning to  understand. He                                                                    
had talked with  all of the major mayors  in his communities                                                                    
and  had talked  with scores  of people  who realized  they,                                                                    
too, would have to tighten their  belts and pay more to make                                                                    
things  work. He  wanted to  make sure  that there  were not                                                                    
deeper cuts  or cuts not  crafted properly. He spoke  of Mr.                                                                    
Teal's  warning  that  the day  would  come  where  spending                                                                    
needed to end. Certain areas in  the state, even at the high                                                                    
water   mark,    remained   chronically    underserved   and                                                                    
economically challenged. He believed  there were cuts in the                                                                    
budget that  had landed with  a louder thud in  Rural Alaska                                                                    
than  in other  parts  of the  state. He  was  not going  to                                                                    
complain, but  rather to look  out for the next  fifty years                                                                    
of the  future of  the state. He  felt that  more accurately                                                                    
reflected  the  gravity  of  the  budget  challenges  facing                                                                    
Representative Edgmon started his  day by reading an article                                                                    
regarding the  mess the State of  Louisiana was experiencing                                                                    
with  having  to shut  down  core  services. He  appreciated                                                                    
working  with  the  diverse members  of  the  committee  who                                                                    
represented the  same diversity  throughout the  great State                                                                    
of  Alaska.  There  were members  representing  the  largest                                                                    
communities  that were  the core  of the  state in  terms of                                                                    
population.  There were  others who  represented the  energy                                                                    
challenged  regions  of the  state  including  the areas  of                                                                    
Fairbanks, Southeast, and Rural  Alaska. The amalgamation of                                                                    
the  discussion would  produce a  budget that  no one  would                                                                    
fully  embrace  or  like.  He   surmised  that  it  was  the                                                                    
beginning  of  a  process  that  would  not  only  challenge                                                                    
legislators  as policy  makers and  as  leaders of  Alaska's                                                                    
future. He  spoke of the  difficulty in staff  reductions in                                                                    
state   government.   He    mentioned   that   through   the                                                                    
subcommittee  process in  one department  39 positions  were                                                                    
eliminated.  The   budget  was   being  reduced   and  tough                                                                    
decisions were being  made. He felt his task  was to produce                                                                    
a budget that was workable  and where the cumulative impacts                                                                    
were not  too regressive  in terms of  their impacts  on the                                                                    
smaller  communities. The  smaller  communities depended  on                                                                    
programs  and services.  He furthered  that Alaska  had very                                                                    
symbolic relationships in which  the smaller communities fed                                                                    
off  of the  larger communities  and the  larger communities                                                                    
provided important services and  economic networks. He spoke                                                                    
of  returning to  his constituents  to discuss  reducing the                                                                    
dividend, cutting  the budget  further, and  introducing new                                                                    
taxes. A combination was necessary  to solve Alaska's fiscal                                                                    
situation.  He emphasized  that when  he sat  down with  his                                                                    
constituents,  by-and-large,  they understood  and  embraced                                                                    
the tough decisions. He urged  his colleagues to communicate                                                                    
with  their  constituents  as  well.   He  believed  it  was                                                                    
incumbent  upon legislators  to be  ambassadors. He  thanked                                                                    
members and added that he  thought everyone around the table                                                                    
wanted to do the right thing.                                                                                                   
10:51:36 AM                                                                                                                   
Representative   Munoz   thanked   the  chairman   for   his                                                                    
leadership  and guidance  through  the  budget process,  the                                                                    
subcommittee  chairs  for  their  efforts, and  all  of  the                                                                    
members who had worked very  hard. She spoke about a balance                                                                    
of input and the work done  by each of the committee members                                                                    
towards the budget  process. She was pleased  that the state                                                                    
was  funding   education  at   statutory  levels.   She  was                                                                    
supportive  of leadership  around behavioral  health and  of                                                                    
addressing  the   crisis  of   heroin  addiction   and  drug                                                                    
addiction in Alaska's communities.  She believed the current                                                                    
budget  recognized the  crisis  and  made significant  steps                                                                    
toward improving  treatment options.  She relayed  that half                                                                    
of  Alaska's  budget, over  $2  billion,  went towards  K-12                                                                    
education and serving the less  fortunate through health and                                                                    
social services.  She agreed that  legislators needed  to be                                                                    
ambassadors  working with  communities  and constituents  to                                                                    
educate  folks  about  the   state's  difficult  times.  The                                                                    
current budget  reflected a reduction  of about  6.9 percent                                                                    
down  from  the  previous  year.  The  state's  revenue  had                                                                    
declined by  more than 75  percent in the same  time period.                                                                    
Alaska  was  in  a  challenging time  period.  However,  she                                                                    
thought  legislators could  be optimistic.  She thought  the                                                                    
state had  a bright  future. She  knew that  tough decisions                                                                    
would continue  to be made  through the  revenue discussions                                                                    
as well  as in  the reform  of Alaska's  oil and  gas credit                                                                    
program.  In   closing,  she   thanked  members   for  their                                                                    
dedication and hard work. She  thought that sometimes it was                                                                    
easier to vote no on a  piece of legislation. There had been                                                                    
plenty  of  times  as  a legislator  where  she  would  have                                                                    
preferred  to   vote  "no".  She  was   confident  that  the                                                                    
legislature was  on the right  track and would be  voting in                                                                    
favor of the budget.                                                                                                            
10:54:37 AM                                                                                                                   
Representative Kawasaki stated that he  would not be able to                                                                    
support the current budget. He hoped  he would be able to in                                                                    
the future. He  thanked Co-Chair Neuman for his  work on the                                                                    
process. He felt that committee  members had worked together                                                                    
on  the budget  but disagreed  on some  of its  elements. He                                                                    
shared  the frustration  of the  member  from the  Anchorage                                                                    
area.  He stated  that  behind  many of  the  numbers was  a                                                                    
person. He  agreed that  a budget was  a moral  document. It                                                                    
spoke to  Alaska's common goals  and challenges and  how the                                                                    
state protected its most  vulnerable, seniors, children, and                                                                    
others.  Because  he  felt  that  the  budget  was  a  moral                                                                    
document it  was difficult  for him  to see  it pass  in its                                                                    
present  form without  addressing some  important areas.  He                                                                    
cited a number  of vulnerable people that  would be affected                                                                    
by the reductions in the  budget. He relayed that University                                                                    
students would  be hit  with huge  targeted cuts  across the                                                                    
state. There was a $4  billion budget deficit. The state had                                                                    
some major  structural problems that  it would have  to deal                                                                    
with. He referred to a  current newspaper article. He stated                                                                    
that  the  legislature could  fix  the  problem and  protect                                                                    
seniors in  the current session.  He thought the  worst part                                                                    
was that the budget did not  include a vision for the state.                                                                    
He thought  the budget was  a roadmap towards  recession. He                                                                    
did  not support  cutting $100  million from  the University                                                                    
over  a two-year  period. He  believed  the legislature  was                                                                    
setting  the state  up  for  a recession.  He  would not  be                                                                    
supporting the budget as it stood.                                                                                              
11:00:52 AM                                                                                                                   
Representative Pruitt  shared that he  had been part  of the                                                                    
private  sector in  the past  and had  a work  colleague who                                                                    
frequently  said, "Teamwork  is messy."  He agreed  with the                                                                    
sentiment.  He  thought  that  it  had  been  messy  working                                                                    
together  on  the  House  Finance  Committee.  In  the  end,                                                                    
though, they  were a team.  He appreciated the  passion from                                                                    
members  about   their  constituents  and   communities.  He                                                                    
reminded the  committee that  it had  only cut  $283 million                                                                    
from  the budget.  He stressed  that it  would not  create a                                                                    
recession. He  relayed that thousands  of people in  the oil                                                                    
and gas industry had lost  their jobs because of oil prices.                                                                    
He furthered  that Alaska was either  already experiencing a                                                                    
recession  or  would  be  soon   due  to  the  industry  not                                                                    
providing the amount  of money it had  provided for Alaskans                                                                    
in  the  past. He  believed  that  the legislature  had  the                                                                    
ability  to accelerate  a  recession or  make  one worse  by                                                                    
asking  for  money  from the  pockets  of  constituents.  He                                                                    
wanted to  make sure  that the  information provided  to the                                                                    
public was  clear and understandable  and included  what the                                                                    
legislature was doing and what  to expect in the future. The                                                                    
general  fund  had  been  decreased  by  about  $1  billion.                                                                    
Ultimately, the  state would have  to use savings  from last                                                                    
year or  the current year  to cover costs. The  general fund                                                                    
spend  in  the  current  year was  lower  due  to  utilizing                                                                    
Representative Pruitt reported that  the state was utilizing                                                                    
savings  to  cover  the  budget.  He  made  clear  that  the                                                                    
legislature  had   not  cut  more  than   $283  million.  He                                                                    
suggested that no household would  consider using savings to                                                                    
pay  bills  as cutting  spending.  The  cuts in  the  budget                                                                    
resulted from  a significant  amount of  hard work  from the                                                                    
co-chairs, the  subcommittee chairs,  and from  every person                                                                    
that sat on the subcommittees.  He believed that in order to                                                                    
continue to manage the budget  statues would have to change,                                                                    
delivery  of  services would  have  to  be reevaluated,  and                                                                    
additional cuts  would have to be  made. Otherwise, programs                                                                    
might  be  cut  altogether.   The  monies  from  the  higher                                                                    
education  fund  of  $145  million would  be  spent  in  the                                                                    
following 3 years. After that  period it would cost $436 per                                                                    
working  individual in  Alaska  to cover  that funding.  The                                                                    
money being used from savings of  $75 million to pay for TRS                                                                    
equated  to $225.90  per every  working  Alaskan. He  opined                                                                    
that legislators would have to  have the tough conversations                                                                    
necessary  to address  the budget  deficit; Alaska  3.0 -  a                                                                    
time when  the Permanent Fund  (PF) was being  considered to                                                                    
pay  for government.  While he  supported the  budget moving                                                                    
out  of  committee he  wanted  to  make  it clear  that  the                                                                    
legislature was only borrowing time  by using savings to pay                                                                    
for  operations.  He surmised  that  at  some point  savings                                                                    
would not be available for use.                                                                                                 
11:09:21 AM                                                                                                                   
Representative Gattis thought it  was important to be square                                                                    
with Alaskans  about the government spend.  She believed all                                                                    
Alaskans  were willing  to pitch  in. She  did not  feel the                                                                    
process  was  done.  She thanked  the  co-chairs  for  their                                                                    
efforts.  She thought  she brought  a different  perspective                                                                    
than those members with longevity.                                                                                              
11:10:56 AM                                                                                                                   
Representative Guttenberg  returned to the  values instilled                                                                    
by  his parents.  He  relayed  that what  drove  him to  the                                                                    
legislature  were the  issues around  Alaskan  hire. He  had                                                                    
come  from the  construction  trade and  viewed many  issues                                                                    
through that  filter. He thought  the state was  well beyond                                                                    
the   point  of   waste,  inefficiencies,   and  ineffective                                                                    
programs. He  believed the  state was  well beyond  the meat                                                                    
and  tendons  into the  bones  in  terms of  reductions.  He                                                                    
expressed  his concerns  about there  being consequences  to                                                                    
the  actions of  the  legislature. He  thought  many of  the                                                                    
amendments  that were  passed would  have dire  consequences                                                                    
for Alaskans. He asserted that  the programs that were being                                                                    
cut  from the  budget  had either  been  adopted or  created                                                                    
because  they worked.  The amendments  proposed by  Minority                                                                    
members  on   the  budget  were  both   cost  effective  and                                                                    
compassionate.  He  was  very   disappointed  in  the  votes                                                                    
because of  the negative consequences that  might result. He                                                                    
opined  that the  budget  was a  reflection  of the  state's                                                                    
moral  compass. He  did  not see  any  bridges being  built.                                                                    
Rather, the  same game was  being played as in  the previous                                                                    
year. He  wondered why  the committee  was not  doing things                                                                    
differently. He was concerned  with the resulting disastrous                                                                    
consequences. He claimed  that what was done  in the current                                                                    
day would be  significant for the future. At the  end of the                                                                    
day,  all  would be  a  compromise.  He thought  legislators                                                                    
would need  to better educate constituents  about the fiscal                                                                    
condition of  the state.  The current  budget fell  short in                                                                    
his estimation.  The burden  that was  being placed  on some                                                                    
people was disproportionate in his  opinion. He advised that                                                                    
legislators all  needed to do  the right thing.  He asserted                                                                    
that Alaska was a  great state with significant opportunity.                                                                    
He  mentioned  the Artic  and  its  potential. He  felt  the                                                                    
budget fell short.                                                                                                              
11:19:18 AM                                                                                                                   
Co-Chair Thompson thanked Co-Chair  Neuman for the amount of                                                                    
time  and energy  he put  into the  budget process.  He also                                                                    
recognized  Co-Chair Neuman's  staff,  Mr.  Ecklund and  Ms.                                                                    
Brown, for  their efforts. He  recalled a difficult  time in                                                                    
the  80's having  his own  business  and having  to ask  his                                                                    
employees to  share their medical  insurance costs,  give up                                                                    
bonuses,  and go  without  salary  increases. He  understood                                                                    
hard times.  He suggested  that the budget  was one  that no                                                                    
one  was  completely  satisfied  with  because  it  affected                                                                    
people. Although he shared his  heartache with other members                                                                    
of  the committee  about  having to  reduce  the budget,  he                                                                    
wanted to focus on those  things that remained in the budget                                                                    
and  the services  still intact.  He commended  everyone for                                                                    
all  of  their hard  work.  He  agreed  with a  member  from                                                                    
Fairbanks that the  budget fell short in  revenues. The next                                                                    
item  of business  would be  how to  fill the  shortfall. He                                                                    
believed there was far more  work to be done moving forward.                                                                    
There  was a  mix of  constituents; some  who felt  that the                                                                    
committee went too  far and some that did  not believe there                                                                    
were enough cuts  to the budget. He thought  the state would                                                                    
have to  look at  other sources  of revenue  including taxes                                                                    
and the  use of  the earnings  from the  PF. He  thanked Co-                                                                    
Chair Neuman again for all of his hard work.                                                                                    
Co-Chair Neuman  acknowledged the team effort  that had been                                                                    
made in compiling the budget.  He knew the budgeting process                                                                    
would be difficult.                                                                                                             
11:23:15 AM                                                                                                                   
Co-Chair  Neuman   recognized  that  currently   Alaska  was                                                                    
experiencing the hardest  times that it had  seen in several                                                                    
years. He  mentioned the high emotions  of committee members                                                                    
and members  of the public  which he believed  were natural.                                                                    
He  conveyed   having  to   deny  financial   requests  from                                                                    
Alaskans. Everyone  that came  to his  office was  told that                                                                    
the state did  not have money. He did not  try to candy-coat                                                                    
the state's  fiscal woes. He  highlighted trying  to uncover                                                                    
every  small pocket  of  money that  was  available. It  was                                                                    
interesting to  think of  the budget in  terms of  having to                                                                    
borrow money. He did not want  to dip into the CBR. However,                                                                    
he would rather dip into  those funds than borrow additional                                                                    
money. He spoke of a  former president that talked about the                                                                    
economy and  how what government  did effected  the economy.                                                                    
He  spoke  of legislation  in  the  works to  address  other                                                                    
pieces  of   the  state  financial  situation.   He  thought                                                                    
focusing on a  change in regulations would  be necessary. He                                                                    
surmised that there was an  overabundance of regulations and                                                                    
that, with  the cuts to  agencies, it would be  difficult to                                                                    
maintain the current  level of regulations. He  had met with                                                                    
the governor about requiring all  of the departments to take                                                                    
a  serious  look  at reducing  regulations.  Many  had  been                                                                    
identified  that  potentially  could  be  removed  from  the                                                                    
books. He  avowed that the  legislature needed to do  all it                                                                    
could to  make Alaska attractive  to industry and  to reduce                                                                    
their risks in  investing in the state. Alaska  did not have                                                                    
capital dollars. Instead, the state  would have to do all it                                                                    
could  to attract  industry investment  dollars in  order to                                                                    
create  jobs developing  its  resources.  He furthered  that                                                                    
Alaska  needed to  have a  workforce  capable of  developing                                                                    
state  resources. However,  a large  number of  Alaskans had                                                                    
serious addictions to drugs and alcohol.                                                                                        
11:29:26 AM                                                                                                                   
Co-Chair Neuman conveyed the importance  of dealing with the                                                                    
state's alcohol  and drug abuse  situation. He spoke  of the                                                                    
budget containing  a proposal  of $30  million to  be spread                                                                    
over 3 years to assist  in directly dealing with the scourge                                                                    
attacking Alaska. He made it  clear to the commissioner that                                                                    
the money was  to be used in proven  and affective programs.                                                                    
A   system  had   already  been   set   up  containing   the                                                                    
methodologies in place to track  programs to see what worked                                                                    
and  what  did not  work.  The  work  was done  through  the                                                                    
recidivism reduction group. The  House Finance Committee had                                                                    
approved of the  work being done 3 years prior.  He spoke of                                                                    
seeing  results with  Alaska State  Troopers having  to deal                                                                    
with a  lesser number of  offenders. He noted  that troopers                                                                    
were  heroes. He  mentioned  Representative Gara  discussing                                                                    
children  in  need.  Many of  the  children's  parents  were                                                                    
hooked on  drugs or  alcohol and  needed help.  He mentioned                                                                    
talking with several different parties  about what needed to                                                                    
be done to solve the  addiction problem in Alaska. The state                                                                    
was  looking   to  have  treatment  available   after  being                                                                    
arrested rather  than after being sentenced.  He stated that                                                                    
40 percent  of the 6,000  inmates in the  corrections system                                                                    
were still awaiting  a sentence. The majority  of them could                                                                    
not receive any treatment  until after their sentencing. The                                                                    
state paid approximately $55 thousand  in jail so they could                                                                    
maybe get treatment.                                                                                                            
Co-Chair  Neuman indicated  that the  state legislature  had                                                                    
reduced the  budget over 40  percent over the last  three or                                                                    
four years. Prior to that the  state budget had grown for 57                                                                    
years.  Every tool  was  needed to  address  the issues.  He                                                                    
opined that  Alaska was  doing okay,  even though  the state                                                                    
had its  issues. He invited  other legislators  to challenge                                                                    
him and  to hold his feet  to the fire. There  was a machine                                                                    
working   behind  the   scenes  to   get  things   done.  He                                                                    
acknowledged  his  staff, Mr.  Ecklund  and  Ms. Brown,  and                                                                    
Representative  Thompson and  his  staff, the  LFD, and  the                                                                    
Legislative Legal Division.                                                                                                     
11:34:47 AM                                                                                                                   
Co-Chair Neuman WITHDREW his OBJECTION.                                                                                         
Representative Guttenberg OBJECTED.                                                                                             
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Kawasaki, Munoz, Pruitt,  Saddler, Wilson, Edgmon,                                                                    
Gattis, Thompson, Neuman.                                                                                                       
OPPOSED: Guttenberg, Gara.                                                                                                      
The MOTION PASSED (9/2).                                                                                                        
There  being   NO  further  OBJECTION,  CSHB   256(FIN)  was                                                                    
REPORTED out of committee with a "do pass" recommendation.                                                                      
Co-Chair Thompson MOVED to report CSHB 257(FIN) out of                                                                          
Committee with individual recommendations. There being NO                                                                       
OBJECTION, it was so ordered.                                                                                                   
CSHB 257(FIN) was REPORTED out of committee with a "do                                                                          
pass" recommendation.                                                                                                           

Document Name Date/Time Subjects
HB 256 HB 257 Op Budget Public Testimony Pkt. 24.pdf HFIN 3/9/2016 9:00:00 AM
HB 256
HB 257
HB 256 HB 257 Op Budget Public Testimony Pkt. 25.pdf HFIN 3/9/2016 9:00:00 AM
HB 256
HB 257
HB 256 HB 257 Op Budget Public Testimony Pkt. 26.pdf HFIN 3/9/2016 9:00:00 AM
HB 256
HB 257