Legislature(2009 - 2010)SENATE FINANCE 532

02/09/2010 09:30 AM Senate FINANCE

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SENATE BILL NO. 254                                                                                                           
     "An  Act  making  supplemental  appropriations,  capital                                                                   
     appropriations,   and  other  appropriations;   amending                                                                   
     appropriations;    repealing   appropriations;    making                                                                   
     appropriations  to capitalize  funds; and providing  for                                                                   
     an effective date."                                                                                                        
     SB 254 was HEARD and HELD in Committee for                                                                                 
     further consideration.                                                                                                     
Ms.  Rehfeld   provided   a  high  level   overview   of  the                                                                   
supplemental  bill  before  the  committee.  She  noted  that                                                                   
agency representatives  are available  online for  questions.                                                                   
She explained the proposal to  place funding into savings due                                                                   
to the  potential surplus in  FY10. She mentioned  the public                                                                   
education  fund appropriation  of approximately $1.1  billion                                                                   
as witnessed  in Section 12(a)  of SB 254. She  discussed the                                                                   
various   appropriations    and   the   repayment    of   the                                                                   
Constitutional Budget  Reserve (CBR). The  regular discussion                                                                   
about supplemental funding includes  unanticipated needs. She                                                                   
discussed  the various  operating  components  of the  budget                                                                   
addressed  through  the  supplemental   appropriations.  Fire                                                                   
suppression comprises a significant  component of the budget.                                                                   
She  mentioned Alaska's  significant fire  season this  year.                                                                   
The base amount  in the budget for fire suppression  is $35.4                                                                   
million.  The non  formula  agency operating  requests  equal                                                                   
approximately  $32  million. She  mentioned  statewide  items                                                                   
included in  the operating proposal  in Section  12(b), which                                                                   
includes  the  movement  of funds  into  the  small  business                                                                   
economic development revolving  loan fund. Additionally, a $5                                                                   
million request is included to  replenish the disaster relief                                                                   
fund  under  Section  12(c). Specific  capital  requests  are                                                                   
"emergency"  in nature  and address areas  where funding  was                                                                   
not  sufficient  to complete  a  project.  The total  of  the                                                                   
capital component of the budget is $58.3 million.                                                                               
10:21:43 AM                                                                                                                   
Ms.  Rehfeld   observed  that  the  review   of  supplemental                                                                   
requests  includes  discernment  of standalone  items  versus                                                                   
those that  can be addressed in  the next budget  cycle. Some                                                                   
items were  not incorporated  into the  FY11 budget,  but are                                                                   
currently discussed in terms of  budget amendments. She noted                                                                   
that  inmate  health  care is  another  area  of  significant                                                                   
concern with  a supplemental request  based on the  number of                                                                   
catastrophic  cases. She  noted  the number  of  catastrophic                                                                   
cases. The state  must not charge other federal  programs for                                                                   
health  care  of  inmates  when   they  enter  incarceration.                                                                   
Medicaid growth causes concern,  as the authorization in FY10                                                                   
was not sufficient.                                                                                                             
10:23:46 AM                                                                                                                   
Ms. Rehfeld  highlighted sections  of the  17 page  bill. The                                                                   
first  section  of the  bill  is the  operating  supplemental                                                                   
request by departments.  Section 2 summarized  the funding by                                                                   
agency. Section  3 provides the  capital requests.  Section 4                                                                   
summarizes  the capital  funding. Section  5 is the  language                                                                   
section  and  spurs discussion  about  the  Federal  Matching                                                                   
Assistance Program  (FMAP) rate  under the American  Recovery                                                                   
and  Reinvestment  Act (ARRA).  In  order  for the  state  to                                                                   
receive the benefit under the  ARRA funds requires conditions                                                                   
of  no change  to  current  Medicaid  program and  the  state                                                                   
cannot place the  savings in a "rainy day"  account. Included                                                                   
in the  supplemental bill  is language  clarifying that  that                                                                   
the state's ability to utilize  the higher reimbursement rate                                                                   
has  allowed  the  use  of  general   funds  to  cover  other                                                                   
increased  costs  in  our  budget.  Section  6  includes  the                                                                   
request for  funding to  implement the arbitrator's  decision                                                                   
from  March  19,  2009  regarding   the  Alaska  Correctional                                                                   
Officer Association.  Section 7 includes a specific  item for                                                                   
pupil  transportation  under   DEED.  Section  8  involves  a                                                                   
miscellaneous  claim for  the Division  of Juvenile  Justice.                                                                   
Section 9  is a correction  to an  appropriation in  the FY10                                                                   
budget  concerning $85  thousand for  pipeline training  from                                                                   
DLWD.  Section 10  from  the Department  of  Law  (DOL) is  a                                                                   
request for  $28 thousand for  judgments and claims.  Section                                                                   
11 allows the  Department of Natural Resources  (DNR) the use                                                                   
of program  receipts from the  sale of aircraft  estimated at                                                                   
$2 million.  Section  12 addresses  fund transfers  proposing                                                                   
the transfer  of $1.1  billion to  the public education  fund                                                                   
and also  addresses the  Alaska International Airport  System                                                                   
(AIDEA) revolving  loan fund to  the small business  economic                                                                   
development  fund  along with  the  $5 million  for  disaster                                                                   
relief    referenced    earlier.   Section    13    addresses                                                                   
ratifications.  Ratification   is  sometimes  known  as  zero                                                                   
balancing  and is a  term used  to request authorizations  to                                                                   
cover expenditures  that have  already occurred  and resulted                                                                   
in   an   over   expenditure   of   an   appropriation.   The                                                                   
legislature's  authorization  to  ratify  the  appropriations                                                                   
gives the  department the  additional authorization  for what                                                                   
occurred in  a prior year,  but does  not affect cash  in the                                                                   
current year.                                                                                                                   
Co-Chair Hoffman  asked for the ratification  history for the                                                                   
last  five   years.  He   recalled  that   the  category   of                                                                   
expenditures  is now in  excess of $10  million. He  asked if                                                                   
departments  are  spending  unauthorized  funds  because  the                                                                   
legislature  will ratify  them.  What is  the  administration                                                                   
doing to control the unauthorized spending?                                                                                     
10:29:36 AM                                                                                                                   
Ms. Rehfeld answered  that ratifications include  a couple of                                                                   
outstanding items.  The largest portion is the  $10.3 million                                                                   
ratification for  firefighting. Ratifications are  an area of                                                                   
the budget  where a base  appropriation is decided  upon, not                                                                   
knowing what  the fire season  will look like. The  next step                                                                   
is to approach the legislature  with the supplemental request                                                                   
based on the estimates from the  firefighting that took place                                                                   
during the  last fire session.  Following adjournment  of the                                                                   
legislature,  language   in  the  supplemental   bill  allows                                                                   
ratification  for the  following  year.  Because last  year's                                                                   
fire season  was so  dramatic, the  $10.3 million  represents                                                                   
funding needed for firefighting during the end of FY09.                                                                         
Ms. Rehfeld  announced another  significant piece  concerning                                                                   
the  Department of  Corrections (DOC)  who overestimated  the                                                                   
amount that  they would receive  from the federal  government                                                                   
for  housing federal  prisoners. The  department reduced  the                                                                   
authorization  in the  budget  because DOC  does not  receive                                                                   
funding to house federal prisoners.                                                                                             
10:33:17 AM                                                                                                                   
Co-Chair Stedman  asked the ramifications if  the legislature                                                                   
does not  ratify. Ms. Rehfeld  responded that  the accounting                                                                   
system  clean  up will  not  be effective.  Co-Chair  Hoffman                                                                   
asked if  the departments  would have to  pay the  costs from                                                                   
their current budget.  Ms. Rehfeld answered that  she was not                                                                   
sure that  the department  could revisit  past years  because                                                                   
the statute prohibits it.                                                                                                       
KIM  GARNERO, DIRECTOR,  DIVISION OF  FINANCE, DEPARTMENT  OF                                                                   
ADMINISTRATION,   stated  that   departments  cannot   accrue                                                                   
expenditures from  previous years  that have now  expired due                                                                   
to uncollectable  receivables because  of the legal  sanctity                                                                   
of the appropriations.  The appropriation level  at which the                                                                   
legislature creates the language  locks the accounting system                                                                   
and  the users  of the  funds  at the  legal level.  Co-Chair                                                                   
Stedman compared  the ratification situation with  the Alaska                                                                   
Marine   Highway   System's   compliance   with   legislative                                                                   
Co-Chair   Hoffman  understood   the   situation  with   fire                                                                   
suppression and  correction officers.  He agreed that  a plan                                                                   
was  necessary to  correct expenditures  that  have not  been                                                                   
appropriated by the legislature.                                                                                                
Ms.   Rehfeld  informed   that   an  authorization   of   the                                                                   
expenditures was  approved, but were unavailable  in the end.                                                                   
She  explained  that  areas identified  as  problems  in  the                                                                   
ratification  process   must  be  corrected  in   the  budget                                                                   
document.   Several   corrections   are   proposed   in   the                                                                   
supplemental bill and in the FY11 budget.                                                                                       
Ms. Garnero  noted that  $481 thousand  of ratifications  are                                                                   
related  to several  departments.  The process  is a  onetime                                                                   
clean up  of the  accounting system  receivables. The  future                                                                   
intention is to reconcile annually.                                                                                             
Ms. Rehfeld addressed Section  14 and the correction allowing                                                                   
DOL to address the receipt of  restitution in juvenile cases.                                                                   
The state debt  and other obligations require  adjustments to                                                                   
address    international    airport    revenue    fund    and                                                                   
recommendations  from  their  bond council  to  minimize  the                                                                   
revenue  needed  from  customers   within  the  international                                                                   
Ms. Rehfeld stated that Section  16 extends the lapse for the                                                                   
instate gas pipeline appropriation.  The budget was scheduled                                                                   
to  lapse  on February  28,  2010.  The  department  requests                                                                   
authority to extend  the lapse date to the end  of the fiscal                                                                   
year, June 30, 2010.                                                                                                            
10:38:58 AM                                                                                                                   
Co-Chair  Stedman   wished  to   discuss  the  gas   pipeline                                                                   
appropriation  further   in  the  future.   Co-Chair  Hoffman                                                                   
recalled  that the  legislature  "short funded"  so that  the                                                                   
department  could justify their  accomplishments. He  pointed                                                                   
out  that the  short  fund equaled  $3  million. Ms.  Rehfeld                                                                   
responded  that  the  instate pipeline  coordinator  has  not                                                                   
requested  additional  funds in  the current  year.  Existing                                                                   
contracts are in  place, and work is ongoing.  Only a request                                                                   
for an extension exists.                                                                                                        
Ms.  Rehfeld   announced  that   Section  17  addresses   the                                                                   
Constitutional  Budget Reserve  (CBR) and  the management  of                                                                   
the  funds.  The  department  is  proposing  to  replace  the                                                                   
management with  general funds at $1.673 million.  Section 17                                                                   
also  authorizes a  draw from  the  Statutory Budget  Reserve                                                                   
(SBR) if  revenues are not  sufficient to cover  expenditures                                                                   
in FY10.                                                                                                                        
10:41:13 AM                                                                                                                   
Co-Chair   Stedman  requested   clarification  on   the  $1.6                                                                   
million. He  asked if  it included the  cost of handling  the                                                                   
$400 million over the next 90  days or is it a portion of the                                                                   
management  funds  by DOR.  Ms.  Rehfeld explained  that  the                                                                   
mentioned funds are  the management fees for  the entirety of                                                                   
the CBR.                                                                                                                        
Co-Chair Hoffman asked for justification.  He asked if it was                                                                   
because  the administration  does  not believe  that a  three                                                                   
quarter  vote in the  legislature was  possible. Ms.  Rehfeld                                                                   
explained  that if  the goal  is to  retain the  CBR then  it                                                                   
should  not  be drawn  from  to  manage the  funds.  Co-Chair                                                                   
Stedman  declared  that  a discussion  about  plans  for  the                                                                   
sizable state savings should be held this session.                                                                              
Ms.  Rehfeld referred  to Section  18 and  the regular  lapse                                                                   
provisions for capital projects.  Appropriations requested in                                                                   
Section 12 and the deposit to  the public education fund does                                                                   
not lapse.  Section 19 is  a repeal  of Section 43c  known as                                                                   
the  17(b) provision.  The  administration  does not  believe                                                                   
that the provision is necessary  given the objective to repay                                                                   
the  CBR.  Section 20  requires  an  effective date  for  the                                                                   
passage  of the bill.  Section  21 states that  the act  will                                                                   
take effect April 18, 2010.                                                                                                     
10:44:59 AM                                                                                                                   
Senator  Ellis  asked  about Section  6  and  the  bargaining                                                                   
agreement with DOC. He asked about  an adjustment to the FY11                                                                   
budget regarding the agreement.  Ms. Rehfeld answered that if                                                                   
the government  approves this, these funds will  be allocated                                                                   
to the personal services components  within the DOC budget in                                                                   
order  to  pay   the  increased  wages  as   incorporated  in                                                                   
arbitrator's decision.  She stated  that the $3  million will                                                                   
be spread  where their  personal services  cost exist  within                                                                   
their budget.                                                                                                                   
10:46:14 AM                                                                                                                   
Ms. Rehfeld noted that if the  legislature chooses to approve                                                                   
the funding,  then the FY11  budget must be amended.  Senator                                                                   
Ellis  asked  if  the agreement  would  exist  in  a  section                                                                   
related to the department. Ms.  Rehfeld revealed that a large                                                                   
bargaining  unit   agreement  that  covers   all  departments                                                                   
requires a  single section that  allocates across all  of the                                                                   
agencies  and the funding  sources and  is spread  throughout                                                                   
all of the budgets if approved by the legislature.                                                                              
10:47:15 AM                                                                                                                   
Co-Chair Hoffman elaborated that  the committee would address                                                                   
the  legislation  further in  the  future. He  requested  the                                                                   
questions about SB 253 be answered tomorrow.                                                                                    
Senator  Olson asked  a  question about  Section  11 and  the                                                                   
Department  of Natural  Resources  (DNR).  He voiced  concern                                                                   
about an appropriation  for aircraft replacement.  He assumed                                                                   
that the  aircraft referred to  was the CL214 used  for water                                                                   
bombing. He  asked why the  parts and accessories  were sold.                                                                   
Ms.  Rehfeld could  not answer  the  question. Senator  Olson                                                                   
suggested a future meeting regarding the issue.                                                                                 

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