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 appropriations. 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 airport. 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.