The first meeting of the LRC Subcommittee on 2010-2012 Budget Preparation and Submission was held on Thursday, July 9, 2009, at 1:30 PM, in Room 171 of the Capitol Annex. Representative Rick Rand, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Charlie Borders, Co-Chair; Representative Rick Rand, Co-Chair; Senators Julian M. Carroll, David Givens, Denise Harper Angel, and Robert Stivers II; Representatives Lonnie Napier, Sannie Overly, Arnold Simpson, and Robin L. Webb.
Guests: Representative Derrick Graham, and John Hicks, Deputy State Budget Director, Office of State Budget Director (OSBD).
LRC Staff: L. Bart Hardin, Debra Gabbard, and Spring Emerson.
Chairman Rand began the meeting by thanking all the members for their presence and apologized for any meeting conflicts. He then introduced John Hicks, Deputy State Budget Director, Office of State Budget Director (OSBD), and asked him to provide an overview of proposed changes to the Executive Branch budget instructions.
Senator Borders expressed his concern regarding the transparency issue and making sure everyone knows where all the dollar amounts are coming from. He also stated that they must remain mindful of the fact that some of the funds were temporary and would not be available in future years. He said erring on the side of too much information would be preferable to not having enough information.
Senator Carroll asked what amount of time was used for measuring performance and productivity for the baseline budget. Mr. Hicks replied five years; two fiscal years of actual past performance, the current year, and then the two fiscal years that information is being requested for. Senator Carroll said he didn’t think that was long enough. He indicated that they should go back to the point when state government was operated within its revenue, and look at the measurement of productivity since that time as compared to the agency’s growth during the same period. He asked if there was measurement of expenditure flow by quarter in comparison with other quarters. Mr. Hicks answered that the budget instructions do not request quarterly information, but the agencies have the ability to generate detailed quarterly reports.
Senator Stivers inquired about the $741 million figure that was mentioned. Mr. Hicks replied that was the fiscal year 2010 value of extra Medicaid money and the Fiscal Stabilization Fund. Senator Stivers stated there were administrative fees built in to the American Recovery and Reinvestment Act of 2009 (ARRA) funds, and asked if those fees were included in that $741 million. Mr. Hicks replied they were not, explaining that there were other programmatic funds that added money to existing programs. He added that those funds would be addressed separately.
Senator Stivers asked if the $8 billion represented the total expenditures for the year, including the stimulus funds and administrative fees, or did it represent the revenue being generated. Mr. Hicks replied that the $8.3 billion in fiscal year 2010 was general fund revenues. Senator Stivers asked if the total budget is $8.4 billion or up to $9 billion. Mr. Hicks replied that the expenditure value is $9 billion. Senator Stivers inquired about the half-year of Medicaid stimulus money. Mr. Hicks stated that he could provide that information at a later date.
Chairman Rand asked if the agencies knew they would receive stimulus money. Mr. Hick replied in the affirmative, adding that they were seeking competitive funds as well.
Senator Stivers asked if the $290 million in 2011 would be unavailable in 2012. Mr. Hicks replied in the affirmative, adding that all stimulus funds would be gone in 2012. Senator Carroll inquired if the funds would be gone in the last half of fiscal year 2012. Mr. Hicks answered that they would actually be gone at the end of fiscal year 2011. Senator Carroll stated that he was trying to match the funds with the Commonwealth’s budget cycle, but they are not on the same cycle. Mr. Hicks said that 50% of money was available now, even though they were given a certain time period to use it.
Chairman Rand asked if the budget instructions were based on the current organization structure as opposed to potential reorganizations. Mr. Hicks replied that it would be based on where things were now. Chairman Rand inquired about the timeline for finalizing the instructions. Mr. Hicks replied September 1 was the target date for finalizing decisions. Chairman Rand asked why the budget instructions were late getting to us. Mr. Hicks replied that the OSBD had been busy budgeting and re-budgeting with considerably fewer people on staff.
Senator Carroll inquired if zero-line budgeting was discussed during the technical process of evaluating agency budgets. Mr. Hicks replied that there were concepts in zero-based budgeting that were still being used.
Senator Carroll commented on the tremendous amount of expertise available in the OSBD as well as the LRC Office of Budget Review. He expressed his appreciation and gratitude for their good work.
Senator Stivers asked if budgeted at current levels of expenditures and revenues with no growth would there be a $400-450 million shortfall. Mr. Hicks answered that was a reasonable number for fiscal year 2011. He explained that the budget instructions were simply a set of requests based upon current level of spending; however, the decision process is separate.
Chairman Rand asked for a motion to direct the Co-Chairs to work with LRC staff to finalize the 2010-2012 Budget Instructions and formally present them to LRC for adoption. A motion was made by Senator Stivers, seconded by Representative Webb, and adopted by voice vote.
Chairman Rand asked for a motion to direct staff to send out Defined Calculations letters to specific agencies before 2010-2012 Budget Instructions are finalized. A motion was made by Senator Stivers, seconded by Representative Webb, and adopted by voice vote.
There being no further business before the Subcommittee, the meeting was adjourned at 2:27 PM.