Legislature(2015 - 2016)HOUSE FINANCE 519
03/31/2016 08:30 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmations: Alaska Mental Health Trust Authority | |
| HB373 | |
| SB124 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 373 | TELECONFERENCED | |
| + | SB 124 | TELECONFERENCED | |
| + | HB 319 | TELECONFERENCED | |
| *+ | HB 250 | TELECONFERENCED | |
| + | HB 249 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 31, 2016
8:32 a.m.
8:32:16 AM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 8:32 a.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Jerome Selby; Marty Rutherford, Acting Commissioner,
Department of Natural Resources; Alex Nouvakhov, Division
of Oil and Gas, Department of Natural Resources; Matt Gill,
External Affairs, Senior Manager, Tesoro; Senator Stoltz,
Sponsor, District; Denise Daniello, Executive Director,
Alaska Commission on Aging; Jacqelli Ziegenfuss,
Administrative Operations Manager II, Senior Disabilities
Services, Department of Health and Social Services; Kris
Curtis, Legislative Auditor, Alaska Division of Legislative
Audit; Marie Darlin, AARP, Juneau; Representative Cathy
Tilton.
SUMMARY
HB 249 ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
HB 249 was SCHEDULED but not HEARD.
HB 250 INDIV. INCOME TAX: CREDITS; RETURNS
HB 250 was SCHEDULED but not HEARD.
HB 319 SNOWMOBILE REGISTRATION FEES
HB 319 was SCHEDULED but not HEARD.
HB 373 APPROVAL OF SALE OF ROYALTY OIL TO TESORO
HB 373 was REPORTED out of committee with a "do
pass" recommendation and with one previously
published indeterminate fiscal note: FN1 (DNR).
SB 124 EXTEND SUNSET ON AK COMMISSION ON AGING
SB 124 was HEARD and HELD in committee for
further consideration.
CONFIRMATIONS: ALASKA MENTAL HEALTH TRUST AUTHORITY
Co-Chair Thompson reviewed the agenda for the day.
8:33:32 AM
^CONFIRMATIONS: ALASKA MENTAL HEALTH TRUST AUTHORITY
He relayed that Laraine Derr would not be confirmed during
the current meeting.
8:33:59 AM
JEROME SELBY, was interested in the public service position
because he saw it as an opportunity to help Alaskans using
state resources. The Mental Health Trust assets would be
used to develop jobs for Alaskans while providing more
funds for the trust and its targeted set of beneficiaries.
He enjoyed developing natural resources of which he had
several years of experience.
Mr. Shelby had been the Mayor for the Kodiak Island Borough
for 24 years. He had also served on the U.S. Department of
the Interior, Minerals Management Service, Outer
Continental Shelf Policy Committee making decisions
regarding all of the offshore oil assets in America. The
borough had operated the Kodiak Island Mental Health center
while he was mayor. Since then the management of the center
had been contracted out to Providence hospital. He had a
long history of working with the trust. He also felt that
it was a good time to ensure additional dollars went into
the trust because of the state's tight budget times. He
spoke of the Alaska Mental Health Trust Board recently
approving about $4 million in assistance dollars to the
Department of Health and Social Services (DHSS). He enjoyed
working together to come up with solutions to benefit the
people of Alaska.
Representative Guttenberg commented that Mr. Selby had an
impressive resume. He asked him to talk about how he would
apply his personal experience to the board. He wanted him
to elaborate on how he would be a natural fit. Mr. Selby
had a substantial history in health care going back to 1971
and had a good feel for health care delivery. He spoke of
his experience in Kodiak using the land the borough had
received from the state to generate revenue through a
number of leases. Several of the leases became development
opportunities that fueled and strengthened Kodiak's
economy. He enjoyed putting things together to make
successful ventures.
8:38:56 AM
Vice-Chair Saddler asked if Mr. Selby was actively serving.
Mr. Selby was currently serving and had attended the
February and March board meetings. He was pleased that a
timber sale had been approved by the board at the March
meeting.
Vice-Chair Saddler mentioned that the board had made some
important decisions to dedicate funds to the Medicaid
reform bill. He asked Mr. Selby how he voted. Mr. Selby
commented that with his limited experience on the board he
relied on recommendations from staff and other board
members. He used a "common sense" approach measuring
against the Alaska Mental Health Trust's guidelines and
mission.
Vice-Chair Saddler mentioned that the range of trust
beneficiaries was broad. He asked if Mr. Selby had a better
understanding or experience with any one class of
beneficiaries over another. Mr. Selby did not. The mental
health center within the Kodiak Island Borough tried to
serve a range of needs. He was aware that it was an
unreasonable expectation that the center could cover every
possible need especially with limited funding. Therefore,
wise decisions had to be made.
8:42:48 AM
Vice-Chair Saddler asked about how Mr. Selby would
influence the trust's board decisions. Mr. Selby responded
that he hoped his expertise would help the board make
better decisions and would result in return in revenues and
service delivery. He noted his ability to help discern
amongst various options and to make tough decisions. He was
comfortable and had a significant amount of experience
making difficult decisions.
Representative Edgmon thanked the committee for the
thoughtful questions and spoke in support of Mr. Selby's
appointment to the board. While Mr. Selby was mayor of
Kodiak, the representative had a long work relationship
with him. He mentioned the trust as a unique body with a
unique responsibility. The representative thought that Mr.
Selby's experience being an ideal fit in terms of him being
a very involved member and the mission of the trust
authority. He encouraged other members to support Mr.
Selby's confirmation.
Co-Chair Thompson acknowledged Representative Cathy Tilton
in the audience. He stated that he encouraged the
advancement of Mr. Selby's name to the joint body for
confirmation.
8:45:57 AM
AT EASE
8:49:05 AM
RECONVENED
Co-Chair Thompson intended to move HB 373 out of committee
in the current day if it was the will of the members.
HOUSE BILL NO. 273
"An Act relating to the transfer of the title to a
vehicle, including certain manufactured homes and
trailers, on the death of the owner; and providing for
an effective date."
8:49:50 AM
MARTY RUTHERFORD, ACTING COMMISSIONER, DEPARTMENT OF
NATURAL RESOURCES, indicated she would be providing a brief
overview of the proposed sale of the state's royalty oil to
Tesoro.
Commissioner Rutherford relayed that she would discuss the
process and the criteria for royalty-in-kind (RIK) sales.
She would also discuss the specific contract terms of the
Tesoro RIK contract. She would also be mentioning another
royalty oil contract the state was in the mist of
negotiating.
Commissioner Rutherford began with slide 2: "Royalty In-
Kind versus Royalty In-Value":
The State has a choice to take its royalty in-kind
(RIK) or in-value (RIV)
· When the State takes its royalty as RIV, the
lessees who produce the oil also market the
State's share along with their own production and
pays the State the value of its royalty share.
· When SOA takes its royalty share as RIK, the SOA
assumes ownership of the oil, and the DNR
Commissioner disposes of it through the sale
procedures prescribed by AS 38.05.183.
· Currently, the SOA receives all royalties as RIV;
historically, the SOA has regularly taken
royalties as RIK.
Commissioner Rutherford advanced to slide 3: "Non-
Competitive RIK Sale Process":
· Before taking RIK, the DNR Commissioner must find
it is in the State's best interest.
· DNR must decide whether to sell RIK pursuant to a
competitive auction or a non-competitive,
negotiated sale.
· Solicitation of Interest issued January 2015 to
prospective purchasers to gauge market interest.
· DNR determined that there was not competition
allowing for a competitive sale, and proposes to
enter into the negotiated 5 year contract with
Tesoro.
Commissioner Rutherford continued to slide 4:
"Commissioner's Decision Criteria":
AS 38.05.183(e) states that the commissioner must sell
the State's royalty oil to the buyer who offers
"maximum benefits to the citizens of the state." In
making this determination, the commissioner must
consider:
1. The cash value offered
2. The projected effects of the sale on the economy
of the state
3. The projected benefits of refining or processing
the oil in state
4. The ability of the prospective buyer to provide
refined products for distribution and sale in the
state with price or supply benefits to the
citizens of the state
5. The eight criteria listed in AS 38.06.070(a), as
reviewed by the Royalty Board
Commissioner Rutherford noted that she would be talking
about the eight criteria in greater detail in another
slide.
Commissioner Rutherford turned to slide 5: "Approval
Process for the RIK Sale":
· DNR must make a Best Interest Finding (BIF) in
support of the sale
· Preliminary BIF issued February 2016; final BIF
issued in March 2016.
· DNR presented the sale to the Royalty Board on
March 15, 2016; the Board reviewed the BIF and
the contract, and unanimously voted to recommend
the Legislature approve the sale to Tesoro.
· Prior to finalizing the RIK contract, the
Legislature must pass a bill ratifying the
contract with Tesoro (HB 373; SB 205).
8:54:44 AM
Commissioner Rutherford discussed slide 6: "Royalty Board's
Decision Criteria":
AS 38.06.070(a) states that the Alaska Royalty Oil and
Gas Development Advisory Board must consider:
1. The revenue needs and projected fiscal condition
of the state;
2. The existence and extent of present and projected
local and regional needs for oil and gas
products;
3. The desirability of localized capital investment,
increased payroll, secondary development and
other possible effects of the sale;
4. The projected social impacts of the transaction;
and
5. The projected additional costs and
responsibilities which could be imposed upon the
state and affected political subdivisions by
development related to the transactions.
Commissioner Rutherford stated that number 3 was not
applicable because the state was selling to an existing
refinery that had been using alternative privately
purchased supplies. She also relayed that number 5 was not
applicable because the state had an established refinery.
Commissioner Rutherford turned to slide 7: "Royalty Board's
Decision Criteria Cont.":
AS 38.06.070(a) states that the Alaska Royalty Oil and
Gas Development Advisory Board must consider:
6. The existence of specific local or regional labor
or consumption markets or both which should be
met by the transaction;
7. The projected positive or negative environmental
effects related to the transactions; and
8. The projected effects of the proposed transaction
upon existing private commercial enterprise and
patterns of investment.
Commissioner Rutherford added that the royalty board
reviewed the final best interest finding and the associated
Tesoro contract. They voted unanimously to recommend that
the legislature approve the sale.
Commissioner Rutherford spoke on slide 8: "Tesoro RIK
Contract Terms":
· 5 year contract for 20,000 to 25,000 barrels per
day.
· The RIK sales price uses a netback formula and
provides higher revenue to State compared to RIV.
· If Tesoro nominates zero barrels for 3
consecutive months, the contract terminates.
· Security: Tesoro shall provide a letter of
opinion from a financial analyst or a stand-by
letter of credit equal in value to 90 days of ANS
royalty oil (if rating falls below BBB- and
Baa3).
· In-state processing: Tesoro to use "commercially
reasonable efforts" to manufacture refined
products from the ANS royalty oil.
· Employment of Alaska residents: no discrimination
against AK companies and residents.
Commissioner Rutherford highlighted that Tesoro had over
210 Alaskan employees and employed over 40 Alaskan
contractors. The plant was located in Nikiski and had been
in operation for several decades.
8:58:26 AM
Commissioner Rutherford detailed slide 9: "RIK Contract
Price":
ANS Spot Price - $1.95 - Tariff Allowance +/- Quality
Bank Adjustments - Line Loss
· ANS Spot Price = Average US West Coast Price for
Alaska North Slope oil (reported by industry
trade publications Platts and Reuters)
· $1.95 RIK Differential
· Destination value minus marine costs so RIK >
RIV.
· Tariff Allowance = TAPS and Pipelines upstream of
PS-1.
· Quality Bank Adjustments = as reported by TAPS
Quality Bank Administrator.
· Line Loss (loss of volume between PS1 and the
VMT).
Commissioner Rutherford pointed to the price formula listed
at the top of the slide in red. The Revenue In-Kind
contract prices equaled the Arctic North Slope (ANS) spot
price minus $1.95 minus a tariff allowance, adjusted for a
quality bank - either up or down - minus line loss. She
explained that ANS spot price was the destination value of
ANS at the United States West Coast - determined by reports
from the industry trade publications, Reuters and Platts.
The next item deducted was a location differential. She
reported that the amount of $1.95 was used in the
solicitation of interest. She explained that starting with
the ANS spot price the state deducted the marine
transportation costs. When the state received RIV and
looked to the working interest owners the
shippers/producers charged the state between $3.30 and
$3.70 for the cost of the marine transportation from the
Valdez Marine Terminal to the West Coast. The state then
deducted the tariff allowance, a combination of the Trans
Alaska Pipeline tariff and the upstream pipelines.
Following those deductions the state adjusted for a quality
bank, determined by the TAPS quality bank administrator at
the Federal Energy Regulatory Commission (FERC). Finally,
the line loss was deducted, the loss of volume that
occurred between Pump Station 1 and the Valdez Marine
Terminal. The resulting figure equaled the value that the
state of Alaska received. She explained that difference
between RIK versus RIV was about $1.95 versus $3.50 - about
$1.50 in the state's favor. The only distinction between
calculating the RIK versus was RIV had to do with the
amount being deducted.
Commissioner Rutherford highlighted slide 10: "Contract is
in the State's Best Interest":
· DNR estimates the State will receive $45 to $56
million in additional revenue over taking RIV.
· Producers deduct around $3.30 to $3.70 from the
west coast value as a "transportation deduction"
in arriving at the price for RIV.
· The proposed Tesoro contract will deduct only
$1.95 as a "location differential" from the west
coast ANS value.
· The proposed sale provides crude to Tesoro's
refinery at Nikiski with associated economic and
social benefits to Alaska's economy:
· Tesoro employs approximately 210 Alaskans
· Tesoro produces 59,000 bpd refined products at
its Nikiski refinery
· Tesoro refinery's estimated contribution to the
local economy is $127mm
9:02:55 AM
Commissioner Rutherford moved to slide 11: "Additional
Royalty Oil Sales":
•Additional royalty oil volumes are available for the
other in-state refiner, Petro Star; helping maintain a
competitive in-state refining industry.
•DNR is currently negotiating sales with Petro Star of
remaining royalty oil under similar contractual terms.
•The proposed Tesoro contract and forthcoming Petro
Star contract will allow for additional sale oil
nominations to maximize royalty oil sales if the State
has more royalty oil than is currently forecasted.
Commissioner Rutherford added that if the volume fell the
state would be pro-rationing both contracts down together.
She concluded her presentation and made herself available
for questions.
Co-Chair Thompson asked about the quality bank adjustment.
He asked her to elaborate on the subject.
Commissioner Rutherford suggested Mr. Nouvakhov would be a
better person to address Co-Chair Thompson's question.
ALEX NOUVAKHOV, DIVISION OF OIL AND GAS, DEPARTMENT OF
NATURAL RESOURCES, responded that the quality adjustment in
the netback evaluation equation looked at the crude which
was being sold at the entry of the TAPS and compared it to
the comingled stream at the Valdez point. If any residuals
were frozen into the TAPS the payment or penalty would be
borne by Petro Star rather than the sellers. The two
contracts between the State and Tesoro and between the
state and Petro Star would have the same quality
adjustment.
Commissioner Rutherford explained to Mr. Nouvakhov that
because both Petro Star and Tesoro took their oil at the
terminus the question was whether there was any quality
bank adjustment involved in the formula for Tesoro.
9:06:30 AM
Mr. Nouvakhov responded in the affirmative. He explained
that there was because, depending on the nominating field,
the state had an option as to which fields and crudes were
nominated. For example, if the state nominated something
for the crude oil field and then compared that to a
commingled final crude in Valdez there might be a quality
adjustment.
Co-Chair Thompson was still unclear. He thought the quality
bank had to do with the amount of product taken off by
Petro Star in the Fairbanks area. They take out a part of
the product and what was placed back in the line was of a
lesser quality. Therefore, there was a quality bank change
to Petro Star. He furthered that if Tesoro took it out in
the same as it would go to the West Coast and did not put
anything back in the line, he wondered if there would still
be a quality bank adjustment. They did not put back a
lesser quality product into any line.
Mr. Nouvakhov responded that Co-Chair Thompson was correct
that Tesoro did not put any product back into a line. He
detailed that the crude the state sold at the point of
delivery at Pump Station 1 could be of a different quality
than the final commingled ANS crude which Tesoro took at
the Valdez Terminal.
Commissioner Rutherford furthered that the state received
an average of 12.5 percent from certain fields. The state
took delivery of its RIK from Pump Station 1. What was
delivered downstream from that could be of lessor or
greater quality. The quality bank used an adjustment to
calculate either a deduction or an increase to the state's
value to ensure the state would receive the pure molecular
value for the units from which the state received its oil.
Representative Wilson commented that Petro Star would be
effected by the quality bank differently than Tesoro
because of their location. She did not think how they
[Tesoro] were effected had anything to do with their
contracts because a certain portion was not in the
contract. It was dealt with separately because of it being
a federal government related transaction and certain
information was unknown at the time. Commissioner
Rutherford indicated she was correct. She relayed that it
was an effort to ensure that where the state took its
molecules and the composition of the particular molecules
were accommodated so that when they were mixed with
everything going into line the state received the
appropriate value for the molecules.
9:10:03 AM
Representative Wilson thanked Department of Natural
Resources for making it possible for the state to keep its
own oil in the state and using it for the in-state
refinery. She hoped it would result in keeping the refinery
more profitable and steady. She hoped the state had learned
a lesson from what happened at Flint Hills and looked
forward to the arrival of Petro Star.
Representative Gara was fine with the bill. He was glad a
rider was not in the bill like there had been two years
previously. He commented that the more he looked at the
legislation the unhappier he became about what the
legislature did 2 years prior. He explained that
legislation that passed granted up to $10 million per year
of tax credits adding to the royalty renewal contract for
three company owners of refineries. Tesoro had indicated
they did not want them. He did not believe the state was in
the kind of financial condition to continue that kind of
legislating. He opined that in part the budget was very
unfair to many people. He thought it would be unfair not to
give the $10 million to Tesoro if the state was giving it
to others. He would consider offering an amendment on the
House Floor.
Co-Chair Thompson indicated that the discussion would
continue on the house floor.
Representative Guttenberg had assumed that the quality bank
calculation was zero. He realized that there were
adjustments for quality per field. He queried if there was
a daily calculation on flow rate. He wondered if the state
was taking oil from its high volume fields. Commissioner
Rutherford responded that she would ask Mr. Nouvakhov to
speak to his question about flow. She responded that the
State of Alaska received its royalty oil as it was produced
by producers. The state could not over lift or under lift.
When the producers produced from various fields the state
received its royalty percentage from particular leases. If
there was a variation of the royalty rate, it would very
between leases. The state took it as it was produced by the
various working interests by field and by lease.
9:13:54 AM
Vice-Chair Saddler asked about the effects of the price
indices rising substantially. He wondered if the contracts
for the sale to Tesoro had any provisions for an escalated
price. Commissioner Rutherford explained that the place
where the state captured how the price was variable was at
the ANS spot price.
Vice-Chair Saddler asked Commissioner Rutherford to
describe the negotiations that lead to the equalization of
the pro-rata provisions in exchange for changed volume for
Petro Star.
Commissioner Rutherford detailed that when the department
went out for the solicitation of interest the state
received various responses. Two of the five parties that
responded were North Slope Producers who had indicated that
while they might be able to meet a price point of $195 they
were intending to ship out of state for refining. The state
had received a response from Flint Hills indicating they
were closing down and not interested. The state also
received a response from Petro Star that they were
interested but were not willing to hit the price point.
Tesoro expressed their interest and willingness to hit the
price point. The state, then began its negotiations with
Tesoro. As negotiations with Tesoro progressed Petro Star
came back expressing their interest and the desired price
point. The state was well into the negotiating process with
Tesoro. As part of trying to accommodate Petro Star's
desire for volume the state asked Tesoro if it was willing
to give up some of its volume to accommodate Petro Star's
interest. The state believed it was good to have a
competitive environment for refining in Alaska. In exchange
the state had looked at providing Tesoro with a
preferential pro-rationing position. She furthered that as
the negotiations continued a point was reached where all
partners were relatively satisfied. In the end it was
decided that neither party would have a pro-rationing
decision. The state would pro-ration down equally between
any contracts the state had in place.
Co-Chair Thompson asked for further questions.
9:17:22 AM
MATT GILL, EXTERNAL AFFAIRS, SENIOR MANAGER, TESORO, urged
members support for the legislation. He read from a
prepared statement:
Tesoro Corporation is a Fortune 100 company and is an
independent refiner and marketer of petroleum
products. Tesoro's refining operations started Alaska
with the purchase of the Kenai refinery back in 1969.
Our Kenai refinery has the operational capacity to
produce up to 72,000 barrels per day and is primarily
focused on Jet and Diesel production followed by
gasoline and gasoline blendstocks, heating oil and
heavy fuel oils, propane and asphalt. We operate a 68-
mile, common-carrier products pipeline that transports
jet fuel, gasoline and diesel fuel to the Port of
Anchorage and the Anchorage International Airport. The
wholesale delivery of our products occurs through our
terminals in Kenai, Anchorage, our Nikiski dock and
the Port of Anchorage.
In addition to being the largest taxpayer in the Kenai
Peninsula Borough, Tesoro is also able to provide
around 225 family wage jobs at the refinery, along
with about 30 full-time contractors that are working
in and around the refinery year round. We provide
retail fuels at our company-owned Tesoro 2-Go retail
outlets as well as at numerous branded and unbranded
outlets. We employ operators who work at our terminals
in the Port of Anchorage and in Nikiski.
We are a major supporter of the Cook Inlet Regional
Citizens Advisory Council (CIRCAC) and the largest
member of the Cook Inlet Spill Prevention & Response
team (CISPRI).
We actively support a wide range of local events and
programs - from employee fundraising for the United
Way to youth sports programs. Each year we sponsor all
of the 5th and 6th grade classes on the Kenai
Peninsula to conduct a mission at the Kenai Challenger
Learning Center and we are the Signature Sponsor of
"Caring for the Kenai" program.
Tesoro strongly urges you to support House Bill 373,
"An Act approving and ratifying the sale of royalty
oil by the State of Alaska to Tesoro Corporation and
Tesoro Refining and Marketing Company LLC; and
providing for an effective date."
This legislation is the result of constructive dialog
and productive negotiations between the Department of
Natural Resources and the Tesoro Corporation. By all
accounts, our company was very impressed with the
State's ability to understand our issues and arrive at
a mutually beneficial agreement that is truly a win-
win for both parties as well as accommodating to the
other refineries in the State.
For the State, the DNR estimates that it will continue
to receive a price for its Royalty-in-Kind oil that
exceeds the price it would have receive if it elected
to keep its Royalty Oil in Value.
For Tesoro, this 5 year contract will provide us with
a stable supply of ANS crude while also giving us the
volumetric flexibility to help accommodate seasonal
fluctuations in demand for refined products. The
availability, flexibility and stability that this
contract offers will have a positive impact on our
ability to maintain our ongoing operations at our
Kenai refinery.
In order to accommodate the needs of the other in-
state refiners, Tesoro and the State modified this
contract to reduce volumes as well as eliminate a
proration clause and a 5 year extension option.
Tesoro believes in Alaska's future and is committed to
being an active corporate citizen. We look forward to
continuing to provide Alaskans with clean burning
fuels to keep your homes warm and your cars, boats and
snow machines traveling across this great state.
I urge you to support House Bill 373.
9:21:20 AM
Representative Pruitt reported regularly getting asked
about pricing. He asked Mr. Gill how Tesoro saw the sales
impacting the consumer. Mr. Gill clarified that
Representative Pruitt was asking about gasoline prices
versus oil prices.
Representative Pruitt responded affirmatively. Mr. Gill
relayed that the approval or denial of the contract before
the committee would have no direct impact on street prices
of gasoline and Tesoro's other oil products. It was
strictly a commercial transaction between Tesoro and the
State of Alaska, equivalent to a commercial seller.
Vice-Chair Saddler queried about any other supply of crude
oil that would replace the state RIK oil. He wondered about
the current source of capacity assuming there would be no
change in the refinery throughput. Mr. Gill reported that
currently Tesoro took every drop of oil produced in Cook
Inlet, the company's base supply. It supplemented the Cook
Inlet oil with ANS crude either through state royalty
contracts or through contracts with other North Slope
producers. On rare occasion the company had to import crude
oil from out of state to fill its' needs. Currently,
Tesoro's royalty oil contract, which expired in January
2016, left the company with a gap until the new contract
was in effect in August 2016. It was his understanding that
the company had to purchase some Russian crude to bring
into the refinery.
9:23:37 AM
Co-Chair Thompson OPENED public testimony.
Co-Chair Thompson CLOSED public testimony.
Co-Chair Thompson asked Vice-Chair Saddler to review the
fiscal note.
Vice-Chair Saddler reviewed one indeterminate fiscal note
from DNR, Division of Oil and Gas, Office of Management and
Budget, component number 439. The fiscal note was dated
March 23, 2016.
Co-Chair Neuman MOVED to report HB 373 out of Committee
with individual recommendations and the accompanying
indeterminate fiscal note. There being NO OBJECTION, it was
so ordered.
HB 373 was REPORTED out of committee with a "do pass"
recommendation and with one previously published
indeterminate fiscal note: FN1 (DNR).
9:25:01 AM
AT EASE
9:29:05 AM
RECONVENED
SENATE BILL NO. 124
"An Act extending the termination date of the Alaska
Commission on Aging; and providing for an effective
date."
Co-Chair Thompson relayed the next bill, SB 124. He did not
intend to move the bill from committee in the current
meeting. He read a list of available testifiers.
9:29:57 AM
SENATOR STOLTZ, SPONSOR, explained that his district was
part of the home of the fastest growing senior population
in the State of Alaska. He had introduced the bill by
request. It was a bill supported by numerous organizations
of seniors, individual seniors, and a wide array of others.
He wanted to reflect that it was not his bill but one that
belonged to the senior community and a broader group of
Alaskans.
Senator Stoltz relayed that the extension of the sunset
which would expire in July 2016 followed the
recommendations of the Budget and Audit Committee. Ms.
Curtis and her staff performed the audit and recommended an
8 year extension. There were other recommendations
including the commission improving its public notices of
subcommittees. He encouraged public participation. He
doubted that the commission did anything intentionally to
discourage public involvement. The other recommendation was
a gentle admonition, because of scarce resources, to
confine its' agenda to activities of senior Alaskans rather
than wandering into other policy areas. The Senate State
Affairs Committee and the Senate Finance Committee looked
at the fiscal impact. The Senate Finance Committee had a
lengthy discussion about the fiscal note, which he remarked
was a significant aspect. There were recommendations made
by the Senate Finance Committee for more significant cuts.
The committee mediated at the reduction of one person in
the current year and the potential reduction of 2 people in
subsequent years. They arrived at those conclusions working
with the administration.
Senator Stoltz felt the bill was fairly straight forward
and came down to whether the commission performed a
significant role. He thought the Alaska Commission on Aging
was the conduit for which federal funds were received. He
thought the amount was approximately $11 billion. He and
the audit division believed the commission performed an
important function. The Senate Finance committee looked at
the finances and remembered two words, "We're broke," that
were relevant to any discussion on any state issue being
dealt with. In spite of the state's fiscal situation he
thought the commission had a worthy role.
9:35:11 AM
Co-Chair Neuman mentioned the analysis on the fiscal note
it discussed how the Older Americans Act provided $12,851
in funding for seniors in FY 16. He wondered if the
commission decided how the money was spent. Senator Stoltz
responded that the commission, working with the
administration, was likely to decide how the money was to
be spent. He deferred to Ms. Daniello to provide a detailed
description. Some of the money was designated through
various components of the budget.
Co-Chair Neuman thought members were advocates of local
control. The health commission controlled federal funds for
programs that affected seniors. Senator Stoltz added that
it was one of the strongest citizen boards in the state. He
noted that Rachel Greenberg from his region was a great
member. He also mention Edna Debreeze, another active
member. He thought there was a deep well of knowledge and
capability on the citizens' board that he was not as
concerned about a diminution of admission the board was a
solid citizen's board.
Co-Chair Thompson thanked Senator Stoltz. He called Ms.
Daniello to the table to answer questions.
9:38:07 AM
DENISE DANIELLO, EXECUTIVE DIRECTOR, ALASKA COMMISSION ON
AGING, introduced herself.
Co-Chair Thompson was looking at the fiscal note eliminated
by the other body. He wondered about the elimination of one
full time position from the commission in FY 17 and two
full time positions beginning removed from the budget in FY
18. He asked about the effect it would have on the board's
ability to fulfill its statutory responsibility.
Ms. Daniello commented that it would have a dramatic impact
on the board's ability to do what it had been doing since
the commission's inception in 1981. Based on her
understanding of the Senate Finance Committee's fiscal note
it was an elimination of one position in FY 2017 and an
elimination of a second position in FY 18 for a total of
two staff positions resulting in a 50 percent reduction of
its staff. She remarked that the state had a growing senior
population. Currently, there were more than 120,400
seniors, 75,000 of whom were 65 years and older. It was not
just the growing senior population, but was also the growth
of the number of people of the oldest old. She continued
that each cohort of the senior population had different
needs and resources. The commission worked to do research
on prevailing trends and report data on a variety of
indicators. The commission convened stakeholder groups and
met with seniors around the state to ask for their input.
The commission developed the Alaska State Plan for Senior
Services, a 4 year comprehensive state plan, and was in
charge of its implementation.
Ms. Daniello also spoke of doing a significant amount of
education, advocacy, and planning efforts. The commission
provided guidance to other agencies of state government
that were also targeting how to address the growing senior
population within their planning efforts. She detailed the
loss of the administrative assistant who took care of the
day-to-day business transactions for the commission. The
position also helped provide board meeting packets and many
other administrative duties. She reviewed the duties of the
Planner 2 position that would be lost; the person worked
with the executive director to develop the state plan for
senior services satisfying the requirement under the Older
Americans Act to draw down the $11 million in funding. If
the fiscal note was approved the commission would continue
to do its best to satisfy its mandatory requirements. She
mentioned having done much more over the past years. She
noted hosting senior housing summits, the power of aging
symposium and working with partners to develop other
planning efforts. She reiterated that the loss of staff
would affect the commission greatly.
9:41:54 AM
Co-Chair Thompson asked if the commission would be able to
fulfill its statutory requirements. Ms. Daniello answered
that the commission had a year to prepare for the loss of
the Planner 2 position. She relayed that the commission was
very good at partnering. She assured the committee she
would do her pest to fulfill the mandatory statutory
requirements.
Co-Chair Neuman asked what positions were currently filled,
their duties, and their salaries.
Ms. Daniello relayed that currently there was an
administrative assistant position responsible for the day-
to-day business activities of the commission. She worked
with that person to develop financial projections. The
administrative assistant was also responsible for procuring
all travel, doing financial reports required for travel,
procuring office supplies, answering phones, handling mail,
and other miscellaneous duties.
Ms. Daniello identified the second position at the
commission, the Planner 1 position, funded by the Alaska
Mental Health Trust Authority using the trust's authorized
receipts. She furthered that because the position was
funded by the trust the person was responsible for focusing
on the needs of senior trust beneficiaries including older
people with behavioral health needs, depression, mental
illness, and specifically Alzheimer's disease and related
dementias. Additionally, there was a growing population of
people with intellectual and developmental disabilities who
were aging as well as their caregivers.
Ms. Daniello moved on to describe the duties of the third
position in her office, the Planner 2 position. This
position was very important to the commission conducting
day-to-day research and assembling information to compile
graphs and charts used in PowerPoint presentations,
reports, and position papers. The position also provided
assistance to the executive director in developing needs
assessment activities and provided different types of needs
analysis used to collect information from the public that
informed advocacy and the state plan for senior services.
The position also supported the executive director in
coordinating the state planned advisory committee meetings
and provided support in developing the plan including the
goals, strategies, and performance measures. The position
also helped with organizing efforts for the commission's
newsletter and other responsibilities.
Ms. Daniello reviewed her own duties as the Executive
Director for the commission. She oversaw all of the work of
the commission including planning, advocacy, and education.
The position also prepared all of the PowerPoint
presentations, position papers, and formal correspondence
from the commission to legislators, the governor, public
members, state agencies, and non-profit organizations. The
Executive Director was responsible for making sure the
state plan was developed according to the requirements of
the U.S. Administration on Community Living and much more.
She relayed that she took direction from the commission,
particularly the commission chair.
9:46:34 AM
Co-Chair Neuman asked about the salary schedules.
Ms. Daniello deferred to Ms. Ziegenfuss to provide the
salary information.
JACQELLI ZIEGENFUSS, ADMINISTRATIVE OPERATIONS MANAGER II,
SENIOR DISABILITIES SERVICES, DEPARTMENT OF HEALTH AND
SOCIAL SERVICES, asked if she should provide the salaries
or the total costs including benefits.
Co-Chair Neuman asked for both.
Ms. Ziegenfuss reviewed the salary schedule. The Executive
Director was a range 23, at a salary of $112,000 per year,
a benefits package of $56 thousand, for a total of
$169,441. The Administrative Assistant 2 position was a
range 14, at a salary of $58,296, a benefit package of
$37,835, for a total of $96,130. The Planner 2 position was
a range 19, at a salary of $68,801, a benefits package of
$41,623, for a total of $110,424. The Planner 1 position
was a range 17, at a salary of $73,809, a benefits package
of $43,429, for a total of $117,238.
Co-Chair Neuman asked that the information be provided in
writing. He thought the salaries were high and he would
like Ms. Curtis' input.
Representative Gara asked Ms. Daniello to elaborate on the
duties related to accessing $11 million in federal funding
that currently rested with one of the positions slated for
elimination.
Ms. Daniello responded that the funds were granted through
the Older Americans Act to provide services for seniors.
Also, in Alaska Title 3 funds were available providing
nutrition, transportation, and support services. It was one
of the largest senior grant programs the state had for
seniors. The program also include the National Family
Caregiver Support Program. The amount of federal funding
was over $5.8 million. Additionally, there was the
Nutrition Services Incentive Program which provided funding
used to purchase food for senior meals totaling $467,080.
There was also Title 7 funding for elder protection for the
Adult Protective Services and the Office of the Long-Term
Care Ombudsman totaling $103,193. There was federal funding
for Title 6 programs for tribal organizations in the amount
of $4.4 million. The funding went directly to the tribes
because of their direct relationship with the government
and the services mirrored services provided through Title 3
funding. The federal funding she spoke of totaled over $11
million.
9:51:40 AM
Representative Gara assumed that Department of Health and
Social Services had access to the funds. Ms. Daniello
answered that the money did not come through the commission
but rather through DHSS. The commission did the work in
partnership with the Division of Senior and Disabilities
Services to satisfy certain requirements ensuring the State
of Alaska received funding. She relayed that the DHSS was
the sole state agency on aging in Alaska. The
responsibilities were spelled out in the Older Americans
Act. The administration of federal and state funding for
senior programs went through the Division of Senior and
Disabilities Services and they managed the funds rather
than the commission.
Representative Gara asked about the volume of traffic
received through the commission's office. Ms. Daniello
responded that the amount of calls the commission received
was significant. She furthered that the office also
directed people to the Aging and Disability Center for
follow-up as well as talking with them. Often times the
commission received calls from care givers who were very
stressed out.
Representative Wilson wondered if the commission was
helping to bring federal funds to Alaska. She also wondered
why a portion of the funding was not being reinvested into
the commission. Ms. Daniello responded that there was a
small amount of money that came to the commission,
approximately $72 thousand. The rest of the funding for the
commission came from the General Fund with the exception of
the Mental Health Trust Authority Authorized Receipts
(MHTAAR) fund for the Planner 1 position.
Representative Wilson wanted to better understand the
criterial for determining how much money went to the
commission. She mentioned that she did not see $72 thousand
on the fiscal note.
9:55:00 AM
Vice-Chair Saddler mentioned hearing about the possibility
of obtaining additional waivers. He wondered how the
operations of the commission would change with the
potential cuts being proposed. Ms. Daniello relayed that
the commission had advocated to have waiver services
available to people with cognitive impairments who might
not meet the level of care requirements. The commission was
pleased with and had been actively involved in the
development and educational efforts having to do with
Medicaid 1915(i). The commission would be staying involved
with the state plan options.
Representative Gattis drew attention to the commission only
receiving a small portion of the $11 million in federal
funding. She had heard Ms. Daniello discuss the commission
working in tandem with the DHSS. She wondered why more
money did not flow directly to the commission. Ms. Daniello
explained that the Commission on Aging worked in
partnership with the DHSS to satisfy the responsibilities
of a state unit on aging. The responsibilities were
described in the Older Americans Act in Section 3056ad. The
Older Americans Act specified that the state unit on aging
was responsible for having fiduciary responsibilities
administering the federal and state funding for senior
programs and services, developing a state plan for senior
services, and serving as a visible advocate for elders. The
commission also provided significant education. She spoke
of a series of educational forums. She offered to send Co-
Chair Thompson opinions from seniors on Medicaid reform.
Co-Chair Thompson requested that she provide the
information to his staff.
9:59:53 AM
Representative Guttenberg asked if the planners on her
staff were also grant writers. He wondered if they were
writing grants that brought federal dollars to Alaska.
Ms. Daniello explained that the state plan for senior
services was the source of the draw down of federal money.
By having that plan the state remained in compliance with
the Older Americans Act. The 4 year state plan was approved
by the DHSS, the governor, and the U.S. Administration on
Community Living. There was an advisory council mostly
comprised of public members of senior age. The commission
wrote grant applications and employees worked as a team to
gather and compile information. She cited an example where
her staff submitted an application to the National
Alzheimer's Association for funding to include the
perceived cognitive impairment model in the behavioral risk
factor surveillance survey to gather information about
people with cognitive impairment. She mentioned the state
never before having the opportunity to receive certain
information from Alaskans directly. She relayed that the
commission's plan for the following year was to work with a
couple of funders to include a module that would look at
the needs of family care givers.
Representative Guttenberg asked whether the ability to
maintain federal funding was in jeopardy with the loss of
two positions being cut. Ms. Daniello was uncertain. She
relayed that the commission would do its best to develop a
4 year state plan and to be an active and physical activist
for elders.
Co-Chair Thompson invited Ms. Curtis to the table.
10:03:33 AM
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, reported that the division did a sunset
review of the Commission on aging. They looked at whether
the commission should be extended and whether they were
serving the public's interest. Overall, the audit concluded
that the Alaska Commission on Aging (commission) was
serving the public's interest by helping older Alaskans
lead dignified, independent, and useful lives through
advocacy, outreach, and education. Furthermore, the
commission served as the advisory council to advise on
matters on the development, administration, and operations
related to the state plan. The commission met the federal
requirement that each state establish an advisory council
to advise the state on aging matters. The division
recommend the maximum extension in statute of 8 years to
June 30, 2024.
Ms. Curtis relayed that there were two recommendations
resulting from the audit. The first was for the executive
director to implement and follow public notice
requirements. There had been some meetings that were not
public noticed as required. The second recommendation was
to the chair person to review and approve the legislation
watch list prior to distribution. The commission
periodically held teleconferences to gather public input
and discuss legislation affecting seniors. She explained
that to facilitate the feedback the commission published
watch lists of bills relevant to senior matters. When the
auditors looked at the watch lists they found legislation
that was not applicable to their duties. The auditors
recommended that in order to efficiently use the
commission's resources that they limit the watch lists to
only bills affecting seniors.
10:05:19 AM
Representative Wilson asked if a consideration of the
number of staff was part of the audit process. Ms. Curtis
was asked by the Senate Finance Committee her opinion about
whether the commission's staff could do its job and meet
responsibilities without jeopardizing federal funding with
the loss of a position. She answered that the auditors did
not explicitly enter into a sunset review looking at
whether the level of positions was adequate or whether they
were compensated appropriately. There were upwards of 200
boards and commissions. The Commission on Aging was given a
higher level of scrutiny because it was up for sunset in
the current year. She suggested that it could be time for a
legislative audit of all boards and commissions. She
reported that the Senate Finance Committee seemed to be
interested in her suggestion. A similar audit was conducted
in 1992. At the time there was a governor's council on
boards and commissions that did a holistic review and
suggested merging some boards and providing different
compensation. She was aware there was interest and thought
it might be a good time for such an audit. However, what
she stated specifically related to the Commission on Aging
was that the auditors did not believe that a loss of a
position would impact its ability to produce a state plan,
key to maintaining federal funding.
Co-Chair Thompson clarified that in the fiscal note it
indicated that in 2018 a second position would be lost. He
wondered if that loss would have any affect. Ms. Curtis
answered that undeniably when positions were cut services
were cut as well. In talking with the staff that conducted
the audit they believed there would be a reduction in
services provided. It would come down to prioritization of
services. She thought the state plan would be a top
priority. She was unsure whether the quality of the plan
would be compromised. She thought the level of work with
less workforce would be much more difficult. It was hard to
say if the level of work would lead to obtaining federal
funding. The judgement would have to be made in 2 years.
The auditors thought the commission could absorb a cut but
would likely result in reduced services.
Representative Wilson asked about the amount of federal
funding the commission received versus the goals of the
commission. She wondered if the auditors ever weighed in on
whether the DHSS should provide more funding. Ms. Curtis
replied that the auditors did not scrutinize the
commission's funding mechanisms. She thought that obtaining
additional federal funding would depend on its activities
in the current year. The audit and background material laid
out information about the federal program and the
commission's role in coordination with the department. It
was a joint process but the programs themselves were
administered by the Division of Senior and Disabilities
Services. They had the federal and state programs that
served seniors. The commission was the planning entity. The
appropriate funding would be left up to the department.
10:09:42 AM
Representative Pruitt asked about the second recommendation
from the auditors. He understood the concern was that the
commission would not want the issue to become politicized.
He asked if there had been follow-up in order to ensure the
commission was staying within the scope of senior services
when tracking legislation. Ms. Curtis answered that once
the audit was released there was no mechanism for the
auditors to go back in. There was no type of review or
evidence to support any changes.
Representative Pruitt asked if Ms. Curtis was satisfied
with the responses from the commission. Ms. Curtis relayed
that the commission as well as the department were
receptive and responsive to the audit. She was satisfied
with the audit.
Representative Guttenberg referred to the letter from the
commission in response to the audit recommendations. The
commission concurred with the audit findings and was
addressing them. He was aware the commission was
responsible for developing a state plan, but wondered who
was responsible for implementing it. Ms. Curtis responded
that much of the plan was implemented by the department.
However, the commission was responsible for outreach and
education which was part of the plan.
Representative Guttenberg asked if the commission staff
oversaw the department to make sure it complied with the
plan. Ms. Curtis responded that one of the functions of the
commission was to receive feedback from the people served.
She thought the commission was well aware of the degree to
which services were provided. She thought it was a more
indirect absorption of information rather that the
commission overseeing as a hierarchical type of
relationship within the department.
Representative Guttenberg was trying to better understand
the relationship between the commission and the department
and whether it was scrutinized as part of the audit. Ms.
Curtis reported conducting a survey of stakeholders to
understand the degree to which the commission was
successful. The survey responses and questions were in the
back of the state plan. In general, the feedback on the
commission was very positive. The plan was redone every 4
years. The degree to which the plan was successful would be
reevaluated when developing the next goals. She thought the
executive director of the Commission on Aging would be a
better person to answer his question. In response to the
question about the recommendations provided by the
auditors, every time the auditors did a sunset review they
familiarized themselves with the previous report
recommendations. In the introduction paragraph to the
findings and recommendations the auditors always addressed
the prior sunset audit recommendations. In the sunsets
audits there was a mechanism to come back in a certain
amount of time.
10:15:25 AM
Representative Guttenberg understood requesting feedback
and getting feedback. As far as implementing the plan and
its success, he wondered if she had looked at any feedback
from the federal government on how the state's
implementation.
Ms. Curtis responded that the auditors did not contact the
federal oversight agency to inquire about their
satisfaction.
Co-Chair Thompson OPENED public testimony.
10:16:44 AM
MARIE DARLIN, AARP, JUNEAU, indicated that AARP frequently
worked with the Commission on Aging. The organization
represented the aging population and encouraged younger
people to join also because they would become part of that
population in the future. She was also a member of the
commission for several years. She told of the commission's
previous audit which she opined had good results. The
recommendations that were made at the time were all
addressed by the commission. She was also the chairman of
the legislative committee for the Commission on Aging and
affirmed that as advocates they watched legislation. The
commission had a watch list containing all of the
legislation introduced relating to the aging population in
whatever way. There might have been a couple of pieces of
legislation on the list that could not be tied to the topic
of the aging. The commission had taken measures to rectify
the list. The watch list was signed off by both the
chairman of the commission and herself. She believed the
concerns resulting from the audit had been addressed. In
discussing a reduction in staff, she commented that once
the 4 year plan was put together, then it was up to the
commission to look at the implementation of the plan and be
able to report and keep track of it. She reported that the
commission consisted of 11 members. She emphasized that the
commission made very sure that it represented the entire
State of Alaska from the smaller communities to the urban
communities. When it came to looking at legislation and
other issues the commission made sure to have the input
from different areas of the state about where it should
place its energies and focus. The commission hopefully
represented all of the issues and concerns from throughout
the state.
10:22:02 AM
Co-Chair Thompson CLOSED public testimony.
Co-Chair Thompson indicated he would be setting SB 124
aside.
SB 124 was HEARD and HELD in committee for further
consideration.
Vice-Chair Saddler commended the board for its good work
and thanked the bill sponsor.
Co-Chair Thompson indicated that the balance of the agenda
would be rescheduled for another time.
ADJOURNMENT
10:23:19 AM
The meeting was adjourned at 10:46 a.m.