Legislature(2001 - 2002)
03/01/2002 01:33 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 414
An Act making supplemental and other appropriations;
amending appropriations; and providing for an effective
date.
HOUSE BILL NO. 415
An Act making supplemental and other appropriations;
amending appropriations; making appropriations to
capitalize funds; and providing for an effective date.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
(OMB), OFFICE OF THE GOVERNOR, summarized the supplemental
requests. She noted that eight years ago supplemental
requests were in the neighborhood of $90 million dollars,
partly because the budgeting process did not acknowledge the
full cost of operations. Ms. McConnell stated that the
Administration submitted a supplemental request because the
version after May was not reflective of the actual
situation. Ms. McConnell discussed placeholders [for the
Supplemental Requests], which amounted to $20 million
dollars after reforms. This was later moved to $16 million
dollars, and after May was reduced to $12 million dollars by
the Legislature. HB 414 & HB 415 total $38.7 million
dollars, which is over the placeholder, some of which are a
result of budget cuts. Ms. McConnell mentioned concerns
with federal funding because the schedule was delayed.
There are critical areas pending that could potentially
affect the supplemental.
Ms. McConnell added that when breaking the supplemental into
fast track and the regular process OMB paid most attention
to the items that are most urgent.
OFFICE OF THE GOVERNOR
Section 8
Elections component request for $25 thousand dollars
from the general fund to cover costs for printing and
mailing a Primary Election Voter Education Guide in
time to explain the new law (shifted from FY03 budget
which will be amended).
GAIL FENUMIAI, ELECTION PROGRAM SPECIALIST, DIVISION OF
ELECTIONS, OFFICE OF THE LEIUTENANT GOVERNOR, stated that
the Division of Elections requested supplemental funding in
the amount of $25 thousand dollars to pay for the cost of
printing a voter guide. The guide would be used to inform
voters of the changes in the primary election system as a
result of passage of HB 183. Ms. Fenumiai added that the
funding request would be offset by the Governor's amended
FY03 budget with a reduction of $25 thousand dollars to the
on-election year funding request. (section 8)
ALASKA COURT SYSTEM
Section 1
Judicial Conduct component request of $6.8 thousand
dollars appropriated from the general fund to be used
for legal fees in excess of the FY01 supplemental
budget.
Co-Chair Mulder noted that there was a letter from the
Alaska Court System in the member's files.
DEPARTMENT OF HEALTH AND SOCIAL SERVICES
Section 4(a)
Medicaid Services Component - Projected to run out
April 16. Request for $4.57 million dollars
appropriated from the general fund for FY01 bills paid
in FY02; request for $1.8 million dollars also from the
general fund, requested to cover under-funding last
year below low case scenario; $6.34 million dollars
requested from general fund is for caseload at mid-case
range and cost increases, particularly for seniors and
disabled. Total request of $12,712.5 dollars in general
fund appropriations. $106,618.0 is requested from
federal funds. $23,903.3 designated from Statutory
Program Receipts; Total Medicaid Services request
$143,233.8 million dollars.
JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, noted that the
total request from the supplemental budget for the Medicaid
program was $143 million dollars. She observed that this was
the largest budget item request in the program's history.
She anticipated that $106.6 million dollars in federal
funds, $23.9 million from statutory designated program
receipts, and $12.7 million dollars of general funds.
Ms. Clarke referenced the handout, and discussed the rising
cost of health care in Alaska from 1995-2000. She stated
that the consumer price index (CPI) in Anchorage grew by
about 9 percent, while health care costs rose 27 percent.
The average cost of health care in Alaska is anywhere from
25-45 percent above average costs for the rest of the
country.
Ms. Clarke added that the current authorization for Medicaid
is $561 million dollars for FY02, and that the program spent
$583 million dollars in FY01. She noted that the program
was aware that they were $22 million dollars short of
spending authorization coming into the new year. She stated
that the program pushed about a week's worth of spending
from FY01 into FY02, totaling about $13 million dollars.
She observed that the program kept on track with their
supplemental last year until May and June when their bills
increased considerably.
In response to a question from Co-Chair Mulder, Ms. Clarke
explained that providers were pushing bills through faster
because they knew that there was a possibility the Medicaid
Program could run out of money. She advised that pharmacy
costs had an over 30 percent increase in FY02.
BOB LABBE, DIRECTOR, DIVISION OF MEDICAL ASSISTANCE,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, interjected that
this was related to a slow down in services after Christmas.
More claims show up in the spring and summer months because
people are sicker in the winter, and there is a lag in
billing. The grant programs, community based care programs,
and mental health programs, which are sensitive to the cash
flow issues, are part of the problem. They are attempting
to get everything through the system in case the program
runs out of money. He reiterated that there has
historically been a spike in that quarter.
Representative Davies referenced the spreadsheet. He
inferred that the Medicaid budget had been funded at the low
case scenario last year. In addition, the budget was funded
below the low case scenario for a portion of the year. In
order to be more realistic the budget should be adjusted
from the low case to the mid case scenario to finish out the
year.
Ms. Clarke explained that the Governor used the low case
scenario [in his FY02 request for Medicaid funding]. The
Legislature cut the Medicaid budget below the case scenario.
Medicaid costs have "leaped over" the mid case scenario and
are currently in the high case scenario. She referenced a
letter sent to the Committee in April that tried to identify
what a mid case scenario would look like, but the request
before the legislature is now at the high case scenario.
Representative Davies summarized that [Medicaid costs] are
now higher than the mid case scenario.
Ms. Clarke explained that the description in the spreadsheet
describes the general fund portion of the request. The
$23.9 million dollar statutory designated program receipts
(SDPR) from the Fair Share program are also being used as a
match for the Medicaid program, which moves it into the high
case scenario.
Representative Davies understood that all estimates have a
margin for error. He observed that the department chose the
low case scenario and the legislature agreed. He asked how a
$143 million dollar funding level would compare to the high
case estimate.
Ms. Clarke replied that a high case scenario had not been
attempted. It was her opinion that the $143 million dollars
in additional spending authority would have come out of the
high case scenario. She observed that pharmaceuticals were
30 percent higher in the first six months of FY02 than they
were in FY01.
Representative Davies attempted again to determine, if the
budget had been funded at the mid case scenario, how much
more would have been placed into it?
Ms. Clarke replied that the mid case would have needed
another $8 to $9 million general fund dollars.
Representative Davies asked how much more was used from
other funds. He pointed out that designated receipts were
about twice the general funds, and federal funds were about
five times the program receipts. He questioned if the
ratios would be similar to that.
Ms. Clarke was not sure.
Representative Davies requested that information.
Co-Chair Mulder observed that the Governor had requested the
low case scenario funding.
Representative Harris pointed out that the House Finance
Committee had fully funded the Medicaid Program.
Representative Croft contended that the Legislature did not
estimate as it should. Medicaid needs to be fully addressed
in order to prevent the concern in the future.
Representative Harris advised that there were two options,
either put more money into it on a local level to match the
federal funding or reduce the Medicaid options.
Representative Croft and Representative Davies disagreed
with that comment.
Ms. Clarke pointed out that there was a 7 percent increase
in cost services. She observed that the elderly and
disabled were the highest cost services. Overall there has
been an 18 percent increase in Medicaid costs this year.
Pharmaceutical and home and community based waiver care
costs are 30 to 40 percent higher.
Vice-Chair Bunde noted that there have been projections from
the Department of Labor estimating a huge growth in the
population over 65 years old, and a large decrease in the
population age 30 to 50. He asked if the Department had
experienced the increase.
Mr. Labbe replied that there has been a continuous increase
in the senior citizen population on the Medicaid program.
The elderly population using Medicaid have not adjusted at
the same rate as other groups. The retirees are retiring
with more income and are not eligible to access these
programs at that rate. They are more likely to access the
benefits later in life when they enter nursing care. Mr.
Labbe said he would have expected to see more, but the
growth in the Medicaid elderly program is actually lower
than the overall population growth of that segment of the
population.
Co-Chair Mulder observed that the huge federal amounts from
the statutory designated project receipts related to the
last cycle of the Pro Share Program.
Ms. Clarke agreed and stated that in the FY02 budget, they
can continue the Pro Share Program. This year, along with
the Pro Share Program, a similar program started called Fair
Care, which uses the same mechanism as the Tribal Hospital.
Six months funding was included for that program in the
supplemental request. Otherwise, the impact on the general
fund and fiscal gap would have been greater. She added that
they had done their best to limit the general fund access.
Mr. Labbe spoke to the progress made by the Fair Share
program in Washington DC. There have been informal
discussions with the federal government on a state plan
amendment. Mr. Labbe said he anticipates formal questions on
the amendment. He thought that it would be in June before
it is known whether or not it is approved. He noted that
according to the attorneys he had spoken to, the program was
legal under the regulations, but they were not sure what
action would be taken. Mr. Labbe did not forsee the issuance
of payment in anticipation of the approval.
Representative Hudson acknowledged the difficulty in dealing
with this budget. He asked the number of Alaskans that
require Medicaid assistance.
Mr. Labbe replied that the division serves approximately
118,000 Alaskans per year, with an average of 80,000 per
month.
In response to a question asked by Representative Hudson,
Mr. Labbe explained that each state has some latitude in
establishing eligibility levels. There are certain groups
that are required to be covered. There is a federal
Supplemental Security Income (SSI) program, which makes a
person eligible for Medicaid. If a person moves to a
different state that has a Medicaid program in effect, the
state would have to cover them. Each state has different
policies, but they are required to follow national
guidelines.
Representative Hudson asked how the Alaska standards stack
up against Washington State.
Mr. Labbe replied that Alaska is at 200 percent of the
poverty level. Alaska is with a group of states at that
level. He thought that Washington was at 250 percent. He
claimed that the federal poverty level varied throughout the
country. Adult public assistance has one of the highest
income standards because Alaska has a higher supplement than
most states, due to the high cost of living in Alaska. Some
states provide a medical needy program, allowing people to
buy into the Medicaid program. Alaska does not provide
that. He concluded that each state varies in its structure.
Co-Chair Mulder asked about the co-pay arrangement.
Mr. Labbe replied the federal government does not allow co-
payment for services for children or pregnant women.
Currently, there is discussion regarding that concern. He
addressed the Denali Kid Care program.
Representative Croft noted that he was stunned that 20
percent of Alaskans are income eligible for Medicaid.
Co-Chair Mulder commented that the Native Health Services
(NHS) addresses a certain amount of that population. He
agreed that it was a stunning percentage and asked if it was
indicative of other states.
Mr. Labbe replied that it was representational of the other
states. He mentioned the unduplicated annual number, and
added that a large percentage of eligible recipients are
children.
Co-Chair Williams asked if Alaska Native Services or
Medicaid paid first.
Mr. Labbe replied that the State is the primary payer for
the Indian Health Service. To the extent that they access
the Indian Health Service and Tribal Health System, the
State receives federal reimbursement. Much of the
enrollment is driven by collection of third party revenue in
response to under-funding. Only 60 percent of the health
need is being met in the State. It is different in Alaska
because Alaska has a larger Native population than a smaller
state does, with the exception of South Dakota and New
Mexico. Most states do not have Alaska natives equaling 38
percent of Medicaid recipients.
Representative Davies pointed out that around 25 percent of
Alaskan kids live in families below the poverty level, and
around 40 percent of the population has no health care at
all.
Co-Chair Mulder asked how much of last years appropriation
was spent on non federally matched programs and services.
Ms. Clarke replied that most match federal services. She
mentioned that the State was forced to pay for abortion
services through the Supreme Court.
Co-Chair Mulder asked if it was through the Supreme Court or
the Superior Court.
Ms. Clarke said it was the Supreme Court.
Co-Chair Mulder said he thought the case was still before
the Superior Court.
Ms. Clarke said that the Superior Court had ruled in July
2001.
Co-Chair Mulder mentioned some services in the Hold Harmless
Program that were not federally matched.
Ms. Clarke discussed the Permanent Fund Dividend Hold
Harmless Program and Longevity Bonus Hold Harmless Program.
Mr. Labbe thought there were maybe 15 individuals that
should not be included in the program possibly because of
coding problems in the system. He thought that essentially
it is matched except for a very small piece.
Section 4(b)
$2,529.6 million dollars requested to fund Subsidized
Adoptions & Guardianship formula program caseload
growth.
Ms. Clarke noted that last year $2.3 million dollars was
requested for the program. Legislative funding was reduced.
There was a $1.8 million dollars under-funding going into
FY02. Ms. Clark said that request was based on a 14 percent
growth in the Subsidized Adoption Program and that the
actual growth was 18 percent. She explained that the
program subsidizes special needs adoptions. Although the
request was above projections, growth in the program was
good news, because it helps children find permanent homes
instead of remaining in foster care programs. She noted
that this item had been reduced in the FY02 budget.
Co-Chair Mulder asked whether the children would still be
able to be transferred for adoption without the special
services if the appropriation was not made.
Ms. Clarke explained that this type of adoption is a special
situation and that there is a contract signed each year. It
is less expensive than foster care.
Co-Chair Mulder asked what the average subsidy was.
Ms. Clarke said it averages $22.70 per day, and that a
special needs child receives an augmented rate of $48.89 per
day.
Co-Chair Mulder noted that total would be $8,000 per year.
Ms. Clarke added that it continued until the child is 18
years old.
Representative Harris pointed out that these are some of the
hardest cases to place and have been on the wait list for a
number of years.
Ms. Clarke reiterated that these are some of the most
difficult children to place and some have been in foster
care for a number of years. In response to a question from
Representative Harris, Ms. Clarke advised that these were
special needs children that might not otherwise be adopted.
Representative Harris referenced the Balloon project.
Ms. Clarke stated that the Balloon project has helped move
1,200 children out of the foster program in the last three
years.
Representative Harris asked what funding the request would
do to the wait list.
Ms. Clarke clarified that the funding in the supplemental
covers existing cases that have come into the subsidy
program. At the close of FY01, 1500 children per month were
receiving the subsidy. At the end of FY03, it may be 1800
children per month.
In response to a question from Representative Lancaster, Ms.
Clarke noted it did not include emergency foster care.
Discussion followed between Co-Chair Mulder and Ms. Clarke
on the average augmented rate for a special needs child
subsidy. Co-Chair Mulder pointed out that money was not
being saved by moving a child out of foster care into the
Subsidized Adoption Program because the per-day rate was the
same in both programs unless it was for a special needs
child. Ms. Clarke maintained that most of the children in
the Subsidized Adoption Program were special needs children.
Representative Croft discussed with Ms. Clarke the yearly
average cost for a child in the program. Representative
Croft noted that these are the most difficult children and
they would not be adopted without state assistance. They
could either sit the in foster care system or with a state
subsidy enter a home. He suggested that it would be cheaper
than foster care.
Ms. Clarke pointed out that foster care is approximately
twice the amount of the subsidy for special needs children.
Representative Croft questioned the impact to the families
if the state did not fund the $2.5 million dollars in
subsidized costs. Ms. Clarke stated that they had received
legal advice that action could lead to a breach of contract.
In response to a question by Representative Croft, Ms.
Clarke noted that children return to foster care due to
disruptions. She anticipated that there would be more
disruptions, as the families could not afford to retain care
without the subsidy.
Co-Chair Mulder questioned if families were asked to take
less. He understood that these are all high needs children.
Co-Chair Mulder requested that Representative Harris
research the matter.
TAPE HFC 02 - 35, Side B
Co-Chair Mulder questioned if there had been a foster care
reduction. Ms. Clarke noted that the slow track supplemental
shows an offset to the reduction in the special needs foster
care area. They continued to look at projections.
Co-Chair Mulder stated that he did not see a decrease in the
slow track supplemental for foster care.
Ms. Clarke indicated that despite a $600 thousand dollar
deficit, they only asked for $300 thousand dollars.
Representative Hudson asked about the federal funding.
Ms. Clarke explained that the federal funds were retained.
Some of the state funds are needed to match the federal
appropriation in order to receive the Title 4E Program. She
explained that they receive 50 percent of the funds for the
population that is eligible.
UNIVERSITY OF ALASKA
Section 11(a)
Request for $800 thousand dollars from University
Receipts for System wide Small Planning, Design and
Construction. Funding authority needed in excess of
the FY02 small project non-general fund receipt
authority for Lena Point fisheries and ocean sciences
facility for simultaneous excavation with the National
Oceanic and Atmospheric Association [NOAA] to prevent
disruption and damage to the facility at a later date.
PAT PITNEY, UNIVERSITY OF ALASKA, TSETIFIED VIA
TELECONFERENCE. She presented the request for authorization
for University receipt expenditure for Lena Point, and a
change in scope request on capitol appropriation from FY02.
She stated that the University needs to commit to the
National Oceanic and Atmospheric Association [NOAA] for the
infrastructure.
In response to a question from Co-Chair Mulder, Ms. Pintey
stated that the University receipts were coming from bond
proceeds, to be paid by natural resources funds.
Representative Davies noted that Senator Stevens has been
involved in the project's funding.
Ms. Pitney acknowledged that there had been a federal
agreement, and that there was expectation of state funding
for the project as well. The Lena Point facility had been
on the University's Capitol Budget request for 5 years.
Section 11(b)
Scope Change for Sec 3, Ch 61, SLA 2001 to include UAA
Heating, Ventilation, and Air Conditioning Piping
Replacement Phases 1-4
Representative Lancaster questioned inconsistencies in the
bill regarding pool replacement and HVAC piping that did not
appear on the short form. Ms. Pitney explained that in FY02
the scope increased to include high priority maintenance,
and that extended to the pool replacement. Pipe failures in
the summer required emergency maintenance. Some projects
had to be delayed because of that. Ms. Pitney emphasized
that a piece of the supplemental provided the clarification
to expand funding to cover the pipe failure.
Co-Chair Mulder noted that the University had contacted him
when the failure occurred and that he thought that the item
was appropriate.
MILITARY AND VETERANS AFFAIRS
Section 6 - Disaster Planning & Control
Request for $100 thousand dollars from the general
fund to maintain 24-hour State Emergency Coordination
Center [SECC], the agency that coordinates all
federal, state and local jurisdictional responses
associated with any disaster or event.
NICO BUS, ADMINISTRATIVE SERVICES MANAGER, DIVISION OF
SUPPORT SERVICES, DEPARTMENT OF NATURAL RESOURCES, spoke in
support of the request. He noted that another $174 thousand
dollars was found within the department. Mr. Bus explained
that in order to keep the center running, they utilize two
12.5-hour shifts, seven days a week. There are other
unanticipated costs. The request would allow funding through
the end of the year and serves the purpose for which it was
intended.
Co-Chair Mulder expressed concerns that the department knew
the appropriation level but did not manage within that
level.
Mr. Bus noted that cutbacks were made to avoid using general
funding, however the center was still about $100 thousand
dollars short.
In response to a comment by Representative Lancaster, Mr.
Bus explained the redirection of existing general fund
authority. He stated that they were no longer performing a
number of functions to accommodate the cutbacks.
Representative Davies asked which of the functions they
diverted or stopped.
JIM BOUTCHART, PROGRAM MANAGER, DIVISION OF EMERGENCY
SERVICES, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS,
TESTIFIED VIA TELECONFERENCE, listed cost reductions.
In response to a statement made by Representative Davies,
Mr. Bus explained that the Division thought their request
was going to be around $300 thousand dollars. There were
unanticipated costs. Mr. Bus reiterated that $174 thousand
dollars were diverted from within the division.
Co-Chair Mulder questioned if the employees were unionized.
Mr. Bus noted that they were working 7.5-hour days and that
they now work 12.5-hour shifts. He stated that they now work
a 42-hour a week shift and that they are working seven days
a week, year round.
DEPARTMENT OF NATURAL RESOURCES
Section 7
Scope change for SLA97, CH50, Sec 15(k), P9, L13 from
prepare and administer the Kalgin Island II, Caribou
Hills, S. Ninilchik-Dome View, South Ninilchik Block
timber sales in Kenai Peninsula to Kenai Peninsula to
reduce risks from wildfire.
Mr. Bus explained that the request was for reappropriation
for timber sales from four specific sites. Two were underway
when the market fell. He noted that they still need small
salvage timber in that area and he asked that the money be
used for smaller sales around the urban area to reduce fire
hazards and to offer salvaged timber. The request is to
redirect existing funds.
Representative Lancaster asked whether the Department was
working in conjuncture with the Borough. Mr. Bus affirmed.
Representative Hudson asked if there were logging operations
in that area. Mr. Bus observed that the spruce beetle is
making the market unproductive.
Section 6
Disaster Planning & Control
Representative Davies questioned the need for a 24-hour
facility.
Mr. Bus stressed the importance of that function taking into
consideration homeland security issues.
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES
Section 5
$2,876.9 million dollars requested for Marine Highway
Stabilization Fund FY02. Deficit due to Columbia fire
and fuel cost increases. If not funded, Spring/Summer
service would need to be drastically cut, reducing
revenues during highest revenue season. Ships would be
put into lay-up status for extended periods.
NANCY SLAGLE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES,
testified in support of the request. She noted that the
request is based on the impact of the loss of revenues that
the Marine Highway has had related to the fire on the
Columbia and delays in refurbishment. The Columbia was off
line for approximately 13 months. The projections of
revenues did not take this into account. The department had
been optimistic in their budget request. There was a $3.5
million dollars loss, some of which was offset through
reductions in fuel costs.
CAPTAIN GEORGE CAPACCI, GENERAL MANAGER, ALASKA MARINE
HIGHWAY SYSTEM, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, spoke to the actions taken by the department to
offset the loss of revenues from the Columbia. He noted that
there were a number of measures to reduce costs: unfilled
vacancies, downgraded positions, travel reductions, docking
fees which are being negotiated, coordinated ship yard
costs, reorganization to reduce overtime, schedule printing
savings, renegotiated contracts for services and supplies,
and introduced a seasonal tariff increase.
Co-Chair Mulder asked how much the itinerary charge would
generate.
Captain Capacci noted that rider-ship had increased. Other
ships were laid up during the winter to save operating
costs. He mentioned revenue losses due to cutbacks in
service and the addition of a cost of living increase from
the tariff in October. He discussed some unusual ship lay-
ups to save operational costs.
Co-Chair Mulder questioned if union contracts allowed a
stoppage of payment during lay-up.
Captain Capacci observed that in FY02 the employees took
vacation time that amounted to $10 million dollars.
Co-Chair Mulder observed that this was one-eighth of their
budget.
Captain Capacci emphasized the need to keep a well-trained
employee base.
Vice-Chair Bunde suggested that labor should be
renegotiated.
Captain Capacci acknowledged his remarks regarding labor
costs and noted that several contracts are being negotiated
with intent to reduce costs. He stated that he was in close
contact with the Union and that the Union understood the
situation.
Co-Chair Williams stressed that if employees were treated
with respect and paid what they were worth, there would not
be a need for union contracts. He emphasized the importance
of the system.
Representative Hudson pointed out that the Ferry
Stabilization Fund was created to appropriate $40 million
dollars allowing it to grow, and be used only for unusual
circumstances. He pointed out that the fund has been
depleted from lack of legislative appropriation.
Co-Chair Williams understood that ferry employees received
vacation time in lieu of pay increases.
Ms. Slagle acknowledged that non-monetary incentives are
part of the negotiation process.
Section 10(a)(1)
$127.8 thousand dollars requested from the general fund
for Chandalar (James Dalton Hwy) Maintenance Station
Replacement. Temporary rental and other costs of
vacating the maintenance station due to imminent
structural failure.
Section 10(a)(2)
$21.9 thousand dollars requested from the general fund
for East Fork (Parks Hwy- S of Cantwell) Maintenance
Station Replacement. Temporary rental and other costs
of vacating the maintenance station due to imminent
structural failure.
Section 10(a)(3)
$45.5 thousand dollars requested from the general fund
for Willow (Parks Hwy) Maintenance Station Replacement.
Temporary rental and other costs of vacating the
maintenance station due to imminent structural failure.
Section 10(a)(4)
$72 thousand dollars requested from the general fund
for Nome Maintenance Station Imminent Structural
Failure. Temporary rental and other costs of vacating
the maintenance station to due imminent failure.
Section 10(b)
Chandalar Maintenance Station Replacement Design Costs
(SDPR from NTSC - see line 6) $456.8 thousand dollars
from Statutory Designated Program Receipts.
Ms. Slagle reviewed the project requests. She advised that
there were failures at the Chandalar facility. She noted
that several facilities are not structurally sound to
withstand the elements and three facilities had been shut
down. Actions have been taken to take care of the employees
and equipment associated with those facilities.
FRANK RICHARDS, STATEWIDE MAINTENANCE ENGINEER, DEPARTMENT
OF TRANSPORTATION AND PUBLIC FACILITIES, explained that
temporary arrangements are being made until permanent
replacements can be found. He detailed the new locations
and implications for the temporary storage and operation of
the maintenance stations.
Ms. Slagle added that they are in the process of finding
alternative space in Nome. The request would help with the
costs in dealing with the alternative locations. The timing
is such that the design needs to occur promptly to take
advantage of the short construction season.
Representative Foster stated that several of the structures
had collapsed. He pointed out that the one in Nome had been
built in 1943. He thought that the state had gotten its
money's worth out of that one.
Ms. Slagle provided members with a packet, which provided
information and photographs for each of the facilities (Copy
on File).
Representative Davies emphasized that the request is the
result of the State of Alaska's deferred maintenance
problems. He stressed the safety issues involved.
Representative Croft revisited consideration of the Marine
Highway vacation pay issue. He pointed out that vacation
time occurs regardless of when it is taken.
Co-Chair Williams agreed that vacation time could be
misleading.
Section 10(c)
Title change from West Douglas Highway Extension to
Gastineau Channel Second Crossing to match federal
project name change
Ms. Slagle noted that the request is an extension of the
West Douglas Highway. She asked for the title to be changed
in state statute so that the City and Borough could go forth
with the project.
Representative Hudson affirmed the importance of the title
change, and pointed out that this project was of utmost
importance to the City and Borough of Juneau.
DEPARTMENT OF CORRECTIONS
Section 3
Palmer Correctional Facility request for $172.2
thousand dollars appropriated from Statutory Designated
Program Receipts for a new well including pump and well
house as primary water well has failed and is
nonrepairable. Statutory Designated Program Receipts
(SDPR) are from interest earnings of Northern Tobacco
Securitization Corporation (NTSC).
DWAYNE PEEPLES, DIRECTOR, ADMINISTRATIVE SERVICES,
DEPARTMENT OF CORRECTIONS, provided information on the
department's request. There was a catastrophic failure of
the main well of the Palmer facility. He stated that the
emergency measures that were taken were inadequate.
JOAN BROWN, ANALYST, OFFICE OF MANAGEMENT AND BUDGET (OMB),
OFFICE OF THE GOVERNOR, explained that the statutory
designated program receipts would be received from tobacco
securitization and could only be used for debt service on
those bonds or for capitol projects.
Representative Hudson stated he was unaware that the state
was using the Tobacco Securitization funds for Capitol
Projects.
Ms. Brown explained that $2.8 million dollars in earnings
were previously unanticipated and that OMB was informed by
the Alaska Housing Finance Corporation (AHFC) that the
earnings could only be used for debt retirement or Capitol
Projects.
DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT
Section 2(a)
Idaho National Engineering and Environmental Laboratory
Grant Contract for Alaska Business Research. Funds in
the amount of $20 thousand dollars are available March
1, 2002.
TOM LAWSON, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF
COMMUNITY AND ECONOMIC DEVELOPMENT, explained that the
request was for the Alaska Science and Technology
Foundation. He noted that the Foundation had received a
contract with the Idaho National Engineering and
Environmental Laboratory. He stated that the contract would
provide business opportunities for the state. Mr. Lawson
added that the project was expected to start in March.
Section 2(b)
International Trade and Business Endowment, which would
replace unrealized FY02 Investment Earnings. Fund
Source Change in the amount of $230.4 thousand general
fund dollars.
TAPE HFC 02 - 36, Side A
Mr. Lawson explained that this was a funding source change
for the International Trade and Market. He noted that as a
result of the market downturn the funding shortfall was over
$200 thousand dollars. He stated that the division would
have problems with scheduled missions, trade shows and
possible layoffs if the funding was not appropriated.
Representative Davies asked how large the endowment was.
Mr. Lawson replied that it has a principal of $4,950 million
dollars and is invested by the permanent fund and treated as
a subset of the Alaska Science and Technology Foundation
endowment. After some discussion with Representative
Davies, Mr. Lawson pointed out that the net earnings reserve
were counted separate from the principal, which is where the
problem rests.
Representative Davies explained that there were a number of
these kinds of funds that should be treated as endowments
for that reason.
Representative Hudson asked what the typical had earnings
had been.
Mr. Lawson replied that in the better years the endowment
had earned about $500 thousand dollars per year. The Rainy
Day account was penalized by the unrealized losses.
Representative Hudson inquired what would happen if the
funds were not appropriated.
Mr. Lawson stated that the division would need to look at
lay-offs and shutting down programs for the rest of the
year.
Section 9(a)
Technical correction to add the inadvertently omitted
FY02 appropriation from the Power Cost Equalization
Endowment fund to the Power Cost Equalization [PCE] and
Rural Electrification Fund.
Section 9(b)
Fully fund the statutory formula in the PCE statute in
the amount of 1,100 million general fund dollars. Cost
increase is due to higher fuel costs.
Section 9(c)
Fully fund the PCE statute in the amount of 1,100
thousand dollars. Increase due to higher fuel costs. 1
Section 9(d)(1)
Delete sufficient authorization from FY02 to pay FY01
late bills.
Section 9(d)(2)
Add authorization to pay PCE Program FY 01 late bills.
Mr. Lawson reviewed sections 9(a)- 9(d)(2)
Mr. Lawson noted section 9(a) was an oversight in the FY02
budget. On February 1st of each year, the revenue
department is to provide an estimate on 7 percent of the
value of the Power Cost Equalization (PCE) endowment to be
appropriated into the PCE fund. That item was overlooked.
The Department requests that $7.062 million dollars to be
appropriated from the PCE Endowment into the PCE Fund.
Mr. Lawson spoke to section 9(d). Due to the increase of
fuel oil [costs] in FY01, the department ran short of money
for the PCE program. He stated that the request was for $56
thousand dollars to be reappropriated to cover the costs of
unpaid FY01 grant obligations.
Mr. Lawson explained items 9(b) & (c). Because of the high
cost of fuel, the PCE program had to be prorated at 92
percent. It has been prorated for the past seven months. In
February, it was rationed down to 80 percent. Section 9(b)
would put $1.1 million dollars into the general fund and
then appropriate it to the Department to fully fund the PCE
program.
Co-Chair Mulder noted that the program was funded at $15.7
million dollars last year. He commented that fully funding
is in the "eye of the beholder."
Vice-Chair Bunde observed that fuel costs are always a
problem for the program. Fuel costs in urban Alaska had
declined in the past several months. He asked if fuel
costs could stabilize in the next fiscal year.
Mr. Lawson replied that there was a handout with the
spreadsheet that estimates the total cost for FY03 to be
$18.453 million dollars. The costs are not just due to
higher fuel costs but also to inflation and growth in the
area. In response to a question from Vice-Chair Bunde, Mr.
Lawson estimated a growth assessment at about 4 percent.
Representative Davies acknowledged the question of fully
funding. He asked about increased utilization.
Ms. McConnell noted that the PCE statute provides a formula
and directs the appropriation to be prorated if there is
insufficient funding. The issue of full funding has been
tied into the original endowment plan. When the Endowment
was put together, what was required to fully fund that
statute was $15.7 million dollars, the projection in FY00.
The increase in fuel prices happened subsequent to the plan
being put together. The amount was outside the expectations
of that program area.
Ms. McConnell referred to the difference in fuel prices in
rural Alaska. Fuel deliveries are made in late summer, and
that means if the price of fuel is still high in August, the
rural areas do not receive the benefit of the change in
market price that urban areas do. Power Cost Equalization
costs today are based on summer fuel costs. She added that
rural utilization is significantly below what it is in urban
areas.
Representative Lancaster suggested that this relates to the
Rail Belt Energy Fund, which stated the Bush would receive
15.7 percent even when the endowment was established. He
claimed that the state is not doing their job by not telling
the oil companies what they are to pay for oil. At this
time the companies tell the state what they will pay.
Co-Chair Mulder agreed and credited Mr. Poe.
HB 414 and HB 415 were HELD in Committee for future
consideration.
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