05/02/2017 01:30 PM House FINANCE

SENATE BILL NO. 107                                                                                                           
                                                                                                                                
     "An Act relating to the Alaska capital income fund."                                                                       
                                                                                                                                
3:46:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster relayed that it was the first hearing for                                                                       
the legislation.                                                                                                                
                                                                                                                                
3:46:33 PM                                                                                                                    
                                                                                                                                
SENATOR ANNA MCKINNON, SPONSOR, read the Sponsor Statement                                                                      
(copy on file):                                                                                                                 
                                                                                                                                
     The State  of Alaska  maintains over  2,200 facilities,                                                                    
     which span  over 14 entities, including  the University                                                                    
     of Alaska and the  Court system. These facilities total                                                                    
     19 million  square feet  of space  and have  a combined                                                                    
     replacement value of $8.6 billion.                                                                                         
                                                                                                                                
     The  State's current  outstanding deferred  maintenance                                                                    
     backlog  totals over  $1.84  billion,  which peaked  in                                                                    
     FY2012  at $2.3  billion. With  current funding  levels                                                                    
     and   no  consistent   funding  source,   the  deferred                                                                    
     maintenance backlog  is expected  to trend  up, causing                                                                    
     our facilities to fall into disrepair.                                                                                     
                                                                                                                                
     The Alaska capital income fund  was created in 2006 and                                                                    
     receives  an annual  deposit of  the earnings  from the                                                                    
     Amerada  Hess  Settlement  invested  by  the  Permanent                                                                    
     Fund.                                                                                                                      
                                                                                                                                
     Senate  Bill 107  envisions  using  these funds,  which                                                                    
     cannot  be  used  for dividends,  to  provide  reliable                                                                    
     annual   funding   for    preventative   and   deferred                                                                    
     maintenance. It  is important we set  up this mechanism                                                                    
     to  continue  to  preserve   our  investment  in  these                                                                    
     facilities  as the  infrastructure  ages  and cost  for                                                                    
     repairs and replacement increases.                                                                                         
                                                                                                                                
3:48:09 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki   wondered  whether   the  language                                                                    
restricted the use of the funds.                                                                                                
                                                                                                                                
Co-Chair MacKinnon stated that  she could not put restraints                                                                    
on the use of  the fund. The main intent of  the bill was to                                                                    
encourage  future  legislatures  to  spend  the  funding  on                                                                    
deferred maintenance.                                                                                                           
                                                                                                                                
Representative  Kawasaki surmised  that the  bill could  not                                                                    
constrain other  legislatures, but  wanted to  establish the                                                                    
intent of the fund.                                                                                                             
                                                                                                                                
Co-Chair MacKinnon responded agreed.                                                                                            
                                                                                                                                
Representative Kawasaki  asked how much  was in the  fund at                                                                    
present.                                                                                                                        
                                                                                                                                
Co-Chair  MacKinnon  responded  that  it  had  a  6  percent                                                                    
interest rate at approximately $26 million.                                                                                     
                                                                                                                                
3:50:48 PM                                                                                                                    
                                                                                                                                
Representative  Thompson had  been  concerned with  deferred                                                                    
maintenance.  He  stressed  that there  were  many  deferred                                                                    
maintenance projects.                                                                                                           
                                                                                                                                
Co-Chair  Foster noted  the other  testifiers available  for                                                                    
questions.                                                                                                                      
                                                                                                                                
Representative Wilson asked about the prioritization list.                                                                      
                                                                                                                                
Co-Chair  MacKinnon   responded  that  the   capital  budget                                                                    
chairman  would  take  the budget  from  the  government  to                                                                    
evaluate the  use of appropriations or  general fund dollars                                                                    
on  an  annual  basis.  The  fund  could  be  redirected  to                                                                    
prioritize deferred maintenance.                                                                                                
                                                                                                                                
Representative  Wilson   wondered  if  there  had   been  an                                                                    
assessment  of all  of the  smaller  buildings, and  whether                                                                    
those  buildings  were  still   utilized.  She  queried  who                                                                    
decided whether a building be closed permanently .                                                                              
                                                                                                                                
Co-Chair MacKinnon responded that the  state did most of the                                                                    
prioritization, and  thought some of  the bill needed  to go                                                                    
through a more formal process.                                                                                                  
                                                                                                                                
3:54:45 PM                                                                                                                    
                                                                                                                                
Representative  Neuman asked  why the  bill was  needed. The                                                                    
bill was an  advisory bill. He understood  the importance of                                                                    
maintaining buildings, but felt that  the bill gave away the                                                                    
appropriation authority of the legislature.                                                                                     
                                                                                                                                
Co-Chair MacKinnon  posed the question  as to why  the state                                                                    
would  not put  its best  foot forward  to address  deferred                                                                    
maintenance.  It was  a  step in  the  right direction.  She                                                                    
appreciated the question.                                                                                                       
                                                                                                                                
Representative Neuman  asked about  the naming of  the fund,                                                                    
and whether it bound future legislatures.                                                                                       
                                                                                                                                
Co-Chair  MacKinnon suggested  that  any future  legislature                                                                    
could do what it wanted.                                                                                                        
                                                                                                                                
Co-Chair  Foster recognized  Representative Reinbold  in the                                                                    
audience.                                                                                                                       
                                                                                                                                
3:59:21 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton  asked if the  item would  be a part  of the                                                                    
capital budget or the operating budget.                                                                                         
                                                                                                                                
Vice-Chair Gara did not want to vote for empty legislation.                                                                     
                                                                                                                                
Co-Chair  MacKinnon stressed  that  the state  had a  budget                                                                    
deficit,  and the  bill helped  to assign  funds for  needed                                                                    
deferred maintenance.                                                                                                           
                                                                                                                                
4:04:03 PM                                                                                                                    
                                                                                                                                
Vice-Chair Gara  commented that  she was  in the  company of                                                                    
Governor Walker and the previous governor.                                                                                      
                                                                                                                                
Co-Chair Foster thanked the presenter and indicated he                                                                          
would be setting the bill aside. He reviewed the agenda for                                                                     
the following meeting.                                                                                                          
                                                                                                                                
SB 107 was HEARD and HELD in committee for further                                                                              
consideration.