Legislature(2001 - 2002)

03/01/2002 01:33 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 414                                                                                                            
     An Act making supplemental and other appropriations;                                                                       
     amending appropriations; and providing for an effective                                                                    
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                          
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                                                                   
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                                                                   
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                                                                   
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                                                                   
Co-Chair Mulder  expressed concerns that the  department knew                                                                   
the  appropriation  level  but  did not  manage  within  that                                                                   
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                                                                   
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                                                                   
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                                                                   
Captain Capacci  emphasized the  need to keep  a well-trained                                                                   
employee base.                                                                                                                  
Vice-Chair   Bunde    suggested   that   labor    should   be                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   

Document Name Date/Time Subjects