Legislature(2007 - 2008)HOUSE FINANCE 519
07/31/2008 04:00 PM FINANCE
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HOUSE BILL NO. 4001 An Act making supplemental appropriations, capital appropriations, reappropriations, and other appropriations; making appropriations to capitalize a fund; and providing for an effective date. 4:14:38 PM KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, explained that HB4001 totals over $700 million and will provide resources necessary for the Alaska Gas Inducement Act (AGIA) license before the legislature. Included are implementation costs, the reimbursement fund, job training for Alaskans, instate gas use, and infrastructure for gas pipeline construction. She relayed that the major component of the bill was the $500 million request to capitalize the AGIA reimbursement fund. The request was for reappropriation of $300 million from the Alaska Housing Finance Corporation (AHFC) plus $36 million of interest combined with $164 million of general funds, which would fully capitalize the reimbursement fund at the $500 million. Ms. Rehfeld added that another component of the bill requests $15 million for gas pipeline implementation. Components within that request include contractual expertise that would be needed on an ongoing basis for the gas pipeline implementation, and she stated that $42.7 million was needed for workforce development through the Departments of Labor, Education, and the University of Alaska. She continued that there was approximately $130 million for the Department of Transportation and Public Facilities (DOT/PF) for infrastructure projects in the state and $25 million proposed for the Alaska Natural Gas Development Authority (ANGDA) instate gas use project. 4:17:20 PM Ms. Rehfeld provided an analysis of section one which includes appropriations for capital projects and grants from the general fund or other funds as set out in section two or this act by funding sources to the agencies named for the purposes expressed. These appropriations are for the Department of Education workforce scholarship program and for recent high school or GED graduates preparing for careers in AGIA related occupations. This would be operated through the post secondary education commission. Also included is an appropriation to the Department of Labor & Workforce Development including $34.8 million dollars. Components of this request include a pipeline administrator, $26.5 million for a competitive grant program for a technical training plan for the gas line, $2 million for a pipeline training center, $1.5 million for the Alaska vocational technical center in Seward, $2.5 million for GED program and adult basic education, and a $750 thousand request for skills upgrade and training, and a job awareness program. $23.5 million for the Haines highway reconstruction, realignment and Chilkat River bridge replacement. $1 million would be for the University of Alaska for equipment purchases. Finally, the reappropriation request of the earnings within the AHFC where the $300 million has been residing, and a request of $164 million to capitalize the AGIA reimbursement fund, complete section one. 4:22:26 PM Co-Chair Chenault asked if the $500 million for TransCanada should be appropriated out of total general funds. Ms. Rehfeld responded that the legislature could determine if the funds from (AHFC) could be used. She claimed that it was proposed because there had been discussion that the $300 million had been set aside for the purpose of creating a gas pipeline. She stated that she was not opposed to a different method of appropriation rather than taking the $300 million from AHFC. 4:23:52 PM Representative Gara requested more information on the funding of $500 million dollars for AGIA and how the $300 million dollars got into the AHFC account. He asked if they were dividend dollars. Ms. Rehfeld replied that the $300 million was appropriated to the AHFC account in FY 2006. Representative Gara thought that the dividends should be used for low income housing purposes unless the $300 million were appropriated as savings. Co-Chair Chenault added that the $300 million were appropriated to AHFC as a savings account. 4:24:59 PM Co-Chair Chenault clarified that the intent of the meeting was to give an overview of the discussed components of the projects. He stated that the bill will come back to Committee for public testimony. Representative Gara wanted the opportunity to ask questions of the department heads at a future date. 4:26:23 PM Representative Gara questioned the appropriation to (ANGDA) for spur line permits. He understood that AGIA provides for five points within the state. He expressed interest in the spur line that provides instate gas rather than the immediate spur line for the export of gas. He wanted to know more about the spur line money. 4:27:31 PM PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, explained that the spur line discussed in the ANGDA appropriation would serve the Southcentral Anchorage area. Representative Gara asked why the first permit being funded was for the spur line. Commissioner Galvin recommended that ANGDA discuss that. He discussed the need to bring gas into populated parts of the state. The line would go through the Fairbanks area and continue along the highway out of the state. He noted the value of having a line connecting the main line into the Anchorage area. The spur line would connect Anchorage or the Cook Inlet to the rest of the distribution system. As gas development takes place, supply will dictate where the line runs. Ultimately, the gas distribution system must connect Southcentral area to the main line. He stated that ANGDA has identified the project sequencing. The funding would put the state in a position to take maximum advantage of the development of the mainline. 4:30:30 PM Representative Gara expressed concern about unnecessary spending. He noted the other possibility of a bullet line from the North Slope to Anchorage. Commissioner Galvin responded that the need for the spur line exists regardless of the options. The spur line is on the same route as the bullet line. He stated that the work should be done now for the ultimate connection of the line, and that each option requires this particular segment. 4:33:01 PM Representative Gara understood that a spur line from Fairbanks to Anchorage was needed for either the spur or bullet line. Commissioner Galvin acknowledged that the affected segments are between Anchorage, Glennallen, Delta, and Fairbanks. Representative Gara did not want to spend money on a line that would never be used. Commissioner Galvin clarified that the state's interest has always been the Richardson Highway route. He believed that it was in the state's best interest to begin the work, so that the preliminary project is finished when the discussed options become available. Representative Gara felt it was premature to start spending money on a line from Glennallen to Anchorage until the decision was made. Commissioner Galvin emphasized getting gas to Alaskans who don't currently have access. 4:35:27 PM Co-Chair Chenault noted the projected total of $1.2 billion dollars for repairs to gas pipeline associated roads. He asked why the state of Alaska should use general funds to pay for the road repairs, when the possibility exists that they could be rolled into the tariff rates. Commissioner Galvin stated that the Dalton Highway was an asset greater than facilitating the construction of a gas line. Development on the North Slope is intended for oil exploration and an emerging gas exploration. 4:37:16 PM Co-Chair Chenault asked if the state was not building a gas line, highway work would be needed. He thought that the expense should be tied into the tariffs of the pipeline itself. 4:38:56 PM Representative Thomas expressed concern about future capital budgets. Ms. Rehfeld understood his concern. Representative Thomas wanted his district to have local employment opportunities in addition to those provided by the pipeline. 4:39:52 PM Representative Crawford queried the prohibition of the use of federal funds for regular road maintenance. FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, stated that the challenge with the Federal Highway Funds is the Federal Highway Trust Fund is facing a significant reduction in the amount of revenue flowing into it due to the high cost of gasoline and the resulting reduced amount of miles driven. The fund is seeing fewer increases and a reduction of federal funds is anticipated. The challenge is taking the funds received and achieving the projects currently in the Statewide Transportation Improvement Program (STIP), with the mentioned budget constraints. He explained that the goal of using general fund dollars was to enable a reliever on the STIP in future years, allowing STIP dollars to be spent on other priority projects. Representative Crawford questioned if the department's goal was to lock the state in if the funds were not available from the federal government. Mr. Richards provided an example of three Dalton projects using federal dollars. The constraints of the STIP dollars, has resulted in fewer projects and have delayed some projects. 4:44:03 PM Representative Crawford asked about the time frame for the construction projects. Mr. Richards stated that the three projects would be bid in the fall and begin in the summer of 2009, depending on the contractor's time frame. The emphasis of other allocations is to start the design work for the next construction season, creating the infrastructure and minimizing competition from other projects. Representative Crawford thought that the area needed a large amount of maintenance each year because of the weather, the trucks, and the use of the Dalton Highway. Mr. Richards agreed; however foundation issues create a challenge. The goal is to upgrade the embankment anywhere there is melting permafrost, which will take a number of construction seasons. 4:46:59 PM Representative Kelly asked if federal dollars would be lost if the project was initiated now. Mr. Richardson replied that he did not know if federal money would be missed for this road or if those federal dollars would instead be spent on competing projects. Representative Kelly reiterated the query regarding the use of federal dollars. He pointed out that the state does not know what the next authorization of the federal highway bill will be, but possibly the majority of federal funds will go to large communities for mass transit to reduce the amount of green house gas emissions. He wondered if rural population states would receive less money. Mr. Richards stated that the federal program comes with federal requirements of timelines and processes on a program of this size. The use of the general fund could shave millions of dollars off of the program and will maximize the use of federal dollars providing the state with more flexibility. Representative Kelly understood that future appropriations are difficult to determine. His interest was in the prevention of forgoing any match. He claimed understanding that the placement of the dollars will provide positive benefits and net gains. 4:52:40 PM Representative Gara noted that if the state spends money on roads, it would free up $129 million for other STIP projects. He did not know if the state could afford a capital budget with this allocation of road money. He proposed that the legislature move the projects up the federal list in order to qualify for the federal funding and queried the timeline of that scenario. Mr. Richards explained that the department has a STIP application process that is scored. He stated that "the STIP gets played and becomes a political hot potato." The proposed highways are part of a national highway system. The amount currently received is about $75 million per year. Any of the other projects would be postponed. The amount of money is limited, yet the need is large. Representative Gara asked when the roads would be constructed if federal money was used. Mr. Richards referenced the PowerPoint presentation showing the individual projects. Several projects programmed have not made it onto the STIP because it is a three year planning document. He offered to provide information as to where future projects fit in. Representative Gara thought that the projects did not need to be built this year and that it would be many years before pipe is transported on the roads. He wanted to see as many roads as possible built with federal dollars. Mr. Richards clarified that one of the challenges was the time constraint of the preliminary environmental and design work. The goal is a gas pipeline by 2018. There are six construction seasons left for the necessary preliminary highway work, if the pipeline construction begins in 2015. Postponing the highway construction could increase the cost of the pipeline construction. Representative Gara expressed confusion about pushing the project through by 2018, when some delay might enable the use of federal dollars. Mr. Richards stated that the 2018 date is TransCanada's projection. The projects could go forward with federal dollars if they were unlimited. He spoke to the benefit of using the general fund. 5:00:07 PM HB 4001 was HEARD and HELD in Committee for further consideration.