Legislature(2007 - 2008)HOUSE FINANCE 519

07/31/2008 04:00 PM FINANCE

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* first hearing in first committee of referral
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Heard & Held
-- Testimony <Invitation Only> --
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   

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