Legislature(2019 - 2020)ADAMS ROOM 519

04/02/2019 01:30 PM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
01:30:43 PM Start
01:31:24 PM HB38
02:21:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 38                                                                                                             
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and   other  appropriations;  making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
1:31:24 PM                                                                                                                    
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET, provided  a PowerPoint presentation titled  "HB 38 -                                                                    
FY2020  Capital  Overview," dated  April  2,  2019 (copy  on                                                                    
file).  She  began  on  slide   3  and  discussed  that  the                                                                    
governor's FY  20 capital  budget request  included deferred                                                                    
maintenance  projects,  federal matching  requirements,  and                                                                    
maximization  of federal  funding  for  project grants.  She                                                                    
reported  that  the  original project  request  had  totaled                                                                    
$1,261,259,300,  comprised  of  $143 million  General  Funds                                                                    
(GF),  $90 million  in other  funds, and  $1.027 billion  in                                                                    
federal funds.  She elaborated  that amendment  packages had                                                                    
been submitted to the legislature  on March 14 and March 27,                                                                    
which included an increase of  $10 million in other receipts                                                                    
and a decrease of $12.5  million in federal funds. The total                                                                    
amended [capital] budget was $1,258,818,000.                                                                                    
Vice-Chair Ortiz  asked why there  had been a  $12.5 million                                                                    
reduction in federal funds.                                                                                                     
Ms.  Sanders replied  that the  decrement in  the amendments                                                                    
was related  to the National Petroleum  Reserve-Alaska (NPR-                                                                    
A) impact grants. The Department  of Commerce, Community and                                                                    
Economic  Development (DCCED)  had submitted  two amendments                                                                    
to the  legislature. The first  was for a  supplemental that                                                                    
distributed  grant  funding  received in  2019.  The  second                                                                    
amendment trued  up the same  grant projects for FY  20. She                                                                    
detailed  that  the  estimate  had  been  approximately  $19                                                                    
million  in  the  initial budget,  but  the  actual  federal                                                                    
funding received had been closer to $6 million.                                                                                 
Vice-Chair Ortiz asked if the  NPR-A revenues were less than                                                                    
Ms. Sanders  replied in the affirmative.  She detailed there                                                                    
may  be  an additional  grant  process  later  in FY  20  if                                                                    
additional  federal   revenue  was  received.   At  present,                                                                    
approximately  $6.5  million  had   been  received  and  was                                                                    
allocated in the FY 20 budget.                                                                                                  
1:35:11 PM                                                                                                                    
Ms.  Sanders moved  to  a bar  chart on  slide  4 showing  a                                                                    
historical summary  of capital  requests by  funding source.                                                                    
The blue portion of the  bars reflected unrestricted general                                                                    
fund  (UGF) appropriations  from FY  16 through  FY 20.  The                                                                    
bars  also  included  designated  general  funds  (DGF)  [in                                                                    
orange],  other funds  [in gray],  and federal  receipts [in                                                                    
Ms. Sanders turned  to slide 5 and  relayed the presentation                                                                    
was  intended  as  an overview  of  the  governor's  capital                                                                    
budget  request. The  slide provided  a budget  breakdown by                                                                    
agency and  included both amendment packages  put forward in                                                                    
March for a total of $1.2 billion.                                                                                              
1:36:22 PM                                                                                                                    
Ms.  Sanders  advanced to  slide  6  that highlighted  items                                                                    
included  in  the budget.  The  first  increment was  for  a                                                                    
Department  of Transportation  and  Public Facilities  (DOT)                                                                    
federal highway surface  transportation project. The project                                                                    
consisted  of  $690  million in  federal  receipts  and  $35                                                                    
million UGF  state highway match. The  total required amount                                                                    
for the federal funding was  $60 million. She explained that                                                                    
a reappropriation  was requested in the  capital budget that                                                                    
would  use $25  million from  the Tustumena  replacement for                                                                    
the federal  highway match to  meet the FY 20  federal match                                                                    
Vice-Chair  Ortiz addressed  the reappropriation  related to                                                                    
the Tustumena.  He asked  how much money  there had  been in                                                                    
federal  funds for  the Tustumena  vessel replacement  if it                                                                    
went forward.                                                                                                                   
Ms. Sanders replied $220 million in federal receipts.                                                                           
Vice-Chair Ortiz  asked how close  the $220 million  and the                                                                    
state match came to paying for the vessel replacement.                                                                          
Ms. Sanders replied  that she knew there had  been some work                                                                    
done  on design,  but she  did not  know how  far along  the                                                                    
project had progressed.                                                                                                         
LAURA  CRAMER, DEPUTY  DIRECTOR,  OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET,  replied  that the  federal  funds  and state  match                                                                    
would have fully funded the Tustumena replacement.                                                                              
Vice-Chair Ortiz  asked for verification  the administration                                                                    
was  requesting a  reappropriation  of  $690 thousand  [$690                                                                    
million] in federal funds to  go towards the federal highway                                                                    
Ms.  Sanders clarified  the move  only took  the GF  portion                                                                    
that was  matching the Tustumena project  and reappropriated                                                                    
the  funds  to  the  capital  project  for  federal  highway                                                                    
surface  transportation. The  request did  not move  federal                                                                    
receipts  allocated  for  the   [Tustumena]  project  -  the                                                                    
receipts still resided with that project.                                                                                       
Co-Chair Wilson  clarified the figure was  $690 million, not                                                                    
$690 thousand.                                                                                                                  
1:39:54 PM                                                                                                                    
Co-Chair  Wilson  referenced  the $690  million  in  federal                                                                    
funds and noted her understanding  that the number may be as                                                                    
high as $750 million. She  wondered about the possibility of                                                                    
the  number increasing.  She believed  some  states had  not                                                                    
used all  of their funding  the previous year and  there had                                                                    
been a "round  two" of federal funding  distributed. She was                                                                    
trying to determine  what the odds were the  state would get                                                                    
more than $690 million.                                                                                                         
Ms. Sanders replied the $690  million was the maximum amount                                                                    
that  would be  received  in  FY 20.  She  had not  received                                                                    
additional  information from  DOT  specifying an  additional                                                                    
allocation would be made.                                                                                                       
Co-Chair  Wilson wanted  to ensure  the  state was  matching                                                                    
available federal funds.                                                                                                        
Representative  Josephson believed  Ms.  Sanders had  stated                                                                    
the  sizeable federal  match for  the Tustumena  replacement                                                                    
would  remain in  that account  effectively. He  asked about                                                                    
the administration's  ultimate intent  for the  funds, given                                                                    
the  its belief  that the  state  should not  have a  purely                                                                    
government backed  role in the Alaska  Marine Highway System                                                                    
Ms. Sanders replied  the intent was currently to  bring on a                                                                    
marine  consultant  to determine  what  the  future of  AMHS                                                                    
would look like. The match  funding allocated in the capital                                                                    
budget  would  be  reappropriated  to  the  federal  highway                                                                    
surface transportation  project. Until  a study by  a marine                                                                    
consultant  was  completed,  the   project  would  not  move                                                                    
1:42:09 PM                                                                                                                    
Ms. Sanders directed attention to  the second item under DOT                                                                    
on slide  6. The airport improvement  program totaled $198.7                                                                    
million,  comprised of  $187.2 million  in federal  receipts                                                                    
and $11.5 million  in other receipts. She  reported the item                                                                    
had been amended in the  March 14th submission of amendments                                                                    
to increase the other receipts  by a total of $21.5 million.                                                                    
She moved  to an  increment for statewide  federal programs,                                                                    
which consisted  of $38.5 million  in federal  receipts, $10                                                                    
million in other receipts, and $238.3 million UGF.                                                                              
Ms.  Sanders  advanced to  the  last  item  on slide  6  and                                                                    
relayed  that  the  NPR-A  impact  grant  program  had  been                                                                    
amended in the  March 14 packet. She  detailed the increment                                                                    
had  initially  been  put  forward as  an  estimate  of  $19                                                                    
million  in federal  receipts  and it  had  been reduced  to                                                                    
approximately  $6.5  million.  Additionally,  the  amendment                                                                    
packet had  allocated the funding  to the  individual grants                                                                    
based on the department's grant solicitation process.                                                                           
Ms. Sanders  moved to slide  7 and addressed  the Department                                                                    
of  Environmental Conservation  Village Safe  Water Projects                                                                    
totaling $64.830  million, comprised  of $52.250  million in                                                                    
federal receipts, $12.080 million  in UGF, and $500 thousand                                                                    
in  other receipts  (typically statutory  designated program                                                                    
receipts that communities contributed towards projects).                                                                        
Co-Chair Wilson  asked how  much the  projects had  been the                                                                    
previous  year; how  much had  been spent;  and whether  the                                                                    
state met its federal  matching funds obligation, or whether                                                                    
the state used more UGF than federal funds.                                                                                     
Ms. Sanders  did not  have the  expenditure detail  on hand.                                                                    
She would follow up on the question.                                                                                            
1:44:53 PM                                                                                                                    
Co-Chair Wilson asked  what the department could  do to make                                                                    
sure villages were  able to maintain systems  once they were                                                                    
installed. She  believed where  maintenance funds  came from                                                                    
had  become a  substantial  issue. She  explained that  most                                                                    
areas did not have large populations or tax base.                                                                               
Ms. Sanders agreed to provide the information.                                                                                  
Ms. Sanders  highlighted the  South Denali  Visitor's Center                                                                    
under the Department of Natural  Resources (DNR) on slide 7.                                                                    
The  project  would utilize  $4.5  million  from the  Alaska                                                                    
Housing  Finance  Corporation   (AHFC)  dividend  and  $10.3                                                                    
million from  the Alaska  Industrial Development  and Export                                                                    
Authority (AIDEA)  dividend (the dividends were  returned to                                                                    
the state  on an annual  basis, were classified as  UGF, and                                                                    
were   available  for   appropriation).  Additionally,   the                                                                    
project would use $10.2 million in AIDEA receipts.                                                                              
Vice-Chair  Ortiz asked  about how  the AIDEA  dividends and                                                                    
receipts had been used in previous budget cycles.                                                                               
Ms. Sanders answered  that the dividend funds  could be used                                                                    
at the discretion of the  legislature and were classified as                                                                    
UGF. She explained  the funds could be and had  been used on                                                                    
a variety  of projects. The AIDEA  receipts had historically                                                                    
been used in the operations of the AIDEA corporation.                                                                           
Vice-Chair Ortiz asked Ms. Sanders to repeat her answer.                                                                        
1:47:20 PM                                                                                                                    
Ms. Sanders  replied that AIDEA receipts  had typically been                                                                    
used in the operations of the AIDEA corporation.                                                                                
Vice-Chair   Ortiz  asked   if  it   was  the   department's                                                                    
understanding that  AIDEA did not  need the receipts  to run                                                                    
the corporation in the upcoming year.                                                                                           
Ms.  Sanders  answered  that  she could  not  speak  to  the                                                                    
details of  the analysis done  by the Department  of Revenue                                                                    
(DOR).  It was  her  understanding there  were excess  AIDEA                                                                    
receipts  available   for  appropriation.  There   were  two                                                                    
increments in  the governor's proposed budget  that utilized                                                                    
AIDEA receipts.                                                                                                                 
Vice-Chair Johnston discussed where  the AIDEA receipts came                                                                    
from. She  used the Red  Dog Mine  as an example,  where she                                                                    
believed the  bonds had likely  been paid off and  there was                                                                    
still a  lease agreement. She  asked if AIDEA  receipts came                                                                    
from the lease agreement.                                                                                                       
Ms. Sanders  replied that  she would  follow up  in writing.                                                                    
She  noted the  scenario provided  by Co-Chair  Johnston was                                                                    
not  her understanding  of the  receipts.  She reported  the                                                                    
receipts were  utilized by the corporation  for investing in                                                                    
Vice-Chair Johnston stated that  receipts were one thing and                                                                    
fund balances  were another. She asked  for verification Ms.                                                                    
Sanders  was  specifically  saying  receipts  and  not  fund                                                                    
Ms. Sanders  answered that  AIDEA receipts  was a  fund code                                                                    
outlined  for  the  AIDEA  corporation  funding.  She  would                                                                    
follow up to provide clarity on the receipt source.                                                                             
1:49:21 PM                                                                                                                    
Representative  LeBon  asked  for  verification  that  AIDEA                                                                    
receipts  were a  combination of  return  on investment  and                                                                    
earnings from participation and direct loans made by AIDEA.                                                                     
Ms.  Sanders  would  follow up  to  ensure  the  information                                                                    
provided to the committee was accurate.                                                                                         
Representative LeBon believed his  statement was correct. He                                                                    
explained   that  the   receipts   were   the  earnings   of                                                                    
investments made  by AIDEA -  some were  participation loans                                                                    
with banks;  some were direct  loans by AIDEA and  some were                                                                    
investments.  He  elaborated that  AIDEA  used  some of  its                                                                    
earnings for  the purpose. He  detailed that  dividends were                                                                    
paid under  a different  formula. He explained  that drawing                                                                    
on AIDEA's capital  was another path of  utilizing AIDEA for                                                                    
different  purposes.  He believed  the  project  would be  a                                                                    
reasonable use  of AIDEA earnings.  He reported that  in the                                                                    
participation  loan world,  AIDEA used  earnings from  other                                                                    
investments   (prior   years'    returns)   to   fund   bank                                                                    
participation loans. He  clarified that AIDEA did  not go to                                                                    
the bond market every time a bank did a participation loan.                                                                     
Vice-Chair  Ortiz asked  how close  the combined  sources of                                                                    
funds came to paying for the South Denali Visitor's Center.                                                                     
Ms. Cramer replied  that the last updated  estimates for the                                                                    
project  were $27  million.  The total  for  the project  on                                                                    
slide  7 was  about $25  million due  to the  possibility of                                                                    
federal and private funds. She  elaborated that phase one of                                                                    
the  project had  been completed  using state,  federal, and                                                                    
private  funds.  The  department   was  confident  it  could                                                                    
achieve the $27 million  mark with those additional [federal                                                                    
and private] funds.                                                                                                             
Vice-Chair Ortiz asked if the  South Denali Visitor's Center                                                                    
was a state park.                                                                                                               
Ms. Cramer  answered in  the affirmative.  She did  not know                                                                    
whether it was designated as a  state park - she believed it                                                                    
was.  She explained  that part  of  the issue  was the  high                                                                    
traffic currently  experienced by the Denali  National Park.                                                                    
The center  would divert some  of the traffic and  save wear                                                                    
and tear on the national park roads.                                                                                            
1:52:13 PM                                                                                                                    
Co-Chair Wilson wondered who wanted  the project. She stated                                                                    
the Denali and Mat-Su Boroughs did not want the project.                                                                        
Ms. Cramer answered the project  had been put forward by the                                                                    
department for years.  She elaborated that phase  one of the                                                                    
project  had been  completed and  it had  been a  department                                                                    
priority for many years.                                                                                                        
Co-Chair Wilson  asked what phase  one was and  what revenue                                                                    
it brought in.                                                                                                                  
Ms. Cramer  complied. She detailed  that phase one  had been                                                                    
the buildout of some  trails, camping spots, electrical, and                                                                    
roads. She did  not have the amount that had  been funded on                                                                    
hand.  She  believed  the initial  revenue  projections  for                                                                    
phase  one had  been around  $48,000; however,  the estimate                                                                    
had  been  exceeded  and annual  revenue  was  approximately                                                                    
Co-Chair Wilson pointed out that  the cost for phase one had                                                                    
not  been provided;  therefore, the  committee did  not know                                                                    
the expense to revenue ratio.                                                                                                   
Ms. Cramer did  not have the data on hand.  She would follow                                                                    
up with the information.                                                                                                        
Representative   Josephson  surmised   dividends  were   not                                                                    
synonymous with receipts. He asked  if they meant to use the                                                                    
word dividend or receipt on slide 7.                                                                                            
Ms. Sanders answered that the  AIDEA and AHFC dividend funds                                                                    
were intended  to be  used for  the project.  She elaborated                                                                    
there were  available dividends  that had  been made  to the                                                                    
state.  Additionally,  the use  of  $10.2  million in  AIDEA                                                                    
receipts  was  also  intentional. She  clarified  they  were                                                                    
separate funding sources.                                                                                                       
1:54:04 PM                                                                                                                    
Vice-Chair Ortiz  was supportive  of projects  enhancing and                                                                    
assisting the tourism industry statewide.  He asked if there                                                                    
was a  projection for the  ongoing and maintenance  costs of                                                                    
the project.  He used the  state museum  as an example  of a                                                                    
project  that had  been shown  to  require some  significant                                                                    
ongoing maintenance  costs. He asked about  expected revenue                                                                    
Ms. Cramer replied that revenues  were anticipated to exceed                                                                    
$1  million by  the  fifth year  of  operation, which  would                                                                    
fully cover operating costs for phase two of the project.                                                                       
Representative  Carpenter asked  who would  own and  operate                                                                    
the visitor's center.                                                                                                           
Ms.  Cramer answered  the state  would own  and operate  the                                                                    
facility.  She   noted  that  the  federal   government  had                                                                    
tentatively   committed  to   running  some   of  the   park                                                                    
operations at no cost to the state.                                                                                             
Representative  Carpenter   asked  for   a  repeat   of  the                                                                    
Ms. Cramer  answered that  the state  would own  and operate                                                                    
the visitor's center.                                                                                                           
Co-Chair Wilson  asked for verification the  UGF funds could                                                                    
be used  for other  projects if  they were  not used  on the                                                                    
visitor's center project.                                                                                                       
Ms. Cramer replied in the affirmative.                                                                                          
1:55:56 PM                                                                                                                    
Ms.  Sanders addressed  deferred  maintenance components  on                                                                    
slide 7.  She noted there  was a significant backlog  in the                                                                    
state's deferred  maintenance projects. The  first increment                                                                    
was   $4.5   million   from  the   Public   Building   Fund,                                                                    
administered by the Department  of Administration (DOA). She                                                                    
explained that state agencies contribute  to the fund, which                                                                    
was used  for deferred  maintenance projects  on state-owned                                                                    
buildings. The second  request was $2.7 million  UGF for the                                                                    
Court  System, which  received its  own  money for  deferred                                                                    
maintenance projects. The third  increment was $26.6 million                                                                    
DGF from  the Alaska Capital  Income Fund for the  Office of                                                                    
the  Governor. She  explained the  intention was  to have  a                                                                    
single project where the Office  of the Governor worked with                                                                    
DOT  and its  facilities maintenance  group to  identify and                                                                    
prioritize the  projects for all  state agencies  (she noted                                                                    
the process had  been used the preceding year  as well). She                                                                    
elaborated  that  instead   of  having  individual  projects                                                                    
throughout  the agencies,  there would  be one  project that                                                                    
allowed   for   flexibility   in  responding   to   deferred                                                                    
maintenance projects that may move up on the priority list.                                                                     
Ms. Sanders  moved to the  fourth deferred  increment, which                                                                    
was for  the Department  of Education and  Early Development                                                                    
(DEED) K-12 major maintenance  project totaling $7.4 million                                                                    
DGF from the Capital Income  Fund. The amount would fund the                                                                    
first project on the K-12  major maintenance list. The fifth                                                                    
project was $5 million DGF  from the Capital Income Fund for                                                                    
the University.                                                                                                                 
Co-Chair  Wilson asked  for an  explanation  of the  Capital                                                                    
Income Fund and how it was funded.                                                                                              
Ms. Sanders  explained that the  Alaska Capital  Income Fund                                                                    
received  receipts from  the Amerada  Hess settlement  on an                                                                    
annual basis.  She elaborated that the  previous session the                                                                    
legislature passed legislation designating  the fund for use                                                                    
of deferred maintenance.                                                                                                        
Co-Chair  Wilson asked  if there  was other  money deposited                                                                    
into the fund when projects had money left over.                                                                                
Ms. Sanders answered  that in recent history  there had been                                                                    
other UGF deposits made to  the fund by the legislature from                                                                    
gaming and  gambling. The primary  source of funds  was from                                                                    
the Amerada Hess settlement.                                                                                                    
Co-Chair Wilson asked for the current fund balance.                                                                             
Ms. Sanders answered there were  two appropriations - one in                                                                    
the  supplemental budget  and one  in the  capital budget  -                                                                    
utilizing the  full fund  balance for  deferred maintenance.                                                                    
She would follow up with the total.                                                                                             
1:59:48 PM                                                                                                                    
Representative  LeBon asked  if the  $10.2 million  in AIDEA                                                                    
receipt funds was being treated as an investment or grant.                                                                      
Ms. Sanders answered the funds  would be an appropriation to                                                                    
DNR  specifically for  the [South  Denali Visitor's  Center]                                                                    
project. She clarified  that the funds were not  a grant and                                                                    
not a loan.                                                                                                                     
Representative LeBon  surmised the funds were  an investment                                                                    
into the project.                                                                                                               
Ms. Sanders replied affirmatively.                                                                                              
Vice-Chair  Ortiz  asked  for the  current  balance  of  the                                                                    
state's growing deferred maintenance obligation.                                                                                
SHELLY  WILLHOITE,  CAPITAL  BUDGET COORDINATOR,  OFFICE  OF                                                                    
MANAGEMENT  AND BUDGET,  answered  the amount  was about  $9                                                                    
billion  [note:  this  figure   was  revised  later  in  the                                                                    
Vice-Chair Ortiz  asked for verification  that theoretically                                                                    
the legislature could use the  $10 million in AIDEA receipts                                                                    
and   $4.5  million   in   [AHFC]   receipts  for   deferred                                                                    
maintenance as well  as the particular project.  He asked if                                                                    
that was a legal use of the funds.                                                                                              
Ms. Sanders replied in the affirmative.                                                                                         
2:01:33 PM                                                                                                                    
Vice-Chair  Ortiz  asked  if   it  was  also  true  deferred                                                                    
maintenance  costs   would  continue  to  increase   if  the                                                                    
maintenance was not addressed.                                                                                                  
Ms. Sanders agreed.  She elaborated that the  reason for the                                                                    
supplemental and  capital budget requests was  to prioritize                                                                    
deferred maintenance.                                                                                                           
Representative   Josephson    looked   at    the   statewide                                                                    
prioritized   deferred   maintenance  increment   of   $26.6                                                                    
million. He asked if Ms.  Sanders had stated that the method                                                                    
of the  governor's office making prioritizing  decisions for                                                                    
various agencies  was something the  previous administration                                                                    
had done as well.                                                                                                               
Ms.  Sanders   answered  that  OMB   had  been   working  on                                                                    
developing   a  comprehensive   system  that   outlined  the                                                                    
deferred maintenance  prioritization. She expounded  that in                                                                    
the  past  individual  agencies   came  forward  with  their                                                                    
priorities, while  there may have been  other priority needs                                                                    
that  were  more pressing.  She  explained  the idea  was  a                                                                    
single  allocation  where  DOT  and  the  governor's  office                                                                    
worked together to prioritize needs.                                                                                            
Representative    Josephson    asked   if    the    previous                                                                    
administration had used the same process.                                                                                       
Ms. Sanders replied affirmatively.                                                                                              
Representative Tilton  asked if the administration  was also                                                                    
identifying assets the state may be better off selling.                                                                         
Ms. Sanders  answered in the affirmative.  She detailed that                                                                    
the administration  had put  forward a  governor's directive                                                                    
to work  through divesting any  state owned  facilities that                                                                    
may no longer be necessary.                                                                                                     
2:03:38 PM                                                                                                                    
Representative  Carpenter asked  what  the  annual cost  for                                                                    
deferred maintenance would  be if the state were  to keep up                                                                    
with the $9 billion total cost.                                                                                                 
Ms. Sanders  did not have  information on the growth  at the                                                                    
time. She  suggested the possibility  of asking  DOT experts                                                                    
to address the  committee to explain how  they valued assets                                                                    
and what the growth was over time.                                                                                              
Representative  Carpenter considered  the $9  billion as  an                                                                    
unfunded  liability.   He  did  not  know   whether  current                                                                    
spending was keeping  up with the cost, but  he suspected it                                                                    
was not.  He wanted a better  idea of how bad  the situation                                                                    
Ms. Sanders believed  that four to five  years earlier there                                                                    
had  been  some  information  on  a plan  to  keep  up  with                                                                    
deferred maintenance growth.                                                                                                    
Representative  Carpenter assumed  the  state  had not  kept                                                                    
with the plan referenced by Ms. Sanders.                                                                                        
Ms.  Sanders replied  that based  on  the state's  financial                                                                    
downturn,  the   budget  had   not  maintained   the  amount                                                                    
necessary to keep up with  the figure determined in the past                                                                    
Representative Carpenter  remarked that he guessed  that was                                                                    
the case  considering the deferred  maintenance cost  was $9                                                                    
billion. He did not believe that had been a good plan.                                                                          
2:05:37 PM                                                                                                                    
Representative  LeBon stated  that  in  the business  world,                                                                    
replacement and reserves  was 3 to 5  percent, which equated                                                                    
to $300 million to $500 million.                                                                                                
Co-Chair Wilson  referenced the  Public Building  Fund under                                                                    
DOA.  She surmised  someone was  putting money  away because                                                                    
there was $4.5  billion that could be utilized  in the fund.                                                                    
She wondered why  they were not doing the same  thing in the                                                                    
statewide  priority list.  She thought  it sounded  like the                                                                    
courts  were doing  the same  thing. She  recalled that  Ms.                                                                    
Sanders had said  the UGF funds for the courts  (on slide 7)                                                                    
were funds the courts had put away.                                                                                             
Ms.   Sanders  answered   there  were   certain  state-owned                                                                    
buildings  that fell  under the  Public  Building Fund.  She                                                                    
detailed that  the court's buildings,  University buildings,                                                                    
and schools did  not fall under that  fund; therefore, those                                                                    
entities did not contribute to the fund.                                                                                        
Co-Chair Wilson expressed confusion  and asked if the Public                                                                    
Building Fund  was used for  buildings that were  not state-                                                                    
Ms.  Sanders   clarified  the  funds  went   to  state-owned                                                                    
Co-Chair  Wilson  asked  for verification  that  state-owned                                                                    
buildings were  underneath the fund, but  the University and                                                                    
courts were not.                                                                                                                
Ms.  Sanders  answered that  the  University  and the  Court                                                                    
System had and maintained their own buildings.                                                                                  
Co-Chair Wilson asked  if the University put  any money away                                                                    
for deferred maintenance.                                                                                                       
Ms. Sanders answered  that she did not  know what University                                                                    
was putting  away for  its own  buildings. She  reported the                                                                    
University  had come  to  the governor  with  a request  for                                                                    
deferred maintenance funding.                                                                                                   
Co-Chair Wilson asked for  verification that the legislature                                                                    
could make the  $5 million for the  University into matching                                                                    
funds  to find  out  whether  it put  funding  away for  its                                                                    
Ms. Sanders deferred the question to the University.                                                                            
Co-Chair  Wilson  directed  remarks  to  the  committee  and                                                                    
relayed  they  could  choose  to   designate  the  funds  as                                                                    
matching  funds   to  ensure  money   was  put  in   by  the                                                                    
University. She  asked for a  list of where the  $26 million                                                                    
had been  spent the previous  year. She thought there  was a                                                                    
priority list  that was  much newer  than the  five-year old                                                                    
list  [mentioned by  Ms. Sanders].  She  furthered that  the                                                                    
priority list  was supposed to  include buildings  the state                                                                    
was going to sell and which  it would utilize. She asked OMB                                                                    
to try to find more current information.                                                                                        
2:08:10 PM                                                                                                                    
Ms. Sanders clarified  she had been referring  to a proposal                                                                    
on a plan to move  forward with deferred maintenance several                                                                    
years ago. She  had information to provide  to the committee                                                                    
on the current prioritization list.                                                                                             
Co-Chair Wilson communicated her  preference for the list to                                                                    
also  include buildings  the state  was trying  to sell  and                                                                    
Representative Carpenter cited  FY 13 as a  year where state                                                                    
revenues were  high. He asked  if there had been  a deferred                                                                    
maintenance list at  the time or whether the  state had been                                                                    
fully funding  its maintenance  requirements. He  was trying                                                                    
to gauge how long the state had been deferring maintenance.                                                                     
Ms. Sanders replied  that OMB would follow  up. She believed                                                                    
there had always been a deferred maintenance backlog.                                                                           
Representative  Sullivan-Leonard   asked  when   the  Public                                                                    
Building  Fund  and  Alaska Capital  Income  Fund  had  been                                                                    
established and what the intent  had been for the funds. She                                                                    
believed they had been around for some time.                                                                                    
Ms. Sanders  answered that she  could not provide  a history                                                                    
on the  Public Building  Fund. She  relayed that  the Alaska                                                                    
Capital Income Fund had existed  for a significant amount of                                                                    
time. She detailed the fund  had typically been utilized for                                                                    
capital projects. She reiterated  her earlier testimony that                                                                    
the  previous session  the  legislature  had designated  the                                                                    
fund specifically for deferred maintenance projects.                                                                            
2:10:03 PM                                                                                                                    
Representative Carpenter stated it  would be helpful to know                                                                    
which projects had been deferred the longest.                                                                                   
Ms.  Sanders replied  that OMB  would provide  a spreadsheet                                                                    
with the list of deferred  maintenance projects. She did not                                                                    
know whether the  list included the date a  project had been                                                                    
Ms. Sanders reported that the presentation had concluded.                                                                       
Co-Chair  Wilson  shared  that  a  detailed  list  had  been                                                                    
provided   to  committee   members  [summary   sheet  titled                                                                    
"Governor's Capital Budget  - Appropriations and Allocations                                                                    
(by  department) (1196),"  provided by  OMB and  released on                                                                    
February  13, 2019  (copy on  file)].  She referenced  DNR's                                                                    
Arctic  Strategic   Transportation  and   Resources  (ASTAR)                                                                    
program, to which the legislature  had allocated funding the                                                                    
previous year. She  asked for a description  of the program,                                                                    
its status, and how much money had been spent to date.                                                                          
Ms. Cramer  replied that the  legislature had  allocated $10                                                                    
million  to  ASTAR  the previous  year.  She  explained  the                                                                    
program was  to "build  out" the  North Slope  by connecting                                                                    
communities and exploring  resource development projects and                                                                    
opportunities.  She  reported  that  the  increment  in  the                                                                    
proposed  capital budget  was $3  million. She  detailed the                                                                    
request  from DNR  had initially  been $5  million, but  the                                                                    
administration  had  asked  the  department  to  revise  the                                                                    
amount  based  on  its  true  needs for  FY  20,  which  had                                                                    
resulted in the $3 million request.                                                                                             
Co-Chair Wilson  asked for  the status  of the  program. She                                                                    
wondered  if any  roads had  been built  or if  the projects                                                                    
were at an impact study phase.                                                                                                  
Ms.  Cramer replied  that numerous  studies had  taken place                                                                    
and there had been work  with local communities to determine                                                                    
potential  impacts  on  the  communities.  She  relayed  her                                                                    
understanding there was roughly  $1.5 million remaining from                                                                    
the  appropriation   made  the  previous  year,   which  was                                                                    
expected to be spent by July 1.                                                                                                 
Co-Chair  Wilson asked  if any  of the  NPR-A funds  for the                                                                    
region could  be utilized to  move the project  forward more                                                                    
Ms. Cramer answered in the  negative. She expounded that the                                                                    
DNR  commissioner  was  exploring  the idea,  but  it  would                                                                    
require a federal change to the NPR-A grant process.                                                                            
Representative  Josephson requested  transaction sheets  and                                                                    
expenditure information on ASTAR's funding to date.                                                                             
2:13:09 PM                                                                                                                    
Ms. Cramer agreed to provide the information.                                                                                   
Co-Chair  Wilson asked  about a  $7.4 million  increment for                                                                    
the   Alaska  Travel   Industry   Association  (ATIA).   She                                                                    
highlighted $1.5  million from  the increment  designated to                                                                    
assuring  direct  flights  from  to  priority  international                                                                    
markets. She asked for detail.                                                                                                  
Ms. Sanders answered that the  ATIA capital project was $7.4                                                                    
million grant to  a named recipient. She  detailed the money                                                                    
went  to  ATIA  and  was   primarily  used  for  flyers  and                                                                    
handouts,  the  website, and  visitors  guide.  She was  not                                                                    
familiar with the increment  highlighted by Co-Chair Wilson.                                                                    
She noted the department was also available for questions.                                                                      
Co-Chair  Wilson  asked if  the  state  was subsidizing  any                                                                    
Ms. Sanders would follow up.                                                                                                    
Ms. Sanders made clarifying remarks  related to the deferred                                                                    
maintenance liability.  She elucidated  that the  $9 billion                                                                    
number provided  earlier in the meeting  was the replacement                                                                    
value  of  the  assets.  The  current  deferred  maintenance                                                                    
backlog was approximately $1.9 billion.  She would follow up                                                                    
with any additional information.                                                                                                
Co-Chair  Wilson  explained  the reason  for  the  different                                                                    
colored  sheets in  member's capital  budget binders;  paper                                                                    
colors  changed  as  different amendments  were  added.  She                                                                    
noted  that the  NPR-A funds  had not  been included  in the                                                                    
budget until  March 27. She  asked if  the item had  come in                                                                    
late and if it was normal to receive the funds.                                                                                 
Ms. Sanders answered that OMB  received an estimate when the                                                                    
governor's  budget was  released each  year. Once  the grant                                                                    
application  period   was  closed  and  grant   awards  were                                                                    
identified,  OMB  submitted  amendments to  the  legislature                                                                    
breaking out the allocations.                                                                                                   
2:16:16 PM                                                                                                                    
Representative  Josephson  remarked   that  DCCED  had  some                                                                    
oversight  [related  to the  NPR-A  grant  process], but  he                                                                    
wondered whether there  was a sense the  funds were proforma                                                                    
because it was federally required.                                                                                              
Ms.  Sanders  answered  that  the  grant  process  had  very                                                                    
specific  guidelines; grant  applications  were ranked,  and                                                                    
funding   was  allocated.   She   relayed   there  was   not                                                                    
significant discretion in the process.                                                                                          
Vice-Chair Johnston  asked about the $1.5  million [to ATIA]                                                                    
to  prioritize  international   markets  (i.e.  China).  She                                                                    
thought it may be necessary  to hear directly from ATIA. She                                                                    
was aware of a minimum of  three other efforts to obtain the                                                                    
direct  flights.  She  hoped there  was  a  coordination  of                                                                    
Co-Chair  Wilson replied  that  would be  nice. She  relayed                                                                    
that her office would reach out to ATIA.                                                                                        
Representative Sullivan-Leonard noted  the budget included a                                                                    
$6 million  and $60  thousand increment for  community block                                                                    
grants. She asked for detail on the grants and recipients.                                                                      
Ms.  Sanders   answered  that   the  request   was  received                                                                    
annually. She elaborated the request  included $6 million in                                                                    
federal  receipts and  $60 thousand  in matching  funds. She                                                                    
detailed  the   community  services  block  grant   had  one                                                                    
nonprofit called  the Rural Alaska Community  Action Program                                                                    
that  received  a  portion  of  the  funding.  She  believed                                                                    
RuralCap   was   receiving   funding  from   the   community                                                                    
development block grants.                                                                                                       
Co-Chair  Wilson wondered  why the  state, not  communities,                                                                    
was matching the federal funds.                                                                                                 
Ms. Sanders deferred the question to DCCED.                                                                                     
HANNA  LAGER,  DIVISION   OPERATIONS  MANAGER,  DIVISION  OF                                                                    
ADMINISTRATIVE SERVICES,  DEPARTMENT OF  COMMERCE, COMMUNITY                                                                    
AND  ECONOMIC  DEVELOPMENT,  replied  that half  of  the  $6                                                                    
million in  federal funds went  to Ruralcap as a  grant. The                                                                    
community action  association was a federal  designation and                                                                    
was  the only  entity in  the state  that could  receive the                                                                    
funds.  The  remaining  $3  million  and  the  required  $60                                                                    
thousand  state  match  went  out  through  a  competitively                                                                    
awarded  grant program.  The recipients  were not  listed in                                                                    
the  bill because  they  had not  yet  been identified;  the                                                                    
information would  be available  over the  next year  as the                                                                    
grants were awarded.                                                                                                            
Co-Chair Wilson asked why the  state was matching the funds.                                                                    
She   believed  there   were   other   federal  funds   that                                                                    
communities were responsible for matching.                                                                                      
Ms. Lager  answered the  $60 thousand  was a  required state                                                                    
match to receive the federal funding.                                                                                           
Co-Chair Wilson asked for verification  that the state could                                                                    
not  make the  communities match  the funds.  Alternatively,                                                                    
she wondered if it did  not matter who provided the matching                                                                    
Ms. Lager answered  it was her understanding  that the state                                                                    
was required to  provide matching funds in  order to receive                                                                    
the federal funds.                                                                                                              
Co-Chair  Wilson requested  to see  the document  specifying                                                                    
that the state could not  allow others [i.e. communities] to                                                                    
Representative Tilton asked if there were metrics showing                                                                       
the effectiveness of the programs receiving grant funding.                                                                      
Ms. Lager replied that DCCED required periodic grant                                                                            
reporting once a grant was awarded. She did not have any                                                                        
detail on hand and would follow up with the information.                                                                        
HB 38 was HEARD and HELD in committee for further                                                                               
Co-Chair Wilson reviewed the schedule for the following