Legislature(2001 - 2002)

10/03/2002 01:15 PM House BUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
                       JOINT COMMITTEE ON                                                                                     
                   LEGISLATIVE BUDGET & AUDIT                                                                                 
                         October 3, 2002                                                                                        
                            1:15 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
SENATE MEMBERS PRESENT                                                                                                        
                                                                                                                                
Senator Gene Therriault, Chair                                                                                                  
Senator Lyman Hoffman                                                                                                           
Senator Gary Wilken, alternate                                                                                                  
                                                                                                                                
SENATE MEMBERS ABSENT                                                                                                         
                                                                                                                                
Senator Jerry Ward                                                                                                              
Senator Randy Phillips                                                                                                          
Senator Dave Donley                                                                                                             
                                                                                                                              
HOUSE MEMBERS PRESENT                                                                                                         
                                                                                                                                
Representative Hugh Fate                                                                                                        
Representative Ken Lancaster                                                                                                    
Representative Bill Williams, alternate                                                                                         
                                                                                                                                
HOUSE MEMBERS ABSENT                                                                                                          
                                                                                                                                
Representative Eldon Mulder                                                                                                     
Representative Reggie Joule                                                                                                     
Representative John Harris                                                                                                      
Representative John Davies, alternate                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
REVISED PROGRAMS (RPLs)                                                                                                         
AUDIT REPORTS                                                                                                                   
AUDIT REQUESTS                                                                                                                  
VETERANS' HOME STUDY                                                                                                            
FINAL REPORT ON FEDERAL REVIEW OF THE DIVISION OF FAMILY & YOUTH                                                                
SERVICES                                                                                                                        
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LARRY MEYERS, Deputy Director                                                                                                   
Division of Tax                                                                                                                 
Department of Revenue                                                                                                         
                                                                                                                              
NICO BUS, Administrative Services Manager                                                                                     
Department of Natural Resources                                                                                                 
                                                                                                                                
JOHANNA MUNSON, Special Assistant                                                                                               
Department of Natural Resources                                                                                                 
                                                                                                                                
MARK MYERS, Director                                                                                                            
Division of Oil & Gas                                                                                                           
Department of Natural Resources                                                                                                 
                                                                                                                              
MICHAEL SHIFFER, Program Coordinator                                                                                            
Alaska Workforce Investment Office                                                                                              
Department of Labor & Workforce Development                                                                                     
                                                                                                                                
PAT POLAND, Director                                                                                                            
Division of Business & Community Development                                                                                    
Department of Community & Economic Development                                                                                  
P.O. Box 110800                                                                                                                 
Juneau, Alaska 99811-0800                                                                                                       
                                                                                                                                
TOM LAWSON, Director                                                                                                            
Division of Administrative Services                                                                                             
Department of Community & Economic Development                                                                                  
P.O. Box 110800                                                                                                                 
Juneau, Alaska 99811-0800                                                                                                       
                                                                                                                                
PETE HALLGREN, City Administrator                                                                                               
Delta Junction                                                                                                                  
City of Delta Junction                                                                                                          
P.O. Box 229                                                                                                                    
Delta Junction, Alaska 99737-0229                                                                                               
Phone: (907) 895-4656                                                                                                           
FAX: (907) 895-4375                                                                                                             
                                                                                                                                
NAN THOMPSON, Chair-Commissioner                                                                                                
Regulatory Commissioner of Alaska                                                                                               
701 West Eighth Avenue, Suite 300                                                                                               
Anchorage, Alaska 99501                                                                                                         
                                                                                                                                
BOB STALNAKER, Information Systems                                                                                              
Administrative Services                                                                                                         
Department of Environmental Conservation                                                                                        
410 Willoughby, Suite 303                                                                                                       
Juneau, Alaska 99801-1795                                                                                                       
                                                                                                                                
YURI MORGAN, Legislative Staff                                                                                                  
Denali Commission                                                                                                               
510 L Street, Suite 410                                                                                                         
Anchorage, Alaska 99501                                                                                                         
                                                                                                                                
TAPE 02-08, SIDE A                                                                                                            
                                                                                                                                
CHAIR GENE  THERRIAULT called the  Joint Committee  on Legislative                                                              
Budget  & Audit  to order  at 1:15  p.m. on  Thursday, October  3,                                                              
2002.    Senators  Therriault,  Hoffman,  Wilken,  Representatives                                                              
Lancaster, Williams,  and Representative Fate were  all present at                                                              
the roll call.                                                                                                                  
                                                                                                                                
REVISED PROGRAMS (RPLs)                                                                                                       
                                                                                                                                
RPL Number:  04-03-1005                                                                                                       
                                                                                                                                
CHAIR  THERRIAULT  announced  that  the first  order  of  business                                                              
would  be the  RPLs.   They were  split  into two  groups and  the                                                              
committee  would  move on  those  twelve  RPLs with  no  technical                                                              
problems.   Subcommittee  staff were  consulted on  the RPLs.   He                                                              
asked if any RPLs  needed to be moved down to  the full discussion                                                              
agenda.                                                                                                                         
                                                                                                                                
SENATOR  HOFFMAN stated  he did  not want  to move  the first  RPL                                                              
down to  the full discussion  agenda but  did have some  questions                                                              
on the Motor Fuel Tax Compliance RPL number 04-03-1005.                                                                         
                                                                                                                                
CHAIR THERRIAULT  asked who  was available  to discuss  RPL number                                                              
04-03-1005, Department of Revenue Motor Fuel Tax Compliance.                                                                    
                                                                                                                                
LARRY  MEYERS, Deputy  Director,  Division of  Tax, Department  of                                                              
Revenue, was available.                                                                                                         
                                                                                                                                
SENATOR  HOFFMAN asked  if  the request  for  the RPL  was due  to                                                              
companies not being  in compliance with the motor fuel  tax and if                                                              
so, how  much money was anticipated  by performing  the compliance                                                              
audits.                                                                                                                         
                                                                                                                                
MR. MEYERS  stated that  the $8,000 for  travel was primarily  for                                                              
an  auditor  and   wasn't  really  designated  for   a  particular                                                              
function.                                                                                                                       
                                                                                                                                
SENATOR  HOFFMAN   asked  if  through   the  audit   the  division                                                              
envisioned finding people  out of compliance and, if  so, how much                                                              
was anticipated in  collections.  He inquired as to  whether it be                                                              
more than the $8,000 to be spent on the audits.                                                                                 
                                                                                                                                
MR.  MEYERS  stated that  he  couldn't  guarantee that  the  money                                                              
received from  the federal program  would be more than  what would                                                              
be expended.                                                                                                                    
                                                                                                                                
SENATOR  HOFFMAN asked  if  it was  anticipated  that audit  would                                                              
look at the portion  of motor fuel tax that the  state levies, the                                                              
5 percent for boats, 8 percent for highways, and for aviation.                                                                  
                                                                                                                                
MR. MEYERS replied yes, that is what it would be used for.                                                                      
                                                                                                                                
CHAIR THERRIAULT  asked if  there were  further questions  on that                                                              
RPL.   Next, he brought  up RPL  number 10-03-4042, Department  of                                                              
Natural  Resources,  Western  North  Slope  Satellite  Development                                                              
Project.  He  mentioned that the write-up from  the administration                                                              
indicated  that an  agreement  would  be in  place  by October  3,                                                              
2002,  and that  had not taken  place.   He didn't  see a  problem                                                              
giving  the authorization  for  the SDPR  at  this time.   He  was                                                              
concerned that  it be made clear  that the authorization  for this                                                              
and any  other RPLs with SDPR  that the authorizations  given were                                                              
for the  specific projects  named.   If a  particular project  did                                                              
not happen  then the department was  not free to just  accept SDPR                                                              
for something else.                                                                                                             
                                                                                                                                
SENATOR  HOFFMAN   had  a  question  on  RPL   number  12-03-0101,                                                              
Department   of  Public   Safety,   Alaska   Rural  Village   Fire                                                              
Suppression  Capabilities.   He wanted  to  request a  copy of  29                                                              
villages   that  would   be  receiving   critically  needed   fire                                                              
training.                                                                                                                       
                                                                                                                                
REPRESENTATIVE FATE  had a question on the  10-03-4044, Department                                                              
of Natural Resources, Point Thomson Project Coordinator.                                                                        
                                                                                                                                
NICO  BUS,  Administrative  Services   Manager,  was  on  line  to                                                              
discuss the RPL.                                                                                                                
                                                                                                                                
REPRESENTATIVE  FATE asked  how long  it was  envisioned that  the                                                              
position  would be around.   He  was interested  in the  duties of                                                              
the coordinator position.                                                                                                       
                                                                                                                                
MR.  BUS stated  the  agreement would  go  through December  2003.                                                              
The position would  be around as long as the services  were needed                                                              
by the companies.                                                                                                               
                                                                                                                                
CHAIR  THERRIAULT  stated that  subcommittee  staff  had told  the                                                              
committee staff that the state had already hired Dick LeFebvre.                                                                 
                                                                                                                                
MR. BUS  answered that  yes, Mr. LeFebvre  had been appointed  and                                                              
after  a favorable  decision  from the  committee  today, then  he                                                              
would start charging his time to the Point Thomson project.                                                                     
                                                                                                                                
CHAIR  THERRIAULT   asked  if  he   had  been  hired   before  the                                                              
department had the funds to pay for the position.                                                                               
                                                                                                                                
MR.  BUS  stated   that  if  the  RPL  was  not   authorized,  the                                                              
department  would  have  to  absorb  the  costs  in  another  area                                                              
because Exxon was told that the department would expedite it.                                                                   
                                                                                                                                
CHAIR THERRIAULT asked how long he had been on board.                                                                           
                                                                                                                                
JOHANNA   MUNSON,   Special   Assistant   to   the   Commissioner,                                                              
Department  of Natural  Resources,  stated that  Mr. LeFebvre  was                                                              
appointed on July 24.                                                                                                           
                                                                                                                                
MARK  MYERS,  Director,  Division  of Oil  &  Gas,  Department  of                                                              
Natural  Resources, addressed  the  chair's concerns.   He  stated                                                              
that one of the  main reasons the coordinator  position was needed                                                              
was to  give input  to the EPA  [Environmental Protection  Agency]                                                              
on the  environmental impact statement.   The initial  development                                                              
would  consist  of about  75,000  barrels  a  day of  gas  cycling                                                              
liquids production.   He  went on to  describe the unit  expansion                                                              
requirements as  being pretty aggressive.   There  are significant                                                              
penalties if  the requirements  are not  met about $27.5  million.                                                              
The division  did not want  to be a  roadblock and was  working to                                                              
ensure the  project went forward.   It is  a huge project  for the                                                              
state.  It was  very important to get the coordinator  up to speed                                                              
in working with  EPA.  He agreed the division may  have jumped the                                                              
gun a little, but said it was all with good intentions.                                                                         
                                                                                                                                
SENATOR  THERRIAULT asked  if there  were  further questions  with                                                              
the consent agenda.  Seeing none, he asked for the motion.                                                                      
                                                                                                                                
REPRESENTATIVE  FATE moved  that  the committee  approve the  RPLs                                                              
listed as a block under consent agenda [those RPLs were 04-03-                                                                  
1005, Department of RevenueMotor Fuel Tax Compliance; RPL 06-03-                                                               
0124, Department  of Health  & Social  Services, Far North  Family                                                              
Support  Project  &  Workforce Coordination  Project;09-03-0020,                                                               
Department  of Military  & Veterans'  Affairs,  CIP-Anti-Terrorism                                                              
Activities;10-03-4038, Department of Natural  Resources BLM/NPR-A                                                              
Coordination;10-03-4039, Department of Natural  Resources, Alaska                                                              
Oil &  Gas Exploration,  Development & Permitting  Project;10-03-                                                              
4040, Department  of Natural Resources, Alaska  Cadastral Project;                                                             
10-03-4041,  Department  of Natural  Resources,  BLM/Ring of  Fire                                                              
Resource  Management  Plan;  10-03-4042,   Department  of  Natural                                                              
Resources,  Western  North Slope  Satellite  Development  Project;                                                              
10-03-4044,  Department   of  Natural  Resources,   Point  Thomson                                                              
Project Coordinator  - Revised; 11-03-1066,  Department of  Fish &                                                              
Game, Increase SDPR  for Harbor Seal Work;  12-03-0101, Department                                                              
of   Public  Safety,   Alaska  Rural   Village  Fire   Suppression                                                              
Capabilities;   18-03-0359(CIP),   Department   of   Environmental                                                              
Conservation,  Public  Drinking  Water System  Security].    There                                                              
being no  objection, the  consent portion of  the RPLs  agenda was                                                              
approved.   He next moved  to the full  discussion portion  of the                                                              
agenda.                                                                                                                         
                                                                                                                                
RPL Number:  07-03-1036                                                                                                       
                                                                                                                              
MICHAEL   SHIFFER,    Program   Coordinator,    Alaska   Workforce                                                              
Investment Office,  Department of  Labor & Workforce  Development,                                                              
was  present   to  discuss   RPL  07-03-1036   on  the   Workforce                                                              
Investment Act & Denali Commission Grants.                                                                                      
                                                                                                                                
DAVID TEAL, Director,  Division of Legislative  Finance, discussed                                                              
his findings  on the RPL.   He explained  that the precise  amount                                                              
and  purpose of  the authorization  needed by  the department  was                                                              
unclear to  his division.   It appeared  that the department  used                                                              
existing  authorization to  put some  of the money  on the  street                                                              
and  this  RPL   would  replace  that  federal   authorization  in                                                              
anticipation of  future need.   He explained  that this was  not a                                                              
major  objection to  the RPL  they  just wanted  the committee  to                                                              
understand  the  specific  purposes  of  the  money.    APIC,  the                                                              
Industry &  Careers Consortium, has  already been  granted through                                                              
the Alaska  Department of  Labor [and  Workforce Development]  and                                                              
is related  to another  RPL  later on  the agenda.   He wanted  to                                                              
clarify  that the  money  was  not being  used  for  what the  RPL                                                              
states.                                                                                                                         
                                                                                                                                
CHAIR THERRIAULT asked  the department to explain  how the funding                                                              
had been switched around.                                                                                                       
                                                                                                                                
MR. SHIFFER,  explained that there was  a grant that came  in from                                                              
the U.S.  Department of Labor.   The department chose to  use some                                                              
existing authority  knowing that they  needed to spend  that money                                                              
later in  the year.  As the  year progressed along  the department                                                              
found  itself needing  to  spend  the funds.    He referenced  the                                                              
carry  forward money  for  the  workforce investment  grants  that                                                              
were  about  to  come  due.   The  department  was  trying  to  be                                                              
responsive to get the funds out to the private nonprofit.                                                                       
                                                                                                                                
SENATOR HOFFMAN asked which private nonprofit that was.                                                                         
                                                                                                                                
MR.  SHIFFER responded  that it  was the  Alaska Process  Industry                                                              
Career Consortium.   It is a collection of agencies  that focus on                                                              
jobs in the oil & gas industries.                                                                                               
                                                                                                                                
CHAIR  THERRIAULT  asked  if  this   RPL  had  any  new  positions                                                              
associated with it.                                                                                                             
                                                                                                                                
REPRESENTATIVE FATE  moved that the  committee approve  RPL number                                                              
07-03-1036.  There being no objections, the RPL was approved.                                                                   
                                                                                                                                
RPL Number: 08-03-0103                                                                                                        
                                                                                                                                
CHAIR THERRIAULT  moved next to RPL number  08-03-0103, Department                                                              
of  Community  &  Economic  Development,  Delta  Junction  Missile                                                              
Defense  Test  Bed Facilities  Impact,  and  asked if  anyone  was                                                              
present to explain the request.                                                                                                 
                                                                                                                                
MR.  TEAL   explained  the   Division  of  Legislative   Finance's                                                              
position  that  the RPL  would  leave  the department  with  about                                                              
$270,000 of authorization  that appears to be surplus.   Secondly,                                                              
as  the  original  grant  was about  to  be  signed  $9.7  million                                                              
another $9 million  became available.  There doesn't  seem to be a                                                              
precise description of the projects.                                                                                            
                                                                                                                                
PAT   POLAND,  Director,   Division   of  Business   &   Community                                                              
Development,  Department  of  Community  &  Economic  Development,                                                              
spoke to  the RPL.   He explained that  there is a  long-term plan                                                              
between the  Department of  Missile Defense  and the community  of                                                              
Delta Junction.   He  had a  list of projects  from the  community                                                              
and  was prepared  to  share them  with the  meeting.   The  first                                                              
three years of funding was contained in the list.                                                                               
                                                                                                                                
SENATOR  THERRIAULT  explained the  list  would  be faxed  to  the                                                              
members on  teleconference.  The  community had been  expecting to                                                              
get $9  million, and  that list  was shared  with the  legislature                                                              
during the budget cycle.                                                                                                        
                                                                                                                                
REPRESENTATIVE FATE  clarified that those were  pass-through funds                                                              
to be administered by Delta Junction.                                                                                           
                                                                                                                                
MR. POLAND confirmed that.                                                                                                      
                                                                                                                                
CHAIR THERRIAULT asked about the surplus of $270,000.                                                                           
                                                                                                                                
TOM  LAWSON,   Director,  Division  of  Administrative   Services,                                                              
Department  of Community  &  Economic Development  explained  that                                                              
federal dollars  will come  in and  then be  passed on  through to                                                              
the community.   He figured there would be little  if any interest                                                              
generated.                                                                                                                      
                                                                                                                                
CHAIR  THERRIAULT asked  if any  interest generated  on the  funds                                                              
would be counted as federal funds.                                                                                              
                                                                                                                                
MR. LAWSON replied that was correct.                                                                                            
                                                                                                                                
CHAIR  THERRIAULT asked  whether,  of things  were passed  through                                                              
quickly  to the community  and held  in an  account, any  interest                                                              
would be accounted for separately and not on the state's books.                                                                 
                                                                                                                                
MR. LAWSON confirmed that was correct.                                                                                          
                                                                                                                                
CHAIR THERRIAULT  asked about  the $270,000  surplus funds,  then,                                                              
and if the RPL couldn't just be approved for $270,000 less.                                                                     
                                                                                                                                
MR.  LAWSON  explained  that  the  capital  request  was  for  $10                                                              
million, and then  the grant came in a little less  than that.  As                                                              
far as the department  was concerned, it would be  fine to approve                                                              
it for less.                                                                                                                    
                                                                                                                                
PETE  HALLGREN, City  Administrator,  Delta Junction  was on  line                                                              
and  testified that  the  full amount  to  be  considered was  $18                                                              
million.  He  offered to go through the projects  being considered                                                              
by   the  Department   of  Transportation   &  Public   Facilities                                                              
(DOT&PF).   He asked  if the committee  had a  signed copy  of the                                                              
Memorandum  of  Agreement  (MOA).   He  said  he had  received  it                                                              
yesterday for a total of $18.3 million.                                                                                         
                                                                                                                                
CHAIR   THERRIAULT  stated   that  if   the  department   received                                                              
authorization for  $10 million during the budget  process and this                                                              
RPL was for $9 million, that didn't add up to $18.3 million.                                                                    
                                                                                                                                
SENATOR WILKEN  asked if  there was  a list  of the projects  that                                                              
the funds  would be spent  on.  He stated  he saw where  the $18.3                                                              
million would be spent.                                                                                                         
                                                                                                                                
MR.  POLAND replied  that there  is  a list  of approved  projects                                                              
that had  been identified  and studied  and approved  by the  U.S.                                                              
Department of Defense (USDOD).                                                                                                  
                                                                                                                                
CHAIR THERRIAULT  clarified that  the list was  the same  that had                                                              
gone through the regular legislative budgetary projects.                                                                        
                                                                                                                                
MR. POLAND  clarified  that a number  of the  projects are  fairly                                                              
large  and were  just  now starting  the  design and  engineering;                                                              
thus  the costs  may  vary some  and there  might  be some  moving                                                              
around of the funds between the projects.                                                                                       
                                                                                                                                
CHAIR  THERRIAULT  asked  if  there was  the  possibility  of  new                                                              
projects to be added.                                                                                                           
                                                                                                                                
MR. POLAND replied  not without the approval of  the Department of                                                              
Defense.                                                                                                                        
                                                                                                                                
SENATOR  HOFFMAN  stated there  seemed  to  be  a lot  of  figures                                                              
running  around.   He asked  about  combining the  FY 02  & FY  03                                                              
lists  of  projects.   That  added  up  to $23  million  worth  of                                                              
projects but  didn't match  the back up  given the committee.   He                                                              
said  there was  a  need for  reconciliation.    He was  concerned                                                              
about the  commissioner signing  the MOA  without approval  of the                                                              
Legislative Budget & Audit Committee.                                                                                           
                                                                                                                                
MR. POLAND  expected it was because  DOD told the  department that                                                              
there  had to  be a  signed  agreement in  place  before the  deal                                                              
could be completed.   Because it  was FY 03 money the  funds would                                                              
lapse.   Because the  department is  simply a pass-through  agency                                                              
they  were trying  to  be  helpful to  USDOD  and helpful  to  the                                                              
community.                                                                                                                      
                                                                                                                                
CHAIR THERRIAULT clarified  that signing the MOA  did not obligate                                                              
the state.   It simply states  that if the funds  materialize then                                                              
this agreement would already be in place.                                                                                       
                                                                                                                                
SENATOR HOFFMAN  said that if the  committee does not  take action                                                              
then  the  money does  not  pass  through.    He pointed  out  the                                                              
previous unsigned  agreement had  certain projects listed  but the                                                              
signed agreement did not have the projects delineated.                                                                          
                                                                                                                                
MR. POLAND said the project were outlined in the backup.                                                                        
                                                                                                                                
MR. TEAL said there should be a list in the backup.                                                                             
                                                                                                                                
MR. HALLGREN  said that the latest  USDOD version of the  list had                                                              
a  complete  break  down  of  the   $18.3  million.    There  were                                                              
approximately nine  pages, with one major change  in shifting from                                                              
one project  to another.   He explained  that pool assistance  was                                                              
$3.5 million,  fire station addition  was $3.2 million,  ambulance                                                              
and  fire truck  were  $.9 million,  community  landfill was  $5.5                                                              
million,  recreation  center  and   library-city  hall  were  $1.2                                                              
million,  communications-TV  tower  was $480,000,  postal  service                                                              
programs  were $270,000,  education  programs  were $750,000,  and                                                              
business  loans were  changed  from $5  million  to $2.5  million.                                                              
Basically,  $2.5  million  was switched  from  business  loans  to                                                              
school  assistance.   These are  for  FY 02  and 03.   The  higher                                                              
number referenced earlier was for FY 04, in addition.                                                                           
                                                                                                                                
CHAIR THERRIAULT confirmed that the funds totaled $18.3 million.                                                                
                                                                                                                                
MR. HALLGREN confirmed that.                                                                                                    
                                                                                                                                
SENATOR  HOFFMAN stated  that the  FY 02  - 04  document of  funds                                                              
totaled closer to $30 million.                                                                                                  
                                                                                                                                
MR.  POLAND stated  that  the study  submitted  to  USDOD and  the                                                              
community of  Delta Junction  have been  working on the  projects,                                                              
and  the  department  simply viewed  itself  as  the  pass-through                                                              
agency.                                                                                                                        
                                                                                                                               
MR.  TEAL  stated  that  it appeared  that  the  list  of  capital                                                              
projects were  what Delta Junction  expects to pay for  the entire                                                              
list of projects.   So the totals would be larger  because it also                                                              
includes the federal funds.                                                                                                     
                                                                                                                                
CHAIR THERRIAULT  said he wanted  to make sure that  the committee                                                              
not approve more than the total for the projects.                                                                               
                                                                                                                                
MR.  POLAND  stated  that  department   does  not  object  to  the                                                              
authorization being lowered.                                                                                                    
                                                                                                                                
MR. TEAL  suggested  that if the  committee were  going to  reduce                                                              
the  authorization,   it  consider  doing  so  at   the  level  of                                                              
$18,350,000 because there is a $50.0 administrative fee.                                                                        
                                                                                                                                
MR. POLAND said the department would need that authorization.                                                                   
                                                                                                                                
SEN. DONLEY asked  if Senator Wilken were on line.   He pointed to                                                              
the  school construction  figure  of $11  million  for two  fiscal                                                              
years.                                                                                                                          
                                                                                                                                
MR. POLAND said  he didn't think that the school  project had been                                                              
approved.                                                                                                                       
                                                                                                                                
CHAIR THERRIAULT stated  that the School District has  a school in                                                              
Greely now being  maintained in a warm status.  He  wasn't sure if                                                              
that school would be utilized.                                                                                                  
                                                                                                                                
SENATOR DONLEY wanted  to know if this school  district was paying                                                              
anything locally toward the school foundation formula costs.                                                                    
                                                                                                                                
SENATOR THERRIAULT stated that it was not an organized borough.                                                                 
                                                                                                                                
SENATOR  DONLEY wanted  to know  how any  of this  money could  be                                                              
utilized to  offset some of  those costs  to the state  since they                                                              
aren't  paying any local  taxes.   He also  wanted some  guarantee                                                              
that the  schools would be properly  maintained.  He  thought some                                                              
of  this  money should  go  towards  those  costs instead  of  the                                                              
community relying on the people in the rest of the state.                                                                       
                                                                                                                                
SENATOR  THERRIAULT   said  he  wasn't   sure  that   the  federal                                                              
government  was  looking to  step  in and  help  with  that.   The                                                              
federal funds  were being  used to  mitigate the negative  impacts                                                              
of the federal projects.                                                                                                        
                                                                                                                                
SENATOR DONLEY  said that  the impacts from  the base  closure was                                                              
one of  the reasons that  the community  didn't want to  pay local                                                              
taxes to support their schools.                                                                                                 
                                                                                                                                
SENATOR WILKEN  said that it seemed  that there was  $4.25 million                                                              
that was going toward  education.  He would like  to know from the                                                              
Delta Greely  school  district where  that money  was going  to be                                                              
applied.  He also  wanted to know if the $4.25  million was simply                                                              
a grant  or if there  was any local  match money going  towards it                                                              
as well.                                                                                                                        
                                                                                                                                
MR. HALLGREN said  he didn't speak for the school  district but it                                                              
was 100  percent  grant money  and it  was in the  amount of  $3.5                                                              
million to  the school district.   The other portion  was $750,000                                                              
for  education programs  which will  go to  the city.   He  stated                                                              
that  they were  a second-class  city  and precluded  by law  from                                                              
having their  own school district.   There  is a $30,000  grant to                                                              
study potential  borough  formation.   None of  the basis for  the                                                              
money had to do with a desire not to pay for schools.                                                                           
                                                                                                                                
SENATOR WILKEN stated  he understood and he looked  forward to Mr.                                                              
Hallgren's  support while  working with  the Delta-Greely  Borough                                                              
to  form  their   own  government  so  they  can   pay  for  their                                                              
education.   He also  asked again  for the list  of projects.   He                                                              
wanted to  have a discussion about  building a new  school whether                                                              
or not  the people  would sign on  to maintain  it in the  future.                                                              
He said  he would  not object to  the request  because it  is time                                                              
sensitive.                                                                                                                      
                                                                                                                                
CHAIR THERRIAULT  said that  the discussion  will continue  in the                                                              
future.                                                                                                                         
                                                                                                                                
SENATOR WILKEN  was concerned about  where the $4.5  million would                                                              
be applied so  that he could track  it over the next  two years to                                                              
assure  it's being  spent wisely.    He also  agreed with  Senator                                                              
Donley that  some of that  money should be  given to the  state to                                                              
help  replace the  four mills  requirement  that the  rest of  the                                                              
people in the state are responsible for.                                                                                        
                                                                                                                                
REPRESENTATIVE DAVIES was present on teleconference.                                                                            
                                                                                                                                
CHAIR THERRIAULT stated  that the RPL did need to  be reduced down                                                              
to $8,350 million.                                                                                                              
                                                                                                                                
REPRESENTATIVE FATE  moved that the  committee approve  RPL 08-03-                                                              

0103 with the revised amount of $8,350 million. There being no objection, the request was approved. [There is no recording on Side B of Tape LBA 02-8.] TAPE LBA 9, SIDE A RPL Number: 08-03-0104 CHAIR THERRIAULT next moved to RPL number 08-03-0104 Department of Community & Economic Development, Rural Alaska Internet Access Grant Program. MR. TEAL commented that the Division of Legislative Finance found that it appeared that USDA would require some state or local match. It was felt that the RCA's staff time would meet the in-kind match. He was concerned that it might be appropriate that the grant be administered in a different division other than RCA. NAN THOMPSON, Chair-Commissioner, Regulatory Commissioner of Alaska, explained the RPL. The amount is variable in regard to which community it is serving. These funds are directed towards communities with a high rate of "not employed" and lower populations. The amount of match is unknown because the federal government was still reviewing the list of eligible communities. She stated that it may go down. The community that is selected as the beneficiary will be the one that puts up the match. Use of community facilities may be considered as a match. The RCA would not be hiring anyone new to be administering the grant moneys. CHAIR THERRIAULT asked Tom Lawson about match funds and whether the department was planning to supply some of that. MR. LAWSON said it was his understanding that the money would come from the local communities. It was still being worked out which division in the department would be administering the grants. SENATOR THERRIAULT asked if it would be handled by an unbudgeted RSA. MR. LAWSON replied that would be a likely means. MS. THOMPSON said that staff time could be used as a match and that was acceptable to USDOD. CHAIR THERRIAULT asked about a percentage for match from the communities. MS. THOMPSON replied that twenty percent would be the high end under the federal guidelines and can be reduced based on a showing of economic distress on the community. She said that they were in the process of defining which communities will be eligible to receive the funds. CHAIR THERRIAULT asked if this was just half the money needed for the projects. MS. THOMPSON said only part of the money was put out at this time and the other would be cycled through next fiscal year. REPRESENTATIVE FATE asked whether the future funds would come in under the same requirements as they are now. MS. THOMPSON stated that is USDA's choice and it would be her intent that the match requirements remain the same. SENATOR WILKEN had to leave the meeting. REPRESENTATIVE DAVIES asked about funds would be available in the future would they be additional communities served. He wanted to know if the projects would be self-contained. MS. THOMPSON said that was something that was looked at closely. They needed to be self-supporting. REPRESENTATIVE FATE moved that the committee approve RPL number 08-03-0104. SENATOR THERRIAULT asked for a roll call vote. YEAS: Senators Donley, Hoffman, Therriault, Representative Joule, Lancaster, Williams, Davies, and Fate. NAYS: 0 The motion passed 8-0. RPL number: 08-03-0108 CHAIR THERRIAULT moved to RPL number 08-03-0108, Department of Community & Economic Development, Alaska Process Industry Partnership. MR. TEAL explained that the comments from the Division of Legislative Finance are related to the previous RPL number 07- 03-1036. This money flowed from US Department of Labor to APIC and now back to the Department Community & Economic Development (DCED). It is related and is now coming back into the state as SDPR which is the correct classification. CHAIR THERRIAULT clarified that the position that was vacant was now being filled. MR. LAWSON explained that when this funding surfaced the department chose to leave this position on the books and it is being reclassified as an exempt position. REPRESENTATIVE FATE moved that the committee approve RPL 08-03-

0108. There being no objection, the request was approved. CHAIR THERRIAULT stated that Mr. Teal had disclosed that his wife was working on this project and may be the one to fill the position in the future. RPL number 18-03-0358 CHAIR THERRIAULT moved next to RPL number 18-03-0358, Department of Environmental Conservation. MR. TEAL explained that this RPL was a request for capital funds and there is no existing capital project to which money could be added and believed that this was an incorrect classification. If it were "reclassed" as an operating request it should be revised to reflect only the FY 03 amount and drop the FY 04 amount. That would revise it from $715,707 down to $361,500. BOB STALNAKER, Administrative Services, Department of Environmental Conservation, explained that there was no objection from the department. He clarified that it was two grants from EPA that help to get all the data integrated from different programs. One was an internal and one was external integration. REPRESENTATIVE FATE moved that the committee approve RPL number 18-03-0358, revised to an operating request and down to $361,500. There being no object to the motion, the RPL was approved. REPRESENTATIVE FATE moved that the committee move into executive session for the purpose of discussing confidential audit reports under AS 24.20.301. AUDIT REPORTS REPRESENTATIVE FATE moved that committee return to regular session following the executive session at 2:55 p.m. No objection was made. REPRESENTATIVE FATE moved that the following final audits be released to the agencies for response. Those audit reports were [Department of Revenue, Treasury Revenue Management System, Department of Community & Economic Development, State Medical Board, Department of Community & Economic Development, Board of Nursing, Department of Community & Economic Development, Board of Certified Direct-Entry Midwives]. There were no objections to the motions to release the preliminary audits. AUDIT REQUEST REPRESENTATIVE FATE moved that the committee approve an audit request by Senator Donley on the Department of Transportation & Public Facilities. SENATOR DONLEY spoke about the efficiency of the department due to the some 70 layoffs. He asked that the construction of road projects in the state be compared with that of other states. MS. DAVIDSON, Legislative Auditor spoke to the request. She thought the audit would not be started until April or May and a specialist would have to be hired to help them. She stated she may need to come back to the committee for approval of a contract to do so. It would provide a very interesting look of the inner workings of DOT&PF to the legislature. SENATOR THERRIAULT said he had spoken with Ms. Davidson about the budget aspect of this request. REPRESENTATIVE FATE said this would provide a model for studying the efficiencies of a program and would be helpful in looking at other departments. SENATOR HOFFMAN asked about the timing of preliminary response. MS. DAVIDSON said she had spoken with Senator Donley's staff about that issue and they were agreeable. REPRESENTATIVE DAVIES encouraged Ms. Davidson to hire the independent engineer for that expertise. SENATOR THERRIAULT spoke again about the budget issues. REPRESENTATIVE JOULE asked about the quality control aspect of the project. SENATOR DONLEY said that the quality control would be part of the process of making sure there was a decent project in the planning and construction phase. He is interested in how our quality control compares with other states. MS. DAVIDSON stated that it would be addressed in a micro and macro levels. DOT&PF has a couple of groups that already do that. As the benchmarks are set, those things will be looked at overall. REPRESENTATIVE DAVIES asked about the scope of the audit, and whether or not it would include aviation as well. SENATOR DONLEY stated that his interest was in the road construction projects and did not reference the airport issues. REPRESENTATIVE FATE moved that the committee approve the audit request of DOT&PF benchmarks. There being no objection, the request was approved. VETERANS' HOME STUDY SENATOR THERRIAULT spoke about the veterans' home study and informed the committee that the RFP was in the process of being written. Staff was looking at an Oregon study to sort of model after it. A draft had been prepared. MS. DAVIDSON spoke about the draft RFP. As a result of discussions taking place, she recommended that the committee phase the study. The veterans' groups were looking for a study to be completed to support an application to the Department of Veterans' Affairs for the acquisition of a housing grant. They were very helpful in providing information. She referenced an earlier discussion of the committee that several options be looked at, rather than just a stand-alone home. MS. DAVIDSON stated that there needed to be a needs assessment, an economic feasibility study, and then look at what approach should be taken. The first phase would be the identification of the needs assessment and then the feasibility of the options. Then, from there the legislature can evaluate the results of that and recommend which direction to take. The RFP should be let for $150,000 for this first phase. MS. DAVIDSON explained that the first phase should be done towards the end of FY 03, and then the rest of the money would need to be reappropriated for further study to be done by the beginning of the next session. SENATOR THERRIAULT spoke about making application to the federal government. It made sense that the legislature not make the actual application; that would be more appropriate coming from the administration. He agreed there would be quite a bit of work to be done in determining what the needs of veterans were. He wanted to make sure that phasing the project was acceptable to the committee. REPRESENTATIVE DAVIES agreed that the phasing made a lot of sense. [There is no recording on Side B of Tape LBA 02-9.] TAPE LBA 02-10, SIDE A FINAL REPORT ON THE FEDERAL REVIEW OF DIVISION OF FAMILY & YOUTH SERVICES REPORT MS. DAVIDSON next spoke about the Final Report on the Federal Child & Family Services. The report was different from a Legislative Audit report. This report gives a broad based view of how well DFYS is doing. Representative Fate's original audit request was primarily on the welfare of children in state custody. She gave an overview of the findings of the federal review report. SENATOR HOFFMAN asked if there was an overall rating for the Department. MS. DAVIDSON stated that the department showed non-compliance on 7 of the 10 main issues. There was no overall rating. REPRESENTATIVE FATE stated he didn't feel that this was adequate to address his concerns. Several things have not been looked at one of which was the medical conditions of the children going into the foster homes. His concerns were mainly focused on what the medical condition is or was at the time the child went into the home or whether or not the condition was contracted while in the home. The concerns came about after several deaths occurred in the foster homes. He felt disappointed with the federal review and felt as though the committee didn't have the answers he was looking for. MS. DAVIDSON stated that the review was run strictly on federal guidelines and she knew that the state audit staff was not going to be involved in that aspect. After getting into the review substantially the state audit staff did not know what aspects of medical conditions would be looked at. She proposed that the committee expand the scope of an on-going audit. She stated that there are two on going audits of DFYS and they are not really related, but with the committee's approval she could identify those specific areas that needed to be looked at and bring those into one of the existing audits. She felt this would result in a more timely answer to the committee. REPRESENTATIVE FATE stated that would be fine. He explained he had been a foster parent and would like to see those answers. SENATOR THERRIAULT pointed out that the federal report did touch on the medical condition of the children in cases that were reviewed. He thought the auditors could use some of the information of the federal review and expand on it. MS. DAVIDSON agreed that DFYS does not do adequate work and with additional audit review they could identify better to the extent that the division is not doing an adequate job. She explained that they would look further into regional issues, a statewide deficiency, a particular medical or mental health type issues that are not being done. She felt a better evaluation would result. CHAIR THERRIAULT asked if there should be an actual motion to expand one of those audits. MS. DAVIDSON explained that her recommendation would be that she be given the opportunity to talk to Representative Fate to get a clear understanding of what should be done and then take it up at the next meeting. REPRESENTATIVE LANCASTER asked who would be coming up with the program improvement plan. MS. DAVIDSON said she would not be involved in developing the program improvement plan. She would monitor it and get it out to the committee. It would be DFYS and the commission on Child Protection called together by Governor Knowles to look at adoption issues and other issues may result with comments from the Alaska Court System. REPRESENTATIVE DAVIES asked what Ms. Davidson's sense of how DFYS views the findings of the report. He wanted to know if they were on track to producing the plan. MS. DAVIDSON stated she believed the department was in agreement with the review. There was an issue with the training of the social workers and DFYS had asked the federal reviewers to take another look at that finding. It was changed to "in compliance" and identified the improvements that DFYS had made in that area. DFYS has bought into the process and committed substantial resources to the review and taking the program improvement plan seriously. REPRESENTATIVE DAVIES asked, in the case of lower-priority reports of harm, whether or not DFYS was going to specifically deal with that issue. MS. DAVIDSON stated that her understanding was that they would have to address it. She stated she hadn't seen the plan but thought they had 30-60 days to respond. REPRESENTATIVE DAVIES said that was one area he would like addressed. CHAIR THERRIAULT moved on to the school district budget waivers. He stated he had received them and the department and board would be holding a teleconference later in the week. He stated he had scanned a number of them and noticed there were some districts that are taking further steps to come into compliance. Others were claiming that the cost of insurance was rising and that was causing them from moving closer to compliance this year. He would be going through them. Next, he gave a brief update on the school cost study. He stated that the oversight committee would be meeting with the contractor and a couple of the representatives from ALASBO to participate at that meeting. SENATOR THERRIAULT stated that the next meeting would be tentatively set for November 13. He introduced Yuri Morgan as the new committee staff person at the Denali Commission. YURI MORGAN, Legislative Staff, Denali Commission, gave a brief overview of his position, stating his primary job was to be a resource to the committee. He would be working on energy and on health and safety, the two primary issues being worked on. SENATOR THERRIAULT stated that Mr. Morgan was the contact for any information that might be needed by committee members. ADJOURNMENT There being no further business before the committee, the meeting was adjourned at 4:25 p.m.

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