Legislature(2001 - 2002)
02/14/2002 09:32 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
JOINT HOUSE AND SENATE FINANCE COMMITTEE
February 14, 2002
9:32 AM
TAPES
SFC-02 # 9, Side A
SFC 02 # 9, Side B
SFC 02 # 10, Side A
CALL TO ORDER
Co-Chair Dave Donley convened the meeting at approximately 9:32 AM.
PRESENT
Senator Dave Donley, Co-Chair
Senator Lyda Green
Senator Gary Wilken
Co-Chair Pete Kelly
Senator Alan Austerman
Senator Donny Olson
Also Attending: ANNALEE MCCONNELL, Director, Office of Management
and Budget, Office of the Governor; TOM LAWSON, Director, Division
of Administrative Services, Department of Community and Economic
Development; DWAYNE PEEPLES, Director, Division of Administrative
Services, Department of Corrections; JANET CLARKE, Director,
Division of Administrative Services, Department of Health and
Social Services; BOB LABBE, Director, Division of Medical
Assistance, Department of Health and Social Services; KURT PARKAN,
Deputy Commissioner, Department of Transportation and Public
Facilities; CAPTAIN GEORGE CAPACCI, General Manager, Marine Highway
System, Department of Transportation and Public Facilities; FRANK
RICHARDS, State Maintenance Engineer, Division of Statewide
Maintenance, Department of Transportation and Public Facilities;
ROBERT POE, Executive Director, Alaska Industrial Development &
Export Authority and Alaska Energy Authority, Department of
Community and Economic Development; SARA FISHER-GOAD, Financial
Analyst, Alaska Industrial Development & Export Authority (AIDEA)
and Alaska Energy Authority (AEA), Department of Community and
Economic Development; NICO BUS, Administrative Services Manager,
Division of Support Services, Department of Natural Resources; GAIL
FENUMIAI, Election Program Specialist, Division of Elections,
Office of the Lieutenant Governor; WENDY REDMAN, Vice President for
University Relations, University of Alaska
Attending via Teleconference: From Anchorage: MARLA GREENSTEIN,
Executive Director, Alaska Commission on Judicial Conduct, Alaska
Court System; From Fairbanks: PAT PITNEY, Director of Budget
Development and Institutional Planning, University of Alaska
SUMMARY INFORMATION
SB 291-SUPPLEMENTAL APPROPRIATIONS: FAST TRACK
SB 292-SUPPLEMENTAL APPROPRIATIONS
The Committees heard testimony from the Court System, Department of
Community and Economic Development, Department of Corrections,
Department of Health and Social Services, Department of
Transportation and Public Facilities, Department of Military and
Veterans Affairs, Department of Natural Resources, Governors
Office, and the University of Alaska. The bills were held in
Committee.
SENATE BILL NO. 291
"An Act making supplemental and other appropriations; amending
appropriations; and providing for an effective date."
SENATE BILL NO. 292
"An Act making supplemental and other appropriations; amending
appropriations; making appropriations to capitalize funds; and
providing for an effective date."
This was the first hearing for these bills in the Senate and House
Finance Committees.
ANNALEE MCCONNELL, Director, Office of Management and Budget,
Office of the Governor, conveyed to the Committee there have been
tremendous improvements in the past several years in the budgeting
process. She noted the departments have worked well together on
getting more realistic numbers in the main budget and that
supplementals have been more limited to changes caused by
unforeseen circumstances. She noted the FY 01 supplement request
was $40 million. She stated the FY 02 request is in the same range
as the FY 01 supplemental request.
Ms. McConnell specified that some requests in this Fast Track
Supplemental are the result of timeframes, and others are the
result of insufficient funds to meet statutory obligations "based
on best current projections." She stated the child adoption program
is one that has exceeded projections and has had a "dramatic
increases in numbers." She stated this is good news as more
children have been placed in permanent homes, and also saves the
state "the expense of paying foster care for children who are in
state custody."
Ms. McConnell stressed the numbers presented are the most accurate
projections available given the first six months of this fiscal
year. She gave as examples: general relief is "on target" with last
May's projections, public assistance is higher than projected, and
other areas are lower. She explained that when a budget is prepared
in May for the fiscal year that starts in July, it represents the
best estimates the departments can make for the statutory
obligations.
Ms McConnell continued that a few funding sources identified to
reduce the FY 02 general fund requests, did not "pan out" as had
been hoped. She stated the University of Alaska Science &
Technology Foundation interest earnings were below projections
because of changes in the stock market condition as are the level
of funds available for international business endowment. She
continued that Department of Fish and Game funding has been
affected by the downturn in the fisheries industry.
Ms. McConnell stated updates on fires and disasters would be
provided as time progresses, however, expenses incurred by fires to
date are $7.2 million dollars. She informed that the costs incurred
by fire activity "will rise up until and after" the legislature
adjourns and on into the summer season. She noted these costs would
have to be presented as "a ratification rather than a
supplemental."
Ms. McConnell relayed that fuel costs have increased to
approximately "$2.1 million throughout the various agencies," in
spite of the fact that "fuel prices have come down from where they
were". She reminded that the FY 01 and FY 02 fuel budgets were set
at the FY 2000 level with the extra expenses being paid on a
"supplemental basis." She continued that the FY 03 budget would be
submitted at a higher level, "as fuel prices are not coming down as
we had hoped."
Ms. McConnell said the state has been fortunate in having some
"one-time money available to use to offset some of the capital
expenditures." She cited the unanticipated interest earnings from
the tobacco bond would help replace other funding that did not
materialize. She referenced the memorandum in the back-up material
that she had received from Deven Mitchell of the Department of
Revenue, dated February 11, 2002, which states these earnings are
limited "to be used for paying down debt service on these very same
bonds or for capital projects."
Ms. McConnell requested the Committee act on both SB 291 and SB 292
as early as possible to allow the departments to address "fee-
timing problems." She continued that the Fast Track supplemental
requests require action before the final days of the session.
Court System
SB 291
Section 1
Court System
Judicial Conduct
Legal fees in excess of FY 2001 supplemental.
Actual amount is $6,829.77
$6,800 general funds
MARLA GREENSTEIN, Executive Director, Alaska Commission on Judicial
Conduct, Alaska Court System, testified via teleconference from
Anchorage and noted that the Alaska Commission of Judicial Conduct
is technically a separate entity from the Alaska Court System but
is presented as part of the Court System's budget. She stated this
request would have "a very large impact on this small entity." She
noted this request is "directly due to underestimation in last
year's supplemental request for the cost of proceedings that were
pending before the United States Supreme Court on a formal matter
against a judge." She stated this represents the balance of the
cost for that proceeding.
Department of Community and Economic Development
SB 291
Section 2 (a)
Department of Community and Economic Development
Alaska Science & Technology Foundation
Idaho National Engineering and Environmental Laboratory Grant
Contract for Alaska Business Research. Funds are available
March 1, 2002.
$25,000 Statutory Designated Program Receipts
TOM LAWSON, Director, Division of Administrative Services,
Department of Community and Economic Development stated this
request seeks funds to enter into a contract to implement applied
business research and other various efforts in environmental
energy, transportation, and other areas. He stated the contract
would begin March first and will conclude in the fall.
SB 291
Section 2 (b)
Department of Community and Economic Development
International Trade & Business Development
International Trade & Business Endowment - replace unrealized
FY 02 Investment Earnings - Fund Source Change
$230,400 general funds
($230,400) International Trade and Development Fund Earnings
Reserve
Mr. Lawson stated this is a funding source change from
International Trade and Development Fund Earnings Reserve to the
general fund. He continued that as part of the FY 02 operating
budget, the Division of International Trade and Market Development
received $496,400 in earnings reserve from the International Trade
and Business endowment. He stated this was an authorization to draw
that money from the endowment. He explained that the FY 01 year-end
endowment audit reflected $697,000 in the total earnings reserve;
however only $266,000 was earned in FY 01. He said that because of
losses incurred in the first half of FY 02, the total earnings
reserve has now "dwindled to approximately $270,000 as reported in
the December statement." He stated that in order to maximize the
earnings, no funds have been drawn from the endowment this year as
has been normal practice; as a result, the International Trade and
Market Development Division is facing a shortfall of over $200,000
which is approximately 10 percent of its budget. He stressed this
shortfall "will seriously hamper already scheduled trade missions
and shows and will result in layoffs as well." He requested, "this
anticipated shortfall be fixed with the general fund funding
exchange."
Senator Austerman asked for information on the endowment.
Mr. Lawson responded the $4,950,000 endowment was set up by the
legislature in approximately 1996.
Senator Austerman inquired as to the current fund balance.
Mr. Lawson replied there is approximately $5,222,000 in the
endowment after unrealized losses are accounted for.
Senator Austerman clarified the request for $230,000 general funds.
Mr. Lawson concurred.
Department of Corrections
SB 291
Section 3
Department of Corrections
Palmer Correctional Center
New well including pump and wellhouse as primary water well
has failed and is nonrepairable. Statutory designated program
receipts (SDPR) are from interest earnings of Northern Tobacco
Securitization Corporation (NTSC)
$172,200 Statutory Designated Program Receipts
DWAYNE PEEPLES, Director, Division of Administrative Services,
Department of Corrections, explained this request would fund
replacement of the Palmer Water Well as it has completely failed.
He stated a temporary solution uses an "irrigation well with a
plastic pipe running across the surface;" however, the entire well
must be replaced.
Co-Chair Donley characterized this request as a definite fast-track
supplemental item, and suggested general funds dollars might be
more appropriate than Statutory Designated Program Receipts.
Department of Health and Social Services
SB 291
Section 4(a)
Department of Health and Social Services
Medicaid Services
Medicaid Services - Projected to run out April 16. $4.57
million general funds is for FY 2001 bills paid in FY 2002;
$1.8 million general funds is from underfunding last year
below low case scenario; $6.34 million general funds is for
caseload at mid-case range and cost increases, particularly
for seniors and disabled.
$143,233,800
$ 12,712,500 general funds
$106,618,000 federal funds
$ 23,903,300 Statutory Designated Program Receipts
JANET CLARKE, Director, Division of Administrative Services,
Department of Health and Social Services, informed the Committee
this request for costs incurred by the Medicaid program is the
"largest supplemental request" the Department has ever proposed.
She detailed the rising cost of health care in the nation and in
Alaska. She explained that while the Anchorage urban Consumer Price
Index (CPI) has risen 8.9 percent over the past several years,
medical costs have increased 27.4 percent. She informed the
Committee that actual Medicaid expenditures in FY 01 were $583
million and the FY 02 Medicaid budget is $561,6 million, leaving
the Department starting out the year with $22 million less than
what was spent in FY 01. She commented that actual cost projections
for the Medicaid program in FY 02 are approximately 18 percent
above FY 01 costs; primarily due to increasing costs for the
elderly, disabled individuals and pharmaceutical costs. She noted
that Medicaid expenses and projections are detailed in the backup
material. She continued the Department projects an increase of over
5,000 individuals on Medicaid in FY 02 from FY 01.
Ms Clarke stated the backup information also includes a six-month
FY 02 comparison to the equivalent six months in FY 01 sorted into
categories. She informed the costs could have been higher had not
the Department sought refinancing opportunities which increase the
amount of federal funding while limiting the amount of state
general fund dollars through a matching program.
Co-Chair Donley voiced appreciation to the Department for the "hard
work" they have demonstrated in trying to keep expenses down. He
continued that the Department "has to deal with a maze of federal
and state laws which were designed when the state had a lot more
money available than it currently does." He commented the state has
not "re-vamped" its statutes, and the Departments efforts are
appreciated.
Senator Olson, noting the $6.3 million supplemental request for
seniors and disabled, inquired if there has not been an increase
caused by the younger population.
Ms. Clarke responded there have been increases in children's needs;
however "the real cost drivers" are senior citizens and the
disabled.
Senator Olson asked the reason for this.
BOB LABBE, Director, Division of Medical Assistance, Department of
Health and Social Services, stated the senior population is the
primary user of the Medicaid program for long-term care services,
and there has been "a significant increase in the use of home and
community based care." He continued the senior population is the
primary user of prescription drugs, and furthermore, most seniors
have Medicare coverage, which does not cover prescription drugs and
usually doesn't cover long care term services, but does provide
short nursing home coverage He stated the disability population has
similar issues with the exception that only about half of the
persons who are disabled have Medicare coverage, so the state also
has the primary payment responsibility for physician and hospital
care as well. He specified these two groups are five to six times
more expensive on a monthly basis than coverage for a child;
therefore the cost to the state for children is significantly
lower.
Senator Olson agreed the costs incurred by seniors would explain
the expense.
Ms. Clarke added the Department had a sizable supplemental request
in FY 01, "however in May and June the costs shot up" significantly
above what had been projected. She stated this resulted in $4.6
million of the FY 02 appropriation of $12.7 million general funds
being used to cover FY 01 expenses.
Senator Austerman stated Medicaid costs are driven by population
and stressed the need for the state to entertain a long-range
population projection. He asked if the Department of Health and
Social Services has worked with the Department of Labor and
Workforce Development to conduct long-range population projections
for the state.
Ms. Clarke responded that the Department of Health and Social
Services provided a five-year population projection the Senate
Health Education and Social Services subcommittee in November 2001.
She continued it "would be good" to work with Department of Labor
and Workforce Development and provide additional information to the
Senate Finance Committee.
Mr. Labbe noted the Department of Health and Social Services has
undertaken on a special forecasting project to review demographics,
insurance costs, and other costs. He stated the Department is also
waiting for the final results of a Department of Labor and
Workforce Development survey on recent insurance statistics. He
pointed out that a variety of information is important to assist
the Department's budgeting forecasts. He reported that the senior
population on the whole is growing faster than the senior
population on the Medicaid program since Medicaid coverage for
seniors is limited to certain income and asset levels. He stated
the Department anticipates that "down the road" some of the
seniors, who do not currently qualify for the program, may qualify
as they start to need long-term care services. He continued that
the seniors who need long term care are typically 85 and older, and
Alaska has the fastest growing 85 and older population group in the
nation.
Co-Chair Kelly stated would like to know the characteristics of the
people in the Medicaid program, and asked Ms. Clarke if the
Department of Health and Social Services has demographic breakouts
on its recipients. He continued that the numbers keep increasing,
and he would like to know, in addition to the senior population
numbers, what other population groups are driving the growth. He
continued that the Department is doing a good job of managing the
program; however the state should seek to identify the problem and
devise a cure. He stated that if some of the people are in the
program because they made "bad choices," the state should discuss
what could be done about those choices and how those choices are
going to be "rewarded with dollars."
Ms. Clarke stated the Department has a lot of information about
this program and has demographic groups broken out. She exampled
there is information on the disabled, elderly, adults and children
as well as age breakouts and other information. She stated the
Department would supply this information to the Committee.
Co-Chair Kelly asked if the Department could provide a breakout on
single parents as a result of divorce or other circumstances.
Mr. Labbe replied this level of demographics information is
"probably not available" through the Medicaid program records;
however the Public Assistance System records may provide some
marital status data. He continued that certain personal
information, such as whether a patient smokes, would not be
available from the current program applications; however, some of
this information is "out there."
Mr. Labbe noted that some information could be garnered regarding
medical conditions by reviewing Medicaid patients' medical records.
He stated the tobacco lawsuit provides models for estimating
emphysema deaths and other smoking related conditions, and
specified that the election district report could provide further
information on where children and seniors are. He summarized
personal information is hard to obtain.
Co-Chair Kelly stated the information currently provided by the
Department of Health and Social Services does not indicate the data
source, "it is just more information that helps you manage the
problem." He continued that public policy is hard to make when
based on "anecdotal evidence."
Co-Chair Kelly stated his wife works in a pediatric clinic that
serves many patients between the ages of sixteen and twenty-four,
who are on Medicaid, have kids, and have never been married. He
opined, "they need to stop that or this number is never going to
shrink." He stated, yes the seniors are going to age and drive some
of those costs, but "we keep spitting into that population this
group of young people who should be healthy and productive and yet
they are not." He requested the Department of Health and Social
Services to research this information.
Ms. Clarke replied the Department would "do its best" to get the
requested information by pursuing the information from other
sources such as the Division of Vital Statistics.
Senator Olson stated the program costs are driven by the older
population; not by the younger people.
Ms. Clarke confirmed Senator Olson's remark; however, she stated
the numbers of people the Department has classified as the adult
group, is rising because of the number of pregnant women included
in that group. She stated that the number of adults participating
in the Temporary Assistance for Needy Families (TANF) Program have
been decreasing as have the welfare rolls.
Co-Chair Kelly acknowledged the "expediential growth" in the aging
population, but reiterated the need for further information on the
"population at large" involved in the Medicaid program.
Senator Austerman opined this is a valuable discussion and stated
the question is how to remedy this problem in the long term. He
continued this question extends further than the Department of
Health and Social Services. He voiced that perhaps the Senate
Finance Committee needs to "drive the discussion" in order to
obtain information on "younger working people," the elderly and
other demographic groups to develop a "long tern concept." He
opined this effort would help resolve the need to address the
funding of supplemental requests each year.
Senator Olson mentioned that his office had received a report about
"the dramatic increase" in the number of expenditures relating to
the Medicaid program "that was somewhere in the neighborhood of 490
percent." He asked Ms. McConnell if that report had been in error.
Ms. Clarke responded that the Division of Legislative Finance has
acknowledged there was an error in that data, and that a correction
letter had been provided to all members of the Legislature.
Ms. Clarke stated the Medicaid program has grown 190 percent over
that time period in total funds, with general funds growing 38
percent. She noted this is an average of less than five percent
growth a year since 1995.
Senator Green asked what percentage was used in figuring the
federal match amount in this request.
Ms. Clarke replied the match reflected in this request is based on
a 59.8 percent match, however the match rate for Medicaid has been
reduced to 57 percent. She informed that proposed federal
legislation in the Economic Stimulus packet in the United States
Congress might increase the match rate to approximately 60 percent.
She stated the Department is following this legislation closely.
Mr. Labbe informed the Committee the federal legislation did not
pass the United States Senate, and is currently being debated in
the United States House of Representatives. He continued that
another bill is being proposed because many states are experiencing
budget problems and are "looking for some federal relief on the
matching rate." He reported the Department of Health and Social
Services "has worked on a proposal to keep the state of Alaska's
matching rate from dropping," and there is another proposal on the
national level for a $5 million stimulus package that has wide
bipartisan support.
Senator Green asked the amount of the general fund request if the
federal match was factored at 57 percent.
Ms. Clarke responded the general fund request would increase by $9
million.
Senator Green stated there is a five percent chance of Congress
passing a match assistance change; therefore it would be "more
realistic" for this general fund request to be $21 million instead
of $12 million.
Senator Green asked if this request includes any Pro-Share or Fair-
Share programs.
Ms. Clarke responded that "the bulk of the Pro-Share program" would
be used in FY 02 and that FY 03 "will really take a hit."
Senator Green asked about the future of the Fair Share program and
whether it might impact this request.
Mr. Labbe responded this request is "considerably lower" because of
the "anticipated Fair Share" arrangement. He expressed the Fair
Share portion is likely to be approved at the federal level;
therefore, the Department included those funds in this request. He
mentioned that Fair-Share funds are also factored into the FY 03
budget.
Senator Green asked if the Department assumes the Fair-Share and
Pro-Share funds would continue and; therefore, incorporates them
into the following year's budget. She warned, if they are
incorporated into the budget, the state may "set ourselves up in
the wrong direction," for the state would have to fulfill the
commitment with general funds if those funds were not forthcoming.
Mr. Labbe stated the Department determines projections of total
expenditures based in terms of general funds, and they strive to
maximize federal funding sources. He stated the Department has not
increased its general fund requests based on available federal
funding as the Department understands that if the federal funds do
not materialize, then "we have a bigger hole" to fill. He continued
the federal government makes special arrangements with every state
and this particular program "is so Alaska specific," it is not
anticipated to be of concern. He cited, for instance, that Alaska
being the only state that operates tribal hospitals under the Pro-
Share arrangement.
Senator Green cautioned that "the assumption is that general fund
money would have to fill the gap" if federal Pro Share and/or Fair
Share funds are not available.
Co-Chair Donley asked if program receipts could fund this request.
Ms. Clarke responded if this request were not funded by general
funds, the state would not have the required state match for the
Medicaid program, and therefore would not earn the federal dollars.
She stated this would result in the Department having to terminate
the Medicaid program when the "authority to spend was stopped."
Co-Chair Donley asked if this request could be funded at a lower
level.
Ms. Clarke responded the Department anticipates that the program
would run out of money by April fifteenth.
Co-Chair Donley asked if current law allows the Department to
reduce or pro-rate payments to extend the original appropriation to
the end of the fiscal year.
Ms. Clarke responded this is not an option as the Medicaid program
"is a highly regulated program," and regulations would have to be
changed. She detailed the length of time it takes for that process
to occur.
Co-Chair Donley asked if the Department of Health and Social
Services "would support the flexibility" to reduce payments if
there was a shortage of funds, rather than halting payments.
SFC 02 # 9, Side B 10:16 AM
Ms. Clarke responded that statute determines the level of payments
to hospitals, nursing homes, and physicians.
Co-Chair Donley asked if the Department management would support
these types of statutory changes.
Mr. Labbe pointed out that in addition to state statutes, there are
also federal restrictions. He furthered that the law allows for
changes in services, population and reimbursement policies, but any
direct changes due to funding reductions would be challenged in
federal court.
Co-Chair Donley voiced that Alaska as well as other states are
experiencing demand for increased Medicaid funding, and asserted
this issue could be addressed at the federal level. He challenged
the Department to "think outside the box…to address what the law
could be and what the legislature could do on the state level." He
also challenged the Department to ask Alaska's congressional
delegation for assistance at the federal level to give the
Department flexibility.
Mr. Labbe expressed the willingness to discuss options in
approaching this, and asked for direction from the legislature.
Co-Chair Donley suggested the Department request flexibility in the
event of a shortfall in funding. He continued that the legislature
"could still entertain" a supplemental request; however, the option
to stretch payments out over the remainder of the fiscal year
"would be good" if funding is short.
Co-Chair Kelly asked the Department what potential violations might
have resulted from prior proposed legislation regarding the pro-
rata program.
Ms. Clarke responded analysis indicates prior proposed changes
would have had no impact on the Medicaid program.
Mr. Labbe concurred, and stated the proposed pro-rata legislation
would have affected programs such as adult public assistance,
payments to individuals, and the longevity bonus.
Co-Chair Kelly asked if other proposed legislation would have
impacted the Medicaid program.
Ms. Clarke did not recall any specifics.
Co-Chair Kelly asked the Department to provide a copy of any
analysis that has been conducted which would identify what federal
laws would be violated if the state implements a pro rata change.
Ms. Clarke responded the Department would supply the analysis.
Co-Chair Donley commented that the prior year, in looking for a
long-term solution to the Medicaid funding situation, the Committee
sponsored a $200,000 appropriation for a study on the impact of the
Permanent Fund Dividend (PFD) program on the volume of people in
the welfare program. He said the governor vetoed that legislation
and stated that information "was already available." Co-Chair
Donley asked the Department what the impacts of the PFD program are
on the welfare system.
Ms. Clarke responded she did not have that information.
Co-Chair Kelly stated that "the governor's veto was over the
objection" of the Permanent Fund staff who were interested in that
information.
Co-Chair Donley reiterated that the Committee had tried to begin
the long-term planning process as Senator Austerman had suggested;
however, the governor's veto "stopped that effort." Co-Chair Donley
stated he has requested a copy of the information from the
governor's office.
SB 291
Section 4(b)
Department of Health and Social Services
Subsidized Adoptions & Guardianships
Formula program caseload growth
$2,529,600 general funds
Ms Clarke informed this request is a result of this program
experiencing 18 percent growth instead of the projected 14 percent.
She stated this growth is good news for the program as it
indicates, "more children are getting into permanent homes."
Ms. Clarke stated the Department's request for this program in the
FY 02 budget was not fully funded, and this, combined with the
growth in the program, has contributed to the budgetary problem.
She informed that, at the close of FY 01, there were approximately
1,500 special-needs children per month in the program and this
number is expected to grow to 1,800 by the end of FY 02. She
stressed "this program has had considerable support from the
legislature over the years," and commented that the Department of
Health and Social Services "believes this it is a program that
needs to grow." She continued that this program has helped the
Department reduce the expenditures of the foster care program, and
there "was not an increment for the foster care program" in FY 02
and that "the base rate has been reduced as well." She stated these
programs are interlinked, and this Subsidized Adoptions &
Guardianships program is a program the Department "would call a
success."
Marine Highway System
SB 291
Section 5
Department of Transportation and Public Facilities
Marine Highway Stablization Fund
Marine Highway Stablization Fund FY 02 deficit due to Columbia
fire and fuel cost increases. If not funded, Spring/Summer
service would need to be drastically cut, reducing revenues
during highest revenue season. Ships would be put into lay-up
status for extended periods.
$2,876,900 general funds
KURT PARKAN, Deputy Commissioner, Department of Transportation and
Public Facilities, distributed a graph [copy on file] to the
Committee that depicts the expenses of the Marine Highway System
(MHS), and projected the MHS would run out of money in May 2002. He
stated the most significant contributing factor was the F/V
Columbia's fire in early June 2000. He informed that the F/V
Columbia was out of service from June 2000 through the latter part
of July 2001, although the Department had anticipated it would be
back in service in May of 2001.
Mr. Parkan reiterated that the F/V Columbia was out of service for
a portion of FY 00, all of FY 01, and a portion of FY 02. He stated
that July is typically the biggest revenue-generating month for the
MHS, and this ship is the biggest revenue-generating vessel.
Mr. Parkan informed the Committee that the Department did not
expend some FY 02 budgeted allocations in marketing and
administration because they anticipated having a deficit. He stated
expenses were further mitigated by lower fuel costs.
Co-Chair Donley asked how much money is currently in the Marine
Highway fund.
Mr. Parkan estimated $6 million.
Co-Chair Donley asked what would happen if the $6 million is used
to cover some of the costs in this request.
Mr. Parkan replied the $6 million is what the Department would use
to "get us through May" and then it "will be gone."
Co-Chair Donley asked what expenses were related directly to the
F/V Columbia fire.
Mr. Parkan responded that not all costs reflected in the request
are the result of the fire onboard the F/V Columbia. He stated the
Department had over-projected revenue for both FY 01 and FY 02, and
that the Department had anticipated having the F/V Columbia in
service in FY 02. He continued that a rebound in activity did not
occur, as anticipated.
Co-Chair Donley voiced that the state "heavily subsidizes the
Marine Highway System because it doesn't generate enough money on
its own to be able to pay for its operation." He continued that
since "the revenue generated does not pay for the operation in the
first place, shouldn't the expenses have actually gone down" since
there were lower operational costs.
Mr. Parkan responded that Co-Chair Donley "was correct to a certain
extent." He noted that the chart in the back-up material reflects
some savings of expenditures in FY 01 and FY 02. He stressed that
the Columbia only operates in the summertime, and the savings from
vessel lay-ups "are already built" into the budget. He stated the
overall operational savings helped offset the reduction in
revenues, and when the F/V Columbia went off line, the F/V
Malaspina was used as her replacement.
Senator Olson stated that if the $6 million in the MHS's account
will run out in June, that means it takes $2 million a month to run
the MHS. He asked if this is the norm.
Mr. Parkan said yes, this is what it costs to operate the MHS. He
continued that "different things," like the F/V Columbia fire and
the Canadian ferry blockage a few years ago, are anticipated and
are factored into the budget.
Senator Olson asked how the operating expenses would change when
the fast ferries come on line.
Mr. Parkan replied that overall costs would decrease because labor
costs would be lower. He elaborated that one crew instead of two
would work on the fast ferries because they operate "essentially as
day-boats." He commented that fuel costs would increase but the
"savings in labor will be greater."
Senator Austerman asked if there was any "ridership" loss when the
F/V Columbia was out of service. He also asked if insurance covered
loss of revenue as well as the costs of repairs to the F/V
Columbia.
Mr. Parkan responded the F/V Malaspina has the same passenger
capacity as the F/V Columbia; however it cannot accommodate the
same amount of vehicles. He stated that insurance did not cover
operating expenses.
Senator Austerman stated that since the F/V Columbia was in lay-up
status there would not have been any operating expenses. He asked
about the insurance coverage regarding loss of revenue.
Mr. Parkan replied that there was no insurance coverage on loss of
revenue.
Senator Austerman clarified that insurance did cover the cost of
repairs.
CAPTAIN GEORGE CAPACCI, General Manager, Marine Highway System,
Department of Transportation and Public Facilities, stated the
Federal Highway Administration covered the costs of the F/V
Columbia's repairs. He commented that the switchboard repairs cost
$1.5 million, and that "the actual larger portion of the shipyard
expense was the rehabilitation of the staterooms which was a $9
million project." He stated the Federal Highways Administration
paid these costs as well.
Captain Capacci reaffirmed that insurance did not cover lost
revenue. He continued that even though the F/V Columbia was in lay-
up status for a year, there were crew costs and lay-up costs
incurred in the amount of approximately $1.8 million.
Senator Austerman asked for clarification that the MHS does not
have insurance for fire damage.
Captain Capacci stated that through risk management "there is
insurance for those types of repairs and damages that are
incidental" to the system. He clarified; however, in this case, the
Federal Highway Administration covered the costs.
Mr. Parkan clarified that Marine Highway funds were not used to
cover repairs on the vessel.
SB 291
Section 10(a)(1)
Department of Transportation and Public Facilities
Northern Region Highways & Aviation
Chandalar (James Dalton Highway) Maintenance Station
Replacement - Temporary rental and other costs of vacating the
maintenance station due to imminent structural failure.
$127,800 general funds
SB 291
Section 10(a)(2)
Department of Transportation and Public Facilities
Central Region Highways & Aviation
East Fork (Parks Highway - South of Cantwell) Maintenance
Station Replacement Temporary rental and other costs of
vacating the maintenance station due to imminent structure
failure.
$21,900 general funds
SB 291
Section 10(a)(3)
Department of Transportation and Public Facilities
Central Region Highways & Aviation
Willow (Parks Highway) Maintenance Station Replacement -
Temporary rental and other costs of vacating the maintenance
station due to imminent structural failure.
$45,500 general funds
SB 291
Section 10(a)(4)
Department of Transportation and Public Facilities
Northern Region Highways & Aviation
Nome Maintenance Station imminent Structural Failure -
Temporary rental and other costs of vacating the maintenance
station due to imminent failure.
$72,000 general funds
SB 291
Section 10(b)
Department of Transportation and Public Facilities
Northern Region CIP
Chandalar Maintenance Station Replacement Design Costs (SDPR
from NTSC-see line 6)
$456,800 Statutory Designated Program Receipts
Mr. Parkan stated these expenses are related to maintenance
stations that have been closed due to facility concerns. He
exampled that roofs have collapsed at various locations, and the
Department has closed some high-risk facilities to assess the
repair needs. He informed that the assessment report indicates that
several facilities are at risk of failure; therefore the Department
vacated those facilities. He stated this request includes rent in
other facilities until the state facilities are repaired, and he
explained what some of the temporary facilities consist of. He
informed the Committee that some design costs for facility repairs
are included in this request; however, construction requests are
included in other legislation.
Co-Chair Donley inquired what the funding source is for subsection
10 (b).
Mr. Parkan stated the funding was Statutory Designated Program
Receipts from the Tobacco Settlement Bond extra earnings.
Co-Chair Donley clarified these are actually general funds.
Senator Austerman asked when the Chandalar Maintenance Station was
vacated.
Mr. Parkan stated it was vacated in June 2001.
Senator Austerman asked if this request is for a full year of
operation and rental costs.
FRANK RICHARDS, State Maintenance Engineer, Division of Statewide
Maintenance, Department of Transportation and Public Facilities,
stated the request for $127,000 covers the purchase of a double-
wall tent. He stated that the available shop space did not have
adequate ventilation so the tent was needed in order to perform
tasks such as welding.
Senator Olson asked why the tent was so expensive.
Mr. Richards stated the tent was a 72 feet by 120 feet Alaska
Coverall building. He continued that additional costs were incurred
by ground preparation, erecting the tent, and moving into the
facility.
Senator Olson requested further information from the Department on
what caused the deterioration of the building in Chandalar.
Department of Community and Economic Development
ROBERT POE, Executive Director, Alaska Industrial Development &
Export Authority (AIDEA) and Alaska Energy Authority (AEA),
Department of Community and Economic Development, addressed the
Committee. He stated there are four requests in SB 291 regarding
Power Cost Equalization (PCE).
SB 291
Section 9 (a)
Department of Community and Economic Development
Power Cost Equalization & Rural Electrification Fund
Technical correction to add the inadvertently omitted FY 02
appropriation from the Power Cost Equalization Endowment fund
to the Power Cost Equalization and Rural Electrification Fund
$7,062,200 PCE EF
Mr. Poe said this section addresses a technical issue. He referred
to the spreadsheet in the backup material that outlines how the PCE
endowment system is set up. He informed that $15.7 million was
appropriated in the FY 02 budget for PCE; however, since FY 02 was
the first year "the PCE endowment fund was brought into play," the
appropriation language that would have moved the $15.7 million from
the PCE endowment to the PCE fund, did not happen. He stated this
request is to correct that oversight.
Mr. Poe stated if this does not happen, the funds to pay PCE would
not be available. He stated that 1999 legislation allowed PCE to
prorate payments; consequently, payments have been at 80 percent.
SB 291
Section 9(b)
Department of Community and Economic Development
Power Cost Equalization & Rural Electrification Fund
Fully fund the statutory formula in the PCE statute. Cost
increase is due to higher fuel costs.
$1,100,000 general funds
SB 291
Section 9(c)
Department of Community and Economic Development
Power Cost Equalization
Fully fund Power Cost Equalization (PCE) statute. Increase due
to higher fuel costs.
$1,100,000 PCE
Mr. Poe stated these requests would increase PCE payments for FY 02
to 100 percent for March through June, instead of the current pro-
rated 80 percent.
Section 9(d)(1)
Department of Community and Economic Development
Power Cost Equalization
Delete sufficient authorization from FY 02 to pay FY 01 late
bills
[$56,800] PCE
Section 9(d)(2)
Department of Community and Economic Development
Power Cost Equalization
Add authorization to pay power cost equalization program FY 01
late bills
$56,800 PCE
Mr. Poe stated these requests are related to a $56,800 PCE
"problem" that occurred in FY 01. He stated the PCE program is a
cost-driven system, "that is costs are incurred and the PCE program
has to reimburse them." He stated that on occasion, "bills come in
fairly late, although funds are encumbered in anticipation" of what
those bills might be. He continued that when FY 01 was closed out,
the PCE program "was $56,800 short," and this request requests
authorization to pay these FY 01 expenses out of FY 02 funds. He
noted this request is based at the 80 percent payment factor. He
stated that if Section 9(d)(1) and Section 9(d)(2) were passed, it
would allow payment for the outstanding debt.
Senator Austerman asked if the general fund appropriation in
Section 9(b) is based upon 100 percent payments instead of 80
percent.
Mr. Poe responded yes, and clarified the request is only for 100
percent payments from March to June.
Senator Austerman asked Mr. Poe for further explanation on Section
9 (c).
Mr. Poe stated Section 9(c) is actually an appropriation of the
endowment funds to the PCE of the general funds as explained in
Section 9 (b). He continued that Section 9 (c) is the actual
appropriation for March through June payments.
SARA FISHER-GOAD, Financial Analyst, Alaska Industrial Development
& Export Authority (AIDEA) and Alaska Energy Authority (AEA),
Department of Community and Economic Development, explained,
"Section 9 (b) is actually the capitalization directed to the PCE
fund. It does not go through the endowment fund." She continued
that "9(c) is the authorization to expend that money" for FY 02.
Senator Austerman asked for clarification that Section 9 (b) and
9(C) involve the same money.
Ms. Goad concurred.
Senator Wilken stated in FY 00, the Committee put forth effort on
the PCE program "to try to get it to be self-sustaining". He noted
that one of the funding sources in FY 00 was the National Petroleum
Reserve - Alaska (NPRA). He asked if the PCE program managers have
requested "some NPRA money to help make up the shortfall."
Mr. Poe replied the managers have not, and "there is only a small
amount of money available" currently from NPR-A.
Mr. Lawson explained that in the year 2000, there were significant
funds available in the NPRA program due to reserve sales, and that
the PCE program received approximately $9 million from an NPRA
appropriation. He continued there was no NPRA money appropriated in
FY 01. He stated there is $1.7 million in total grant money
available from NPRA in FY-02, and he expected this would be the
amount annually available for grants.
Senator Wilken asked if the PCE program has submitted a request for
a portion of the $1.7 million in grant funds available from NPRA
for FY 03.
Mr. Poe replied that the PCE program has not put in a request for
this grant money.
Senator Wilken stated that "if we don't ask, we don't get," and as
a result of the FY 00 proceedings, it was understood that the PCE
program would have access to available NPRA funds. He suggested the
managers of the PCE program pursue this funding source.
Mr. Lawson stated the statute relating to NPRA grants specifies "it
is the intent of the legislature to fund grants that show impact
from the oil and gas development." He continued "if there is any
money left over at the end of the year, 25 percent of the balance
goes into the permanent fund," 25 percent goes into an educational
trust, "and the remainder can go into the PCE fund." He stated,
"this formula is set up in statute."
Senator Wilken suggested the Committee look at PCE projects to
determine if any are impacted by oil development, as those projects
would qualify to request NPRA grant funds.
Senator Austerman supported Senator Wilken's comments.
Co-Chair Donley stated that in FY 00, "the understanding in this
Committee and on the floor of the Senate," was "that if NPRA money
did not materialize, there was no on-going obligation" for the
legislature "to fund to any specific money level without the NPRA
money being an element in that funding."
SFC 02 # 10, Side A 11:04 AM
Mr. Poe stressed that the efforts of the legislature to develop
funding mechanisms for the PCE program have been successful with
the establishment of such things as the endowment. He cited other
recent funding sources such as revenue from the sale of the Four
Dam Pool. He stressed that statute specifies how the PCE program is
to be funded. He stated, "the managers' job is to inform the
legislature about the program and what the costs are, and the
legislature's job is to allocate limited resources to fund those
needs." He stated the good news is the "endowment fund really helps
a lot." He stated that Section 9(c) might be an area that could be
funded from other funding sources.
Senator Austerman supported Mr. Poe's comments and stated efforts
are underway to change how the PCE program operates, and this would
result in "a significant difference" in how the PCE program
operates in FY 03.
Senator Wilken stated this is the first time the Committee has seen
an effort by the PCE program to try to work within its resources
and the pro-rating endeavor should be recognized.
Co-Chair Donley voiced appreciation to ADEIA and the PCE program
for their efforts toward working within their budget.
SB 292
Section 16(d)
Department of Revenue
Treasury Division
Correct fund source for Ch 60, SLA 2000 PCE Fund/Sale of 4 Dam
Pool/Energy (HB 446) fiscal note.
Mr. Poe informed that this item is to cover fees charged by the
Department of Revenue Treasury Division to manage the endowment. He
stated, in prior years, those fees were charged against the PCE
funds, not the PCE endowment fund. He stated these management fees
are a cost to the ratepayers receiving PCE, and this request asks
to have these fees charged to the endowment fund instead.
Senator Wilken clarified this is a request for zero funds since it
is a transfer of funds.
Mr. Poe responded that is correct, and this section would repair a
"technical problem."
SB 292
Section 2(b)
Department of Community and Economic Development
Power Project Fund
Denali Commission Appropriation to the Power Project Fund
$4,900,000 federal funds
Mr. Poe stated this project seeks ways to reduce the cost of power
in rural Alaska, and utilities that serve rural Alaska were asked
for suggestions on how to reduce those costs. He stated that 40
proposals were received, "15 of which showed a positive cost
benefit." He clarified that each of the proposals has "a grant
portion and debt portion so there would be a loan aspect to it as
well." He informed that the 15 proposals total approximately $7.5
million with a loan program portion of $4.9 million. He continued
this request "asks to receive those Denali Commission funds in the
Power Project fund and then loan that money to rural utilities for
these projects that will lower the cost of power in those
communities."
Military and Veteran Affairs
SB 291
Section 6
Department of Military and Veterans Affairs
Disaster Planning & Control
Costs to maintain 24-hour State Emergency Coordination Center
(SECC), the agency that coordinates all federal, state and
local jurisdictional responses associated with any disaster or
event
$100,000 general funds
NICO BUS, Administrative Services Manager, Division of Support
Services, Department of Natural Resources, stated this is a request
to maintain the 24-hour state emergency coordination center. He
stated the center was created the prior year with $203,000 in
funding support from the legislature and an expected annual cost of
$450,000. He stated the Department reallocated funds to support the
center; however that funding is now exhausted.
Senator Austerman asked if the $203,000 the legislature funded was
general funds.
Mr. Bus concurred.
Senator Austerman reconfirmed that, at that time, the Department
stated it would cost $450,000 to run the center.
Mr. Bus commented that the Department was not sure of the total
amount initially, as negotiations with the union had not been
completed. He stated that with the $203,000 appropriation from the
legislature, the Department believed they could try to make it
work; however, the funding is "still shy about $100,000."
Senator Austerman asked the total cost of the program.
Mr. Bus responded $450,000.
Senator Austerman confirmed this amount, and asked how much federal
dollars are involved.
Mr. Bus replied the Department has investigated the federal funding
option, and currently there is no Federal Emergency Management
Agency (FEMA) grant monies available.
Senator Austerman stated that the $203,000 allocation from the
legislature plus this request for $100,000 would bring the general
fund allocation to $303,000.
Mr. Bus concurred.
Senator Austerman stated that $147,000 is provided by the
Department.
Mr. Bus concurred and elaborated the $147,000 is also general funds
that the Department had received but had redirected to the center.
Senator Austerman stated therefore, this program is funded fully by
general funds.
Mr. Bus stated that Oil and Hazardous Response funds are
contributed, but are not reflected.
SB 291
Section 7
Natural Resources
CIP
Scope change for SLA97, CH50, Sec 15(k), P9, L13 - from
prepare and administer the Kalgin Island II, Caribou Hills, S.
Ninilchik-Dome View, South Ninilchik Bick timber sales in
Kenai Peninsula to Kenai Peninsula to reduce risks from
wildfire.
Zero fund request
Mr. Bus informed the Committee this request for a reappropriation
of a timber sale project on the Kenai Peninsula was intended to
administer sales on the islands specified in the request. He stated
the Department has been successful in part of the sale; however,
"the timber sale market collapsed" and the project could not be
completed as originally intended. He continued that the Department
held meetings with the residents of the Kenai Peninsula area, and
this request is to redirect the balance of the funds to smaller
sales that would reduce the risk of wildfire.
SB 292
Section 4
Department of Military and Veterans Affairs
Disaster Relief Fund
The Disaster Relief Fund directly funds the core services of
the Division of Emergency Services, 10 full-time positions and
the match for another 10 positions. Fund capitalization to
cover the core services costs has been done in the
supplemental for several years.
$680,000 general funds
Mr. Bus stated this request is intended to capitalize the disaster
relief fund. He stated this is an annual request to fund the
salaries of staff working on disasters.
Senator Austerman inquired as to what this money is spent on.
Mr. Bus responded it pays for staff working on direct disaster
assistance with communities and working on disaster plans.
Senator Austerman asked why this request is included in the
supplemental budget if it is for normal staffing.
Mr. Bus stated this money has never been added into the base
funding; however the Department would support it being reflected in
the base funding.
SB 292
Section 7
Natural Resources
Fire Suppression
Fixed costs and fire suppression costs incurred to date.
Updated costs for spring fire suppression will be provided as
needed.
$7,235,000 general funds
Mr. Bus explained this request is to cover the expenses of fires in
the summer of 2001, and the balance of fixed costs. He informed the
Committee the average expenses in a year are $12 million and the
base funds appropriated in the FY 02 budget was $3 million. He
stated this request does not include suppression costs for May and
June 2002 activities.
Senator Wilken suggested the Committee consider investigating the
expenditures, as Alaska did not seem to have many major fires in
the summer of 2001. He voiced concern as to how Alaska is
reimbursed for expenses incurred by "shipping people out to assist
with fires" in other regions of the country.
Mr. Bus stated the Department would provide a breakout of the costs
incurred relating to last summer's fires.
SB 292
Section 13
Department of Military and Veterans Affairs
Army Guard Facilities Maintenance
Federal funds for increased telecommunications costs for the
Distance Learning project.
$350,000 federal funds
Mr. Bus stated this item is fully funded by federal dollars to
addresses telecommunication costs of providing the Distance
Learning project to armories in the outlying regions of the state.
SB 292
Section 14(1)
Department of Natural Resources
Geological Development
Federal grant awards for geological projects
$493,400 federal funds
Mr. Bus said these federal funds would allow for geological
projects
SB 292
Section 14(2)
Department of Natural Resources
Parks Management
Increased fuel costs
$20,200 general funds
SB 292
Section 14(3)
Department of Natural Resources
Parks Management
Increased costs for two-way radio circuits
$40,700 general funds
Mr. Bus listed these requests.
SB 292
Section 14(4)
Department of Natural Resources
Recorder's Office
Costs of title records for new title companies. Title
insurance laws require companies to have duplicate records for
the past 25 years.
$300,000 Statutory Designated Program Receipts
Mr. Bus stated this request is a result of new title insurance
companies starting business, as state law requires these entities
to have duplicate records for the last 25 years. This request would
allow the Department to make the duplicate copies and the cost
would be fully reimbursed by the businesses.
SB 292
Section 14 (4)
Department of Natural Resources
Recorder's Office
Assume recording duties in Valdez, Glennallen, and Seward that
were previously done by the Court System without charge.
Increased costs to process heavy volume of mortgage refinance
activity and implement completed classification study.
$235,000 Receipt Support Services
Mr. Bus specified this request is for receipt-supported services.
He noted that the Department has relied on the Alaska Court System
for all court recording activities done in the communities outlined
in the request; however, due to staffing constraints, the Court
System could no longer provide the services. He stated that in
addition, the court staff is not trained in the Department's
procedures. He stated this request would complete the transfer from
the court to the Department.
Mr. Bus stated that as a result of a large increase in loan
refinancing, additional non-permanent staff was hired in November
and December to keep up with the workload. He stated this assisted
in expediting the refinancing process, resulting in an increase of
one million dollars in extra revenue for the state treasury. He
continued; however, labor costs increased as well. He stated the
non-permanent positions would expire at the end of February, as the
workload would be brought current.
Mr. Bus continued that a portion of this request also covers salary
increases for Recorders as a result of reclassification. He stated
the total request of $235,000 would be covered by new revenue
generated this year.
Co-Chair Donley summarized Section 14 pertains to expenses that
would be covered by additional revenue.
Mr. Bus stated that was correct. He stated the work would not be
done if customers do not pay for it.
Senator Olson asked if the temporary workers generated the entire
one million dollars in new revenue.
Mr. Bus responded that regular staff generated the new revenue with
support from the non-permanent staff. He stated that normally the
Department generates $4 million dollars in revenue and this year,
"the Department pulled in $5 million."
Mr. Bus stated that refinancing has been beneficial to business,
the general public, and the state.
SB 292
Section 20(b)
Department of Natural Resources
Fire Suppression
FY 2001 Fire suppressions costs
AR 37313-01 Fire Suppression
$4,730,000 general funds
Mr. Bus stated this is a Ratification that provides for fire
suppression projected costs for May and June 2002 that are not
covered in the supplemental.
SB 291
Section 19
Miscellaneous Claims
Military & Veterans Affairs
Miscellaneous Claims: $274,000
$300 general funds
Mr. Bus stated this is for a miscellaneous claim.
Office of the Governor
SB 291
Section 8
Office of the Governor
Division of Elections
Costs for printing and mailing a Primary Election Voter
Education Guide in time to explain the new law (shifted from
FY 2003 budget which will be amended)
$25,000 general funds
GAIL FENUMIAI, Election Program Specialist, Division of Elections,
Office of the Lieutenant Governor informed the Committee this
$25,000 request is "for the production of a primary election voter
education guide as a result of the changes in the primary election
system." She continued this is part of the state's voter outreach
efforts. She stated this amount would be offset in the Governor's
amended FY 03 budget with a reduction to the Election funding
request.
University of Alaska
SB 291
Section 11(a)
University of Alaska
Systemwide Small Planning, Design and Construction
Funding authority needed in excess of the FY 02 small project
non-general funds receipt authority for Lena Point fisheries
and ocean sciences facility for simultaneous excavation with
NOAA to prevent disruption and damage to the facility at a
later date.
$800,000 University of Alaska Receipts
WENDY REDMAN, Vice President for University Relations, University
of Alaska, informed the Committee that the University of Alaska and
the National Oceanic and Atmospheric Administration (NOAA) is
requesting these funds for excavation and dynamite site work for
the Lena Point joint-use research facility. She noted that the NOAA
would be soliciting requests for bids for site excavation this
month, and the University's cost for this work would be
significantly less if done in conjunction with NOAA's site
excavation.
SB 291
Section 11(b)
University of Alaska
CIP
Scope change for Sec 3, CH 61, SLA 2001 to include University
of Alaska Anchorage heating, ventilation, and air conditioning
Piping Replacement Phases 1-4
Ms. Redman stated this request resulted from a change in scope on a
FY 01 $10 million Capital Improvement Project (CIP) that the
University received for renovation and repair at the Anchorage
campus. She informed the Committee that during the CIP project
work, major pipe damage was discovered that resulted in the
University having to request this change in scope to accommodate
the unanticipated expense.
Senator Austerman asked which University receipts would be used for
the Lena Point Project, as it is a capital project.
Ms. Redman stated the receipts for the project would be allocated
from the National Resources Fund, generated from the Land Grant
Fund. She stated portions of that fund have been dedicated to
planning and design work for facilities. She informed the Committee
of a request for the cost of construction of the facility in the FY
03 budget request.
Senator Austerman asked that further information on the National
Resources Fund be supplied to the Committee.
Ms. Redman responded the information on the Fund is forthcoming as
it is submitted annually to the Legislature.
Senator Austerman asked for further information on the FY 01
allocation for the University of Alaska Anchorage renovation.
Ms. Redman stated the FY 01 money was appropriated to address
deferred maintenance, code compliance and bio-medical and science
laboratory renovation. She continued that as these upgrades were
being undertaken, several pipes exploded and approximately $2
million of the allocation was used for emergency pipe repair and
renovation. She stated this required a change in the scope of the
project.
Senator Olson inquired if the biomedical project is in jeopardy due
to the change of the University of Alaska Anchorage project's
scope.
Ms. Redman replied that the funding originally allocated for the
biomedical portion of the FY 01 funding was used to repair the pipe
system as the laboratory upgrades were not designated as an
emergency; therefore, the University would pursue further capital
funding to upgrade the laboratories in conjunction with another
project.
Senator Olson summarized there are no biomedical field upgrades
occurring now at the University of Alaska, Anchorage.
Ms. Redman responded that there is approximately $8 million worth
of renovation money being utilized at the University of Alaska
Anchorage campus; however, she is not sure which specific projects
are underway.
PAT PITNEY, Director of Budget Development and Institutional
Planning, University of Alaska, testified via teleconference from
Fairbanks and specified $3.6 million was dedicated for science
renovation, biomedical lab renovation, and planning for science
instruction. She continued that with this reduction would "hit
within that $3.6 million."
Ms. Redman stated the replacement of this money has already been
addressed in the deferred maintenance bond legislation.
Senator Austerman, noting that the campus in Juneau occupies
several acres of land, asked why the University rented space for a
University budget office downtown.
Ms. Redman responded her single room downtown office is easily
accessible to the Legislature, and results in a savings of both
transportation time and fuel costs.
Co-Chair Donley announced these presentations complete the fast
track supplemental requests in SB 291.
Co-Chair Donley stated the legislature does "the best we can and
try to make sure there is public services delivered and that we do
the best we can with the state treasury." He noted there are a lot
of items in the fast track supplemental, and reminded that the
funding of these requests is a process that takes place each year.
Co-Chair Donley stated it is a challenge for the legislature to
determine what funding is appropriate.
Co-Chair Donley voiced concern that endowments are treated as
dedicated funds, since the state of Alaska has "a constitution that
prohibits dedicated funds, and there is a lot of groups around here
that have programs and they may be good programs but to try to
protect their programs politically, they have created endowments in
our state budget." He elaborated endowments "are really just
general funds, and those are funds that could be used to reduce the
fiscal gap, could be used for education, or things that are
constitutional priorities." He stated "as we look at funding coming
from endowments, we shouldn't just think that they are not real
money, because they are real money that could be used for police,
or fire, or public health or education." He stressed that because a
program has a statute that suggests its endowment funds "should be
used for a particular purpose, doesn't mean that's always the
highest and best use for that money at this particular time for the
state of Alaska."
ADJOURNMENT
Co-Chair Dave Donley adjourned the meeting at 11:44 AM.
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