Legislature(2009 - 2010)HOUSE FINANCE 519
04/11/2010 12:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB296 | |
| HB416 | |
| HB421 | |
| SB199 | |
| HB424 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 296 | TELECONFERENCED | |
| + | HB 416 | TELECONFERENCED | |
| *+ | HB 421 | TELECONFERENCED | |
| += | HB 424 | TELECONFERENCED | |
| + | SB 199 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 11, 2010
1:13 p.m.
1:13:53 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:13 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Vice-Chair
Representative Allan Austerman
Representative Mike Doogan
Representative Anna Fairclough
Representative Neal Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
None
ALSO PRESENT
Representative Mike Chenault; Representative Nancy
Dahlstrom; Senator Charlie Huggins; Bryan Butcher,
Director, Government Affairs and Public Relations, Alaska
Housing Finance Corporation, Department Of Revenue; Konrad
Jackson, Staff, Representative Kurt Olson, Sponsor; Kevin
Brooks, Deputy Commissioner, Department of Administration;
Max Hensley, Staff, Senator Johnnie Ellis, Sponsor; Senator
Johnnie Ellis, Sponsor; Jon Sherwood, Medicaid Special
Projects, Division of Health Care Services, Department of
Health and Social Services; James Armstrong, Staff,
Representative Bill Stoltze; Jerry Burnett, Deputy
Commissioner, Division of Treasury, Department of Revenue;
Michelle Rizk, Budget Director, University of Alaska; Wendy
Redman, Vice President, Statewide Programs, University of
Alaska.
PRESENT VIA TELECONFERENCE
Dan Fauske, CEO/Executive Director, Alaska Housing Finance
Corporation, Department of Revenue; Joe Dubler, Director of
Finance, Alaska Housing Finance Corporation, Department of
Revenue; Jim Lynch, Treasurer, University of Alaska
Foundation; Eric Wohlforth, Chair, University of Alaska
Foundation Investment Committee; Dr. David Logan,DDS,
Alaska Dental Society.
SUMMARY
HB 296 ENERGY EFFICIENCY BONDS; LOANS; FUND
CSHB 296(FIN) was REPORTED out of Committee with
a "do pass" recommendation and with attached
previously published fiscal notes: FN 1(REV), FN
2(DOT).
HB 416 PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS
HB 416 was REPORTED out of Committee with a "do
pass" recommendation and with attached previously
published fiscal notes: FN 1(LAW), FN 2(UA).
HB 421 PUBLIC EMPLOYEE SALARIES
HB 421 was HEARD and HELD in Committee for
further consideration.
HB 424 G.O. BONDS FOR EDUCATION PROJECTS
HB 424 was REPORTED out of Committee with a "do
pass" recommendation and with attached new fiscal
note by the Department of Revenue.
SB 199 MEDICAID COVERAGE FOR DENTURES
SB 199 was REPORTED out of Committee with a "do
pass" recommendation and with attached new fiscal
note by the Department of Health and Social
Services and previously published fiscal note:
FN2 (DHS).
HOUSE BILL NO. 296
"An Act authorizing and relating to the issuance of
bonds by the Alaska Housing Finance Corporation;
establishing the Alaska energy efficiency revolving
loan fund and relating to the fund; authorizing
municipalities and the State of Alaska to borrow money
from the Alaska Housing Finance Corporation for the
purposes of the Alaska energy efficiency revolving
loan fund; and providing for an effective date."
1:15:27 PM
BRYAN BUTCHER, DIRECTOR, GOVERNMENT AFFAIRS AND PUBLIC
RELATIONS, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT
OF REVENUE, reported that HB 296 would allow Alaska Housing
Finance Corporation (AHFC) to establish an energy
efficiency revolving loan fund through bond sales of up to
$250 million. He stated that $28.3 million was appropriated
to the State Energy Program from the federal government
stimulus funds [American Recovery and Reinvestment Act].
The state would use $18 million of the funds to leverage
the program. The program was approved through the U.S.
Department of Energy. He explained that municipalities,
school districts, or state entities could take out a low
interest loans from AHFC to perform energy efficiency work
to public buildings, as prescribed by a mandatory energy
audit. The audit would be carried out by an energy
performance contractor. The loan would be repaid by the
energy costs savings achieved through the energy efficiency
improvements. He added that if the savings, as determined
by the audit were not achieved, the contractor would be
responsible for the loan payments. He pointed out that the
public entity would realize budget savings by increasing
energy efficiency in public buildings.
Representative Austerman asked who the contractor would be.
Mr. Butcher explained that established energy performance
contractors would perform the audit and hire subcontractors
to perform the work. The corporation estimated that
approximately 2,500 jobs will be created.
1:19:16 PM
Representative Gara wondered how long the loan period was.
He expressed concern that a long loan repayment period
i.e., twenty years could diminish any initial savings. Mr.
Butcher indicated that the loan tends to extend for shorter
periods since the amount of loan improvement money fronted
should compare with the energy savings realized over an
estimated number of years, with the possibility of early
repayment, if additional energy costs savings are realized.
Representative Gara asked why the bond program costs $18
million. Mr. Butcher explained that AHFC was required to
have a two percent minimum debt service reserve; five
million is the required minimum for $250 million. He added
that the additional leveraged funds of $18 million will
help reduce interest rates. He noted that the U.S.
Department of Energy complemented the program for being
self-sustaining ensuring the longevity of the program.
1:23:08 PM
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE (via teleconference),
supported Mr. Butcher's testimony.
Co-Chair Stoltze requested discussion on the fiscal note FN
1 (REV). Mr. Butcher relayed that the corporation submitted
a zero fiscal note; no additional expenditures are
anticipated.
Representative Fairclough wondered if the state will set
energy efficiency standards or goals. Mr. Butcher stated
that AHFC was developing regulations to achieve energy
efficiency standards statewide.
Vice-Chair Thomas felt that AHFC had good energy efficiency
standards for homes and hoped for similar standards for
public buildings. Mr. Butcher agreed. He added that $2
million was set aside to work with the Alaska Energy
Authority to make their energy efficiency software
applicable to public buildings as well as residences.
1:27:04 PM
Representative Doogan inquired further about interest
rates.
JOE DUBLER, DIRECTOR OF FINANCE, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE (via teleconference),
replied that the interest rate was dependent on the terms
of the loan, determined by the length of the payback period
and amount borrowed. He expected the rate to be low based
on tax exempt debt on municipal or state buildings.
Co-Chair Hawker opened and closed public testimony.
Representative Austerman inquired further on interest
rates. He wondered why the interest rates were variable.
Mr. Dubler responded that the longer length of the loan the
greater the risk. He exemplified a municipality that needs
a five year loan as opposed to a municipality that needs a
fifteen year loan and stated that a longer loan requires
paying a higher return.
1:31:15 PM
Co-Chair Hawker summarized that not all borrowers are
equal.
Mr. Dubler agreed and added that not all loans are equal as
well. He exemplified that interest on a mortgage loan for
fifteen years is half of a percent lower than a thirty year
loan. It is a standard risk component built in to fixed-
rate debt.
Representative Fairclough wondered if the operating costs
of new technologies such as, a high efficiency boiler are
imbedded into the formula to determine energy cost savings.
1:33:15 PM
Mr. Butcher answered that AHFC was still in the process of
deciding how the program will be administered.
Representative Kelly asked for more information about how
the $18 million would be leveraged and how AHFC would
establish interest rates for specific loans. Mr. Dubler
explained the process. He stated that AHFC would evaluate
each loan, use available funds from the initial $18 million
and set the borrower's interest rate at what the interest
rate would be if bonds had been sold. The corporation does
not intend to issue bonds until program demand increases
and more capital is needed. The corporation would not make
a profit off the program; the purpose is only to weatherize
buildings throughout the state. The interest rates would be
higher for long term debt because the bond purchasers
demand a higher interest rate for a longer term bond. He
surmised that in the bond market AHFC would borrow nine to
ten year debt to cover the eight to ten year loans they are
financing. He concluded that the $250 million is the
eventual estimated total to get the fund revolving and
continue for many years.
1:37:19 PM
Vice-Chair Thomas noted that the Regional Education
Attendance Areas (REAA) in his district was struggling
financially. He wondered what they would use for collateral
and how it could realistically help them with skyrocketing
energy costs in rural areas. Mr. Butcher acknowledged that
other states do not have the challenges rural Alaska has.
He pointed out that the school administrator would not have
to come up with any additional funds. The energy savings
would offset the loan repayments. Vice-Chair Thomas opined
that the school district would rather pass savings on to
their teachers or that energy prices would surge again and
use up the savings, requiring state assistance to repay the
loan.
Vice-Chair Thomas MOVED to report CSHB 296(ENE) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 296(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with attached previously published
fiscal notes: FN 1(REV), FN 2(DOT).
HOUSE BILL NO. 416
"An Act adopting and relating to the Uniform Prudent
Management of Institutional Funds Act; relating to the
investment of money for charitable purposes by
institutions, including governmental institutions; and
relating to the University of Alaska."
1:41:25 PM
KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR,
stated that HB 416 would allow the State of Alaska to adopt
the Uniform Prudent Management of Institutional Funds Act
(UPMIFA). He briefly summarized the history and events that
led to the legislation. The State adopted the Uniform
Management of Institutional Funds Act (UMIFA) in 1972. In
2006, UMIFA was revised and up-dated to UPMIFA and has been
adopted by all but six states and Puerto Rico. UPMIFA
brings two changes to institutional funds management and
endowment accounting: first, is the elimination of the
historic dollar value as a benchmark for endowment spending
and the amount identified for accounting purposes as
permanently restricted net assets; secondly, clarification
of the legal classification of earnings. He continued that
UPMIFA incorporates the experience gained in thirty five
years under UMIFA and adoption will bring the state current
with updated fiduciary practices. He stressed that UPMIFA
is default legislation; other provisions in law in donor
agreements or governing instruments supersede UPMIFA.
Co-Chair Hawker asked what state savings accounts or
activities would be affected by the legislation.
Mr. Jackson surmised that none would be affected. He
thought that the state had governing provisions for all of
their funds. He emphasized that governing instruments
supersedes uniform prudent management language.
Co-Chair Hawker asked who would be affected within the
state structure.
1:46:34 PM
Mr. Jackson noted that endowments within the University of
Alaska are among funds that would be affected.
Co-Chair Hawker opened public testimony.
JIM LYNCH, TREASURER, UNIVERSITY OF ALASKA FOUNDATION (via
teleconference), stated he has been managing the
University's endowments for approximately twenty five
years. He reiterated that the legislation sets out
responsible practices and standards for investment and
management and provides essential guidance for the
administration of endowments and charitable funds. He
indicated that it reduces the exposure of fund
administrators to legal challenges. The state does not
offer guidance or standards to deal with institutional
funds. He summarized that UPMIFA delineated current
practices that are used nationally.
Mr. Lynch added that there were two UPMIFA provisions that
were specifically applicable to the university: management
of endowments, and the clarification that state fiduciary
rules apply to the university.
1:51:36 PM
Mr. Lynch noted support for UPMIFA from non-profits such as
the Rasmussen Foundation. Mr. Lynch remarked that various
state funds are all heavily regulated by the state and
would not be affected by the legislation. He noted UPMIFA
mostly applies to non-profits, and municipalities.
Co-Chair Hawker surmised that UPMIFA would have a greater
impact on the non-profit public sector. He wondered if the
legislation would impose new duties or additional burdens
to small organizations in the private sector. Mr. Lynch
felt that it would assist non-profits by clarifying their
fiduciary responsibilities. The guidelines help non-profits
manage the funds in accordance with the donor's intent.
1:55:42 PM
ERIC WOHLFORTH, CHAIR, UNIVERSITY OF ALASKA FOUNDATION
INVESTMENT COMMITTEE (via teleconference), contended that
the legislation was important and would be consistent with
most other states. He noted that many donors are out of
state and use to their own state's endowment administration
rules. Additionally, many small university endowments are
governed by old-fashioned rules that do not permit payment
of scholarships. Those funds would become available for the
payment of scholarships with adoption of the legislation.
Finally, he was assured by the fact that the bill was
default legislation.
Representative Fairclough asked if UPMIFA addressed
situations where the organization would like to change the
purpose of the endowment. Mr. Lynch related that the rules
require that the institution would have to ask a court for
permission to change the purpose of an endowment. However,
an expedited procedure exists for an endowment that is
under fifteen thousand dollars and over twenty years old.
The non-profit organization must notify the attorney
general's office as to the intent to change or to modify
restrictions on the endowment.
2:03:11 PM
Co-Chair Hawker closed public testimony
Co-Chair Stoltze MOVED to report HB 416 out of Committee
with individual recommendations and the accompanying fiscal
notes. There being NO OBJECTION, it was so ordered.
HB 416 was REPORTED out of Committee with a "do pass"
recommendation and with attached previously published
fiscal notes: FN 1(LAW), FN 2(UA).
HOUSE BILL NO. 421
"An Act relating to the compensation of certain public
officials, officers, and employees not covered by
collective bargaining agreements; and providing for an
effective date."
2:05:16 PM
KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, reported that negotiations had concluded
resulting in voluntary agreements between the state and the
five unions that represent state employees. He noted that
HB 421 provided a similar wage increase for non-covered
employees in the executive, legislative, and judicial
branches.
He summarized the contents of the legislation by section.
Section 1, of the bill represents a two percent increase to
the FY 2010 salary schedule to begin in FY11. Sections 2
and 3, of the bill provide for similar increases in FY12
and 13. Section 4, addresses a similar wage increase for
employees of the executive branch. Section 5, provides for
a comparable two percent increase for employees of the
court system. He pointed out that the executive and
judicial branches do not use the legislature's wage range
classification. Section 6, clarified that the University of
Alaska employee's wage increases are determined by the
Board of Regents. Section 7, provides for an effective date
of July 1, 2010.
Co-Chair Stoltze announced that the wage increase does not
apply to elected officials. Mr. Brooks affirmed.
Representative Austerman asked for clarification of the
wage increase. Mr. Brooks restated that the wage increase
was two percent for FY 2011, FY 2012, and FY 2013.
2:08:43 PM
Co-Chair Hawker questioned the wage increase when the state
economy is struggling and with record-high unemployment
rates. Mr. Brooks replied that the department was aware of
the economic climate and the issues were prevalent in
discussions with the labor unions. The contracts reached
with unions were relatively modest compared with contracts
in past years. He argued for parity for similarly situated
state employees not covered by unions.
Co-Chair Hawker appreciated acknowledgement of the dilemma.
He believed the court system employee's compensation was
relatively low. He wondered if it was possible to approve
the fiscal note for the court system but not for the
executive and legislative branches.
2:12:03 PM
Mr. Brooks expressed uncertainty regarding the procedure to
make the change.
Co-Chair Hawker wondered what would happen if the committee
passed out the bill but zeroed out the fiscal notes for the
executive and legislative branches. Mr. Brooks thought that
the money would have to be taken from other sources of
funding in the executive and legislative budgets. The bill
would authorize the expenditure for all three branches of
government.
Representative Kelly asked what the rate of inflation was
estimated to be in the next three years. Mr. Brooks
reported that the department did not attempt to project the
consumer price index (CPI) in relation to the wage
increases.
Representative Fairclough cited page 37, Article 12 of the
Alaska Constitution that addresses the merit system. She
asked if the wage increases in HB 421 were based on the
merit system as described in the constitution. Mr. Brooks
believed that it was consistent with Article 12. However,
the wage increases were mostly associated with cost-of-
living adjustments.
Representative Fairclough opined that it was difficult to
award merit pay to outstanding employees through the
established system. Mr. Brooks thought that the state's pay
system was consistent with the merit principals set forth
in the constitution.
2:16:35 PM
Representative Fairclough hypothesized the situation of a
zero-based budget without increases and asked if an
administrator had the flexibility to change an employee's
pay within the existing structure by changing steps or
ranges. Mr. Brooks stressed that it was important to
distinguish between statutory employees and those covered
under collective bargaining agreements [unionized]. He
affirmed that the rate of pay can be changed
administratively through individual job reclassifications.
Representative Gara relayed that the average rate of
inflation over the last three years was 2.7 percent. He
believed that a "meager" two percent wage increase fails to
keep up with the cost of living. He was supportive of the
increase and wished it was higher.
Representative Austerman asked when the last salary
increase was. Mr. Brooks answered that the previous three
fiscal years had increases of five and one half percent the
first year and three percent the following two years.
Representative Austerman asked if the inflation rate was
2.7 percent over the last three years. Mr. Brooks affirmed.
2:20:27 PM
Co-Chair Hawker pointed to Section 6 of the bill and
inquired about the absence of a fiscal note for the
University of Alaska. Mr. Brooks answered that the
University of Alaska was not included in HB 421. Co-Chair
Hawker wondered why the Section exists. Mr. Brooks supposed
it was a clarifying section. He implied that it could be
removed.
Co-Chair Hawker wondered if the rules that determine how
the legislative branch sets the range increments are
referenced in the legislation. Mr. Brooks related that the
legislative staff pay rules are covered under the reference
to Title 24 on page 1, line 9 of the bill.
HB 421 was HEARD and HELD in Committee for further
consideration.
SENATE BILL NO. 199
"An Act providing for a two-year funding cycle for
medical assistance coverage for dentures."
2:24:31 PM
2:24:55 PM AT EASE
2:29:50 PM RECONVENED
SENATOR JOHNNIE ELLIS, SPONSOR, explained that the
legislation would allow clients covered under the Medicaid
Adult Preventative Dental program (APD) to get a complete
set of upper and lower dentures in same fiscal year. He
remarked that this would allow the client to "chew their
food." The plan to divide the denture benefit into two
fiscal years was adopted as a cost savings measure. He
shared a personal story of a constituent's experience
needing dentures under adult dental Medicaid that spurred
his involvement with the legislation. He relayed that the
constituent was distraught and contemplating suicide
because he could not eat or speak clearly without teeth.
Acquiring half a set of dentures was useless and prolonged
his misery for an entire year. He believed that there will
be a cost savings to the program with the legislation.
2:33:17 PM
Representative Foster wondered what the intent of the
original legislation was; to divide the denture benefit
into two fiscal years. Senator Ellis restated that it was a
cost containment measure intended to divide the benefit
over fiscal years. He felt that overall the program was
"great" and well intended but this aspect was not properly
considered. He believed that this type of situation created
public skepticism toward government and could be easily
remedied to restore credibility.
DR. DAVID LOGAN, DDS, DENTIST, ALASKA DENTAL SOCIETY (via
teleconference), testified in favor of the legislation. He
indicated that the program benefits all parties involved.
The patient's dignity and quality of health would be
restored. The dentist would deliver the denture service
more effectively by performing the same procedures for a
set of dentures once, rather than individually; that also
reduces patient travel expenses for multiple visits from
rural areas. The efficiency would create cost savings to
the state. There would also be a preventative benefit by
the removal of diseased and abscessed teeth before
infection sets in and requires additional dental and
expensive(i.e. emergency room visits) medical services;
creating additional cost savings.
Co-Chair Hawker cited the fiscal note for the Department of
Health and Social Services, FN2 (DHSS), in the amount of
$935 thousand for FY 2011. He noted that the expenditure
decreases to $467.5 thousand in FY 2012 and is zero for the
subsequent years. He wondered if the program has a sunset
provision and asked for an explanation of the fiscal note.
JON SHERWOOD, MEDICAID SPECIAL PROJECTS, DIVISION OF HEALTH
CARE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
answered that the sunset on the Adult Preventive Dental
program had been eliminated. He furthered that the fiscal
note reflects an initial anticipated increase in
expenditures as APD provides both upper and lower dentures
in the same fiscal year for the first two years. There will
be patients receiving their second year denture along with
new patients entitled to both dentures in the same fiscal
year. The department feels that by the third year the
program will have caught up with the initial impacts of the
expanded benefit.
2:43:11 PM
Co-Chair Hawker asked if the demand for the APD program was
expected to decline. Mr. Sherwood replied that the fiscal
note does not assume a decrease in the out years. Co-Chair
Hawker recalled that in the early years of the APD program
costs were overestimated. Co-Chair Hawker wondered if the
same situation applied to the fiscal note. Mr. Sherwood
explained that fiscal notes reflect the department's best
reasonable estimate of costs.
Representative Austerman asked what the original estimate
of the program's cost was. Mr. Sherwood guessed that it was
approximately $10 million.
Co-Chair Hawker remembered that the original APD bill
placed a limit on the aggregate amount of funds available
for the program in a year. The aggregate cap was removed
from the program when the sunset was eliminated. The
utilization of the program was under anticipated costs at
approximately $7.5 million, half of the amount was federal
funds and half was general funds.
Representative Austerman asked how much money is currently
appropriated for the APD program excluding the fiscal note.
Mr. Sherwood did not know. He wanted to clarify that the
APD program included many other services besides dentures.
2:48:54 PM
Co-Chair Hawker reported that the FY 2009 actual expense
level was $5.9 million, and the FY 2010 total appropriation
was $7.3 million. The FY 2008 governors request was $8.1
million.
Representative Austerman felt that the department should
know the amount currently appropriated in the budget for
the program. Co-Chair Hawker agreed that the fiscal note
request appeared speculative.
Mr. Sherwood explained that the benefit is relatively new
and the fiscal note amount was based on a best estimate of
the legislations impact regardless of the base amount
appropriated.
Representative Gara observed that out of the $935 thousand
fiscal note (FN 2 (DHS)) expenditure, $626.5 thousand are
federal funds and $308.6 thousand are general funds. He
discerned that the "upfront" additional cost for both
dentures this year means the expenditures will be that much
less next year. He felt that over the long term the same
amount of money will be spent and the fiscal note was
misleading; it only appears there will be extra costs. He
deduced that the initial costs will be leveled out to a
zero dollar increment over the long term. He surmised that
the department should request additional funds for services
provided this year but request less for next year.
2:53:46 PM
Representative Kelly commented that he agreed with Rep.
Gara that the increment "washes out" over time and supports
the legislation.
Co-Chair Hawker shared that he authored the initial APD
bill because the only dental Medicaid services available
for adults was for a crisis situation which the patient had
to experience infection or acute pain. He felt that was a
"barbaric" system.
Representative Fairclough asked about differences of sixty
percent and fifty seven percent in the federal match rate
between FY 2011 and FY 2012 depicted on the fiscal note.
Mr. Sherwood explained that the decline in the federal
match rate in FY 2012 is due to the phasing out of the
stimulus funds.
Vice-Chair Thomas asked about the annual denture benefit
limit in terms of lost dentures.
2:58:33 PM
Mr. Sherwood answered that there is a dollar limit on the
amount of annual dental benefit, if replacement dentures
exceeds the limit a patient would have to wait until the
second year. The annual monetary limit is only enough for
an upper or lower denture.
Co-Chair Hawker directed attention to the fiscal note, FN 1
(DHS) that was zeroed out in Senate Finance. He noted that
the fiscal note had requested a personal services
expenditure of $183.3 thousand for two full time employees.
He cited a new fiscal note, from the department in the
amount of $147.9 thousand dollars for one employee for one
year. He asked for an explanation of the request. Mr.
Sherwood indicated that originally the department thought
that the claims processing system could not handle a two
year spending limit and that claims would be processed
manually. Subsequently, the department was able to come up
with a programming solution. The new fiscal note reflects a
request for $50 thousand to enhance the existing claims
processing system or the new system that is currently being
developed. The remaining amount is for one person to track
and process authorizations until the new system can
accommodate automated processing. The person will not be
hired if the automated system is working.
Co-Chair Hawker asked if the position should be classified
as temporary on the fiscal note. Mr. Sherwood affirmed.
Co-Chair Hawker noted that the new fiscal note will become
number four when published and adjusted to reflect the
position as temporary.
Representative Fairclough informed the committee that
dental issues contribute to the suicide rate in the state
and she will support the bill.
Co-Chair Hawker MOVED to report SB 199 out of Committee
with individual recommendations and the accompanying fiscal
notes. There being NO OBJECTION, it was so ordered.
SB 199 was REPORTED out of Committee with a "do pass"
recommendation and with attached new fiscal note by the
Department of Health and Social Services and previously
published fiscal note: FN2 (DHS).
3:08:34 PM AT EASE
6:25:56 PM RECONVENED
HOUSE BILL NO. 424
"An Act providing for and relating to the issuance of
general obligation bonds in a principal amount of not
more than $1,000,000 for the purpose of paying the
cost of education projects for public schools and the
University of Alaska; and providing for an effective
date."
6:26:02 PM
Co-Chair Hawker MOVED to ADOPT CS HB 424(FIN) Work Draft
26-LS1649\P as a working document before the committee.
Co-Chair Stoltze OBJECTED for discussion.
JAMES ARMSTRONG, STAFF, REPRESENTATIVE BILL STOLTZE,
explained the CS. He stated that HB 424 is a request for a
$384.2 million general fund bond authority and if adopted
would be sent to voters for the November 2010 general
election.
Mr. Armstrong presented a brief summary of the legislation
by section:
· Section 1, specifies the amount of the bond.
· Section 2, contains the education project fund. He
added that is the standard language for bond bills.
· Section 3, relates to the Mount Edgecombe High
School aquatic facility in Sitka and the State
Library Archives and Museum facility in Juneau that
will be bonded in the amount of $20 million for each
project ($40 million total).
· Section 4, identifies three school replacements and
renovations in western Alaska for a total of $128.5
million.
Co Chair Stoltze interjected that these three schools are
referred to as the Kasayulie Schools in reference to the
lawsuit and eventual judgment that lead to changes in rural
school funding.
Mr. Armstrong continued the sectional presentation with:
· Section 5 identifies the University of Alaska's
Valley Center for Art and Learning on the Matanuska
Susitna (Mat-Su) Campus, the Community Arena and
Athletic Center in Anchorage, the Life Science
Classroom in Fairbanks, two projects for the Kenai
Campus's student housing and Career and Technical
Education Center and the Prince William Sound
Community College campus renovation and renewal.
Total $161.8 million.
· Section 6 identifies the Department of Fish and
Game's Near Island Research facility {$20 million)
in Kodiak.
· Section 7 names the Department of Commerce,
Community and Economic Development grants for a
total of $33.9 million. He noted the list of
projects begin on page 4, of the legislation. The
first seven projects are for library construction in
Anchorage, Cordova, Kenai, Mat-Su, North Slope,
Petersburg, and Seward. The eighth and ninth
projects are located on Prince of Wales Island for a
vocational education center in Klawock and the
Northwest Magnate School and Kotzebue High School in
the Northwest Arctic Borough.
· Section 8 appropriates the cost of issuing the bond
per the Department of Revenue; total $4,610.400.
6:30:14 PM
Mr. Armstrong noted that the bonds were eligible under the
Build America Bond Act as part of the federal stimulus
program (ARRA); the bonds would need to be sold before
December 31, 2010. Upon voter approval the federal
government will pay thirty five percent of the interest
over the twenty year life of the bond.
JERRY BURNETT, DEPUTY COMMISSIONER, DIVISION OF TREASURY,
DEPARTMENT OF REVENUE, clarified that the program was
extended through December 2011.
Representative Doogan asked if the identified projects were
pieces of projects rather than whole projects. Mr.
Armstrong replied that only two University of Alaska
projects (projects two and three) were funded in portions,
their balance will be included in the capital budget as
general funds. In the event the bonds are not adopted by
voters the two projects would move forward with previously
appropriated cash on hand; $25 million for an arena on the
Anchorage Campus and $38 million for a life sciences center
for the Fairbanks campus.
Co-Chair Stoltze interjected that $20 million of the
existing funds are comprised of University revenue bonds.
6:34:07 PM
Co-Chair Hawker announced that not all of the bond projects
in HB 424 are for entirely new facilities. Many of the
projects such as the Northwest Magnet School and library
projects are for renovations, improvements, etc. He
cautioned against creating public misperceptions.
Mr. Armstrong mentioned that the library projects on page 4
were currently included in the Senate's version of the
capitol budget and if approved as part of the bond package,
it was the intent of the chair to remove them in the House
version.
Representative Doogan asked for more information about the
Near Island Research Facility listed in Section 6.
Representative Austerman explained that it will be located
in Kodiak next to the National Oceanic and Atmospheric
Association (NOAA) and the University's Fishery and
Technology Center buildings. The facility will house
Department of Fish and Game offices, research, and
educational facilities.
6:38:14 PM
Representative Gara cited the university projects on page
3, line 8, and asked what the regent priorities were. Co-
Chair Stoltze stated that projects number 2 (Community
arena and athletic center) and 3 (Life Science Classroom
and laboratory building) were regents priorities. The other
projects have been on the regents lists in the past.
Mr. Armstrong pointed out that all of the ten previous bond
propositions put forward to voters since statehood had been
approved.
Representative Foster underscored the importance of
resolving the Kasayulie case and contended that the three
school projects were a positive step. He reported that the
Alakanuk School was two hundred and twenty percent over
capacity.
Co-Chair Hawker relayed that the three school projects in
HB 424 were the three top schools by ranking on the school
construction list prepared by the Department of Education
and Early Development. Mr. Armstrong affirmed.
Representative Gara asked if any projects in HB 424 are
included in the Senate version of the capital budget bill.
6:41:36 PM
Mr. Armstrong listed the seven library projects on page 4,
lines 1-12, that are in the Senate version of the capital
budget: Loussac Library, Anchorage; Cordova Center and
Library Cordova; Community Library expansion Kenai;
Sutton Community Library and Resource Center, Matanuska-
Susitna ; Tuzzy Library expansion, North Slope; Public
Library, Petersburg; Community library ,Seward.
Co-Chair Stoltze closed public testimony.
Mr. Armstrong cited that the Department of Revenue's fiscal
note accompanying the legislation depicts the sum of
$29,095,000 in expenditures for the out years FY 2012
through FY 2016. The amount will be decreased in a revised
fiscal note to $28,773,000.
6:46:08 PM
Representative Doogan asked if the intent was to find
complete funding for the two projects that would only be
partially funded by the general obligations bonds, before
the end of session. Co-Chair Stoltze affirmed.
Representative Gara requested to hear from the university
regarding the university projects. He wondered if the
university was in support of the list.
6:49:34 PM
WENDY REDMAN, VICE PRESIDENT, STATEWIDE PROGRAMS,
UNIVERSITY OF ALASKA, responded that the university
supported the projects. She noted that the Life Sciences
facility in Fairbanks was the major priority for the
university this year. The other projects were on campus
priority lists.
Representative Gara inquired about the university's
priority for funding for engineering buildings. Ms. Redman
replied that the university requested $10 million for
planning engineering facilities for the Anchorage and
Fairbanks campuses. She reported that the request was not
included in the governor's budget. They were considered the
most important projects that the university wanted to move
forward after the Life Sciences building. The Senate
included $5 million in the capital budget for the Anchorage
engineering facility and nothing for Fairbanks.
Co-Chair Stoltze suspected that all the bond projects were
on the regents' list at some point.
6:53:14 PM
Representative Gara voiced frustrations with the shortage
of university housing in Anchorage. He felt that more
housing at the main campuses of Anchorage, Fairbanks, and
Juneau would create a vibrant, statewide university system.
Ms. Redman reported that the university created a committee
to work on housing in collaboration with AHFC to facilitate
the project and to expect a plan to come before the
legislature in the near future.
Representative Fairclough reported that she had two boys at
the University of Alaska in Fairbanks, in order to avoid
any conflicts of interest.
Representative Gara inquired if the $20 million Department
of Fish and Game Near Island facility was a state priority.
Representative Austerman explained that the project was the
top priority on the capital improvement list for the City
and Borough of Kodiak.
Representative Gara wondered if it was a priority for the
Department of Fish and Game. Representative Austerman was
not certain.
6:58:51 PM
Representative Fairclough spoke in support of the "Build
America Bond" projects. She commented that projects had to
be chosen that met the requirements of the program. She
voiced that she supported the legislation and liked the
concept of the thirty five percent interest payback. She
believed the package helped the state save money on these
projects.
Representative Salmon wondered if the bond package amount
was going to grow. Co-Chair Stoltze stated that he did not
think the amount could grow. He felt that there was a limit
to the debt threshold the voters would approve. He stated
that the legislature would act responsibly and leverage the
available federal money over a fair geographical balance in
the state according to the constraints of the bond program.
Representative Gara thought that there has been a lot of
criticism of the federal government within the state but a
readiness to accept federal funds. He pointed out that the
bill was an example of something the President has done
that was getting people back to work.
7:02:28 PM
Co-Chair Hawker MOVED to report CSHB 424(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note.
CSHB 424(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with attached new fiscal note by
the Department of Revenue.
ADJOURNMENT
The meeting was adjourned at 7:04 PM.