Legislature(2011 - 2012)HOUSE FINANCE 519
05/04/2011 10:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB107 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 107 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
May 4, 2011
10:05 a.m.
10:05:52 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 10:05 a.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Reggie Joule
Representative Mark Neuman
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Alan Austerman; Representative Cathy Munoz;
Representative Peggy Wilson; Senator Cathy Giessel; Senator
Linda Menard; Karen Rehfeld, Director, Office of Management
and Budget, Office of the Governor; James Armstrong, Staff,
Representative Bill Stoltze; Laura Baker, Director,
Division of Administrative Services, Department of
Transportation and Public Facilities; Mike Vigue, Chief of
Surface Transportation Planning, Department of
Transportation and Public Facilities; Sam Kito III,
Manager, School Facilities Section, Department of Education
and Early Development.
PRESENT VIA TELECONFERENCE
Mark A. Luiken, Commissioner, Department of Transportation
and Public Facilities; Patrick Kemp, Deputy Commissioner,
Highways and Public Facilities, Department of
Transportation and Public Facilities; Larry Hartig,
Commissioner, Department of Environmental Conservation;
Bill Griffith, Facilities Programs Manager, Department of
Environmental Conservation.
SUMMARY
HB 107 BUDGET: CAPITAL
HB 107 was HEARD in HELD in committee for further
consideration.
HOUSE BILL NO. 107
"An Act making and amending appropriations, including
capital appropriations and other appropriations;
making appropriations to capitalize funds; and
providing for an effective date."
10:06:35 AM
Co-Chair Stoltze noted that the Senate had proposed that
the capital budget be delayed.
Representative Gara asked whether the bill before the
committee was the governor's original bill.
Co-Chair Stoltze answered in the affirmative.
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, relayed that there had been
amendments submitted to the original capital budget bill.
She noted that there was a copy of the bill as it at been
introduced at the beginning of the session, as well as two
spreadsheets. "FY2011 Capital Supplemental Requests Not in
SB76" (copy on file) contained items that the
administration hoped would be considered. "Capital
Amendments" (copy on file) consolidated the three groups of
amendments submitted to the legislature.
Ms. Rehfeld stated her intent to provide the committee with
a brief refresher on the items in the governor's capital
budget, review the significant changes in the draft Senate
CS (Version T) that was not yet before the committee, and
discuss concerns regarding delaying the passage of a
capital budget. She noted that the commissioner and deputy
commissioner of the Department of Transportation and Public
Facilities (DOT/PF) was available to discuss the
department's major federal programs, and that other
officials were present to discuss other federal projects
and school construction.
Ms. Rehfeld informed the committee that the amended
governor's budget totaled $1,966,300,000. She listed fund
category totals:
· Unrestricted General Funds: $764.1 million
· Designated General Funds: $32.9 million
· Other Funds: $91.8 million
· Federal Funds: $1,770,600,000
Ms. Rehfeld explained that the numbers included a request
for $160 million for the Alaska Gasline Inducement Act
(AGIA) Reimbursement Fund.
Ms. Rehfeld highlighted state general funds used to match
or leverage federal and other funds. For example, there
were about $104 million state general funds in the budget
that would leverage over $719 million in federal and other
funds, including DOT/PF highway and federal funds,
Department of Environmental Conservation (DEC) village safe
water funds and municipal grants matching local funds, and
municipal harbor grant funds.
10:11:40 AM
Ms. Rehfeld continued that the governor's capital budget
included an energy package, with $65.7 million for the
Susitna project, $25 million in renewable energy grants,
$25 million for weatherization and home energy rebates
under the Alaska Housing Finance Corporation (AHFC), and
$10 million for the Southeast energy grant fund.
Ms. Rehfeld noted that the power cost equalization and low-
income heating assistant programs were fully funded in the
budget. The Roads to Resources had been included under
resource development and access and infrastructure in order
to open up opportunities for oil and gas and other mineral
extraction. She referred to port projects for Anchorage,
Pt. Mackenzie, and Skagway. The second year of the
governor's proposed five-year deferred maintenance program
had been included (at $100 million), as well as $5.5
million for the in-state gas project.
Ms. Rehfeld relayed that school construction costs had also
been included for the first project on the Department of
Education and Early Development (DEED) school construction
list ($28.5 million); there were also 14 projects under the
department's major maintenance list (around $20 million).
Ms. Rehfeld explained that many of the significant items
that she had highlighted were included in the draft CS
(Version T) that was currently in the Senate Finance
Committee. She highlighted items in the draft CS, which
proposed adding an additional $48 million for two
additional school construction projects. The CS proposed to
add an additional $53 million for major maintenance
projects on the DEED list, or down to number 33 on the
list. The draft CS included about $219 million for specific
energy projects, $11.6 million for renewable energy (in
addition to the $25 million originally included; all of the
round four projects would be included), and an additional
$25 million for weatherization and home energy rebates.
There was a total of $265.5 million for grants to
municipalities, another $121.7 million for grants to named
recipients, and a smaller dollar amount (less than $2
million) for unincorporated communities.
Ms. Rehfeld highlighted the significant deletions in the
Senate draft CS, beginning with the AGIA reimbursement:
$160 million had been requested, but the draft CS reduced
the amount to $60 million, a reduction of $100 million. The
proposal was based on the reimbursements needed before the
end of the calendar year. She believed significant pressure
would be placed on the amount of funding available to
reimburse allowable expenditures. She noted that
supplemental funds would be needed the following year.
Ms. Rehfeld referred to earlier discussion about six items
that the governor had included in the capital request that
some felt would be more appropriate in the operating
budget. She explained that the reason the particular items
had been requested through the capital budget related to
timing and the need for flexibility. In addition, there was
question whether the items should continue to be in the
operating budget.
Ms. Rehfeld highlighted the Department of Law (DOL) request
for $14 million for two projects. She noted that the
department needed flexibility to be able to address major
cases and on-going efforts related to oil and gas and
mining for the BP corrosion litigation. She emphasized the
difficulty of predicting when such cases would move and the
amount of resources needed to conduct the work. She
believed using the capital budget provided more
flexibility. She acknowledged that the work could be
accomplished through a multi-year operating budget item,
but she thought those kinds of items made it difficult to
make cost comparisons year-to-year.
10:17:15 AM
Ms. Rehfeld continued that $5 million of the requested $14
million related to oil and gas and mining would be targeted
to outside counsel and experts associated with major oil
and gas matters, including Pt. Thompson, some of the on-
going Trans-Alaska Pipeline System (TAPS) tariff issues,
and oil and gas royalty issues and tax matters. She
referred to $9 million requested as a capital item for
experts and other litigation activities associated with the
BP maintenance practices that had resulted in the oilfield
shutdown and the resulting loss of production.
Co-Chair Stoltze noted that the attorney general had
expressed concern about the items and the ability of DOL to
address the issues.
Ms. Rehfeld discussed the importance of tourism funding.
The governor had requested a total of $16 million for
tourism marketing. She was aware that the committee had
spent a significant amount of time on legislation designed
to address the issue, which had not passed. She believed
there would be a significant funding gap with the current
structure related to visitor marketing efforts. She hoped
for additional funding through the capital budget process
in order to address the industry marketing funding gap,
while a longer-term solution was worked out.
Ms. Rehfeld pointed out that the Aerospace Corporation
funding was important; the state had made a significant
investment in the Kodiak launch facility. The governor had
introduced Executive Order 115 (which had been approved by
the legislature) to transfer the Aerospace Corporation form
the Department of Commerce, Community, and Economic
Development (DCCED) to the Department of Military and
Veterans Affairs (DMVA). She believed the proposal
represented a better alignment with the mission and
capabilities of both the launch facility and DMVA. She
noted that $4 million had been included in the capital
request; however, the agency had indicated that it was in
need of $8 million in order to sustain the operations into
the next year.
Ms. Rehfeld stressed that the item was not included in the
operating budget because she believed there needed to be a
discussion with the legislature about the state's on-going
commitment to the Aerospace Corporation and the level of
state funding that should be included on an annual basis,
either in the operating budget or through a capital
appropriation.
10:21:14 AM
Co-Chair Stoltze recognized other members present in the
room.
Ms. Rehfeld listed three smaller capital budget items that
the administration had requested:
· $600,000, DCCED, Export Potatoes
· $400,000, DEC, Shellfish Beach Monitoring
· $100,000, Department of Revenue, Software Training
Ms. Rehfeld added that the three items would be more like
pilot programs than on-going operating items, but they
could go into the operating budget if the committee so
willed. She asked that there be opportunity to discuss the
items before the budget passed.
Co-Chair Thomas asked whether the described items were part
of the capital amendments to the Senate bill. He wondered
why the requests were not placed in the budget earlier.
Ms. Rehfeld responded that the administration had not
submitted any formal amendments to the draft capital CS
pending before the Senate Finance Committee. The items were
in the governor's original request; they were hoping that
the funding would be retained.
Co-Chair Thomas believed that the requests should have been
made at the same time that the amendments had been made.
Ms. Rehfeld responded that the administration did not
formally submit amendments for items that were already in
the governor's budget.
Vice-chair Fairclough queried the amount the state would
have to access or match federal dollars. She believed the
purpose of the committee meeting was to understand what was
at risk for the state if the capital budget was not passed.
Ms. Rehfeld replied that the amount was $104 million in
general funds that would match over $719 million in federal
and other funds. She continued that the large items were
included in DOT/PF and DEC. She noted that the two
departments would address the committee related to specific
questions.
Representative Gara believed that it was important to have
funding available for projects that were scheduled to take
place during the coming summer. He queried money that could
not be used in past years because of backlogs.
10:26:29 AM
Ms. Rehfeld thought part of the question referred to
information about the status of previously authorized
capital projects. She pointed out that at any point in
time, there were a number of projects that were previously
authorized by the legislature but were not moving forward
for one reason or another. Many of the projects were DOT/PF
projects and some of the federal authorization was provided
through legislative appropriations. The funds were used as
they were received, but the department would not have the
flexibility to move excess authorization to another project
without legislative approval.
Ms. Rehfeld continued that the items before the committee
included, for example, capital supplemental items that the
department was bringing forward in order to bid out for the
summer construction season. The projects requested for FY
12 that would take effect July 1 were those that could be
under development for the following summer (2013). There
always needed to be projects in the queue that were going
through various stages of development. Capital projects
typically had a life of five years, although many took much
longer than that because of the environmental and
permitting work needed.
Ms. Rehfeld mentioned that she had wrap-up items related to
the overall impacts of delays before the individual
agencies spoke.
Representative Gara asked about the renewable energy fund.
He noted that when the statute was originally passed, the
goal had been to put $50 million each year into the fund.
The year before, the governor had vetoed half the amount,
and was proposing only $25 million for the current year. He
viewed Alaska as resource-rich but energy-poor, and queried
the governor's intent related to the item.
Ms. Rehfeld did not know whether the governor had ever been
opposed to the original intent of HB 152. She thought the
administration had attempted to make sure the
appropriations made were to projects that could move
forward. She noted that Alaska Energy Authority (AEA)
initially had challenges getting the process underway and
managing the grants. She believed there was a process in
place that that legislature and administration believed was
good for vetting projects. The round-four list contained
$36 million in projects that had gone through the process,
and not $50 million. She thought the most important thing
was a good list of projects that were ready to go, and not
the specific number. She knew that the process set up in HB
152 was slated to sunset in the following year; she thought
there would be discussion about possible improvements to
the process.
10:30:37 AM
Ms. Rehfeld addressed the possible impacts of delaying or
not passing the capital budget. She stressed that the
capital budget was very important to people and communities
across the state. She stated that there would be serious
implications if a capital budget did not pass, or if
passage was significantly delayed until the fall or the
following legislative session. She detailed that the
biggest concern was related to state-matched dollars that
leveraged federal highway, aviation, and water and sewer
project funding. She referred to municipal matching grants
for water and sewer projects and municipal harbor grants.
Ms. Rehfeld maintained that Alaska could lose federal
dollars if it was not able to obligate the funds in a
timely manner or secure the matching funds and that other
states could get the funds that Alaska lost. She referred
to times in the past when there had been a very small
match-only capital budget; there were also times when the
capital budget did not pass during a regular session, and
the budget work was done during a special session.
Ms. Rehfeld emphasized that capital budgets were
particularly important for infrastructure development,
maintenance, and jobs. Capital projects took several years
to be completed (with design, permitting, and phasing) and
the projects moved forward at different times. She
underlined the importance of having projects in the queue
to keep the economy moving forward. She argued that small
private-sector contractors needed to be able to bid on jobs
and relied on capital projects to plan for their
construction season and hiring. She believed that waiting
until later in the year could present further complications
in getting a supplemental capital budget passed. She added
that it was rare to get a supplemental budget passed early
in a legislative session.
Ms. Rehfeld believed rural communities in particular would
be impacted by a delay. She noted that delays typically
increased project costs. She stated that the administration
was hopeful about getting a capital budget passed during
the special session and moving the projects forward.
10:34:01 AM
Co-Chair Stoltze queried the impact on smaller communities
with smaller budget items.
Ms. Rehfeld responded that many of the smaller projects
that went through as grants to the municipalities and named
recipients were very important to small communities. She
pointed out that the smaller projects could be
expeditiously awarded through DCCED.
Co-Chair Stoltze did not want to miss the smaller projects.
Representative Doogan wondered whether there was a date
after which appropriations would not achieve their stated
purpose.
Ms. Rehfeld did not know what the "drop dead" date would
be. She discussed timing issues for specific federal
programs. She noted that a project that had been authorized
but was delayed for environmental reasons, for example,
would not necessarily lose access to funds.
Representative Doogan pointed out that Ms. Rehfeld had
testified about her preference for passing a capital budget
before the special session was over. He wondered whether
the end of the special session would be the "drop dead"
date, or whether there was a date after which it was not
recoverable.
Ms. Rehfeld responded that she did not know whether she
could answer the question. She could say that the
administration's goal was to have a capital budget that
would take effect July 1, 2011.
Co-Chair Stoltze asked whether September would be a little
late.
Ms. Rehfeld responded that September would be after July 1.
Representative Wilson requested a copy of Ms. Rehfeld's
notes. She queried the weatherization program and other
programs that would no longer have funds. She asked how
much funding was remaining in the weatherization program.
She did not want to wait until the weather got cold.
10:38:01 AM
Ms. Rehfeld deferred to the Alaska Housing Finance
Corporation.
Representative Guttenberg referred to supplementals, which
were usually used for on-going programs. He asked how many
of the supplemental requests (such as the Cold Bay Airport
improvements) were ongoing and required funding in order to
be finished. He wanted an accounting of how many jobs would
be lost.
MARK A. LUIKEN, COMMISSIONER, DEPARTMENT OF TRANSPORTATION
AND PUBLIC FACILITIES (via teleconference), reported that
he was currently meeting with the commissioners from the
other 49 states to discuss the future of the federal
surface transportation bill being debated in Congress and
the potential impact to future federal highways programs.
He added that the current House version of the bill
proposed to cut the annual appropriation by 33 percent, or
nearly $14 billion. Each state's federal authorization
would be impacted by an equivalent amount, or as much as
$150 million for Alaska (based on the current formula fund
calculations).
Commissioner Luiken pointed out that the capital budget
defined through legislative authority the projects that
DOT/PF would be allowed to develop each year. He stated
that the capital budget was imminently important to
Alaska's communities and small and large businesses. He
maintained that a gap in funding would create significant
timing issues and loss of federal funding for the state.
Commissioner Luiken added that the state had never been in
the position before; given the financial struggles of other
states, and the federal situation, he thought there would
be very little sympathy for Alaska if the money went
unobligated. He stated that the money would quickly be
redistributed to other states which were able to obligate
the funds within the federal timelines. He added that the
federal Department of Transportation could look at Alaska's
federal FY 11 obligation and potentially cut the following
year's federal program by the unobligated amount as well.
Commissioner Luiken continued that the FY 12 capital budget
listed the projects that were scheduled to be obligated
during federal FY 11. In order to get the federal
agreements to the Federal Highway Administration (FHWA) by
the beginning of September (Alaska's cutoff for submittal
to obligate federal fiscal year funds), the budget
authority would be needed no later than mid-July 2011.
However, getting the authority that late in the year would
leave the regions and headquarters with only a few weeks to
work up the projects for submittal to Alaska's
headquarters, allowing only a week or two to move the
submittal to FHWA for obligation. He stressed that the
later the authority was obtained, the greater the risk.
Vice-chair Fairclough asked for more information about the
dates.
Commissioner Luiken replied that FHWA had said that the
state needed to have the funds obligated by the first week
of September, as it took them at least three weeks to
process the information and get it to the federal level.
Commissioner Luiken continued that DOT/PF was at risk of
losing about $190 million in federal FY 11 funds if the
capital appropriations were delayed. The governor's FY 12
capital budget included $190 million in federal funding
requests for surface transportation. In addition, there
were another $100 million in airport improvement funds that
were planned for obligation using federal FY 11 funds. He
underlined that Alaska was at risk of missing its FHWA
obligation deadlines and losing the funds forever if the
legislative authority was not available for the projects by
July 1.
10:44:59 AM
Commissioner Luiken continued that many of the federal FY
11 project requests provided appropriate level of funding
authority for larger projects. For example, the Glenn
Highway Milepost 172 to 189 rehabilitation for $10 million
in the FY 12 request was part of an overall project cost of
$24.5 million; it was anticipated to start in August.
Projects would be delayed until the following year unless
there was full project authority. He noted that not all
projects could be done in phases; those that could not
might cost more in future years due to demobilization,
remobilization, and overall changes to construction costs.
Commissioner Luiken explained that the FY 12 capital budget
also included $123 million in airport improvement program
federal FY 11 funds. A delay in the construction season
would continue to impact the state. For example, the runway
safety area in Kotzebue was a $28 million project; $17
million had been used, and an addition $20 million was
needed, so the state needed about $9 million in authority
for FY 12 capital requests (expected to go out in August).
He emphasized that the runway safety area was only one of
approximately ten projects that needed to be completed
before 2015, by federal mandate. He underlined that pushing
the one project back could potentially push the entire
program back.
Commissioner Luiken further discussed the Cold Bay project.
The pavement rehabilitation project had been slated for
advertising during the current week; however, the schedule
would be delayed until supplemental appropriations passed.
He emphasized that continued delays would push the project
schedule out, and construction could get delayed until the
following year again. In addition, delays in the capital
project funding authority jeopardized project schedules in
rural Alaska even more, because of the shorter construction
season and challenges shipping to areas dependent upon
barge service.
Commissioner Luiken turned to the Alaska Marine Highway
System, the Bethel overhaul program; about $50 million in
both federal funds and general funds was at risk. The
annual requirement needed to addressed, and a delay or lack
of funding could result in extending the annual maintenance
schedule due to lack of haul-out facility availability. In
addition, there could be delays in scheduled sailings due
to changes in the vessel overhaul schedule; delays could be
mean less revenue and/or increased vessel operations costs.
There was also increased risk of vessel operation failure
due to delayed annual overhaul.
Commissioner Luiken argued that all the department's
deferred maintenance programs were at risk. Besides pushing
deferred maintenance repairs further out into the future
for the portion of deferred maintenance that went to
contractors, there would be economic hardship from the loss
of projects. Rural areas would not receive deferred
maintenance on highways or rural aviation sites until the
following season due to seasonality changes.
Commissioner Luiken pointed out that the governor's budget
included $10.5 million to continue environmental work for
Roads to Resources projects in the Northern Region. The
road to Umiat would be suspended, and caribou studies would
be delayed for the Ambler mining district road.
Commissioner Luiken concluded that the proposed delay could
impact the department's federal FY 12 federal aid program
for highways. Assuming a potential loss of $150 million,
plus the fact that the state could potentially not obligate
$190 million, $340 million could be at risk for the highway
program and $100 million for the Airport Improvement
Program (AIP). The calendar year 2012 construction program
could also be affected.
10:49:43 AM
Co-Chair Stoltze referred to the late 1990s when about $18
million in unobligated funds from another state were used
to do the Minnesota International Airport Road bypass.
Commissioner Luiken replied that Alaska had generally been
on the receiving end because it had been ready with other
projects to obligate. However, he stated that the situation
was currently particularly acute because most of the
projects on the shelf were funded through the American
Recovery and Reinvestment Act (ARRA) funding. He stressed
that there was significant funding at risk.
10:51:13 AM
Vice-chair Fairclough wondered how well Alaska was
positioned with projects that were ready to go. She also
wondered how projects were different in terms of timing.
Commissioner Luiken responded that Alaska was very prepared
and was able to obligate all of the ARRA funds provided to
the state (about $178 million). He noted that every one of
the projects was currently underway.
PATRICK KEMP, DEPUTY COMMISSIONER, HIGHWAYS AND PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES (via teleconference), believed Vice-chair
Fairclough's question referenced the phases a project went
through. He stated that Phase 2 was a pre-construction
phase; there was a separate pot of money in the capital
bill for the amount, which allowed the department to do
design starts. Without the capital bill, the department
would not be able to start new designs in the current year
to fulfill the FY 12 project list. He stressed that a large
Phase 3 (right-of-way acquisition phase) could not be
funded. Phase 4 was the construction phase; none of the
projects without authority could be put forward for
advertisement in the current year.
10:54:26 AM
Vice-chair Fairclough asked whether Alaska had received
second-round funding from other states that were unable to
obligate under ARRA.
Mr. Kemp replied that Alaska had received some additional
funding for the ARRA projects. He noted that the current
President's bill to Congress had a proposed $50 billion for
ARRA; DOT/PF was trying to prepare for that as well as what
had been requested in the capital bill. He believed the
ARRA funding was fully used, and addressed all the projects
the state had on the shelf.
Vice-chair Fairclough thanked DOT/PF for being ready. She
noted that there were no longer available projects if other
funds became available quickly. She commented that without
a capital budget, the state would not be able to design and
prepare for possible new projects, with a ripple effect in
the construction industry.
Co-Chair Stoltze asked Mr. James Armstrong to testify as a
former Anchorage Metropolitan Area Transportation Study
(AMATS) director.
JAMES ARMSTRONG, STAFF, REPRESENTATIVE BILL STOLTZE,
explained that one year, the state had gotten around
$800,000 or $900,000; he was allowed as the coordinator
(through approval from the policy committee) to take some
construction funding and move two projects forward that had
been in the design phase. He thought there were other
similar organizations around the country that would gladly
take any cash the state turned back.
10:57:37 AM
Representative Neuman believed that when a DOT/PF project
went out to bid, the department had to have the funds in
hand in order to put it out to bid. He wondered whether the
requests for the appropriations came in phases.
Representative Neuman noted that the construction projects
had been coming in at about 30 percent under bid. He asked
whether there was money left over. He queried the impact of
not receiving some of the funds.
Co-Chair Stoltze stated that some projects were reallocated
in the middle of the construction season.
Mr. Kemp explained that prior to going to bid with a
federal aid project, the department was given authority to
advertise and was allowed by FHWA to go to Phase 4; this
was the case 99 percent of the time. Occasionally, when
DOT/PF knew that a permit or right-of-way transaction was
imminent, the department advertised with state funds and
obligated the money during the advertising period, although
it would not open bids until the money from FHWA was
obligated.
Mr. Kemp assured the committee that the department was very
careful with the procurement process, which involved tens
of millions of dollars; however, occasionally it did use
general funds.
Mr. Kemp continued that bids running under 30 percent were
a great concern to DOT/PF. He said there had been a number
of items in the current year that had conglomerated, and
the department was nervous about meeting its obligation
authority for federal FY 11. The state was underrunning
projects, which meant that more projects had to be put out.
In addition, the project contingencies had been wiped out
with the ARRA funding; there was very little to offer just
months before. There had been meetings with OMB to discuss
options for a failsafe mechanism. He stressed that things
were looking better and he believed the state would meet
its regular federal aid obligations; some projects would
have to be brought forward from federal FY 12.
Mr. Kemp reminded the committee that the department had
gone through a similar scenario the year prior. During
federal FY 10, the department had had to reach forward into
federal FY 11 and obligate 75 percent of its Statewide
Transportation Improvement Program (STIP) projects that
came under obligation. He acknowledged that the federal
fiscal year got a little confusing, but pointed out that
the state had to work with the STIP.
Mr. Kemp pointed out that the department needed flexibility
to manage its projects through the STIP. The department
also needed additional authority. He assured the committee
that DOT/PF knew that it had a lot of authority on the
books and was trying the clean that up.
11:03:06 AM
Mr. Kemp stated that the department's main focus was
getting projects back on the shelf in order to be ready for
another possible jobs bill from Congress. He noted that
there could be $50 billion of competitive projects for ARRA
funding if Congress passed a highways bill in the current
year, but the state would not have anything ready.
LAURA BAKER, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, added
that it was necessary to consider procurement rules. She
pointed out that the state of Alaska could not go out to
advertise a project without having the funding and/or the
funding authority to back that. In terms of the federal
funding, the department billed the federal government. She
emphasized that legislative authority was necessary for
each of the projects to go forward.
Representative Neuman wondered how prepared the state was
to move into the coming construction season in terms of
funds that could be available. He asked whether there had
been some overfunding to the states and whether Alaska had
to pay some money ($54 million) back for transportation
projects.
Mr. Kemp did not believe that the department had had to
return federal aid obligation funds.
MIKE VIGUE, CHIEF OF SURFACE TRANSPORTATION PLANNING,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, replied
that Congress had been using an appropriation bill
procedure in recent years that included a rescission; an
unobligated balance would be resent. He noted that Congress
had been using the procedure for the past ten years. The
large number referred to by Representative Neuman was at
the end of the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: a Legacy for Users (SAFETEA-LU)
at the end of 2009.
Mr. Armstrong believed that the state was operating under
the Transportation Equity Act: a Legacy for Users (TEA-LU).
Mr. Vigue replied that SAFETEA-LU had expired in 2009;
currently the state was operating under an extension of
SAFETEA-LU.
Ms. Baker pointed out that the rescission was an example of
the kind of dynamics that the state had to deal with
related to federal program funding. In addition, the
previous year, late in the session, the department had come
forward with about $140 million in projects because there
were additional formula funds to distribute to states. A
state might lose funds, but could also gain some. She
agreed with Mr. Kemp that authorization flexibility was
needed in order to move projects between federal fiscal
years and adapt to changes from the federal side.
11:07:32 AM
Vice-chair Fairclough believed the word "rescission" meant
that the federal government had promised a certain amount
of money, but when the state had not spent it, the federal
government notified the state that the money was no longer
available.
Mr. Vigue responded that her statement was correct. He
added that usually, when the federal government passed an
appropriations bill at the beginning of the year, it
included a rescission, and it also looked at the previous
year's unobligated balance. He explained that the federal
program gave an apportionment and separately gave authority
to spend it. Usually, less authority than apportionment was
given; the rescission would come back and take the
unobligated apportionment.
Vice-chair Fairclough commented that she preferred her own
definition.
Representative Joule referred to an environmental impact
statement (EIS) related to the Foothills West
Transportation Access project (the road to Umiat) under the
Roads to Resources program. He noted that both the
Anaktuvuk Pass tribal council and city council had come up
with resolutions in opposition to the project. He wondered
whether there were plans to hear from the community of
Anaktuvuk Pass under the EIS process. He asked how long the
process would go on and how much it would cost.
Ms. Baker replied that there had been an informal public
hearing process, but there had not been an official EIS
process.
Mr. Kemp added that the funds expected for the current year
would begin the EIS work. He said there would be a scoping
effort, which would entail going to all the affected
communities and stakeholders to bring information and take
public comment. The results would be studied in the EIS. He
added that the department knew about 90 percent of what had
to be studied through the agencies, but community input
would be taken. He acknowledged that there were a lot of
fears about what a road would mean to the area and to
subsistence.
Mr. Kemp informed the committee that the department had
been through the EIS process many times; often groups had
tried to thwart even beginning the process. He believed
that stopping the process interrupted the very tool that
would be used to evaluate the social, natural science, and
other impacts of the project. He was sure that others on
the panel knew of projects that were being stopped before
the formal permitting and National Environmental Policy Act
(NEPA) work began. He stated that the department was
proposing the funds in order to ensure that the work
proceeded.
Representative Joule asked for a definition of "affected
community." He wondered who the department planned to get
input from.
Mr. Kemp responded that the department planned to get input
from communities in the immediate area. He added that the
process was a massive undertaking for Alaska, and not just
the communities nearby. The department had had a number of
informal hearings, including in Anaktuvuk Pass. He believed
the communities in a certain radius from the roadway and
development would be considered the most affected
communities.
Representative Joule relayed that the caribou had a
migration pattern and did not care about which communities
were close. He wondered whether the Upper Kobuk area and
other areas covered by the movement of the Western Arctic
Caribou Herd would also be included in the definition of
"affected communities."
Mr. Kemp replied that the caribou would be studied as well;
not only primary impacts but secondary and cumulative
impacts would be considered. He emphasized the importance
of going through the scoping process (the first stage of
the NEPA process) in order to formulate the questions and
the types of things that would be studied.
11:15:28 AM
Representative Joule pointed out that there were community
concerns about the road but also potential offshoots of the
road to other developments (such as coal) that might impact
the area.
Mr. Kemp responded that he was not aware of any coal
development issues. He reported that he had asked staff in
the Northern Region (including the Roads to Resources
manager) to look into the coal development; he expected to
have the information by mid-May.
Representative Gara believed the goal of the proposed
budget was to utilize all available federal transportation
funds. He wondered whether all the projects on the
transportation list had been ranked through the STIP
process. He asked what room there was for projects on the
AMATS list. He asked how the projects were decided upon,
and queried the relationship between the STIP and AMATS
processes.
Mr. Kemp answered that the AMATS organization would decide
the project priorities. He added that there had been some
discussion about indemnification issues, but the projects
would be out during the current fiscal year. He did not
know the answer to the second part of the question.
Representative Gara believed the AMATS process only helped
projects in the Anchorage and Mat-Su areas. There were
projects on the list that were obviously statewide, which
he assumed were covered by the STIP. He asked how the
department decided where to put the federal funds
available.
Co-Chair Stoltze pointed out that the metropolitan planning
process, whether it was the Anchorage, Fairbanks
Metropolitan Area Transportation Study (FMATS), or the Mat-
Su version, represented a significant portion of the funds.
11:18:44 AM
Mr. Kemp answered that AMATS had approximately $40 million
within the DOT/PF program, and FMATS had $5 million to $7
million in the STIP program. He noted that there were
several categories within the STIP, including the track
projects, the Community Transportation Program (CTP), and
the Alaska Highway System (AHS) program; the programs were
ranked and graded and went through a project evaluation
process. He added that the National Highway System (NHS)
portion for the main corridors went through an internal
departmental process, and included the Glenn Highway, the
Parks Highway, and projects that had a high volume of
traffic and were critical to the state.
Mr. Kemp continued that the state's STIP encompassed
everything that the federal gas tax receipts allowed the
state to recover. He added that there were restraints and
that the STIP could not be overfunded in any given year,
which was why other projects had to be available. For
example, a project could "slip" because a permit did not go
through or a piece of right-of-way could not be purchased,
and the Phase 4 construction funds could not be obligated
in a fiscal year. The department had to then quickly drop
the project and pull another project from the next fiscal
year or even two fiscal years ahead. He provided an example
related to a $30 million project that the state could not
advance because of NEPA issues; the state came very close
to losing the $30 million. He emphasized that the money was
gone forever once it was lost. The department fortunately
had contingency authority and was able to use the money for
the Rich Highway, which was in the STIP and could be
substituted so that the federal aid could be used.
Mr. Armstrong offered to review the Transportation
Improvement Process (TIP).
Representative Gara wanted to make sure that the projects
in the budget were ranked.
Mr. Armstrong replied that the items were ranked. He
explained that AMATS went out to a selection process to all
the community councils and all interested members through
federal guidelines. He noted that the process was a
painstaking one, with staff bringing recommendations to the
technical advisory committee and eventually to the policy
committee and through the assembly process and the planning
and zoning process. He assured the committee that the
projects were thoroughly vetted. He noted that the TIP was
a smaller version of the STIP.
Representative Gara wondered what was left over for rural
communities in the ranking process.
Mr. Armstrong replied that community transportation roads
projects in communities like Dillingham or Kotzebue
competed against roads projects in Juneau or Ketchikan;
DOT/PF had its own elaborate STIP process with amendments.
11:23:35 AM
Co-Chair Thomas queried rumors that DOT/PF was sitting on
$1.5 billion.
Ms. Baker responded that legislative authority, federal
approval, and a STIP project were all required for a
federal highways program. She added that the legislative
authority was for the federal funds as well as the state
matching funds. She explained that when projects came in
under bid, currently the excess funding was listed in the
accounting system with the specific project. The department
went through a process of looking at the excess federal
authority and dropped the federal authority off the books.
Ms. Baker added that there could be large or "mega"
projects, or projects that were tied up in court (such as
the Juneau Access Road); there was authority on the books
for part of the project. She emphasized that most capital
projects in departments were slated for about five years;
however, if the federal process was involved, the process
could average seven to ten years or more, when right-of-way
or environmental issues were involved. She stated that
going back and taking the authority off the books would
affect how the state would proceed with the project. The
state could owe money to the federal government for what
had already been done on the project.
Ms. Baker continued that the state had a lot of unobligated
funding (money that was unemcumbered or unspent) in the
accounting system; that was the appropriation view. There
was also the program project view. There were different
phases of a project, work was being done, and things were
being coded. The department had found through analysis
(using the additional capital budget coordinating position
added by the legislature the year prior) that there were
various relationships: a single appropriation to a single
project, multiple appropriations to a single project, and
multiple appropriations to multiple projects. The view was
very complex, and not all of the data was in one database.
The department was working towards a database that would
include all projects.
Ms. Baker acknowledged that there was excess federal
authority and she said there were ways to clean that up.
11:27:16 AM
Ms. Baker continued that technically speaking, there was
over $2 billion in excess federal authority. There was only
$240 million in general funds. Out of the total
appropriations for the timeframe, the unobligated balance
was about 2 percent of the overall appropriations that the
legislature had funded. There were projects that went back
to 1980. She assured the committee that the department was
in the process of cleaning the books up; in the future,
there would be one internal process.
Ms. Baker turned to another issue that had come up. Some
previous person had put a project in so that the federal
allocation to the state would not be lost; that federal
authority could still be sitting on the books for a project
that was not moving forward for various reasons. Taking the
project off the books might make someone think a project
was taken from their district. The department needed to
organize and coordinate the effort.
Co-Chair Thomas stated that there were hundreds of millions
of dollars that were obligated to the Ketchikan access
bridge and other projects. The legislature had the
impression that there was $1.5 billion that could be
"thrown out the door" to projects; however, that was not
the case, and some of the funds were obligated to specific
projects. He pointed out that road projects in his district
had been purged and put back in under the STIP. He opined
that the department gave preferential treatment to some
projects. He referred to projects in Haines. He wanted to
make it clear that the $1.5 billion was obligated and not
available for the capital budget.
Co-Chair Stoltze believed that it was important to stay
away from politics and to focus on the impacts to the
state's economy.
Vice-chair Fairclough pointed out that Ms. Baker had taken
some time to describe the complexity of the issue before
policy makers. She believed a shorter way was needed to
explain the complexity of the dilemma to Alaskan citizens
in the face of media statements about the so-called extra
money.
11:31:15 AM
Co-Chair Stoltze commented that there had been enough sound
bites and that it was important to be clear about what was
needed. He believed it was important to give the public
real information.
Vice-chair Fairclough remarked that there had been talk of
a scenario in which projects were waiting and bids were
coming in lower. She referred to times when projects were
coming in over and projects had to be repositioned. She
wondered what happened when the projects were more
expensive than anticipated.
Ms. Baker replied that in the past, the department would
come back to the legislature and ask for increased
authority. She said that part of the issue was that on one
hand, the legislature wanted to understand what DOT/PF was
doing with the projects; on the other hand, the department
had been criticized in the past for moving money around.
She noted that election districts could change between
project allocations.
Ms. Baker explained to Co-Chair Thomas that a road project
that was not moving along might have gone back into the
queue, but the funds had to go into another road project.
Funds for a bridge project had to be moved to a bridge
project that had gone through the prioritization process.
Ms. Baker addressed the issue of increased authorization.
She noted that there was a budget amendment that was part
of the governor's budget; the department had asked for $10
million of a wait-restriction type allocation, so that
there would be the ability to go to the Legislative Budget
and Audit Committee to get increased authorization (the
committee could not add new projects but could increase
existing projects). Another avenue was through the
supplemental process; the department would come to the
legislature during the legislative process and ask for
increased funding. She referred to discussion about the
Richardson Highway that had taken place earlier in the
session. The project was slated for the following year, but
the federal authorization of $30 million was necessary to
refill the contingency pot so that on-going projects that
needed a few million dollars here and there would not be
limited.
Ms. Baker noted that other states had a little more
flexibility with their money, as far as making adjustments.
She reiterated that the process was complex.
11:35:54 AM
Representative Edgmon queried commodity prices. He knew
that a lot of DOT/PF projects were tied to petroleum
products and prices. He thought there were risk factors
related to putting the capital budget off until later in
the year, as commodity prices could surge upwards. He
pointed out how everything in rural Alaska was tied to the
cost of fuel, such as barge service and asphalt.
Ms. Baker added that bids coming in lower were not so much
the result of reduced costs but the result of more
competition. She noted that the department would sometimes
ask for increased authority for projects that did not have
full funding. There was a lot of impact from projects being
delayed for over the period of years; the original
estimates could change significantly and require more
authority and more matching funds.
Representative Joule asked whether there were more out-of-
state contractors bidding on Alaska projects and how that
impacted local-hire.
Mr. Kemp replied that the department had not seen a lot of
major contractors successfully submitting a low bid on
projects, but it had noticed increased competition between
smaller contractors and sub-contractors.
11:39:35 AM
Mr. Armstrong noted that someone had been calling him every
three days since November related to the re-appropriation
section of the bill.
Ms. Rehfeld agreed that the process was not a simple one.
Commissioner Luiken summarized that the department was
focused on the current federal fiscal year. He emphasized
that the capital budget situation would have impacts for
the state in both the current and future federal fiscal
years.
Ms. Baker added that not meeting the obligations in the
current year or in FY 12 would establish the baseline for
reductions.
11:42:55 AM
RECESSED
2:05:59 PM
RECONVENED
Ms. Rehfeld stated that the Department of Environmental
Conservation projects would be discussed.
LARRY HARTIG, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION (via teleconference), informed the committee
that the main component of DEC's proposed capital budget
related to facilities programs that were largely water and
wastewater projects throughout Alaska, including both rural
and large communities. There were three facilities
programs: the Village Safe Water Program for small rural
communities, the Municipal Matching Grants for larger
communities (funded with state general fund money matched
with local funds), and the Revolving Loan Fund. He
underlined that all of the programs would be impacted by a
capital budget delay.
Commissioner Hartig pointed out that in FY 12, the three
programs would leverage about $62 million in federal funds,
assuming approval of the governor's request in state
funding. He stated that the funds would create a number of
projects and jobs throughout the state, including in rural
Alaska. Communities were not just dependent on the services
from the Village Safe Water Program, but on the jobs
created. He stressed that the projects would provide safe
drinking water and sanitation throughout the state,
including many rural communities that had not had the
services before.
Commissioner Hartig emphasized the risk in delaying
funding. He stated that slowing down the projects in
anticipation of money coming in later was a better
alternative than going full ahead and running out of money,
which would stop the projects. He warned that there might
not be time or funds to remobilize the projects during the
construction season. He emphasized that there was no
certain "drop dead" date on any of the projects.
2:11:59 PM
Commissioner Hartig began with a review of the Village Safe
Water Project. He explained that the program had a federal
component and a state component. The federal money was for
75 percent of the project and the matching state/local
grant was for the other 25 percent. The FY 11 amount was
$30 million in federal receipt authority that would be
matched with $10 million general funds. He explained that
the federal FY 11 authority had been delayed, but DEC
expected to hear soon from the U.S. Department of
Agriculture and the Environmental Protection Agency (EPA),
the two federal agencies that funded the program, that they
were ready to receive applications for the safe water
grants. He stressed that a delay in getting state capital
funds would mean a delay in applying for federal money.
Neither the state nor federal funds could be used until the
start of the state fiscal year July 1; the question was how
early the department could apply for the federal funds for
the present construction season.
Commissioner Hartig noted that DEC had had discussions with
the federal agencies, which needed at least two weeks to
turn a state grant request into federal dollars. The
department had gone through the larger on-going projects
for the summer that could be impacted by a delay in the
capital budget until September. He estimated that
construction scheduled for the summer could move ahead if
the department was able to get $10 million during the
special session for the safe water project ($7.5 million in
federal receipt authorization and $2.5 million general fund
match), because the projects could be phased. However, DEC
needed assurance that the remainder of the requested funds
($30 million federal funds and state match) would be
available.
2:15:30 PM
Co-Chair Stoltze stressed that there was no guarantee that
the legislature would convene to consider a capital budget
in September.
Commissioner Hartig stated that DEC had not considered the
consequences of a later date. He pointed out that at the
end of the federal fiscal year, the federal agencies were
more pressed and the turn-around time would be longer. He
believed that not getting the state matching funds until
October would make it difficult to deal with the lead time
for the 2012 construction season, including getting
contracts and scheduling barges. He agreed to provide more
information.
2:17:27 PM
Commissioner Hartig turned to the Municipal Grants Program,
explaining that no federal money was associated with the
program, but state general fund money with a local
community match. The governor's proposed budget had a
request for $20 million for the program.
Commissioner Hartig detailed that each year, DEC solicited
larger communities that would not qualify for the Village
Safe Water grants, and asked which projects they wanted to
apply for through the Municipal Grants Program. Criteria
was used to rank the projects applied for; about $20
million in selected projects had been put in the proposed
budget.
Commissioner Hartig explained that eight communities were
slotted to receive the grants for nine different projects
for FY 11 (one community had two projects). When
communities were ranked high on the list and likely to get
funding, they often use their own money to start the
projects and then came back for reimbursement. He
maintained that it was difficult to evaluate the stress
that might occur in the communities if there was a delay in
the capital budget, or no capital budget. At least one of
the communities on the current list did not have the
ability to forward-fund a project, and the project would be
moved back one year.
Co-Chair Stoltze asked the names of the communities on the
list.
Commissioner Hartig listed the communities and their
projects:
· Kodiak: $3.5 million, Ultraviolet secondary water
treatment facility
· Palmer: $2.5 million, Utility extension
· Soldotna: $693,000, Well house construction
· Sitka: $3.5 million, Disinfection facility
· Haines: $0.5 million, Pipe replacement
· Unalaska: $3 million, Water treatment plant
· Ketchikan (two projects): $2.5 million, Water and
sewer main replacement; $1.6 million, Water and sewer
improvement project
· Kenai: $1.5 million, Water transmission main
2:20:36 PM
Commissioner Hartig continued to discuss the Municipal
Grants Matching program. He explained that some communities
would be able to start projects and some would not if the
capital budget were delayed. There was risk for communities
that started the projects; also if part of a capital budget
were formed in the special session for communities that
could not start their own projects, there would be new
criteria for the list and the priority order would be
changed. The department believed that a delay into the fall
could mean substantial delays in projects, possibly until
the next construction season. He stressed that funding the
projects right away was the only way to avoid the delay.
Co-Chair Thomas believed the communities that did not want
the capital budget moved forward were on the list; he
wondered why they were kept at the top and not rolled down
to allow communities that wanted the capital budget to be
at the top.
Commissioner Hartig replied that the department used set
criteria to rank the projects and had not looked at other
factors.
Co-Chair Stoltze believed the question was rhetorical.
2:22:57 PM
Commissioner Hartig turned to the third program, the
Revolving Loan Fund, which had two components; there were
different funds used for drinking water and clean water
projects. The revolving fund was a federal program. Funds
were provided each year to the states, which used the funds
to give loans to communities at favorable interest rates
and terms for drinking water and clean water projects.
Commissioner Hartig noted that more recently, the federal
government had instructed the states to use a portion of
the loan funds for a loan forgiveness program (essentially
grants). The proposed capital budget for FY 12 had an item
called "drinking water capitalization grant subsidy
funding" for about $4 million for the Alaska drinking water
fund, and another request called "clean water
capitalization grant subsidy funding" for $1.8 million for
the Alaska clean water fund. He detailed that the items
were in the capital budget because they were loan
forgiveness portions of the revolving loan fund programs.
Since the monies would not be paid back as loans, the items
had to be in the capital budget.
Commissioner Hartig emphasized that without the capital
budget funds, the state would not get the rest of the money
for the loan program. For example, the $4 million for the
Alaska drinking water fund in the capital budget would
allow the state to get an additional $13.6 million in
federal funds to be used for the revolving loan program for
drinking water; that money appeared in the operating
budget. Similarly, the $1.8 million in the clean water fund
in the capital budget was necessary to attract the $12.2
million federal funds to make loans that appearred in the
operating budget.
2:25:05 PM
Commissioner Hartig stressed that each community's projects
had to be considered individually when looking at the
effects of a delayed capital budget on the revolving loan
funds program. He said that all the federal funds would be
delayed, and that the numbers would be significant.
Commissioner Hartig stated that the department was not as
concerned about losing any of the federal funds connected
with the three programs to another state, although there
was some risk of that. Historically, DEC had been able to
get funds when going after them late. The main concern was
connected with the village safe water program, because the
program was unique to Alaska. Over the past six to eight
years, there had been a precipitous drop in federal funding
for the program; federal funds had gone down 40 percent in
the past six years and continued to go down. He explained
that the program was seen as an earmark rather than a
mainstream, base federal program; opponents could use the
excuse to cut funds to Alaska if funds started accumulating
and were not appropriated and used. The department had been
working hard to make sure the funds were used effectively
and efficiently. He did not want to put the program at
risk.
2:27:40 PM
Representative Edgmon referenced a project in Dillingham, a
sewer line that was in great need of repair as soon as
possible. Part of the sewer line had been exposed and was
near the beachfront. He believed the cost of the project
would be in the range of $4 million and that there were
some funds in the Senate capital budget; if the budget were
delayed, the City of Dillingham would have to come up with
funds from elsewhere in order to access the loan. He
thought the project highlighted how important a timely
capital budget could be for the community in his district,
which was struggling because of rising costs in energy and
health insurance. He asked for more information about the
Dillingham project and wondered whether the $4 million was
tied to the revolving loans fund.
Commissioner Hartig replied that Dillingham was faced with
a relatively dire situation with a sewer line that had been
exposed through erosion and could fail. He stated that the
project was not in the DEC's capital budget.
BILL GRIFFITH, FACILITIES PROGRAMS MANAGER, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION (via teleconference), responded
that the Dillingham project would be a combination of a
capital project grant, along with a loan that DEC was
trying to put together with the city. He believed the loan
would be funded in the upcoming years using the state
revolving loan fund. Potentially, both the grant and the
loan could be impacted if the capital budget was not
approved in time for the summer's construction season.
Representative Edgmon reiterated concerns about the timing
of the capital budget.
Co-Chair Stoltze asked whether the project in Unalaska was
of concern as well.
Representative Edgmon agreed that the project was also
important, although he did not know whether the timing was
as sensitive as the Dillingham project.
Representative Wilson asked whether health and safety
issues were of concern when scoring the projects.
Commissioner Hartig answered in the affirmative.
Representative Wilson wondered whether the communities
would be able to afford the 25 percent matching funds based
on their income if there was a delay in the funding.
Commissioner Hartig replied that the 25 percent match
related to the village safe water program was provided by
the state. He noted that once the project was built, the
communities had to have the capacity to fund it on-going.
Before the project was done, DEC evaluated what was
affordable in the community, and that affected the size of
the project.
Representative Wilson wondered whether the municipal grant
program had a match requirement.
Commissioner Hartig answered in the affirmative. He
explained that the amount of the match was on a sliding
scale; larger communities were required to come up with a
larger match. The match amounts were set by the Alaska
legislature and had been adjusted recently.
Co-Chair Stoltze noted that the adjustment had been made in
2008.
Commissioner Hartig added that the matches ranged from 15
percent to 40 percent.
2:34:20 PM
Representative Wilson stressed that there were significant
safety and health issues related to the capital funding.
She stated concerns. She requested information about costs
for the following year.
Commissioner Hartig stated that there was a tie-in, as a
number of communities used the municipal loan program to
come up with the required state match.
Representative Joule pointed out that the price of oil was
around $110 a barrel; he did look forward to delivery and
purchasing time. He thought about the cost of heating and
fuel for remote rural areas and the water and sewer
projects, which also provided employment. He queried the
potential loss of employment for the season related to
delayed capital requests.
Commissioner Hartig replied that the Village Safe Water Act
passed by the legislature had the goal of providing local
employment and training. He stated that DEC took that
aspect of the program very seriously and was proud of its
record of creating jobs in rural Alaska. He agreed that a
capital budget delay would impact job opportunities in
rural Alaska. Delays could mean a slow-down, which meant a
smaller workforce.
Mr. Griffith stated that any delay on some projects would
mean that DEC had to slow them down so that it could avoid
stopping and demobilizing projects, which would mean laying
workers off. He explained that there would be some layoffs,
with the hope that the employees would stay around until
the project could be funded. A long enough delay would mean
stopping work for the season. He added that costs tended to
go up every year and a delay could mean increased costs.
2:38:59 PM
Co-Chair Stoltze referred to concerns about dates.
Vice-chair Fairclough queried capitalizing federal funds.
Commissioner Hartig replied that the inability to pay back
loans resulted in the capital expense (related to the
revolving loan fund programs).
Vice-chair Fairclough asked who was not able to pay back
the loans.
Commissioner Hartig clarified that there was no question of
a default on a loan; the federal agency (EPA) was providing
the funds for drinking and clean water programs for loan
forgiveness, which was similar to a mini-grant. The
department received the money through the loan-fund program
and would not loan it out but give it out in grants.
Therefore, the money would not be paid back and the program
would be more like a capital project.
Vice-chair Fairclough believed the situation was the
opposite of what DOT/PF had described.
Commissioner Hartig answered in the affirmative.
2:42:32 PM
Representative Wilson raised the issue of air quality in
the North Pole and Fairbanks areas. She referred to money
in the capital budget that would be used to study air-
quality issues, and $3 million for a wood program. She
wondered how a delay in the capital budget would affect the
state's relationship with the EPA.
Commissioner Hartig replied that Fairbanks had a
"nonattainment" issue (small particulate matter that
resulted in the combustion of hydrocarbons) related to the
federal Clean Air Act. He thought the community was working
well with the state and EPA to address the issue. One of
the ways the issue could be addressed was through a change-
out program to efficient wood stoves and wood boilers.
However, there was a federal deadline for coming up with an
attainment plan and reasonable progress towards completing
the plan had to be demonstrated. He agreed that it was
critical to take major steps towards addressing the issue
within the next year or so. He added that the programs
described were not in DEC's budget or the governor's
budget, but were time-sensitive. He pointed out that there
were other monies coming in to address air-quality issues
in Fairbanks and other areas in the state; those funds
would come through federal highway dollars and the DOT/PF
budget. He emphasized that a delay would affect not only
DOT/PF projects, but other air-quality projects in the
state, including in the Fairbanks area.
Representative Wilson wondered whether more money would be
lost if attainment was not achieved.
Commissioner Hartig replied that the punitive aspect of the
Clean Air Act was that federal highway funds could be
restricted if there was no attainment plan and no progress
towards meeting it. He added that the result was a long
ways in the future, and would not happen because of a delay
in the current capital budget.
Representative Wilson commented that people in the
Fairbanks area would preferred to change stoves out in July
or August because of the weather. She emphasized that
ultimately, transportation funds for the whole state could
be impacted.
2:46:19 PM
Co-Chair Stoltze clarified that the issue was nonattainment
and not a lack of available matching federal funds.
Commissioner Hartig agreed. He did not mean to minimize the
possible result, but did not think that several months of
delay in the state capital budget would mean losing the
money to other states. The risk was more long-term (five to
ten years).
2:47:35 PM
AT EASE
2:56:38 PM
RECONVENED
SAM KITO III, MANAGER, SCHOOL FACILITIES SECTION,
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, reviewed the
programs and the impact of a delayed capital budget. He
explained that the facility program of the Department of
Education and Early Development (DEED) annually developed a
prioritized list of school construction and major
maintenance projects. He noted that the priority lists were
the driving factors in development of the governor's
capital budget. The projects were in HB 107 and included 14
items on the major maintenance list and one school
construction project.
Mr. Kito stated that the major maintenance list projects
were in good shape; several projects were ready to go as
soon as money became available July 1. Some project starts
would be impacted if the money was not available July 1;
the projects would be delayed a full year if the budget was
delayed until fall. He anticipated a 2 percent to 5 percent
increase in costs for school construction projects delayed
one year (based on cost estimates by HMS, Inc., which works
for the school districts). The difference in cost would not
incorporate any changes in cost that could occur as a
result of reconstruction activities taking place in Japan
after the tsunami.
Co-Chair Stoltze wondered whether commodity prices had been
taken into consideration.
Mr. Kito replied in the affirmative; HMS, Inc. factored in
expected increases in fuel costs and commodity costs.
Mr. Kito continued that 14 major maintenance projects would
be impacted. The school construction project was a little
further out, but a delayed passage of the capital budget
could possibly impact the start date of construction. The
design process would take a certain amount of time and the
project could be delayed a full season.
Mr. Kito pointed out that the department had two other
projects in the capital budget for the Mt. Edgecumbe High
School (state-run boarding school in Sitka) deferred
maintenance and for the Stratton Library (on the Sheldon
Jackson campus in Sitka and currently owned by DEED) roof
and siding replacement.
3:00:30 PM
Mr. Kito detailed that the Stratton Library building had
been used mainly as storage; a delay in the project could
affect the department's ability to complete roofing and
siding because of escalating costs. He added that Mt.
Edgecombe was in the middle of a heating plant project, and
the construction would be delayed a full year, which could
be impacted by cost escalations as well.
Mr. Kito highlighted two projects on the major maintenance
list. First was a soil and remediation project in Arctic
Village, which was a follow-up to an existing school
replacement project. When the new school was constructed,
the old school was demolished and petroleum product was
found that had to be cleaned up. He stressed that there was
a concern that the petroleum product was moving towards the
school facility.
Mr. Kito turned to the second project in Scammon Bay in the
Lower Yukon School District; a fuel tank placed in an area
behind the school was subject to drifting snow, and the
foundation to nearby facilities had been compromised. The
project would relocate the tank and generator to the other
side of the school building.
3:04:27 PM
Vice-chair Fairclough pointed to Alaska Housing Finance
Corporation (AHFC) teacher health and public safety
professional housing upgrades and asked whether the item
affected anything DEED was doing. She wondered whether
teacher housing affected education in the state.
Mr. Kito stated that the item was not a part of DEED's
program. He added that the capital component of DEED was
for construction of school facilities; the teacher housing
program was managed independently through AHFC, which had
varying levels of funding each year. He did not know the
impact of the item, but he knew there was a backlog of
requests for teacher housing.
Co-Chair Stoltze pointed out that teacher housing was in
the same funding category as housing for nurses.
Vice-chair Fairclough pointed out that $5 million in the
capital budget was at risk for teacher housing, health and
public safety.
Representative Wilson queried the Arctic Village project.
Mr. Kito replied that the new school had been constructed
and the old school was demolished. The item was to clean up
the spill that was the result of activities that had taken
place at the old school. There was a concern that petroleum
product was migrating towards the new school.
Representative Wilson asked how quickly the petroleum was
moving and the possible impact of a delay.
Mr. Kito replied that the district was very interested in
trying to move the project forward in the current year; the
district had started advertising for a contractor, pending
availably of funding.
Representative Gara asked whether the problems with the
described projects would exist if the capital budget was
passed by the end of the special session.
Mr. Kito replied that July 1 was the standard starting date
for all of the projects. The districts were aware that the
money would be available July 1; schedules would be
impacted if there was a delay.
3:08:02 PM
Representative Edgmon wondered whether there was anything
in the capital budget related to energy needs of the
schools.
Mr. Kito replied that there was not a specific
appropriation for school energy needs, but there were a
couple of projects in the capital budget because of a
change made by the legislature the year prior. One project
was a lighting project for the Kake City School District.
Ms. Rehfeld concluded that the capital budget was important
to Alaska, and that she was optimistic about passing the
capital budget.
3:10:04 PM
Co-Chair Stoltze felt optimistic that there would be a
capital budget passed before the end of the special
session.
ADJOURNMENT
The meeting was adjourned at 3:10 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB107Consolidated Amendments to HB107.pdf |
HFIN 5/4/2011 10:00:00 AM |
HB 107 |
| HB107Capital Supplementals not in SB76.pdf |
HFIN 5/4/2011 10:00:00 AM |
HB 107 |
| HB107 Comm. Luiken HFC Testimony_May 4.pdf |
HFIN 5/4/2011 10:00:00 AM |
HB 107 |