Legislature(2019 - 2020)ADAMS ROOM 519

03/15/2019 01:30 PM House FINANCE

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01:34:58 PM Start
01:36:04 PM Fy 20 Budget Overview: Department of Transportation and Public Facilities
02:33:49 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ FY20 Dept. Budget Overview: Dept. of TELECONFERENCED
Transportation
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 15, 2019                                                                                            
                         1:34 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:34:58 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster called the House Finance Committee meeting                                                                      
to order at 1:34 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bart LeBon.                                                                                                      
                                                                                                                                
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Lacey  Sanders, Budget  Director, Office  of Management  and                                                                    
Budget; Amanda  Holland, Management Director,  Department of                                                                    
Transportation  and Public  Facilities; Mary  Siroky, Deputy                                                                    
Commissioner,  Department   of  Transportation   and  Public                                                                    
Facilities.                                                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
FY 20 BUDGET OVERVIEW: DEPARTMENT OF TRANSPORTATION AND                                                                         
PUBLIC FACILITIES                                                                                                               
                                                                                                                                
Co-Chair Foster reviewed the meeting agenda.                                                                                    
                                                                                                                                
^FY  20 BUDGET  OVERVIEW: DEPARTMENT  OF TRANSPORTATION  AND                                                                  
PUBLIC FACILITIES                                                                                                             
                                                                                                                                
1:36:04 PM                                                                                                                    
                                                                                                                                
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET,  indicated Amanda  Holland  would  be speaking  this                                                                    
afternoon.                                                                                                                      
                                                                                                                                
AMANDA   HOLLAND,   MANAGEMENT   DIRECTOR,   DEPARTMENT   OF                                                                    
TRANSPORTATION   AND  PUBLIC   FACILITIES,  introduced   the                                                                    
PowerPoint Presentation:  "FY2020 Governor's  Amended Budget                                                                    
Overview:   Department   of    Transportation   and   Public                                                                    
Facilities."  She  began  with   slide  3:  "FY2020  Budget:                                                                    
Department  of  Transportation  & Public  Facilities"  which                                                                    
showed the  funding comparison between the  FY 19 management                                                                    
plan operating  budget for the Department  of Transportation                                                                    
and  Public Facilities  (DOT)  in comparison  to  the FY  20                                                                    
governor's  amended  budget  from  February  13,  2019.  The                                                                    
difference  between  the  two   budgets  was  a  $57,200,800                                                                    
unrestricted general fund (UGF)  reduction and a $38,849,500                                                                    
designated general fund (DGF)  reduction for a total general                                                                    
fund reduction  of $96,050,300. She conveyed  that the total                                                                    
operating budget  was $593,349,600 for the  FY 19 management                                                                    
plan. The FY 20 governor's  amended budget reflected a total                                                                    
of $533,126,500.                                                                                                                
                                                                                                                                
Ms. Holland  reported fund changes throughout  the operating                                                                    
budget for FY 20 in the  "other" fund category. There was an                                                                    
overall   increase   of   $36,352,300   resulting   from   a                                                                    
$42 million request for interagency  receipts - an authority                                                                    
to  receive   funds  from  other  agencies   for  the  newly                                                                    
established  Division of  Facilities Services.  The division                                                                    
was  a consolidation  of facilities  maintenance across  the                                                                    
enterprise. It  was offset by some  reductions in unrealized                                                                    
receipts in the  other fund category. She  continued that in                                                                    
the federal fund category there  was a reduction of $525,100                                                                    
due to  unrealizable federal receipts  and the  depletion of                                                                    
the  last amount  of the  Adak Airport  operation fund  (the                                                                    
fund  provided  to  the  state  by  the  federal  government                                                                    
several years  prior when Alaska first  took over operations                                                                    
of the airport).                                                                                                                
                                                                                                                                
Vice-Chair Ortiz  asked the reason for  unrealizable federal                                                                    
receipts  in the  amount of  $525,100.  Ms. Holland  replied                                                                    
that  in  the  operating  budget  the  department  had  some                                                                    
authority   to  receive   federal  reimbursement   from  the                                                                    
Transportation Safety  Association (TSA) for  Alaska's rural                                                                    
airports. The federal government  no longer provided as much                                                                    
monetary support for law enforcement  officials at the rural                                                                    
airports. Even  though the  state had  the authority  in the                                                                    
budget, the  federal government was no  longer providing the                                                                    
funding.                                                                                                                        
                                                                                                                                
Ms.  Holland spoke  to the  position  comparison. There  was                                                                    
some slight movement between the  two budgets. She explained                                                                    
that the changes reflected the  positions being moved out of                                                                    
DOT  to  the Office  of  Information  Technology within  the                                                                    
Department  of   Administration  (DOA)   as  well   as  some                                                                    
positions being moved into DOT  as part of the consolidation                                                                    
of facilities services.                                                                                                         
                                                                                                                                
Vice-Chair Ortiz asked about  the potential position changes                                                                    
if  the  governor  were  to move  forward  with  his  budget                                                                    
changes  to  the Alaska  Marine  Highway  System (AMHS).  He                                                                    
wondered  where  the reductions  in  positions  to the  AMHS                                                                    
could be  found. Ms. Holland  responded that  the department                                                                    
was not deleting  any positions in the  operating budget for                                                                    
the AMHS. The positions were  funded for 3 months, 6 months,                                                                    
or a  full year  depending on the  work that  was available.                                                                    
The state  needed all of the  positions in order to  be able                                                                    
to honor the summer schedule.                                                                                                   
                                                                                                                                
1:41:06 PM                                                                                                                    
                                                                                                                                
Co-Chair  Foster responded  that  effectively the  positions                                                                    
would  be  gone but  were  included  because of  the  summer                                                                    
months.  Ms.  Holland  explained that  when  the  department                                                                    
budgeted for the  positions, it was able to  budget them for                                                                    
2 months, 6 months, 8 months,  or 12 months depending on the                                                                    
work and the funding  available. The position control number                                                                    
(PCN),a unique identifier for  each position, would actually                                                                    
stay in the  budget on the department's books  for an entire                                                                    
fiscal  year  based on  the  work  the  state had  for  each                                                                    
position for at least part of the fiscal year.                                                                                  
                                                                                                                                
Ms.   Holland  continued   to  slide   4:  "FY2020   Budget:                                                                    
Department  of Transportation  & Public  Facilities Snapshot                                                                    
($ Thousands)"  which showed some  of the  budget highlights                                                                    
for  FY 20.  The  first  item was  the  AMHS transition,  an                                                                    
overall reduction  in the budget  of combined  general funds                                                                    
of   $97,988,800.  The   total   amount   was  composed   of                                                                    
$64,179,700   UGF   and   $33,809,100   DGF   and   included                                                                    
administration, support, and operations for the AMHS.                                                                           
                                                                                                                                
Vice-Chair Ortiz asked if there  would be a reduction in DGF                                                                    
because  of reduced  revenues  if the  system  were to  shut                                                                    
down.  Ms.   Holland  responded  in  the   affirmative.  She                                                                    
explained  that  the DGF  that  remained  in the  governor's                                                                    
amended  budget  for  FY  20   was  revenue  that  would  be                                                                    
collected during the system's weeks of operation.                                                                               
                                                                                                                                
Vice-Chair  Johnston  asked  about reduced  federal  funding                                                                    
with the  closure of  the AMHS.  Ms. Holland  responded that                                                                    
the department  would be  using all  of its  federal funding                                                                    
receipts in a fiscal year.  The state would not lose federal                                                                    
funding through the AMHS transition.                                                                                            
                                                                                                                                
Co-Chair  Wilson asked  how much  federal funding  the state                                                                    
lost  when it  decided to  build its  ferry system  in-state                                                                    
rather  than using  the state's  request for  proposal (RFP)                                                                    
process. It  was her understanding that  federal funds would                                                                    
have been  available if the  state had gone through  the RFP                                                                    
process, rather than a sole  source award. Ms. Holland would                                                                    
get back to the committee with the information.                                                                                 
                                                                                                                                
Co-Chair Wilson asked why in FY  92 the state had 61 percent                                                                    
in  fare box  recovery versus  33.3  percent in  FY 18.  Ms.                                                                    
Holland did  not know the  ridership history and  the reason                                                                    
for the spike  in 1992 of 450,000 passengers.  In FY 18, the                                                                    
ferry system had  a ridership of about 250,000.  There was a                                                                    
large uptick in 1992. She  mentioned a switch in the state's                                                                    
fare box recovery  rated when the fast  vehicle ferries came                                                                    
online  between  2004 to  2006.  The  original plan  was  to                                                                    
divest some other ferries to  maintain a 9-vessel fleet. She                                                                    
was unsure  why the system  kept operating the  vessels when                                                                    
the fast ferries  came online. As a result,  the state fleet                                                                    
increased to an 11-vessel fleet  and resulted in an increase                                                                    
in operating costs for the following several years.                                                                             
                                                                                                                                
1:46:27 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilson asked  about the  possibility of  using the                                                                    
fleet in  a different way to  reach the 61 percent  in order                                                                    
to  continue  service to  all  locations.  It might  mean  a                                                                    
reduction in route frequency. Ms.  Holland reported that the                                                                    
department had  focused on maximizing  service. It  had been                                                                    
the department's  direction for the  previous 5 or  6 years.                                                                    
However, it was willing to  look at other alternatives and a                                                                    
different  balance between  revenue and  service. She  added                                                                    
that the  department thought  a qualified  marine consultant                                                                    
might  be able  to provide  some viable  options for  how to                                                                    
provide a good balance of service and revenue generation.                                                                       
                                                                                                                                
Representative    Josephson   had    never   sat    on   the                                                                    
transportation  committee. He  asked if  the fleet  would be                                                                    
turned over to a private  operation. He wanted to understand                                                                    
the administration's  plan. Ms.  Holland responded  that the                                                                    
department wanted to  identify the ways in  which to realize                                                                    
reductions   in   the   state's  financial   liability   and                                                                    
obligations. The door was open  to look at several different                                                                    
options.  Options   included  privatization,  public-private                                                                    
partnership,  refining  service,   and  other  options.  The                                                                    
department recently put  out a request for  proposal for the                                                                    
consultant  and included  9 or  10 possibilities  as options                                                                    
for transitioning the AMHS to a more sustainable system.                                                                        
                                                                                                                                
Representative   Josephson   asked  how   many   consultants                                                                    
applied.  Ms. Holland  indicated  the state  had received  1                                                                    
proposal  that was  currently being  evaluated to  determine                                                                    
whether it met the criteria.                                                                                                    
                                                                                                                                
Representative Josephson  asked if the  administration would                                                                    
consider looking  at the  issue next  year because  not many                                                                    
proposals had been submitted. Ms.  Holland reported that the                                                                    
administration was looking at  a full implementation for the                                                                    
following  year.  She  would  be  happy  to  ask  about  the                                                                    
possibility of changing the current timeline.                                                                                   
                                                                                                                                
1:50:28 PM                                                                                                                    
                                                                                                                                
Representative  Knopp   mentioned  the  state   receiving  a                                                                    
significant  amount of  federal dollars  for transportation.                                                                    
He was  aware that federal dollars  associated with airports                                                                    
came  with  strings  attached.  He  asked  if  strings  were                                                                    
attached  for  the  AMHS.  If  so,  he  wondered  about  the                                                                    
liability to the state.                                                                                                         
                                                                                                                                
Ms. Holland replied that all  of the federal funding for the                                                                    
AMHS was  received from the Federal  Highway Administration.                                                                    
The Federal  Highway Administration had a  different payback                                                                    
policy  for  the  AHS  compared   to  the  Federal  Aviation                                                                    
Administration. For example, if  the state were to calculate                                                                    
its  responsibility  when  it was  disposing  of  a  federal                                                                    
highway  funded ferry  vessel asset,  first the  state would                                                                    
have to  calculate the  federal share.  In other  words, the                                                                    
state would have to calculate how  much it would owe back to                                                                    
the federal government.                                                                                                         
                                                                                                                                
Ms. Holland  explained the Federal  Highway Administration's                                                                    
procedure. The costs expended on  the vessel were identified                                                                    
by  year  in three  categories:  federal,  state match,  and                                                                    
other state  funds. The figures  were converted to  the year                                                                    
of  sale using  an inflation  rate. Afterwards,  the sum  of                                                                    
each category of  year and current year  value were totaled.                                                                    
The  federal share  was  the fraction  of  funds divided  by                                                                    
total  funds and  expressed as  a percentage.  She used  the                                                                    
example of the M/V Taku  which was recently divested. First,                                                                    
the department had the expenditures  with no inflation, then                                                                    
the department did  the conversion to 2016  dollars, and the                                                                    
federal share percentage was calculated  to be 63.9 percent.                                                                    
She  asserted that  the percentage  would  be different  for                                                                    
every  vessel  depending  on  how  much  federal  money  was                                                                    
invested in the  vessel and how long ago  the state invested                                                                    
the federal funds into the vessel.                                                                                              
                                                                                                                                
Ms.  Holland continued  that the  department  looked at  how                                                                    
much it  would receive for  the vessel. The  department used                                                                    
statutory state disposal methodology.  The M/V Taku sold for                                                                    
a gross  price of $4,000,000  and the  cost of the  sale was                                                                    
$550,000. The net  receipt for the M/V  Taku was $3,450,000.                                                                    
After  the net  price  was determined,  the department  took                                                                    
63.9 percent of  federal funds and subtracted  the amount of                                                                    
$2,204,550. The  remainder of  $1,200,000 was  state funding                                                                    
and remained  with the  state. The  federal funding  of 63.9                                                                    
percent or $2,204,500 was applied  to another Alaska federal                                                                    
aid project  and could  qualify as a  state match.  It could                                                                    
also be applied  to another federal capital  project such as                                                                    
a road or bridge.                                                                                                               
                                                                                                                                
Representative Knopp asked if a  full analysis had been done                                                                    
for the entire system. He  wondered about the bottom line if                                                                    
the  system  were  to  end. Ms.  Holland  replied  that  the                                                                    
administration  had not  done a  full  analysis because  the                                                                    
department was waiting for the  options the consultant would                                                                    
be  providing. It  could change  things significantly.  They                                                                    
might recommend divesting  one or two assets  or all assets.                                                                    
All of the AMHS assets combined were worth $1.1 billion.                                                                        
                                                                                                                                
1:55:45 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz brought  up the  formula  Ms. Holland  had                                                                    
reviewed.  He  wanted  to  clarify  that  the  63.9  percent                                                                    
federal funding would  not have to be repaid  to the federal                                                                    
government  but  could  be  used  for  other  projects.  Ms.                                                                    
Holland indicated he  was correct. She noted  that the money                                                                    
had  to  be  used  for other  federal  aid  projects  (other                                                                    
Federal   Highway  Administration   funded  projects).   She                                                                    
confirmed that  the state would  be able to reuse  the money                                                                    
rather than paying it back to the federal government.                                                                           
                                                                                                                                
Vice-Chair Ortiz  asked if  the same would  be true  for the                                                                    
terminals in which federal dollars  were used to build them.                                                                    
Ms. Holland  responded that it  did not apply  to facilities                                                                    
such  as terminals  and docks.  She  would get  back to  the                                                                    
committee about the process.                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  asked if  she  know  enough to  determine                                                                    
whether  the   state  would  be  negatively   or  positively                                                                    
affected. Ms.  Holland did  not know  much about  the issue.                                                                    
She was  aware there was  a different payback process  for a                                                                    
land-based operation.                                                                                                           
                                                                                                                                
Vice-Chair  Ortiz asked  if anyone  from the  department had                                                                    
looked  into the  issue. Ms.  Holland was  aware of  several                                                                    
engineers  and transportation  planners  who  had looked  at                                                                    
what the process  would be. She knew they  were working with                                                                    
the  Federal  Highway  Administration to  better  understand                                                                    
what the process would look  like. The department focused on                                                                    
the  vessel  first  and just  received  information  on  the                                                                    
vessel process in  the prior week. They were  looking at the                                                                    
facilities information next.                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  suggested that  the decision to  shut down                                                                    
the  ferry  system  had  occurred   before  the  report  was                                                                    
released.  He thought  the legislature  was  being asked  to                                                                    
make a decision without all of the information.                                                                                 
                                                                                                                                
Co-Chair  Foster  interjected  that  Mary  Siroky  from  the                                                                    
department might  be able to  respond to  Vice-Chair Ortiz's                                                                    
questions.                                                                                                                      
                                                                                                                                
1:59:48 PM                                                                                                                    
                                                                                                                                
MARY    SIROKY,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                    
TRANSPORTATION AND  PUBLIC FACILITIES,  had not had  time to                                                                    
brief the  Office of Management  and Budget.  The department                                                                    
had just  heard earlier in the  day at a staff  meeting that                                                                    
the process  for facilities  was basically  the same  as for                                                                    
vessels. She  elaborated that whatever money  the department                                                                    
took in and the related  percentage was the state's to spend                                                                    
as match funding or as part of a federal aid project.                                                                           
                                                                                                                                
Vice-Chair  Ortiz  asked  about the  historical  investments                                                                    
made by the  federal government. He asked if  there would be                                                                    
an obligation by  the state to sell off or  repay money back                                                                    
to  the federal  government.  Ms. Siroky  reported that  the                                                                    
department would do a similar  present net value calculation                                                                    
which would lead  to the federal and  state percentages. The                                                                    
percentage  would   be  applied   to  a  sales   price.  The                                                                    
percentage  of state  funds would  be put  into the  general                                                                    
fund and the  percentage of federal funds  would remain with                                                                    
the state and be used for federal aid projects.                                                                                 
                                                                                                                                
Ms.  Holland continued  speaking  to slide  4. She  reported                                                                    
that  the proposed  FY 20  governor's  amended budget  would                                                                    
adjust the  operating weeks  [days] for the  AMHS. In  FY 19                                                                    
the  number  of  operating  weeks  [days]  was  345.9  weeks                                                                    
[days]. In FY  20 it would reduce down to  84.8 weeks [days]                                                                    
which would allow the AMHS  to honor its published schedule.                                                                    
The  Alaska Marine  Highway  System  published its  schedule                                                                    
through September. In June or  July the system would publish                                                                    
its schedule.  Schedules only came  out 5  to 6 months  at a                                                                    
time.                                                                                                                           
                                                                                                                                
Ms.  Holland  continued  that the  department  was  given  a                                                                    
directive   from   the   governor  to   identify   potential                                                                    
reductions   to  the   state's   financial  obligation   and                                                                    
liability  as  related to  the  AMHS.  The report  from  the                                                                    
consultant was due  on August 1, 2019 and  would include the                                                                    
information that  was in several other  reports. She relayed                                                                    
that through the years the  department had produced a number                                                                    
of  reports about  the AMHS.  However, none  of them  took a                                                                    
hard  look  at how  the  AMHS  could  transition to  a  more                                                                    
sustainable and  affordable system. Some of  the examples of                                                                    
the reports  the consultant would  reference as well  as new                                                                    
information they would be gathering  included a 2012 systems                                                                    
analysis,  a 2015  tariff analysis,  a 2016  economic impact                                                                    
analysis, 2017  phase 1 and  2 Alaska Marine  Highway reform                                                                    
reports,  numerous  annual  traffic volume  reports,  annual                                                                    
financial  reports, and  various  vessel condition  reports.                                                                    
There was a significant  amount of information available and                                                                    
there  was new  information  for the  department to  gather,                                                                    
compile, and synthesize.                                                                                                        
                                                                                                                                
Vice-Chair Ortiz returned  to the topic of  a consultant. He                                                                    
asked if  the deadline for the  submission of an RFP  from a                                                                    
consultant  was  March  11,   2019.  Ms.  Holland  responded                                                                    
affirmatively.  Vice-Chair  Ortiz  clarified that  only  one                                                                    
vendor  submitted an  RFP. Ms.  Holland responded,  "That is                                                                    
correct." Vice-Chair Ortiz  asked how long the  RFP had been                                                                    
posted.  Ms.  Holland  replied that  the  informal  RFP  was                                                                    
submitted on March 1, 2019.                                                                                                     
                                                                                                                                
2:05:17 PM                                                                                                                    
                                                                                                                                
Representative Josephson wondered  if the administration was                                                                    
asking  legislators to  defund something  before they  had a                                                                    
report describing  what a  replacement operation  might look                                                                    
like. Ms. Holland replied that  the administration had asked                                                                    
the department to look at  various options. Currently, there                                                                    
was  an option  on the  table in  the budget  to discontinue                                                                    
service beginning  August 1,  2019 which  would be  the plan                                                                    
going forward.  Once received,  the consultant  report would                                                                    
indicate future plans for FY 21 and beyond.                                                                                     
                                                                                                                                
Representative  Josephson  suggested   that  in  the  window                                                                    
between  October 1,  2019 and  2021 there  would not  be any                                                                    
ferry service until a new  proposal was adopted. He wondered                                                                    
if he was correct. Ms.  Holland indicated the AMHS would not                                                                    
provide  service. She  could not  speak  to whether  private                                                                    
operators would provide service in its stead.                                                                                   
                                                                                                                                
Vice-Chair Johnston  asked if the  costs related  to storing                                                                    
the ferries  were in  the budget.  Ms. Holland  responded in                                                                    
the positive.  She indicated that  the FY 20 budget  and the                                                                    
plan that  the department had proposed  with sailings ending                                                                    
October 1, 2019 accounted for  any layup requirements of the                                                                    
vessels. The  state would continue  to care and  protect its                                                                    
assets even if they were not running.                                                                                           
                                                                                                                                
Ms. Holland turned  to slide 5: "  FY2020 Budget: Department                                                                    
of    Transportation    &   Public    Facilities    Snapshot                                                                    
($ Thousands) [con't.]." She reported  another change in the                                                                    
FY 20  governor's amended  budget -  a reduction  in funding                                                                    
for rural airports  in the amount of $46,900  UGF. The state                                                                    
had 237 rural  airports that were owned and  operated by DOT                                                                    
including  some  seaplane  bases.   She  reported  that  the                                                                    
governor  issued  a  directive  on  February  13th  for  the                                                                    
department  to  analyze  options for  reducing  the  state's                                                                    
financial obligation  and liability  as it related  to rural                                                                    
airports  while  also  considering  the  importance  of  air                                                                    
travel  for  many  rural  communities.  The  department  was                                                                    
establishing   a  formal   divestment  process.   The  total                                                                    
operating costs  for the rural  airport system in FY  18 was                                                                    
$35.6 million.  The total  revenues in FY  18 for  the rural                                                                    
airport  system was  $10.9  million  which included  airport                                                                    
leasing receipts of $6.3 million  and aviation fuel taxes of                                                                    
$4.5 million.                                                                                                                   
                                                                                                                                
2:09:05 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster had  looked at the breakdown  of the $46,900                                                                    
figure. He thought for the  Northern region $17,000 could be                                                                    
saved. There  was a list  in the finance subcommittee  of at                                                                    
least 17 airports which meant  that $1,000 or less was being                                                                    
spent at some of the airports.  He asked what kind of things                                                                    
happened at the rural airports.  He wondered if there was an                                                                    
assessment each year  where someone went out  to the airport                                                                    
sites to evaluate  them at a cost of about  $1,000. He asked                                                                    
her to clarify how the $17,000 was being spent.                                                                                 
                                                                                                                                
Ms. Holland  answered that the  airports had  varying costs.                                                                    
The most  expensive airports  to operate  were the  part 139                                                                    
airports -  airports with jet service.  The Federal Aviation                                                                    
Administration   had  higher   requirements  for   operation                                                                    
including  qualified  firefighters,  certain  lighting,  and                                                                    
runway   lengths.  Some   of  the   state's  airports   were                                                                    
classified   as  "backcountry"   airports  which   were  not                                                                    
maintained. Pilots  used those  airports at their  own risk.                                                                    
The  Department  of  Natural  Resources  (DNR)  had  several                                                                    
backcountry airports as  well. The state had  a few airports                                                                    
on the road system  which required equipment officers caring                                                                    
for the  roads to provide  for snow and ice  management. The                                                                    
department would look  at the conditions of  the airports to                                                                    
determine  where the  $17,000  reduction  could be  absorbed                                                                    
having the least impact on runways being operable.                                                                              
                                                                                                                                
Co-Chair   Wilson  asked   why  the   state  was   replacing                                                                    
$3,761,000 of  vehicle rental with UGF.  Ms. Holland replied                                                                    
that each  year the  appropriations of vehicle  rental taxes                                                                    
equaled actual revenue collections  in the previously closed                                                                    
fiscal year. The governor directed  OMB to include a capitol                                                                    
appropriation of 70 percent of  the available vehicle rental                                                                    
taxes to the  Alaska Travel Industry Association  as a named                                                                    
recipient  grant. The  required replacement  of the  vehicle                                                                    
rental taxes existed  in three departments to  allow them to                                                                    
maintain the  level of services provided:  The Department of                                                                    
Transportation  and  Public  Facilities, the  DNR,  and  the                                                                    
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
Co-Chair  Wilson asked  for the  previous year's  percentage                                                                    
for  the travel  industry.  Ms. Sanders  responded that  the                                                                    
entire  available  amount  was   distributed  to  the  three                                                                    
agencies. There  was not  a specific  allocation to  a named                                                                    
recipient grant.                                                                                                                
                                                                                                                                
Co-Chair Wilson asked if it  was general funds that went out                                                                    
to  the  travel  industry  the previous  year.  Ms.  Sanders                                                                    
confirmed that  it was  general funds that  went out  in the                                                                    
prior year.                                                                                                                     
                                                                                                                                
Co-Chair  Wilson  pointed  out   that  the  state  was  also                                                                    
replacing the  motor fuel  tax of  $1,232,000 with  UGF. She                                                                    
asked about  the short funding.  Ms. Holland  explained that                                                                    
the  Department  of  Revenue  did its  best  every  year  to                                                                    
project the  total amount  of motor fuel  tax that  would be                                                                    
collected. The  motor fuel  tax collection  rate was  not as                                                                    
high as  projected which was  the reason the  department was                                                                    
asking for  UGF instead. She  commented that there  had been                                                                    
an  increase  in  energy efficiency.  She  noted  more  fuel                                                                    
efficient  cars that  could operate  for  longer. She  noted                                                                    
there had been  an uptick in the use of  electric cars which                                                                    
the  department thought  contributed to  the impact  of less                                                                    
motor fuel taxes being collected.                                                                                               
                                                                                                                                
2:14:21 PM                                                                                                                    
                                                                                                                                
Co-Chair   Wilson  asked   for   the  FY   18  actuals   and                                                                    
projections.  Ms. Holland  would get  back to  the committee                                                                    
with the information.                                                                                                           
                                                                                                                                
Co-Chair  Wilson   noted  airport  leasing   receipts  being                                                                    
replaced with  UGF in  the amount  of $1,985,000.  She asked                                                                    
for an explanation  of the change. Ms.  Holland reported the                                                                    
state having some unrealizable  receipts in the department's                                                                    
airport leasing  receipts primarily  due to the  downturn in                                                                    
the Deadhorse  area. Leasing receipts in  Deadhorse had gone                                                                    
down significantly  as well  as an  overall downturn  in the                                                                    
oil  industry. It  impacted the  amount of  money the  state                                                                    
brought in through airport leasing receipts.                                                                                    
                                                                                                                                
Co-Chair Wilson  asked about revenue verses  operating costs                                                                    
at  the Deadhorse  Airport. Ms.  Holland  reported that  for                                                                    
FY 18 operating costs for Deadhorse  were $2,647,000 and the                                                                    
annual revenue was $2,250,000.                                                                                                  
                                                                                                                                
Co-Chair  Wilson asked  if the  department could  change the                                                                    
fees  to  cover  costs   through  regulations.  Ms.  Holland                                                                    
responded that  the department had  the authority  to change                                                                    
landing fees through the regulation  process. There had been                                                                    
pushback   from  carriers   regarding  the   possibility  of                                                                    
instituting landing  fees. She  indicated that  recently the                                                                    
community  of Sand  Point wanted  to become  a part  139 jet                                                                    
service airport.  The carrier flying  into the area  as well                                                                    
as the  community requested landing  fees to help  cover the                                                                    
increased cost of maintenance by  upgrading the airport to a                                                                    
part 139  facility. The department had  some success stories                                                                    
where it was  able to maintain a  sustainable and affordable                                                                    
airport service by working with the communities.                                                                                
                                                                                                                                
Representative  Josephson brought  up vehicle  rental taxes.                                                                    
He  wondered if  the revenue  shift would  largely cure  the                                                                    
travel  industry's problem.  He suggested  that some  of the                                                                    
vehicle rental  tax was being  moved from DOT to  the travel                                                                    
industry.                                                                                                                       
                                                                                                                                
2:18:41 PM                                                                                                                    
                                                                                                                                
Ms.  Sanders  reported  a  long  history  with  the  tourism                                                                    
industry  and  the  vehicle   rental  tax  collections.  The                                                                    
vehicle rental  tax collections  were designated  in statute                                                                    
for   the  purpose   of  tourism   marketing  and   economic                                                                    
development.  Several years  prior, a  decision was  made to                                                                    
distribute the funding  to highways in DOT,  to parks within                                                                    
DNR, and  to economic  development within the  Department of                                                                    
Commerce, Community  and Economic Development  (DCCED). Over                                                                    
the years there had been some  level of funding that went to                                                                    
Alaska Tourism  Marketing through  a named  recipient grant.                                                                    
Tourism was managed within DCCED.                                                                                               
                                                                                                                                
Ms.  Sanders  continued  that the  request  in  the  capital                                                                    
budget appropriated 70 percent of  what was collected in the                                                                    
prior  closed  fiscal year.  The  estimated  70 percent  was                                                                    
based on  a few  economic studies  that had  been completed.                                                                    
One study,  done by the  McDowell group, identified  the use                                                                    
of the funding available  for tourism marketing. She relayed                                                                    
that the funding  was a tax. It was essentially  UGF but was                                                                    
designated  in statute  for a  purpose. The  legislature had                                                                    
the ability to spend the funding  as it saw fit. It could be                                                                    
spent on anything from a  fish study to tourism depending on                                                                    
the will  of the legislature.  The proposal in front  of the                                                                    
committee  was  to  follow the  allocation  of  70  percent.                                                                    
Therefore,  it required  backfill  of general  funds in  the                                                                    
remaining departments  in order  to preserve the  same level                                                                    
of service for the departments.                                                                                                 
                                                                                                                                
Representative  Josephson assumed  the tourism  industry was                                                                    
delighted,   felt   protected,    and   no   longer   needed                                                                    
legislation. Ms.  Sanders could not  speak on behalf  of the                                                                    
tourism  industry. In  her  previous  interactions with  the                                                                    
industry,  they  had  expressed  that  the  money  collected                                                                    
should  go  to  their  industry. She  reminded  members  the                                                                    
funding  was subject  to appropriation.  She  was aware  the                                                                    
industry's  request   had  varied  from   year-to-year.  She                                                                    
recalled previous funding level  requests of $20 million and                                                                    
$16 million.                                                                                                                    
                                                                                                                                
2:22:01 PM                                                                                                                    
                                                                                                                                
Representative  Josephson asked  if  there  were any  safety                                                                    
considerations  with  rural  airport closures.  Ms.  Holland                                                                    
responded  that  safety was  one  of  the first  things  the                                                                    
department  considered when  identifying potential  airports                                                                    
for    closure,   divestment,    or   reclassification    to                                                                    
backcountry. One  of the first things  the department looked                                                                    
at  was the  Federal Aviation  Administration's purpose  and                                                                    
need. The  department considered  whether an airport  was an                                                                    
essential  service  airport or  an  airport  that no  longer                                                                    
provided an essential service. For  example, the state's jet                                                                    
service (part 139) airports were  not included in the review                                                                    
of  potential  divestment  or  reclassification.  They  were                                                                    
serving  an essential  need and  purpose as  defined by  the                                                                    
Federal Aviation Administration.                                                                                                
                                                                                                                                
Ms.  Holland continued  that the  department also  looked at                                                                    
other  things   in  the   review  which   was  why   it  was                                                                    
establishing  a formal  process.  The department  considered                                                                    
the  proximity   of  alternative  airports.  She   used  the                                                                    
community of  Ugashik as  an example.  It had  12 residents.                                                                    
The annual  airport maintenance contract was  $4,800, and an                                                                    
alternate privately  owned airport  existed a 1/2  mile away                                                                    
from   the  DOT   airport.  The   owners  had   expressed  a                                                                    
willingness to  work with the  department. The  question was                                                                    
whether  it was  worth maintaining  an airport  when another                                                                    
was available a 1/2 mile away.                                                                                                  
                                                                                                                                
Ms.  Holland relayed  that there  were several  other things                                                                    
the  department considered  including population.  The state                                                                    
currently  had 5  airports in  communities with  no official                                                                    
population. She noted that the  airport at Deadhorse was one                                                                    
that  needed  to   be  maintained  even  though   it  had  a                                                                    
population of  zero. The Deadhorse airport  was an important                                                                    
part of the  Alaska economy and would not  be considered for                                                                    
divestment or  reclassification. Safety was also  a concern,                                                                    
and  the  Federal  Aviation Administration  had  strict  and                                                                    
clear safety requirements. One of  the top priorities of the                                                                    
department was  to ensure  that the  airports the  state was                                                                    
responsible for were safe.                                                                                                      
                                                                                                                                
Co-Chair  Foster  asked if  an  airport  closure meant  that                                                                    
services such as  snow removal would no  longer be provided.                                                                    
He  thought the  airports would  not be  barricaded off  and                                                                    
could be used for  emergency landings. Ms. Holland responded                                                                    
that technically  they would be  open without  receiving any                                                                    
care or maintenance.                                                                                                            
                                                                                                                                
Representative Josephson  returned to the topic  of ferries.                                                                    
He  noted that  one of  the purposes  for the  Juneau Access                                                                    
Road was  to provide a  ferry terminal closer to  Skagway or                                                                    
Haines.  He wondered,  if the  state  did not  have a  ferry                                                                    
system,  whether the  road project  would  be impacted.  Ms.                                                                    
Holland was not  qualified to make policy  decisions for the                                                                    
department.                                                                                                                     
                                                                                                                                
2:26:47 PM                                                                                                                    
                                                                                                                                
Representative   Josephson   mentioned   the   $42   million                                                                    
interagency   receipts    for   highways,    aviation,   and                                                                    
facilities.   Ms.   Holland   had   brought   up   the   new                                                                    
consolidation of facilities services.  He wondered where the                                                                    
funds  would come  from.  Ms. Holland  replied  that it  was                                                                    
authority  that  would  allow   DOT  to  accept  interagency                                                                    
receipts  from the  clients (other  state  agencies and  the                                                                    
Court   System).   Currently,    DOT   provided   facilities                                                                    
maintenance  for  the   Court  System.  Through  interagency                                                                    
receipt authority the department  could receive funds to pay                                                                    
for the facility maintenance work it performed.                                                                                 
                                                                                                                                
Representative Josephson  asked if the funds  were reflected                                                                    
on the  other side of the  ledger. In other words,  were the                                                                    
funds currently  traveling through interagency  receipts, or                                                                    
were the  $42 million  new dollars the  state would  have to                                                                    
raise.   Ms.  Holland   explained  that   the  Division   of                                                                    
Facilities Services was established in  FY 18 and began with                                                                    
DOT. It  more recently  added some  facilities from  DOA and                                                                    
the  Department of  Education  and  Early Development.  More                                                                    
departments  were  coming  online  every  fiscal  year.  The                                                                    
departments  already had  their  authority  and funding  for                                                                    
care and maintenance of facilities.  The $40 million allowed                                                                    
DOT to  have the funds  transferred to DOT when  it provided                                                                    
service. The  actual funding was  already with  the agencies                                                                    
for the work they were  currently doing for facilities. When                                                                    
it  was  consolidated  within  the  Division  of  Facilities                                                                    
Services,  the department  would have  to have  authority in                                                                    
place to accept the funding.                                                                                                    
                                                                                                                                
Vice-Chair Johnston asked if there  was a way to compare the                                                                    
costs  of maintaining  the facilities  and the  department's                                                                    
projected costs.  Ms. Holland responded  that she  would get                                                                    
the information back to the committee.                                                                                          
                                                                                                                                
Co-Chair Foster  asked for  additional detail  regarding the                                                                    
$46 million  for rural airports. He  provided some examples.                                                                    
He wondered  how much of the  cost had something to  do with                                                                    
driving to an airport to  assess its condition. He suggested                                                                    
setting  some   money  aside  rather  than   making  a  full                                                                    
reduction. He  was concerned that, without  someone checking                                                                    
on an airport, the state would  not be aware of any problems                                                                    
that might  arise. He  thought a  plan might  need to  be in                                                                    
place of having assessments done.                                                                                               
                                                                                                                                
Co-Chair Wilson mentioned the current  fuel tax. She thought                                                                    
user fees should be examined  for both the highway system as                                                                    
well  as   the  Alaska   Marine  Highway  System   to  cover                                                                    
maintenance expenses.  She wanted  to be looking  at apples-                                                                    
to-apples. She  thought the  conversation would  be ongoing,                                                                    
as maintenance was important.                                                                                                   
                                                                                                                                
Ms. Sanders referred back to  the tourism marketing tax. She                                                                    
would check her numbers and get back to the committee.                                                                          
                                                                                                                                
Co-Chair  Foster  reviewed  the  agenda  for  the  following                                                                    
Monday.                                                                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:33:49 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:33 p.m.                                                                                          

Document Name Date/Time Subjects
HFC 3.15.19 FY2020 Gov Amend Budget DOT.pdf HFIN 3/15/2019 1:30:00 PM
HFIN Budget Overview - DOT