Legislature(2009 - 2010)HOUSE FINANCE 519

02/04/2009 01:30 PM FINANCE

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01:35:15 PM Start
01:38:42 PM HB81 || HB83
02:39:58 PM Commerce, Community and Economic Development
03:26:27 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Budget Overviews: TELECONFERENCED
Dept. of Transportation and Public
Commerce, Community and Economic
<Above Item Rescheduled from 02/03/09>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      February 4, 2009                                                                                          
                         1:35 p.m.                                                                                              
1:35:15 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Hawker  called the  House Finance Committee  meeting                                                                   
to order at 1:35 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Mike Hawker                                                                                                      
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Vice-Chair                                                                                      
Representative Allan Austerman                                                                                                  
Representative Harry Crawford                                                                                                   
Representative Anna Fairclough                                                                                                  
Representative Richard Foster                                                                                                   
Representative Les Gara                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Woodie Salmon                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative Kyle Johansen;  Leo Von Scheben, Commissioner,                                                                   
Department  of Transportation  and  Public Facilities;  Frank                                                                   
Richards,   Deputy   Commissioner   of  Highways   &   Public                                                                   
Facilities,   Department   of   Transportation   and   Public                                                                   
Facilities;  Jim   Beedle,  Deputy  Commissioner   of  Marine                                                                   
Operations,    Marine   Highway    System,   Department    of                                                                   
Transportation   and   Public   Facilities;   Nancy   Slagle,                                                                   
Director, Division of Administrative  Services, Department of                                                                   
Transportation and Public Facilities;  Frank Richards, Deputy                                                                   
Commissioner of  Highways & Public Facilities,  Department of                                                                   
Transportation   and    Public   Facilities;    Emil   Notti,                                                                   
Commissioner, Department of Commerce,  Community and Economic                                                                   
Development;    Amanda   Ryder,    Director,   Division    of                                                                   
Administrative  Services, Department  of Commerce,  Community                                                                   
and Economic  Development; Joe Austerman, Manager,  Office of                                                                   
Economic Development,  Department of Commerce,  Community and                                                                   
Economic Development.                                                                                                           
PRESENT VIA TELECONFERENCE                                                                                                    
HB 81     "An Act making appropriations for the operating                                                                       
          and loan program expenses  of state government, for                                                                   
          certain programs,  and to capitalize  funds; making                                                                   
          supplemental     appropriations;     and     making                                                                   
          appropriations   under   art.   IX,   sec.   17(c),                                                                   
          Constitution of the  State of Alaska; and providing                                                                   
          for an effective date."                                                                                               
          Budget Overviews:                                                                                                     
          Department of Transportation  and Public Facilities                                                                   
          Commerce, Community and Economic Development                                                                          
          HB 81  was HEARD and HELD in Committee  for further                                                                   
HB 83     "An Act making appropriations for the operating                                                                       
          and  capital  expenses  of the  state's  integrated                                                                   
          comprehensive mental  health program; and providing                                                                   
          for an effective date."                                                                                               
          HB 83  was HEARD and HELD in Committee  for further                                                                   
HOUSE BILL NO. 81                                                                                                             
     "An  Act making  appropriations  for  the operating  and                                                                   
     loan program  expenses of state government,  for certain                                                                   
     programs, and  to capitalize funds;  making supplemental                                                                   
     appropriations;  and  making appropriations  under  art.                                                                   
     IX,  sec. 17(c),  Constitution of  the State of  Alaska;                                                                   
     and providing for an effective date."                                                                                      
HOUSE BILL NO. 83                                                                                                             
     "An  Act making  appropriations  for  the operating  and                                                                   
     capital    expenses    of   the    state's    integrated                                                                   
     comprehensive mental  health program; and  providing for                                                                   
     an effective date."                                                                                                        
1:38:42 PM                                                                                                                    
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES                                                                            
LEO VON SCHEBEN,  COMMISSIONER, DEPARTMENT  OF TRANSPORTATION                                                                   
AND PUBLIC  FACILITIES (DOT/PF), introduced  department staff                                                                   
present  at  the  meeting  and   discussed  the  departmental                                                                   
structure of DOT (Copy on File).                                                                                                
1:40:18 PM                                                                                                                    
Commissioner  von Scheben listed  accomplishments within  the                                                                   
department  during  2008.  He   spoke  of  a  strategic  plan                                                                   
developed  by the  department and  highlighted five  business                                                                   
goals within the plan that the department hopes to achieve:                                                                     
   · Improve the safety of the transportation system                                                                            
   · Develop a transportation system that supports and                                                                          
     promotes economic development                                                                                              
   · Improve individual and collective performance                                                                              
   · Conduct business in an open and honest manner                                                                              
   · Promote career growth and safety for all staff                                                                             
Commissioner  von Scheben believed  that the newly  developed                                                                   
goals were realistic.                                                                                                           
1:42:18 PM                                                                                                                    
Commissioner  von  Scheben  was   excited  about  the  nearly                                                                   
completed Alaska  Marine Highway Systems (AMHS)  analysis. He                                                                   
stated  that   the  department  is  discussing   the  gasline                                                                   
infrastructure. He listed other  departments that DOT/PF will                                                                   
work  with   in  a  coordinated  effort   concerning  gasline                                                                   
infrastructure needs.                                                                                                           
1:44:14 PM                                                                                                                    
Co-Chair Stoltze  asked Commissioner  von Scheben  to outline                                                                   
the  distribution  of  safety  responsibilities  between  the                                                                   
department and  the railroad. He was particularly  interested                                                                   
in public safety at grade crossings.                                                                                            
FRANK  RICHARDS, DEPUTY  COMMISSIONER  OF  HIGHWAYS &  PUBLIC                                                                   
FACILITIES,   DEPARTMENT   OF   TRANSPORTATION   AND   PUBLIC                                                                   
FACILITIES,   answered   that   the   Alaska   Railroad   was                                                                   
established  before  DOT/PF  roadways.  Because of  this  the                                                                   
responsibility  falls  on DOT/PF  to  pay the  railroads  for                                                                   
repairs and upgrade of grade crossings.  For safety, separate                                                                   
crossings for  railway traffic and highway traffic  have been                                                                   
implemented where possible.                                                                                                     
1:46:13 PM                                                                                                                    
Co-Chair  Stoltze asked  whether  the department  would  have                                                                   
sole  responsibility  for  the  capital  infrastructure.  Mr.                                                                   
Richards replied that the department  is still in the process                                                                   
of negotiating  with the railroad  to determine  which entity                                                                   
shoulders the cost of different safety needs.                                                                                   
1:48:27 PM                                                                                                                    
Commissioner von  Scheben cited the Glenn Highway  and Bragaw                                                                   
Interchange as  major accomplishments  of the department.  He                                                                   
was excited about  the completion of internet  service at the                                                                   
Fairbanks   International   Airport   terminal.   He   listed                                                                   
accomplishments from FY08:                                                                                                      
   · Transferred  ownership  of  five docks  and  harbors  to                                                                   
   · Maintenance  and  Operations   crews  covered  1,563,794                                                                   
     linear feet of highways with surface crack seal                                                                            
     treatment or re-leveling depressed roadway surfaces by                                                                     
   · Paved 33 lane miles of gravel roads.                                                                                       
   · Reconstructed 31 lane miles of roads.                                                                                      
   · Performed 529 bridge inspections.                                                                                          
   · Completed  9,748 commercial  vehicle inspections  during                                                                   
   · Conducted airport pavement  condition inspections on one                                                                   
     third of all paved airports in the state.                                                                                  
   · Between 2006  and 2008, fatal  and major  injury crashes                                                                   
     dropped by 77 percent on the Seward Highway and 37                                                                         
     percent on the Parks Highway, Alaska's two designated                                                                      
     safety corridors.                                                                                                          
   · Provided surface  maintenance of either gravel  or paved                                                                   
     runways for 31 airports.                                                                                                   
   · Performed repairs on 34 bridges.                                                                                           
   · 17 percent  reduction in square footage  of structurally                                                                   
     deficient bridges (2007-2008).                                                                                             
   · Replaced over  41 failing  culverts, some over  six feet                                                                   
     in diameter.                                                                                                               
   · The Ted  Stevens Anchorage International  Airport, South                                                                   
     Terminal Seismic and Security Retrofit Project,                                                                            
     Concourse A was completed.                                                                                                 
   · In  2008  both  AMHS  passenger  and  vehicle  ridership                                                                   
     showed an increase in numbers from those of 2007.                                                                          
   · AMHS on-time departures were at 93 percent for 2008.                                                                       
1:51:23 PM                                                                                                                    
Representative   Salmon   wondered    about   accomplishments                                                                   
pertaining to the AMHS. Commissioner  von Scheben referred to                                                                   
the  systems analysis.  He  felt  that vessels  arriving  and                                                                   
departing  according  to  schedule should  be  considered  an                                                                   
accomplishment.  He added  that the ferry  schedule  had been                                                                   
approved  early  in  the year  to  ensure  that  out-of-state                                                                   
travelers could plan travel with  the ferry system during the                                                                   
summer  tourist  season. The  department  has  set aside  $60                                                                   
million  for  vessel  replacement.  He  relayed  that  he  is                                                                   
receiving less complaints  from the public than  in the past.                                                                   
He suggested  providing  a list of  AMHS accomplishments  for                                                                   
the committee at a later date.                                                                                                  
1:53:35 PM                                                                                                                    
Representative  Gara asked about  the possibility of  a river                                                                   
highway  system.  He  wondered   what  the  state  spends  in                                                                   
providing transportation on the Yukon and Kuskoquim rivers.                                                                     
1:54:09 PM                                                                                                                    
JIM BEEDLE, DEPUTY COMMISSIONER  OF MARINE OPERATIONS, MARINE                                                                   
HIGHWAY  SYSTEM,  DEPARTMENT  OF  TRANSPORTATION  AND  PUBLIC                                                                   
FACILITIES, answered  that AMHS  does not have  vessels built                                                                   
for  travel  on  rivers.  Representative   Gara  asked    the                                                                   
department to  consider river travel.  He felt that  the need                                                                   
for a freshwater system was strong.  Commissioner von Scheben                                                                   
responded  such an  endeavor would  be  of high  cost to  the                                                                   
1:55:25 PM                                                                                                                    
Commissioner  von  Scheben  continued with  the  FY09  status                                                                   
report. A 2008  management system upgrade on  the AMHS vessel                                                                   
MV  Aurora saved  the department  $120,000.  The same  system                                                                   
upgrade is  being done on the  MV Tustumena and  MV Matanuska                                                                   
and savings to the state should  be evident within two years.                                                                   
Co-Chair  Hawker stated  that  the FY08  allocation for  fuel                                                                   
from  the governor's  budget had  been based  on higher  fuel                                                                   
prices.  He wondered if  the drop  in the  price of  fuel had                                                                   
left the department with an excess fuel allotment.                                                                              
1:57:05 PM                                                                                                                    
NANCY SLAGLE, DIRECTOR, DIVISION  OF ADMINISTRATIVE SERVICES,                                                                   
DEPARTMENT   OF   TRANSPORTATION   AND   PUBLIC   FACILITIES,                                                                   
explained that the  department used the fuel  cost savings to                                                                   
cover increased  costs  for fuel and  utilities for  highways                                                                   
and aviation  facilities that had  not seen the same  drop in                                                                   
fuel cost because  of the timing of annual  procurements. The                                                                   
department had  already purchased most  of the fuel  prior to                                                                   
the  price  drop.  Rural  areas  are  experiencing  a  slower                                                                   
response  to   dropping  fuel   prices.  The  department   is                                                                   
continuing to review the AMHS fuel needs.                                                                                       
Co-Chair  Hawker asked  for an  accounting reconciliation  of                                                                   
fuel  costs for  FY09  and  comparisons and  projections  for                                                                   
FY10.  He felt  this  would give  the  committee  a basis  to                                                                   
examine what might  be needed in discussing  the continuation                                                                   
of  the  fuel  subsidy  program.   Commissioner  von  Scheben                                                                   
replied that the department would  provide the information as                                                                   
soon as possible.                                                                                                               
1:58:47 PM                                                                                                                    
Representative Crawford  asked if any thought  had been given                                                                   
to capital  requests for  the building  of more fuel  storage                                                                   
facilities. He suggested stockpiling  fuel in anticipation of                                                                   
rising fuel  costs. Commissioner  von Scheben wondered  where                                                                   
the storage facilities might be  built and if the stored fuel                                                                   
would  be  specifically  for  AMHS.  Representative  Crawford                                                                   
suggested  building  in  Ketchikan,   Wrangall,  Juneau,  and                                                                   
possibly Haines, and  clarified the fuel would be  for use by                                                                   
the AMHS.  Commissioner  von Scheben answered  that he  would                                                                   
take the idea into consideration.                                                                                               
2:00:25 PM                                                                                                                    
Representative Gara  thought that the cost of  importing fuel                                                                   
from Washington State was less  expensive per gallon and that                                                                   
the  price is  inflated  in Alaska.  He  felt  that a  larger                                                                   
storage  capacity  in  the state  was  comparable  to  having                                                                   
another refinery. He thought that  this was a possible way to                                                                   
look   at  lowering   fuel   costs  throughout   the   state.                                                                   
Representative  Foster  pointed   out  the  plan  could  work                                                                   
against the  state. Representative  Gara maintained  that the                                                                   
fuel storage plan  could save rural Alaskan's  $0.60 to $0.70                                                                   
per gallon.  Co-Chair Hawker  suggested discussing  the issue                                                                   
with  the Department  of  Commerce, Community,  and  Economic                                                                   
2:03:19 PM                                                                                                                    
Commissioner von  Scheben spoke of  the effect of  the hiring                                                                   
freeze on  the department.  The department  has a vacancy  of                                                                   
275  full-time positions  and  100 seasonal  positions.  This                                                                   
amounts to  10 percent  of its  workforce. Waivers  have been                                                                   
requested  for  the continuation  of  construction  programs,                                                                   
road   maintenance,  airport   maintenance,  continued   safe                                                                   
operations of AMHS, and international  airports.  He informed                                                                   
the committee that  the federal stimulus package  was a major                                                                   
topic of  discussion within the  department and  has prompted                                                                   
the  department   to  prepare   a  Statewide   Transportation                                                                   
Improvement Program (STIP) amendment.                                                                                           
2:04:26 PM                                                                                                                    
Commissioner  von Scheben specified  that the STIP  amendment                                                                   
would be ready by February 6, 2009.                                                                                             
Co-Chair Hawker asked Commissioner  von Scheben to talk about                                                                   
how the  federal stimulus plan  would affect the  department.                                                                   
Commissioner   von  Scheben  understood   that  the   federal                                                                   
stimulus  funding  the  department would  receive  would  not                                                                   
require a  state match. The  department would be  required to                                                                   
use  50  percent  of  the funding  within  90  to  180  days,                                                                   
depending on which version of the plan is passed.                                                                               
2:05:47 PM                                                                                                                    
Commissioner von  Scheben estimated that the  amount of money                                                                   
that his  department could receive  was between $300  to $500                                                                   
million. He informed that discussions  are ongoing concerning                                                                   
the use of stimulus funds.                                                                                                      
2:07:02 PM                                                                                                                    
Commissioner von  Scheben felt that more would  be known once                                                                   
President  Obama signed  a stimulus  bill.  The STIP  process                                                                   
takes 90  days. The department  began the STIP  process early                                                                   
in order to  be project-ready when the stimulus  funds become                                                                   
Co-Chair  Hawker  asked  how the  department  will  determine                                                                   
which projects will receive stimulus dollars.                                                                                   
FRANK  RICHARDS, DEPUTY  COMMISSIONER  OF  HIGHWAYS &  PUBLIC                                                                   
FACILITIES,   DEPARTMENT   OF   TRANSPORTATION   AND   PUBLIC                                                                   
FACILITIES, stated that the money  would be spent on projects                                                                   
that have been on the STIP and approved by the legislature.                                                                     
2:09:24 PM                                                                                                                    
Mr. Richards stressed that congress  is adamant that stimulus                                                                   
dollars will be  pulled and distributed to other  states with                                                                   
bid-ready projects  if the dollars are not spent  in the time                                                                   
allotted. He asserted  that a list of projects  had been made                                                                   
that could  use the money  provided they receive  legislative                                                                   
approval.  The  department  must   first  complete  the  STIP                                                                   
amendment to  highlight projects going into  the construction                                                                   
phase. The amendment should be  going out on February 6, 2009                                                                   
concurrent with  the department's request  for appropriation.                                                                   
The  hope  is  to  have the  projects  begin  as  quickly  as                                                                   
possible.  Another  emphasis   Congress  has  placed  on  the                                                                   
stimulus  money is  that  it be  used  in areas  of  economic                                                                   
distress;  this  equates  to   60  percent  of  the  proposed                                                                   
projects for  highways and transit.   All areas of  the state                                                                   
qualify as  economically distressed  except The North  Slope,                                                                   
Anchorage, Fairbanks, Juneau, Sitka, and Ketchikan.                                                                             
2:11:13 PM                                                                                                                    
Representative   Austerman   asked   for  a   definition   of                                                                   
transportation projects.                                                                                                        
Deputy  Richards  answered  that   there  are  three  initial                                                                   
formula funds  mentioned: the federal highway  administration                                                                   
funds, the federal transit administration  funds, and federal                                                                   
aviation  funds.  Under  the  federal  highway  program,  the                                                                   
department  uses  funds  for  enhancement  of  transportation                                                                   
projects  such   as  bikeways,  pedestrian   facilities,  and                                                                   
waysides. The House and Senate  bills currently being debated                                                                   
on  the federal  level  have  differing definitions  of  what                                                                   
constitutes a transportation project.                                                                                           
Vice-Chair Thomas asked if a requirement  for organized labor                                                                   
was in  the stimulus plan.  Deputy Richards answered  that he                                                                   
did  not  think  it  was  a  requirement.  Vice-Chair  Thomas                                                                   
expressed  concern that  contracts in  rural Alaska  would be                                                                   
given to  large companies  instead of  local contractors.  He                                                                   
felt that  the contracts should be  bid out on a  small scale                                                                   
for the stimulus package funds to help rural Alaskans.                                                                          
2:15:08 PM                                                                                                                    
Representative Fairclough  wondered if a dollar  number could                                                                   
be  given  for  differed  maintenance  for  the  department's                                                                   
facilities, highways, and airports.  Deputy Richards answered                                                                   
that   the   department's   dollar   numbers   for   differed                                                                   
maintenance are ever-increasing.                                                                                                
2:17:45 PM                                                                                                                    
Representative  Fairclough wondered  how  the department  was                                                                   
planning  on   addressing  the   issue  of  rising   deferred                                                                   
maintenance  numbers.  She felt  that some  stimulus  dollars                                                                   
could be used for deferred maintenance  projects, rather than                                                                   
funding  new projects.  She  spoke  of poor  road  conditions                                                                   
throughout the  state, particularly in rural  areas and along                                                                   
the Glenn Highway. She questioned  weather the department had                                                                   
plans  to  use stimulus  dollars  to  repair roads  in  those                                                                   
areas.  Deputy  Richards  replied   that  Glenn  Highway  rut                                                                   
repairs are on the list of projects.                                                                                            
2:19:51 PM                                                                                                                    
Mr. Richards added  that culverts on 62 miles of  road on the                                                                   
Dalton  Highway  will  be  replaced.  He  stressed  that  the                                                                   
department  has  every  intention   of  using  some  stimulus                                                                   
dollars  for deferred  maintenance in  the areas of  highways                                                                   
and aviation.                                                                                                                   
Representative Fairclough asked  if the Glenn Highway repairs                                                                   
were in  the STIP amendment  and, if  so, when would  they be                                                                   
completed.   Deputy  Richards   replied   that  the   project                                                                   
timelines are listed on the departments website.                                                                                
2:21:40 PM                                                                                                                    
Representative  Gara  asked  if  airport  upgrades  in  rural                                                                   
Alaska  go  through  the  STIP  amendment.  Commissioner  von                                                                   
Scheben  replied no.  Representative  Gara expressed  concern                                                                   
that stimulus dollars  would not be used for  rural community                                                                   
2:23:17 PM                                                                                                                    
Commissioner  von  Scheben  shared  that a  list  of  Airport                                                                   
Improvement Programs (AIP) is currently being compiled.                                                                         
Representative  Gara  felt  that  local  hire  needed  to  be                                                                   
enhanced throughout the state.  He wondered if the department                                                                   
would be diligent about local  hire. Commissioner von Scheben                                                                   
replied that  DOT/PF has a Disadvantaged  Business Enterprise                                                                   
(DBE)  program.  He  added  that  between  the  aviation  and                                                                   
highway  projects  there is  potential  for  local hire.  Mr.                                                                   
Richards added  that the  price of the  projects have  a wide                                                                   
range.  He   spoke  of  different   groups  that   DOT/PF  is                                                                   
collaborating with in order to put Alaskans to work.                                                                            
2:27:21 PM                                                                                                                    
Representative  Austerman   stated  he  was   concerned  with                                                                   
contract overload.  He thought  outside contractors  would be                                                                   
necessary.  Commissioner von  Scheben  communicated that  the                                                                   
increase in  workload would be  30 percent. He felt  that the                                                                   
Alaskan workforce would not be overburdened.                                                                                    
2:28:56 PM                                                                                                                    
Co-Chair Stoltze  relayed that the  Glenn Highway is  a state                                                                   
highway and  its Eagle River Bridge  is the most  used bridge                                                                   
in the  state. He asked that  the ownership of  the Birchwood                                                                   
Airport remain with the state.                                                                                                  
2:30:45 PM                                                                                                                    
Commissioner  von Scheben replied  that he  was not  aware of                                                                   
any  change of  ownership concerning  the Birchwood  Airport.                                                                   
Co-Chair  Stoltze  stated  for   the  record  that  Birchwood                                                                   
Airport is  the only rural  airport that  is not in  debt and                                                                   
that the municipality would like  to retain it as a source of                                                                   
2:32:31 PM                                                                                                                    
Representative   Fairclough  noted   that  Commissioner   von                                                                   
Scheben reached out to committee  members and invited them to                                                                   
view the  Dalton Highway  and see  the challenges  firsthand.                                                                   
She felt  the experience  had been  informative. She  thought                                                                   
that there  were consequences  to be  expected for  accepting                                                                   
stimulus money and cautioned the department to plan ahead.                                                                      
2:34:13 PM                                                                                                                    
Representative Foster reported  that Northwest Alaska has 152                                                                   
state employees; two in Saint  Mary's, two in Unalakleet, and                                                                   
148  in  Nome.  Half  of the  Nome  employees  were  born  in                                                                   
villages and have a knowledge of the needs in rural Alaska.                                                                     
2:35:25 PM                                                                                                                    
^COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT                                                                                 
EMIL NOTTI,  COMMISSIONER, DEPARTMENT OF  COMMERCE, COMMUNITY                                                                   
AND ECONOMIC  DEVELOPMENT (DCCED),  presented his  staff. The                                                                   
department's  vision  statement   is  to  promote  a  healthy                                                                   
economy  and strong  communities.  The total  FY10  operating                                                                   
budget  request  fort  the department  is  $187,618,100.  The                                                                   
amount  includes a  general fund  reduction  of 48.6  percent                                                                   
from the FY09 Management Plan  (a decrease of $18.5 million).                                                                   
This decrease is primarily due  to the removal of $23 million                                                                   
of general funds  used to pay for a one-year  increase in the                                                                   
ceiling of Power Cost Equalization  (PCE) formula from $0.525                                                                   
to $1.00/kWh.  To more accurately compare  budgetary changes,                                                                   
when the  $23 million  one-time PCE  funding is removed  from                                                                   
comparisons, the department's  general fund increases by $4.5                                                                   
million.  The  requested increases  can  be  broken into  two                                                                   
groups: budgetary changes that  maintain the current level of                                                                   
service  or budgetary  changes  that  increase  the level  of                                                                   
service.  About $4.36  million is requested  to maintain  the                                                                   
current level of service as follows:                                                                                            
   · $2 million of general funds to replace business license                                                                    
     revenue due to annual reduction fees from $100 to $50.                                                                     
   · $1.9 million of general funds in Alaska Seafood                                                                            
     Marketing Institute (ASMI) to replace lost federal and                                                                     
     other revenue.                                                                                                             
   · $255.5 of general funds for contractual salary                                                                             
   · $210.3 of general funds for the Alaska Energy Authority                                                                    
     (AEA) Executive Director/Statewide Energy Coordinator.                                                                     
The general fund budgetary change  that increases the current                                                                   
level of service  is $150,000 of general funds to  the AEA to                                                                   
support the  implementation of  alternative energy  and other                                                                   
energy initiatives.                                                                                                             
2:39:58 PM                                                                                                                    
Commissioner Notti  relayed that funding for  the PCE request                                                                   
program is $32.8 million, down form $51.1 million in FY09.                                                                      
2:42:01 PM                                                                                                                    
Commissioner Notti  revealed that  the majority of  the $138,                                                                   
311,401  capital budget  request  is for  projects that  pass                                                                   
through   the   department   to   associated   organizations,                                                                   
corporations,  and   communities.  He  listed   corporations,                                                                   
agencies and contracts within the department:                                                                                   
    · AEA Energy  Projects: $31 million ($20  million federal                                                                   
      and $11 million other).                                                                                                   
    · AEA-Denali  Commission  match  for rural  Power  System                                                                   
      Upgrades: $10 million other funds.                                                                                        
    · Community Block  Grants: $6.1 million  ($70,000 general                                                                   
      fund and $6,030,000 federal.                                                                                              
    · Manufacturing   Extension  Program:  $806,401   general                                                                   
    · Community  Development  and Assistance:  $2.63  million                                                                   
      ($430,000 general fund, $600,000 federal, $1,600,000                                                                      
    · Denali  Commission Match  for Rural Transportation:  $5                                                                   
      million other funds,                                                                                                      
    · NPR-A  [  National  Petroleum  Reserve  Alaska]  Impact                                                                   
      Grant program: $22.5 million federal.                                                                                     
    · Electrical   Emergencies   Program:  $250,000   general                                                                   
Commissioner   Notti   pointed   out   that   the   following                                                                   
corporations  have   been  assigned  to  the   department  by                                                                   
   · Alaska Aerospace Development Corporation, (AADC)                                                                           
   · Alaska Industrial Development and Export Authority,                                                                        
   · Alaska Energy Authority (AEA)/AIDEA                                                                                        
   · Alaska Railroad Corporation (ARRC)                                                                                         
   · Regulatory Commission of Alaska (RCA)                                                                                      
   · Alaska Seafood Marketing Institute (ASMI)                                                                                  
Commissioner   Notti   stated   that   these   entities   are                                                                   
independent   from  the  department   but  their   respective                                                                   
missions  are  complimentary  and  within the  scope  of  the                                                                   
mission of the department.                                                                                                      
2:43:10 PM                                                                                                                    
Co-Chair  Stoltze spoke  of the effective  marketing  done by                                                                   
the Alaska  Seafood Marketing  Institute (ASMI).  He wondered                                                                   
if ethics would  allow the department to take  over marketing                                                                   
from  the  Department  of Natural  Resources  by  creating  a                                                                   
corporation  similar   to  ASMI  to  market   Alaska's  other                                                                   
agricultural   goods.  Commissioner   Notti  felt   that  the                                                                   
question should be brought to  the legislature. He offered to                                                                   
research the subject for the committee.                                                                                         
Representative  Gara  mentioned  DCCED efforts  to  alleviate                                                                   
fuel problems in rural Alaska.  He pointed out that the state                                                                   
could save money by upgrading  existing diesel plants. Denali                                                                   
Commission  money  is currently  being  used  to upgrade  the                                                                   
plants.  According to  AEA  the cost  for  upgrades in  rural                                                                   
Alaska  is $30  million. He  felt that  upgrading the  plants                                                                   
quickly  would   benefit  the  state  and  wondered   if  the                                                                   
department had been discussing the issue.                                                                                       
2:48:04 PM                                                                                                                    
Commissioner  Notti  replied  that the  department  had  been                                                                   
looking into upgrades.  He thought that the  biggest expenses                                                                   
were tank farms and diesel generators.  He expressed that the                                                                   
cost of  diesel fuel  was not  going down  and suggested  the                                                                   
state consider alternatives. He  reassured the committee that                                                                   
the department was committed to helping lower energy costs.                                                                     
2:49:45 PM                                                                                                                    
Representative  Gara  understood  that  diesel use  in  rural                                                                   
areas would  continue  to some extent  regardless of  whether                                                                   
other energy options  were available. He maintained  that the                                                                   
state  would  benefit  from  immediate   upgrades  of  diesel                                                                   
plants. Commissioner Notti replied  that the department would                                                                   
work with AIDEA on the issue.                                                                                                   
Representative  Austerman queried  the employee structure  of                                                                   
AIDEA and  AEA. Commissioner Notti  thought that  between the                                                                   
two  divisions   there  were  66  employees.   Representative                                                                   
Austerman  asked for clarification  as to  how many  of those                                                                   
employees were working specifically for AEA.                                                                                    
AMANDA RYDER, DIRECTOR, DIVISION  OF ADMINISTRATIVE SERVICES,                                                                   
DEPARTMENT OF  COMMERCE, COMMUNITY AND ECONOMIC  DEVELOPMENT,                                                                   
explained  that organizational  work charts  can be  found in                                                                   
the  Governor's  Budget  Detail   Book.  Employees  of  AIDEA                                                                   
constitute AEA workforce. Representative  Austerman asked why                                                                   
the number of employees was not  broken down in the overview.                                                                   
Ms. Ryder  believed that due  to a legislative  decision made                                                                   
many years  ago in order  to cut costs,  the AEA  cannot have                                                                   
official employees by statute.                                                                                                  
Vice-Chair  Thomas  noted  that   no  one  from  the  tourism                                                                   
industry  was present  at  the meeting.  He  wondered if  the                                                                   
department  worked  with  the tourism  industry  through  the                                                                   
Alaska Travel Industry Association (ATIA).                                                                                      
2:54:02 PM                                                                                                                    
Commissioner Notti  answered that the bulk of  money spent on                                                                   
tourism flows through the department directly to ATIA.                                                                          
Vice-Chair Thomas  wondered about  the difference  in funding                                                                   
between ATIA  and ASMI. Ms. Ryder  stated that $9  million of                                                                   
state funds have been appropriated  for ATIA. The FY09 budget                                                                   
for  ASMI  is  $750,000,  a  fund   source  change  has  been                                                                   
requested  that  would  bring  the  total  budget  up  to  $2                                                                   
Vice-Chair  Thomas  emphasized  that the  commercial  fishing                                                                   
industry  contributes $84  million  per year  to the  general                                                                   
fund. He expressed  concern that the equity  of marketing was                                                                   
not fairly balanced  between ATIA and ASMI and  stressed that                                                                   
commercial  fishermen put  enough  into the  general fund  to                                                                   
receive more money for marketing.  He asserted that given the                                                                   
amount of funding they are receiving  from the state, someone                                                                   
from ATIA should be present at the meeting.                                                                                     
2:57:15 PM                                                                                                                    
Representative Salmon  asked about ceasing the  use of diesel                                                                   
fuel in  rural villages.  He wondered  if the department  was                                                                   
funding the  exploration of new energy  sources. Commissioner                                                                   
Notti answered  that all the  money going to  energy research                                                                   
is going through  ATIA. He stated that new  research would be                                                                   
generated through ATIA and not DCCED.                                                                                           
2:59:17 PM                                                                                                                    
Representative  Salmon  wondered   about  river  power  as  a                                                                   
replacement  for  the diesel  generators.  He  felt the  fish                                                                   
wheel  was an efficient  power  source. He  thought a lot  of                                                                   
diesel fuel could  be saved between May and  December with an                                                                   
alternative hydro fuel source.                                                                                                  
3:01:10 PM                                                                                                                    
Representative  Salmon felt that  alternative energy  sources                                                                   
could  be  applied  to  rural   Alaska.  He  questioned  what                                                                   
advances  were  being  made  to  create  viable,  successful,                                                                   
alternative energy  sources. He  wondered what percentage  of                                                                   
departmental funds has been devoted to the subject.                                                                             
3:03:13 PM                                                                                                                    
Commissioner  Notti  could  not give  immediate  numbers.  He                                                                   
talked about  possible technical  problems with river  power.                                                                   
He felt answers could come from  AIDEA. He felt it would take                                                                   
a combination  of  systems to  solve the  energy problem.  He                                                                   
agreed the river  is a powerful energy source but  he felt it                                                                   
was going  to take  a long  time to  efficiently harness  the                                                                   
3:04:34 PM                                                                                                                    
Representative  Fairclough hoped that  DCCED and  other state                                                                   
agencies working in the field  of alternative energy research                                                                   
were sharing  information.  Commissioner Notti  answered that                                                                   
AEA has  vetted the  projects that have  been put  before the                                                                   
legislature and  that the projects differ  geographically and                                                                   
technologically.  Representative Fairclough  stated that  the                                                                   
methodology used  by the University  of Fairbanks  to examine                                                                   
the  cost  benefit  of  different   energy  alternatives  was                                                                   
impressive. She hoped  a filter was in place  between AEA and                                                                   
the university  to avoid duplicate projects which  would cost                                                                   
the  state twofold.  She expressed  that energy  alternatives                                                                   
limited to summertime  use may not be valuable  to the state.                                                                   
She  pointed  out  that  millions  of  federal  dollars  have                                                                   
already been spent researching alternative energy.                                                                              
3:07:39 PM                                                                                                                    
Commissioner  Notti reassured the  committee that  the filter                                                                   
that is currently being used helps  the department to examine                                                                   
the  cost  benefits  of  a  variety   of  alternative  energy                                                                   
possibilities.  Co-Chair Hawker  urged the  department  to be                                                                   
diligent in spending state money.                                                                                               
3:08:30 PM                                                                                                                    
Co-Chair  Hawker commented  on SB#230  which authorized  $100                                                                   
million of  state funds to  be spent  on tax credits  for the                                                                   
film  industry. He  wanted  to know  where  the film  offices                                                                   
would be located and if the payment  of credits were included                                                                   
in the budget.  Commissioner Notti replied that  it has taken                                                                   
time to  draft regulations. A  film office director  has been                                                                   
hired as  well as  an assistant.  Applications are  currently                                                                   
being taken now for reimbursement  approval. To date no money                                                                   
has been  spent in reimbursements.  Ms. Ryder added  that the                                                                   
tax credits  were not included  in the budget.  She clarified                                                                   
that  the Department  of  Revenue  (DOR) calculates  the  tax                                                                   
credit in its fiscal summary.                                                                                                   
3:10:09 PM                                                                                                                    
Co-Chair  Hawker   reiterated  the  question  asking   for  a                                                                   
definitive number in  the state budget that is to  be used to                                                                   
pay the film credits.                                                                                                           
3:11:34 PM                                                                                                                    
JOE  AUSTERMAN,  MANAGER,  OFFICE  OF  ECONOMIC  DEVELOPMENT,                                                                   
DEPARTMENT  OF COMMERCE, COMMUNITY  AND ECONOMIC  DEVELOPMENT                                                                   
(OED),  informed  the  committee   that  OED  would  issue  a                                                                   
certificate for the tax credit.  Given that The film industry                                                                   
is not  a taxpayer  to the  state, the  certificate would  be                                                                   
brokered  to  businesses  that   have  corporate  income  tax                                                                   
obligations  to  the state.  He  stated that  the  authorized                                                                   
appropriation is handled through  DOR. Co-Chair Hawker voiced                                                                   
his  discomfort with  the departments'  uncertainty with  the                                                                   
spending  authority   behind  the  certificates.   Ms.  Ryder                                                                   
assured the committee that she would research the issue.                                                                        
3:13:29 PM                                                                                                                    
Mr.  Austerman stressed  that  the department  had worked  to                                                                   
draft  regulations  that  would  create  a  program  with  an                                                                   
Alaskan focus.  The department is committed to  ensuring that                                                                   
the program  benefits  the state. The  regulations are  under                                                                   
public review  for another  30 days and  a package  should be                                                                   
ready for signing in 60 days.                                                                                                   
Representative  Salmon wondered about  future funding  of the                                                                   
Denali  Commission.  Commissioner   Notti  replied  that  the                                                                   
department was not directly involved  with the commission. He                                                                   
asserted that  he did  not know about  future funding  of the                                                                   
Denali Commission and did not want to speculate.                                                                                
Representative  Gara wondered  how  much  local business  was                                                                   
expected to  be generated by  the film office.  Mr. Austerman                                                                   
explained that there is a reporting  requirement written into                                                                   
SB#230 which  identifies anticipated  film industry  spending                                                                   
in the  state. A  report will  be generated  to identify  how                                                                   
much money is coming into the  state and which companies will                                                                   
qualify for  the tax credit. He  asserted that the  OED would                                                                   
work  to  identify  the industries  economic  impact  to  the                                                                   
3:18:12 PM                                                                                                                    
Representative Austerman pointed  out that in addition to the                                                                   
tax credits,  the state is  funding the film  office $290,000                                                                   
per year from the general fund.                                                                                                 
Co-Chair Hawker mentioned the  graphs in the 10-year overview                                                                   
did  not  reflect  any  change in  general  or  capital  fund                                                                   
expectations. Commissioner Notti  remarked that there were so                                                                   
many economic unknowns  that it was difficult  to project the                                                                   
3:19:35 PM                                                                                                                    
Co-Chair Hawker  suggested that  budget funding be  requested                                                                   
in good faith. He felt that the  department had not presented                                                                   
an honest budget but rather a  safe budget. He felt there was                                                                   
no vision for the department reflected in the overview.                                                                         
3:21:56 PM                                                                                                                    
Representative  Salmon hoped that  the future budget  request                                                                   
from  the department  would include  funding for  alternative                                                                   
energy testing.                                                                                                                 
Representative   Crawford   expressed    concern   that   the                                                                   
department  did not have  an effective  plan to move  forward                                                                   
with  renewable energy  projects.  He warned  that the  state                                                                   
should be prepared when fuel prices rise again.                                                                                 
3:23:49 PM                                                                                                                    
Representative    Kelly    felt   that    the    department's                                                                   
participation in the clean coal  project should be noted as a                                                                   
significant achievement.                                                                                                        
Commissioner  Notti  referred  to  Representative  Crawford's                                                                   
concerns. He  reported that there  was a plan  to effectively                                                                   
oversee alternative energy projects.                                                                                            
3:26:27 PM                                                                                                                    
Representative   Joule   thanked   Commissioner   Notti   for                                                                   
recognizing that  there is  a difference between  alternative                                                                   
and renewable energy.                                                                                                           
HB 81 and HB 83 were HEARD and  HELD in Committee for further                                                                   
The meeting was adjourned at 3:27 PM.                                                                                           

Document Name Date/Time Subjects
COMMERCE 10 year plan.pdf HFIN 2/4/2009 1:30:00 PM
HB 81
DOT&PF Org Chart .pdf HFIN 2/4/2009 1:30:00 PM
HB 81
TRANSPORTATION 10 year plan 2009.02.04 HFC.pdf HFIN 2/4/2009 1:30:00 PM
HB 81
Historical Construction Expenditures.pdf HFIN 2/4/2009 1:30:00 PM
HB 81
M&O GF Auth.pdf HFIN 2/4/2009 1:30:00 PM
HB 81