Legislature(2011 - 2012)HOUSE FINANCE 519

02/09/2012 01:30 PM FINANCE

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 9, 2012                                                                                           
                         1:36 p.m.                                                                                              
1:36:52 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 1:36 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Reggie Joule                                                                                                     
Representative Mark Neuman                                                                                                      
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Karen Rehfeld,  Director, Office  of Management  and Budget,                                                                    
Office of the Governor;  Angela Rodell, Deputy Commissioner,                                                                    
Treasury  Division,  Department of  Revenue;  Representative                                                                    
Alan Austerman.                                                                                                                 
HB 283    BUDGET: CAPITAL                                                                                                       
          HB 283 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
HB 285    APPROP: MENTAL HEALTH BUDGET                                                                                          
          HB 285 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
HB 286    G.O. BONDS FOR PORTS                                                                                                  
          HB 286 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
HB 307    SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS                                                                             
          HB 307 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
HOUSE BILL NO. 283                                                                                                            
     "An Act  making and amending  appropriations, including                                                                    
     capital   appropriations   and  other   appropriations;                                                                    
     making   appropriations   to  capitalize   funds;   and                                                                    
     providing for an effective date."                                                                                          
1:38:56 PM                                                                                                                    
KAREN  REHFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET                                                                    
(OMB),  OFFICE OF  THE GOVERNOR,  explained  that she  would                                                                    
provide a high level overview of the legislation.                                                                               
Co-Chair Stoltze  agreed that a  broad and  general approach                                                                    
would be the most helpful.                                                                                                      
Ms.  Rehfeld  informed  the committee  that  the  governor's                                                                    
proposed FY  13 capital  budget totaled $1.8  billion, which                                                                    
excluded duplicated funds.  She referred line 24  of the OMB                                                                    
December  2011 fiscal  summary,  which  included the  mental                                                                    
health  capital  budget.  The  total  number  included  $882                                                                    
million  in  unrestricted  general  funds,  $81  million  of                                                                    
designated general  funds, $20  million of other  funds, and                                                                    
$820.5  million  of federal  funds.  The  bill contained  14                                                                    
sections.  The first  section was  the  largest and  totaled                                                                    
$1,766,800,000; it was organized  by department and projects                                                                    
were   listed  in   priority  order.   Deferred  maintenance                                                                    
appeared  at the  end  of each  department's  list with  the                                                                    
exception  of   Department  of  Transportation   and  Public                                                                    
Facilities (DOT)  because it had  been organized  within the                                                                    
different  appropriation levels.  Individual project  review                                                                    
listing  and backup  for each  project was  included in  the                                                                    
member's  capital  budget  books. She  highlighted  priority                                                                    
projects  in   the  Resource  and  Development   (R&D)  area                                                                    
including,   Roads  to   Resources,  permitting,   strategic                                                                    
minerals  assessments,  digital   mapping,  and  responsible                                                                    
development of  natural resources. The budget  also included                                                                    
education funding for  two schools off of  the Department of                                                                    
Education and  Early Development (DEED)  school construction                                                                    
list that totaled $61 million.                                                                                                  
1:42:54 PM                                                                                                                    
Representative Gara  queried the  fund source for  bulk fuel                                                                    
upgrades listed on page 4  of the bill. Ms. Rehfeld directed                                                                    
attention to  the appropriation  level on  page 3,  line 24.                                                                    
She explained that a portion of  the $7 million was paid for                                                                    
with general  funds. She  would follow up  with detail  at a                                                                    
later time.                                                                                                                     
Ms. Rehfeld continued to  highlight the education components                                                                    
including $24  million for the  first 14 projects  on DEED's                                                                    
school   major  maintenance   list.  Other   items  included                                                                    
disaster  preparedness and  a search  and rescue  helicopter                                                                    
for  the  Interior under  the  Department  of Public  Safety                                                                    
(DPS);  transportation  infrastructure   such  as  highways,                                                                    
aviation, municipal,  water, sewer, village safe  water, and                                                                    
Co-Chair  Stoltze asked  to hear  a list  of litigation  and                                                                    
settlements items later in the meeting.                                                                                         
Representative Joule  discussed a $14  million appropriation                                                                    
that had been  vetoed the prior year related to  a school in                                                                    
Kivalina. He believed  that the state did not  want to build                                                                    
the school  at the existing  location, which was one  of the                                                                    
reasons  the  appropriation  had been  vetoed.  He  wondered                                                                    
whether  the  administration  had   been  working  with  the                                                                    
community  to find  a transportation  route to  the mainland                                                                    
where a school could be built.                                                                                                  
Ms.  Rehfeld  responded  the state  had  been  working  with                                                                    
Kivalina on a relocation site.  Work was underway to include                                                                    
the  project on  the DEED  priority list  for the  following                                                                    
fiscal year. She noted that  improvements were needed on the                                                                    
existing  building, but  a relocation  of  the school  would                                                                    
represent significantly different  costs; therefore steps to                                                                    
determine the best approach and timing were in progress.                                                                        
1:46:58 PM                                                                                                                    
Representative Joule  noted that  road access to  the school                                                                    
fell  under  the  purview of  DOT;  therefore,  he  wondered                                                                    
whether the department would work  with the community on the                                                                    
issue. Ms. Rehfeld  deferred the question to  DOT for follow                                                                    
up at a later time.                                                                                                             
Representative  Joule  communicated  that there  was  a  $10                                                                    
million  road to  resources  in Umiat  that  people did  not                                                                    
want; the people in Kivalina would  be happy to use the road                                                                    
to find an alternative location for the school site.                                                                            
Ms. Rehfeld outlined the various sections in the bill:                                                                          
   · Sections 2 and 3 summarized the funding sources in the                                                                     
     numbers section of  the bill by department  and for all                                                                    
     fund sources respectively.                                                                                                 
   · Sections 4 through 6 were included for informational                                                                       
     purposes  and   related  to  the   proposed  Government                                                                    
     Obligation (G.O.) Bond package in HB 286.                                                                                  
   · Section 7 gave Legislative Budget and Audit the                                                                            
     authority  to   consider  federal  and   other  program                                                                    
     receipts that came  in when the legislature  was not in                                                                    
   · Section 8 related to fund capitalization and included                                                                      
     $60 million for proposed  Alaska Gasline Inducement Act                                                                    
     (AGIA)  reimbursements  and  $1.7  million  in  federal                                                                    
     funds for the Emerging Energy Technology Fund.                                                                             
   · Section 9 included a $25 million fund transfer to the                                                                      
     Renewable Energy  Grant Fund  and a $35.5  million fund                                                                    
     transfer  to the  Regional Educational  Attendance Area                                                                    
     School Fund.                                                                                                               
1:49:26 PM                                                                                                                    
Ms. Rehfeld continued to detail the bill sections:                                                                              
   · Section 10 related to the State Insurance Catastrophic                                                                     
     Reserve  Fund  that  allowed  insurance  claims  to  be                                                                    
     appropriated  to state  agencies in  order to  mitigate                                                                    
   · Section 11 included an appropriation for National                                                                          
     Petroleum  Reserve-Alaska  (NPRA) grants  estimated  at                                                                    
     approximately $5.4  million. A list  developed annually                                                                    
     by the  Department of Commerce, Community  and Economic                                                                    
     Development (DCCED)  would be brought to  the committee                                                                    
     to include in the budget.                                                                                                  
   · Section 12 encompassed three pieces for Department of                                                                      
     Fish  and Game  (DFG)  related to  amending a  previous                                                                    
     appropriation for the Sport  Fish hatchery in Anchorage                                                                    
     to  include  operations.  There  was  a  subsection  to                                                                    
     reappropriate $5 million from  the hatchery to the Fish                                                                    
     and Game  Fund that would  allow DFG to apply  any sale                                                                    
     proceeds from the resolution  sale towards the purchase                                                                    
     of equipment for a new vessel.                                                                                             
Ms.  Rehfeld  detailed  several  ongoing  operating  funding                                                                    
questions related to the Sport  Fish Division. She explained                                                                    
that the division's budget had  Fish and Game Fund authority                                                                    
and that the  administration had concerns about  the cash in                                                                    
the    fund   and    future    revenue   projections.    The                                                                    
reappropriation of the  $5 million into the  fund would help                                                                    
ease concerns  in the short-term.  She furthered  that there                                                                    
were  several ways  to address  the issue  and that  related                                                                    
conversations would be continued.                                                                                               
Co-Chair Stoltze  wondered whether  the surplus  of proceeds                                                                    
was related  to bond  sales that had  occurred in  2007. Ms.                                                                    
Rehfeld deferred the question to the department.                                                                                
Co-Chair  Stoltze  was  concerned  about  ambiguity  on  the                                                                    
issue. He welcomed any opportunity  to pay off the bonds and                                                                    
to shorten  the commitment the  life of the $9  surcharge on                                                                    
sport fishing licenses. Ms. Rehfeld  asked the DFG to follow                                                                    
up with a response.                                                                                                             
Co-Chair  Stoltze   stressed  that  the   department  should                                                                    
prioritize  the  retirement of  the  debt.  He believed  the                                                                    
funds  should   be  used  for  capital   and  not  operating                                                                    
1:53:32 PM                                                                                                                    
Representative  Neuman wondered  whether DCCED  could choose                                                                    
how  to  delegate  the  proposed  $5.4  million  in  capital                                                                    
project grants (Section 11, page 52).                                                                                           
Ms. Rehfeld replied  that funding for NPRA  grants came from                                                                    
the Bureau of  Land Management under the  U.S. Department of                                                                    
the  Interior (proceeds  were derived  from sales,  rentals,                                                                    
bonuses, and  royalties on leases  issued within  the NPRA).                                                                    
Local entities  applied for  grants within  communities that                                                                    
were directly impacted  by the leases or  development of oil                                                                    
and  gas within  the  NPRA. She  elaborated  that a  certain                                                                    
number of communities were eligible  to apply for grants and                                                                    
the  funds   could  be  used  for   planning,  construction,                                                                    
maintenance and  operation of  public facilities,  and other                                                                    
necessary public services.                                                                                                      
Representative  Neuman  asked   for  verification  that  the                                                                    
grants only  applied to communities impacted  by development                                                                    
within the NPRA. Ms. Rehfeld responded in the affirmative.                                                                      
Co-Chair  Thomas referred  to Section  12(d) related  to the                                                                    
transfer  of general  funds to  sport fish  construction and                                                                    
operations.  He discussed  the ability  to absorb  operation                                                                    
costs  within  the  department.  He  asked  Ms.  Rehfeld  to                                                                    
provide an  explanation of the  change during  the operating                                                                    
budget portion of the meeting.                                                                                                  
Ms. Rehfeld  replied that DFG  would be available  to answer                                                                    
questions. She  cited concerns that  the cash flow  into and                                                                    
out of  the Fish  and Game  Fund had been  low; she  did not                                                                    
believe the issue had been contemplated in the past.                                                                            
Co-Chair  Thomas explained  that the  operating budgets  had                                                                    
gone up  and down for  years. He remembered being  told that                                                                    
DFG costs could be absorbed  and he wondered why the comment                                                                    
had been made.                                                                                                                  
Co-Chair  Stoltze noted  that the  item had  been a  revenue                                                                    
bond, but he  believed that the obligation to  voters was no                                                                    
less  implicit. He  believed that  letting  the public  know                                                                    
that the House Finance Committee  was not playing games with                                                                    
funds would send a positive  message. He voiced his tendency                                                                    
to be critical of revenue bonds.                                                                                                
1:57:31 PM                                                                                                                    
Representative  Gara asked  whether  sport fishery  facility                                                                    
upgrades had  been completed. Ms. Rehfeld  believed that the                                                                    
Anchorage hatchery had been completed.                                                                                          
Representative Gara  surmised that  the designation  of left                                                                    
over  sport  fish money  to  operating  expenses meant  that                                                                    
money  remained.  Ms.  Rehfeld   responded  that  there  was                                                                    
approximately $5 million available.                                                                                             
Representative Gara  referred to earlier testimony  from Co-                                                                    
Chair Stoltze related fishing license fees.                                                                                     
Co-Chair  Stoltze clarified  that  there was  a proposal  to                                                                    
forego an  opportunity to shorten the  obligation of license                                                                    
Ms. Rehfeld continued to explain the bill sections:                                                                             
   · Section 13 provided for lapsed provisions of various                                                                       
     sections. For sections that  were identified as capital                                                                    
     projects, appropriations  were made for the  valid life                                                                    
     of the  projects and carried  forward from one  year to                                                                    
     the next.                                                                                                                  
   · Section 14 included the effective date of the bill:                                                                        
     July 1, 2012.                                                                                                              
Representative   Doogan   wondered    whether   funds   were                                                                    
transferred from  the general  fund to  a discrete  fund for                                                                    
expenditure (under the fund transfers  section of the bill).                                                                    
Ms. Rehfeld replied in the affirmative.                                                                                         
Representative  Doogan asked  what happened  when the  money                                                                    
was not  spent in its  entirety. Ms. Rehfeld  responded that                                                                    
the money  would remain  in the particular  fund for  use at                                                                    
another time.  The legislature could appropriate  as much as                                                                    
it  wanted  into  a  fund  and could  then  choose  to  make                                                                    
appropriations when it saw fit.                                                                                                 
Representative Doogan  wondered whether the  legislature was                                                                    
"banking"  a fund  for the  next year  if it  was not  fully                                                                    
expended.  Ms.  Rehfeld  answered in  the  affirmative.  She                                                                    
explained that  designated funds were usually  expended from                                                                    
the Renewable Energy  Grant Fund on an  annual basis. Fiscal                                                                    
Year  13 was  the first  year of  the formula  that required                                                                    
funds based  on the  amount paid  in municipal  debt service                                                                    
for  school  projects  to go  into  the  Regional  Education                                                                    
Attendance Area  School Fund; the proposed  budget allocated                                                                    
the funds  to two  school projects  included in  the capital                                                                    
Representative  Gara  referred  to the  organization  Arctic                                                                    
Power   and   wondered   whether  the   administration   had                                                                    
considered  something  similar  to advertise  that  Alaska's                                                                    
clean  natural gas  was  not harsh  on  the environment.  He                                                                    
discussed that part  of the state's future was  related to a                                                                    
gas  pipeline. He  noted  that one  of  the impediments  was                                                                    
shale gas in  the Lower 48 and forecasts had  shown that the                                                                    
price  of shale  gas  would increase  as communities  became                                                                    
more concerned about its impacts.                                                                                               
Ms.   Rehfeld  believed   that   Commissioner  Sullivan   at                                                                    
Department of  Natural Resources (DNR) had  been involved in                                                                    
education and outreach to educate  people in the Lower 48 on                                                                    
Alaska's  potential.   She  added  that  Arctic   Power  had                                                                    
broadened its scope  to help with education  and outreach in                                                                    
the Lower 48.                                                                                                                   
Representative Gara  was interested  in an ad  campaign that                                                                    
highlighted   the  cleanliness   of  Alaska's   natural  gas                                                                    
compared  to shale  gas in  the  Lower 48.  He believed  the                                                                    
campaign would  help increase Alaska's chances  of finding a                                                                    
market for its gas.                                                                                                             
2:03:31 PM                                                                                                                    
Representative Edgmon  emphasized the need to  make Congress                                                                    
aware  of  Alaska's broad  support  for  opening the  Alaska                                                                    
National  Wildlife  Reserve  (ANWR)  and  that  the  state's                                                                    
pipeline was  only one-third full. He  discussed funding for                                                                    
Arctic Power and the potential  need to double or triple the                                                                    
state's effort in D.C.                                                                                                          
Vice-chair  Fairclough  believed  that  leg  work  could  be                                                                    
beneficial  and hoped  the state  would continue  working to                                                                    
open the  petroleum reserve. She  was hopeful  that Congress                                                                    
would pass  an ANWR  resolution; the National  Conference of                                                                    
State Legislatures  supported the  opening of  the petroleum                                                                    
reserve  by a  three-quarters  vote.  The legislature  would                                                                    
continue to encourage  the U.S. Senate to  support the issue                                                                    
as well.                                                                                                                        
Co-Chair  Stoltze thought  the  current makeup  of the  U.S.                                                                    
Senate and the  president could prevent a bill  on the issue                                                                    
from passing.                                                                                                                   
Representative  Costello wondered  how many  runways in  the                                                                    
state  were  not  up   to  Federal  Aviation  Administration                                                                    
standards. Ms. Rehfeld would have DOT follow up with a                                                                          
HB 283 was HEARD and HELD in committee for further                                                                              
HOUSE BILL NO. 286                                                                                                            
     "An Act providing  for and relating to  the issuance of                                                                    
     general obligation bonds for  the purpose of paying the                                                                    
     cost of  municipal port projects; and  providing for an                                                                    
     effective date."                                                                                                           
2:07:47 PM                                                                                                                    
Co-Chair Stoltze asked for information on the governor's                                                                        
proposal to use general obligation (G.O.) bonds as a                                                                            
funding approach.                                                                                                               
ANGELA RODELL, DEPUTY COMMISSIONER, TREASURY DIVISION,                                                                          
DEPARTMENT OF REVENUE, read from a statement:                                                                                   
     This bill would authorize  the issuance of $350 million                                                                    
     in general obligation debt.  General obligation debt is                                                                    
     backed by the  full faith, credit and  resources of the                                                                    
     State. We currently have  approximately $628 million in                                                                    
     general  obligation bonds  outstanding.  The State  has                                                                    
     the  resources and  capacity to  take  on the  proposed                                                                    
     additional debt.                                                                                                           
     Currently, interest  rates are  at historic  lows. This                                                                    
     has  allowed us  to take  advantage of  the market  and                                                                    
     reduce  our debt  service  obligations.  In January  of                                                                    
     2012,  we sold  $175.56 million  of general  obligation                                                                    
     refunding  bonds (with  more  than $26  million of  the                                                                    
     2012 bonds sold  to Alaskans) and used  the proceeds to                                                                    
     refund $191.410  million of bonds that  had been issued                                                                    
     in 2003.  This transaction has an  all-in true interest                                                                    
     cost  of 1.24%  and saved  the state  $27 million,  net                                                                    
     present value.                                                                                                             
     This  transaction  demonstrates the  attractiveness  of                                                                    
     Alaska's general obligation paper  and also the current                                                                    
     low cost  of borrowing  in the  tax exempt  market. Any                                                                    
     new debt  issued will have the  debt service structured                                                                    
     to provide  a low cost of  funds and a level  burden on                                                                    
     future  state budgets.  As we  move  forward with  this                                                                    
     proposed  legislation, we  would like  to work  closely                                                                    
     with  you  to  ensure  all of  the  projects  meet  the                                                                    
     necessary  tests   for  tax  exemption  and   can  take                                                                    
     advantage of the low rates.                                                                                                
     In November  of 2010, Moody's Investors  Service raised                                                                    
     the state's general obligation rating  to AAA. This was                                                                    
     followed by  S&P raising  our rating  to AAA  this past                                                                    
     December. A  triple A rating is  the highest investment                                                                    
     grade  rating achievable  and expresses  an opinion  of                                                                    
     the rating  agency as  to the ability  of the  state to                                                                    
     honor  its  long-term unsecured  financial  obligations                                                                    
     and contracts. In reviewing  our rating, Fitch, Moody's                                                                    
     and  S&P will  be looking  to the  final dollar  amount                                                                    
     issued and  the overall plan of  finance in conjunction                                                                    
     with other State issues such  as revenues, expenses and                                                                    
     other  commitments   such  as  the   PERS/TRS  unfunded                                                                    
     We  have  provided  a fiscal  note  which  assumes  the                                                                    
     voters   would   approve   $350  million   in   general                                                                    
     obligation bonds.  We are required  by federal  tax law                                                                    
     to track all  funds to final expenditure  and to ensure                                                                    
     that all funds are spent within  3 years of the date of                                                                    
     issuance. In  order to comply with  these requirements,                                                                    
     we  assumed   the  bonds  would  be   issued  in  three                                                                    
     tranches, giving  an opportunity for funds  to be spent                                                                    
     before  additional debt  is  incurred.  We assumed  the                                                                    
     first issuance  would come in February  2013, following                                                                    
     the November 2012 election.  Debt repayment would begin                                                                    
     in Fiscal Year 2014.                                                                                                       
2:11:39 PM                                                                                                                    
Ms. Rodell continued reading from a statement:                                                                                  
     The  costs  associated  with  issuing  bonds  including                                                                    
     underwriting,   ratings,   legal   counsel,   financial                                                                    
     advisors,    marketing    and   disclosure    services,                                                                    
     administration and  printing, for  a $350  million bond                                                                    
     program would  total approximately $2,965,000  or $8.50                                                                    
     per bond.                                                                                                                  
Co-Chair Stoltze asked whether there were projections that                                                                      
showed how different interest rates would impact the FY 14                                                                      
operating budget and beyond.                                                                                                    
Ms. Rodell replied that interest  rates were not expected to                                                                    
rise   in  the   near-term;  the   department  had   made  a                                                                    
conservative estimate  of 4 percent  if an issuance  did not                                                                    
occur until 2014.  She elaborated that DOR  had raised rates                                                                    
slightly with  the assumption that they  would rise somewhat                                                                    
because  there would  be two  years before  it had  the full                                                                    
issuance.   The   projected    interest   rate   would   add                                                                    
approximately $19 million per year in debt service.                                                                             
Representative Wilson  asked whether investments  would make                                                                    
more than  4 percent. Ms.  Rodell replied that  DOR expected                                                                    
the long-term  funds would exceed 4  percent. Representative                                                                    
Wilson asked  what the same  funds had made the  prior year.                                                                    
Ms.  Rodell  replied  that  the  DOR  Revenue  Sources  Book                                                                    
assumed a 3.2  percent rate for general  funds going forward                                                                    
and a 6.85 percent rate for long-term funds.                                                                                    
Representative Gara asked what  the Statutory Budget Reserve                                                                    
(SBR)  was currently  earning. Ms.  Rodell replied  that the                                                                    
SBR  was   currently  earning  approximately   3.5  percent.                                                                    
Representative Gara  asked whether the amount  was less than                                                                    
the bonds would  cost. Ms. Rodell answered  that DOR assumed                                                                    
a rate  of 3.2 percent  at present with the  assumption that                                                                    
rates would rise on the  bond issuance; it also assumed that                                                                    
rates  would   increase  on  the  SBR   if  borrowing  costs                                                                    
increased to 4 percent.                                                                                                         
2:15:23 PM                                                                                                                    
Representative Gara  surmised that  the SBR was  invested in                                                                    
short-term issuances and that it  could be used more quickly                                                                    
than Constitutional  Budget Reserve (CBR) funds.  Ms. Rodell                                                                    
responded in the affirmative.                                                                                                   
Representative Gara  discussed that there was  currently $16                                                                    
billion  in savings  and  the state  would  have no  problem                                                                    
making long-term  bond payments  in the next  several years.                                                                    
He was  concerned about the possibility  of increased annual                                                                    
payments  of $19  million ten  years out  if state  revenues                                                                    
decreased and  costs continued to  increase. He  thought the                                                                    
state could be  more responsible presently and  know what it                                                                    
could afford to spend.                                                                                                          
Ms. Rodell  replied that there  would be no money  to invest                                                                    
for the  future if  the $350 million  was spent  at present;                                                                    
therefore,  there would  be no  funds to  fall back  on when                                                                    
revenues were on the decline.  Whereas, the state would only                                                                    
need to come up with $19  million to pay the debt service if                                                                    
debt had been issued. She  stressed that once cash was spent                                                                    
it was gone.                                                                                                                    
Representative Gara believed that  the state would be facing                                                                    
a tighter  budget 10 years  in the  future and that  the SBR                                                                    
could be much  smaller if it only earned 3  or 4 percent per                                                                    
year. He opined that DOR's  assumption that the SBR would be                                                                    
the same  size in  ten years was  unlikely. He  believed the                                                                    
state  should work  to protect  future years  from long-term                                                                    
Co-Chair  Stoltze  commented  that  bonds  had  an  internal                                                                    
discipline and  they had to  be inherently fair  for Alaskan                                                                    
voters  to approve.  He added  that the  governor could  not                                                                    
"cherry  pick"  or veto  certain  sections.  He opined  that                                                                    
perhaps  spending  would even  be  restrained  less than  it                                                                    
would have been through other spending vehicles.                                                                                
2:18:47 PM                                                                                                                    
Representative Doogan  asked whether the bond  issuance cost                                                                    
would come  out of the  general fund. Ms. Rodell  replied in                                                                    
the affirmative.                                                                                                                
Representative  Doogan wondered  whether  the issuance  cost                                                                    
was the only cost that  tax payers were responsible for. Ms.                                                                    
Rodell answered that outside of  the issuance cost, the only                                                                    
other cost  was associated with principle  and interest; the                                                                    
costs were amortized over the life of the debt.                                                                                 
Representative  Doogan queried  the total  cost of  existing                                                                    
bonds. Ms.  Rodell replied that  there were $628  million in                                                                    
outstanding principal.  She asked  for clarification  on the                                                                    
Co-Chair Stoltze  clarified that  the question  related only                                                                    
to G.O. bonds.                                                                                                                  
Representative  Doogan verified  that he  was interested  in                                                                    
the current  cost of existing  G.O. bonds. Ms.  Rodell would                                                                    
follow up with the information.                                                                                                 
Representative Doogan  noted that  the current  $350 million                                                                    
was likely  to increase. He  asked for verification  that if                                                                    
the  state's total  indebtedness  was $670  million that  50                                                                    
percent would have been added  to the debt total. Ms. Rodell                                                                    
responded in the affirmative.                                                                                                   
2:21:06 PM                                                                                                                    
Representative  Joule  wondered  how   high  the  state  was                                                                    
willing  to   go  related  to   a  bond  package   with  the                                                                    
understanding  the legislature  would have  an interest.  He                                                                    
observed  that the  governor recognized  needs of  the state                                                                    
through legislation  and that  negotiation would  occur with                                                                    
the state's upper tolerance level in mind.                                                                                      
KAREN REHFELD,  DIRECTOR, OFFICE  OF MANAGEMENT  AND BUDGET,                                                                    
OFFICE  OF  THE  GOVERNOR,  replied that  the  governor  had                                                                    
indicated there  was room for  between $50 and  $75 million.                                                                    
She believed there  was also sensitivity to  what the voters                                                                    
felt comfortable approving.                                                                                                     
Representative  Joule  referred  to talk  about  "one-third,                                                                    
one-third, one-third."                                                                                                          
Co-Chair Stoltze pointed to the  fiscal note that included a                                                                    
sale schedule.                                                                                                                  
2:23:00 PM                                                                                                                    
Representative Edgmon wondered whether  the bond package had                                                                    
been directed at "shovel ready" projects.                                                                                       
Ms.  Rehfeld  answered that  the  projects  were in  various                                                                    
stages;  some  were  more  shovel  ready  than  others.  She                                                                    
explained that the timing of  the bond sales would depend on                                                                    
where the projects' stood. She  pointed out that none of the                                                                    
projects would  be fully funded  for specific phases  and it                                                                    
would  be important  for the  projects to  be able  to reach                                                                    
completion  with the  help of  other financing  options. She                                                                    
restated that the bonds were  not designed to fully fund the                                                                    
2:24:19 PM                                                                                                                    
Co-Chair Thomas  believed that community  projects partially                                                                    
funded  by  bonds  would  need  additional  funding  in  the                                                                    
future.  He wondered  why the  projects would  not be  fully                                                                    
funded with  bond money, given  his belief that it  would be                                                                    
less expensive than using general funds.                                                                                        
Ms.  Rehfeld responded  that  there  were different  funding                                                                    
opportunities for  each project  and some were  working with                                                                    
the  Alaska  Industrial  Development  and  Export  Authority                                                                    
Co-Chair Stoltze remarked  that it was not  necessary to get                                                                    
into  detail on  specific  projects during  the meeting.  He                                                                    
thought there were  pros and cons to  fully funding projects                                                                    
all at  once. He noted  the issue would  be dealt with  as a                                                                    
policy that was  presented in the budget and  without it the                                                                    
construction of the capital budget  would be different given                                                                    
that  holes  would  be  created.   Ms.  Rehfeld  agreed  and                                                                    
believed the governor had put  the bill forward to work with                                                                    
the legislature on  developing infrastructure along Alaska's                                                                    
Vice-chair  Fairclough asked  how much  bond debt  the state                                                                    
typically  had  relative  to  the  $627  million  debt.  She                                                                    
relayed that  the legislature had  been working to  pay down                                                                    
debt during her  time in office. She asked  for a historical                                                                    
five to  ten year perspective.  Ms. Rodell replied  that the                                                                    
state had a past history of not issuing bond debt.                                                                              
Co-Chair Stoltze  pointed to bonds  used in 2002,  2008, and                                                                    
Ms. Rodell continued  to reply and explained  that there was                                                                    
$197 million in voter  approved authorized unissued debt for                                                                    
education;  before the  debt was  issued  the Department  of                                                                    
Education and Early  Development would have to  show that it                                                                    
was prepared to  spend the money during  the three-year time                                                                    
frame.  The  $628  million  was  more  than  the  state  had                                                                    
historically had  on its books,  given that the state  had a                                                                    
long period of no G.O. debt issuance.                                                                                           
Co-Chair Stoltze  explained that there had  been securitized                                                                    
loans  and revenue  bonds on  the  books and  that the  G.O.                                                                    
bonds had been  present during the past  three elections; he                                                                    
noted his  preference for the approach,  given its inclusion                                                                    
of voters.                                                                                                                      
Vice-chair Fairclough  noted that Standard and  Poor's (S&P)                                                                    
had recently upgraded the state's  credit rating to AAA. She                                                                    
pointed to the  fiscal note that showed  an expected blended                                                                    
rate of 2.35  percent on the $350 million debt.  The CBR was                                                                    
currently yielding 3.4 percent and  the CBR subaccount had a                                                                    
6.85 percent rate  of return. She surmised  that there would                                                                    
be  a  net  gain  to  Alaskans.  She  discussed  that  small                                                                    
communities  may  not  have  the ability  to  come  up  with                                                                    
matching  funds  that  the   administration  may  want.  She                                                                    
wondered  how the  bond  market would  look  at the  state's                                                                    
fiscal  structure of  $16 billion  per year.  She referenced                                                                    
the decline in  production that had been offset  by the high                                                                    
production value.                                                                                                               
2:33:11 PM                                                                                                                    
Ms. Rodell answered that rating  agencies would primarily be                                                                    
concerned about  the state's  plan to  repay debt,  but they                                                                    
would  not put  a  cap  on the  state's  debt issuance.  She                                                                    
communicated  that the  state  had traditionally  structured                                                                    
its debt very conservatively and  it worked to limit debt to                                                                    
20 years  or less. The  state worked to actively  manage and                                                                    
take  advantage of  current  markets and  had  been able  to                                                                    
frontload a significant  portion of the debt,  to keep near-                                                                    
term  debt  service constant,  and  offer  relief in  FY  22                                                                    
through FY  24 by  over $10 million  per year.  She believed                                                                    
agencies  would  look  at  all   of  the  state's  financial                                                                    
obligations including the unfunded  liability for the Public                                                                    
Employees'   Retirement   System    (PERS)   and   Teachers'                                                                    
Retirement System  (TRS). Agencies would also  look at steps                                                                    
Alaska  was taking  to manage  the obligations,  to increase                                                                    
revenues,  and to  hold budgets  back  in declining  revenue                                                                    
years.  She expounded  that  Alaska had  a  good history  of                                                                    
showing  fiscal restraint  when  revenues  were not  meeting                                                                    
Vice-chair Fairclough  discussed the  PERS and  TRS unfunded                                                                    
liability.  She surmised  that the  state was  able to  move                                                                    
within  the  current range,  maintain  its  AAA rating  with                                                                    
Moody's and  S&P, and go  forward carrying debt  without too                                                                    
much  of  a burden  on  the  current operating  budget.  Ms.                                                                    
Rodell agreed.                                                                                                                  
Co-Chair  Stoltze believed  the  governor would  communicate                                                                    
his views on the appropriate debt cap.                                                                                          
HB  286  was  HEARD  and   HELD  in  committee  for  further                                                                    
HOUSE BILL NO. 285                                                                                                            
     "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."                                                                                                        
2:36:20 PM                                                                                                                    
KAREN  REFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                    
OFFICE  OF   THE  GOVERNOR,  discussed   that  HB   285  was                                                                    
incorporated in  the budget books  and in  subcommittee work                                                                    
for  the  operating and  capital  budgets.  The bill  was  a                                                                    
collaborative effort between the  Alaska Mental Health Trust                                                                    
Authority  (AMHTA),  AMHTA  beneficiary  groups,  and  state                                                                    
agencies  (Department   of  Administration,   Department  of                                                                    
Corrections, Department of  Education and Early Development,                                                                    
Department  of Health  and  Social  Services, Department  of                                                                    
Labor  and  Workforce  Development,  Department  of  Natural                                                                    
Resources, Department of Revenue,  University of Alaska, and                                                                    
the  Court  system); it  provided  a  comprehensive look  at                                                                    
programs  and services  for AMHTA  beneficiaries. The  total                                                                    
budget was $249,376,500; the  operating component was $236.5                                                                    
million  and  the  capital   component  was  $12.9  million.                                                                    
Unrestricted   general  funds   made   up  $212.4   million,                                                                    
designated  general  funds  were $20.1  million,  and  other                                                                    
funds represented $16.8 million.                                                                                                
Ms.  Rehfeld relayed  that AMHTA  settlement income  account                                                                    
funds were  zero based. The  trust operating funds  from the                                                                    
current year were reversed and  built back in dependent upon                                                                    
the  trust's recommendation;  the  trust budgeted  on a  two                                                                    
year cycle. Letters that  included AMHTA recommendations and                                                                    
the governor's budgeted  items were included in  a letter in                                                                    
member's packets.                                                                                                               
HB  285  was  HEARD  and   HELD  in  committee  for  further                                                                    
HOUSE BILL NO. 307                                                                                                            
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,  and   other  appropriations;  amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
2:38:47 PM                                                                                                                    
KAREN  REFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                    
OFFICE OF THE GOVERNOR, discussed  that she would provide an                                                                    
overview of  HB 307 and would  highlight supplemental budget                                                                    
items  on   a  spreadsheet  titled  "FY   2012  Supplemental                                                                    
Requests"(copy on file).                                                                                                        
Ms. Rehfeld  discussed that the FY  12 proposed supplemental                                                                    
budget totaled $97,236,400. She  provided a breakdown of the                                                                    
     Unrestricted General Funds         $78,514,700                                                                             
     Designated General Funds           ($2,350,600)                                                                            
     Other Funds                        $4,810,000                                                                              
     Federal Funds                      $16,271,300                                                                             
Ms. Rehfeld  explained that within the  supplemental request                                                                    
agency operations  totaled $38.9 million; $30.4  million was                                                                    
general fund. The request included:                                                                                             
     Fire Suppression                   $4.9 million                                                                            
     Disaster Relief                    $3.0 million                                                                            
     Formula - Adult Public Assistance  $2.6 million                                                                            
Ms.  Rehfeld  relayed  that  the  capital  supplemental  for                                                                    
emergency repairs and projects that  were ready to go to bid                                                                    
during  the upcoming  summer  totaled  $20.4 million;  $10.1                                                                    
million was general fund. The  bill included two significant                                                                    
settlements: (1)  a $20 million settlement  was reached with                                                                    
the Department  of Law for  the Optional  Retirement Program                                                                    
$20.0  million;  and,  (2) an  $18  million  settlement  was                                                                    
reached  with   the  Department   of  Education   and  Early                                                                    
Development for the Moore case.  She explained that the bill                                                                    
had 18 sections.                                                                                                                
2:42:34 PM                                                                                                                    
Ms.  Rehfeld  pointed  to  items  4  through  7  related  to                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED)  (page  1 of  the  spreadsheet).  She detailed  that                                                                    
there had  been challenges  with the  Corporations, Business                                                                    
and  Professional Licensing  (CBPL)  Division fee  structure                                                                    
and how  it had  charged various  programs for  indirect and                                                                    
other activities.  The division had been  working to capture                                                                    
what  some of  the problems  had been  for the  past several                                                                    
years.  Item  6 was  the  largest  item  and related  to  an                                                                    
adjustment for licensing fees:                                                                                                  
    Corporations, Business and Professional Licensing:                                                                          
     Adjustment  for Licensing  Fees  -  Fund source  change                                                                    
     from    professional   licensing    receipts   (receipt                                                                    
     supported services)  to the  general fund  to reimburse                                                                    
     the   professions   for    historical   indirect   cost                                                                    
     overpayments  that were  associated  with the  Business                                                                    
     License and  Corporations programs. This is  a one-time                                                                    
     fund change.                                                                                                               
     General Fund Receipt Supported Services $0.0                                                                               
Ms. Rehfeld  expounded that the professional  licensing fees                                                                    
were  supposed  to  be   self-supporting;  however,  as  the                                                                    
charges were  incorrectly tagged to certain  boards the fees                                                                    
had gone  up. The  one-time change would  allow the  fees to                                                                    
carry  forward  into the  upcoming  year,  which would  help                                                                    
smooth  cost  increases over  time.  Other  CBPL items  were                                                                    
related  to indirect  charges  associated  with support  for                                                                    
professional  licensing  boards.  She  believed  legislative                                                                    
subcommittees would  spend a substantial  amount of  time on                                                                    
the issues.                                                                                                                     
Co-Chair Thomas  pointed to  page 1, item  2 related  to the                                                                    
Public  Defender  Agency  (PDA)   under  the  Department  of                                                                    
Administration. He pointed to  the backup materials (Section                                                                    
1, page  2) and  asked about  the $125,000  for a  new lease                                                                    
remodel for  Kotzebue and an additional  $150,000 for "other                                                                    
anticipated  but  unbudgeted  maintenance."  He  opined  the                                                                    
items should have been in the FY 12 budget.                                                                                     
Ms. Rehfeld  agreed. She  explained that  the administration                                                                    
had  worked hard  in the  past  several years  to avoid  not                                                                    
budgeting and  using the supplemental  to fall back  on. She                                                                    
detailed that the budgets for  the Office of Public Advocacy                                                                    
(OPA) and the PDA had  been among the most difficult budgets                                                                    
because the administration had not  been able to address the                                                                    
increasing caseloads in a reasonable  way. Work was underway                                                                    
to determine a better way to  budget for the two agencies in                                                                    
the future.                                                                                                                     
Co-Chair  Thomas   wondered  whether  the  $45,000   for  an                                                                    
unbudgeted computer upgrade was  for more than one computer.                                                                    
He repeated his concern about unbudgeted items.                                                                                 
2:48:03 PM                                                                                                                    
Ms.  Rehfeld replied  that the  PDA item  would be  detailed                                                                    
further during the subcommittee process.                                                                                        
Representative  Gara asked  about  a  $244,000 increase  for                                                                    
support  for CBPL  boards and  commission  members (page  1,                                                                    
item 4 on  the spreadsheet). He wondered why  the amount had                                                                    
been increased by 75 to 80 percent from the prior year.                                                                         
Ms. Rehfeld  replied that the professional  licensing boards                                                                    
were  supposed to  be self-sufficient;  however, because  of                                                                    
some business  accounting challenges the state  had not been                                                                    
able to  track expenses  to the  right boards.  She believed                                                                    
that the  bill and  the FY  13 budget  tried to  correct the                                                                    
issue through the fees paid by the boards.                                                                                      
Representative Gara remarked that it  was fine if the amount                                                                    
reflected reimbursement  to boards that had  put the funding                                                                    
in; however, he was concerned if the money was additional.                                                                      
Representative Joule  referred to page 1,  item 9 associated                                                                    
with  Department of  Corrections (DOC)  community jails.  He                                                                    
wondered  how the  $600,000 was  broken out  between the  15                                                                    
community  jails.  The  administration had  brought  forward                                                                    
$190,000  for the  Kotzebue community  jail the  prior year;                                                                    
money had  been moved  around within the  line item  and the                                                                    
Kotzebue jail  had been  shorted by  approximately $125,000.                                                                    
He asked whether the item included funds to cover the jail.                                                                     
Ms. Rehfeld  believed there  was a  specific line  item that                                                                    
covered  the  Kotzebue  jail.  She   relayed  that  DOC  had                                                                    
scheduled  a meeting  with the  jail  to discuss  reopening;                                                                    
some of the  funds in item 9 would help  with the reopening.                                                                    
The  item would  be  considered for  the  amended budget  as                                                                    
well. Part of the issue  related to how community jails were                                                                    
funded;  the  department  was  working to  come  up  with  a                                                                    
blended  per  bed rate  to  allocate  funding to  avoid  the                                                                    
situation that had occurred when the jail had closed.                                                                           
2:53:42 PM                                                                                                                    
Vice-chair  Fairclough communicated  that  according to  the                                                                    
backup  the  Kotzebue  jail  was   scheduled  to  reopen  on                                                                    
February  1, 2012.  She wondered  whether  the facility  had                                                                    
reopened. Ms. Rehfeld replied in  the negative. She restated                                                                    
that  DOC was  scheduled to  meet with  the jail  to discuss                                                                    
Vice-chair  Fairclough asked  about  a  $75,000 budget  item                                                                    
related to  dispatching services  for Kotzebue.  Ms. Rehfeld                                                                    
replied  that the  item  was for  the  Department of  Public                                                                    
Safety (DPS) and was not related to the Kotzebue jail.                                                                          
Vice-chair  Fairclough observed  that the  dispatch services                                                                    
had been  paid for in  matching funds previously,  but would                                                                    
be charged to the state under the proposed budget.                                                                              
Ms.  Rehfeld informed  the committee  that there  was a  DPS                                                                    
request  for transportation  during  the  time the  Kotzebue                                                                    
jail was closed.                                                                                                                
Ms. Rehfeld  pointed to page  2, item 10 for  the Department                                                                    
of Education and Early Development (DEED):                                                                                      
     Student and School Achievement:                                                                                            
     Comprehensive    System    of    Student    Assessments                                                                    
     Contractual  Costs: this  additional funding  is needed                                                                    
     to   accommodate  the   negotiated  contract   for  the                                                                    
     Comprehensive  System of  Student  Assessments. The  FY                                                                    
     2013  Governor's budget  includes an  additional $750.0                                                                    
     for modified contract terms.                                                                                               
     General Fund $1,000.0                                                                                                      
Ms. Rehfeld elaborated that an  increase in the FY 13 budget                                                                    
had been included for standards based assessments.                                                                              
Representative  Wilson believed  that funding  had not  been                                                                    
included for  the standards-based  assessments for  a couple                                                                    
of  years and  that  the item  made up  for  the error.  Ms.                                                                    
Rehfeld  believed  the  funding was  for  existing  contract                                                                    
increases. She deferred the question to DEED for follow up.                                                                     
Representative  Wilson  had  received a  different  response                                                                    
from DEED. Ms. Rehfeld replied  that they would follow up on                                                                    
the question later.                                                                                                             
2:56:23 PM                                                                                                                    
Ms.  Rehfeld highlighted  Department  of  Health and  Social                                                                    
Services (DHSS) items 14 through 16 on page 2:                                                                                  
     Item 14                                                                                                                  
     Adult Public Assistance:                                                                                                   
     Adult  Public Assistance  Caseload  Growth -  Increased                                                                    
     program  enrollment, particularly  in the  disabled and                                                                    
     blind category  - tied  to the  dramatic growth  in the                                                                    
     Alaska  senior  population.  A  $6,075.0  increment  is                                                                    
     included in the FY 2013 Governor's budget.                                                                                 
     General Fund $2,600.0                                                                                                      
     Item 15                                                                                                                  
     Energy Assistance Program:                                                                                                 
     Low Income Home Energy  Assistance Program (LIHEAP) and                                                                    
     Alaska Affordable  Heating Program for the  state based                                                                    
     on  projected needs.  The impact  of this  supplemental                                                                    
     request  is  being  considered for  a  FY  2013  budget                                                                    
     General Fund $928.7                                                                                                        
     Item 16                                                                                                                  
     Energy Assistance Program:                                                                                                 
     Low Income Home Energy  Assistance Program (LIHEAP) and                                                                    
     Alaska Affordable  Heating Program for Tribes  based on                                                                    
     projected  needs.  The   impact  of  this  supplemental                                                                    
     request  is  being  considered   for  a  FY2013  budget                                                                    
     General Fund $1,691.6                                                                                                      
Representative  Edgmon asked  whether the  public assistance                                                                    
item  had been  included to  meet increased  caseload demand                                                                    
and expected federal shortfalls.                                                                                                
Ms.  Rehfeld replied  that item  14 was  based on  increased                                                                    
demand.  There  was  also   contingency  language  that  was                                                                    
dependent on  the amount  of federal  funding that  would be                                                                    
provided. The  item was  designed to  fill the  shortfall in                                                                    
the projection for the remainder of the fiscal year. She                                                                        
expected to receive updated numbers in the future.                                                                              
Ms. Rehfeld pointed to page 3, item 23 related to the                                                                           
Department of Law:                                                                                                              
     Oil, Gas and Mining:                                                                                                       
     Oil  and Gas  Outside  Counsel  - Increased  litigation                                                                    
     costs for  oil and gas outside  counsel attributable to                                                                    
     three types of cases:  tariff proceedings; Trans Alaska                                                                    
     Pipeline  System (TAPS)  property tax  proceedings; and                                                                    
     oil and  gas royalty  issues. An increment  of $6,150.0                                                                    
     is  included in  the  FY2013 Governor's  budget and  is                                                                    
     based on anticipated caseload.                                                                                             
     General Fund $3,116.0                                                                                                      
Ms. Rehfeld discussed item 25 for the Department of                                                                             
Military and Veterans Affairs (page 3):                                                                                         
     Office of the Commissioner:                                                                                                
     Base  Realignment  and   Closure  Commission  Impact  -                                                                    
     Department  of  Defense   Secretary  Leon  Panetta  has                                                                    
     announced that the  plan to cut nearly  $500 billion in                                                                    
     the  next  10  years  from the  Department  of  Defense                                                                    
     budget   will  impact   all  50   states  and   a  Base                                                                    
     Realignment  and  Closure  Commission  (BRAC)  will  be                                                                    
     requested  of Congress  to address  facility reductions                                                                    
     as soon  as possible.  The U.S. military's  presence in                                                                    
     Alaska  represents  10%  of the  state's  economy.  The                                                                    
     Alaska  Military  Force  Advocacy  and  Structure  Team                                                                    
     (AMFAST)  recommends  the  State   of  Alaska  hire  an                                                                    
     experienced consulting group  to address ideas proposed                                                                    
     by  the  next  BRAC.  This  request  will  promote  and                                                                    
     sustain Alaska's current  military facilities and force                                                                    
     structure.  The   impact  of  this  request   is  being                                                                    
     considered for a FY2013 budget amendment.                                                                                  
     General Fund $300.0                                                                                                        
Co-Chair  Thomas remarked  that a  resolution passed  by the                                                                    
Senate discouraging the closure  of military bases in Alaska                                                                    
had  left out  Coast  Guard bases.  He  stressed that  Coast                                                                    
Guard  bases  were very  important  to  rural and  Southeast                                                                    
Alaska and would be included in the House resolution.                                                                           
3:00:17 PM                                                                                                                    
Representative  Gara  referred  to the  $3  million  outside                                                                    
counsel appropriation (page  3, item 23). He  opined that it                                                                    
was  less expensive  to hire  in-house counsel  for research                                                                    
memos,  briefings,  and other.  He  wondered  why the  state                                                                    
should  pay more  money for  outside counsel  when the  work                                                                    
could be done in-state.                                                                                                         
Ms.  Rehfeld replied  that  there  were excellent  attorneys                                                                    
doing  great work  in the  areas that  needed assistance  on                                                                    
some  of the  important  larger ongoing  cases. She  relayed                                                                    
that it was  possible for some of  the work to be  done by a                                                                    
line  attorney  if  the  state   was  willing  to  bring  on                                                                    
additional  employees; however,  that was  not the  approach                                                                    
that  had currently  been taken.  The item  had been  on the                                                                    
administrations  list to  include  in  the operating  budget                                                                    
each year, but a supplemental request was usually required.                                                                     
Representative Gara  noted that he  had worked on  the Exxon                                                                    
Valdez  oil  spill case  and  the  state had  hired  outside                                                                    
counsel at that  time as well. He  explained outside counsel                                                                    
had  done  work that  should  have  been done  in-house.  He                                                                    
believed that  administrations had  used outside  counsel to                                                                    
keep the  state employee  count down,  but it  actually cost                                                                    
the state more money.                                                                                                           
Co-Chair Thomas  commented that  sometimes the  state needed                                                                    
to  hire former  state  attorneys who  had done  significant                                                                    
work on specific cases in order to gain their expertise.                                                                        
3:03:55 PM                                                                                                                    
Ms. Rehfeld flagged Department of  Natural Resources item 35                                                                    
(page 4):                                                                                                                       
     Fire Suppression Activity:                                                                                                 
     FY2012 Fire Suppression Activity - This is a                                                                               
     preliminary estimate of supplemental needs for spring                                                                      
     firefighting and  costs of  initial attack  of wildland                                                                    
     fires through June 30, 2012.                                                                                               
     General Fund $4,892.5                                                                                                      
Ms. Rehfeld  directed attention to  page 5, item 38  for DPS                                                                    
Alaska State Trooper detachments:                                                                                               
     Replace Federal Pass through  Funds from Alaska Highway                                                                    
     Safety  Office -  The Alaska  Bureau of  Highway Patrol                                                                    
     will  no  longer  receive  federal  funds  for  non-DUI                                                                    
     related  traffic  enforcement.  In  order  to  maintain                                                                    
     traffic   enforcement  to   include  non-DUI   specific                                                                    
     activity,  such  as  impaired driving,  youth  drivers,                                                                    
     aggressive   driving  and   speeding,  and   seat  belt                                                                    
     enforcement, supplemental  funding is necessary  as the                                                                    
     current  budget cannot  absorb these  costs. Additional                                                                    
     federal  funding reductions  are  anticipated for  DUI-                                                                    
     related traffic  enforcement starting  in FY  2014. The                                                                    
     impact   of   this   supplemental  request   is   being                                                                    
     considered for a FY 2013 budget amendment.                                                                                 
     General Fund $1,900.0                                                                                                      
Ms. Rehfeld expounded that  the Department of Transportation                                                                    
and  Public  Facilities  (DOT)  would  continue  to  receive                                                                    
federal  highway  safety  funds,  but the  amount  of  funds                                                                    
related to driving under the  influence (DUI) would be less.                                                                    
She noted  that the  issue would  continue to  be monitored,                                                                    
given  the importance  of ongoing  DUI  and non-DUI  related                                                                    
enforcement on the highway safety corridors.                                                                                    
Representative Doogan  surmised that the  federal government                                                                    
had discontinued funds and the  state had become responsible                                                                    
for  funding  items with  general  fund  money. Ms.  Rehfeld                                                                    
responded in  the affirmative. She clarified  that continued                                                                    
work  would  not  be funded  through  the  specific  highway                                                                    
safety grant.                                                                                                                   
Representative  Doogan wondered  whether  an evaluation  had                                                                    
been  made   to  determine  whether  the   items  should  be                                                                    
continued or  lapsed. Ms. Rehfeld replied  that the governor                                                                    
considered  the issues  and had  brought forward  items that                                                                    
warranted ongoing work.                                                                                                         
3:07:52 PM                                                                                                                    
Representative Joule  pointed to  item 37 on  page 5  in the                                                                    
amount   of   $106,000   for    DPS   jails   and   prisoner                                                                    
transportation. He  did not know  what time period  had been                                                                    
used or whether there had  been earlier expenses. He pointed                                                                    
to a  $75,000 expenditure  (item 36)  and wondered  how much                                                                    
the items would  end up costing the state;  he thought costs                                                                    
could  have  been  saved.   He  discussed  the  difficulties                                                                    
related  to transportation  of prisoners  from rural  areas,                                                                    
many of which  did not have holding  facilities. He believed                                                                    
the state  was beginning to realize  that it had had  a good                                                                    
deal.  He  hoped  that  a  deal  between  Kotzebue  and  the                                                                    
administration could be settled.                                                                                                
Ms. Rehfeld  agreed. She understood  that progress  had been                                                                    
made and the administration hoped for a positive outcome.                                                                       
Co-Chair  Thomas remarked  that  the seatbelt  law had  been                                                                    
implemented  because the  federal government  would pay  for                                                                    
the  enforcement.  He  wondered  whether the  law  would  be                                                                    
repealed if the federal funding  was taken away. Ms. Rehfeld                                                                    
answered   that  item   38  did   not  relate   to  seatbelt                                                                    
enforcement,  which  was  attached to  a  different  federal                                                                    
highway safety funding stream.                                                                                                  
Vice-chair Fairclough referred to  bad weather conditions in                                                                    
Eagle  River  and  Anchorage  that   had  resulted  in  road                                                                    
closures   and  stranded   drivers.  She   wondered  whether                                                                    
substantial funds had been included  for highway safety. She                                                                    
was concerned that residents would  have been unreachable in                                                                    
emergency situations.  She understood  that DOT  was working                                                                    
to  stay   on  top  of   the  issue.  She  pointed   to  two                                                                    
appropriations  for $100,000  apiece  for  sanding and  snow                                                                    
removal and wondered whether the amount was enough.                                                                             
Ms. Rehfeld responded  that DOT would do what  was needed to                                                                    
protect  the safety  of citizens.  She expected  the numbers                                                                    
would  be refined  during session  to  account for  disaster                                                                    
3:14:00 PM                                                                                                                    
Representative  Neuman  was  concerned  that  the  long-term                                                                    
programs (e.g. item 38) that  had been funded by the federal                                                                    
government  in  the  past  almost  became  embedded  in  the                                                                    
operating budget.  He wondered  whether there  was a  way to                                                                    
identify federal funds that were  not coming or if the state                                                                    
was backfilling them with general funds.                                                                                        
Ms. Rehfeld replied that the  administration worked with the                                                                    
departments  to identify  what  they  knew looking  forward;                                                                    
typically the reductions and timing  were not known very far                                                                    
in advance. She explained that  the co-chair had requested a                                                                    
look-back  on  federal funds  that  could  be identified  as                                                                    
going  away. The  issue also  involved funds  that had  gone                                                                    
directly  to  institutions, organizations,  or  communities;                                                                    
there would be  pressure for the state to look  at the items                                                                    
to determine  whether it should  continue them.  She pointed                                                                    
to  the  DPS  DUI  enforcement  federal  grant  change  that                                                                    
specified allowable  and unallowable costs as  an example of                                                                    
an issue the state would need to address.                                                                                       
Representative Neuman  was interested in a  ten-year forward                                                                    
plan that  showed which  federal funds  the state  would not                                                                    
receive.  He believed  there were  many important  non-state                                                                    
items  that  the state  could  become  overloaded with  when                                                                    
funding was lost.                                                                                                               
Ms. Rehfeld moved to DOT item 50 on page 6:                                                                                     
     AIA Field and Equipment Maintenance:                                                                                       
     Purchase De-icing  Chemicals - In FY2011,  the cost per                                                                    
     ton of  urea increased  from $342 per  ton to  $719 per                                                                    
     ton.  Also, the  airport has  commissioned a  third new                                                                    
     tank  for  potassium  acetate   in  order  to  mitigate                                                                    
     continuing supply  shortages. An increment  of $1,634.5                                                                    
     has been included in FY 2013 Governor's budget.                                                                            
     International Airport Revenue Fund $1,634.5                                                                                
Ms.  Rehfeld  looked at  item  52,  page  6 related  to  the                                                                    
University of Alaska:                                                                                                           
     Anchorage Campus:                                                                                                          
     Federal Receipt Authority for  Pell Grants - Additional                                                                    
     federal receipt authority is  needed to accommodate the                                                                    
     increases  in Pell  grant activity.  A related  FY 2013                                                                    
     budget amendment is also being considered.                                                                                 
     Federal Receipts $5,000.0                                                                                                  
Ms. Rehfeld directed attention to  capital items; there were                                                                    
several items that  were emergency in nature or  could go to                                                                    
bid during the upcoming summer  if the funding authority was                                                                    
moved   up.   She    highlighted   a   DOC   Yukon-Kuskokwim                                                                    
Correctional  Center  Dorm  Renovation  Project  for  Bethel                                                                    
(item 55, page 7):                                                                                                              
     This project  is necessary  to replace  capital funding                                                                    
     that was  redirected from other projects  to address an                                                                    
     emergency   with    overcrowding   at   Yukon-Kuskokwim                                                                    
     Correctional  Center (YKCC).  The YKCC  Dorm Renovation                                                                    
     Project  adds  28   additional  bunks,  increasing  the                                                                    
     offender housing capacity to 193.                                                                                          
     General Fund $1,284.5                                                                                                      
Ms.   Rehfeld  furthered   that   DOC   had  used   deferred                                                                    
maintenance funds  that had been  slated for  other projects                                                                    
in  order to  complete the  work; therefore,  item 55  would                                                                    
provide the  department with  replacement funds.  She looked                                                                    
at item  57 on page 7  that funded $1.1 million  for a Kenai                                                                    
River  parcel  purchase  from the  Exxon  Valdez  Oil  Spill                                                                    
Settlement  (EVOSS)  trustee  council.  The  purchase  would                                                                    
provide public access to the river.                                                                                             
Co-Chair  Thomas thought  EVOSS funds  were only  designated                                                                    
for oil  damaged properties. Ms. Rehfeld  explained that the                                                                    
EVOSS council had recommended the  fund source for the Kenai                                                                    
land purchase.  She could not  speak to the  requirements of                                                                    
the EVOSS funding.                                                                                                              
Co-Chair  Thomas   thought  follow   up  on  the   item  was                                                                    
Ms. Rehfeld pointed to DOT items 59 and 60 on page 7:                                                                           
     Item 59                                                                                                                  
     Alaska Marine  Highway System - Cordova  Dock Emergency                                                                    
     Repairs  - The  existing  float system  of the  Cordova                                                                    
    Dock needed emergency repairs in the fall of 2011.                                                                          
     General Fund $1,200.0                                                                                                      
     Item 60                                                                                                                  
     Alaska  Marine Highway  System  -  Vessel and  Terminal                                                                    
     Overhaul  and  Rehabilitation  -  Vessel  and  terminal                                                                    
     overhaul and  rehabilitation is primarily used  to meet                                                                    
     and  maintain United  States  Coast Guard  requirements                                                                    
     and obtain  Certificates of Inspection  (COI) necessary                                                                    
     to  operate the  vessels. Total  spending this  year is                                                                    
     slightly  higher than  previous years  due to  the one-                                                                    
     time  $1.2M  propeller  shaft  strut  replacement  work                                                                    
     required by the  Malaspina in order to  clear a pending                                                                    
     CG-835 No-Sail order which was about to expire.                                                                            
     General Fund $5,455.0                                                                                                      
Ms.  Rehfeld  relayed that  in  the  past several  years  $7                                                                    
million  to $8  million had  been included  annually in  the                                                                    
budget for overhaul work on state ferries.                                                                                      
3:20:59 PM                                                                                                                    
Vice-chair  Fairclough  wondered  which project  had  excess                                                                    
funds that  had been  redirected to  fund the  Bethel Yukon-                                                                    
Kuskokwim correctional facility (item 55, page 7).                                                                              
Ms. Rehfeld replied that the  deferred maintenance money had                                                                    
been  diverted  from  other projects  in  order  to  address                                                                    
immediate   emergency  overcrowding   in  the   correctional                                                                    
facility;  the  funding  would allow  DOC  to  complete  the                                                                    
projects that had been shorted funds.                                                                                           
Vice-chair  Fairclough  asked  why the  Kenai  River  parcel                                                                    
purchase  (item 57)  had  not  been included  in  the FY  13                                                                    
capital budget.                                                                                                                 
Ms. Rehfeld answered that there  were a number of items that                                                                    
Department of Natural Resources  (DNR) needed to complete in                                                                    
order to purchase the property  and prepare the boat launch;                                                                    
DNR felt that more work could  be done on the boat launch if                                                                    
the funds were allocated sooner.                                                                                                
Ms. Rehfeld explained that several  items on page 8 had been                                                                    
moved to the supplemental budget  in order to allow projects                                                                    
to go out to bid  during the current spring. She highlighted                                                                    
several capital items:                                                                                                          
     Item 68                                                                                                                  
     Nome - Runway 10-28  Rehabilitation - This project will                                                                    
     rehabilitate, repave  and repaint  the settled  area on                                                                    
     the  main runway  of the  Nome Airport.  Repair of  the                                                                    
     settled  area   has  become  a  high   priority  safety                                                                    
     concern.  The project  will advertise  for construction                                                                    
     bids in  April 2012 with  a schedule for  completion by                                                                    
     fall of 2012.                                                                                                              
     Federal Receipts $3,900.0                                                                                                  
     Item 69                                                                                                                  
     Unalaska   -   Runway    Safety   Area   and   Pavement                                                                    
     Rehabilitation -  This project will construct  a runway                                                                    
     safety  area, runway  extension,  airport lighting  and                                                                    
     drainage   improvements,  other   minor  repairs,   and                                                                    
     address  poor  pavement   conditions  at  the  Unalaska                                                                    
     Airport. In order to  utilize the upcoming construction                                                                    
     season  and  not  have  to   wait  another  12  months,                                                                    
     authorization is needed before July 1.                                                                                     
     Federal Receipts $3,000.0                                                                                                  
     Item 71                                                                                                                  
     Anchorage  Metropolitan  Area Transportation  Solutions                                                                    
     (AMATS)  - Glenn  Highway Trail  Rehabilitation -  This                                                                    
     project  will  resurface  the  existing  Glenn  Highway                                                                    
     trail between  Muldoon Road  and North  Birchwood Loop,                                                                    
     construct  a   wayside  at  milepost  (MP)   8.6,  pave                                                                    
     existing parking  area at the westbound  weigh station,                                                                    
     replace the existing pedestrian  bridge over Ship Creek                                                                    
     (bridge  #1402),  construct  minor realignment  of  the                                                                    
     pathway  at the  Muldoon Interchange,  and upgrade  any                                                                    
     curb  ramps not  meeting  ADA guidelines.  In order  to                                                                    
     utilize the  upcoming construction season and  not have                                                                    
     to  wait another  12  months,  authorization is  needed                                                                    
     before July 1.                                                                                                             
     Federal Receipts $2,340.0                                                                                                  
Ms.  Rehfeld  directed attention  to  page  9 that  included                                                                    
Department  of  Law  (DOL) judgments  and  settlements.  She                                                                    
provided  detail on  the Moore  settlement  that focused  on                                                                    
helping low  performing districts  to achieve  success (item                                                                    
79). The $18  million would be used over  a five-year period                                                                    
and  a  committee would  be  appointed  (that would  include                                                                    
DEED) to design how the funds would be used.                                                                                    
Co-Chair  Thomas wondered  whether funds  for non-performing                                                                    
schools could  be removed from  the operating  budget, given                                                                    
the $18 million allocation in the supplemental budget.                                                                          
Ms. Rehfeld replied that the  funds in the supplemental were                                                                    
specific to  a legal  settlement. She deferred  the question                                                                    
to DOL for follow up.                                                                                                           
3:25:10 PM                                                                                                                    
Representative   Wilson   relayed   that   they   [Education                                                                    
Subcommittee]  were meeting  with  the  attorney general  to                                                                    
determine  what  the  state  could and  could  not  do.  She                                                                    
wondered why  the Moore settlement funds  had been allocated                                                                    
all  at once  if  they were  to be  spent  over a  five-year                                                                    
Ms. Rehfeld replied that the  decision may have been part of                                                                    
the settlement negotiation.                                                                                                     
Representative Wilson would follow up on the issue.                                                                             
Ms. Rehfeld referred  to page 9, item 80.  She detailed that                                                                    
the backup  materials included a complete  list of judgments                                                                    
and  claims. Item  80 was  the  largest and  related to  the                                                                    
optional retirement  system for university professors  and a                                                                    
change  in the  Teachers' Retirement  System (TRS)  employer                                                                    
contribution rate:                                                                                                              
     Judgments  and   Settlements  -  Actual   judgment  and                                                                    
     settlement costs received as of January 30, 2012                                                                           
     General Fund $20,770.8                                                                                                     
Ms. Rehfeld discussed the  supplemental request for disaster                                                                    
relief; it was  hard to predict the level  of funding needed                                                                    
(item 87). The  item factored in expectations  based on fall                                                                    
and winter storms and potential spring flooding and other:                                                                      
     Supplemental Disaster  Funding - Current  disasters are                                                                    
     expected to exhaust the available  general funds in the                                                                    
     Disaster Relief  Fund. In addition  to fall  and winter                                                                    
     storms,  traditionally there  are  springs floods  that                                                                    
     have been  eligible for expenditures from  the Disaster                                                                    
     Relief Fund.  The impact  of this  supplemental request                                                                    
    is being considered for a FY2013 budget amendment.                                                                          
     General Fund $3,000.0                                                                                                      
3:27:32 PM                                                                                                                    
Ms. Rehfeld  pointed to ratifications  on page 10.  Items 97                                                                    
through 99 reflected precise dollar  amounts; funds for fire                                                                    
suppression activity (item 97) were $36,388.                                                                                    
Representative Costello looked at a  DNR item related to the                                                                    
gas pipeline  project (page 9,  item 85) that  included zero                                                                    
funding.  She asked  for  an explanation  on  the item  that                                                                    
appeared to be a statute related change.                                                                                        
Ms.  Rehfeld  explained that  the  item  related to  ongoing                                                                    
Alaska Gasline  Inducement Act (AGIA) efforts  under DNR and                                                                    
extended  the lapse  date on  a previous  appropriation. She                                                                    
would follow up with the estimated amount.                                                                                      
Representative  Neuman wondered  whether the  item 85  was a                                                                    
reappropriation  of   a  prior  supplemental.   Ms.  Rehfeld                                                                    
responded  that   some  of  the  AGIA   appropriations  were                                                                    
classified as  a "multi-year operating";  the administration                                                                    
followed up to  provide an estimate of  available funds that                                                                    
would allow  items to  continue into  the next  fiscal year.                                                                    
She would follow up with more detail.                                                                                           
Vice-chair Fairclough  commended DOL for  resolving multiple                                                                    
legal cases that had been ongoing.                                                                                              
3:31:46 PM                                                                                                                    
The meeting was adjourned at 3:31 PM.                                                                                           

Document Name Date/Time Subjects
HB 307-Supplemental_Spreadsheet_1-31-12.pdf HFIN 2/9/2012 1:30:00 PM
HB 307
HB286-DOR-TRS-NEW FN 01-31-12.pdf HFIN 2/9/2012 1:30:00 PM
HB 286
HB 286 Testimony.pdf HFIN 2/9/2012 1:30:00 PM
HB 286
HB 283-Response to HFC Questions Capital Budget letter dated 2.21.2012.pdf HFIN 2/9/2012 1:30:00 PM
HB 283