Legislature(2013 - 2014)HOUSE FINANCE 519

01/28/2013 01:30 PM FINANCE


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01:31:21 PM Start
01:34:21 PM Fy 14 Governor's Department Overview: Department of Natural Resources
02:43:38 PM Fy 14 Governor's Budget Overview: Department of Transportation and Public Facilities
03:24:32 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 65 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 66 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ Governor's FY14 Budget Overview: TELECONFERENCED
- Dept. of Natural Resources
- Dept. of Transportation & Public Facilities
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     January 28, 2013                                                                                           
                         1:31 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:31:21 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Austerman  called   the  House  Finance  Committee                                                                    
meeting to order at 1:31 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lindsey Holmes                                                                                                   
Representative Scott Kawasaki, Alternate                                                                                        
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Ed  Fogels,  Deputy   Commissioner,  Department  of  Natural                                                                    
Resources;  Joe Balash,  Deputy Commissioner,  Department of                                                                    
Natural  Resources; Jean  Davis, Director,  Support Services                                                                    
Division, Department of Natural  Resources; Pat Kemp, Acting                                                                    
Commissioner,  Department   of  Transportation   and  Public                                                                    
Facilities;    Mary    Siroky,   Director,    Division    of                                                                    
Administrative  Services, Department  of Transportation  and                                                                    
Public Facilities;                                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
FY14 GOVERNOR'S BUDGET OVERVIEW:                                                                                                
                                                                                                                                
     Department of Natural Resources                                                                                            
     Department of Transportation                                                                                               
HB 65     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 65 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 66     APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 66 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 65                                                                                                             
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs,    capitalizing   funds,   amending                                                                    
     appropriations,   and   making  reappropriations;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
HOUSE BILL NO. 66                                                                                                             
                                                                                                                                
     "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."                                                                                                        
                                                                                                                                
Co-Chair   Austerman   stated   that   the   House   Finance                                                                    
Subcommittee  on Health  and Social  Services had  met as  a                                                                    
committee  as a  whole on  January 23  for the  Department's                                                                    
budget overview. He related that  because all the members of                                                                    
the House  Finance Committee  sat on  the Health  and Social                                                                    
Services  (DHSS) Subcommittee,  the  overview  would not  be                                                                    
repeated;  however,  the  minutes  from  the  House  Finance                                                                    
Subcommittee's  DHSS Budget  Overview would  be included  in                                                                    
the  current  meetings  minutes.  [Note:  Minutes  from  the                                                                    
January 23,  2013 Department of  Health and  Social Services                                                                    
Subcommittee DHSS  Budget Overview  are attached at  the end                                                                    
of this meeting.]                                                                                                               
                                                                                                                                
^FY  14   GOVERNOR'S  DEPARTMENT  OVERVIEW:   DEPARTMENT  OF                                                                    
NATURAL RESOURCES                                                                                                               
                                                                                                                                
1:34:21 PM                                                                                                                    
                                                                                                                                
ED  FOGELS,  DEPUTY   COMMISSIONER,  DEPARTMENT  OF  NATURAL                                                                    
RESOURCES,  began  the  budget overview,  "State  of  Alaska                                                                    
Department  of  Natural Resources"(copy  on  file).discussed                                                                    
slide 4  "State of Alaska Department  of Natural Resources."                                                                    
The  slide  detailed  the  department's  core  services  and                                                                    
included the mission statement:                                                                                                 
                                                                                                                                
     Article  8,  Section  1   of  the  Alaska  Constitution                                                                  
     provides:                                                                                                                
     •"It  is  the policy  of  the  State to  encourage  the                                                                    
     settlement  of  its land  and  the  development of  its                                                                    
     resources  by making  them  available  for maximum  use                                                                    
     consistent with the public interest."                                                                                      
                                                                                                                                
     DNR Mission Statement:                                                                                                   
     •Responsibly develop Alaska's  resources by making them                                                                    
     available for  maximum use and benefit  consistent with                                                                    
     the public interest.                                                                                                       
                                                                                                                                
     DNR Core Services:                                                                                                       
     1.  Foster responsible  commercial development  and use                                                                    
     of state  land and  natural resources,  consistent with                                                                    
     the   public  interest,   for   long-term  wealth   and                                                                    
     employment                                                                                                                 
     2.  Provide  access  to  state  lands  for  public  and                                                                    
     private use, settlement, and recreation                                                                                    
     3.  Ensure sufficient  data acquisition  and assessment                                                                    
     of land  and resources  to foster  responsible resource                                                                    
     development                                                                                                                
     4. Mitigate  threat to the public  from natural hazards                                                                    
     by providing comprehensive  fire protection services on                                                                    
     state,  private,  and   municipal  lands,  and  through                                                                    
     identifying significant geological hazards                                                                                 
                                                                                                                                
1:36:19 PM                                                                                                                    
                                                                                                                                
Mr. Fogels spoke to slide 5, which provided the                                                                                 
department's land management details:                                                                                           
                                                                                                                                
     Land Ownership                                                                                                           
     •Federal Land: More than 200 million acres                                                                                 
     •State Land:  Approx. 100 million acres  of uplands, 60                                                                    
     million acres of tidelands,  shore lands, and submerged                                                                    
     lands, and 40,000 miles of coastline                                                                                       
     •Native Corporation Land: 44 million acres                                                                                 
                                                                                                                                
     DNR:                                                                                                                     
     •Manages  one of  the largest  portfolios of  oil, gas,                                                                    
     minerals, renewable  resources, water, and land  in the                                                                    
     world                                                                                                                      
     •Manages  all  oil  and  gas   fields  on  state  land,                                                                    
     including  two of  the largest  oil and  gas fields  in                                                                    
     North America                                                                                                              
     •Oversees all activities that occur on state land                                                                          
                                                                                                                                
Mr.  Fogels pointed  to slide  6, "Alaska  as a  Storehouse:                                                                    
Hydrocarbons."   Compared   to   most  basins,   Alaska   is                                                                    
relatively underexplored, with 500  exploration wells on the                                                                    
North  Slope,  compared  to   Wyoming's  19,000.  The  slide                                                                    
further detailed:                                                                                                               
                                                                                                                                
     North Slope                                                                                                              
     USGS estimates  that Alaska's North Slope  has more oil                                                                    
     than any other Arctic nation                                                                                               
        · OIL: Est. 40 billion barrels of conventional oil                                                                    
          (USGS & BOEMRE)                                                                                                       
        · GAS: Est. over 200 trillion cubic feet of                                                                           
          conventional natural gas (USGS)                                                                                       
     •Alaska   has  world-class   unconventional  resources,                                                                    
     including  tens of  billions of  barrels of  heavy oil,                                                                    
     shale oil,  and viscous oil, and  hundreds of trillions                                                                    
     of  cubic  feet  of  shale  gas,  tight  gas,  and  gas                                                                    
     hydrates                                                                                                                   
        · Positive methane hydrate test production                                                                              
                                                                                                                                
     Cook Inlet                                                                                                               
     USGS  estimates that  significant undiscovered  volumes                                                                    
     of hydrocarbons remain to be found in the Cook Inlet:                                                                      
     •19 trillion cubic feet of natural gas                                                                                     
     •600 million barrels of oil                                                                                                
     •46 million barrels of natural gas liquids                                                                                 
                                                                                                                                
1:36:36 PM                                                                                                                    
                                                                                                                                
Mr. Fogels discussed slide 7, "Alaska as a Storehouse-                                                                          
Strategic & Critical Minerals":                                                                                                 
                                                                                                                                
     The State of  Alaska Ranks in the Top Ten  in the World                                                                  
     for Important Minerals, Including:                                                                                       
     •Coal: 17 percent of the  world's coal; 2nd most in the                                                                  
     world                                                                                                                      
     •Copper: 6 percent  of the world's copper;  3rd most in                                                                  
     the world                                                                                                                  
     •Lead: 2 percent of the world's lead; 6th most in the                                                                    
     world                                                                                                                      
     •Gold: 3 percent of the world's gold; 7th most in the                                                                    
     world                                                                                                                      
     •Zinc: 3 percent of the world's zinc; 8th most in the                                                                    
     world                                                                                                                      
     •Silver: 2 percent of the world's silver; 8th most in                                                                    
     the world USGS estimates                                                                                                   
                                                                                                                              
     According to the USGS, Alaska has over 70 occurrences                                                                    
     of Rare Earth Elements (REE).                                                                                            
                                                                                                                              
1:36:42 PM                                                                                                                    
                                                                                                                                
Mr. Fogels spoke to slides 8 through 11, "State of Alaska-                                                                      
DNR has 7 divisions":                                                                                                           
                                                                                                                                
     1. Division of Agriculture (DoA)                                                                                       
          •Franci Havemeister, Director                                                                                         
         •47 full and part-time budgeted positions                                                                              
          •4.6% of DNR's FY14 Operating Budget Request                                                                          
          •$7,760.8 budget request (all sources)                                                                                
          •Promotes   and  encourages   development  of   an                                                                    
          agriculture industry in Alaska                                                                                        
                                                                                                                              
     2. Division of Forestry (DoF)                                                                                          
          •Chris Maisch, Director                                                                                               
          •276 full  and part-time budgeted  positions (does                                                                    
          not include the hundreds of fire season crews)                                                                        
          •27.5% of DNR's FY14 Operating Budget Request                                                                         
          •$46,737.3 budget request (all sources)                                                                               
          •Serves  Alaskans  through forest  management  and                                                                    
          wildland fire protection                                                                                              
                                                                                                                                
     3. Division of Geological & Geophysical Surveys (DGGS)                                                                 
          •Bob Swenson, Director                                                                                                
         •55 full and part-time budgeted positions                                                                              
          •5.6% of DNR's FY14 Operating Budget Request                                                                          
          •$9,468.5 budget request (all sources)                                                                                
          •Determines  the  potential  of Alaskan  land  for                                                                    
          production   of  metals,   minerals,  fuels,   and                                                                    
          geothermal resources,  the locations  and supplies                                                                    
          of groundwater and  construction material, and the                                                                    
          potential  geologic hazards  to buildings,  roads,                                                                    
          bridges, and other installations                                                                                      
          State of Alaska                                                                                                       
          DNR has 7 Divisions                                                                                                   
     4. Mining Land and Water                                                                                               
          •Brent Goodrum, Director                                                                                              
          •227 full and part-time budgeted positions                                                                            
          •16.8% of DNR's FY14 Operating Budget Request                                                                         
          •$28,631.2 budget request (all sources)                                                                               
          •Provides for  the appropriate use  and management                                                                    
          of  Alaska's state  owned land  and water,  aiming                                                                    
          toward  maximum  use  consistent with  the  public                                                                    
          interest                                                                                                              
                                                                                                                                
     5. Oil & Gas                                                                                                           
          •Bill Barron, Director                                                                                                
          •100 full and part-time budgeted positions                                                                            
          •10.1% of DNR's FY14 Operating Budget Request                                                                         
          •$17,138.5 budget request (all sources)                                                                               
          •Responsible for  the leasing  of state  lands for                                                                    
          oil, gas, and geothermal exploration                                                                                  
                                                                                                                              
     6. Parks & Outdoor Recreation                                                                                          
          •Ben Ellis, Director                                                                                                  
          •185 full and part-time budgeted positions                                                                            
          •9.6% of DNR's FY14 Operating Budget Request                                                                          
          •$16,399.1 budget request (all sources)                                                                               
          •Provides  outdoor  recreation  opportunities  and                                                                    
          conserves  and interprets  natural, cultural,  and                                                                    
          historic  resources for  the  use, enjoyment,  and                                                                    
          welfare of the people                                                                                                 
                                                                                                                              
     7. Support Services                                                                                                    
          •Jean Davis, Director                                                                                                 
          •130 full and part-time budgeted positions                                                                            
          •7.7% of DNR's FY14 Operating Budget Request                                                                          
          •$13,162.6 budget request (all sources)                                                                               
          •Provides  client-focused,   efficient  and  cost-                                                                    
          effective  financial,  budget, procurement,  human                                                                    
          resource,  information  technology  and  recording                                                                    
          services to DNR and the public                                                                                        
          State of Alaska DNR has 7 Divisions                                                                                   
                                                                                                                              
     Office of the Commissioner                                                                                             
          •Dan Sullivan, Commissioner                                                                                           
          •10 full-time budgeted positions                                                                                      
          •1.00% of DNR's FY14 Operating Budget Request                                                                         
          •$1,712.3 budget request (all sources)                                                                                
                                                                                                                                
1:38:16 PM                                                                                                                    
                                                                                                                                
Mr. Fogels pointed to slides 12 and 13, "State of Alaska-                                                                       
DNR Offices":                                                                                                                   
                                                                                                                                
     Gas Pipeline Project Office                                                                                            
     •Eric Hatleberg, Acting Director                                                                                           
     •7 full-time budgeted positions                                                                                            
     •1.8% of DNR's FY14 Operating Budget Request                                                                               
     •$2,997.8 budget request (all sources)                                                                                     
     •Monitors efforts by the  Alaska Pipeline Project (APP)                                                                    
     to  design, develop,  construct and  operate a  48-inch                                                                    
     natural  gas  pipeline  to  commercialize  North  Slope                                                                    
     natural gas                                                                                                                
                                                                                                                                
     State Pipeline Coordinator's Office                                                                                      
     •Mike Thompson, State Pipeline Coordinator                                                                                 
     •30 full and part-time budgeted positions                                                                                  
     •4.6% of DNR's FY13 Operating Budget Request                                                                               
     •$7,870.1 budget request (all sources)                                                                                     
     •Issues leases  of state  land for  pipeline rights-of-                                                                    
     ways  and implements  the state's  policy set  forth in                                                                    
     Alaska   Statute   (AS)    38.35.010   concerning   the                                                                    
     development,   use,   and   control   of   a   pipeline                                                                    
     transportation system within the state                                                                                     
                                                                                                                                
     Office of Project Management & Permitting                                                                              
     •Tom Crafford, Director                                                                                                    
     •16 full-time budgeted positions                                                                                           
     •4.7% of DNR's FY14 Operating Budget Request                                                                               
     •$7,964.3 budget request (all sources)                                                                                     
     •Coordinates  the review  of larger  scale projects  in                                                                    
     the state                                                                                                                  
                                                                                                                                
     Alaska Mental Health Trust Land Office                                                                                 
     •Greg Jones, Executive Director                                                                                            
     •18 full and part-time budgeted positions                                                                                  
     •2.4% of DNR's FY14 Operating Budget Request                                                                               
     •$3,996.1 budget request (all sources)                                                                                     
     •Protecting and  enhancing the  value of  Alaska Mental                                                                    
     Health  Trust  Lands  while  maximizing  revenues  from                                                                    
     those lands over time                                                                                                      
                                                                                                                                
1:39:47 PM                                                                                                                    
                                                                                                                                
Mr. Fogels  addressed slide 14, "Key  Performance Measures."                                                                    
The  slide showed  the  increase in  the  Dollars that  were                                                                    
committed to  memorandums of  understanding with  the Office                                                                    
of  Project  Management  and Permitting  for  large  project                                                                    
coordination. With each  year that passed by  there was more                                                                    
activity in  the state  and the  department served  a useful                                                                    
and  valuable  service  in coordinating  the  permitting  of                                                                    
projects.                                                                                                                       
                                                                                                                                
Mr. Fogels  spoke to slide  15, "Key  Performance Measures."                                                                    
The  slide illustrated  the monetary  value of  agricultural                                                                    
products sold  in Millions. The Division  of Agriculture was                                                                    
not  directly  responsible   for  the  performance  measure;                                                                    
however, the  department looked to  it in order  to increase                                                                    
awareness of  Alaska Grown products  and market  options, as                                                                    
well as to expand gross product sales.                                                                                          
                                                                                                                                
1:41:08 PM                                                                                                                    
                                                                                                                                
Mr. Fogels  discussed slide 16, "Key  Performance Measures."                                                                    
The  slide charted  Alaska boating  fatalities. the  boating                                                                    
safety program had reduced the  number of boating fatalities                                                                    
in the state.                                                                                                                   
                                                                                                                                
1:41:32 PM                                                                                                                    
                                                                                                                                
JOE  BALASH,  DEPUTY  COMMISSIONER,  DEPARTMENT  OF  NATURAL                                                                    
RESOURCES,  discussed  slide  18, "Secure  Alaska's  Future:                                                                    
Oil." He  related that  declining oil  through TAPS  was the                                                                    
most critical economic issue facing the state:                                                                                  
                                                                                                                                
     •TAPS has transported over 16.3  billion barrels of oil                                                                    
     and natural gas liquids  since June of 1977. Production                                                                    
     peaked  at 2.2  million  barrels per  day  in the  late                                                                    
    1980s, representing 25% of U.S. domestic production                                                                         
                                                                                                                                
     •Since  its  peak,  however,  throughput  has  steadily                                                                    
     declined; today, TAPS is 2/3  empty and declining at 6%                                                                    
     per year                                                                                                                   
                                                                                                                                
     •TAPS throughput decline  threatens economic disruption                                                                    
     and the very existence of our pipeline                                                                                     
                                                                                                                                
     •We must  encourage industry  to invest  in exploration                                                                    
     and  development  of  conventional  and  unconventional                                                                    
     resources  on  state  and  federal  land,  onshore  and                                                                    
     offshore                                                                                                                   
                                                                                                                                
     •TAPS has plenty of capacity for increased throughput                                                                      
                                                                                                                                
     •Most  near-term  critical  economic issue  facing  the                                                                    
     state                                                                                                                      
                                                                                                                                
     •Less oil  in the pipeline  year after year  takes away                                                                    
     revenue from future generations-the ultimate giveaway                                                                      
                                                                                                                                
1:43:17 PM                                                                                                                    
                                                                                                                                
Mr. Balash addressed slide 19, "Secure Alaska's Future:                                                                         
Oil." The slide listed the state's comprehensive strategy                                                                       
to increase TAPS throughput to one million barrels per day:                                                                     
                                                                                                                                
     I.   Enhance   Alaska's  global   competitiveness   and                                                                    
     investment climate                                                                                                         
                                                                                                                                
     II.  Ensure the  permitting process  is structured  and                                                                    
     efficient                                                                                                                  
                                                                                                                                
     III.  Facilitate and  incentivize  the  next phases  of                                                                    
     North Slope development                                                                                                    
                                                                                                                                
     IV. Promote Alaska's  resources and positive investment                                                                    
     climate to world markets                                                                                                   
                                                                                                                                
1:44:20 PM                                                                                                                    
                                                                                                                                
Mr. Balash pointed to slide 20, "Cook Inlet, NS & Beaufort                                                                      
Sea Lease Sales." He related that the strategy was proving                                                                      
successful:                                                                                                                     
                                                                                                                                
     Cook Inlet, 2011 & 2012 Lease Sales                                                                                      
     •In June  2011, the  state received the  highest number                                                                    
     of Cook  Inlet lease  sale bids  in 28  years, totaling                                                                    
     over $11 million                                                                                                           
          oTotal tracts sold: 108                                                                                               
          oTotal high bonus bids: $10,986,826.20                                                                                
     •In May 2012,  Cook Inlet lease sale  bids totaled more                                                                    
     than $6.8 million                                                                                                          
          oTotal tracts sold: 44                                                                                                
          oTotal high bonus bids: $6,865,835                                                                                    
                                                                                                                                
     NS & Beaufort Sea, 2011 & 2012 Lease Sales                                                                               
     •In  December  2011,  the  Division   of  Oil  and  Gas                                                                    
     received more than 300 bids  from more than 15 bidders,                                                                    
     totaling more  than $21 million, signifying  one of the                                                                    
     most successful sales in recent Alaska history                                                                             
          oTotal tracts sold: 239                                                                                               
          oTotal high bonus bids: $18,712,945.98                                                                                
     •In November 2012, bids for all areas totaled more                                                                         
     than $14 million with tracts sold in the Foothills                                                                         
     area for the first time since 2009                                                                                         
          oTotal tracts sold: 122                                                                                               
          oTotal high bonus bids: $14,240,333.73                                                                                
     •State needs billions of dollars in new investment to                                                                      
    meet the Governor's one-million-barrels-a-day goal                                                                          
                                                                                                                                
1:45:13 PM                                                                                                                    
                                                                                                                                
Mr.  Balash discussed  slide 21,  "North  Slope: Recent  and                                                                    
Proposed Activity."  The slide  illustrated North  Slope oil                                                                    
and  gas activity  in 2012.  He relayed  that the  state had                                                                    
parties  looking into  the full  range of  resources on  the                                                                    
slope,  both in  the  legacy  fields and  in  new areas.  He                                                                    
pointed out that a very  small improvement in a legacy filed                                                                    
far surpassed the  arrival of new production  in new fields.                                                                    
He stressed that the state's  legacy partners were important                                                                    
and should not be forgotten.                                                                                                    
                                                                                                                                
Mr. Balash pointed to slide 22,  "Next Phases & New Areas of                                                                    
Exploration for  NS Oil and  Gas." He noted that  while some                                                                    
fields  were  maturing,  the  basin  itself  was  relatively                                                                    
underexplored.  The  slide   listed  opportunities  for  the                                                                    
future:                                                                                                                         
                                                                                                                                
     •Shale oil exploration - ongoing                                                                                           
          oJuly 31st conference in Anchorage on Shale Oil                                                                       
                                                                                                                                
     •Shell finally was able to drill its first exploratory                                                                     
     wells in the Beaufort and Chukchi Seas                                                                                     
                                                                                                                                
     •Record of federal permitting delays should be a                                                                           
     continued source of concern for the State                                                                                  
                                                                                                                                
     •Eastern North Slope open, PT settled                                                                                      
          oPT permits issued by the State and the Corps of                                                                      
          Engineers                                                                                                             
     •Linc Energy drilling operations at Umiat are moving                                                                       
     forward                                                                                                                    
                                                                                                                                
     •New players, operators and exploration on state land                                                                      
          oShell, Repsol, Brooks Range, Great Bear, Savant                                                                      
          oExxon Mobil, Conoco Phillips                                                                                         
                                                                                                                                
     •These   developments,   while   positive,   are   just                                                                    
     scratching the surface of our overall potential                                                                            
                                                                                                                                
1:47:45 PM                                                                                                                    
                                                                                                                                
Mr. Balash  spoke to slides  23 and 24, "Cook  Inlet-Oil and                                                                    
Gas Activity":                                                                                                                  
                                                                                                                                
     •Legislative tax and investment incentives are working                                                                     
                                                                                                                                
     •Old and  new players exploring and  investing: Apache,                                                                    
     Hilcorp,  Armstrong,  Linc, Buccaneer,  Nordaq,  Furie,                                                                    
     Cook Inlet Energy, ConocoPhillips, CIRI                                                                                    
                                                                                                                                
     •Hundreds of millions invested in 2012                                                                                     
                                                                                                                                
     •Dramatic increase in  number of drill rigs  in inlet -                                                                    
     either idle, available or stacked                                                                                          
          oIn November 2006, 9 rigs                                                                                             
          oIn November 2009, 12 rigs                                                                                            
          oIn November 2012, 17 rigs (includes 2 jack-up                                                                        
          rigs)                                                                                                                 
                                                                                                                                
     •Companies shooting major 3-D  seismic over large areas                                                                    
     of the basin                                                                                                               
          oNever previously done at this scale with this                                                                        
          sophisticated technology                                                                                              
          oPresents huge opportunities for development                                                                          
                                                                                                                                
     •New gas storage project on  line; important for supply                                                                    
     security  and more  steady  year-round production,  and                                                                    
     peak availability                                                                                                          
                                                                                                                                
     •Attractive price for gas relative  to Lower 48 markets                                                                    
     - but challenged by a relatively small market                                                                              
                                                                                                                                
     •State   continues  to   focus  on   safe,  responsible                                                                    
     development and operations                                                                                                 
                                                                                                                                
Mr. Balash  stated that the state  owed a lot to  Cook Inlet                                                                    
Sedimentary Basin; it  paved the way to statehood  and was a                                                                    
hotbed of activity  during the 1950's and  1960's, until the                                                                    
discovery of  Prudhoe Bay in  1968. Consequentially,  all of                                                                    
the  attention was  redirected to  the North  Slope and  for                                                                    
three decades  Cook Inlet was  forgotten. In recent  years a                                                                    
consolidation had been seen in  the existing assets with the                                                                    
arrival of new and credible players attracted by incentives                                                                     
created by the legislature.                                                                                                     
                                                                                                                                
1:50:23 PM                                                                                                                    
                                                                                                                                
Mr. Balash addressed slide 25, "Commercializing NS Gas:                                                                         
2012 State of the State and Benchmarks":                                                                                        
                                                                                                                                
     Key principles for any project                                                                                         
     •Gas to  address Alaska's  in-state needs  for abundant                                                                    
     supplies of low-cost energy and economic growth                                                                            
     •Gas  that  will  maximize the  value  of  the  state's                                                                    
     massive  resource base  through high-volume  and export                                                                    
     markets                                                                                                                    
     •A   project   that    incentivizes   exploration   and                                                                    
     investment in continued oil and gas development                                                                            
                                                                                                                                
     Governor's Roadmap to Gasline                                                                                          
                                                                                                                                
     1. Resolve Point Thomson                                                                                                   
     2. Align during the first quarter of 2012                                                                                  
     3.   Two   projects-under    AGIA   and   AGDC-complete                                                                    
     discussions by  third quarter of 2012  determining what                                                                    
     potential exists to consolidate projects                                                                                   
     4.  Harden numbers  on  an Alaska  LNG  project by  the                                                                    
     third quarter of 2012, and  identify a pipeline project                                                                    
     and associated work schedule                                                                                               
     5. If  milestones are met,  the 2013  Legislature takes                                                                    
     up  gas tax  legislation designed  to move  the project                                                                    
     forward                                                                                                                    
                                                                                                                                
1:52:04 PM                                                                                                                    
                                                                                                                                
Mr. Balash discussed slides  26 through 29, "Commercializing                                                                    
NS Gas Significant Progress." Slide  26 showed a letter from                                                                    
the Chief  Executive Officers of  ExxonMobil, ConocoPhillips                                                                    
and  British Petroleum.  He noted  the call  out box  on the                                                                    
slide which highlighted key points:                                                                                             
                                                                                                                                
          "Serious discussions between our companies have                                                                       
     taken place  over the past  several months,  along with                                                                    
     the  Alaska  Pipeline  Project (APP)  parties  who  are                                                                    
     supporting  the  AGIA License.  We  have  aligned on  a                                                                    
     structured, steward able  and transparent approach with                                                                    
     the  aim  to  commercialize  North  Slope  natural  gas                                                                    
     resources within an AGIA framework.  As a result of the                                                                    
     rapidly evolving  global market,  large-scale liquefied                                                                    
     natural  gas (LNG)  exports  from south-central  Alaska                                                                    
     will be assessed as an  alternative to gas lone exports                                                                    
     through  Alberta.  In  addition  to  broadening  market                                                                    
     access, a south-central Alaska  LNG approach could more                                                                    
     closely align  with in-state  energy demand  and needs.                                                                    
     We   are    now   working    together   on    the   gas                                                                    
     commercialization  project   concept  selection,  which                                                                    
     would include an associated  timeline and an assessment                                                                    
     of   major   project  components   including   in-state                                                                    
     pipeline routes and capacities,  global LNG trends, and                                                                    
     LNG tidewater site locations, among others."                                                                               
                                                                                                                                
Mr. Balash spoke to slide 27, which contained a second                                                                          
letter from the same three companies. He noted key points:                                                                      
                                                                                                                                
          "On March 30, 2012, ExxonMobil, ConocoPhillips                                                                        
     and BP submitted a letter  informing you of progress in                                                                    
     working together on the next  generation of North Slope                                                                    
     resource  development.  Since   that  time,  the  three                                                                    
     producer   companies  and   TransCanada,  through   its                                                                    
     participation  in the  Alaska  Pipeline Project  (APP),                                                                    
     have maintained  momentum and executed  important early                                                                    
     work  to  select  leading   concepts  for  a  potential                                                                    
     project. We are  writing to update you  on the progress                                                                    
     that has been made to date.                                                                                                
                                                                                                                                
     We  have  narrowed  the   broad  range  of  alternative                                                                    
     development   concepts  and   assessed  major   project                                                                    
     components, including that  gas pipeline, gas treatment                                                                    
     to  remove  CO2  and   other  impurities,  natural  gas                                                                    
     liquefaction,   LNG   storage,  and   marine   terminal                                                                    
     facilities as described  on Attachment 2. Individually,                                                                    
     each of these components  would represent a world-class                                                                    
     project.  Combined, they  result in  a mega-project  of                                                                    
     unprecedented scale  and challenge;  up to  1.7 million                                                                    
     tons of steel,  a peek construction workforce  of up to                                                                    
     15,000, a permanent workforce of  over 1,000 in Alaska,                                                                    
     and an estimated  total cost in today's  dollars of $45                                                                    
     to $65+ billion."                                                                                                          
                                                                                                                                
Mr. Balash continued to Slide 28 which discussed the key                                                                        
factor of commercializing the development of Point Thomson:                                                                     
                                                                                                                                
     The State  of Alaska  has made significant  progress on                                                                  
     commercializing North Slope gas                                                                                          
     •Much of the upstream infrastructure is in place                                                                           
     •There  is a  renewed  focus from  key stakeholders  on                                                                    
    monetizing the massive reserves of North Slope gas                                                                          
     •Hundreds  of millions  of dollars  have been  spent on                                                                    
     critical engineering  and environmental  regulatory and                                                                    
     commercial work required for a gas project                                                                                 
                                                                                                                                
     WSJ: Alaska, Gas Firms Clear Way For Pipeline                                                                            
                                                                                                                                
     Point  Thomson   settlement  "…paves  the  way   for  a                                                                    
     pipeline  project to  ship natural  gas from  the North                                                                    
     Slope, unleashing the state's  massive gas reserves." -                                                                    
     WSJ, 3/30/12                                                                                                               
                                                                                                                                
     FT: Oil Groups Agree on $40bn Alaska Gas Project                                                                         
     "ExxonMobil,   BP  and   ConocoPhillips  have   reached                                                                    
     agreement  with   the  state   of  Alaska  to   take  a                                                                    
     significant  step forward  on a  $40bn-plus project  to                                                                    
     export  liquefied  natural  gas to  Asia,  resolving  a                                                                    
     long-running  lease dispute  that had  been holding  up                                                                    
     progress.                                                                                                                  
     In a  joint letter, the  chief executives of  the three                                                                    
     companies  said  they  were  "aligned"  on  a  plan  to                                                                    
     develop the huge gas reserves  of Alaska's North Slope,                                                                    
     which until now  have been stranded without  a route to                                                                    
     market." - Financial Times, 3/30/12                                                                                        
                                                                                                                                
Mr.  Balash continued  to slide  29, which  further detailed                                                                    
the  progress that  had been  made in  commercializing North                                                                    
Slope gas. He  turned to slides 30  and 31, "Commercializing                                                                    
NS Gas Point Thomson":                                                                                                          
                                                                                                                                
     •Point Thomson is a multi-billion dollar project                                                                           
                                                                                                                                
     •Beginning construction now                                                                                                
                                                                                                                                
     •Producing  Point Thomson  liquid condensate  into TAPS                                                                    
     as part of Phase 1                                                                                                         
                                                                                                                                
     •Big prize - gas commercialization for LNG                                                                                 
                                                                                                                                
     •Significant portion of  infrastructure being built for                                                                    
    Phase 1 is applicable to a gas line or LNG project                                                                          
                                                                                                                                
     •Three     phases    of     development    in     2012:                                                                    
     explaining/defending   settlement;    permitting;   and                                                                    
     getting to work                                                                                                            
                                                                                                                                
1:56:06 PM                                                                                                                    
                                                                                                                                
Mr. Balash spoke to slide  32 titled "Commercializing NS Gas                                                                    
Comparative  Advantages."   He  said  that   the  department                                                                    
believed  that these  were  advantages  that positioned  the                                                                    
state well in the marketplace:                                                                                                  
                                                                                                                                
     •The North  Slope of Alaska  is estimated to  have over                                                                    
     200 trillion cubic feet of conventional gas                                                                                
                                                                                                                                
     •Conventional  gas is  not controversial-unconventional                                                                    
     gas in the Lower 48 U.S. states remains controversial                                                                      
                                                                                                                                
     •35 trillion cubic feet of known reserves                                                                                  
                                                                                                                                
     •Prudhoe Bay reinjects 8 billion  cubic feet of gas per                                                                    
     day, which is enough to meet Canada's daily gas needs                                                                      
                                                                                                                                
     •These numbers  do not include  the trillions  of cubic                                                                    
     feet  of  shale  gas,  tight   gas,  and  gas  hydrates                                                                    
     estimated for the North Slope                                                                                              
                                                                                                                                
     •This  is an  almost inexhaustible  supply of  gas with                                                                    
     new technology                                                                                                             
                                                                                                                                
     •North  Slope  gas is  "wet"  gas  with a  high  energy                                                                    
     content (BTU value)                                                                                                        
                                                                                                                                
     •An  Alaska  LNG  project  has  complete  certainty  of                                                                    
     supply; not all other projects do                                                                                          
                                                                                                                                
Mr. Balash stressed that it was important that Alaska LNG                                                                       
be in high demand in the global market. He listed other                                                                         
comparative advantages of Alaska LNG:                                                                                           
                                                                                                                                
     •Existing  oil  and  gas infrastructure  on  the  North                                                                    
    Slope can be utilized for a large-scale LNG project                                                                         
                                                                                                                                
     •The route for  a large-scale LNG project  would be the                                                                    
     same  or  similar  to  the  existing  Trans-Alaska  Oil                                                                    
     Pipeline route,  which will  save on  costs and  have a                                                                    
     limited impact on the environment                                                                                          
                                                                                                                                
     •Alaska  has  a   longstanding  tradition  of  reliably                                                                    
     exporting LNG to Asia                                                                                                      
          oAlaska has been exporting LNG to Japan for over                                                                      
          40 years                                                                                                              
          oAlaska has transported 2.5 trillion cubic feet                                                                       
          of gas to Asia (the majority to Japan) over this                                                                      
          time                                                                                                                  
          oAlaska has never missed a LNG cargo shipment to                                                                      
          Asia                                                                                                                  
                                                                                                                                
     •  Alaska  is  the  only place  in  the  United  States                                                                    
     exporting LNG                                                                                                              
                                                                                                                                
     •Alaska  does  not  use   gas  supplies  for  political                                                                    
     purposes                                                                                                                   
                                                                                                                                
     •Avoids  strategic  shipping  choke points  that  other                                                                    
     sources of LNG must traverse                                                                                               
                                                                                                                                
                                                                                                                                
     •Benefits from  American legal and  political stability                                                                    
     and the rule of law                                                                                                        
                                                                                                                                
     •No looming conflicts in the region                                                                                        
                                                                                                                                
     •Proximity/shipping costs are very low                                                                                     
                                                                                                                                
     •Use  of existing  infrastructure  and pipeline  routes                                                                    
     reduces costs                                                                                                              
                                                                                                                                
     •Cold   weather  efficiencies   significantly  decrease                                                                    
     processing costs compared to warmer climates                                                                               
                                                                                                                                
1:57:45 PM                                                                                                                    
                                                                                                                                
Mr. Balash addressed slide 34, which highlighted the                                                                            
difference in distance on the water between Alaska and                                                                          
potential LNG customers.                                                                                                        
                                                                                                                                
Co-Chair Austerman noted for the record that Representative                                                                     
Gara and Representative Wilson had joined the committee.                                                                        
                                                                                                                                
1:58:23 PM                                                                                                                    
                                                                                                                                
Mr. Fogels addressed slide 35, "Secure Alaska's Future:                                                                         
Strategic and Critical Minerals":                                                                                               
                                                                                                                                
     Objective:   To   highlight  Alaska's   potential   for                                                                  
     exploration, development,  and processing  of strategic                                                                  
     and  critical minerals,  including Rare  Earth Elements                                                                  
     (REEs)                                                                                                                   
     "Secure  Alaska's  Future:  Strategic  Minerals"  is  a                                                                  
     comprehensive strategy that will:                                                                                        
                                                                                                                                
     I.  Undertake   a  statewide  assessment   of  Alaska's                                                                    
     strategic mineral potential-millions  budgeted for this                                                                    
     project                                                                                                                    
                                                                                                                                
     II.  Provide support  for the  development of  known or                                                                    
     highly   prospective   strategic  mineral   occurrences                                                                    
     throughout  Alaska through  infrastructure partnerships                                                                    
     and incentives                                                                                                             
                                                                                                                                
     III.   Improve   the   structure  and   efficiency   of                                                                    
     permitting  processes  in  order  to  expedite  mineral                                                                    
     development, including strategic minerals                                                                                  
                                                                                                                                
     IV.  Deepen   partnership  and  cooperation   with  the                                                                    
     federal    government,   local    governments,   Native                                                                    
     corporations,  and  other  potential  new  entrants  to                                                                    
     encourage   domestic   exploration,  development,   and                                                                    
     processing of REEs and other strategic minerals                                                                            
                                                                                                                                
     V.  Attract new  investment  and  markets for  Alaska's                                                                    
     abundant mineral resources                                                                                                 
                                                                                                                                
1:59:17 PM                                                                                                                    
                                                                                                                                
Mr. Fogels discussed slide 36, "Strategic and Critical                                                                          
Minerals: Recent Mining Activity":                                                                                              
                                                                                                                                
     In  2011,  the  gross  mineral  production  value  from                                                                  
     Alaska  totaled  $3.8  billion,   up  16%  since  2010.                                                                  
     Mineral  ore production  had an  export  value of  $1.8                                                                  
     billion in 2011, nearly 40% of Alaska's total exports.                                                                 
                                                                                                                                
     •Producing Mines in Alaska                                                                                               
        · Red Dog: one of the world's largest zinc mines,                                                                     
          produced over 555k tons of zinc and 78k tons of                                                                       
          lead in 2011                                                                                                          
        · Greens Creek: among the world's top 10 silver                                                                       
          mines, produced over 9.48 million ounces of                                                                           
          silver, 56k ounces of gold, and 73k tons of zinc                                                                      
          in 2011                                                                                                               
       · Pogo: produced 356k ounces of gold in 2011                                                                           
        · Fort Knox: produced 289.8k ounces of gold in 2011                                                                   
        · Usibelli: produced a record 2.2 million tons of                                                                     
          low  sulfur coal  in 2011,  exporting half  of its                                                                    
          production                                                                                                            
        · Nixon Fork: gold and copper mine re-opened in                                                                       
          2011  and   still  in   pre-commercial  production                                                                    
          phases                                                                                                                
        · Kensington: 2011 was first year of production for                                                                   
          this new gold mine-produced 88,420 ounces of gold                                                                     
Mr. Fogels spoke to slide 37, "Strategic and Critical                                                                           
Minerals: Recent Mining Activity":                                                                                              
                                                                                                                                
     In  2011,  mineral  exploration  investment  in  Alaska                                                                  
     totaled $365  million - accounting for  about one-third                                                                  
     of the total spent on exploration in the U.S.                                                                            
                                                                                                                                
     •Advanced exploration projects include:                                                                                    
          ·  Donlin: ~ 42.3 million ounces of gold (the only                                                                  
             project currently in the permitting phase)                                                                         
          ·  Pebble: ~ 80.6 billion pounds  of copper, 107.4                                                                  
             million ounces of gold, and 5.6 billion pounds                                                                     
             of molybdenum                                                                                                      
          ·  Bokan   Mountain:    enriched    in    yttrium,                                                                  
             dysprosium, and critical heavy Rare Earth                                                                          
             Elements                                                                                                           
          · Money Knob: ~20.6 million ounces of gold                                                                          
          ·  Niblack:  ~7.3  million  tons  of  polymetallic                                                                  
             (copper, gold, silver, and zinc) volcanogenic                                                                      
             massive sulfide project                                                                                            
                                                                                                                                
     •30 exploration projects spent over  $1 million each in                                                                    
     2011                                                                                                                       
     •$2.8 billion has been spent  on mineral exploration in                                                                    
     Alaska since 1981                                                                                                          
                                                                                                                                
2:00:30 PM                                                                                                                    
                                                                                                                                
Mr. Fogels discussed slide 38, "Strategic and Critical                                                                          
Minerals: Statewide Assessment and Outreach":                                                                                   
                                                                                                                                
     •State  is   undergoing  a  statewide   assessment  for                                                                    
     strategic  and critical  minerals -  $2.7M appropriated                                                                    
     in FY2013  budget (and $2.7M  requested to  continue in                                                                    
     FY2014)                                                                                                                    
          · One of largest undertakings in the country                                                                          
          ·  Looking to work  with other public  and private                                                                    
             groups                                                                                                             
          · Information will be made available to public                                                                        
     •Held  first  "Alaska  Strategic  &  Critical  Minerals                                                                    
     Summit" in Fairbanks in 2011. The event had:                                                                               
          · Huge turnout                                                                                                        
          · Very favorable national press                                                                                       
                                                                                                                                
2:01:17 PM                                                                                                                    
                                                                                                                                
Mr. Fogels addressed slide 39, "Strategic and Critical                                                                          
Mineral: Statewide Assessment and Outreach":                                                                                    
                                                                                                                                
     •Held  second  annual   "Alaska  Strategic  &  Critical                                                                    
     Minerals Summit" in Fairbanks  on November 30, 2012, at                                                                    
     the Fairbanks Princess Riverside Lodge                                                                                     
     •Speakers included:                                                                                                        
          · State and Federal Government Officials and a                                                                        
             representative from Japan Oil, Gas and Metals                                                                      
             National Corporation (JOGMEC)                                                                                      
          · University of Alaska                                                                                                
          · Native Corporation leaders                                                                                          
          · Private Industry                                                                                                    
                                                                                                                                
Mr. Fogels announced that the summit would be an annual                                                                         
event.                                                                                                                          
                                                                                                                                
Mr. Fogels spoke to slide 40, "Permitting Reform: Statewide                                                                     
Strategy":                                                                                                                      
                                                                                                                                
     Objective:  Improve the  State  of Alaska's  permitting                                                                  
     processes in  order to advance  the public  interest by                                                                  
     ensuring   projects   are   permitted  in   a   timely,                                                                  
     predictable  and  efficient manner  while  safeguarding                                                                  
     the environment.                                                                                                         
                                                                                                                                
     DNR has been working with  a team from DNR, DEC, ADF&G,                                                                  
     and LAW to develop and advance strategies that aim to:                                                                   
                                                                                                                                
     I. Improve  agencies' internal permitting  structure to                                                                    
     create a more efficient, timely, and certain process                                                                       
                                                                                                                                
     II.   Enhance  coordination   within  different   state                                                                    
     departments   and    with   different    entities   and                                                                    
     stakeholders throughout the state                                                                                          
                                                                                                                                
     III. Seek  input from the  public about  the permitting                                                                    
     process including  input from  municipalities, industry                                                                    
     and non-governmental organizations                                                                                         
                                                                                                                                
     IV.  Improve coordination  between  the  state and  the                                                                    
     federal  government-federal  permitting issues  have  a                                                                    
     strong influence on state projects                                                                                         
                                                                                                                                
     V. Anticipate  and plan for permitting  the next phases                                                                    
     of resource development, e.g. the Shale Oil Task Force                                                                     
                                                                                                                                
2:03:54 PM                                                                                                                    
                                                                                                                                
Mr. Fogels spoke to slide 41, "Permitting Reform:                                                                               
Significant Progress":                                                                                                          
                                                                                                                                
     ·  In FY12, the Legislature provided approximately $2.7                                                                    
        million in  operating  funds  for  the  Division  of                                                                    
        Mining,  Land   &   Water   to  create   efficiency,                                                                    
        timeliness and certainty in the permitting process                                                                      
     ·  We are  utilizing capital  funding from  FY12 ($2.5M                                                                    
        for  the   Unified  Permit   Project  and   Document                                                                    
        Management) to focus on business management software                                                                    
        and services                                                                                                            
     ·  In FY13, the  Legislature approved  the continuation                                                                    
        of FY12 operating funds as part  of the ongoing base                                                                    
        for permitting  and an  additional  $950.0 to  cover                                                                    
        increased personnel costs and  fill vacant positions                                                                    
        focused on permitting                                                                                                   
          o FY13 capital budget included $3.3M to continue                                                                      
             work on the Unified Permit Project, including                                                                      
             the continuation of IT strategies and Business                                                                     
             Process Management                                                                                                 
     · Permitting Reform Significant Progress                                                                                   
     · We have filled and trained new and vacant positions                                                                      
     ·  We  reclassified  and   updated  over   50  position                                                                    
        descriptions                                                                                                            
     ·  Since the beginning  of FY12,  the backlog  has been                                                                    
        reduced by 38.2% (1,015 authorizations)                                                                                 
     ·  We have  conducted  public  meetings  statewide  for                                                                    
        input on state permitting processes                                                                                     
     ·  We are evaluating internal processes to identify and                                                                    
        fix inefficiencies                                                                                                      
                                                                                                                                
Mr. Fogels discussed slide 42, "Permitting Reform:                                                                              
Statutory Changes":                                                                                                             
     2012 Legislature - HB361                                                                                                 
     •The  Division of  Mining,  Land  and Water  identified                                                                    
     over  30  statutory  changes  that  would  help  reduce                                                                    
     applicant    costs,    create   efficiencies,    reduce                                                                    
     redundancies,  and   reduce  opportunities   for  legal                                                                    
     challenges                                                                                                                 
                                                                                                                                
     •During  the  2012  Legislative session,  the  Governor                                                                    
     introduced HB 361, which  included the highest priority                                                                    
     changes related  to leasing and disposal  programs that                                                                    
     would  help   reduce  the  permitting  burden   on  the                                                                    
     applicant  and free  more  time for  staff  to work  on                                                                    
     processing applications                                                                                                    
                                                                                                                                
     •HB 361 was passed and signed by the Governor                                                                              
                                                                                                                                
2:05:44 PM                                                                                                                    
                                                                                                                                
Mr. Fogels addressed slide 43, "Agriculture: 2012 Overview                                                                      
of Accomplishments":                                                                                                            
                                                                                                                                
The Division of Agriculture continues to be very busy                                                                         
promoting and encouraging development of the agriculture                                                                      
industry in Alaska                                                                                                            
                                                                                                                                
     •Worked  to  increase  the   demand  for  Alaska  grown                                                                    
     products; created strong advocacy  for the Alaska grown                                                                    
     program throughout the state                                                                                               
                                                                                                                                
     •Deepened  DNR cooperation  and  coordination with  the                                                                    
     farming community                                                                                                          
                                                                                                                                
     •Explored  new  marketing  ventures to  promote  Alaska                                                                    
     Grown  program; instituted  Restaurant Rewards  Program                                                                    
     to encourage the use of local produce                                                                                      
                                                                                                                                
     •Provided  support and  promotion  to  over 40  Farmers                                                                    
     Markets throughout  the state,  which continue  to grow                                                                    
     in popularity                                                                                                              
                                                                                                                                
     •Farm  to School  Program is  recognized as  a national                                                                    
     leader                                                                                                                     
          oProgram  is  actively engaged  in  47  out of  54                                                                    
          school  districts; 100%  of  the school  districts                                                                    
          have  received  the Alaska  Seasonal  Availability                                                                    
          Chart.   Five  recipes   utilizing  Alaska   Grown                                                                    
          products have been developed that meet federal                                                                        
          school meal requirements.                                                                                             
                                                                                                                                
     •Sold 1,327 acres of agricultural  land in the Northern                                                                    
     Region                                                                                                                     
                                                                                                                                
     •Added 52 new farms to the Alaska Grown user list                                                                          
                                                                                                                                
     •Published  the Alaska  Forage  Manual  (2012) and  was                                                                    
     nationally recognized  for the  following publications:                                                                    
     Alaska Coastal  Revegetation and Erosion  Control Guide                                                                    
     (2010)  &   Interior  Alaska  Revegetation   &  Erosion                                                                    
     Control Guide (2012)                                                                                                       
                                                                                                                                
2:07:14 PM                                                                                                                    
                                                                                                                                
Mr. Fogels discussed slide 44, Parks and Outdoor                                                                                
Recreation: 2012 Overview of Accomplishments":                                                                                  
                                                                                                                                
Serves the Alaska public through outdoor recreation,                                                                          
educational programming, and access to public lands                                                                           
                                                                                                                              
     •Recruited,  hired  and  trained  more  than  700  park                                                                    
     volunteers who  donated more than  95,000 hours  to the                                                                    
     park system-a cash value of more than $2 million                                                                           
                                                                                                                                
     •Permitted  1,104  individuals  to  provide  commercial                                                                    
     recreational  services  in   state  park  areas,  which                                                                    
     resulted in millions of dollars  in direct and indirect                                                                    
     economic benefit to the state                                                                                              
          oIn  2011   (the  most  recent   data  available),                                                                    
          sportfish   guide  businesses   operating  in   10                                                                    
          different state park  areas generated approx. $7.7                                                                    
          million  in   revenue;  businesses   that  offered                                                                    
          guided hikes in 14  different park areas generated                                                                    
          approx. $790,000 in revenue                                                                                           
                                                                                                                                
     •Lower  Chatanika   SRS  was  reinstated   into  active                                                                    
    management thanks to local and legislative support                                                                          
                                                                                                                                
     •3 new  public use cabins  in Southeast (2  Eagle Beach                                                                    
     SRA,  1  Juneau  Channel Islands  SMP);  PUC  occupancy                                                                    
     increased 9% and overnight camping increased 3%                                                                            
                                                                                                                                
     •4 "Arts in the Parks" events statewide                                                                                    
                                                                                                                                
     •National honors,  including: Joe  McCullough, National                                                                    
     Boating Safety Educator of the  Year, and Judy Bittner,                                                                    
     Dept.  of Interior  National  Partners in  Conservation                                                                    
     Award                                                                                                                      
                                                                                                                                
Mr. Fogles addressed slide 45, "Forestry-Timber Resources:                                                                      
2012 Overview of Accomplishments":                                                                                              
                                                                                                                                
     Alaska has 17% of the nation's forest land                                                                               
                                                                                                                                
     •Finished  final report  for  Governor's Alaska  Timber                                                                    
     Jobs Task  Force per AO  258; report makes  35 specific                                                                    
     recommendations that  span 8  substantive areas  of the                                                                    
     industry sector                                                                                                            
                                                                                                                                
     •Sold  18,786,000 board  feet of  lumber to  34 Alaskan                                                                    
     businesses                                                                                                                 
                                                                                                                                
     •Provided direct and indirect  support to over 80 woody                                                                    
     biomass  projects  - this  is  important  work that  is                                                                    
     assisting  many small,  remote  communities and  larger                                                                    
     roadside  communities  that  are struggling  with  high                                                                    
    energy costs for space heating and electrical needs                                                                         
                                                                                                                                
     •Continue  to work  through the  State Tongass  Team to                                                                    
     provide  coordinated  comments  to USFS  in  regard  to                                                                    
     federal timber  sales in the Tongass  National Forest-a                                                                    
     continual challenge                                                                                                        
                                                                                                                                
     •Worked  with  Department  of   Law  to  support  their                                                                    
     efforts in  appealing the invalidated  Tongass National                                                                    
     Forest  exemption from  the Roadless  Rule  in the  9th                                                                    
     Circuit                                                                                                                    
                                                                                                                                
     •New   marketing  tag   line:   "Triple  Bottom   Line:                                                                    
     Environment, Economy and Communities"                                                                                      
                                                                                                                                
2:09:15 PM                                                                                                                    
                                                                                                                                
Mr. Fogels spoke to slide 46, "Forestry - Wildland Fires:                                                                       
2012 Overview and Accomplishments":                                                                                             
                                                                                                                                
     •Contained  95%  of  the fires  in  Critical  and  Full                                                                    
     Protection Options at 10 acres  or less during the 2012                                                                    
     season                                                                                                                     
                                                                                                                                
     •Responded to  late-season wildfires in  Dillingham and                                                                    
     the Mat-Su Valley                                                                                                          
                                                                                                                                
     •Provided  assistance to  Municipality of  Anchorage in                                                                    
     response to  extreme wind  and rain  events and  to the                                                                    
     Mat-Su Borough in response to flooding                                                                                     
                                                                                                                                
     •Played   a  major   role  in   providing  firefighting                                                                    
     assistance   to   the   lower  48   states   during   a                                                                    
     particularly difficult fire season for the Nation                                                                          
                                                                                                                                
     •Provided  a   critical  tactical  asset  for   use  by                                                                    
     wildland fire  managers in the  form of  fire retardant                                                                    
     air tankers to supplement  the USFS national air tanker                                                                    
     fleet that has shrunk to an inadequate fleet                                                                               
                                                                                                                                
     •Instructed  40 rural  students in  basic fire-fighting                                                                    
     and 34  students in advanced  fire-fighting at  the Tok                                                                    
     Wildland Fire Academy                                                                                                      
                                                                                                                                
Mr. Balash spoke to slide 48, "2013 Legislative Session &                                                                       
Beyond: Oil Tax Reform":                                                                                                        
                                                                                                                                
     •The  Governor has  been  encouraged  by the  consensus                                                                    
     that has emerged over the past year                                                                                        
                                                                                                                                
     •Alaska  should be  in the  forefront of  this American                                                                    
     energy  renaissance rather  than  watch oil  production                                                                    
     continue to ebb                                                                                                            
                                                                                                                                
     •Alaskans agree that something needs to be done                                                                            
                                                                                                                                
     •Implementing  comprehensive  plan-tax  reform  remains                                                                    
     key                                                                                                                        
                                                                                                                                
     Core Principles of Tax Reform:                                                                                         
     •Must be fair to Alaskans                                                                                                  
                                                                                                                                
     •Encourage new production                                                                                                  
                                                                                                                                
     •Simple so that it restores balance to the system                                                                          
                                                                                                                                
     •Durable for the long term                                                                                                 
                                                                                                                                
     Status quo  favored by some  is unfair to  Alaskans and                                                                    
     unacceptable.                                                                                                              
                                                                                                                                
Mr. Balash addressed slide 49, "2013 Legislative Session                                                                        
and Beyond: Other Efforts":                                                                                                     
                                                                                                                                
     Gas Commercialization                                                                                                  
                                                                                                                                
     •Governor's new benchmarks in 2013 State of the State                                                                      
                                                                                                                                
     •We  will  work  to  accelerate  gas  line  development                                                                    
     because of our urgent need for in-state energy                                                                             
                                                                                                                                
     •The window of opportunity to  sell Alaska LNG to Asian                                                                    
     markets will not be open indefinitely                                                                                      
                                                                                                                                
     •Global competition is fierce                                                                                              
                                                                                                                                
     •Continued work on demand-pull                                                                                             
                                                                                                                                
     Permitting Reform                                                                                                      
                                                                                                                                
     •Progress  has  been  made but  we  will  again  pursue                                                                    
     significant legislative efforts  to create efficiencies                                                                    
     by  streamlining  processes, reduce  redundancies,  and                                                                    
     reduce opportunities for legal challenges                                                                                  
                                                                                                                                
     •Introduction  by  Governor  of  HB 77  builds  on  our                                                                    
     comprehensive  reform  efforts;   critical  to  state's                                                                    
     future                                                                                                                     
                                                                                                                                
     Promoting the State                                                                                                    
                                                                                                                                
     •Mineral  Exploration  Roundup  Conference,  Vancouver,                                                                    
     January 28-31, 2013                                                                                                        
                                                                                                                                
     •North American  Prospect Expo, Houston,  February 5-8,                                                                    
     2013                                                                                                                       
                                                                                                                                
     •"Alaska Grown" produce                                                                                                    
                                                                                                                                
     •Alaska  State  Parks  hosting   "Arts  in  the  Parks"                                                                    
     throughout the summer                                                                                                      
                                                                                                                                
     •Example: Oil & Gas Journal feature on Alaska                                                                              
                                                                                                                                
2:12:38 PM                                                                                                                    
                                                                                                                                
JEAN DAVIS, DIRECTOR,  SUPPORT SERVICES DIVISION, DEPARTMENT                                                                    
OF  NATURAL  RESOURCES, discussed  slide  51,  "DNR FY  2014                                                                    
Budget: Employees and Budget Structure":                                                                                        
                                                                                                                                
     •DNR currently employs about 1,100 Alaskans in full-                                                                       
     time and seasonal positions, with main offices in                                                                          
     Anchorage, Juneau, Fairbanks and Palmer, and regional                                                                      
     offices throughout the state                                                                                               
                                                                                                                                
     •The  budget  structure reorganization  implemented  by                                                                    
     the Legislature in FY2012  has simplified the reporting                                                                    
     and presentation  of the budget. The  FY2014 Governor's                                                                    
     budget retains this structure.                                                                                             
                                                                                                                                
2:13:48 PM                                                                                                                    
                                                                                                                                
Ms. Davis  discussed slide 52,  "DNR FY 2014  Budget: Budget                                                                    
Growth  Analysis (Prepared  by Legislative  Finance)", which                                                                    
contained a  bar graph that  reflected DNR's share  of total                                                                    
agency operations, general  fund only. Between FY  05 and FY                                                                    
14  DNR's  general  fund  budget grew  by  $40  million,  an                                                                    
average growth  rate of  5.3 percent.  The share  of general                                                                    
fund for DNR  when compared to all state  agency budgets was                                                                    
2 percent, down from 2.63 in FY 06.                                                                                             
                                                                                                                                
2:14:29 PM                                                                                                                    
                                                                                                                                
Ms. Davis  spoke to  slide 53, "DNR  FY 2014  Budget: Budget                                                                    
Growth  Analysis (Prepared  by Legislative  Finance)", which                                                                    
contained a bar graph reflecting  DNR's percent of the total                                                                    
department's  budget by  funded  group,  all funds.  General                                                                    
funds were 61 percent of the  total budget in FY 05 and were                                                                    
63 percent of the FY 14 Governor's budget.                                                                                      
                                                                                                                                
Ms. Davis  spoke to  slide 54, "DNR  FY 2014  Budget: Budget                                                                    
Growth  Analysis (Prepared  by Legislative  Finance)", which                                                                    
was  a   line  graph   that  illustrated   the  department's                                                                    
continued budget  growth, general fund only,  compared to 10                                                                    
- year plan.  The dark black line was  the annual management                                                                    
plan,  the green  dotted line  was the  continuation of  5.3                                                                    
percent  annual growth,  and the  dotted black  line charted                                                                    
DNR's 10 - year plan with initiatives.                                                                                          
                                                                                                                                
Ms. Davis  discussed slide 55,  "DNR FY 2014  Budget: Budget                                                                    
Growth  Analysis (Prepared  by Legislative  Finance)", which                                                                    
contained  a  line  graph  that  detailed  the  department's                                                                    
continued budget  growth, all funds,  compared to 10  - year                                                                    
plan.                                                                                                                           
                                                                                                                                
Ms. Davis  addressed slide 56,  "DNR FY14  Budget: Operating                                                                    
Budget  by  Core  Services," which  contained  a  pie  chart                                                                    
offering  the  percentages  of  core  service  distribution:                                                                    
foster  responsible  development,  provide access  to  state                                                                    
lands,  sufficient  data  acquisition  and  assessment,  and                                                                    
mitigate natural hazard threats.                                                                                                
                                                                                                                                
2:16:55 PM                                                                                                                    
                                                                                                                                
Ms. Davis spoke to slide  57, "DNR FY 2014 Budget: Operating                                                                    
Budget by Division/Office." The  slide contained a pie chart                                                                    
that broke down the operating  budget funds by division. The                                                                    
FY  13  authorized operating  budget  was  $167, 522.5;  the                                                                    
request  for  FY 14  was  $169,952.3.  She noted  that  Fire                                                                    
Suppression was contained within the Division of Forestry.                                                                      
                                                                                                                                
Ms.  Davis  pointed  to  slide  58,  "DNR  FY  2012  Budget:                                                                    
Operating  Budget   by  Core   Services,"  which   showed  a                                                                    
breakdown  of  core  services by  the  four  funding  source                                                                    
groups.  She   shared  that  Legislative   Finance  Division                                                                    
characterized  the governor's  request  into two  scenarios:                                                                    
adjusted  base and  the governor's  new  request items.  The                                                                    
chart  showed the  comparison from  what the  department was                                                                    
currently  operating under  and the  adjusted base.  The key                                                                    
differences were outlined  at the bottom of  the slide. One-                                                                    
time  items had  been backed  out of  the adjusted  base and                                                                    
would be considered a new request if reinstated.                                                                                
                                                                                                                                
2:18:55 PM                                                                                                                    
                                                                                                                                
Ms.  Davis   discussed  slide  59,  "DNR   FY  2014  Budget:                                                                    
Operating  Budget by  Core Services."  The slide  showed the                                                                    
adjusted base on the left  side and the governor's budget on                                                                    
the right. The middle portion  showed a 5.1 percent increase                                                                    
in general  funds form the  adjusted base to  the governor's                                                                    
request. She noted the key  changes in the bottom portion of                                                                    
the slide.  The first  five were  a restoration  of one-time                                                                    
items  and amounted  to  approximately  $3.4 million.  Below                                                                    
that line  were the  new items  requested by  the department                                                                    
for FY 14.                                                                                                                      
                                                                                                                                
2:20:07 PM                                                                                                                    
                                                                                                                                
Ms.  Davis addressed  slide 60,  which listed  the operating                                                                    
budget highlights,  or the critical  changes in  the budget.                                                                    
The  changes  were  listed by  initiative;  Secure  Alaska's                                                                    
Future-Oil,  Strategic  Minerals, Gasline,  Permitting,  and                                                                    
Forestry/Agriculture/Parks.                                                                                                     
                                                                                                                                
2:22:40 PM                                                                                                                    
                                                                                                                                
Ms.  Davis  pointed  to  slide 61,  which  listed  the  same                                                                    
initiatives as capital budget highlights.                                                                                       
                                                                                                                                
Mr. Fogels concluded with slide, 62:                                                                                            
                                                                                                                                
     •The FY2014 Budget reflects our focus on DNR's core                                                                        
     services and the Administration's major statewide                                                                          
     initiatives                                                                                                                
     •Many challenges and opportunities                                                                                         
     •Opportunities far outweigh the challenges, in large                                                                       
    measure due to our abundant natural resource wealth                                                                         
     •Partnerships    are    key:   public,    stakeholders,                                                                    
     legislature, private sector, Administration                                                                                
                                                                                                                                
2:23:22 PM                                                                                                                    
                                                                                                                                
Representative Wilson  discussed the graph on  slide 57. She                                                                    
asked whether  "Fire Suppression" meant what  the state paid                                                                    
to put out wildfires.                                                                                                           
                                                                                                                                
Mr. Fogels responded that managing  the forests was probably                                                                    
a  component to  preventing forest  fires, but  that it  was                                                                    
dependent on where the fires broke out.                                                                                         
                                                                                                                                
Representative Wilson queried  whether DNR communicated with                                                                    
other agencies to explore better forest management.                                                                             
                                                                                                                                
Mr.  Fogels responded  that the  wildfire fighting  force in                                                                    
the state was  a combination of local,  municipal, and state                                                                    
agencies. He  offered a  more thorough  briefing at  a later                                                                    
date.                                                                                                                           
                                                                                                                                
2:25:10 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman noted  the increase  in the  department's                                                                    
budget  size.   He  queried   whether  the   department  had                                                                    
projected any  revenue streams to the  state in anticipation                                                                    
of developed resources.                                                                                                         
                                                                                                                                
Mr. Balash  replied that the  department did  have estimates                                                                    
on  increased  oil  royalties  due to  the  oil  tax  reform                                                                    
effort.  He stated  that  the 5  percent  growth figure  was                                                                    
being knocked  down significantly in the  current budget. He                                                                    
related  that the  department's  budget growth  was at  just                                                                    
over 2 percent.                                                                                                                 
                                                                                                                                
2:27:45 PM                                                                                                                    
                                                                                                                                
Vice-Chair Neuman asked if the  department had estimated out                                                                    
the opportunities for the state  to diversify income revenue                                                                    
streams.                                                                                                                        
                                                                                                                                
Mr. Fogels  responded that the  department had taken  a look                                                                    
at  all  the  different  divisions  in  order  to  determine                                                                    
revenue streams.  He said that  the department  work further                                                                    
with the committee on the issue.                                                                                                
                                                                                                                                
2:29:24 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki  queried the  amount of  the request                                                                    
for  the   Hunting  Guide   Concession.  He   asked  whether                                                                    
statutory language would be needed to make a change.                                                                            
                                                                                                                                
Mr.  Fogels replied  that the  department, along  with DF&G,                                                                    
was  working to  craft a  guide concession  program for  the                                                                    
state. The states past exclusive  guide area system had been                                                                    
deemed  illegal by  the Supreme  Court.  The department  had                                                                    
been working on the program  for many years and were working                                                                    
to create regulations for the program.                                                                                          
                                                                                                                                
2:32:02 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki  noted that  he had expected  to see                                                                    
an  impact  in DNR's  budget  from  the dismantling  of  the                                                                    
Coastal Zone Management Program.                                                                                                
                                                                                                                                
Mr.  Balash  replied  that the  program  had  been  directed                                                                    
through  the department  and  had  been part  of  the FY  12                                                                    
budget. The adjustments were made  in the FY 12 budget cycle                                                                    
and had  no specific increment or  decrement associated with                                                                    
the  program  for  the  FY  13  budget.  The  division  that                                                                    
formerly  ran the  program had  been responsible  for grants                                                                    
that were not being  administratively run through the Office                                                                    
of Project Management and Permitting.                                                                                           
                                                                                                                                
Representative   Gara  asked   about  how   the  number   of                                                                    
exploration wells compared over the last 5 years.                                                                               
                                                                                                                                
Mr. Balash answered that it  depended on how you counted the                                                                    
wells. He offered to get the numbers to the committee.                                                                          
                                                                                                                                
Representative Gara  asked whether there was  an expectation                                                                    
about  when the  maximum  would be  reached for  hydrocarbon                                                                    
liquids  and if  projection could  be found  in the  revenue                                                                    
forecast.                                                                                                                       
                                                                                                                                
Mr. Balash replied  that the pipeline would  have a capacity                                                                    
of 70,000 barrels per day;  in 2016 the expectation was that                                                                    
there  would  be  10,000  barrels  per  day  of  condensates                                                                    
recovered  at   Point  Thomson   and  shipped   through  the                                                                    
pipeline.                                                                                                                       
                                                                                                                                
2:37:52 PM                                                                                                                    
                                                                                                                                
Representative  Munoz wondered  whether  the department  had                                                                    
improved due to  the closure of the  Coastal Zone Management                                                                    
Program.                                                                                                                        
                                                                                                                                
Mr. Balash responded that one  of the losses with the demise                                                                    
of the  program was the  loss of the  coordination function.                                                                    
The department had  been able to pick up some  of that slack                                                                    
through  the Office  of Project  Management and  Permitting.                                                                    
With   regard  to   local   governments  specifically,   the                                                                    
department had  executed a memorandum of  understanding with                                                                    
the North Slope Borough  and involved quarterly meeting with                                                                    
the  borough  mayor  and the  commissioner's  offices,  with                                                                    
monthly meetings at  the staff level. Issues  of concern and                                                                    
importance  to  the  borough  were   kept  in  mind  as  the                                                                    
department  made decisions.  He said  that the  coordination                                                                    
had resulted  in several jointly signed  letters between the                                                                    
borough  mayor  and the  commissioner;  one  on the  federal                                                                    
permitting of  Point Thomson, another  was a request  to the                                                                    
Department  of the  Interior  for  a seat  at  the table  to                                                                    
undertake reviews of Shell's OCS program.                                                                                       
                                                                                                                                
2:41:16 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:42:47 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
2:43:28 PM                                                                                                                    
^FY   14   GOVERNOR'S   BUDGET   OVERVIEW:   DEPARTMENT   OF                                                                  
TRANSPORTATION AND PUBLIC FACILITIES                                                                                          
                                                                                                                                
2:43:38 PM                                                                                                                    
                                                                                                                                
PAT KEMP, ACTING COMMISSIONER, DEPARTMENT OF TRANSPORTATION                                                                     
AND PUBLIC FACILITIES, related that he would be giving a                                                                        
brief overview of the department. He introduced staff.                                                                          
                                                                                                                                
Commissioner Kemp discussed slide 2, "Mission":                                                                                 
                                                                                                                                
     "Get    Alaska     moving    through     service    and                                                                  
     infrastructure."                                                                                                         
                                                                                                                                
     To do this we:                                                                                                             
                                                                                                                                
     •Provide for the safe and efficient movement of people                                                                     
     and goods                                                                                                                  
                                                                                                                                
     •Provide access to state services                                                                                          
                                                                                                                                
     •Open opportunities for exploration and development of                                                                     
     Alaska's resources                                                                                                         
                                                                                                                                
2:45:10 PM                                                                                                                    
                                                                                                                                
Commissioner   Kemp    spoke   to   slide    3,   "Statutory                                                                    
Requirements":                                                                                                                  
                                                                                                                                
     •AS 44.42 Department of Transportation and Public                                                                          
     Facilities                                                                                                                 
                                                                                                                                
     •AS 44.68.010 Use of State-owned Vehicles                                                                                  
                                                                                                                                
     •AS 44.68.210 Highway Equipment Working Capital Fund                                                                       
                                                                                                                                
     •AS 35 Public Buildings, Works, and Improvements                                                                           
                                                                                                                                
     •AS 19 Highways and Ferries                                                                                                
                                                                                                                                
     •AS 19.10 State Highway System                                                                                             
                                                                                                                                
    •AS 19.10.300 Commercial Motor Vehicle Requirements                                                                         
                                                                                                                                
     •AS 19.25 Utilities, Advertising, Encroachment and                                                                         
     Memorials                                                                                                                  
                                                                                                                                
     •AS 19.65 Alaska Marine Highway System                                                                                     
                                                                                                                                
     •AS 19.65.050 Alaska Marine Highway System Fund and                                                                        
     Budget                                                                                                                     
                                                                                                                                
     •AS 19.75 Knik Arm Bridge and Toll Authority                                                                               
                                                                                                                                
     •AS 2 Aeronautics                                                                                                          
                                                                                                                                
Commissioner Kemp addressed slide 4, "Organization", which                                                                      
showed the organization flow chart of the department.                                                                           
                                                                                                                                
Commissioner Kemp discussed slide 5, "DOT & PF Assets":                                                                         
                                                                                                                                
     •3,186 full time positions                                                                                                 
                                                                                                                                
     •Own and maintain 5,601 miles of roads/highways                                                                            
                                                                                                                                
     •84 Maintenance Stations                                                                                                   
                                                                                                                                
     •254 State Airports                                                                                                        
                                                                                                                                
     •2 International Airports                                                                                                  
                                                                                                                                
     •700 Facilities (4 million + sq. ft.)                                                                                      
                                                                                                                                
     •11 ferries                                                                                                                
                                                                                                                                
     •35 Ferry Terminals                                                                                                        
     •24 Harbors                                                                                                                
                                                                                                                                
     •805 State Owned Bridges                                                                                                   
                                                                                                                                
     •7 Weigh Stations                                                                                                          
                                                                                                                                
2:47:40 PM                                                                                                                    
                                                                                                                                
Commissioner Kemp spoke to slide 6, "Core Services":                                                                            
                                                                                                                                
     •Construction of transportation infrastructure &                                                                           
     facilities                                                                                                                 
                                                                                                                                
     •Maintenance & operations of the state transportation                                                                      
     systems                                                                                                                    
                                                                                                                                
     •Measurement standards/commercial vehicle enforcement                                                                      
                                                                                                                                
Commissioner Kemp discussed slide 7, "Priorities":                                                                              
                                                                                                                                
     •Operate and maintain safe and reliable roads,                                                                             
     airports, ferries & facilities                                                                                             
                                                                                                                                
     •Ensure Alaska has the transportation infrastructure                                                                       
     necessary to grow the economy                                                                                              
                                                                                                                                
     •Develop and implement efficiencies in both the                                                                            
     operating and capital budgets                                                                                              
                                                                                                                                
Commissioner Kemp addressed slide 8, "Challenges":                                                                              
                                                                                                                                
     •Moving Ahead for Progress 21st Century Act (MAP-21)                                                                       
                                                                                                                                
     •Balancing budget against public needs, changing                                                                           
     conditions and expectations                                                                                                
                                                                                                                                
     •Congestion in Anchorage and MatSu                                                                                         
                                                                                                                                
     •Safety corridors                                                                                                          
                                                                                                                                
     •High cost of commodities                                                                                                  
                                                                                                                                
     •Getting our resources to tidewater                                                                                        
                                                                                                                                
     •Federal oversight                                                                                                         
                                                                                                                                
2:50:45 PM                                                                                                                    
                                                                                                                                
MARY SIROKY, DIRECTOR,  DIVISION OF ADMINISTRATIVE SERVICES,                                                                    
DEPARTMENT   OF   TRANSPORTATION  AND   PUBLIC   FACILITIES,                                                                    
discussed slide  9, "Measures  & Results."  Moving clockwise                                                                    
from  top to  bottom; the  first graph  illustrated the  3 -                                                                    
year moving average percentage  change in traffic fatalities                                                                    
per 100 million  vehicle miles traveled. She  noted that the                                                                    
number  of fatalities  had been  consistently  low up  until                                                                    
2011. The  uptake was considered random  and the preliminary                                                                    
numbers for  2012 were expected  to go back down.  Graph two                                                                    
shoed  the  increase  in  highway   safety  roads  that  met                                                                    
department  standards. The  goal  of the  department was  to                                                                    
have  the national  highway system  roads meet  the national                                                                    
standards and  had been making steady  progress towards that                                                                    
end. The  bottom left  slide showed  the reduction  of rural                                                                    
airports  that  were  seasonally   closed.  Shared  that  82                                                                    
percent  of Alaska's  communities were  served primarily  by                                                                    
air  service and  to  not  have air  service  resulted in  a                                                                    
significant impact on those  communities. The department was                                                                    
working to  reduce the number of  seasonal airport closures.                                                                    
The  final slide  charted the  Alaska Marine  Highway System                                                                    
Vessel car  deck capacity utilization.  She stated  that the                                                                    
department hoped to better utilize  the car deck by marrying                                                                    
service  to   capacity.  The  department  had   made  steady                                                                    
progress towards that  end; when the department  was able to                                                                    
marry  the  right vessel  to  the  right service,  the  best                                                                    
utilizations were a result.                                                                                                     
                                                                                                                                
2:54:13 PM                                                                                                                    
                                                                                                                                
Ms.  Siroky  spoke  to slide  10  titled  "FY2014  Operating                                                                    
Budget."  The operating  budget request  was $635,658.8  and                                                                    
consisted  of $359,391.4  of general  funds, $272,  422.8 of                                                                    
other funds  and $3,  844.6 of federal  funds. Of  the total                                                                    
request 63 percent  of the budget was  for personal services                                                                    
and 35 percent was  services and commodities. The department                                                                    
spent a significant amount on  contracts for professional to                                                                    
take care  of rural airports, hauling  snow, street sweeping                                                                    
and road maintenance.                                                                                                           
                                                                                                                                
2:55:17 PM                                                                                                                    
                                                                                                                                
Ms.  Siroky pointed  to slide  11  titled "FY2014  Operating                                                                    
Budget  Funding Sources."  The  significant  portion of  the                                                                    
operating budget came from general  funds, 46 percent. Funds                                                                    
were  also   brought  in  from  the   Whittier  Tunnel  Toll                                                                    
Receipts,  Vehicle  Rental   Tax  Receipts,  Marine  Highway                                                                    
System Fund,  Federal Funds, Inter-Agency  Receipts (other),                                                                    
International  Airport   Revenue  Funds,  and   the  Highway                                                                    
Equipment Working Capital Fund.                                                                                                 
                                                                                                                                
Ms. Siroky  addressed slide 12  titled "FY2014  GF Operating                                                                    
Allocations." The  Alaska Marine Highway System  (AMHS) used                                                                    
46 percent  of the  general funds  dollars in  the operating                                                                    
budget.  The second  largest portion  of the  usage was  for                                                                    
highways and  aviation. The department built  a large amount                                                                    
of  infrastructure with  federal dollars  but could  not use                                                                    
federal dollars  to maintain the marine  highway system. She                                                                    
noted that  administrative support  was a  significant piece                                                                    
of  the  pie and  included  the  Commissioner's Office,  the                                                                    
Division of Administrative Services,  Equal and Civil Rights                                                                    
enforcers,  Internal  Auditors,  Transportation  Management,                                                                    
Statewide  Aviation  Division  and  the  Administration  and                                                                    
support  services  for  each of  the  department's  regional                                                                    
offices.                                                                                                                        
2:59:42 PM                                                                                                                    
                                                                                                                                
Ms.  Siroky discussed  slide  13,  "FY2014 Operating  Budget                                                                    
Changes." The  operating budget  request of  $14.182 million                                                                    
could be broken down into the following:                                                                                        
                                                                                                                                
     •Salary and Health                                                                                                         
     $2,925.7                                                                                                                   
                                                                                                                                
     •New Initiatives                                                                                                           
     $450.2                                                                                                                     
                                                                                                                                
     •Impacts to Highways & Aviation                                                                                            
     $5,274.3                                                                                                                   
                                                                                                                                
     •Maintain Current Level of Service (Baseline)                                                                              
     $5,812.5                                                                                                                   
                                                                                                                                
     •Technical Adjustments                                                                                                     
     ($164.8)                                                                                                                   
                                                                                                                                
     •One Time Items                                                                                                            
     ($115.2)                                                                                                                   
                                                                                                                                
3:03:42 PM                                                                                                                    
                                                                                                                                
Ms.  Siroky spoke  to slide  14,  "FY2014 DOT  & PF  Capital                                                                    
Budget." The  FY 14 capital  budget request  was $984,113.5,                                                                    
79 percent of which was made  up of federal funds. The funds                                                                    
supported   both   surface   and   aviation   transportation                                                                    
programs.                                                                                                                       
                                                                                                                                
Ms. Siroky addressed slide 15,  which offered a look back at                                                                    
the department's funding over the  last 10 years. She shared                                                                    
that the federal  funding had become less and  less in terms                                                                    
of the  operating budget over  the years. She stated  that a                                                                    
change  occurred from  FY 05  to FY  06 in  undesignated and                                                                    
designated general funds.  The change was due to  a shift in                                                                    
the  budget  structure  with regard  to  the  AMHS  subsidy.                                                                    
Starting in  FY 06,  undesignated general funds  were placed                                                                    
directly  in the  AMHS budget.  Previously,  the funds  were                                                                    
placed into the AMHS funds  and the budget expended the AMHS                                                                    
fund as designated general funds.  The percentage of general                                                                    
funds was 49 percent in FY 05  and was now 58 percent in the                                                                    
FY 14 budget.                                                                                                                   
                                                                                                                                
3:06:00 PM                                                                                                                    
Ms. Siroky  spoke to  slide 16,  which illustrated  that the                                                                    
department  was 17  percent of  the general  funds operating                                                                    
budget. She  related that the  yellow boxes  represented the                                                                    
fuel trigger.                                                                                                                   
                                                                                                                                
Ms. Siroky discussed slide 17, "10-Year Projection Graph."                                                                      
She asserted  that the department was  diligently working to                                                                    
become  a  "flatline"  agency. She  noted  that  some  small                                                                    
growth was expected  due to the gasline.  Slide 18, "10-year                                                                    
Projection Graph", offered the general fund component.                                                                          
                                                                                                                                
3:07:11 PM                                                                                                                    
                                                                                                                                
Ms.  Siroky addressed  slide 19,  "Information." She  listed                                                                    
the current information on Alaska's roadways:                                                                                   
                                                                                                                                
     · Weather Cameras                                                                                                          
     · Weather Watches                                                                                                          
     · Road Construction                                                                                                        
     · Future Construction                                                                                                      
     · Incidents                                                                                                                
     · Driving Conditions                                                                                                       
     · Available by Phone or on the web                                                                                         
                                                                                                                                
Ms.  Siroky   relayed  that  the   Statewide  Transportation                                                                    
Improvement   Program   (STIP)    was   searchable   online.                                                                    
Additionally, the  public could  sign up to  receive notices                                                                    
from the department on "Gov Delivery" or 511.Alaska.gov.                                                                        
                                                                                                                                
Co-Chair  Austerman  requested  further  discussion  on  the                                                                    
first bullet of slide 8 of the presentation.                                                                                    
                                                                                                                                
Commissioner  Kemp  responded   that  the  department  would                                                                    
designate between  $70 million  and $100 million  dollars to                                                                    
the Community  Transportation Program; many projects  in the                                                                    
mill were located within the  program and the department did                                                                    
not have the funding for  construction. The funding would go                                                                    
to  the National  Highway  System  and there  was  a set  of                                                                    
performance measures that were  being crafted on the federal                                                                    
level  that  the department  would  have  to abide  by.  The                                                                    
department was  concerned by several measures;  for example,                                                                    
pavement ride.  He opined  that nowhere  else in  the nation                                                                    
were there roads constructed on  permafrost; the state could                                                                    
not  match pavement  smoothness on  the national  level. The                                                                    
department had been promised a  seat at the table during the                                                                    
rule making, but  there were still concern. He  said that by                                                                    
the  time  the rules  were  written  there  would be  a  new                                                                    
highway bill.                                                                                                                   
                                                                                                                                
Co-Chair Austerman understood that  the standards had yet to                                                                    
be imposed because the rules had not been written.                                                                              
                                                                                                                                
Commissioner Kemp replied in the affirmative.                                                                                   
                                                                                                                                
3:10:36 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman   asked  about   the  $171   million  for                                                                    
Community Transportation  Programs. He believed that  if the                                                                    
state  did the  projects they  would cost  considerably less                                                                    
because the  federal funds  were tied to  so many  rules. He                                                                    
understood  that with  MAP-21 if  the state  was to  receive                                                                    
federal dollars the money would  have to be spent on federal                                                                    
projects; state projects would require state funds.                                                                             
                                                                                                                                
Commissioner  Kemp  replied  that  he  was  unsure  that  he                                                                    
understood  the question.  He  relayed  that the  department                                                                    
used general  funds for all  categories within the  STIP. He                                                                    
related that under the federal  guidelines, a project worked                                                                    
in steps; a project could  not be designed until the process                                                                    
had been  gone through  incrementally. A  way to  leverage a                                                                    
project was to  interject state funds; there  were many ways                                                                    
that a project could be accelerated using state funds.                                                                          
                                                                                                                                
3:13:09 PM                                                                                                                    
                                                                                                                                
Representative  Holmes noted  the increase  in the  de-icing                                                                    
program  and inquired  if any  alternative technologies  for                                                                    
de-icing had been considered.                                                                                                   
                                                                                                                                
Ms.  Siroky responded  that  the  requirements for  de-icing                                                                    
were based on  the number of landings per years.  Not all of                                                                    
the  state's jet  airports required  de-icing.  She had  not                                                                    
heard  of any  other  means of  de-icing  than the  chemical                                                                    
solution currently being used.                                                                                                  
                                                                                                                                
3:15:02 PM                                                                                                                    
                                                                                                                                
Representative  Munoz inquired  how  the municipal  airports                                                                    
were handling the de-icing obligation.                                                                                          
                                                                                                                                
Ms. Siroky restated that airports  without jets landing were                                                                    
not  required to  de-ice. She  said that  the airport  would                                                                    
need to  have 1,000 jet landings  per year in order  for de-                                                                    
icing to be required.                                                                                                           
                                                                                                                                
Representative Munoz  inquired how the Juneau  and Ketchikan                                                                    
airports would  absorb the additional costs.  She understood                                                                    
that  the  material  was  brought in  in  liquid  form.  She                                                                    
stressed  that  the  requirement  was a  difficult  one  and                                                                    
wondered if the department had  pursued an exemption for the                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Ms. Siroky replied that she would look in to.                                                                                   
                                                                                                                                
Representative Gara said that in  the past he had seen roads                                                                    
that had been  torn up and resurfaced that  hadn't seemed in                                                                    
disrepair. He wondered whether there  was a way to implement                                                                    
a standard for resurfacing roads on an as-needed basis.                                                                         
                                                                                                                                
Commissioner Kemp  replied that resurfacing should  be based                                                                    
on  need  and  rut  depth  as  well  as  problems  with  the                                                                    
pavement.  He  shared that  the  department  was working  to                                                                    
implement hard  aggregate into the pavement.  He shared that                                                                    
Egan Drive,  in Juneau,  used to  need to  be paved  every 5                                                                    
years. Hard  rock was  brought up  form Haines  which bumped                                                                    
the repaving  up to  every 17 years.  He stressed  that hard                                                                    
aggregate should alleviate the issue.                                                                                           
                                                                                                                                
3:19:15 PM                                                                                                                    
                                                                                                                                
Representative  Gara pointed  out that  the section  of road                                                                    
between Cooper Landing and Talkeetna  was very dangerous. He                                                                    
queried why  the signs that used  to be there were  gone. He                                                                    
noted that drivers  were unaware of where  the pullouts were                                                                    
and  requested  that  signs  be added  to  that  section  of                                                                    
highway.                                                                                                                        
                                                                                                                                
Commissioner Kemp  replied that  he would  be happy  to look                                                                    
into it.                                                                                                                        
                                                                                                                                
3:21:28 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki spoke  to slide  11. He  understood                                                                    
that the AMHS was funded by receipts.                                                                                           
                                                                                                                                
Ms.  Siroky  replied that  the  revenues  were derived  from                                                                    
passenger and car fares. She  added that the system received                                                                    
and infusion of general fund dollars as well.                                                                                   
                                                                                                                                
3:22:41 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki inquired if how the AMHS fares were                                                                     
identified.                                                                                                                     
                                                                                                                                
Ms. Siroky replied that she would back to the committee                                                                         
with more details, but that she did not think that the                                                                          
fares had changed significantly in the past several years.                                                                      
                                                                                                                                
3:24:14 PM                                                                                                                    
                                                                                                                                
Co-Chair Austerman discussed housekeeping.                                                                                      
                                                                                                                                
HB 65 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
HB 66 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
3:24:32 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:24 p.m.                                                                                          
                                                                                                                                
                                                                                                                                
               HOUSE FINANCE SUBCOMMITTEE                                                                                       
               HEALTH AND SOCIAL SERVICES                                                                                       
                   January 23, 2013                                                                                             
                       8:33 a.m.                                                                                                
                                                                                                                                
                                                                                                                                
8:33:06 AM                                                                                                                      
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Chair Neuman called the House Finance Health and Social                                                                         
Services Subcommittee meeting to order at 8:33 a.m.                                                                             
                                                                                                                                
MEMBERS PRESENT                                                                                                                 
                                                                                                                                
Representative Mark Neuman, Chair                                                                                               
Representative Alan Austerman                                                                                                   
Representative Bill Stoltze                                                                                                     
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                  
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
William  Streur,  Commissioner,  Department  of  Health  and                                                                    
Social  Services;  Sarah  Woods,  Deputy  Director,  Finance                                                                    
Management  Services,   Department  of  Health   and  Social                                                                    
Services; Amanda Ryder,  Fiscal Analyst, Legislative Finance                                                                    
Division;   Pete   Ecklund,   Staff,   Representative   Alan                                                                    
Austerman.                                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
OPERATING BUDGET  OVERVIEW: DEPARTMENT OF HEALTH  AND SOCIAL                                                                    
SERVICES                                                                                                                        
                                                                                                                                
8:33:41 AM                                                                                                                      
                                                                                                                                
Chair  Neuman introduced  committee staff.  He welcomed  the                                                                    
commissioner  of   the  Department  of  Health   and  Social                                                                    
Services (DHSS)  and relayed that  the committee  would hear                                                                    
an overview of the governor's  proposed FY 14 budget for the                                                                    
department.                                                                                                                     
                                                                                                                                
8:34:20 AM                                                                                                                      
                                                                                                                                
WILLIAM  STREUR,  COMMISSIONER,  DEPARTMENT  OF  HEALTH  AND                                                                    
SOCIAL SERVICES, introduced department staff.                                                                                   
                                                                                                                                
Chair  Neuman asked  Commissioner Streur  to follow  up with                                                                    
additional  detail  on  the   areas  staff  specialized  in.                                                                    
Commissioner Streur agreed.                                                                                                     
                                                                                                                                
Commissioner  Streur  provided  a Power  Point  presentation                                                                    
titled  "Innovation and  Change:  Department  of Health  and                                                                    
Social Services  2013." He  shared his  intent to  provide a                                                                    
high  level   overview  of   the  department's   budget.  He                                                                    
addressed a DHSS  organizational chart on slide  2. He noted                                                                    
that  there  were  currently  two  vacancies  including  the                                                                    
assistant commissioner  for Finance Management  Services and                                                                    
the  deputy  commissioner  for   Medicaid  and  Health  Care                                                                    
Policy; he  elaborated that department staff  were providing                                                                    
great  support  in  both  locations.   He  stated  that  the                                                                    
department had gone  through many changes in  the past year,                                                                    
which he planned to address throughout the presentation.                                                                        
                                                                                                                                
Commissioner  Streur  explained that  DHSS  had  moved to  a                                                                    
results  based budgeting  and management  model; any  funded                                                                    
items  would be  measured for  effectiveness and  efficiency                                                                    
going  forward.  He  noted  that the  change  would  not  be                                                                    
instantaneous,  but  the  department  was  working  hard  on                                                                    
moving  towards   the  measurement  model.  He   listed  the                                                                    
department's three priorities on slide 3:                                                                                       
                                                                                                                                
I.   Health and Wellness across the Lifespan                                                                                    
II. Health Care Access, Delivery, and Value                                                                                     
III. Safe   and   Responsible    Individuals,   Families   &                                                                    
Communities                                                                                                                     
                                                                                                                                
8:39:06 AM                                                                                                                      
                                                                                                                                
Commissioner Streur discussed Priority I on slide 4:                                                                            
                                                                                                                                
Priority I: Health and Wellness Across the Lifespan:                                                                            
                                                                                                                                
A.   Promote and protect the health of Alaskans                                                                                 
B.   Provide quality  of life in  a sage  living environment                                                                    
for Alaskans                                                                                                                    
                                                                                                                                
Commissioner Streur  communicated that he had  asked each of                                                                    
the divisions  to define how  they fit into Priority  I. The                                                                    
divisions had  determined the priorities and  core services;                                                                    
therefore,  each division  would have  its own  set of  core                                                                    
services  and  outcomes  expected. He  provided  an  example                                                                    
related to  the department's mission to  promote and protect                                                                    
the  health   of  all  Alaskans.   He  explained   that  the                                                                    
associated  efficiency  measure  focused  on  the  cost  for                                                                    
percentage of  improved health; each division  would respond                                                                    
to  the  measure  (e.g.   Children's  Services,  Senior  and                                                                    
Disability Services, Healthcare Services, and other).                                                                           
                                                                                                                                
Commissioner Streur pointed to Priority II on slide 5:                                                                          
                                                                                                                                
Priority II: Health Care Access, Delivery and Value                                                                             
                                                                                                                                
A.   Manage health care coverage for Alaskans in need                                                                           
B.   Facilitate  access   to  affordable  health   care  for                                                                    
Alaskans                                                                                                                        
                                                                                                                                
Commissioner Streur highlighted Priority III on slide 6:                                                                        
                                                                                                                                
Priority  III: Safe  and  Responsible individuals,  families                                                                    
and communities                                                                                                                 
                                                                                                                                
A.   Strengthen Alaskan families                                                                                                
B.   Protect vulnerable Alaskans                                                                                                
C.   Promote   personal   responsibility   and   accountable                                                                    
decisions by Alaskans                                                                                                           
                                                                                                                                
Commissioner  Streur  emphasized  the importance  of  making                                                                    
sure  Alaskans had  personal responsibility  to ensure  they                                                                    
had "skin  in the game"  and felt that  they were a  part of                                                                    
decisions made  around their  healthcare and  social service                                                                    
needs. He used  a "three legged stool" analogy  for the role                                                                    
of the consumer,  provider, and payer; it  was important for                                                                    
all three  groups to be  a part  of improving health  in the                                                                    
state.                                                                                                                          
                                                                                                                                
Chair Neuman asked Commissioner  Streur to discuss work that                                                                    
had been  done to  encourage medical  groups to  use generic                                                                    
versions  of prescription  drugs. He  provided a  context of                                                                    
patients wanting  new drugs before  the generic  version was                                                                    
available.                                                                                                                      
                                                                                                                                
Commissioner Streur  answered that  the department  had been                                                                    
working  with  the provider  system.  He  had met  with  the                                                                    
Alaska State  Medical Association and Alaska  Physicians and                                                                    
Surgeons  about  their  role related  to  prescriptions.  He                                                                    
furthered that DHSS  was moving back towards  a primary care                                                                    
driven model; the goal was  to push the management of health                                                                    
care to the  primary care area and to have  a "health home."                                                                    
The purpose  of the health home  would be to ensure  that an                                                                    
individual  was given  sound advice  and  the capability  to                                                                    
make  some decisions  about their  healthcare. Additionally,                                                                    
the  department would  work with  providers to  locate areas                                                                    
that could  be operated more effectively  (e.g. to determine                                                                    
if repeating expensive procedures such  as an MRI or CT scan                                                                    
was   really  necessary,   whether   high-cost  brand   name                                                                    
medication  was necessary  for  first  line medication,  and                                                                    
other). He  had been  told by  physicians that  patients had                                                                    
torn  prescription  drug  advertisements from  magazines  to                                                                    
show  doctors what  prescription  they  wanted. He  stressed                                                                    
that  brand  name drugs  were  expensive.  The goal  was  to                                                                    
encourage   medical    providers   to    prescribe   generic                                                                    
medication.                                                                                                                     
                                                                                                                                
8:44:08 AM                                                                                                                      
                                                                                                                                
Commissioner   Streur    continued   to    discuss   generic                                                                    
medication. He  explained that for every  1 percent increase                                                                    
in the use  of generic medications, $1 million  was saved in                                                                    
the Medicaid budget. He shared  that several million dollars                                                                    
had been  saved in  the current fiscal  year and  $8 million                                                                    
had been saved the prior  fiscal year. He expounded that the                                                                    
state   had   begun  to   fall   behind   on  generic   drug                                                                    
prescriptions in  the past; Blue  Cross was currently  at 83                                                                    
percent through Northwest America;  Alaska was in the mid-70                                                                    
percent range and  had a long way to go.  He reiterated that                                                                    
DHSS was working with the provider community on the issue.                                                                      
                                                                                                                                
8:45:06 AM                                                                                                                      
                                                                                                                                
Representative Costello asked  Commissioner Streur to repeat                                                                    
the    savings   statistic    related   to    generic   drug                                                                    
prescriptions.  Commissioner   Streur  reiterated   that  $1                                                                    
million was saved in the  Medicaid budget for each 1 percent                                                                    
increase in the use of generic medications.                                                                                     
                                                                                                                                
Representative Guttenberg  understood that it  was important                                                                    
that consumers  not "shop" for prescription  drugs. He asked                                                                    
about  the pharmaceutical  community's influence  on doctors                                                                    
related to prescribing medication.  He wondered whether DHSS                                                                    
discussed the topic with the medical providers in Alaska.                                                                       
                                                                                                                                
Commissioner   Streur  replied   in   the  affirmative.   He                                                                    
complimented the  federal government and  the pharmaceutical                                                                    
industry for  their efforts  to prevent  excessive influence                                                                    
on doctors  related to prescriptions. He  acknowledged there                                                                    
would  continue  to  be  some  influence  as  pharmaceutical                                                                    
industry  budgets were  huge; however,  some items  had been                                                                    
curtailed (e.g. free  lunches were not showing  up in doctor                                                                    
offices  from  pharmaceutical   companies  any  longer).  He                                                                    
believed  the problem  had  decreased  substantially in  the                                                                    
past five  years. He  relayed that  doctors were  willing to                                                                    
work  with   the  department  when  they   understood  their                                                                    
personal  role in  the cost  of health  care. He  added that                                                                    
providers  were incentivized  to  work  with the  department                                                                    
given  that that  the alternative  to increasing  efficiency                                                                    
was reducing provider rates.                                                                                                    
                                                                                                                                
8:47:46 AM                                                                                                                      
                                                                                                                                
Chair Neuman pointed  out that there was a  finite amount of                                                                    
money available for Medicare and Medicaid reimbursements.                                                                       
                                                                                                                                
Representative  Holmes  observed that  specific  individuals                                                                    
were responsible  for driving a  significant portion  of the                                                                    
costs (e.g.  individuals with chronic illnesses  who went to                                                                    
a   variety  of   providers).  She   wondered  whether   the                                                                    
department was  moving towards a care  coordination model in                                                                    
order to rein in costs.                                                                                                         
                                                                                                                                
Commissioner   Streur  answered   in  the   affirmative.  He                                                                    
elaborated that  DHSS was moving toward  high-cost case care                                                                    
management;  its   prior  and   retrospective  authorization                                                                    
contract had  been revitalized.  The department  was working                                                                    
to identify  high-cost individuals who needed  to be managed                                                                    
(e.g. diabetes  and asthma patients who  made emergency room                                                                    
visits   because   they    were   not   making   physicians'                                                                    
appointments or taking their prescriptions).                                                                                    
                                                                                                                                
Representative Munoz  stated that pharmacy  benefit managers                                                                    
acted as the middlemen  between manufacturers and retailers.                                                                    
She wondered  whether the  department reviewed  contracts or                                                                    
state  policies related  to the  managers  to determine  how                                                                    
costs were affected.                                                                                                            
                                                                                                                                
Commissioner  Streur  replied  that   DHSS  had  a  pharmacy                                                                    
benefit manager  for the Medicaid  program. He  believed the                                                                    
managers  operated  in 26  states  and  were under  constant                                                                    
scrutiny;   DHSS  and   its  pharmacists   did  review   the                                                                    
contracts. He added that the  manager did meet most industry                                                                    
standards    and   was    responsible    for   some    prior                                                                    
authorizations,  informing  pharmacies  of  an  individual's                                                                    
insurance coverage,  if a person was  filling a prescription                                                                    
too soon, and other.                                                                                                            
                                                                                                                                
8:51:22 AM                                                                                                                      
                                                                                                                                
Representative Munoz  pointed to legislation  addressing the                                                                    
practices  of  pharmacy  benefit  managers  in  Alaska.  She                                                                    
encouraged  the department  to  review  the legislation  and                                                                    
believed there were opportunities to save costs.                                                                                
                                                                                                                                
Representative   Guttenberg  asked   whether  pharmaceutical                                                                    
management was  conducted by the  private sector.  He stated                                                                    
that  the cost  would go  down as  the size  of the  pool of                                                                    
buyers increased. He observed  that Veterans' Assistance and                                                                    
Native     healthcare      both     provided     inexpensive                                                                    
pharmaceuticals.  He was  interested in  driving costs  down                                                                    
for all buyers and wondered  whether DHSS was coordinating a                                                                    
larger pool  of buyers  with Medicaid or  other in  order to                                                                    
reduce costs.                                                                                                                   
                                                                                                                                
Commissioner  Streur answered  that he  and Becky  Hultberg,                                                                    
Commissioner of  the Department  of Administration  had been                                                                    
meeting with  providers, insurers, and the  medical industry                                                                    
to talk  about the state's  buying power. He  emphasized the                                                                    
need   for  state   departments  to   work  together   (e.g.                                                                    
Department of Corrections,  Worker's Compensation, retirees,                                                                    
unions, and other) to look  at buying power, innovation, and                                                                    
standardization across  the industry.  He would be  happy to                                                                    
provide additional detail at a later time.                                                                                      
                                                                                                                                
8:53:43 AM                                                                                                                      
                                                                                                                                
Representative   Gara  shared   that   he  had   experienced                                                                    
significant   savings  through   a  Canadian   pharmacy.  He                                                                    
wondered  whether  the option  could  be  given to  Medicaid                                                                    
patients. Commissioner  Streur answered in the  negative. He                                                                    
noted that the practice was on the edge of being illegal.                                                                       
                                                                                                                                
Representative  Gara explained  that the  prescriptions were                                                                    
imported through U.S. customs and  sent to consumers as long                                                                    
as they met U.S. law.                                                                                                           
                                                                                                                                
Chair Neuman  shared that he  had asked  Commissioner Streur                                                                    
to  avoid the  use of  acronyms to  provide clarity  for the                                                                    
public.  He  shared  that the  DHSS  subcommittee  would  be                                                                    
meeting year-round.                                                                                                             
                                                                                                                                
8:55:41 AM                                                                                                                      
                                                                                                                                
Commissioner  Streur  addressed   the  department's  service                                                                    
philosophy  on  slide  7.  He  stressed  the  importance  of                                                                    
integrating and  coordinating services.  He shared  that one                                                                    
of  the department's  greatest challenges  was  that it  saw                                                                    
many  of the  same  people in  different  divisions; it  was                                                                    
important  to begin  focusing on  the  person. He  explained                                                                    
that  one  of the  budget  increments  was a  master  client                                                                    
index, which would enable staff  to look online to determine                                                                    
other  areas in  the system  a  client was  involved in.  He                                                                    
believed the change  would be important for  the interest of                                                                    
the clients  and for fiscal  reasons. He did not  believe it                                                                    
did any good to sign  an individual up for public assistance                                                                    
if they were not also  signed up for Medicaid. He reiterated                                                                    
that  the   department  needed  to  better   coordinate  and                                                                    
integrate its services.                                                                                                         
                                                                                                                                
Commissioner  Streur  continued  with  slide  7  related  to                                                                    
strategically  integrated  technology.  The  department  had                                                                    
distributed approximately  $34 million  in federal  funds to                                                                    
hospitals, physicians, and  clinics for technology expansion                                                                    
to  date.  He  communicated   the  department's  mission  to                                                                    
achieve   results-based   budgeting  and   management.   The                                                                    
department was working to  practice fiscal responsibility to                                                                    
be  held accountable  to Alaskans  and the  legislature; the                                                                    
goal was  to ensure that the  accountability was measurable.                                                                    
He  addressed  the  department's   efforts  to  measure  and                                                                    
improve  performance.  He  believed in  the  quality  circle                                                                    
"plan, do, check, act"; improvement  was a constant process.                                                                    
He stressed the importance of  delivering "the right care to                                                                    
the right person at the right time for the right price."                                                                        
                                                                                                                                
8:58:22 AM                                                                                                                      
                                                                                                                                
Representative  Wilson  wondered   if  coordination  existed                                                                    
between  programs such  as Denali  Kidcare and  Medicaid for                                                                    
recipients    of   the    Childcare   Assistance    Program.                                                                    
Commissioner  Streur   responded  in  the   affirmative.  He                                                                    
remarked that it  was a work in progress and  would keep the                                                                    
committee updated.                                                                                                              
                                                                                                                                
Commissioner Streur looked at  DHSS major accomplishments on                                                                    
slide 8.  He shared  that one  of the  department's greatest                                                                    
challenges  was   obesity;  the   Play  Every   Day  obesity                                                                    
prevention campaign was providing  a benefit.  He elaborated                                                                    
that  telling parents  to how  to  feed and  get their  kids                                                                    
outside  daily was  not the  solution; however,  results had                                                                    
been  shown   when  kids  encouraged   other  kids   to  eat                                                                    
healthier. The program  had been in operation  for 18 months                                                                    
and there  were over  7,000 students  in 110  schools across                                                                    
Alaska participating.                                                                                                           
                                                                                                                                
Commissioner Streur shared that  the department's Senior and                                                                    
Disability  Services  Division  had received  a  $1  million                                                                    
award in Elder  Services Case Management (one  of only eight                                                                    
awards  in  the nation).  He  relayed  that a  Comprehensive                                                                    
Mental Health  Integrated Plan had been  established and was                                                                    
moving  forward. Additionally,  the department  continued to                                                                    
monitor  radiation health  support during  Fukushima nuclear                                                                    
disaster (slide 8).                                                                                                             
                                                                                                                                
9:01:24 AM                                                                                                                      
                                                                                                                                
Representative  Guttenberg  asked   whether  the  state  was                                                                    
receiving   federal   assistance   related   to   Fukashima.                                                                    
Commissioner Streur replied that  the federal government was                                                                    
responsible for the  majority of the cost, but  DHSS was the                                                                    
primary  conduit  for  communication with  Alaskans  on  the                                                                    
issue.                                                                                                                          
                                                                                                                                
Commissioner  Streur  turned to  slide  9  related to  major                                                                    
accomplishments in health care  access, delivery, and value.                                                                    
He relayed  that there  had been  75,000 health  care visits                                                                    
provided by public health nurses  across Alaska in FY 12. He                                                                    
believed that public health nurses  were at the forefront of                                                                    
much of  what the  department did and  that it  went largely                                                                    
unrecognized;  he  acknowledged   their  role  in  community                                                                    
disasters  (e.g.  floods  or earthquakes).  He  communicated                                                                    
that Aging  and Disability Resource Centers  had expanded to                                                                    
four  regions and  served 10,367  individuals in  FY 12.  He                                                                    
remarked  that the  figure was  not  huge, but  that it  was                                                                    
increasing  quickly.  He  furthered that  the  centers  were                                                                    
available to serve as a  referral and information source for                                                                    
the  rapidly growing  senior population.  There were  30 new                                                                    
community-based mental health  programs expanding access for                                                                    
earlier interventions.  He detailed  that the  mental health                                                                    
system  in  the past  had  been  focused  on when  a  person                                                                    
presented a severe mental health  or substance abuse related                                                                    
issue. He opined that it  was important to begin intervening                                                                    
earlier.                                                                                                                        
                                                                                                                                
Commissioner Streur  discussed that  the Division  of Public                                                                    
Assistance had  received the U.S. Department  of Agriculture                                                                    
performance  award for  being number  one in  the nation  in                                                                    
payment accuracy rate (slide 10).                                                                                               
                                                                                                                                
9:03:54 AM                                                                                                                      
                                                                                                                                
Commissioner     Streur    read     additional    department                                                                    
accomplishments on slide 10:                                                                                                    
                                                                                                                                
•    State   maximum  allowable   cost   pricing  type   for                                                                    
pharmaceuticals yielded nearly $5 million in savings                                                                            
•    New  training  model  for Public  Assistance  -  Equips                                                                    
staff in  12 weeks.  Former training  program took  nearly 2                                                                    
years                                                                                                                           
                                                                                                                                
Commissioner  Streur  expounded   that  the  shorter  Public                                                                    
Assistance  training  model  was   providing  just  as  much                                                                    
knowledge  as  the  prior program.  He  moved  continued  to                                                                    
discuss accomplishments on slide 11:                                                                                            
                                                                                                                                
•    Domestic  Violence  and   Sexual  Assault  Rural  Pilot                                                                    
Project (Dillingham, Bethel, Kodiak, Sitka)                                                                                     
•    Suicide  prevention training  "Kognito At-Risk"  3-Year                                                                    
Pilot. High school teachers, administrators and staff                                                                           
•    Juvenile  Justice  Quality  Assurance Unit  allows  for                                                                    
continual assessment and timely address of service gaps                                                                         
                                                                                                                                
Commissioner Streur detailed that  the Domestic Violence and                                                                    
Sexual Assault  initiatives had come from  the department as                                                                    
a  "waterfall"  down  from the  governor's  initiatives.  He                                                                    
turned  to  a graph  on  slide  12  that depicted  the  $1.8                                                                    
billion cost  of healthcare  in Alaska  including Department                                                                    
of  Corrections, Medicaid,  Workers Compensation,  Teachers'                                                                    
Retirement  System   (TRS),  Public   Employees'  Retirement                                                                    
System  (PERS),  and  AlaskaCare.  He  noted  that  Medicaid                                                                    
accounted for  $1.6 billion of  the total. He  stressed that                                                                    
the state had a significant  amount of buying power and that                                                                    
it needed to  begin to assert that leverage.  He opined that                                                                    
the  closer   the  department   could  bring   its  programs                                                                    
together, the better off the system would be.                                                                                   
                                                                                                                                
Chair  Neuman  pointed  to  a  substantial  healthcare  cost                                                                    
increase on  the tail-end [2009  through 2010] of  the graph                                                                    
on slide  12. He  wondered how the  department saw  the cost                                                                    
playing out  in future  years. Commissioner  Streur answered                                                                    
that the cost had flattened  significantly in 2011 and 2012,                                                                    
primarily   because    Medicaid   costs    were   flattening                                                                    
considerably. He  acknowledged decreases in  other programs,                                                                    
but noted that they had continued  to grow by 6.3 percent in                                                                    
the past two years. The growth  was down from 9.1 percent in                                                                    
Medicaid  and  for PERS/TRS  retirees.  He  stated that  the                                                                    
curve was bending but had not been bent.                                                                                        
                                                                                                                                
9:06:36 AM                                                                                                                      
                                                                                                                                
Co-Chair Austerman  asked whether the proposed  FY 14 budget                                                                    
contained funds for  Medicaid expansion. Commissioner Streur                                                                    
responded in the negative.                                                                                                      
                                                                                                                                
Commissioner  Streur  looked  at key  department  challenges                                                                    
that included managing quality  assisted living services for                                                                    
the rapidly  aging population (slide  13). He  stressed that                                                                    
the   state's  senior   population  was   increasing  at   a                                                                    
significantly greater  rate when  compared to the  Lower 48.                                                                    
The 65  years of age  and older  population had grown  by 15                                                                    
percent in the Lower 48 and by 70 percent in Alaska.                                                                            
                                                                                                                                
Chair  Neuman asked  the  department  to provide  additional                                                                    
detail at a  future meeting on services  provided to seniors                                                                    
in  Alaska. He  noted  that concern  had  been expressed  by                                                                    
members  related  to  some  of  the  programs.  Commissioner                                                                    
Streur responded in the affirmative.                                                                                            
                                                                                                                                
Commissioner Streur pointed  to another department challenge                                                                    
listed on slide 13:                                                                                                             
                                                                                                                                
•    Chronic disease - three of  every five deaths in Alaska                                                                    
are  linked to  chronic diseases.  Primary risk  factors are                                                                    
obesity, poor diet, lack of exercise and tobacco use.                                                                           
                                                                                                                                
Commissioner Streur  added that great strides  had been made                                                                    
towards curtailing tobacco use.                                                                                                 
                                                                                                                                
Commissioner  Streur  discussed   additional  challenges  on                                                                    
slide   14.  He   shared   that   the  Medicaid   Management                                                                    
Information   System   (MMIS)   design,   development,   and                                                                    
implementation had been  a work in progress  for many years.                                                                    
The  system would  be implemented  in the  fall of  2013. He                                                                    
explained that MMIS would allow  the department to track and                                                                    
pay  for  services  provided  in  the  Medicaid  system.  He                                                                    
relayed  that   the  current  system   was  27   years  old;                                                                    
generating  reports currently  required  40 to  60 hours  of                                                                    
programming.  He  added that  the  majority  of the  reports                                                                    
could not  be saved and had  to be redone if  they needed to                                                                    
be updated  in the  future. The new  system would  allow for                                                                    
electronic  payment and  many other  features  that had  not                                                                    
been  available in  the past.  He stated  the good  news was                                                                    
that he  "quit paying  them at the  two-year mark"  and that                                                                    
"it has been entirely on the  back of the bender up until we                                                                    
go live." He furthered that  "it had not been without paying                                                                    
for us...but it's  not been without paying for  them and not                                                                    
getting paid."                                                                                                                  
                                                                                                                                
Chair  Neuman  asked  how MMIS  would  help  the  department                                                                    
reduce fraud cases and save money.                                                                                              
                                                                                                                                
9:10:16 AM                                                                                                                      
                                                                                                                                
Representative  Gara referenced  the chart  on slide  12 and                                                                    
surmised that  the state could save  money if it had  a list                                                                    
of preferred  Medicaid providers.  He felt  that he  had the                                                                    
best  and   least  expensive  physical  therapy   clinic  in                                                                    
Anchorage.  He wondered  whether  the state  could create  a                                                                    
list  of preferred  general practitioners  based on  clinics                                                                    
that charged reasonable rates.                                                                                                  
                                                                                                                                
Commissioner Streur answered that  the state had a preferred                                                                    
provider network that included  the majority of providers in                                                                    
Alaska; however, it did not  have a best practices preferred                                                                    
provider network.  The primary focus had  been ensuring that                                                                    
Medicaid recipients had access to clinics.                                                                                      
                                                                                                                                
Representative  Gara  asked  whether   creating  a  list  of                                                                    
preferred providers that charged  lower rates would help the                                                                    
state save money.                                                                                                               
                                                                                                                                
Commissioner Streur  believed the question was  difficult to                                                                    
answer. He furthered that he  and Commissioner Hultberg were                                                                    
working  to  identify  best  practices;  however  it  was  a                                                                    
slippery slope in Alaska. He  elaborated that providers that                                                                    
provided  the best  access did  not necessarily  provide the                                                                    
best  care. The  new  system  would allow  DHSS  to look  at                                                                    
referral  patterns,  repeat   visits,  wellness,  medication                                                                    
reviews, and other.                                                                                                             
                                                                                                                                
Representative  Gara repeated  his question  related to  any                                                                    
savings  potential  that  could   be  obtained  through  the                                                                    
creation  of  a  list of  inexpensive  preferred  providers.                                                                    
Commissioner Streur  did not believe the  issue was relevant                                                                    
at present.                                                                                                                     
                                                                                                                                
Chair  Neuman  observed  that Medicaid  fraud  cost  several                                                                    
hundred million  dollars per year.  He asked how  MMIS would                                                                    
help track and reduce fraud.                                                                                                    
                                                                                                                                
9:13:59 AM                                                                                                                      
                                                                                                                                
Commissioner Streur  answered that MMIS and  the Eligibility                                                                    
Information System  would allow for greater  detail in fraud                                                                    
cases.  Additionally,  management   of  the  Medicaid  Fraud                                                                    
Control Unit under the Department  of Law had been revamped;                                                                    
it had become  much more aggressive and  more cooperative in                                                                    
working  with DHSS.  He  added that  the  majority of  fraud                                                                    
cases provider cases, not individual cases.                                                                                     
                                                                                                                                
Commissioner   Streur   continued    with   key   department                                                                    
challenges on slide 14:                                                                                                         
                                                                                                                                
•    Insufficient provider  capacity to meet the  needs of a                                                                    
rapidly aging  population. Increase in senior  population in                                                                    
Alaska from 26,000 in 1993 to over 90,000 by 2015                                                                               
                                                                                                                                
Commissioner  Streur  expounded  that  Medicare  clinics  in                                                                    
Anchorage  had greatly  enhanced access  for recipients.  He                                                                    
was proud that accomplishments had been made.                                                                                   
                                                                                                                                
Representative   Edgmon   asked  whether   Alaska's   senior                                                                    
population  was growing  in specific  regions or  throughout                                                                    
the state.  Commissioner Streur replied that  the growth was                                                                    
occurring  statewide. He  could provide  the committee  with                                                                    
additional census data.                                                                                                         
                                                                                                                                
Representative  Edgmon   asked  if  the   senior  population                                                                    
included individuals  who were  65 years  of age  and older.                                                                    
Commissioner Streur answered in the affirmative.                                                                                
                                                                                                                                
Co-Chair  Stoltze  communicated  that Medicare  clinics  had                                                                    
been  funded   through  less  conventional   capital  budget                                                                    
appropriations  and  voluntary  donations from  health  care                                                                    
providers. He  observed that  the clinics  had proven  to be                                                                    
effective  in  addressing  access  to care.  He  pointed  to                                                                    
competitiveness for  funds and wondered whether  the clinics                                                                    
would  be integrated  into an  eligible  funding source.  He                                                                    
noted that  the capital  budget would  not be  a sustainable                                                                    
way to support the facilities.                                                                                                  
                                                                                                                                
9:17:21 AM                                                                                                                      
                                                                                                                                
Commissioner  Streur  replied  that  the issue  had  been  a                                                                    
challenge  largely  because   of  Medicare  restrictions  on                                                                    
integration.  He  had  offered  to  work  with  the  private                                                                    
Medicare clinic  in south  Anchorage to  ensure that  it was                                                                    
maximizing reimbursement  through Medicare and  Medicaid. He                                                                    
noted that the issue was a  work in progress and agreed that                                                                    
it needed to occur.                                                                                                             
                                                                                                                                
Co-Chair   Stoltze  observed   that   government  help   was                                                                    
sometimes a mixed blessing.                                                                                                     
                                                                                                                                
Commissioner Streur continued with challenges on slide 14:                                                                      
                                                                                                                                
•    Affordable Care Act  (ACA) opportunities and challenges                                                                    
to all Medicaid Service                                                                                                         
                                                                                                                                
Commissioner Streur  emphasized that  ACA was  a significant                                                                    
effort.  There were  many  questions,  concerns, and  moving                                                                    
parts related to  ACA that had not  been addressed including                                                                    
Medicaid  expansion and  the Health  Insurance Exchange.  He                                                                    
was  happy  to  provide   further  detail  at  a  subsequent                                                                    
meeting.                                                                                                                        
                                                                                                                                
Chair  Neuman   pointed  to  a  recent   study  by  Northern                                                                    
Economics  related  to ACA.  His  office  would provide  the                                                                    
study to members to show a different view point.                                                                                
                                                                                                                                
Commissioner   Streur   discussed   that   recruitment   and                                                                    
retention  of qualified  employees  in a  time of  workforce                                                                    
shortages  was  a  constant  challenge  for  the  department                                                                    
(slide  15).  He  pointed to  significant  turnover  in  the                                                                    
Office  of Children's  Services (OCS)  where experience  was                                                                    
important. He read from slide 15:                                                                                               
                                                                                                                                
•    Promoting self-sufficiency, assisting  families to move                                                                    
off public assistance and leave  poverty thru employment. 30                                                                    
percent of  Temporary Assistance families  require intensive                                                                    
services                                                                                                                        
                                                                                                                                
Commissioner Streur  expounded that the  department's master                                                                    
client index and coordination of  services within DHSS would                                                                    
greatly impact success in assisting  families to move off of                                                                    
public assistance.  He stated  that keeping  families intact                                                                    
through preventative,  in-home services, and  avoiding entry                                                                    
into child  protection system was  a "wish and a  dream." He                                                                    
stressed that the issue was  extremely challenging and would                                                                    
be a work in progress for years to come.                                                                                        
                                                                                                                                
Representative  Gara   discussed  the  burnout   rate  among                                                                    
workers in  OCS. He  referenced the study  of a  proposal to                                                                    
hire social worker assistants as a  way to save costs in the                                                                    
department and wondered about its status.                                                                                       
                                                                                                                                
Commissioner Streur  replied that  the study  was a  work in                                                                    
progress.  He shared  that Christy  Lawton, Director  of OCS                                                                    
would  be able  to provide  more detail.  The social  worker                                                                    
cost  study had  been conducted;  one of  the increments  in                                                                    
current  year   would  go  towards  funding   the  item.  He                                                                    
furthered that changing the "mix"  of frontline people was a                                                                    
work in progress.                                                                                                               
                                                                                                                                
9:21:45 AM                                                                                                                      
                                                                                                                                
Chair Neuman  asked committee members  to specify  key areas                                                                    
that they would like more detail on at a later date.                                                                            
                                                                                                                                
Commissioner Streur read the definition  of a formula funded                                                                    
program on slide 16:                                                                                                            
                                                                                                                                
A   program  with   specific  eligibility   standards  which                                                                    
guarantees a  specific level of  benefits for  any qualified                                                                    
recipient. The  eligibility standards  and benefits  must be                                                                    
based in statute.                                                                                                               
                                                                                                                                
Commissioner  Streur detailed  that formula  funded programs                                                                    
included  Medicaid,  public  assistance,  food  stamps,  and                                                                    
other. He turned  to slide 17 related  to non-formula funded                                                                    
items:                                                                                                                          
Grants                                                                                                                          
                                                                                                                                
Components  with  major  grants to  other  organizations  or                                                                    
major contracts  for service  delivery, such  as Residential                                                                    
Child  Care,  Energy  Assistance Program,  Community  Health                                                                    
Grants and various treatment programs.                                                                                          
                                                                                                                                
Program Services                                                                                                                
                                                                                                                                
Administration  and delivery  of  direct  services, such  as                                                                    
public health  nursing and social services,  and the program                                                                    
management of entitlements and grants.                                                                                          
                                                                                                                                
Commissioner  Streur  communicated   that  grants  could  be                                                                    
either federal or general fund  only. He continued with non-                                                                    
formula items on slide 18:                                                                                                      
                                                                                                                                
Administration                                                                                                                  
                                                                                                                                
Departmental administrative oversight  and support programs,                                                                    
including  the  Commissioner's   Office  and  Administrative                                                                    
Services.                                                                                                                       
                                                                                                                                
Facilities                                                                                                                      
                                                                                                                                
The department  manages and operates 24-hour  facilities and                                                                    
institutions. These  include youth  correctional facilities,                                                                    
the Alaska Psychiatric Institute and Alaska Pioneer Homes.                                                                      
                                                                                                                                
SARAH WOODS,  DEPUTY DIRECTOR, FINANCE  MANAGEMENT SERVICES,                                                                    
DEPARTMENT OF  HEALTH AND  SOCIAL SERVICES,  discussed slide                                                                    
19. The slide  showed a comparison of the  DHSS general fund                                                                    
budget compared to  the entire State of  Alaska general fund                                                                    
operating budget.  She pointed out  that across the  span of                                                                    
nine years DHSS had  become approximately one-quarter of the                                                                    
state's general  fund budget (it  had started at  21 percent                                                                    
in FY 05); the DHSS  budget had increased from approximately                                                                    
$600 million in  FY 05 to approximately $1.3  billion in the                                                                    
past couple of  years. She looked at a dip  in the middle of                                                                    
the  chart resulting  from federal  stimulus  funding and  a                                                                    
more  favorable ratio  of federal  funding provided  for the                                                                    
general fund match designated for  the Medicaid program. She                                                                    
noted  that  the last  two  years  showed a  small  increase                                                                    
department's  budget in  the amount  of  $13.7 million;  the                                                                    
funding was  relatively flat in  comparison with  the entire                                                                    
budget.                                                                                                                         
                                                                                                                                
Ms. Woods pointed to a  chart that showed Medicaid's portion                                                                    
of the  total DHSS  general fund  budget (slide  20). Across                                                                    
the span of nine years  Medicaid general funds had increased                                                                    
from  $227  million  to   approximately  $688  million.  She                                                                    
briefly touched on  other formula programs on  slide 21. The                                                                    
slide  included  a  pie  chart   of  all  formula  programs:                                                                    
Medicaid  at 86  percent;  public assistance  at 11  percent                                                                    
including   Alaska   Temporary  Assistance,   Adult   Public                                                                    
Assistance,  Childcare  Benefits,   General  Relief,  Tribal                                                                    
Assistance,   Senior  Benefits,   and  the   Permanent  Fund                                                                    
Dividend Hold  Harmless Program  that enabled  recipients of                                                                    
care  to  remain  eligible for  their  benefits;  Children's                                                                    
Services at  3 percent (foster care  and subsidized adoption                                                                    
guardianship payments); and Health  Care Services at under 1                                                                    
percent  for catastrophic  and chronic  illness. She  shared                                                                    
that  the eligibility  for  public  assistance programs  and                                                                    
Medicaid  was  determined  through  the  department's  aging                                                                    
eligibility information  system. The department  was working                                                                    
to build  a new system;  Medicaid eligibility was  the first                                                                    
component  of  the  work.  She   noted  that  tight  federal                                                                    
timelines  existed  and  the   department  was  invested  in                                                                    
getting the new system up and running as soon as possible.                                                                      
                                                                                                                                
9:27:34 AM                                                                                                                      
                                                                                                                                
Co-Chair Austerman  asked whether  there was an  equal split                                                                    
between total  general funds  for Medicaid  and non-Medicaid                                                                    
programs.  He asked  for  more detail  related  to the  $688                                                                    
million  for Medicaid.  Ms.  Woods answered  that  in FY  05                                                                    
Medicaid  general  funds   accounted  for  approximately  38                                                                    
percent of  the DHSS general  fund budget; it  had gradually                                                                    
risen to 52 percent.                                                                                                            
                                                                                                                                
Co-Chair  Austerman surmised  that  funds  for Medicaid  and                                                                    
non-Medicaid  programs each  accounted for  approximately 50                                                                    
percent of the DHSS general  fund budget. Ms. Woods answered                                                                    
in the affirmative.                                                                                                             
                                                                                                                                
Representative Gara  wondered whether it was  possible for a                                                                    
lower   public  assistance   payment  to   be  provided   to                                                                    
recipients with  higher income eligibility levels.  He asked                                                                    
whether the change would it make much of a dent in savings.                                                                     
                                                                                                                                
Ms. Woods  responded that  formula funded  programs required                                                                    
eligibility criteria  and benefits to be  stated in statute.                                                                    
The  change  was not  impossible,  but  it would  require  a                                                                    
change in statute.                                                                                                              
                                                                                                                                
9:29:25 AM                                                                                                                      
                                                                                                                                
Representative Gara asked what  the maximum income level was                                                                    
that allowed  individuals to qualify for  public assistance.                                                                    
Ms. Woods would get back to the committee with an answer.                                                                       
                                                                                                                                
Representative Edgmon  referred to  testimony that  the DHSS                                                                    
general fund budget  was growing by 9.1  percent. He queried                                                                    
whether the  largest drivers of  the budget growth  were the                                                                    
aging senior  population and cost  shifting from  federal to                                                                    
state  dollars. He  was  interested to  learn  why the  DHSS                                                                    
budget continued to increase  substantially when the overall                                                                    
state population was not growing by 9.1 percent annually.                                                                       
                                                                                                                                
Commissioner  Streur responded  that  in  addition to  items                                                                    
listed by  Representative Edgmon  the rising cost  was based                                                                    
on    Federal   Medical    Assistance   Percentage    (FMAP)                                                                    
participation compared  to state participation  on Medicaid.                                                                    
Rising  costs   were  also   related  to   increasing  fees,                                                                    
utilization,  and  population  accessing  care  (the  annual                                                                    
number of individuals accessing  care had risen from 110,000                                                                    
to  136,000). He  communicated that  Alaska had  experienced                                                                    
"waterfall" from  the recession  in the  Lower 48.  He added                                                                    
that FMAP had declined from a  high of 67 percent down to 50                                                                    
percent based  on the economy  of the state; it  was related                                                                    
to unemployment, overall economy, budget, and other.                                                                            
                                                                                                                                
Representative Edgmon surmised that  the FMAP change was the                                                                    
most   significant   driver    of   the   budget   increase.                                                                    
Commissioner Streur answered in the affirmative.                                                                                
                                                                                                                                
9:32:35 AM                                                                                                                      
                                                                                                                                
Representative Wilson  wondered if  it was true  that Alaska                                                                    
provided  more funding  for better  services to  individuals                                                                    
compared to  the Lower 48. Commissioner  Streur responded in                                                                    
the affirmative.                                                                                                                
                                                                                                                                
Representative  Wilson commented  that individuals  who move                                                                    
to Alaska  because of its  high quality services may  not be                                                                    
aware that the cost of living is also high.                                                                                     
                                                                                                                                
Commissioner  Streur  agreed  that   costs  in  Alaska  were                                                                    
different. For example, 47 of  the 50 states paid a Medicaid                                                                    
reimbursement rate that was less  than Medicare; Alaska paid                                                                    
at 140 percent of Medicare.                                                                                                     
                                                                                                                                
Representative  Munoz  asked  whether   the  state  had  any                                                                    
discretion  in  how much  it  contributed  to Medicaid.  She                                                                    
asked  whether  the  state's contribution  would  correspond                                                                    
equally  if  the formula  automatically  went  up a  certain                                                                    
level.                                                                                                                          
                                                                                                                                
Commissioner Streur  responded that FMAP was  established at                                                                    
the  federal level;  if the  state did  not provide  its set                                                                    
percentage it would not receive  the total federal match. He                                                                    
explained  that  if  a  state  decided  to  contribute  $500                                                                    
million instead of its designated  $600 million, the federal                                                                    
match would be $500 million.                                                                                                    
                                                                                                                                
Ms. Woods  added that  FMAP rates  for the  various Medicaid                                                                    
programs  were different.  For example,  there was  a higher                                                                    
federal participation rate for  breast and cervical cancers;                                                                    
Indian Health  Services was at  a 100  percent participation                                                                    
rate.                                                                                                                           
                                                                                                                                
9:34:54 AM                                                                                                                      
                                                                                                                                
Ms.  Woods addressed  a chart  that showed  the department's                                                                    
total  budget growth  for formula  versus non-formula  items                                                                    
(the non-formula  portion was shown  in red and  the formula                                                                    
portion  was  shown in  blue).  She  communicated that  DHSS                                                                    
formula  funding  overall  had  risen  gradually  from  69.5                                                                    
percent  to  72.3  percent;   the  relative  proportions  of                                                                    
formula and non-formula  were close to the  same even though                                                                    
total costs for the department  had been rising. She pointed                                                                    
to a  slight dip  in the FY  08 and FY  10 budgets  that had                                                                    
been driven  by the  elimination of formula  funded programs                                                                    
including  the longevity  bonus, senior  care benefits,  and                                                                    
DSH   [Disproportionate   Share  Hospital]   payments.   The                                                                    
department  had   been  asked   to  accept  a   $23  million                                                                    
unallocated cut  at the  department level in  FY 10  that it                                                                    
chose to take in two  of its Medicaid components; therefore,                                                                    
the formula portion of the budget had dropped slightly.                                                                         
                                                                                                                                
Commissioner   Streur   clarified   that   DSH   stood   for                                                                    
Disproportionate  Share  Hospital;  it was  federal  funding                                                                    
received by the department that  was matched by the state or                                                                    
the hospital to offset the cost of charity care.                                                                                
                                                                                                                                
Ms.  Woods communicated  that  approximately one-quarter  of                                                                    
the DHSS  budget was  not formula funded.  She pointed  to a                                                                    
pie chart on slide 23.  Program Services made up the largest                                                                    
non-formula  portion  of the  budget  at  14 percent,  which                                                                    
included  administration  and  delivery of  direct  service,                                                                    
public health,  social services,  and management  of formula                                                                    
and grant programs. Other  non-formula budget costs included                                                                    
grant  payments  at  7 percent;  facilities  costs  for  the                                                                    
Alaska  Psychiatric  Institute,  Juvenile Justice,  and  the                                                                    
Alaska Pioneer Homes  at 5 percent; and  Administration at a                                                                    
lean cost [2 percent].                                                                                                          
                                                                                                                                
Ms.  Woods addressed  a graph  generated by  the Legislative                                                                    
Finance Division  (LFD) on slide 24.  The graph demonstrated                                                                    
the  changing   proportions  of  fund  sources   within  the                                                                    
department's total budget. She  pointed to a steady increase                                                                    
in the general  fund portion of the budget from  FY 05 to FY                                                                    
09; it  had increased from 36  percent of total funds  in FY                                                                    
05 to  approximately 50 percent  in FY 09. She  relayed that                                                                    
percentages were much more stable  from FY 09 going forward;                                                                    
there  was a  slight dip  in FY  10 and  FY 11  due to  ARRA                                                                    
[American Recovery and Reinvestment Act] funding.                                                                               
                                                                                                                                
9:38:35 AM                                                                                                                      
                                                                                                                                
Commissioner Streur  turned to slide  25 that showed  a view                                                                    
of the proposed  FY 14 budget compared to the  FY 13 budget.                                                                    
He detailed  that the budget had  increased by approximately                                                                    
$20 million from  $2.637 billion in FY 13  to $2.657 billion                                                                    
in FY  14. He remarked  that the amount was  substantial but                                                                    
that it  was relatively small  in a large budget.  He stated                                                                    
that  the increase  was representative  of the  department's                                                                    
continuing drive to manage its funding.                                                                                         
                                                                                                                                
Ms.  Woods  added  that  budget growth  shown  on  slide  25                                                                    
represented a 1.5 percent increase  in formula funding and a                                                                    
1.2  percent   decrease  in  discretionary   or  non-formula                                                                    
funding.  She  stressed  that   the  dollar  value  increase                                                                    
represented a  dramatic drop from the  prior year's figures.                                                                    
She   remarked   that   the    budget   was   "careful   and                                                                    
conservative."                                                                                                                  
                                                                                                                                
Commissioner Streur  directed attention  to slide  26, which                                                                    
compared  the DHSS  proposed FY  14  budget with  the FY  14                                                                    
adjusted  base  provided  by  LFD.  He  explained  that  the                                                                    
comparison was  reflective of the  $9 million that  had been                                                                    
appropriated the prior year from  alcohol tax; DHSS recorded                                                                    
the  data   slightly  differently  than  LFD.   He  provided                                                                    
proposed budget highlights on slide  27. Medicaid growth was                                                                    
approximately $11  million; he observed that  the amount was                                                                    
relatively  small  compared  to the  $1.6  billion  Medicaid                                                                    
budget.  Other formula  program growth  included $4  million                                                                    
for   public  assistance,   and   $900,000  for   children's                                                                    
services.                                                                                                                       
                                                                                                                                
Representative  Holmes  asked   whether  the  [$11  million]                                                                    
Medicaid growth  was realistic or  if a  future supplemental                                                                    
request could be expected. She  understood that the governor                                                                    
was working  to determine  whether Medicaid  expansion would                                                                    
make sense  for Alaska and wondered  when the administration                                                                    
planned to come forward with a recommendation.                                                                                  
                                                                                                                                
Commissioner  Streur responded  that he  did not  anticipate                                                                    
needing  to  request  supplemental  funds  for  the  current                                                                    
Medicaid population.  He believed DHSS could  operate on the                                                                    
budget it  had presented;  he would be  happy to  discuss it                                                                    
further  during the  Medicaid presentation.  He communicated                                                                    
that DHSS continued to evaluate  studies related to Medicaid                                                                    
expansion;  he was  not entirely  pleased with  studies thus                                                                    
far.  He  pointed  additional  studies  the  department  was                                                                    
evaluating  including  the   Northern  Economics  study.  He                                                                    
needed to  identify the  population currently  covered under                                                                    
grants  to  determine how  many  would  qualify for  the  50                                                                    
percent  Medicaid  "woodwork  effect"  or  the  100  percent                                                                    
Medicaid expansion if it were  to be done. He furthered that                                                                    
if the state  could save $80 million in  state general funds                                                                    
in  grants by  enrolling the  individuals in  Medicaid at  a                                                                    
cost of $36  million, the decision would  be a "no-brainer";                                                                    
however,  there had  been  some  difficulty in  establishing                                                                    
whether that would be the case.                                                                                                 
                                                                                                                                
9:43:12 AM                                                                                                                      
                                                                                                                                
Representative Holmes asked when  the department expected to                                                                    
complete and  share the detailed study.  Commissioner Streur                                                                    
did not  have an estimated  date at present; he  believed it                                                                    
would be later in the current year.                                                                                             
                                                                                                                                
Chair  Neuman  requested  a  copy  of  any  information  the                                                                    
governor was  examining related to Medicaid  expansion under                                                                    
the ACA.                                                                                                                        
                                                                                                                                
Representative  Costello  shared  that the  legislature  had                                                                    
discussed addressing childhood obesity  in schools the prior                                                                    
session.  She stated  that 3  out  of every  10 children  in                                                                    
Alaska's schools  were considered to be  obese. She wondered                                                                    
whether  any studies  had been  conducted  to determine  the                                                                    
costs of  childhood obesity to  the state. She  believed the                                                                    
department's  Healthy  Futures  program  was  wonderful  and                                                                    
queried  whether DHSS  had considered  expanding  it to  all                                                                    
schools throughout the state.                                                                                                   
                                                                                                                                
Commissioner Streur  replied that schools had  to be willing                                                                    
to join in  the Healthy Futures program.  He elaborated that                                                                    
the department  would continue to  work with DEED  to enlist                                                                    
its  support.  The  program had  primarily  been  voluntary,                                                                    
which  he  believed  had  contributed  to  its  success.  He                                                                    
communicated  that DHSS  had identified  $1  million in  the                                                                    
current  budget for  fighting  childhood  obesity. He  noted                                                                    
that  Kerre  Fisher  [director of  the  Division  of  Public                                                                    
Health]  and Dr.  Ward Hurlburt  [chief medical  officer for                                                                    
the Division of  Public Health] would be able  to expound on                                                                    
the topic.  He acknowledged that  more could be done  on the                                                                    
issue.  He  believed  that  the  state  needed  to  be  more                                                                    
aggressive on the issue, but  that successful results of the                                                                    
state's efforts needed to be  shown. He added that effective                                                                    
programs existed and  he anticipated that the  $1 million in                                                                    
the  proposed budget  would  help  demonstrate their  value,                                                                    
which  would  allow DHSS  to  request  a higher  amount  the                                                                    
following year.                                                                                                                 
                                                                                                                                
9:46:08 AM                                                                                                                      
                                                                                                                                
Representative  Costello  was  interested  in  pursuing  how                                                                    
departments could  work together  to share  their expertise.                                                                    
She  wondered whether  there had  been  a recommendation  to                                                                    
DEED on the amount of  physical education (PE) that children                                                                    
should   have   in   schools.   She   was   concerned   that                                                                    
administrations  were  increasing  the number  of  classroom                                                                    
hours and  decreasing PE  time when  schools failed  to meet                                                                    
adequate yearly progress. She stated  that research showed a                                                                    
mind-body connection  and that  children benefited  by being                                                                    
active.                                                                                                                         
                                                                                                                                
Commissioner  Streur  answered   that  DHSS  was  cautiously                                                                    
communicating  with  DEED  on  the  issue.  He  stated  that                                                                    
Commissioner  Hanley was  very  involved  in supporting  the                                                                    
program and  others; however, he  did not want to  force the                                                                    
issue  on  DEED.  He  relayed  that  the  governor  strongly                                                                    
encouraged all  departments to  work more  closely together.                                                                    
He  could provide  a multitude  of cooperative  efforts that                                                                    
were  currently underway  between departments;  working with                                                                    
DEED was one of the department's most significant efforts.                                                                      
                                                                                                                                
Representative Gara communicated that he  had been on a task                                                                    
force in the  past that worked to expand PE.  He shared that                                                                    
some  schools without  space for  PE  had implemented  daily                                                                    
walks for students.  He asked if the  department believed it                                                                    
was  doing enough  on the  issue  or if  another task  force                                                                    
should be developed to determine  how to maximize more PE at                                                                    
the lowest cost.                                                                                                                
                                                                                                                                
Commissioner Streur  deferred the  question to  Dr. Hurlburt                                                                    
who could provide an answer  during a future presentation on                                                                    
public health. He communicated that  he would like to see an                                                                    
expansion of PE  services because they worked,  but he could                                                                    
not currently provide a suggestion on legislation.                                                                              
                                                                                                                                
Representative Gara  asked whether  the type of  food served                                                                    
in  schools was  encouraging obesity  problems. Commissioner                                                                    
Streur  answered  that the  topic  was  probably beyond  his                                                                    
expertise; however,  he believed there was  significant room                                                                    
to build the school lunch  program. For instance, he pointed                                                                    
to the 10-year effort to  reduce sodium in school lunches by                                                                    
40 percent and stated that it could be done overnight.                                                                          
                                                                                                                                
Representative Gara suggested  the introduction of committee                                                                    
legislation for a task force  (or other) on school nutrition                                                                    
and PE.                                                                                                                         
                                                                                                                                
Chair  Neuman  replied that  the  committee  would see  what                                                                    
Commissioner Streur could go forward with.                                                                                      
                                                                                                                                
9:49:51 AM                                                                                                                      
                                                                                                                                
Commissioner Streur  continued to highlight  proposed budget                                                                    
items on  slides 28  through 31.  The budget  included $2.25                                                                    
million  for the  governor's  Domestic  Violence and  Sexual                                                                    
Assault  initiative;  $1.5  million   for  the  Child  Abuse                                                                    
Prevention  and  Treatment   Act  (CAPTA)  integration;  and                                                                    
$1.185  million for  the Social  Worker  Class Study,  which                                                                    
would  "shore up"  salary levels.  Additionally, the  budget                                                                    
included   money  for   juvenile  justice   facility  health                                                                    
services  to   address  increased  costs;  he   discussed  a                                                                    
potential  solution  for   significant  savings  that  would                                                                    
entail enrolling the  kids in Medicaid to pay  at a Medicaid                                                                    
fee  schedule  with  general   funds.  Other  funding  items                                                                    
included   the  Energy   Assistance   Program,  and   health                                                                    
information security/privacy compliance  and remediation. He                                                                    
emphasized the importance of security  and relayed that DHSS                                                                    
had been fined $1.7 million  from the Office of Civil Rights                                                                    
for  a lost  hard  drive.  The fine  had  resulted from  the                                                                    
department's failure to develop  a corrective action plan to                                                                    
prevent  the  problem  from  occurring  in  the  future.  He                                                                    
mentioned deferred  maintenance budget  items that  would be                                                                    
elaborated  on  by  DHSS  divisions  at  a  later  time.  He                                                                    
concluded with  two final budget  items including  phase two                                                                    
of the  Electronic Vital Record Registration  System and the                                                                    
second $10  million increment  for phase  two of  the Bethel                                                                    
Youth Facility Renovation.                                                                                                      
                                                                                                                                
9:52:20 AM                                                                                                                      
                                                                                                                                
Chair   Neuman   thanked   Commissioner   Streur   for   his                                                                    
presentation. He  emphasized the  importance of  the issues,                                                                    
which  accounted for  more than  one-quarter of  the state's                                                                    
total  operating  budget.  He noted  that  the  subcommittee                                                                    
would operate  as a Committee  of the Whole on  a year-round                                                                    
basis. The  subcommittee would  spend a  considerable amount                                                                    
of time  on each  of the  items including  school nutrition,                                                                    
health   centers,    foster   care,    Medicare,   Medicaid,                                                                    
prescription  drugs,   and  other.  He  observed   that  the                                                                    
subcommittee would look at what  it could accomplish related                                                                    
to  formula   and  non-formula   funding  prior   to  budget                                                                    
closeouts.  Additionally,  the  subcommittee would  look  at                                                                    
members' specific requests.                                                                                                     
                                                                                                                                
Chair  Neuman asked  Amanda Ryder  with LFD  to address  the                                                                    
committee. He  communicated that  Ms. Ryder would  provide a                                                                    
10-year  look-back that  would help  illustrate where  large                                                                    
increments resided in different  areas of the department. He                                                                    
believed the  data would be  helpful if it was  necessary to                                                                    
begin looking at budget restraints.                                                                                             
                                                                                                                                
AMANDA RYDER, FISCAL  ANALYST, LEGISLATIVE FINANCE DIVISION,                                                                    
provided a  packet of  graphs from LFD  (copy on  file). The                                                                    
presentation addressed  funding for DHSS from  2005 forward.                                                                    
The   series  of   graphs  detailed   management  plan   and                                                                    
supplementals regarding  Medicaid. She pointed out  slide 1:                                                                    
"Department  of Health  and Social  Services Share  of Total                                                                    
Agency Operations." She agreed  that the department's budget                                                                    
increased  by $717  million in  general funds.  She informed                                                                    
the committee that  LFD was asked to create  a comparison of                                                                    
resident  workers. The  department's budget  was $4,014  per                                                                    
resident  worker using  Department  of  Labor and  Workforce                                                                    
Development  figures from  2010.  She  highlighted that  LFD                                                                    
created  two  comparisons,  one   for  management  plan  and                                                                    
another from  adjusted base. Growth for  management plan for                                                                    
the department  was 1  percent and  1.8 percent  in adjusted                                                                    
base.                                                                                                                           
                                                                                                                                
9:55:32 AM                                                                                                                      
                                                                                                                                
Ms.  Ryder  moved to  slide  2:  "Department of  Health  and                                                                    
Social Services  (All Funds)."  She explained  that personal                                                                    
services or position costs comprised  the largest portion of                                                                    
an agency's budget. She pointed  out that the orange colored                                                                    
portion  of the  bar on  the graph  signified grants,  which                                                                    
were the  majority of the department's  budget. The majority                                                                    
(80  percent)  of  the grants/benefit  were  categorized  as                                                                    
Medicaid.                                                                                                                       
                                                                                                                                
Chair Neuman  asked the  commissioner for  a list  of grants                                                                    
and the  amounts. Commissioner Streur agreed  to provide the                                                                    
information to the committee.                                                                                                   
                                                                                                                                
Ms. Ryder  turned to slide  3: "Salary  Adjustment Increases                                                                    
and  Personal Services  Costs." Personal  services increased                                                                    
by  $144 million  between FY  05 and  FY 14.  She emphasized                                                                    
that the information provided included  all funds as opposed                                                                    
to general  funds alone.  The last bar  on the  graph summed                                                                    
the  change  or increase  due  to  salary adjustments  ($105                                                                    
million)  and non-contractual  personal services  costs ($40                                                                    
million).                                                                                                                       
                                                                                                                                
Representative  Gara asked  for clarification  regarding the                                                                    
percentage of  state funds and  Medicaid. Ms.  Ryder replied                                                                    
that Medicaid comprised 80 percent of total funds.                                                                              
                                                                                                                                
Representative  Gara  asked  about state  funds.  Ms.  Ryder                                                                    
replied that  she did not  have the exact figure,  but would                                                                    
imagine  a "hefty  proportion" of  the department's  general                                                                    
fund budget was Medicaid.                                                                                                       
                                                                                                                                
Representative  Gara explained  that he  asked the  question                                                                    
because  the legislature  could not  control federal  funds.                                                                    
Ms.  Ryder responded  that she  would provide  another graph                                                                    
detailing the growth in Medicaid  by appropriations later in                                                                    
her presentation.                                                                                                               
                                                                                                                                
9:58:27 AM                                                                                                                      
                                                                                                                                
Representative  Wilson asked  whether growth  resulting from                                                                    
contracts could be  tracked. Ms. Ryder replied  that LFD did                                                                    
not  have the  requested information  in its  budget system.                                                                    
She recommended asking the department.                                                                                          
                                                                                                                                
Ms.  Ryder  detailed  slide 4:  "Department  of  Health  and                                                                    
Social  Services Budgeted  Positions."  She  noted that  280                                                                    
positions  had  been added  between  FY  05  and FY  14  (an                                                                    
increase  of  8  percent). She  discussed  various  position                                                                    
additions.                                                                                                                      
                                                                                                                                
Chair Neuman compared slides 3 and  4. He asked if the costs                                                                    
associated with the  position increases included contractual                                                                    
positions and  benefits. Ms. Ryder  responded that  the vast                                                                    
majority of the $144 million  increase in position costs was                                                                    
due  to salary  contractual adjustments  or bargaining  unit                                                                    
agreement increases.                                                                                                            
                                                                                                                                
Chair Neuman surmised  that the increase was 3  percent to 4                                                                    
percent  per year.  Ms. Ryder  replied that  the figure  was                                                                    
approximately 2  percent, but the  exact figure  depended on                                                                    
the bargaining  unit. She pointed  out that FY  14 displayed                                                                    
minimal  increases, because  most bargaining  units had  not                                                                    
been negotiated. Following a  settlement, the governor would                                                                    
submit salary transactions to pay for the increases.                                                                            
                                                                                                                                
10:03:02 AM                                                                                                                     
                                                                                                                                
Chair Neuman queried the average  salary of the department's                                                                    
employees.  Ms.  Ryder did  not  have  the information,  but                                                                    
offered to provide it at a later date.                                                                                          
                                                                                                                                
Chair  Neuman guessed  the amount  was $70  thousand or  $80                                                                    
thousand.                                                                                                                       
                                                                                                                                
Ms.  Ryder explained  slide  5:  "Appropriations within  the                                                                    
Department of  Health and Social  Services Formula  and Non-                                                                    
Formula." She  informed Representative  Gara that  the chart                                                                    
might answer the  questions he posed earlier  in the meeting                                                                    
about  Medicaid costs.  The chart  displayed the  portion of                                                                    
Medicaid in comparison to that  of behavioral health, public                                                                    
health, and children's services.                                                                                                
                                                                                                                                
Chair Neuman  discussed grants. He  understood that  many of                                                                    
the  grants   were  provided  to  drug   and  alcohol  abuse                                                                    
treatment  facilities.  He   wondered  what  the  facilities                                                                    
provided  to  the  state.  He  advocated  for  a  discussion                                                                    
regarding the treatment facilities' practicality.                                                                               
                                                                                                                                
Ms.  Ryder continued  with slide  6: "Appropriations  within                                                                    
the  Department of  Health and  Social Services  Formula and                                                                    
Non-Formula." Medicaid  displayed the fastest  growing piece                                                                    
of the budget. The department's  total fund budget had grown                                                                    
by approximately $1 billion.                                                                                                    
                                                                                                                                
Representative  Gara understood  that the  cost of  Medicaid                                                                    
services  and  new  applicants   resulted  in  the  increase                                                                    
documented  in   past  years.  He  wondered   if  the  newly                                                                    
flattened curve was expected to continue.                                                                                       
                                                                                                                                
Commissioner  Streur responded  in  the  negative. He  noted                                                                    
that Medicaid tended to flux in four-year cycles.                                                                               
                                                                                                                                
Representative  Gara  opined  that Medicaid  services  costs                                                                    
would not  decrease, as unemployment  was presently  low. He                                                                    
wondered about obtaining lower medical services costs.                                                                          
                                                                                                                                
10:08:31 AM                                                                                                                     
                                                                                                                                
Commissioner Streur  replied in  the affirmative.  He agreed                                                                    
that the  rate of  unemployment was at  an all-time  low. He                                                                    
pointed out that the income  levels of the employed Alaskans                                                                    
were most important in relation  to Medicaid. He stated that                                                                    
many  military personnel  enrolled  in  Medicaid because  of                                                                    
their   eligibility.   He   contended  that   Medicaid   and                                                                    
unemployment were not connected.                                                                                                
                                                                                                                                
Chair Neuman  stated that the  unemployment levels  were low                                                                    
because of the  large capital budgets. He  opined that state                                                                    
income  levels would  decrease with  less oil  production in                                                                    
the future.                                                                                                                     
                                                                                                                                
Ms.  Ryder turned  to  slide 7:  "Department  of Health  and                                                                    
Social  Services  Total  Funding Comparison  by  Fund  Group                                                                    
Formula  and  Non-Formula."  She  stated  that  total  funds                                                                    
increased by $979 million.                                                                                                      
                                                                                                                                
Ms.  Ryder  discussed slide  8:  "Department  of Health  and                                                                    
Social Services Percent of the  Total Department's Budget by                                                                    
Fund Group."  She explained that  the percentage  of federal                                                                    
funds was 56  percent in FY 05  and 47 percent in  the FY 14                                                                    
DHSS budget. The percentage of  general funds was 36 percent                                                                    
in FY 05 and 50 percent in the FY 14 budget.                                                                                    
                                                                                                                                
10:11:26 AM                                                                                                                     
                                                                                                                                
Ms. Ryder  moved to  slide 9:  "H&SS Budget  Comparisons (by                                                                    
Appropriations).  The graph  displayed a  separation of  the                                                                    
non-formula programs to  exemplify growth. Behavioral Health                                                                    
increased  by  $47  million or  99  percent.  Public  Health                                                                    
increased  by $48  million  or 199  percent  and Senior  and                                                                    
Disabilities  Services  increased  by  $23  million  or  120                                                                    
percent.                                                                                                                        
                                                                                                                                
Ms. Ryder  explained that LFD provided  two comparisons. She                                                                    
highlighted  the term  "adjusted base."  She explained  that                                                                    
LFD created  a column  that included salary  adjustments and                                                                    
transfers  between  appropriations.   The  column  was  best                                                                    
described as the "cost of  doing business." When funding was                                                                    
added  to  the budget,  the  subcommittees  would "go"  from                                                                    
adjusted base forward. She noted that  it was best to have a                                                                    
statewide decision  made by the full  finance committee. The                                                                    
request was  actually 1 percent  greater for  the Behavioral                                                                    
Health budget, when  a one-time $9 million  was removed. The                                                                    
comparisons provided such information.                                                                                          
                                                                                                                                
10:14:21 AM                                                                                                                     
                                                                                                                                
Ms.  Ryder   moved  to   slide  10:   "Non-Medicaid  Formula                                                                    
Appropriations."  She noted  that only  three appropriations                                                                    
were classified as  non-Medicaid formula appropriations. She                                                                    
turned  to slide  11:  "Total  Formula Appropriations."  She                                                                    
explained   that   supplementals   must   be   included   in                                                                    
discussions  regarding  Medicaid; the  previously  discussed                                                                    
reports were without  supplementals. The governor's proposed                                                                    
budget  did  not  include  supplementals,  so  LFD  compared                                                                    
"management plan."  She furthered that  Medicaid encompassed                                                                    
large  supplementals.  Slide  11 detailed  $100  million  in                                                                    
supplementals for  FY 05 and  FY 06. The 9.1  percent growth                                                                    
rate from  FY 05 through  FY 14  was the result  of one-time                                                                    
fund  source  changes.  She did  not  predict  a  comparable                                                                    
growth  rate to  continue. She  clarified that  Medicaid had                                                                    
grown at $360 million (110  percent) between the FY 05 final                                                                    
budget and the  FY 14 governor's request;  $134.8 million of                                                                    
the increase  was attributable to  FairShare/ProShare, $75.2                                                                    
million was attributable to FMAP  changes, and $32.5 million                                                                    
was attributable to rate rebasing.                                                                                              
                                                                                                                                
10:17:48 AM                                                                                                                     
                                                                                                                                
Ms.  Ryder addressed  slide 12:  "Department  of Health  and                                                                    
Social  Services Continued  Budget  Growth  Compared to  10-                                                                    
Year  Plan."  She  explained  that  the  black  dotted  line                                                                    
displayed  the  department's  projections.  The  green  line                                                                    
displayed  the projection  with  a continuation  of the  9.1                                                                    
percent  annual  growth  rate. The  graph  included  general                                                                    
funds only.  She repeated that many  one-time funds occurred                                                                    
in the  time period. She  opined that the  department's ten-                                                                    
year plan was reasonable.                                                                                                       
                                                                                                                                
Ms.  Ryder concluded  with slide  13: "Department  of Health                                                                    
and Social  Services Continued Budget  Growth Compared  to a                                                                    
10-  Year Plan  (All Funding)."  The department's  estimates                                                                    
and the  LFD's continuation  of the  5.2 annual  growth were                                                                    
closely aligned.                                                                                                                
                                                                                                                                
Representative   Gara   understood   that   the   department                                                                    
succeeded  in  flattening  the increase.  He  asked  if  the                                                                    
future  increase was  due largely  to population  growth. He                                                                    
asked  about the  "driver"  for the  increase  curve in  the                                                                    
future years.                                                                                                                   
                                                                                                                                
Commissioner Streur asked for question clarification.                                                                           
                                                                                                                                
Representative  Gara observed  that  the  flat curve  segued                                                                    
into an increased  spending curve. He asked  if the increase                                                                    
was  driven   by  population  growth.   Commissioner  Streur                                                                    
suspected  that the  growth  was  inflation and  potentially                                                                    
population related.  He anticipated  that much  growth would                                                                    
occur  in the  social  services arena.  He  pointed out  the                                                                    
aggressive  actions  taken  by  the  department  to  improve                                                                    
performance and "corral Medicaid."                                                                                              
                                                                                                                                
10:21:18 AM                                                                                                                     
                                                                                                                                
Chair Neuman  believed that the hearing  had identified many                                                                    
important issues for the subcommittee.                                                                                          
                                                                                                                                
PETE ECKLUND, STAFF,  REPRESENTATIVE ALAN AUSTERMAN, pointed                                                                    
out a  couple of  slides that  would help  clarify questions                                                                    
regarding adjusted base. He informed  the committee that all                                                                    
subcommittees were to start the  budget review from adjusted                                                                    
base.  He  pointed   to  slides  25  and  26   of  the  DHSS                                                                    
presentation. He pointed out the  total funds and management                                                                    
plan  in  the  amount  of $2.637  billion  (slide  25).  The                                                                    
governor's request  was $2.657 billion, which  represented a                                                                    
difference of approximately $20  million. The comparison was                                                                    
valid, but he clarified  that subcommittees began evaluation                                                                    
on slide  26, which  detailed adjusted  base. He  noted that                                                                    
LFD   added  contractual   increases  and   subtracted  from                                                                    
management   plan.   The   subcommittee  would   observe   a                                                                    
governor's  increase  of $37  million.  He  stated that  the                                                                    
commissioner's  comparison was  valid, but  the subcommittee                                                                    
would view the comparison differently.                                                                                          
                                                                                                                                
HB  65  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HB  66  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
10:23:41 AM                                                                                                                     
                                                                                                                                
The meeting was adjourned at 10:23 a.m.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
DOT&PF HFC Overview 01 28 13.pdf HFIN 1/28/2013 1:30:00 PM
DOT HFIN Overview
DNR HFIN Overview 1-28.pdf HFIN 1/28/2013 1:30:00 PM
DNR HFIN Overview
DOT Overview Response 1-28-13.pdf HFIN 1/28/2013 1:30:00 PM
Dot Respnse Overview questions