Legislature(2013 - 2014)HOUSE FINANCE 519

02/05/2014 01:30 PM FINANCE


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01:36:49 PM Start
01:37:45 PM HB266 || HB267
01:37:48 PM Fy 15 Governor's Budget Overview: Department of Education and Early Development
02:32:34 PM Fy 15 Governor's Budget Overview: Department of Commerce, Community and Economic Development
03:42:04 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 266 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 267 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ - FY15 Governor's Budget Overviews: TELECONFERENCED
Dept. of Education & Early Development
Dept. of Commerce, Community & Economic
Development
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 5, 2014                                                                                           
                         1:36 p.m.                                                                                              
                                                                                                                                
1:36:49 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Austerman  called   the  House  Finance  Committee                                                                    
meeting to order at 1:36 p.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Lindsey Holmes                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Michael  Hanley, Commissioner,  Department of  Education and                                                                    
Early  Development;  Heidi  Teshner, Director,  Division  of                                                                    
Administrative Services,  Department of Education  and Early                                                                    
Development;  Susan  K.  Bell, Commissioner,  Department  of                                                                    
Commerce,   Community  and   Economic  Development;   Jeanne                                                                    
Mungle,  Administrative  Services  Director,  Department  of                                                                    
Commerce, Community and Economic Development.                                                                                   
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 266    APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 266 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HB 267    APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 267 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
FY 15 BUDGET OVERVIEWS:                                                                                                         
     DEPARTMENT OF EDUCATION and EARLY DEVELOPMENT                                                                              
     DEPARTMENT   OF   COMMERCE,    COMMUNITY,   and   EARLY                                                                    
     DEVELOPMENT                                                                                                                
                                                                                                                                
HOUSE BILL NO. 266                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain  programs,   capitalizing  funds,   and  making                                                                    
     reappropriations; making appropriations  under art. IX,                                                                    
     sec. 17(c),  Constitution of the State  of Alaska, from                                                                    
     the constitutional budget reserve fund."                                                                                   
                                                                                                                                
HOUSE BILL NO. 267                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health program."                                                                                      
                                                                                                                                
1:37:45 PM                                                                                                                    
                                                                                                                                
^FY 15 GOVERNOR'S BUDGET OVERVIEW: DEPARTMENT OF EDUCATION                                                                    
and EARLY DEVELOPMENT                                                                                                         
                                                                                                                                
1:37:48 PM                                                                                                                    
                                                                                                                                
MICHAEL HANLEY, COMMISSIONER, DEPARTMENT OF EDUCATION AND                                                                       
EARLY DEVELOPMENT, (DEED) introduced himself.                                                                                   
                                                                                                                                
HEIDI TESHNER, DIRECTOR, DIVISION OF ADMINISTRATIVE                                                                             
SERVICES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT,                                                                        
introduced herself.                                                                                                             
                                                                                                                                
Commissioner Hanley discussed slide 2 of the PowerPoint                                                                         
presentation, "Alaska Department of Education and Early                                                                         
Development, FY 2015 Department Overview" (copy on file).                                                                       
                                                                                                                                
     Mission:   To    ensure   quality    standards-   based                                                                    
     instruction  to improve  academic  achievement for  all                                                                    
     students.                                                                                                                  
                                                                                                                                
     Core Services:                                                                                                             
                                                                                                                                
     1.   Public  School   Funding  -   Ensure  funding   is                                                                    
     appropriately  distributed   to  recipients   based  on                                                                    
     legislative appropriations and by Statute.                                                                                 
                                                                                                                                
     2.  Fiscal Accountability,  Compliance and  Oversight -                                                                    
     Ensure  the  department   effectively  and  efficiently                                                                    
     manages state, federal and other funds.                                                                                    
                                                                                                                                
     3. School Effectiveness Programs  - Assist districts by                                                                    
     providing  programs,  technical  on-site  and  distance                                                                    
    delivery support, and early intervention services.                                                                          
                                                                                                                                
     4.  Active Partnerships  -  Provide opportunities  for,                                                                    
     and  collaborate with  government  entities, and  other                                                                    
     public and private organizations.                                                                                          
                                                                                                                                
Commissioner Hanley looked at slide  3, "DEED Budget by Core                                                                    
Services." He stated 80 percent  of the budget went directly                                                                    
to  school districts,  was largely  formula driven,  and was                                                                    
the  location  of  the base  student  allocation  (BSA).  He                                                                    
announced that 14 percent of  the budget was used for fiscal                                                                    
accountability, compliance, and oversight.  He shared that 4                                                                    
percent of the budget  was intended for active partnerships.                                                                    
He stated that  2 percent of the budget was  used for school                                                                    
effectiveness programs.                                                                                                         
                                                                                                                                
Commissioner  Hanley  discussed   slide  4,  "Department  of                                                                    
Education and  Early Development  Measures and  Results." He                                                                    
remarked that  DEED used the Alaska  Performance Scholarship                                                                    
(APS) to  measure results. He  stated that there  were three                                                                    
cohorts  of  students  who had  access  to  the  Performance                                                                    
Scholarship.  He  remarked that  in  2011,  28.8 percent  of                                                                    
students  eligible for  the APS;  in 2012,  27.2 percent  of                                                                    
students  were  eligible for  the  APS;  and in  2013,  31.6                                                                    
percent of students were eligible for the APS.                                                                                  
                                                                                                                                
1:42:48 PM                                                                                                                    
                                                                                                                                
Commissioner  Hanley  highlighted  slide 5,  "Department  of                                                                    
Education and  Early Development Measures and  Results." The                                                                    
chart represented the four year  graduation rates, which was                                                                    
how  Alaska compared  itself to  other  states. He  remarked                                                                    
that there was a common  formula for how the graduation rate                                                                    
was determined.  He noted that  the last two years  showed a                                                                    
two percent increase, and it was  the goal of DEED to hit 90                                                                    
percent  by 2020.  Currently, the  graduation rate  was 71.6                                                                    
percent, so  with a  2 percent per  year increase,  the rate                                                                    
would be approximately 86 percent by 2020.                                                                                      
                                                                                                                                
Commissioner  Hanley  looked  at  slide  6,  "Department  of                                                                    
Education  and Early  Development FY  2015 Operating  Budget                                                                    
Governor's December 12  includes School Debt Reimbursement."                                                                    
The  slide contained  two sets  of  data in  both table  and                                                                    
graph form. The table broke  the budget into two components.                                                                    
The K-12  Formula Programs represented  $1.4 billion  of the                                                                    
total  $1.7  billion  DEED  budget.  The  Agency  Operations                                                                    
budget was $310  million, and he remarked  that $213 million                                                                    
of the $310 million were federal funds.                                                                                         
                                                                                                                                
Commissioner  Hanley  highlighted  slide 7,  "Department  of                                                                    
Education  and  Early  Development  Operating  Overview  All                                                                    
Funds."  The slide  addressed spending.  He  stated that  95                                                                    
percent  of  spending  was  from   grants  in  the  form  of                                                                    
foundation  formula, pupil  transportation, and  school debt                                                                    
reimbursement programs, and child  nutrition programs. The 3                                                                    
percent for  "Other Lines" were for  contractual obligations                                                                    
and  responsibilities, which  include travel  and assessment                                                                    
contracts. He  shared that 2  percent of the budget  was for                                                                    
personal services. He  noted that the bottom  left corner of                                                                    
the  slide  showed the  position  count:  332 full-time,  14                                                                    
part-time, and 17 non-permanent.                                                                                                
                                                                                                                                
Commissioner  Hanley  looked  at  slide  8,  "Department  of                                                                    
Education  and  Early  Development Agency  Operations."  The                                                                    
left graph  was the general  fund operating budget,  with 95                                                                    
percent directed at the K-12  formula programs and 5 percent                                                                    
for   agency   operations.   The  agency   operations   were                                                                    
categorized by fund  source on the right side  of the slide:                                                                    
68 percent  federal funds, 23  percent general funds,  and 9                                                                    
percent other funds.                                                                                                            
                                                                                                                                
1:47:18 PM                                                                                                                    
                                                                                                                                
Commissioner  Hanley  discussed   slide  9,  "Department  of                                                                    
Education and  Early Development  FY 2015  Governor's Budget                                                                    
Highlights."                                                                                                                    
                                                                                                                                
     Operating Budget                                                                                                           
                                                                                                                                
     K-12 Foundation Program:                                                                                                   
     $25,000.0 UGF for school district support outside the                                                                      
     formula to be distributed as additional state aid.                                                                         
     Funding  will   be  distributed  by  AADM   to  include                                                                    
     district cost factors.                                                                                                     
                                                                                                                                
     K-12 Support Boarding Home Grant Funding:                                                                                  
     $961.3 UGF  increase for four new  residential programs                                                                    
     that have been approved by the department.                                                                                 
                                                                                                                                
     Alaska Higher Education Investment Fund:                                                                                   
     AlaskAdvantage Education Grants - $1,500.0 DGF                                                                             
     Alaska Performance Scholarship Awards - $3,000.0 DGF                                                                       
                                                                                                                                
     K-12 Education Formula Funding:                                                                                            
     Forward  funding of  the Foundation  Program and  Pupil                                                                    
     Transportation   to  be   deposited  into   the  Public                                                                    
     Education Fund.                                                                                                            
                                                                                                                                
Commissioner Hanley looked at slide 10, "Department of                                                                          
Education and Early Development FY 2015 Governor's Budget                                                                       
Highlights."                                                                                                                    
                                                                                                                                
     Operating Budget                                                                                                           
                                                                                                                                
     Pre-Kindergarten Grant Funding:                                                                                            
     $2,000.0  UGF   restores  the   Pre-Kindergarten  Grant                                                                    
     program  to  the  $2,000.0 one-time  funding  level  of                                                                    
     FY2014.                                                                                                                    
                                                                                                                                
     Student and School Achievement:                                                                                            
     $100.0  MHTAAR  (Other)  for the  Mental  Health  Trust                                                                    
     Authority Grant  for Alaska  Autism Resource  Center to                                                                    
     maintain current funding levels.                                                                                           
                                                                                                                                
     Alaska Challenge Youth Academy:                                                                                            
     Decrease of $4,791.4  UGF for a transfer  out of DEED's                                                                    
     budget  and  to  be  directly  appropriated  to  DMVA's                                                                    
     Alaska Military Youth Academy allocation.                                                                                  
                                                                                                                                
     Agency Operations Efficiency Reductions:                                                                                   
     Decrease of $646.4 UGF/Federal.                                                                                            
                                                                                                                                
Commissioner Hanley displayed slide 11, "Department of                                                                          
Education and Early Development 10-year Plan Highlights."                                                                       
                                                                                                                                
     Operating Budget                                                                                                           
                                                                                                                                
     -The Department  of Education  & Early  Development has                                                                    
     incorporated  all  FY2015 Governor's  budgeted  changes                                                                    
     into the 10-year plan.                                                                                                     
                                                                                                                                
     -The  10-year  plan  does  not  include  any  potential                                                                    
     statutory changes or associated fiscal notes.                                                                              
                                                                                                                                
     -In  FY2015-FY2024,  the  Foundation  Formula  projects                                                                    
     sustained  funding  including   $25,000.0  outside  the                                                                    
     formula as targeted funding.                                                                                               
                                                                                                                                
     -Operating  cost  increases  include  annual  inflation                                                                    
     adjustments for contractual obligations.                                                                                   
                                                                                                                                
     -Start-up  operating  and  maintenance  costs  for  the                                                                    
     State  Libraries, Archives  and  Museums facility,  the                                                                    
     Sheldon-Jackson Stratton  Library, and the  future MEHS                                                                    
     aquatics facility.                                                                                                         
                                                                                                                                
1:52:53 PM                                                                                                                    
                                                                                                                                
Commissioner Hanley looked at slide 12, "Department of                                                                          
Education and Early Development 10-year Plan Highlights."                                                                       
                                                                                                                                
     Capital Projects                                                                                                           
                                                                                                                                
     -School  district new  facility Construction  estimates                                                                    
     $50,000.0  annually and  includes  projects to  satisfy                                                                    
     the Kasayulie  v. State  consent decree  and settlement                                                                    
     agreement.                                                                                                                 
                                                                                                                                
     -School  district facility  Major Maintenance  projects                                                                    
     estimates $50,000.0 annually.                                                                                              
                                                                                                                                
     -Deferred  maintenance  for   MEHS  appropriations  are                                                                    
     included  which follow  the  current Governor's  5-year                                                                    
     deferred maintenance initiative.                                                                                           
                                                                                                                                
     -Funding  for  the   Sheldon-Jackson  Stratton  Library                                                                    
     renovation and  full funding  for the  State Libraries,                                                                    
     Archives and  Museums facility are included  in the 10-                                                                    
     year projection.                                                                                                           
                                                                                                                                
Commissioner Hanley highlighted slide 13, "Department of                                                                        
Education and Early Development Continued Budget Growth                                                                         
Compared to 10-Year Plan." The slide represented the non-                                                                       
formula general funds (GF) only. He stated that the dotted                                                                      
line was  a projection  of 2006  to 2015,  and extrapolating                                                                    
beyond with  an 8.1 percent  growth. He noted that  the line                                                                    
steepness  from  years 2010  and  2013  was related  to  the                                                                    
inclusion  of APS,  Alaska  Native  Science and  Engineering                                                                    
Program  (ANSEP),   early  learning  programs,   and  school                                                                    
performance incentive programs.                                                                                                 
                                                                                                                                
Commissioner  Hanley  spoke  to  slide  14,  "Department  of                                                                    
Education  and  Early  Development Continued  Budget  Growth                                                                    
Compared to  10-year Plan." The  graph looked at  all funds.                                                                    
He stated that  the 5 percent for agency  operations did not                                                                    
have an  impact on the  displayed trajectory. The  graph did                                                                    
not  include  a BSA  increase.  If  the graph  included  the                                                                    
governor's  proposed BSA  increase,  the  trajectory of  the                                                                    
black  dotted  line on  the  graph  would increase  by  very                                                                    
little. He  stressed that the  $49 million in the  BSA would                                                                    
have very little impact.                                                                                                        
                                                                                                                                
1:58:16 PM                                                                                                                    
                                                                                                                                
Commissioner  Hanley highlighted  slide  15, "Education  and                                                                    
Early Development Budget Compared  to All Agencies Budgets."                                                                    
The bars  on the graph  showed the total  agency non-formula                                                                    
GF budget,  and the  numbers included programs  like Parents                                                                    
as  Teachers, Best  Beginnings,  theme-based education,  the                                                                    
Alaska Advantage  Grant, and the  APS. He remarked  that the                                                                    
DEED  agency  budget  represented  only  2  percent  of  the                                                                    
state's agencies budget.                                                                                                        
                                                                                                                                
                                                                                                                                
Commissioner Hanley  discussed slide  16, "DEED  Formula and                                                                    
Non-Formula Funding."                                                                                                           
                                                                                                                                
     The  department's  total  GF   budget  grew  over  $410                                                                    
     million  (45   percent)  between  FY06  and   the  FY15                                                                    
     Governor's Request - an average  annual growth rate for                                                                    
     that period of 8.1 percent.                                                                                                
                                                                                                                                
     The department's total FY15 GF budget request for DEED                                                                     
     formula and non-formula programs equals $3,973 per                                                                         
     resident worker.                                                                                                           
                                                                                                                                
Co-Chair Austerman  asked for a description  of the "Aquatic                                                                    
Facility." Commissioner  Hanley replied that there  was a 50                                                                    
meter swimming pool  at Mt. Edgecumbe, which was  in need of                                                                    
an upgrade.                                                                                                                     
                                                                                                                                
Co-Chair Austerman looked at slide  4, and expressed concern                                                                    
regarding the  70 percent that  were not represented  in the                                                                    
APS  program.  He  felt  that there  should  be  an  overall                                                                    
holistic  view of  education for  all students,  rather than                                                                    
the  students  that  were  eligible  for  APS.  Commissioner                                                                    
Hanley  agreed  to  provide more  information,  including  a                                                                    
report that  outlined the components of  findings related to                                                                    
APS functionality.                                                                                                              
                                                                                                                                
2:02:08 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  queried  the optimistic  projections  for                                                                    
graduation rates. Commissioner Hanley  replied that he hoped                                                                    
to continue  to see  2 percent growth.  He remarked  that it                                                                    
was  important  to  work with  the  marginal  students,  but                                                                    
agreed that there was a  point where the effort might become                                                                    
futile.                                                                                                                         
                                                                                                                                
Co-Chair Stoltze  shared a story  about someone  who dropped                                                                    
out of  school to start a  business. He would like  to see a                                                                    
cost  comparison between  a public  school student,  charter                                                                    
school  student, home  school  student,  and private  school                                                                    
student. He  felt that  the anecdotes  might be  more useful                                                                    
than  the facts,  because  he already  knows  the facts.  He                                                                    
would  also   like  to  examine  the   cost  of  retirement.                                                                    
Commissioner Hanley agreed to provide that information.                                                                         
                                                                                                                                
2:09:33 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman  looked  at   the  number  of  vocational                                                                    
programs  available,  and  remarked  that  approximately  60                                                                    
percent   was   not    focused   on   vocational   training.                                                                    
Commissioner Hanley  responded that the  vocational training                                                                    
was not  a separate budgetary  component, but was part  of a                                                                    
grant. He stated  that the largest focus of DEED  was to set                                                                    
up  the   residential  schools  that  could   focus  on  the                                                                    
technical and vocational courses.                                                                                               
                                                                                                                                
Vice-Chair  Neuman stated  that  math was  one  of the  most                                                                    
difficult school subjects.  He wondered if there  was a plan                                                                    
to add  more math  classes. Commissioner Hanley  agreed, but                                                                    
stated  that those  decisions were  most often  made at  the                                                                    
local level.                                                                                                                    
                                                                                                                                
Representative  Gara expressed  concern  about staff  losses                                                                    
across  the state.  He wondered  if DEED  had calculated  an                                                                    
estimate  base student  allocation  (BSA)  adjustment in  an                                                                    
attempt  to  avoid  future  budget  decreases.  Commissioner                                                                    
Hanley replied  that an estimate  was offered two  years ago                                                                    
through the  superintendent's organization,  but he  had not                                                                    
calculated another recently. He stated  that he did not have                                                                    
current estimates.                                                                                                              
                                                                                                                                
2:15:36 PM                                                                                                                    
                                                                                                                                
Co-Chair Austerman  noted that  the governor's  bill pointed                                                                    
to  a  BSA  estimate.  He  wondered  how  the  estimate  was                                                                    
determined   without  current   data.  Commissioner   Hanley                                                                    
replied  that  the governor  took  the  initiative to  focus                                                                    
targeted  funds  for  targeted outcomes.  The  governor  was                                                                    
willing  to estimate  a  one and  one-half  increase of  the                                                                    
current BSA. The governor recognized  the increase as modest                                                                    
with Alaska's fiscal climate.                                                                                                   
                                                                                                                                
Representative  Gara  stressed  that   he  would  like  more                                                                    
information  from DEED  regarding  its needs.  He felt  that                                                                    
reducing the  number of  teachers and staff  did not  have a                                                                    
positive   impact  on   education.   He   stated  that   the                                                                    
legislature  had  conducted  some   surveys  and  agreed  to                                                                    
provide legislative  research report, but he  felt that DEED                                                                    
should  provide   better  information   in  order   for  the                                                                    
legislature  to make  an informed  decision. The  governor's                                                                    
proposed $80 increase  to the BSA would result  in even more                                                                    
teacher  lay-offs in  Anchorage. Commissioner  Hanley stated                                                                    
that the governor  had proposed an increase to  the BSA that                                                                    
would hopefully  reduce the number of  lay-offs of education                                                                    
staff in Alaska.                                                                                                                
                                                                                                                                
Representative  Gara  wondered  if  the  governor  would  be                                                                    
willing to have  a discussion that could  stem the continual                                                                    
layoffs  in public  education.  Commissioner Hanley  replied                                                                    
that he believed  the governor would focus on  that, and was                                                                    
interested in having more conversations.                                                                                        
                                                                                                                                
2:20:52 PM                                                                                                                    
                                                                                                                                
Representative  Munoz  wondered  if DEED  had  analyzed  the                                                                    
impact   of  the   one-time  funding.   Commissioner  Hanley                                                                    
responded that there were  several districts that recognized                                                                    
that  it  was  one-time  funding and  incorporated  it  into                                                                    
infrastructure.   He  stated   that  it   would  require   a                                                                    
conversation with every district to  see that it was used as                                                                    
intended. He  felt that the  answer would be  different from                                                                    
every district.                                                                                                                 
                                                                                                                                
Representative  Munoz felt  that there  could be  more money                                                                    
for education.  She wanted to  know why some  districts were                                                                    
struggling more  than others across the  state. Commissioner                                                                    
Hanley   replied   that    some   districts   operate   very                                                                    
efficiently, but others did not.                                                                                                
                                                                                                                                
Representative Guttenberg  looked at  slide 3,  and wondered                                                                    
what was used  as a benchmark for  the fiscal accountability                                                                    
and  school  effectiveness   programs.  Commissioner  Hanley                                                                    
replied  that the  school  effectiveness  programs had  data                                                                    
regarding  institutes,  participation, mentoring,  coaching,                                                                    
and  state system  of  support.  The fiscal  accountability,                                                                    
accounting,  and  oversight  portion was  based  around  the                                                                    
responsibility of  monitoring the use  of the funds  to meet                                                                    
both  state  and  federal guidelines.    The  component  had                                                                    
audits and  reports to ensure accountability  for both state                                                                    
and federal funds.                                                                                                              
                                                                                                                                
2:25:56 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg  wondered  if there  would  be  a                                                                    
change   in  accountability   when   the  funding   changed.                                                                    
Commissioner Hanley  replied that DEED  did not have  a tool                                                                    
to measure local effectiveness at  a school level. He stated                                                                    
that there  were local  measures, but DEED  was not  able to                                                                    
reflect  the   impact  of  one   less  teacher   on  student                                                                    
effectiveness directly.                                                                                                         
                                                                                                                                
Representative   Guttenberg  felt   that   an  analysis   of                                                                    
graduation rates correlating with  teacher lay-offs would be                                                                    
beneficial  to the  legislature. Commissioner  Hanley stated                                                                    
that there  were standard  based assessments  and graduation                                                                    
rate assessments  that DEED conducted. He  agreed to provide                                                                    
that  information.  He  stressed that  determining  a  cause                                                                    
based on those assessments was challenging.                                                                                     
                                                                                                                                
Representative Guttenberg  felt that the positive  effect of                                                                    
vocational training needed to translate across the state.                                                                       
                                                                                                                                
Representative  Wilson  stressed  that  the  discussion  was                                                                    
about local control, and pointed  out that there should be a                                                                    
determination  of how  much DEED  should intervene  in local                                                                    
schools.                                                                                                                        
                                                                                                                                
2:30:29 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:32:22 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^FY 15  GOVERNOR'S BUDGET OVERVIEW: DEPARTMENT  OF COMMERCE,                                                                  
COMMUNITY AND ECONOMIC DEVELOPMENT                                                                                            
                                                                                                                                
2:32:34 PM                                                                                                                    
                                                                                                                                
SUSAN  K.   BELL,  COMMISSIONER,  DEPARTMENT   OF  COMMERCE,                                                                    
COMMUNITY   AND   ECONOMIC    DEVELOPMENT,   delivered   her                                                                    
PowerPoint    presentation:    "House   Finance    Committee                                                                    
Department  Overview." She  stated  that  many changes  were                                                                    
made during  her four years  with the department.  She noted                                                                    
that marketing and infrastructure development was thriving.                                                                     
                                                                                                                                
Commissioner   Bell   began   with  slide   2,   "Department                                                                    
Organization."  She noted  that the  six corporate  agencies                                                                    
had  a board  or commission  that directed  their work.  She                                                                    
stated that the six agencies within the department.                                                                             
                                                                                                                                
Commissioner Bell  continued with  slide 3,  "Core Services;                                                                    
FY 2015  Budget." She described  the pie chart  and detailed                                                                    
the agencies that added to the department's budget.                                                                             
                                                                                                                                
2:36:53 PM                                                                                                                    
                                                                                                                                
Commissioner Bell discussed slide 4, "Economic Growth."                                                                         
                                                                                                                                
     Division of Economic Development                                                                                           
          -Tourism   marketing  and   new  air   connections                                                                    
          contributed  to third  consecutive year  of growth                                                                    
          (1.84 million visitors)                                                                                               
          -Promoted new Icelandair flights  to Alaska in the                                                                    
          UK, France, Sweden,  Denmark, the Netherlands, and                                                                    
          Germany and  brought Top  Chef program  to Alaska,                                                                    
          reaching 2.6 million viewers.                                                                                         
          -Presented Opportunity  Alaska seminar  at Toronto                                                                    
          mineral  industry conference;  exposure to  39,600                                                                    
          attendees with 325 follow up contacts                                                                                 
          -Promoted manufacturing sector  and made in Alaska                                                                    
          products at U.S.  Manufacturing Summit by National                                                                    
          Retail Federation and Walmart                                                                                         
          -24 film production approved  for tax credit based                                                                    
          on $40 million spend                                                                                                  
          -283  loans  for  $28.5 million  to  Alaska  owned                                                                    
          businesses throughout the state                                                                                       
          -Extensive  outreach to  rural and  coastal Alaska                                                                    
          regions to promote utilization of loan programs                                                                       
                                                                                                                                
2:41:56 PM                                                                                                                    
                                                                                                                                
Commissioner Bell continued with slide 5, "Economic                                                                             
Growth."                                                                                                                        
                                                                                                                                
    Alaska Industrial Development and Export Authority                                                                          
          -Net asset value over $1.1 billion (June 2013)                                                                        
          -$20.7 million dividend to the state in FY2014                                                                        
          -Created and  retained more than  297 construction                                                                    
          jobs and 893 permanent jobs                                                                                           
          -Completed 10  loan participations  totaling $11.5                                                                    
          million                                                                                                               
          -Completed  the first  phase  of  the Mustang  oil                                                                    
          development project on the North Slope                                                                                
          -Completed  the  $77   million  expansion  of  the                                                                    
          Ketchikan shipyard                                                                                                    
          -Developing    the   Interior    Energy   Project,                                                                    
          including  an  LNG  liquefaction facility  on  the                                                                    
          North Slope                                                                                                           
                                                                                                                                
Commissioner Bell looked at slide 6, "Economic Growth."                                                                         
                                                                                                                                
     Alaska Seafood Marketing Institute                                                                                         
                                                                                                                                
          -Export  value  up  nearly   85  percent  to  $3.2                                                                    
          billion in ten years                                                                                                  
          -Maintained  Alaska seafood  brand  as the  second                                                                    
          most commonly specified on U.S. menus                                                                                 
          -Conducted  trade  missions, media  outreach,  and                                                                    
          chef tours  to Alaska from Brazil,  Germany, Japan                                                                    
          and China                                                                                                             
          -Conducted  national   promotions  in   more  than                                                                    
          11,000    restaurants,    participated    in    17                                                                    
          foodservice  distributor promotions,  and attended                                                                    
          19 foodservice trade shows                                                                                            
          -Expanded  collaboration  with  tourism  marketing                                                                    
          program,  Alaska Grown,  and  Nutritious Foods  in                                                                    
          Schools grants                                                                                                        
                                                                                                                                
Commissioner Bell highlighted slide 7, "Sustainable                                                                             
Energy."                                                                                                                        
                                                                                                                                
     Alaska Energy Authority                                                                                                    
                                                                                                                                
          -Renewable Energy Fund  invested $227.5 million in                                                                    
          251 projects (Rounds I-VI; Round VII underway)                                                                        
          -Disbursed $40.4 million in  PCE grant payments in                                                                    
          FY 2013                                                                                                               
          -Rural   power   system   upgrades  (53   of   114                                                                    
          completed)                                                                                                            
          -New  Emerging  Energy   Technology  Fund  program                                                                    
          evaluated 70  proposals, 16 projects funded  in FY                                                                    
          2013 (Round II selection underway)                                                                                    
          -Awarded seven  village energy  efficiency program                                                                    
          grants totaling $1.38 million                                                                                         
          -Continued  progress towards  regulatory work  for                                                                    
          Susitna-Watana Hydro project,  conducting 58 field                                                                    
          studies in 2013                                                                                                       
                                                                                                                                
2:49:18 PM                                                                                                                    
                                                                                                                                
Commissioner Bell highlighted slide 8, "Sustainable                                                                             
Energy."                                                                                                                        
                                                                                                                                
     Alaska Gasline Development Corporation                                                                                     
                                                                                                                                
          -Advanced  pipeline   and  facilities   front  end                                                                    
          engineering   and  design   for  class   III  cost                                                                    
          estimates                                                                                                             
          -Conducted    extensive    field    program    for                                                                    
          geotechnical,  wetlands,   and  cultural  resource                                                                    
          data                                                                                                                  
          -Engaged USDOT's Pipeline  and Hazardous Materials                                                                    
          and  Safety   Administration  on   needed  special                                                                    
          permits                                                                                                               
          -Selected open season management contractor                                                                           
          -Incorporated  new  organizational structure  into                                                                    
          business and project execution plans                                                                                  
                                                                                                                                
Commissioner Bell discussed slide 9, "Strong Communities."                                                                      
                                                                                                                                
     Community and Regional Affairs                                                                                             
                                                                                                                                
          -RUBA  assisted   198  communities,   trained  216                                                                    
          utility managers                                                                                                      
          -$1.8 billion distributed  through 2,341 state and                                                                    
          federal grants                                                                                                        
          -Over  $112  million   distributed  for  community                                                                    
          revenue  sharing,  PILT, NFR,  fisheries  business                                                                    
          tax, fisheries landing tax                                                                                            
          -Bulk  fuel  loans  totaling $7.4  million  to  65                                                                    
          communities                                                                                                           
          -Fuel  Watch  Initiative  made 586  calls  to  309                                                                    
          communities    verifying     adequate    financial                                                                    
          resources and actions for winter fuel                                                                                 
          -Preparing digital  community profile maps  for 19                                                                    
          communities  in North  Slope and  Northwest Arctic                                                                    
          Boroughs                                                                                                              
          -Completed  full   value  determinations   for  36                                                                    
          municipal governments  (18 boroughs and  18 cities                                                                    
          in unorganized boroughs)                                                                                              
                                                                                                                                
2:54:10 PM                                                                                                                    
                                                                                                                                
Commissioner   Bell   highlighted    slide   10,   "Consumer                                                                    
Protection."                                                                                                                    
                                                                                                                                
     Banking and Securities                                                                                                     
                                                                                                                                
          -Conducted examinations of  40 depository and non-                                                                    
          depository institutions                                                                                               
          -Issued   new  licenses   to  2   premium  finance                                                                    
          companies,   1   payday   lender,   151   mortgage                                                                    
          broker/lenders, and 60 money services businesses                                                                      
          -Issued license renewals to  14 payday lenders, 28                                                                    
          premium finance  companies, 1 small  loan company,                                                                    
          1  business   industrial  development  corporation                                                                    
          (BIDCO)                                                                                                               
          -Collected   over  $12.9   million  in   fees  and                                                                    
          assessments                                                                                                           
                                                                                                                                
     Corporations, Business and Professional Licensing                                                                          
                                                                                                                                
          -Renewed 35,269 business  licenses (67,074 active)                                                                    
          and 28,697 professional  licenses (66,894 active),                                                                    
          a 3 percent increase from FY 2012                                                                                     
          -Newly   framed/registered    corporations   total                                                                    
         6,329, a 6 percent increase over FY 2012                                                                               
          -Corporate  entities  in good  standing  increased                                                                    
          from 60 to 91 percent  due to courtesy notices and                                                                    
          a new IT system                                                                                                       
          -Quarterly  financial   reports  for  professional                                                                    
          licensing  programs now  available on  website for                                                                    
          licensees, stakeholders, and the public                                                                               
                                                                                                                                
Commissioner   Bell   looked    at   slide   11,   "Consumer                                                                    
Protection."                                                                                                                    
                                                                                                                                
     Insurance                                                                                                                  
                                                                                                                                
          -Issued  or renewed  29,008  licenses, 95  percent                                                                    
          submitted     electronically    (45,316     active                                                                    
          licensees)                                                                                                            
          -Registered 16 purchasing  groups; admitted 15 new                                                                    
          insurance companies,  four surplus  line insurers,                                                                    
          and seven risk retention groups                                                                                       
          -Opened 54 and  closed 77 criminal investigations;                                                                    
          investigated   238   consumer   complaints,   took                                                                    
          actions resulting in $194,648 to consumers                                                                            
          -Collected   $65.8  million   in  premium   taxes,                                                                    
          penalties and fees in FY 2013                                                                                         
                                                                                                                                
Commissioner    Bell   discussed    slide   12,    "Consumer                                                                    
Protection."                                                                                                                    
                                                                                                                                
     Alcoholic Beverage Control Board                                                                                           
                                                                                                                                
          -Licensees  achieved  89 percent  compliance  with                                                                    
          underage   related  laws,   continuing  a   steady                                                                    
          increase for the fourth year                                                                                          
          -Twenty two package stores,  an increase of seven,                                                                    
          are  qualified  to  provide  written  orders  from                                                                    
          rural local option communities                                                                                        
                                                                                                                                
     Regulatory Commission of Alaska                                                                                            
                                                                                                                                
          -Revised telecommunication  regulations to promote                                                                    
          greater  regional   competition  in   response  to                                                                    
          changes in intrastate long distance market                                                                            
          -Discovery  regulations  designed to  improve  the                                                                    
          process  and   provide  increased   efficiency  in                                                                    
          contested cases                                                                                                       
          -Approved  application  from Hilcorp  Alaska,  LLC                                                                    
          for  acquisition of  natural  gas  assets in  Cook                                                                    
          Inlet                                                                                                                 
                                                                                                                                
Commissioner Bell looked at slide 13, "Challenges."                                                                             
                                                                                                                                
     -High cost of energy impacts residents, businesses and                                                                     
     economic development efforts                                                                                               
     -Gaps in critical infrastructure including roads,                                                                          
     ports, communications, and processing facilities                                                                           
     -Uncertainty hampering private investment                                                                                  
     -Federal regulatory and permitting delays and denials                                                                      
     -Maintain awareness in national and international                                                                          
     markets about Alaska products and services                                                                                 
     -Geographic scale impacts logistics and transportation                                                                     
     costs                                                                                                                      
                                                                                                                                
2:59:30 PM                                                                                                                    
                                                                                                                                
JEANNE MUNGLE, ADMINISTRATIVE  SERVICES DIRECTOR, DEPARTMENT                                                                    
OF   COMMERCE,    COMMUNITY   AND    ECONOMIC   DEVELOPMENT,                                                                    
highlighted slide  14, "Budget  by Fund Source."  She stated                                                                    
that  the slide  was  a reflection  of  the budget  decrease                                                                    
between FY 14 and FY 15.  She looked at the UGF portion, and                                                                    
remarked that  the graph reflected  a $7.2  million reversal                                                                    
from  UGF, as  a result  of power  cost equalization  (PCE).                                                                    
There was  an increase in  the DGF line  as a result  of the                                                                    
PCE, so it  was basically an endowment  fund funding change.                                                                    
The  other   funds  decreased  as   a  result   of  unneeded                                                                    
interagency   receipt    authority.   The    federal   funds                                                                    
experienced a very small reduction  as a result of ERA funds                                                                    
and other federal funds that were no longer available.                                                                          
                                                                                                                                
Ms.  Mungle explained  slide 15,  "Budget by  Line Item,  FY                                                                    
2014 to FY 2015." She  stated that the chart represented the                                                                    
budget  by  line  item.  She  remarked  that  there  was  an                                                                    
increase in personal services due  to salary and health care                                                                    
increases. The  travel portion  showed a  decrease due  to a                                                                    
one-time increment  for the military training  credit fiscal                                                                    
note. The services decreased by  $5,382 and commodities also                                                                    
experienced   a  decrease.   The  capital   outlay  remained                                                                    
stagnant, and  the grants and benefits  experienced a slight                                                                    
increase.                                                                                                                       
                                                                                                                                
Ms.  Mungle  addressed   slide  16,  "Performance  Measures,                                                                    
Economic Growth."                                                                                                               
                                                                                                                                
     Target: Create, or retain, 500 permanent jobs annually                                                                     
     through the Project Development and Commercial                                                                             
     Finance programs                                                                                                           
                                                                                                                                
Ms. Mungle looked at slide 17, "Performance Measures."                                                                          
                                                                                                                                
     Target: 100 percent of municipal governments provide                                                                       
     essential public services                                                                                                  
                                                                                                                                
Ms.  Mungle  discussed  slide  18,  "LFD:  Share  of  Agency                                                                    
Operations (GF Only)."                                                                                                          
                                                                                                                                
     The  department's  GF  budget  grew  by  $72.1  million                                                                    
     between FY  06 and  FY 15. The  total percentage  of GF                                                                    
     growth from  FY 06 to  FY 15 Governor's Request  is 109                                                                    
     percent.  The  department's   total  FY  15  Governor's                                                                    
    Request GF budget equals $417 per resident worker.                                                                          
                                                                                                                                
Ms. Mungle looked at slide 19, "LFD: Funding Sources."                                                                          
                                                                                                                                
     The percentage of general funds (UGF and DGF) in the                                                                       
     department's budget was 57 percent in FY 06 and is 67                                                                      
     percent in FY 15 Governor's Request.                                                                                       
                                                                                                                                
Commissioner Bell  explained slide  21, "LFD:  Ten-Year Plan                                                                    
(All Funds)."  She stated that  the slide showed  what would                                                                    
happen  over  the  decade,  if there  was  a  continued  8.5                                                                    
percent growth.  The department had  been very  dynamic with                                                                    
the additions of new divisions  and changes in PCE fund. She                                                                    
remarked that there  had been spikes due to  the addition of                                                                    
legislative finances.  She explained  that the  green dotted                                                                    
line  showed  what would  occur  at  a  growth rate  of  8.5                                                                    
percent.                                                                                                                        
                                                                                                                                
Co-Chair  Austerman remarked  that he  would like  to see  a                                                                    
plan  to increase  economic development  in Alaska.  He felt                                                                    
that the  administration should make economic  development a                                                                    
priority; otherwise the legislature  would form a commission                                                                    
to examine  economic development. He felt  that there needed                                                                    
to  be a  new  economic  base to  carry  the state  forward.                                                                    
Commissioner  Bell  responded   that  DCCED  takes  economic                                                                    
development very  seriously. She looked specifically  at the                                                                    
diversifying  of economic  development projects.  She stated                                                                    
that  there were  a number  of  responsibilities related  to                                                                    
economic development  and stressed that DEED  would continue                                                                    
to  discuss  that  DCCED   took  economic  development  very                                                                    
seriously.                                                                                                                      
                                                                                                                                
Co-Chair Austerman  felt that DCCED  was doing its  job, and                                                                    
felt that there was a step that needed to be taken.                                                                             
                                                                                                                                
3:07:41 PM                                                                                                                    
                                                                                                                                
Co-Chair  Austerman looked  at slide  4, and  wondered where                                                                    
there was  a mention of  commercial fisheries. He  looked at                                                                    
page 29  and 30 of  the "Alaska North to  Opportunity" (copy                                                                    
on file). He pointed out that  there was a focus on tourism.                                                                    
He stated  that fisheries was  the number three  industry in                                                                    
Alaska, and  felt that it needed  to have an equal  focus as                                                                    
tourism.  Commissioner Bell  agreed that  there should  be a                                                                    
focus on fisheries,  and shared that there  would many areas                                                                    
in which DCCED enhanced the fishing industry.                                                                                   
                                                                                                                                
Co-Chair  Austerman noted  that ASMI  was a  board that  was                                                                    
outside of  DCCED's prevue. He  remarked that the  effort of                                                                    
the  DCCED was  what he  was  concerned with,  not just  the                                                                    
participation of DCCED on  ASMI. Commissioner Bell responded                                                                    
that  ASMI had  a  focus  on the  economic  value of  Alaska                                                                    
seafood  and  understanding  that 64,000  were  directly  or                                                                    
indirectly employed  in the  seafood industry.  She remarked                                                                    
that DCCED considered the  seafood industry Alaska's largest                                                                    
private sector employer.                                                                                                        
                                                                                                                                
Co-Chair Austerman disagreed and  did not see that reflected                                                                    
in economic development.                                                                                                        
                                                                                                                                
3:16:40 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  echoed the  concerns.  He  looked at  the                                                                    
Alcoholic Beverage Control (ABC)  Board. He wondered why the                                                                    
ABC Board was not focused  on growing and enhancing the food                                                                    
and beverage  industry. He stressed  that there should  be a                                                                    
discussion regarding  streamlining and whether or  not there                                                                    
were  licensing  issues with  individuals  in  the food  and                                                                    
beverage industry. He  remarked that the effort  to move the                                                                    
ABC Board  from Department of  Public Safety (DPS)  to DCCED                                                                    
was good policy, but bad politics.                                                                                              
                                                                                                                                
3:23:32 PM                                                                                                                    
                                                                                                                                
In   response  to   a   question   from  Co-Chair   Stoltze,                                                                    
Commissioner Bell  stated that DCCED was  accessible for any                                                                    
insurance questions.  She stated that the  Tourism Marketing                                                                    
Program was  in its third  year, and had $18.7  million with                                                                    
the  combination of  general funds  with receipt  authority.                                                                    
She  stated  that the  financial  and  staff resources  were                                                                    
reflective  in  the  activities.   She  understood  the  ABC                                                                    
Board's  focus on  commerce and  business,  and pointed  out                                                                    
that there should also be a  public safety aspect of the ABC                                                                    
Board.                                                                                                                          
                                                                                                                                
Co-Chair  Stoltze   announced  that  the   legislature  also                                                                    
intended the  ABC Board to  maintain a public  safety focus.                                                                    
Commissioner Bell agreed.                                                                                                       
                                                                                                                                
Co-Chair Stoltze  clarified some numbers.  Commissioner Bell                                                                    
stated that the insurance budget  request for FY 15 was $7.6                                                                    
million, so the balance went into the general fund.                                                                             
                                                                                                                                
Representative Guttenberg expressed  concern about broadband                                                                    
access  across the  state, and  asked for  efforts of  DCCED                                                                    
regarding accessibility. Commissioner  Bell replied that the                                                                    
Broadband Task Force  was working to address  the issue. She                                                                    
agreed  to provide  further information.  She remarked  that                                                                    
there was continued progress for broadband access.                                                                              
                                                                                                                                
                                                                                                                                
3:30:59 PM                                                                                                                    
                                                                                                                                
Representative  Costello remarked  that  innovation was  the                                                                    
key to growing  the economy. She wondered if it  was time to                                                                    
rethink the issue of jobs  versus bringing new industries to                                                                    
the state.  Commissioner Bell responded  that public-private                                                                    
partnerships were  essential to  growing the economy  of the                                                                    
state. She  stated that DCCED attended  various conferences,                                                                    
included  the  International Economic  Development  Council.                                                                    
She stressed that  DCCED was using its  resources and trying                                                                    
to stay in  line with the best  practices, share information                                                                    
during the interim, and converse with the private sector.                                                                       
                                                                                                                                
Co-Chair Austerman handed the gavel to Co-Chair Stoltze.                                                                        
                                                                                                                                
Vice-Chair  Neuman wondered  if  the ABC  Board  had made  a                                                                    
determination  regarding the  conflict of  owning a  brewery                                                                    
license and a restaurant  license. Commissioner Bell replied                                                                    
that  the  ABC  Board  was  working  to  keep  the  business                                                                    
operational, and agreed to provide more information.                                                                            
                                                                                                                                
3:37:34 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman  stressed  that sport  fishing  was  very                                                                    
important, and  pointed out that  there was a  recent crisis                                                                    
related to  the sport fishing  industry. He felt  that DCCED                                                                    
had not  helped to mitigate  that problem. He  stressed that                                                                    
there should be  a focus on sport  fishing marketing through                                                                    
tourism or ASMI. Commissioner Bell  replied that the tourism                                                                    
marketing  program  highlighted  sport  fishing  across  the                                                                    
state.                                                                                                                          
                                                                                                                                
HB  266  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HB 267 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
3:42:04 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:42 p.m.                                                                                          

Document Name Date/Time Subjects
FY15 DEED HFIN Budget Overview 2_5_2014.pdf HFIN 2/5/2014 1:30:00 PM
DEED Budget Overview HFIN
DCCED-HFC Overview 02 04 2014 FINAL PDF.pdf HFIN 2/5/2014 1:30:00 PM
DCCED Budget Overview HFIN
DCCED Department Overview publication.pdf HFIN 2/5/2014 1:30:00 PM
DCCED Overview
FY2014_Supplemental_Requests_2-3-14.pdf HFIN 2/5/2014 1:30:00 PM
HB 299
FY2014_Supplemental_Summary_2-3-14.pdf HFIN 2/5/2014 1:30:00 PM
HB 299
DCCED 2013-08-AK-Broadband-Task-Force-Report_A-Blueprint-for-Alaska's-Broadband-Future.pdf HFIN 2/5/2014 1:30:00 PM
DCCED Budget Overview Response HFIN