Legislature(2013 - 2014)HOUSE FINANCE 519

02/20/2014 01:30 PM FINANCE


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01:46:38 PM Start
01:47:19 PM HB265 || HB266 || HB299
01:47:19 PM Overview: Governor's Fy 15 Budget Amendments and Governor's Fy 14 Supplemental Budget Amendments
02:50:22 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
--Delayed to 1:45 p.m. Today--
+ Overview: Governor's FY15 Budget Amendments by TELECONFERENCED
Karen Rehfeld, Director, Office of Management &
Budget
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 20, 2014                                                                                          
                         1:46 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:46:38 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Austerman called the House Finance Committee                                                                           
meeting to order at 1:46 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 Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Tammie Wilson                                                                                                    
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Karen Rehfeld, Director, Office of Management and Budget,                                                                       
Office of the Governor; Chris Christensen III, Associate                                                                        
Vice President for State Relations, University of Alaska.                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 265    BUDGET: CAPITAL                                                                                                       
                                                                                                                                
          HB 265 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HB 266    APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 266 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
                                                                                                                                
HB 299    SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS                                                                             
                                                                                                                                
          HB 299 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
HOUSE BILL NO. 265                                                                                                            
                                                                                                                                
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations   and   other   appropriations;   making                                                                    
     appropriations to capitalize funds."                                                                                       
                                                                                                                                
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. 299                                                                                                            
                                                                                                                                
     "An  Act  making supplemental  appropriations,  capital                                                                    
     appropriations,  and   other  appropriations;  amending                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
Co-Chair Austerman discussed the meeting agenda.                                                                                
                                                                                                                                
1:47:19 PM                                                                                                                    
                                                                                                                                
^OVERVIEW:   GOVERNOR'S   FY   15  BUDGET   AMENDMENTS   and                                                                  
GOVERNOR'S FY 14 SUPPLEMENTAL BUDGET AMENDMENTS                                                                               
                                                                                                                                
1:47:19 PM                                                                                                                    
                                                                                                                                
KAREN REHFELD,  DIRECTOR, OFFICE  OF MANAGEMENT  AND BUDGET,                                                                    
OFFICE OF THE GOVERNOR,  relayed that the proposed amendment                                                                    
package was  small. She remarked that  the supplemental bill                                                                    
had been delivered to the  committee on the 15th legislative                                                                    
day  of the  current session.  She pointed  to line  2 of  a                                                                    
spreadsheet  titled "FY  2014  Supplemental Bill  Amendments                                                                    
Submitted February 18,  2014" (copy on file).  Line 2 listed                                                                    
an  appropriation of  $32.7 million  for the  Susitna-Watana                                                                    
Hydroelectric   Project;   the    appropriation   would   be                                                                    
contingent on  the Alaska  Energy Authority  (AEA) obtaining                                                                    
executed land  access permits needed to  continue with field                                                                    
studies and  other activities needed for  the Federal Energy                                                                    
Regulatory Commission (FERC)  licensing application process.                                                                    
The  funds were  in  addition  to an  FY  15 capital  budget                                                                    
request  of  $10  million.  Lines   3  and  4  included  two                                                                    
reappropriations  of  access  fuel-trigger  dollars  in  the                                                                    
current year budget. The request  on line 3 was $2.5 million                                                                    
and was specific to costs  related to the delayed return-to-                                                                    
service  of the  Tustumena; costs  included loss  of revenue                                                                    
and others  associated with the  Kennicott taking  over some                                                                    
of the  Tustumena trips. Line  4 included  a reappropriation                                                                    
of the  estimated remaining balance  in the fuel  trigger of                                                                    
$5 million  into the vessel replacement  fund. She discussed                                                                    
that the  legislature had put  $10 million into  the current                                                                    
fiscal year  budget for the  design of a  replacement vessel                                                                    
for the  Tustumena; construction funds for  the vessel would                                                                    
be needed in the future when the design was complete.                                                                           
                                                                                                                                
1:51:34 PM                                                                                                                    
                                                                                                                                
Representative  Gara believed  there  were varying  opinions                                                                    
about the Susitna-Watana  Hydroelectric Project. He remarked                                                                    
that  the  state had  spent  $170  million  to date  on  the                                                                    
project.  He   wondered  why  the   state  would   spend  an                                                                    
additional  $32  million when  it  was  looking at  a  large                                                                    
diameter  gasline  that  would provide  approximately  eight                                                                    
times more energy than it could use.                                                                                            
                                                                                                                                
Ms.  Rehfeld replied  that  the  Susitna-Watana project  had                                                                    
been very  important to the  Railbelt system and  would help                                                                    
the state  to meet its  renewable energy goal of  50 percent                                                                    
electrical generation  by 2025. The project  would provide a                                                                    
source  of inexpensive  hydro power  for the  entire region.                                                                    
She  stated  that  the  project was  not  exclusive  of  the                                                                    
gasline  project.  She  detailed   that  the  gasline  would                                                                    
provide gas for Alaskans as  a heat source and would provide                                                                    
a revenue stream for the state.                                                                                                 
                                                                                                                                
Representative  Gara   countered  that  the   gasline  would                                                                    
provide  more energy  than the  state  would need.  Co-Chair                                                                    
Austerman communicated  that he did  not want to  debate the                                                                    
importance of projects.                                                                                                         
                                                                                                                                
Representative Gara wondered why  it made sense during tight                                                                    
budgetary times  to spend $32  million at the same  time the                                                                    
state was working on an  alternative project. He referred to                                                                    
Ms.  Rehfeld's  testimony  that the  Susitna-Watana  project                                                                    
would produce inexpensive power;  he wondered if the project                                                                    
construction  cost  was  factored  in and  if  it  was  only                                                                    
inexpensive if the state paid for the project.                                                                                  
                                                                                                                                
Ms.  Rehfeld replied  that the  total financing  package for                                                                    
the  Susitna-Watana project  had  not  been determined.  She                                                                    
believed the  AEA could provide estimated  savings and power                                                                    
cost estimates.                                                                                                                 
                                                                                                                                
1:54:52 PM                                                                                                                    
                                                                                                                                
Co-Chair Austerman wondered if there  was money in the FY 15                                                                    
budget for  Susitna-Watana. Ms. Rehfeld replied  that the FY                                                                    
15  budget  included  $10  million   for  the  project.  She                                                                    
detailed  that  the governor's  office  had  not included  a                                                                    
larger request initially because  it was hoping the executed                                                                    
permits  would be  available  in order  to  bring forward  a                                                                    
dollar amount for the field  studies required in the current                                                                    
year. The reappropriation was  contingent on securing signed                                                                    
permits;  substantial  progress  had been  made  on  getting                                                                    
permits signed  and several landowners were  willing to sign                                                                    
the permits.                                                                                                                    
                                                                                                                                
Representative    Holmes   referred    to   $95.2    million                                                                    
appropriated  in FY  14 and  the $32.7  million supplemental                                                                    
request, which  combined totaled  $127.9 million for  FY 14.                                                                    
She  looked  at the  $10  million  request  for FY  15.  She                                                                    
wondered  if the  reappropriation was  a move  to put  FY 15                                                                    
funding into the  FY 14 supplemental. She  wondered when the                                                                    
money would actually  be used and why the FY  14 request was                                                                    
only $10 million.                                                                                                               
                                                                                                                                
Ms.  Rehfeld answered  that  there was  an  estimate in  the                                                                    
capital  project write-up  for the  cash flow  needs in  the                                                                    
remainder  of the  current fiscal  year through  FY 15.  The                                                                    
project  was contingent  upon the  permits;  there would  be                                                                    
approximately   $30  million   remaining  in   the  existing                                                                    
project, plus the $32.7 million,  and the $10 million in the                                                                    
FY  15  budget.  She  believed the  funds  would  allow  the                                                                    
project to get through FY  15. There would be one additional                                                                    
year of funding (if everything  remained on schedule) to get                                                                    
to the licensing application period.  There would be another                                                                    
fund installment  for engineering if the  application period                                                                    
was  successful.   She  appreciated   that  the   issue  was                                                                    
confusing and  hoped the backup  material would  clarify the                                                                    
cash flow and timing.                                                                                                           
                                                                                                                                
Representative  Holmes would  look at  the issue  further to                                                                    
determine whether it  was appropriate for the  funding to be                                                                    
in the supplemental or the amended FY 15 budget.                                                                                
                                                                                                                                
1:58:33 PM                                                                                                                    
                                                                                                                                
Representative  Edgmon   believed  the  question   asked  by                                                                    
Representative Holmes  was relevant. He believed  it was the                                                                    
legislature's job to scour the  budget like never before due                                                                    
to  tight  fiscal times.  He  did  not understand  what  the                                                                    
requested money would  do for the project that  was still in                                                                    
the feasibility/study  stage. He remarked that  the requests                                                                    
represented a tremendous  amount of money. He  referred to a                                                                    
Commonwealth North  luncheon from  the prior fall,  where an                                                                    
attendee had recommended using  a Simpson-Bowles approach to                                                                    
take a  look at  a list  of the  proposed large  projects to                                                                    
determine which ones  the state would fund.  He credited the                                                                    
governor for  putting $29  million into  the budget  for the                                                                    
Alaska Housing  Finance Corporation  weatherization program,                                                                    
but noted that the funds  would only get the program through                                                                    
half of  the year. He stressed  that weatherization provided                                                                    
immediate 30  to 40  percent savings  to every  household in                                                                    
addition  to  valuable  jobs  statewide.  He  believed  some                                                                    
people  fully   supported  the  project  while   others  had                                                                    
concerns. He  was interested in  more information  about the                                                                    
project  and the  considerable funds  designated  to it.  He                                                                    
asked  for  verification  that   there  would  be  no  other                                                                    
weatherization requests from the governor at present.                                                                           
                                                                                                                                
Ms.  Rehfeld replied  that AEA  had an  approved study  plan                                                                    
from FERC. She detailed that  there were a number of complex                                                                    
studies currently underway in  order to meet the application                                                                    
timelines. She shared that there  was a list of studies that                                                                    
AEA  could provide  to the  committee.  She appreciated  the                                                                    
conversation  because it  was necessary  in determining  the                                                                    
overall  spending  level   the  legislature  and  governor's                                                                    
office  were  comfortable  with  given  the  current  fiscal                                                                    
environment.  She had  spoken with  the housing  authorities                                                                    
and understood that they were  interested in doubling funds.                                                                    
Part of the  discussion with the committee  would pertain to                                                                    
priorities  it  would  like  included  in  the  budget.  She                                                                    
communicated that the governor's  office was working to keep                                                                    
the amendments and budget as  low as possible; the [Susitna-                                                                    
Watana] project  was a priority  that the  governor's office                                                                    
thought should  be continued if  the permits  were executed.                                                                    
She agreed that significant discussion was needed.                                                                              
                                                                                                                                
2:02:14 PM                                                                                                                    
                                                                                                                                
Representative   Edgmon    wanted   to   gain    a   further                                                                    
understanding of  the project and expenditures.  He believed                                                                    
$178 million had  been appropriated thus far.  He noted that                                                                    
more than $40 million would  be put towards the project that                                                                    
was  still  "on  the  drawing   board."  He  noted  that  an                                                                    
additional $32 million was requested.                                                                                           
                                                                                                                                
Co-Chair  Austerman  replied  that  the  conversation  would                                                                    
occur  when the  supplemental  budget  was brought  formally                                                                    
before the committee. He did  not want to debate one project                                                                    
against another during the current meeting.                                                                                     
                                                                                                                                
Representative  Guttenberg asked  if the  appropriated funds                                                                    
had been  designed to facilitate  permits to be  obtained by                                                                    
AEA. He  addressed that the requested  funds were contingent                                                                    
on the  permits. Ms. Rehfeld  believed all  involved parties                                                                    
were aware that  the permits needed to be  executed in order                                                                    
to continue  and that additional  funding would  be required                                                                    
to  pursue the  project. She  detailed that  the discussions                                                                    
had been ongoing since the  prior fall. She believed AEA was                                                                    
close  to securing  the  permits. She  deferred  to AEA  for                                                                    
further detail.                                                                                                                 
                                                                                                                                
2:04:30 PM                                                                                                                    
                                                                                                                                
Vice-Chair Neuman  He wondered  what to do  about businesses                                                                    
waiting for the project to  move forward. He referred to the                                                                    
spreadsheet  notes that  the additional  funds  would go  to                                                                    
support  the  progress of  licensing  efforts.  He had  been                                                                    
contacted by  a constituent who  had a contract with  AEA to                                                                    
provide support  services for helicopter fueling;  there was                                                                    
currently an  issue with obtaining  a land-access  permit to                                                                    
allow  studies  to  continue. He  detailed  that  the  small                                                                    
business  had  invested  over $100,000  in  tank  farms  for                                                                    
helicopter  refueling. He  believed money  to move  projects                                                                    
forward had been halted until access was acquired.                                                                              
                                                                                                                                
Ms.  Rehfeld  deferred  to  AEA  on  some  of  the  specific                                                                    
contract language. She agreed that  the issue was one of the                                                                    
difficulties  with large  projects.  The  need for  contract                                                                    
workers  was   one  of  the   reasons  that   the  requested                                                                    
appropriations extended into FY 15.                                                                                             
                                                                                                                                
Vice-Chair  Neuman  understood  that the  legislature  would                                                                    
discuss which projects it would  move forward with; however,                                                                    
it had  already engaged in  multiple contracts for  the next                                                                    
couple  of  years. He  wondered  what  commitment the  state                                                                    
should have to contracted employees.                                                                                            
                                                                                                                                
Representative   Gara    referred   to    the   supplemental                                                                    
technicalities   raised   by   Representative   Holmes   and                                                                    
Representative Edgmon.  He wondered  if the  supplemental FY                                                                    
14 funds  would be spent  in FY 15  if the permits  were not                                                                    
secured and money was not needed by June 30, 2014.                                                                              
                                                                                                                                
Ms. Rehfeld answered that the  funding had been requested as                                                                    
capital appropriations that would  have extended terms; most                                                                    
capital appropriations  were for a five-year  timeframe. She                                                                    
detailed  that  if the  supplemental  was  approved and  the                                                                    
permits were  executed the contractors  could begin  work in                                                                    
the upcoming spring  field season. The funds  would still be                                                                    
available for use  beyond June 30, 2014. She  noted that the                                                                    
timing decision was at the discretion of the legislature.                                                                       
                                                                                                                                
2:08:41 PM                                                                                                                    
                                                                                                                                
Co-Chair  Austerman  believed  the conversation  related  to                                                                    
timing would  occur when  the supplemental  was in  front of                                                                    
the committee.                                                                                                                  
                                                                                                                                
Co-Chair  Stoltze believed  that the  Susitna-Watana project                                                                    
would have  legacy benefits that would  continue to increase                                                                    
over  the years.  He remarked  that other  energy needs  had                                                                    
been taken  care of  statewide. He  referred to  other state                                                                    
projects that he found less viable.                                                                                             
                                                                                                                                
Co-Chair   Austerman  reminded   members  to   refrain  from                                                                    
debating projects during the meeting.                                                                                           
                                                                                                                                
2:10:29 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld spoke to the  FY 15 operating budget amendments.                                                                    
She  pointed  to a  spreadsheet  titled  "FY 2015  Operating                                                                    
Amendments." She relayed that few  items were included as an                                                                    
effort  to maintain  a lean  budget. She  looked at  page 1,                                                                    
lines  1   through  3  pertaining   to  the   Department  of                                                                    
Administration  (DOA);   each  of   the  items   related  to                                                                    
requirements under  the Federal Affordable Care  Act. Line 1                                                                    
included a  request for  $61,300 for  fees required  for all                                                                    
active  self-insured health  plans.  She  detailed that  the                                                                    
state paid  a fee for all  individuals in the plans  for the                                                                    
Patient-Centered   Outcomes  Research   Institute.  Line   2                                                                    
included $68,000  in general funds for  self-insured retiree                                                                    
health  plans. Line  3 included  a $3.2  million reinsurance                                                                    
fee. The items had not  been included in the December budget                                                                    
because at the  time the governor's office  had been working                                                                    
with the  Department of Law (DOL)  and DOA on the  issue; it                                                                    
was unknown  whether any litigation  would occur.  After the                                                                    
discussions  the governor's  office had  determined that  it                                                                    
was appropriate to include the  items in the budget in order                                                                    
to avoid any potential nonpayment penalties.                                                                                    
                                                                                                                                
Ms.  Rehfeld moved  to  page  2, line  4,  which included  a                                                                    
reduction  of $150,000  under the  Elected Public  Officers'                                                                    
Retirement  System  (EPORS).  The  decrease  was  due  to  a                                                                    
reduction in participants in the  system; the actuarial work                                                                    
had not been  completed until after the  December budget had                                                                    
been submitted.  Lines 5 and  6 included increments  for the                                                                    
Office  of Public  Advocacy and  the Public  Defender Agency                                                                    
based  on  the  entities' current  caseloads  and  appellant                                                                    
backlogs; the  funds would help,  but would not  address the                                                                    
entire  backlog.   Line  7  included  a   $25,000  statutory                                                                    
designated  program receipts  request  for certification  of                                                                    
export  logs  under  the  Department  of  Natural  Resources                                                                    
(DNR). She  detailed that Legislative  Budget and  Audit had                                                                    
recently  approved a  similar request;  logs were  primarily                                                                    
exported to China.                                                                                                              
                                                                                                                                
Ms. Rehfeld addressed  item 8, a request  to restore funding                                                                    
the governor's office had proposed  to reduce for the Alaska                                                                    
Bureau of  Highway Patrol.  She detailed  that the  unit had                                                                    
been established  with federal  funds within  the Department                                                                    
of Public Safety (DPS) to  maintain dedicated enforcement on                                                                    
Alaska's  four  highway  safety  corridors.  Over  the  past                                                                    
several years the  funding source had been  transferred to a                                                                    
state  general fund  program. The  department had  developed                                                                    
proposals when  it had been  asked to  come up with  ways to                                                                    
deliver  its mission  and core  services at  less cost.  The                                                                    
proposals included  providing enforcement activities  on the                                                                    
highway safety corridors  through state trooper detachments.                                                                    
She stated  that it had  subsequently become clear  that the                                                                    
state would not  be able to maintain the  required patrol in                                                                    
the areas.  She noted that trooper  detachments continued to                                                                    
have  a  great  deal  of  pressure  on  the  regular  patrol                                                                    
services.  She  relayed that  funds  should  be restored  in                                                                    
order to maintain dedicated  resources that had successfully                                                                    
reduced highway fatalities.                                                                                                     
                                                                                                                                
2:15:52 PM                                                                                                                    
                                                                                                                                
Ms. Rehfeld  looked at line  9 related to the  University of                                                                    
Alaska. The  university had completed its  negotiations with                                                                    
United  Academics and  had requested  a total  of $3,370,000                                                                    
for  the agreement;  $1,686,500 of  the request  was general                                                                    
fund. Line  10 reflected an  update to the amount  needed to                                                                    
inflation  proof  the  Alaska  Permanent  Fund;  the  Alaska                                                                    
Permanent  Fund Corporation  provided the  governor's office                                                                    
with  a  monthly  projection  statement.  Page  3,  line  11                                                                    
deleted the  contingency language section  that appropriated                                                                    
lost  federal receipts  with general  funds  related to  the                                                                    
Department of Corrections (DOC);  the department believed it                                                                    
would receive  the necessary federal funding.  Line 12 trued                                                                    
up general  obligation bond debt service  estimates based on                                                                    
timing  and  cash  flow.  Line 13  reduced  a  general  fund                                                                    
request  for  jail  construction reimbursement  by  $512,300                                                                    
given  that  sufficient  cash  was  available  to  apply  to                                                                    
payments in 2014  and February 2015. The  total reduction to                                                                    
the FY 15 operating budget was $5,800,000.                                                                                      
                                                                                                                                
2:17:37 PM                                                                                                                    
                                                                                                                                
Vice-Chair Neuman  asked about line 8  pertaining to highway                                                                    
safety   corridors.  He   stated  that   according  to   the                                                                    
Department  of Transportation  and  Public Facilities  (DOT)                                                                    
none of  the state's highways  would continue to  qualify as                                                                    
highway safety  corridors due to improvements  and decreased                                                                    
fatalities. He  wondered if the  highways would  not qualify                                                                    
due to extra  trooper patrols enforcing the  areas. He asked                                                                    
if the  funds were  not needed anymore  and wondered  if Ms.                                                                    
Rehfeld had discussed the issue with DOT.                                                                                       
                                                                                                                                
Ms. Rehfeld  shared that when  the Bureau of  Highway Patrol                                                                    
had first been established  through federal national highway                                                                    
safety  funds  provided  to  DOT  there  had  been  specific                                                                    
parameters  on  what  the  funds  could  be  used  for.  She                                                                    
detailed that  DOT and DPS  worked together  on enforcement,                                                                    
engineering, and  an education  plan related  to the  use of                                                                    
the federal  highway funds for  the 4  identified corridors.                                                                    
Over time some  of the parameters changed  and federal funds                                                                    
were no longer  available to DPS; therefore,  funds had been                                                                    
replaced with general  fund dollars over the  past couple of                                                                    
years. She did not  know eligibility requirements related to                                                                    
the   designation  of   a  highway   safety  corridor.   The                                                                    
governor's office  proposed a continuation of  general funds                                                                    
for state enforcement along the corridors.                                                                                      
                                                                                                                                
2:20:05 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman   surmised  that  it  was   difficult  to                                                                    
determine whether  increased enforcement, road  upgrades, or                                                                    
a  combination  of the  two,  had  decreased fatalities  and                                                                    
accidents.  He suspected  it was  a  combination of  various                                                                    
items and  believed the legislature  should look  at partial                                                                    
funding for the request.                                                                                                        
                                                                                                                                
Representative Guttenberg  looked at the  $150,000 reduction                                                                    
on  page 2,  line  4  related to  actuarial  work for  EPORS                                                                    
benefits.                                                                                                                       
                                                                                                                                
Ms. Rehfeld clarified  that the item was  based on actuarial                                                                    
work. She  detailed that the  funds were  evaluated annually                                                                    
and the governor's office received the data.                                                                                    
                                                                                                                                
Representative  Guttenberg   asked  whether  the   fund  was                                                                    
supposed to pay  for the item. Ms. Rehfeld  replied that the                                                                    
item  was  a  decrement  based on  the  number  of  eligible                                                                    
members remaining  in the system.  Representative Guttenberg                                                                    
understood. He  asked if  the system had  its own  fund. Ms.                                                                    
Rehfeld replied in the affirmative.                                                                                             
                                                                                                                                
Co-Chair Austerman asked about  line 9 related to university                                                                    
contract negotiations.  He asked  for verification  that the                                                                    
funding  would increase  by  2 percent  for  three years  in                                                                    
addition to  a $750 annual  bonus per employee.  He referred                                                                    
to  most  other  state  contracts that  had  received  lower                                                                    
increases.  He  noted  that school  districts  were  telling                                                                    
their employees to expect zero increases.                                                                                       
                                                                                                                                
Ms. Rehfeld  replied that  there was  a write  up describing                                                                    
the  agreement. She  believed the  university could  provide                                                                    
further detail  on what its  employees were required  to pay                                                                    
for  health  insurance  and other  items  that  other  state                                                                    
employees did  not pay for.  The university did  not provide                                                                    
pay increments like other state agencies.                                                                                       
                                                                                                                                
Co-Chair Austerman asked for  verification that the increase                                                                    
was 2  percent for  three years.  Ms. Rehfeld  believed that                                                                    
was the case.                                                                                                                   
                                                                                                                                
2:23:11 PM                                                                                                                    
                                                                                                                                
CHRIS CHRISTENSEN  III, ASSOCIATE  VICE PRESIDENT  FOR STATE                                                                    
RELATIONS,  UNIVERSITY   OF  ALASKA,  stated  that   it  was                                                                    
difficult to  do a comparison  between university  and state                                                                    
contracts   because  they   covered   different  items.   He                                                                    
explained  that the  university  did  not provide  longevity                                                                    
increases  to employees  (unlike the  state that  provided 3                                                                    
percent longevity  increases during  the first six  or seven                                                                    
years  of employment  and additional  increases every  other                                                                    
year  subsequent  to  that  time). The  request  on  line  9                                                                    
covered  the  full increase  package.  He  relayed that  the                                                                    
university did  a number  of other  things that  reduced the                                                                    
package  value  to  employees.   He  elaborated  that  as  a                                                                    
university employee  he received  roughly 60 percent  of the                                                                    
leave  time  he had  received  when  working for  the  state                                                                    
judicial branch.  He stated that the  university did provide                                                                    
sick leave, but it had no value unless he became sick.                                                                          
                                                                                                                                
Mr. Christensen  continued that the  state paid  100 percent                                                                    
of  the economy  medical  plan premiums  for its  employees,                                                                    
whereas the university was paying  83 percent in the current                                                                    
year and  82 percent  in FY 15.  He communicated  that every                                                                    
month he had  $200 taken from his paycheck to  pay his share                                                                    
of the health insurance  premium. He believed the university                                                                    
had  negotiated tight  and responsible  contracts. He  noted                                                                    
that  the  contracts  before  the  committee  were  for  the                                                                    
university's largest  faculty union.  The union had  a small                                                                    
pot  of  money for  genuine  merit  increases for  exemplary                                                                    
performance  (e.g.   bringing  grants   in  or   other).  He                                                                    
continued that many professors would  receive no bonus, some                                                                    
would receive a small bonus,  and others who showed the high                                                                    
performance  would receive  large bonuses.  He relayed  that                                                                    
the contracts  more closely resembled  those in  the private                                                                    
sector.                                                                                                                         
                                                                                                                                
2:25:52 PM                                                                                                                    
                                                                                                                                
Co-Chair  Austerman asked  about  the $750  cash bonus.  Mr.                                                                    
Christensen  replied that  the amount  had been  negotiated.                                                                    
The actual  percentage increase was  2 percent per  year. He                                                                    
stated  that the  cash would  be  used for  either merit  or                                                                    
market increases. He reiterated  that the university did not                                                                    
provide longevity increases like the state.                                                                                     
                                                                                                                                
Co-Chair  Austerman  asked  how   many  employees  would  be                                                                    
eligible  for the  increase.  Mr.  Christensen replied  that                                                                    
there  were roughly  950 full-time  equivalent employees  in                                                                    
the category.                                                                                                                   
                                                                                                                                
Co-Chair  Stoltze asked  about  the  comparison between  the                                                                    
negotiated  contracts   for  the  university  and   for  DOA                                                                    
negotiated state employee contracts.                                                                                            
                                                                                                                                
Mr. Christensen replied  that there were two  sides that had                                                                    
negotiated  long and  hard. He  believed the  contracts were                                                                    
reasonable  and responsible  when taking  into consideration                                                                    
the  total expenses  and  what employees  had  given up.  He                                                                    
restated  that  it  was  very   difficult  to  do  a  direct                                                                    
percentage comparison between the  university and the state.                                                                    
He did  find it interesting that  the state did not  seem to                                                                    
be  looking  to what  the  university  was doing  to  manage                                                                    
personnel costs in an era of declining revenue.                                                                                 
                                                                                                                                
Co-Chair  Stoltze referred  to the  $750 bonus  and surmised                                                                    
that the figure  was de minimis for a  tenured professor. He                                                                    
wondered  whether the  bonus went  to adjunct  professors as                                                                    
well. Mr. Christensen answered  that adjunct professors fell                                                                    
under  a   different  union.  The  union   under  discussion                                                                    
pertained  to professors  teaching upper  level courses.  He                                                                    
added that the  salary of a full professor  began at $62,000                                                                    
per year  (the equivalent of  a pay  range 19a in  the state                                                                    
system).                                                                                                                        
                                                                                                                                
Co-Chair Stoltze  believed the  $750 may  be a  more prudent                                                                    
way to handle  bonuses. He noted that the  bonus treated the                                                                    
employees equally. He  detailed that if the  bonus was based                                                                    
on percentages they  would pay more for  professors who were                                                                    
already financially well-off.                                                                                                   
                                                                                                                                
Mr. Christensen  pointed out that  the contract  did reclaim                                                                    
some management rights  that had been given  away many years                                                                    
earlier.  For  instance,  language   had  been  improved  to                                                                    
provide that management  had the right to  assign a workload                                                                    
that  met  the needs  of  the  university  with a  focus  on                                                                    
increased  faculty productivity.  The  university felt  that                                                                    
the management givebacks reduced  the cost of the contracts.                                                                    
He noted that  the faculty had been very  forthcoming on the                                                                    
issue; there were  many employees who wanted  to improve the                                                                    
university who  had worked to negotiate  contracts with that                                                                    
goal in mind.                                                                                                                   
                                                                                                                                
2:29:57 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze shared  a story  about one  of his  former                                                                    
professors  at the  University of  Alaska Fairbanks.  He had                                                                    
learned  that  there was  a  $5.8  million United  Academics                                                                    
increase;  $2.9 million  would come  from the  state general                                                                    
fund. He wondered about the  other $2.9 million and asked if                                                                    
it was separate from the appropriation under discussion.                                                                        
                                                                                                                                
Mr. Christensen  answered that not  all of  the university's                                                                    
contracts were  fully negotiated. It appeared  that the full                                                                    
amount  would   be  approximately  $5.1  million   from  the                                                                    
university and $5.1 million from the state's general fund.                                                                      
                                                                                                                                
Co-Chair Austerman  found it interesting that  the state was                                                                    
working to  figure out how  to balance the budget,  but that                                                                    
the  annual  increase  came   to  approximately  $4,000  per                                                                    
employee.                                                                                                                       
                                                                                                                                
Representative  Thompson asked  whether university  receipts                                                                    
would fund  half of the  cost for  each of the  three years.                                                                    
Mr. Christensen  answered in the affirmative.  He noted that                                                                    
three  to four  years earlier  the  state had  picked up  60                                                                    
percent of the cost compared  to the 50 percent it currently                                                                    
covered.  He  communicated  that   the  university  had  the                                                                    
incentive  to  produce contracts  like  the  one before  the                                                                    
committee.                                                                                                                      
                                                                                                                                
Representative Thompson  asked if  the $750 amount  would be                                                                    
received each  year. Mr. Christensen replied  that the bonus                                                                    
was annual.                                                                                                                     
                                                                                                                                
Representative   Gara  asked   for  verification   that  the                                                                    
university  would pay  $1.686 million  and the  general fund                                                                    
would pay for the  remaining $1.686 million. Mr. Christensen                                                                    
responded in the affirmative.                                                                                                   
                                                                                                                                
Representative   Gara  asked   for  confirmation   that  the                                                                    
university would  request another $5.1 million  general fund                                                                    
request in the next year or  so for its other employees (the                                                                    
university  would also  absorb  an  additional $5.1  million                                                                    
increment). Mr.  Christensen answered that the  items should                                                                    
be  in the  current  budget. There  were  two contracts  the                                                                    
legislature had  not yet seen,  but they were  much smaller.                                                                    
All  of the  contracts together  should total  approximately                                                                    
$5.1 million.                                                                                                                   
                                                                                                                                
Representative Gara  asked for  verification that  the items                                                                    
were in  the current  year budget. Mr.  Christensen answered                                                                    
that some of  the items were in the current  year budget. He                                                                    
elaborated  that the  contracts  the  committee had  already                                                                    
seen  in   the  governor's   budget  were  for   the  United                                                                    
Federation of  Teachers, the Fairbanks  Firefighters' Union,                                                                    
and  the  non-covered   employees.  The  proposed  amendment                                                                    
included  the United  Academics faculty.  The committee  had                                                                    
not  yet seen  the University  of Alaska  Adjuncts contract,                                                                    
which would  be approximately $200,000  undesignated general                                                                    
fund and $200,000 designated general fund.                                                                                      
                                                                                                                                
2:33:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  mentioned EPORS  and believed it  had only                                                                    
been  in  effect for  two  years.  Ms. Rehfeld  thought  the                                                                    
system may have been in effect slightly longer.                                                                                 
                                                                                                                                
Co-Chair Stoltze thought EPORS  may have been established in                                                                    
the 9th Legislature. He recalled  that at the time there had                                                                    
only  been nine  Republicans in  the House.  The system  had                                                                    
been a  generous benefit  program that  enabled participants                                                                    
to add onto  their retirement by working at  a higher paying                                                                    
job for one day. He  imagined that remaining participants in                                                                    
the system were currently in their 60s or older.                                                                                
                                                                                                                                
Ms.  Rehfeld replied  that  there were  20  retirees and  15                                                                    
survivors still receiving benefits.                                                                                             
                                                                                                                                
Co-Chair Stoltze  discussed that few employees  could have a                                                                    
significant  financial impact;  the EPORS  beneficiaries had                                                                    
not put a  substantial amount into the system  and the state                                                                    
was paying  a high amount  to those beneficiaries.  He noted                                                                    
that some  of the  employees had not  taken real  benefit of                                                                    
the system, while others had;  there were also some examples                                                                    
of abuse  of the system  by employees who worked  very short                                                                    
periods.                                                                                                                        
                                                                                                                                
Representative Gara  pointed to  a provision in  the current                                                                    
retirement  system that  allowed  a  state employee's  three                                                                    
highest earning  years to count for  retirement. He provided                                                                    
an example  of a state  employee that made  $50,000 annually                                                                    
for the majority of their  career, who then worked for three                                                                    
years   at   $110,000   annually.   He   wondered   if   the                                                                    
administration  was   guarding  against  the   practice.  He                                                                    
remarked that the employee in  his example had not paid into                                                                    
the  pension  system at  $110,000,  but  that their  pension                                                                    
would be based on the amount.                                                                                                   
                                                                                                                                
Co-Chair Stoltze remarked that  municipal employees also had                                                                    
the option.                                                                                                                     
                                                                                                                                
Representative   Gara  reiterated   his   question  to   the                                                                    
administration. Ms.  Rehfeld deferred  the question  to DOA.                                                                    
Representative Gara  asked Ms.  Rehfeld to pass  the concern                                                                    
on to the department.                                                                                                           
                                                                                                                                
Co-Chair  Austerman  noted that  if  a  person served  on  a                                                                    
borough  assembly  for  three  years,  took  $100  out  into                                                                    
retirement, and became elected at  $50,000, the person would                                                                    
get benefits at whatever their timeframe was.                                                                                   
                                                                                                                                
Representative  Gara provided  another example  of a  person                                                                    
working their three high years.                                                                                                 
                                                                                                                                
2:37:48 PM                                                                                                                    
                                                                                                                                
Representative Gara asked about lines 5  and 6 on page 2. He                                                                    
spoke about the increase in  crime sentencing and noted that                                                                    
if sentencing  continued to increase  the state may  need to                                                                    
build another  prison. He asked  which of the formerly  0 to                                                                    
1-year  crimes  had  become  1, 2,  and  3-year  crimes.  He                                                                    
thought  the   state  should  look   into  whether   it  was                                                                    
appropriate  to reduce  any  of the  sentences  in order  to                                                                    
avoid  the  cost  of  another prison.  He  wondered  if  the                                                                    
governor's office or other had looked into the issue.                                                                           
                                                                                                                                
Ms. Rehfeld replied that the  criminal justice working group                                                                    
(including  the DOL,  the Court  System, DOC,  and DPS)  had                                                                    
looked at  issues like the  one mentioned  by Representative                                                                    
Gara.  She would  communicate the  question  to the  working                                                                    
group and believed they could provide the information.                                                                          
                                                                                                                                
Representative Gara did not believe  anything was being done                                                                    
to   address   the   issue   and   believed   it   was   the                                                                    
administration's responsibility.  He asked for  estimates to                                                                    
build a  new prison.   Ms. Rehfeld expressed  certainty that                                                                    
the  issue  had  been  discussed;   she  would  ensure  that                                                                    
information was communicated to the committee.                                                                                  
                                                                                                                                
Co-Chair Stoltze  made a remark  on the efficacy  of picking                                                                    
which   prisoners   were   harmless.   Representative   Gara                                                                    
clarified that he was  speaking specifically about low-level                                                                    
crimes.  Co-Chair Stoltze  commented that  they were  crimes                                                                    
nonetheless.                                                                                                                    
                                                                                                                                
2:40:02 PM                                                                                                                    
                                                                                                                                
Ms.  Rehfeld addressed  the capital  budget amendments  in a                                                                    
spreadsheet  titled   "FY  2015  Capital   Amendments."  She                                                                    
pointed to  line 1 that  provided an update of  the Susitna-                                                                    
Watana project.  Line 2 included  a request of  $580,800 for                                                                    
the Exxon Valdez  Oil Spill Trustee Council  to purchase two                                                                    
parcels  on the  lower  Kenai River  to  provide for  public                                                                    
access and riverbank  restoration. Lines 3 and  4 included a                                                                    
$6  million  funding  request   for  Alaska  Marine  Highway                                                                    
System.  She explained  that the  FY 15  budget included  an                                                                    
annual  $6  million  general fund  request  for  vessel  and                                                                    
terminal upgrades  and overhauls  due to aging  vessels. The                                                                    
proposed  request would  provide  an  additional $6  million                                                                    
from  the  capitalized  account  of  Alaska  Marine  Highway                                                                    
Stabilization  Fund. Line  5 included  a $2,497,500  general                                                                    
fund request  for a  new project  under DOT.  The department                                                                    
had  been  working  on  the  item  with  federal  and  state                                                                    
entities to cleanup  a PCB contamination site  at Aniak High                                                                    
School.  She explained  that the  contamination had  been an                                                                    
issue for  a lengthy period  of time. An agreement  had been                                                                    
negotiated between  various parties;  the project  total was                                                                    
$9.7 million  and the state's  portion was  approximately 16                                                                    
percent.                                                                                                                        
                                                                                                                                
Co-Chair Austerman referred  to the increment on  line 2 and                                                                    
did not  realize that the  Exxon Valdez oil had  extended up                                                                    
to the  Kenai River. Ms.  Rehfeld was  not an expert  on the                                                                    
Exxon Valdez  oil spill,  but she  believed the  council was                                                                    
able  to  use  resources   for  restoration  and  to  access                                                                    
projects. The council  felt that it could  contribute to the                                                                    
item and  had asked the  governor's office to make  the fund                                                                    
request.                                                                                                                        
                                                                                                                                
2:43:15 PM                                                                                                                    
                                                                                                                                
Representative Holmes pointed to  line 1 related to Susitna-                                                                    
Watana  supplemental FY  14 funds  versus FY  15 funds.  She                                                                    
referred to  language on line  1 stating that  the amendment                                                                    
updated  the  projected   future-year  funding  needed.  She                                                                    
believed  that  if the  funds  were  for future  needs  they                                                                    
should not be in the supplemental budget.                                                                                       
                                                                                                                                
Ms. Rehfeld replied that the  amendment updated the out-year                                                                    
costs based  on the $10  million that had been  requested in                                                                    
the  budget and  what would  be  needed in  the next  fiscal                                                                    
year.  She  added  that  additional  cash  flow  detail  was                                                                    
included in  a backup  document ["Alaska Energy  Authority -                                                                    
Susitna-Watana Hydroelectric Project  FY 2015 Request" (copy                                                                    
on file)].  She relayed that  AEA would be happy  to discuss                                                                    
the project in more detail.                                                                                                     
                                                                                                                                
Co-Chair  Austerman   referred  back  to   the  supplemental                                                                    
budget.  He asked  for the  total anticipated  shortfall and                                                                    
draw  from  the  savings  accounts  for  all  budgets  under                                                                    
discussion.                                                                                                                     
                                                                                                                                
Ms. Rehfeld replied that members'  packets should contain an                                                                    
amended  fiscal summary  that included  all of  the budgets;                                                                    
she would ensure members had  the material. She relayed that                                                                    
the revised  fiscal summary would include  fiscal notes that                                                                    
were not  reflected in December  2014. She detailed  that in                                                                    
December the governor's office calculated  the FY 14 draw at                                                                    
$1.9  billion out  of  the reserve  funds;  with the  fiscal                                                                    
notes and  supplemental requests the draw  increased to just                                                                    
below $2.1 billion.  In December the calculated  draw for FY                                                                    
15   had  been   $1.1   billion;  with   fiscal  notes   and                                                                    
supplemental  requests another  $29 million  had been  added                                                                    
for a total of $1.13 billion.                                                                                                   
                                                                                                                                
2:46:09 PM                                                                                                                    
                                                                                                                                
Representative   Gara  asked   about   the  capital   budget                                                                    
amendment for Aniak  High School on line 5. He  did not want                                                                    
students to be  exposed to health risks, but  he wondered if                                                                    
the  waste  was  far  enough underground  that  it  did  not                                                                    
present  a danger  to anyone.  He wondered  if there  was an                                                                    
option to not spend the money if a danger did not exist.                                                                        
                                                                                                                                
Ms. Rehfeld  did not believe  the school would  be operating                                                                    
if the  students were in immediate  danger. She communicated                                                                    
that  work had  been done  by DEC  for cleanup.  The cleanup                                                                    
would be repaid  as a portion of  the negotiated settlement;                                                                    
however, there was  still work to be done.  She believed DOT                                                                    
and DEC could provide further  information on the status and                                                                    
the depth of the contamination.                                                                                                 
                                                                                                                                
Representative   Gara    was   interested    in   additional                                                                    
information. He did  not want students to be  in danger, but                                                                    
he wondered if there was a need for the expenditure.                                                                            
                                                                                                                                
Co-Chair  Stoltze  suspected that  part  of  the danger  was                                                                    
associated with  any potential for litigation  pertaining to                                                                    
an ignored  environmental risk. He  stated that  many things                                                                    
were  done because  of the  fear  of the  legal system.  Ms.                                                                    
Rehfeld replied that the backup  materials talked about that                                                                    
the pertinent buildings operated as  the school's shop and a                                                                    
science  classroom  facility.   The  backup  also  addressed                                                                    
drinking  water   wells  that   were  clear  on   the  site.                                                                    
Additionally, it  addressed the PCB contamination,  what had                                                                    
been  done, and  what the  agreement  would do  in terms  of                                                                    
cleanup.  She  reiterated that  DOT  and  DEC could  provide                                                                    
additional information.                                                                                                         
                                                                                                                                
Co-Chair Austerman discussed the  schedule for the following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:50:22 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:50 p.m.                                                                                          

Document Name Date/Time Subjects
HB 266 Operating_Amendment_Spreadsheet_2-18-14.pdf HFIN 2/20/2014 1:30:00 PM
HB 266
HB 265 Capital_Amendment_Detailed_Backup 2-18-14.pdf HFIN 2/20/2014 1:30:00 PM
HB 265
HB 265 Capital_Amendment_Spreadsheet_2-18-14.pdf HFIN 2/20/2014 1:30:00 PM
HB 265
HB 266 _Operating_Amendment_Detailed_Backup_2-18-14.pdf HFIN 2/20/2014 1:30:00 PM
HB 266
HB 266 Amendment_Summary_2-18-14.pdf HFIN 2/20/2014 1:30:00 PM
HB 266