Legislature(2019 - 2020)ADAMS ROOM 519

04/17/2019 09:00 AM FINANCE

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Audio Topic
09:00:06 AM Start
09:01:08 AM HB38
10:17:55 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 4/16/19 --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
+ Deferred Maintenance Update TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 17, 2019                                                                                            
                         9:00 a.m.                                                                                              
9:00:06 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Wilson called the House Finance Committee meeting                                                                      
to order at 9:36 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Tammie Wilson, Co-Chair                                                                                          
Representative Jennifer Johnston, Vice-Chair                                                                                    
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Neil Steininger, Chief Budget  Analyst, Office of Management                                                                    
and  Budget,  Office  of  the  Governor;  Shelly  Willhoite,                                                                    
Program  Budget Analyst,  Office of  Management and  Budget,                                                                    
Office  of  the  Governor; Laura  Cramer,  Deputy  Director,                                                                    
Office of Management and Budget.                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
Mark Davis, Division of Facilities Services, Department of                                                                      
Transportation and Public Facilities.                                                                                           
HB 38     APPROP: CAPITAL BUDGET                                                                                                
          HB 38 was HEARD and HELD in committee for further                                                                     
Co-Chair Wilson reviewed the meeting agenda.                                                                                    
HOUSE BILL NO. 38                                                                                                             
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and   other  appropriations;  making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
9:01:08 AM                                                                                                                    
NEIL STEININGER, CHIEF BUDGET  ANALYST, OFFICE OF MANAGEMENT                                                                    
AND BUDGET, OFFICE OF THE GOVERNOR, introduced himself.                                                                         
SHELLY   WILLHOITE,  PROGRAM   BUDGET  ANALYST,   OFFICE  OF                                                                    
MANAGEMENT AND  BUDGET, OFFICE  OF THE  GOVERNOR, introduced                                                                    
Co-Chair Wilson indicated Mr. Davis was online.                                                                                 
Ms.  Willhoite   introduced  the   PowerPoint  Presentation:                                                                    
"Deferred Maintenance Update" (copy  on file). She indicated                                                                    
she  would  review  the  status   of  the  state's  deferred                                                                    
maintenance and  the state's balances. Mr.  Steininger would                                                                    
review some  history and  how the state  planned to  use the                                                                    
recommended deferred  maintenance monies in the  budget. Mr.                                                                    
Davis would provide an update  on the Division of Facilities                                                                    
Services,  and how  they  planned  to use  a  new system  to                                                                    
manage deferred maintenance statewide.                                                                                          
Ms.  Willhoite began  with slide  2: "Deferred  Maintenance:                                                                    
Explained."  She  explained  that deferred  maintenance  was                                                                    
maintenance or repairs deferred to  a future budget cycle or                                                                    
postponed   until   funding  was   available.   Preventative                                                                    
maintenance  was handled  within the  operating budget.  She                                                                    
explained that  when preventative  maintenance could  not be                                                                    
completed  and things  fell  into  disrepair, projects  were                                                                    
moved into the deferred  maintenance category. Projects were                                                                    
most  often  items  that  could   not  be  addressed  though                                                                    
preventative  maintenance.  She asserted  that  preventative                                                                    
maintenance was  key to preventing  items from  falling into                                                                    
the deferred maintenance category.                                                                                              
Ms.  Willhoite continued  that the  legislature appropriated                                                                    
money  for  preventative  maintenance annually  through  the                                                                    
operating budget  through facilities  management allocations                                                                    
and  the  public  building  fund.  She  reported  that  when                                                                    
deciding  about maintenance,  changing  business needs  were                                                                    
taken into consideration.                                                                                                       
Ms.  Willhoite  moved  to slide  3:  "Deferred  Maintenance:                                                                    
State  Maintained  Facilities."  Currently,  the  state  had                                                                    
about   2,200    facilities   statewide.    The   facilities                                                                    
encompassed 14  entities including the University  of Alaska                                                                    
and the Court System. The  state had about 19 million square                                                                    
feet  of   space  with  a  combined   replacement  value  of                                                                    
approximately $8.6  billion. The chart provided  a visual of                                                                    
the  number of  facilities  broken down  by department.  The                                                                    
Department  of Transportation  and  Public Facilities  (DOT)                                                                    
had  the  largest  number  of  facilities  followed  by  the                                                                    
University.  The  Department of  Environmental  Conservation                                                                    
had only one facility.                                                                                                          
Ms.  Willhoite turned  to  slide  4: "Deferred  Maintenance:                                                                    
Facility Types." She reported  that facility types varied by                                                                    
entity.   For  example,   the  University   had  classrooms,                                                                    
libraries, dorms, and office  space. Whereas, the Department                                                                    
of Administration  had mainly  office space.  The Department                                                                    
of  Corrections  and the  Department  of  Health and  Social                                                                    
Services had 24  hour facilities such as  the Pioneer Homes,                                                                    
and  prisons.  The  Department   of  Military  and  Veterans                                                                    
Affairs  had  military and  other  types  of facilities  and                                                                    
armories. The  Department of Natural Resources  oversaw park                                                                    
service  cabins, shelters,  and  other types  of shops.  The                                                                    
chart  provided  a  look  by  square  feet  by  entity.  She                                                                    
highlighted  the  University  and  DOT  having  the  largest                                                                    
number of total  square feet. Although the  University had a                                                                    
fewer  number of  facilities,  it had  a  greater number  of                                                                    
square feet.                                                                                                                    
9:05:14 AM                                                                                                                    
Co-Chair  Wilson  asked  if  OMB  was  taking  into  account                                                                    
buildings  rented by  the state.  Ms. Willhoite  replied the                                                                    
numbers only represented facilities owned by the state.                                                                         
Co-Chair Wilson  asked how many  buildings or the  number of                                                                    
square feet  the state rented.  Ms. Willhoite  would provide                                                                    
the information.                                                                                                                
Vice-Chair Ortiz  asked about the  category for  the capitol                                                                    
building. Ms. Willhoite responded  that the capitol building                                                                    
was currently  under the  governor's office.  The governor's                                                                    
office had  the capitol building and  the governor's mansion                                                                    
which were state-owned.                                                                                                         
Co-Chair  Wilson commented  that the  legislature maintained                                                                    
the building.  She thought  that if  the governor  owned the                                                                    
capitol  building, he  should maintain  it. She  was new  to                                                                    
Legislative  Council and  was curious.  Ms. Willhoite  would                                                                    
have to get back to her.                                                                                                        
Vice-Chair Ortiz  thought it was strange,  with a separation                                                                    
of  powers,   that  the  governor  would   own  the  capitol                                                                    
building.  Co-Chair  Wilson  thought the  issue  might  need                                                                    
further review. Ms.  Willhoite commented that it  was on the                                                                    
list for  the governor's office. However,  she would confirm                                                                    
ownership of the building.                                                                                                      
Co-Chair   Wilson  was   under  the   impression  that   the                                                                    
legislature  owned   the  building  and  was   allowing  the                                                                    
governor to  occupy it. She  thought it was possible  for it                                                                    
to be  the other way  around. She thought  clarification was                                                                    
important in terms of the budget.                                                                                               
Ms. Willhoite  continued to slide 5:  "Deferred Maintenance:                                                                    
Statewide Totals."  She reported the total  current deferred                                                                    
maintenance balance  was $1.98 billion which  included $1.85                                                                    
billion from  the executive agencies  and the  Court System.                                                                    
Major school maintenance was $134.7  million. She noted that                                                                    
the school  major maintenance reflected only  the districts'                                                                    
priorities.  School districts  did  not  provide their  full                                                                    
maintenance list. She continued  that of the $134.7 million,                                                                    
$113.8 million was the state's share of the total.                                                                              
Co-Chair  Wilson  asked how  the  state's  share was  $113.8                                                                    
million.  Mr. Steininger  would  get back  to the  committee                                                                    
with a response.                                                                                                                
Representative Carpenter  asked if  the state  requested the                                                                    
school   districts'  full   list  of   deferred  maintenance                                                                    
projects. Ms. Willhoite explained  that school districts use                                                                    
to provide their full list.  However, because they were only                                                                    
partially  funded, school  districts found  it was  a better                                                                    
use  of time  to prioritize  the list  and only  provide the                                                                    
most important items. She offered to request a full list.                                                                       
Representative  Carpenter thought  that  if the  legislature                                                                    
was   deciding   on   funding  for   deferred   maintenance,                                                                    
legislators  should  be  provided  with  the  full  list  of                                                                    
Co-Chair Wilson was concerned  with additional burdens being                                                                    
placed on school districts.                                                                                                     
9:09:03 AM                                                                                                                    
Representative  Carpenter would  like  to  see how  projects                                                                    
were being prioritized.                                                                                                         
Vice-Chair  Johnston  asked   if  the  deferred  maintenance                                                                    
applied  to  all  school  districts  that  were  outside  of                                                                    
organized  boroughs. She  wondered  if it  applied to  state                                                                    
schools  funded  by  state  construction.  She  thought  the                                                                    
figure was a  low number. She did not think  they applied to                                                                    
districts such as the Anchorage  School District, the Mat-Su                                                                    
School District, or the Fairbanks  North Star Borough School                                                                    
District. Ms.  Willhoite could  provide the  project details                                                                    
that  made up  the $134  million. She  was aware  that Mount                                                                    
Edgecumbe and the Anchorage School District were included.                                                                      
Representative  Knopp thought  school districts  owned their                                                                    
own  buildings   and  that  the  figure   encompassed  Mount                                                                    
Edgecumbe and  the Alaska  Vocation Education  and Technical                                                                    
Center (AVTEC). He would appreciate a full list.                                                                                
Co-Chair Wilson  indicated that all schools  could apply for                                                                    
monies  for deferred  maintenance.  She  explained that  the                                                                    
state  provided   grant  money  every  year.   Every  school                                                                    
district could apply for funds.  It was based on the largest                                                                    
need. She  advised looing at  the list on the  Department of                                                                    
Education   and   Early   Development's  website.   If   the                                                                    
legislature  appropriated $10  million, the  money would  be                                                                    
applied to  the priority list  as far down as  possible. The                                                                    
following year  priorities would be reshuffled,  and another                                                                    
amount appropriated  and applied based on  priority. Many of                                                                    
the school districts making a  request for monies were small                                                                    
and without the ability to bond.                                                                                                
Representative  Josephson commented  about school  bond debt                                                                    
reimbursement,  much of  which was  for new  construction in                                                                    
the amount of $140 million for  FY 19. He wanted to know the                                                                    
definition for major maintenance.                                                                                               
Vice-Chair  Ortiz  commented  that the  bonding  process  in                                                                    
relationship  to schools  was  something  separate from  the                                                                    
appropriation  Co-Chair  Wilson   just  spoke  of.  Co-Chair                                                                    
Wilson responded,  "Correct." She  elaborated that it  was a                                                                    
grant for the total project  and school districts could also                                                                    
Representative  Knopp   thought  a  grant  for   a  deferred                                                                    
maintenance request was  not the same as the  state having a                                                                    
deferred maintenance project. He  believed grants were based                                                                    
on  available funding.  Co-Chair Wilson  explained that  the                                                                    
state had  a school maintenance  fund for schools  only. For                                                                    
buildings owned  by the agencies, funding  was not available                                                                    
under major maintenance grants.                                                                                                 
Ms. Willhoite continued with slide  5. She reported that the                                                                    
total  peaked at  $2.3  billion  in FY  2012.  There was  an                                                                    
initiative from  the administration to  significantly reduce                                                                    
the deferred  maintenance by initiating a  5-year plan where                                                                    
they funded at  least $100 million per year for  5 years. As                                                                    
a  result, the  deferred  maintenance dropped.  The low  was                                                                    
$1.6 billion  in FY 17.  Since then,  the trend moved  up as                                                                    
the deferred maintenance allocations decreased.                                                                                 
Co-Chair Wilson asked how much  money had been set aside for                                                                    
deferred maintenance  since FY  11. Ms.  Willhoite responded                                                                    
that it averaged about $123 million for 5 years.                                                                                
Ms.  Willhoite  moved  to slide  6:  "Deferred  Maintenance:                                                                    
Backlog  by Entity."  The slide  showed  a different  visual                                                                    
perspective  of   the  deferred  maintenance   backlog.  The                                                                    
majority of  deferred maintenance was for  the University of                                                                    
Alaska   totaling   $1.2    billion.   The   Department   of                                                                    
Transportation and  Public Facilities  was high on  the list                                                                    
at $320  million. The  school district  maintenance requests                                                                    
totaled  $135 million  and all  other entities  totaled $300                                                                    
9:14:54 AM                                                                                                                    
Co-Chair Wilson  asked whether the  state or  the University                                                                    
was   responsible   for   the  University   buildings.   Mr.                                                                    
Steininger answered that the  University was responsible for                                                                    
its buildings. However, it was  part of the executive branch                                                                    
and  was the  reason for  their inclusion  in the  executive                                                                    
branch totals.                                                                                                                  
Co-Chair Wilson asked if the  state currently had a priority                                                                    
list   for   the   University.  Mr.   Steininger   responded                                                                    
affirmatively.   Co-Chair   Wilson   wanted   to   see   the                                                                    
Vice-Chair Johnston asked if the  state evaluated whether it                                                                    
was worth  doing doing deferred  maintenance on  a building.                                                                    
Ms. Willhoite  responded that another  slide would  show the                                                                    
changes  being  implemented  by   looking  at  the  facility                                                                    
condition  index. More  detail  would be  provided when  the                                                                    
slide was up.                                                                                                                   
Ms.  Willhoite discussed  the graph  on  slide 7:  "Deferred                                                                    
Maintenance:  Backlog by  Entity."  she pointed  to the  bar                                                                    
chart which  allocated each of  the backlogs by  entity. The                                                                    
University and DOT made up the largest portions.                                                                                
Mr. Steininger  advanced to slide 8:  "Deferred Maintenance:                                                                    
Funding History." He would be  reviewing the funding history                                                                    
of deferred maintenance and the  reasons behind the proposal                                                                    
put  forward in  the  governor's budget.  He explained  that                                                                    
from 1998 to 2010  deferred maintenance funding was sporadic                                                                    
and inconsistent.  It was allocated to  specific departments                                                                    
for specific  projects. He  pointed out a  spike in  2009 of                                                                    
$127  million and  lows of  $6.5 million  in 2000-2005.  The                                                                    
time period built  up some of the backlog. In  2011 a 5-year                                                                    
initiative was started to  appropriate $100 million annually                                                                    
for 5 years to try to address the backlog to bring it down.                                                                     
Mr. Steininger  turned to  the chart  on slide  9: "Deferred                                                                    
Maintenance: Funding  History." It highlighted  the sporadic                                                                    
highs and  lows in  the past.  The 5  years in  which higher                                                                    
appropriations for  deferred maintenance were  awarded could                                                                    
be  seen  on the  chart.  The  higher appropriations  had  a                                                                    
significant  effect   on  the  backlog.  It   provided  some                                                                    
reliability because  of a  plan being  in place.  It allowed                                                                    
the department  to plan ahead  for the  deferred maintenance                                                                    
needs and to  address the issue in less of  an ad hoc manner                                                                    
and more of a deliberate manner.                                                                                                
Mr. Steininger advanced to  slide 10: "Deferred Maintenance:                                                                    
Backlog  (excluding school  major  maintenance." He  pointed                                                                    
out the trend  of the backlog dropping over  5 years because                                                                    
of the  higher levels  of funding.  He also  highlighted the                                                                    
lag as the  projects were being completed and  the return of                                                                    
a backlog. The  state ended up reversing  the positive trend                                                                    
it had entered into. He  advocated for a deliberate plan for                                                                    
deferred maintenance.                                                                                                           
Co-Chair Wilson asked why it  was not until the present that                                                                    
the state was  deciding to implement a  plan. Mr. Steininger                                                                    
thought  the state  had always  known it  needed a  plan. He                                                                    
reported that  the end of  the 5 years of  funding coincided                                                                    
with significant  revenues for the state.  He suggested that                                                                    
in leaner times the concerted effort dropped off.                                                                               
Co-Chair Wilson  asked in  5 years  whether the  state moved                                                                    
out or  sold any  of its  buildings. She  wanted to  see the                                                                    
chart separated  into one chart showing  only the University                                                                    
and  another with  all  of the  other  state buildings.  She                                                                    
asked if the state had sold  any of its buildings due to the                                                                    
backlog.  Mr.  Steininger  indicated   Mr.  Davis  would  be                                                                    
speaking to the  divestment of buildings. He  was aware that                                                                    
Department of Military and Veterans  Affairs had divested in                                                                    
some armories and a couple  of other buildings that had come                                                                    
off of  the books. Mr.  Davis would also discuss  a property                                                                    
disposal  workgroup that  was started  to look  further into                                                                    
the  state's portfolio  of  assets and  what  might need  to                                                                    
change.  The idea  was to  get rid  of some  of the  backlog                                                                    
without appropriating money to it.                                                                                              
9:20:19 AM                                                                                                                    
Mr.   Steininger   continued    to   slide   11:   "Deferred                                                                    
Maintenance: What  We Have Learned  and a Plan  Forward." He                                                                    
pointed out that the pattern  of funding coincided with high                                                                    
years of revenue. It also  reversed the growing trend of the                                                                    
backlog  when the  state had  a plan  that was  followed. He                                                                    
also noted that a consistent  reliable level of funding that                                                                    
departments could  count on allowed for  better decisions to                                                                    
be made.  He also pointed  out that  in looking at  the past                                                                    
was that  much of the  deferred maintenance was  directed to                                                                    
specific  projects or  to specific  agencies. There  was not                                                                    
flexibility to manage it holistically  at a statewide level.                                                                    
about   two   years   prior   the   administration   started                                                                    
appropriating  deferred maintenance  to  the  Office of  the                                                                    
Governor  and then  distributing  the funds  looking at  the                                                                    
facilities altogether.  It was the  start of the  process of                                                                    
moving  towards  the  Division of  Facilities  Services.  It                                                                    
allowed a look  at the projects across  agencies rather than                                                                    
in a vacuum.                                                                                                                    
Co-Chair  Wilson   asked  if  a   priority  list   had  been                                                                    
developed.  Mr. Steininger  responded  that each  department                                                                    
had a priority list.  Each department had slightly different                                                                    
criteria that they applied to  their assets and building. He                                                                    
spoke  of the  intricacies  of managing  different types  of                                                                    
facilities. The idea was to  try to get every state facility                                                                    
looked at through the same  lenses and the same standards in                                                                    
order   to   prioritize   the   state's   limited   deferred                                                                    
maintenance money adequately across all of the agencies.                                                                        
Co-Chair Wilson  asked when legislators  would know  how the                                                                    
money  would be  spent, if  it were  to give  the governor's                                                                    
office  $25 million.  Mr. Steininger  responded that  in the                                                                    
prior year the department began  working on the list and had                                                                    
it out  in mid-July. In an  upcoming slide he had  the lists                                                                    
by agency. He  could also provide detailed  backup about how                                                                    
the state allocated  the $25 million in FY 18  and FY 19. He                                                                    
suggested  that  as  the  Division  of  Facilities  Services                                                                    
matured  as  an  organization,   the  information  would  be                                                                    
available   sooner  rather   than  later.   Co-Chair  Wilson                                                                    
commented, "It would be hard without a plan."                                                                                   
9:24:30 AM                                                                                                                    
Mr.  Steininger reviewed  slide  12: "Deferred  Maintenance:                                                                    
Alaska Capital Income  Fund." He maintained that  one of the                                                                    
key pieces in planning was  reliability and knowing a source                                                                    
of  funding  while  in  a  constrained  fiscal  environment.                                                                    
Senate Bill 107 [Legislation  passed in 2018] designated the                                                                    
Alaska  Capital Income  Fund  for  deferred maintenance.  In                                                                    
prior  years, the  receipts for  the  large vessel  gambling                                                                    
taxes had  been transferred  into the Alaska  Capital Income                                                                    
Fund,  and  the  receipts  of  the  large  passenger  vessel                                                                    
gambling funds supplemented  the governor's budget. Annually                                                                    
approximately $35 million to $40  million would be available                                                                    
for allocation to deferred maintenance.                                                                                         
Co-Chair Wilson  asked if the  gambling tax was  $35 million                                                                    
to  $40 million  annually. Mr.  Steininger replied  that the                                                                    
$35  million to  $40 million  was a  combination of  Emerita                                                                    
Hess money  flowing into the  Alaska Capital Income  Fund as                                                                    
well as  large passenger vessel gambling  taxes. The Emerita                                                                    
Hess  money was  estimated to  be approximately  $27 million                                                                    
per  year.  He had  seen  years  where the  large  passenger                                                                    
vessel gambling taxes were as high as $10 million.                                                                              
Representative Josephson asked what  other purposes the fund                                                                    
was used  for besides  deferred maintenance.  Mr. Steininger                                                                    
indicated  that in  most recent  years the  fund was  mostly                                                                    
used for deferred maintenance. The  fund had been used for a                                                                    
handful of  other purposes including for  highways. The fund                                                                    
was  a  designated  fund  and could  be  used  for  anything                                                                    
through  appropriation. However,  OMB  thought  it was  good                                                                    
policy to set a baseline for deferred maintenance funding.                                                                      
Mr.  Steininger detailed  slide  13: "Deferred  Maintenance:                                                                    
Governor's  Proposed  Budget."  He   reported  that  in  the                                                                    
governor's proposed  budget under consideration there  was a                                                                    
request for FY 19 supplemental  funding in the amount of $21                                                                    
million  designated  general  funds (DGF)  from  the  Alaska                                                                    
Capital Income Fund.  In FY 20 the  proposed budget included                                                                    
$26.6  million DGF  for statewide  facilities, $7.4  million                                                                    
DGF  for K-12  major maintenance,  $4.5 million  other funds                                                                    
for  the  Public  Building  Fund, $5  million  DGF  for  the                                                                    
University, and $2.8 million UGF for the Court System.                                                                          
Co-Chair Wilson  asked what  the supplemental  dollars were.                                                                    
She wondered  what projects needed  to be completed  by July                                                                    
1,  2019. Mr.  Steininger  responded  that the  supplemental                                                                    
amount appropriated  was the balance  of the  Alaska Capital                                                                    
Income Fund at  the end of FY 19. He  explained that because                                                                    
there was  no reverse sweep  language and no draws  from the                                                                    
Constitutional  Budget  Reserve   (CBR)  in  the  governor's                                                                    
proposed budget,  the balance of  the Alaska  Capital Income                                                                    
Fund would have otherwise been  swept into the CBR. In order                                                                    
to ensure that  the money was used  for deferred maintenance                                                                    
and that it was adequately  funded, OMB chose to appropriate                                                                    
the  amount through  a supplemental  request.  By doing  so,                                                                    
there  was the  extra benefit  of  OMB being  able to  begin                                                                    
distributing the money to projects  once the bill passed. It                                                                    
was   beneficial  because   it  better   conformed  to   the                                                                    
maintenance season in Alaska.                                                                                                   
Co-Chair Wilson  asked which projects would  be given money.                                                                    
Mr. Steininger would have to  provide the information later.                                                                    
The  list of  projects  was updated  each October.  Co-Chair                                                                    
Wilson  suggested  that  asking   for  $21  million  without                                                                    
providing a list  of what projects would  be receiving funds                                                                    
made it  difficult for her to  do her job. She  did not want                                                                    
to sign  a blank check for  $21 million. She had  hoped that                                                                    
the presentation would provide more information.                                                                                
9:30:43 AM                                                                                                                    
Vice-Chair  Johnston  was  surprised  that  the  information                                                                    
could not be reviewed and  provided in the winter. She asked                                                                    
about  the hiatus  in the  winter. Mr.  Steininger clarified                                                                    
that OMB received a list  of deferred maintenance priorities                                                                    
in October and provided it  to the legislature annually. The                                                                    
Office of  Management and Budget  did not ask  for continued                                                                    
updates  through   the  winter  because  of   the  cycle  of                                                                    
construction and  the maintenance  schedule. He  thought Mr.                                                                    
Davis  could  speak  more  to   the  logistical  impacts  of                                                                    
updating   a  holistic   list  in   the  winter   for  every                                                                    
Co-Chair Wilson  asked Mr. Steininger to  define "holistic."                                                                    
Mr. Steininger indicated that  from a department perspective                                                                    
the state  was looking at  its entire suite of  assets. From                                                                    
the state's perspective and the  perspective of the Division                                                                    
of Statewide  Facilities, all of  the state's  assets needed                                                                    
to be looked at.                                                                                                                
Representative   Josephson   stated    that   it   was   his                                                                    
understanding that the  administration did not want  to do a                                                                    
reverse sweep.  Rather, it  wanted to  take sources  such as                                                                    
the Power  Cost Equalization  (PCE) funding  and move  it to                                                                    
the  general  fund. He  asked  if  the  $21 million  was  an                                                                    
exception. Mr. Steininger  responded that the administration                                                                    
felt the need to obligate  the balance of the Alaska Capital                                                                    
Income  Fund   for  deferred  maintenance  because   of  the                                                                    
reversal of a trend of  the backlog diminishing and starting                                                                    
to  grow  again.  The administration  recognized  it  was  a                                                                    
significant priority.  Although the  state had  the property                                                                    
disposal group, the assets the  state chose to retain needed                                                                    
to be properly maintained.                                                                                                      
Co-Chair Wilson clarified that  although the slide indicated                                                                    
DGF,  it was  funding that  could be  utilized for  schools,                                                                    
bond reimbursement, or anything  else. The money happened to                                                                    
be sitting in a different type  of fund. She did not believe                                                                    
the fund received the same  scrutiny as unrestricted general                                                                    
funds  (UGF).  In other  words,  the  $21 million  could  be                                                                    
applied to  school buildings, the state's  major maintenance                                                                    
list,   or  towards   bond   reimbursement.   It  could   be                                                                    
appropriated in  whatever way the  legislature saw  fit. She                                                                    
invited Ms. Cramer to make additional comments.                                                                                 
9:34:44 AM                                                                                                                    
LAURA  CRAMER, DEPUTY  DIRECTOR,  OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET,  provided  a  back   story  having  coordinated  the                                                                    
capital  budget  for  the legislature  for  the  previous  4                                                                    
years.  She explained  that OMB  had a  list of  prioritized                                                                    
items by  agency. However, emergent  circumstances sometimes                                                                    
occurred  shifting  certain  priorities   up  or  down.  For                                                                    
example, during  spring break-up a  correctional institution                                                                    
experienced sewage  or water pipes breaking  which brought a                                                                    
project from  low on the deferred  maintenance priority list                                                                    
to  the  top. By  giving  a  lump sum  to  OMB  it could  be                                                                    
disbursed as projects became  emergent. The flexibility that                                                                    
came  with  providing  OMB  with a  lump  sum  for  deferred                                                                    
maintenance had worked well over the previous 2 years.                                                                          
Mr.  Steininger continued  to  owever,  there were  emergent                                                                    
slide   14:  "Deferred   Maintenance:   FY  2018   Statewide                                                                    
Appropriation   Status."   He   relayed   that   the   slide                                                                    
represented  the distribution  the administration  made with                                                                    
the $20  million appropriation in  FY 18. He  explained that                                                                    
when the administration  was looking at the  project and how                                                                    
it would distribute  the monies, it looked  at life, health,                                                                    
and safety  issues, as  well as assets  at risk  of imminent                                                                    
failure.  The   administration  considered   timely  project                                                                    
execution,  funding  shovel-ready projects.  Maintenance  in                                                                    
order to  meet a  program mission with  demonstrated returns                                                                    
on investment  was also a  criteria. He pointed to  the list                                                                    
of agencies  and their  corresponding allocations.  He would                                                                    
happily  provide  a  list of  specific  projects  that  were                                                                    
funded. He indicated that the  administration held a certain                                                                    
amount for emergency purposes.                                                                                                  
Mr. Steininger  turned to  slide 15:  "Deferred Maintenance:                                                                    
FY 2019 Statewide Appropriation  Status." He relayed that in                                                                    
FY 19  the state received  another $20 million  for deferred                                                                    
maintenance. The  funding was spread across  28 projects and                                                                    
13 agencies. The same standards  he had mentioned were used.                                                                    
Some  of the  common  projects  included roof  replacements,                                                                    
safety compliance, and plumbing  and electrical repairs. The                                                                    
list  totaled just  over $20  million. In  the distribution,                                                                    
the   administration   included   the  $400,000   held   for                                                                    
contingencies in the  prior year and another  $100,000 for a                                                                    
project that was  completed under budget in  the prior year.                                                                    
In FY 19 the state distributed  all of the funds rather than                                                                    
holding them  for contingency purposes. Since  projects were                                                                    
being  done   under  budget,  money   could  be   found  for                                                                    
contingency situations.                                                                                                         
Co-Chair  Wilson noted  that the  Department of  Corrections                                                                    
(DOC) was at $9.4 million  for a 2-year period. She wondered                                                                    
if  it was  the  reason the  administration was  considering                                                                    
looking  at  closing  correctional  facilities  and  sending                                                                    
inmates out of state. Ms.  Cramer responded in the negative.                                                                    
She  clarified  that  the  state's  correctional  facilities                                                                    
required a significant amount  of deferred maintenance which                                                                    
was the purpose of the spend.                                                                                                   
Co-Chair  Wilson wondered  if the  high cost  of maintenance                                                                    
had  any  bearing  on whether  buildings  stayed  open.  Ms.                                                                    
Cramer responded that when  DOC evaluated which institutions                                                                    
should  be  considered  for  closure,  all  costs  would  be                                                                    
considered. She deferred to DOC  to answer her question more                                                                    
9:38:59 AM                                                                                                                    
Co-Chair  Wilson commented  that  the list  belonged to  the                                                                    
administration and had  nothing to do with  programs; it had                                                                    
to  do   with  buildings.   She  noted  that   the  Wildwood                                                                    
Correctional Complex  was being  evaluated for  closure. She                                                                    
was  uncertain how  the  $9.4 million  would  be spent.  She                                                                    
understood that a certain building  might be so old that the                                                                    
state would  need to look  at other alternatives.  She asked                                                                    
if the  condition of the  Wildwood facility  was influencing                                                                    
its closure.                                                                                                                    
Ms. Cramer conveyed that her  understanding of the selection                                                                    
of Wildwood  was because  there was  a specific  building at                                                                    
the Wildwood  Correctional Complex that was  segregated from                                                                    
the rest  of the  full institution that  could be  shut down                                                                    
completely. Whereas, the rest  of Alaska's institutions were                                                                    
single  buildings  and  could  not  be  segregated  out  and                                                                    
closed. She  deferred to  DOC to  specifically speak  to why                                                                    
Wildwood was chosen.                                                                                                            
Co-Chair Wilson  relayed that it was  her understanding that                                                                    
the department did  not make the choice.  She clarified that                                                                    
there might be  a building in poorer condition  than the one                                                                    
slated to be  closed. Ms. Cramer responded that  she was not                                                                    
aware of  any correctional  facility in such  disrepair that                                                                    
it  needed   to  be  closed.   Co-Chair  Wilson   thought  a                                                                    
significant amount of money was being put into corrections.                                                                     
9:41:03 AM                                                                                                                    
Representative Carpenter returned to  slide 14. He asked Mr.                                                                    
Steininger if he was providing  the committee with a listing                                                                    
of  prioritization   in  terms  of  life,   health,  safety,                                                                    
imminent  failure,  project  execution, and  maintenance  to                                                                    
spaces  that were  meeting  a program's  mission  and had  a                                                                    
demonstrated  return on  investment.  He  wondered if  those                                                                    
facilities that  were not meeting  a program mission  or had                                                                    
not demonstrated  a return on  investment were on  the list.                                                                    
Mr.   Steininger  replied   that  the   list  included   the                                                                    
distribution  detail and  the  projects  that were  selected                                                                    
following  the criteria.  He asked  Representative Carpenter                                                                    
if he was  looking for a list of projects  that did not meet                                                                    
the criteria.                                                                                                                   
Representative Carpenter was interested  in seeing an entire                                                                    
list. Mr.  Steininger could definitely  provide a  full list                                                                    
of   all  deferred   maintenance  projects   identified  and                                                                    
prioritized by all  state agencies. He conveyed  that in the                                                                    
prioritization  that the  administration  underwent in  2018                                                                    
and  2019 it  tried to  transition towards  the Division  of                                                                    
Facilities  Services model.  Mr. Davis  would be  going into                                                                    
significant  detail   on  how   the  division   would  start                                                                    
prioritizing  projects using  a  facilities condition  index                                                                    
(FCI)   and  more   objective   criteria.  Previously,   the                                                                    
administration had  followed the objective criteria  used by                                                                    
each  department and  did a  comparison across  departments.                                                                    
The administration was currently  working with Mr. Davis and                                                                    
his  team  who  were  getting  the  Division  of  Facilities                                                                    
Services off the ground.                                                                                                        
Co-Chair  Wilson recalled  FY  18 being  $32 million  rather                                                                    
than  $20  million.  She  asked  if  she  was  correct.  Mr.                                                                    
Steininger  indicated that  the $20  million was  the amount                                                                    
directly  appropriated to  the  Office of  the Governor  for                                                                    
statewide deferred  maintenance. He  would have to  get back                                                                    
to the  committee about the  other amount of  Alaska Capital                                                                    
Income  Fund monies  which might  have been  appropriated as                                                                    
well. He recalled there were  years where more earnings were                                                                    
deposited  into the  Alaska Capital  Income  Fund than  were                                                                    
appropriated,  which was  why there  was  an additional  $21                                                                    
million available.                                                                                                              
Co-Chair Wilson commented that the  information did not show                                                                    
the  University. She  was certain  it  received funds  every                                                                    
year.  Mr.  Steininger answered  that  the  $20 million  was                                                                    
appropriated to  the Office of  the Governor.  The remaining                                                                    
$12 million  was for  the University  and the  Court System.                                                                    
The  University received  $5 million  and  the Court  System                                                                    
received $2.5 million.  There was also $4.5  million for the                                                                    
Public   Building  Fund   that  was   appropriated  to   the                                                                    
Department of Administration for public buildings.                                                                              
Co-Chair Wilson  asked if  he was talking  about FY  19. Mr.                                                                    
Steininger corrected her, "FY  18." Co-Chair Wilson wondered                                                                    
if there were additional funds to  the $20 million in FY 19.                                                                    
Mr.  Steininger answered  in  the  affirmative. He  reported                                                                    
that there was $4.9 million  in the Public Building Fund and                                                                    
$2 million that went to the University.                                                                                         
Co-Chair  Wilson commented  that she  would appreciate  more                                                                    
accurate numbers.  She was really concerned  that there were                                                                    
many more  questions than answers.  She was  frustrated that                                                                    
answers might  be provided in  an email, but the  public did                                                                    
not always get the information.                                                                                                 
Representative  Josephson commented  that in  the detail  of                                                                    
the deferred maintenance it noted  a roof repair at Wildwood                                                                    
Correctional  Complex. It  specified Building  10. He  hoped                                                                    
the building was  one the governor intended to  use since it                                                                    
had just  been fixed. Ms.  Cramer indicated that it  was the                                                                    
department's plan to continue to use the facility for now.                                                                      
Co-Chair Wilson  stated that the  department did not  have a                                                                    
plan. She  remarked that the  legislature was  still waiting                                                                    
on  the development  of a  plan. Mr.  Steininger handed  the                                                                    
presentation over to Mr. Davis.                                                                                                 
9:46:56 AM                                                                                                                    
MARK DAVIS,  DIVISION OF FACILITIES SERVICES,  DEPARTMENT OF                                                                    
TRANSPORTATION AND  PUBLIC FACILITIES  (via teleconference),                                                                    
reviewed   slide   16:  "Deferred   Maintenance:   Statewide                                                                    
Facilities  Approach."  He  relayed  that  the  Division  of                                                                    
Facilities  Services was  established based  on a  statewide                                                                    
study, department  level collaboration,  and recommendations                                                                    
dated back to 2015. In  2017, OMB directed that the division                                                                    
be  established and  to begin  the process  of consolidating                                                                    
the   function   of    facilities   maintenance   into   one                                                                    
organization. He continued  that July 1, 2018  was the start                                                                    
of  operations for  the division.  One  of the  expectations                                                                    
that  had  been  articulated  to   his  team  from  OMB  was                                                                    
assistance  and recommendations  in  the  areas of  deferred                                                                    
maintenance and state-owned facilities.                                                                                         
Mr.  Davis continued  to  slide  17: "Deferred  Maintenance:                                                                    
Opportunities."  He indicated  that  from  working with  the                                                                    
Facilities  Council   and  members   of  OMB   the  division                                                                    
developed  a  method  for prioritizing  facilities  deferred                                                                    
maintenance  requests.  The  goal  of the  division  was  to                                                                    
incorporate an  FCI as an unbiased  comparison of facilities                                                                    
as  a   component  of  its  recommendations.   The  division                                                                    
expected  to  begin the  FCI  assessments  in the  following                                                                    
fiscal year.                                                                                                                    
Mr.  Davis furthered  that the  division secured  a contract                                                                    
with Aim  AssetWorks, and it  was currently  implementing an                                                                    
enterprise   level   computerized   maintenance   management                                                                    
system. It would be the  system of record for all facilities                                                                    
data  and  would  provide the  division  the  capability  to                                                                    
manage the information for more  than 2,000 facilities owned                                                                    
by  the state.  The division  was also  looking to  link the                                                                    
State  of  Alaska  energy  efficiency  program  with  select                                                                    
deferred maintenance projects.                                                                                                  
Co-Chair  Wilson  asked  when the  administration  would  be                                                                    
looking  at  the  deferred  maintenance  plan  to  determine                                                                    
whether  a  facility  was  needed   any  longer.  Mr.  Davis                                                                    
responded  that  the  directive   from  the  Office  of  the                                                                    
Governor generated  a work group  that was  established, and                                                                    
the departments agreed to take  up the matter of considering                                                                    
which facilities might be eligible  for closure. He would be                                                                    
addressing the topic  further in the presentation.  It was a                                                                    
separate  effort  in   determining  whether  the  department                                                                    
should keep a certain building.  However, it was part of the                                                                    
overall  picture  of  decreasing   the  amount  of  deferred                                                                    
maintenance required from year-to-year.                                                                                         
Vice-Chair  Johnston  expressed  concern that  she  was  not                                                                    
seeing a cooperative system between the two directives.                                                                         
Co-Chair  Wilson thought  that deciding  whether a  facility                                                                    
was  needed  should  happen  prior   to  making  a  list  of                                                                    
maintenance priorities.                                                                                                         
9:51:10 AM                                                                                                                    
Mr.  Davis   discussed  slide  18:   "Deferred  Maintenance:                                                                    
Strategy."  The proposed  strategy  for facilities  deferred                                                                    
maintenance included  an assessment  which had  an objective                                                                    
component based  on the condition  of a building  and energy                                                                    
efficiency. The  department, in  turn, used  the information                                                                    
working with the Facilities  Council to prioritize potential                                                                    
deferred maintenance  projects, track  the execution  of the                                                                    
projects and  results, capture  key performance  levels, and                                                                    
capture  key component  indicators to  measure results.  The                                                                    
goal was to  have a consistent method to assist  OMB and the                                                                    
departments  in  the   prioritization  and  decision  making                                                                    
relative to deferred maintenance.                                                                                               
Co-Chair Wilson  asked about  qualifying for  Alaska Housing                                                                    
Finance  Corporation (AHFC)  loans  that  the committee  had                                                                    
heard about previously  having to do with  energy audits and                                                                    
the  possibility of  low-interest loans.  Mr. Davis  relayed                                                                    
that the  program was available  to all of  the departments.                                                                    
The two people that ran the  program for the state worked in                                                                    
the  Division  of  Facilities Services.  The  administration                                                                    
tried to maximize the program whenever possible.                                                                                
Co-Chair  Wilson  opined  that  the program  was  not  being                                                                    
maximized at all. The committee  had heard only one loan had                                                                    
ever been  taken out.  She asked how  the program  was being                                                                    
utilized. Mr. Davis responded  that Alaska energy efficiency                                                                    
programs had more than one  project. He was happy to provide                                                                    
a full list of projects  that had been completed. Currently,                                                                    
there were  7 projects in  play and about 70  building since                                                                    
the beginning of the program.                                                                                                   
Co-Chair  Wilson clarified  that she  was talking  about the                                                                    
loan   program.  Once   an  energy   efficiency  audit   was                                                                    
completed, there  was a loan  program available  rather than                                                                    
using UGF dollars.  She provided an example  where an energy                                                                    
upgrade  would create  a savings  which, in  turn, could  be                                                                    
used   to  pay   back  the   original  loan   to  make   the                                                                    
improvements.  Mr. Davis  responded that  the administration                                                                    
considered a number of different  financing options for each                                                                    
project. Co-Chair  Wilson disagreed because  the legislature                                                                    
was considering  making the funds available  to non-profits.                                                                    
She thought it might  be a way for the state  to catch up on                                                                    
its deferred  maintenance. She thought it  was important for                                                                    
the government to take advantage of the loan fund.                                                                              
9:54:23 AM                                                                                                                    
Mr.   Davis  reviewed   slide  19:   "Deferred  Maintenance:                                                                    
Assessing  Conditions and  Needs."  The division's  proposed                                                                    
vision  moving forward  was a  coordinated and  programmatic                                                                    
approach   to  involving   all  of   the  departments.   The                                                                    
division's  vision included  characteristics of  continuity,                                                                    
transparency,  and was  result-based. He  wanted to  see the                                                                    
leveraging of the state's expertise  as much as possible. An                                                                    
objective  assessment would  be  involved using  an FCI.  He                                                                    
elaborated that the index was  equal to the value of repairs                                                                    
of a facility divided by  the total replacement value of the                                                                    
Mr. Davis  continued that the  division would  incorporate a                                                                    
building mission and system  factors component. The building                                                                    
mission factor would represent how  essential a facility was                                                                    
to a  department's ability  to carry  out its  mission. They                                                                    
system factor incorporated how critical  the system was that                                                                    
needed  repair. For  example, fire  and life  safety related                                                                    
items  would  be  rated  highly.  The  facilities  condition                                                                    
indexes, the building mission, and  system factors were what                                                                    
the division  used to arrive  at a project index  value that                                                                    
could be prioritized and vetted by the Facilities Council.                                                                      
Mr.  Davis   reported  that  following   a  first   pass  at                                                                    
prioritizing  projects,   the  division   would  incorporate                                                                    
energy efficiency factors into  consideration such as energy                                                                    
intensity  or energy  costs to  determine opportunities  for                                                                    
leveraging  combined   deferred  maintenance   and  financed                                                                    
energy improvements.                                                                                                            
Co-Chair Wilson  asked how  much the  state could  be saving                                                                    
with the energy  efficiencies if they were  to be completed.                                                                    
Mr.  Davis stated  that  it depended  on  the building,  its                                                                    
size,  and the  scope  of the  project. Generally,  projects                                                                    
paid for themselves within about 15 years.                                                                                      
Co-Chair Wilson asked about the  7 energy efficiency upgrade                                                                    
projects  and whether  they had  been  completed. Mr.  Davis                                                                    
stated that  the 7 projects  were currently being  worked on                                                                    
but were  not completed. Co-Chair Wilson  queried what funds                                                                    
were  being  used  to  complete   the  upgrades.  Mr.  Davis                                                                    
answered   that  the   funds  were   coming  from   low-cost                                                                    
commercial  loans and  financing.  He offered  to provide  a                                                                    
complete list  of the financing  for the  projects. Co-Chair                                                                    
Wilson  thought  the information  might  be  helpful so  the                                                                    
state could better  assist AHFC, as their  interest might be                                                                    
too high.ousing                                                                                                                 
Vice-Chair  Johnston  liked  the project  index  value.  She                                                                    
suggested  also including  an asset  value  index. It  would                                                                    
assist in determining  the value, need, and  viability of an                                                                    
Mr.  Davis  thought Vice-Chair  Johnston  made  a very  good                                                                    
point.  He  turned  to   slide  20:  "Deferred  Maintenance:                                                                    
Prioritization   and   Selection."    The   steps   included                                                                    
prioritization  by the  department, then  a discussion  with                                                                    
the Facilities  Council to talk  about all of  the projects.                                                                    
The input  would be  provided to  OMB for  further decisions                                                                    
and  further   prioritizations.  The  division   viewed  the                                                                    
discussion as  a great forum  to combine the  objective data                                                                    
that   was   generated   on   the   facilities   and   other                                                                    
considerations. The  division also  hoped the  process would                                                                    
generate more requests for energy efficiency projects.                                                                          
Mr.  Davis   explained  slide  21:   "Deferred  Maintenance:                                                                    
Results Based  Performance and Reporting." The  slide showed                                                                    
a  way the  division would  be able  to evaluate  a facility                                                                    
after a deferred maintenance project  was complete. The same                                                                    
matrixes could  be applied that  were used in  the selection                                                                    
of  prioritization measuring  the results  after words.  The                                                                    
feedback and reporting  should reinforce the use  of a rule-                                                                    
based   process  and   show  evidence   that  the   deferred                                                                    
maintenance efforts  were extending the life  of the state's                                                                    
9:59:41 AM                                                                                                                    
Mr.  Davis   moved  to  slide  22:   "Deferred  Maintenance:                                                                    
Disposing of State Assets." He  relayed that the Division of                                                                    
Facilities Services  worked with  the Facilities  Council to                                                                    
compile  the   data  on  facilities   and  to   provide  the                                                                    
information  to OMB.  Based on  the scope  of the  task, the                                                                    
department agreed  to participate  in a  statewide workgroup                                                                    
to generate the information  and to provide recommendations.                                                                    
There were  a number  of regulations and  statutes regarding                                                                    
the disposal of state-owned  facilities. The assets that had                                                                    
been   federally  funded   might   require  some   repayment                                                                    
depending on  the rules of  the different  federal agencies.                                                                    
In some  cases, remediation might  be required prior  to the                                                                    
disposal of  an asset with  hazmat present. The role  of the                                                                    
division  in  the  process  was   to  provide  the  data  on                                                                    
facilities and pass the recommendations  to OMB. He reported                                                                    
some divestment of  facilities over the prior  20 years. For                                                                    
example  the Department  of  Military  and Veterans  Affairs                                                                    
(DMVA)  had  disposed  of  15  facilities  since  2006.  The                                                                    
department had  a strategic plan that  included disposing up                                                                    
to 50 other facilities over a period of time.                                                                                   
Mr. Davis noted that DOT  recently sold 2 facilities at $5.5                                                                    
million  combined.  There  had  been a  few  other  property                                                                    
disposals across the state.                                                                                                     
Co-Chair  Wilson  asked  where  the money  went.  Mr.  Davis                                                                    
responded  that in  most cases  the money  went back  to the                                                                    
department.  He  could  provide more  detailed  information.                                                                    
Co-Chair  Wilson asked  if the  University was  part of  the                                                                    
discussion  surrounding  the  disposal  of  facilities.  Mr.                                                                    
Davis responded  in the negative. Co-Chair  Wilson asked why                                                                    
not. Mr.  Davis answered  that the  University had  not been                                                                    
part of the workgroup. Co-Chair  Wilson queried why not. Mr.                                                                    
Davis offered to get back to the committee.                                                                                     
Co-Chair Wilson thought the University  needed to be part of                                                                    
the discussion.  Ms. Cramer interjected that  the University                                                                    
managed its  own assets and  had divested some of  them. She                                                                    
was aware that there were  ongoing efforts to divest more of                                                                    
their  assets.   The  University   had  a   separate  effort                                                                    
occurring internally. She  was happy to reach out  to see if                                                                    
the    University    wanted    to   participate    in    the                                                                    
administration's efforts as well.                                                                                               
Co-Chair Wilson asked if the  University provided a priority                                                                    
list  to  OMB.  Ms.  Cramer responded  that  the  University                                                                    
provided a list  to OMB. The University wanted  to receive a                                                                    
level of  funding of  about $80 million  to $100  million to                                                                    
address  its deferred  maintenance. The  University, similar                                                                    
to the Court System, received a  sum of money from the state                                                                    
and  was  left   to  decide  how  to   manage  its  deferred                                                                    
maintenance. The University had  its own maintenance crew as                                                                    
Co-Chair  Wilson commented  that the  University was  one of                                                                    
the  fastest  growing  deferred  maintenance  entities  that                                                                    
owned federally  funded buildings.  The University  might be                                                                    
subject to the repayment of federal funds.                                                                                      
Representative Carpenter remarked that  Ms. Crammer had used                                                                    
the word "want" in asking  the University to participate. He                                                                    
thought the  word should  be "need."  He concluded  from the                                                                    
presentation that  the state had  failed to  properly manage                                                                    
deferred  maintenance for  several years.  It appeared  that                                                                    
the state  was making an  effort to establish a  better path                                                                    
moving  forward.  He  thought  it  was  important  that  the                                                                    
largest   cost  department   participated  in   the  state's                                                                    
efforts. He  perceived it was  gross negligence on  the part                                                                    
of  the  legislature  that  the   University  had  not  been                                                                    
participating.  He was  uncertain what  needed to  occur for                                                                    
the  University to  participate, but  he stressed  it should                                                                    
happen.  He wanted  to know  if  any statutes  needed to  be                                                                    
changed  to get  the  University to  participate. He  wanted                                                                    
feedback either presently or later  as to why the University                                                                    
was not participating. Ms. Crammer  responded that the State                                                                    
of Alaska did not manage  University assets. She would reach                                                                    
out to the  University and would encourage them  to get back                                                                    
to the committee about their plan.                                                                                              
10:05:19 AM                                                                                                                   
Co-Chair Wilson remarked that if  the legislature wanted the                                                                    
University  to   participate,  it  could  stop   giving  the                                                                    
University money to encourage involvement.                                                                                      
Representative  Carpenter  understood the  University  might                                                                    
manage its assets, but the state paid for them.                                                                                 
Co-Chair Wilson  was concerned because the  school districts                                                                    
also  managed  their  assets,   but  they  participated  and                                                                    
provided a  list. She  thought that  not everyone  was being                                                                    
treated fairly.                                                                                                                 
Vice-Chair  Johnston recommended  caution.  She thought  DOT                                                                    
sometimes  broke   into  silos.   She  preferred   that  the                                                                    
University   report    to   the    legislature.   Otherwise,                                                                    
opportunities  for reassessment  might  get  lost. She  also                                                                    
preferred  to   have  the  University  provide   reports  of                                                                    
deferred maintenance  similar to  what the  school districts                                                                    
provided. She wanted  the legislature to be able  to apply a                                                                    
standard  for  appropriation.   She  advised  caution  about                                                                    
putting everything in one bucket.                                                                                               
Co-Chair Wilson thought  the University needed to  be at the                                                                    
table to discuss deferred maintenance.                                                                                          
Representative Josephson agreed  that the legislature helped                                                                    
the University  in a sizable  way. The  University generated                                                                    
more  revenue that  the state  provided. The  University was                                                                    
not a  department of the  government, and the  Supreme Court                                                                    
had  made  such  a  determination.   There  was  a  list  of                                                                    
departments in  statute, and the  University was not  one of                                                                    
them.  He  cited  a case  that  described  the  University's                                                                    
authority. It  had constitutional and  independent standing.                                                                    
It  also had  its own  bonding  authority and  its own  debt                                                                    
through bonding.  The University  also owned  buildings that                                                                    
were over  100 years old.  He agreed that there  was linkage                                                                    
and leverage and that a conversation needed to happen.                                                                          
Co-Chair Wilson  continued to  advocate for  the involvement                                                                    
of the  University. She  thought it  was important  that the                                                                    
University participated as  long as it continued  to ask for                                                                    
state funding.                                                                                                                  
Representative Carpenter  commented that many of  the issues                                                                    
the  state  dealt  with  using  federal  funds  had  strings                                                                    
attached. In some instances, the  state was mandated to meet                                                                    
certain  requirements. He  did  not see  the situation  with                                                                    
deferred  maintenance and  the University  much differently.                                                                    
He thought  it was  appropriate for the  state to  have some                                                                    
control in how the University  was spending state dollars as                                                                    
well as a  requirement that the money  was spent efficiently                                                                    
and effectively. He agreed with having strings attached.                                                                        
Co-Chair Wilson asked  if there was a way for  the public to                                                                    
access a list of state  properties available for disposal by                                                                    
community. Mr. Davis was not aware  of a list. He could look                                                                    
into it.  the division  could respond to  specific requests.                                                                    
He did not know if there was access to a complete listing.                                                                      
Co-Chair Wilson  asked about a  list of  facilities mandated                                                                    
to  stay  open  because  of  receiving  federal  funds.  She                                                                    
supplied an example of the Alaska State Ferries.                                                                                
10:11:11 AM                                                                                                                   
Vice-Chair  Johnston thought  there  was  a public  disposal                                                                    
process which  required public notice. She  also noted there                                                                    
was  a   tiered  bidding  system   and  various   levels  of                                                                    
Mr. Davis reviewed slide  23: "Deferred Maintenance: Looking                                                                    
Ahead." The  division would  continue to  assist OMB  and to                                                                    
work  with  the  Facilities  Council  in  the  process.  The                                                                    
division was looking forward  to getting uniform assessments                                                                    
of the  state's facilities in  order to focus  the resources                                                                    
that were  made available.  The division would  also provide                                                                    
feedback on  how the process  was working. He  concluded his                                                                    
Representative  Carpenter thought  the division  had made  a                                                                    
great first  step at  adopting better  management processes.                                                                    
He asked  Mr. Davis  to share a  timeline going  forward. He                                                                    
wanted  to know  when  results would  start  to emerge.  Mr.                                                                    
Davis replied  that the division  was putting out  a request                                                                    
for  proposal  for  the expertise  for  conducting  the  FCI                                                                    
process. The  division would prioritize  a set  of buildings                                                                    
for  the experts  to work  with to  provide feedback  to the                                                                    
division.  Simultaneously, the  division  would be  training                                                                    
in-house staff how  to do the process. He  expected to apply                                                                    
the  metrics in  the  following  year to  the  first set  of                                                                    
priorities. He expected  that the amount of  buildings to be                                                                    
assessed would grow based on the division's capacity.                                                                           
Vice-Chair  Johnston  noted  the  large  number  of  backlog                                                                    
dollars for DOT. She asked if  the amount had to do with all                                                                    
aspects  of highways.  Mr. Davis  responded that  there were                                                                    
other categories of deferred  maintenance. He indicated that                                                                    
the focus of the presentation  was facilities, but he agreed                                                                    
there   were  other   components  of   deferred  maintenance                                                                    
including highways.                                                                                                             
Vice-Chair  Johnston asked  if aviation  maintenance dollars                                                                    
were for runways other than  the international airports. Mr.                                                                    
Davis responded, "That is correct."                                                                                             
Vice-Chair  Johnston asked  about  deferred maintenance  for                                                                    
harbors. Mr. Davis responded that  the harbors had different                                                                    
funding  mechanisms  depending  on which  harbor  was  being                                                                    
discussed. Some  harbors were maintained through  the Harbor                                                                    
Maintenance  Grant  Program.  Some harbors  were  owned  and                                                                    
maintained  by  cities and  boroughs,  and  some were  state                                                                    
funded. The  deferred maintenance  monies would  be directed                                                                    
to the state-owned harbors.                                                                                                     
Co-Chair  Wilson  announced  that  someone  from  the  Court                                                                    
System was present if any members had questions.                                                                                
Co-Chair Wilson relayed the agenda for Thursday.                                                                                
Representative  Josephson asked  if  a crime  bill would  be                                                                    
getting to finance in the following week.                                                                                       
Co-Chair Wilson confirmed  that a crime bill  would be heard                                                                    
in the  following week and that  there would be a  number of                                                                    
hearings  on  the  issue  in  the next  week  and  over  the                                                                    
weekend. Members needed to be prepared to work through the                                                                      
following weekend.                                                                                                              
HB 38 was HEARD and HELD in committee for further                                                                               
10:17:55 AM                                                                                                                   
The meeting was adjourned at 10:17 a.m.                                                                                         

Document Name Date/Time Subjects
Deferred Maintenance Project SLA1997-2020 Appropriations to Date.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
_FY19 DM Backlog Statewide OMB 4-17-2019.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
DM Presentation for HFIN 04.17.2019.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
FY2018 Deferred Maintenance Distribution.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
FY2019 Distribution Detail.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 DM Presentation for HFIN 04.17.2019 revised (1).pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 Energy Efficiency Projects Cumulative 2019.04.23.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 FY20ConstructionFinal List.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 FY20MaintenanceFinal List.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 GAO Building Management.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 Major Maintenance_School Construction .pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 OMB Response to HFIN 4.17.19 Questions.pdf HFIN 4/17/2019 9:00:00 AM
HB 38
HB 38 Univ Deferred Maintenance Backlog .pdf HFIN 4/17/2019 9:00:00 AM
HB 38