Legislature(2019 - 2020)ADAMS ROOM 519

02/11/2020 01:30 PM FINANCE

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Audio Topic
01:31:58 PM Start
01:33:01 PM HB205 || HB206
01:33:09 PM Fy 21 Budget Overview: Department of Law
02:10:06 PM Fy 21 Budget Overview: Department of Commerce, Community and Economic Development
03:30:48 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ FY21 Dept. Budget Overviews: TELECONFERENCED
- Dept. of Law
- Dept. of Commerce, Community & Economic
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 11, 2020                                                                                          
                         1:31 p.m.                                                                                              
1:31:58 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:31 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Cathy Tilton                                                                                                     
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
Representative Colleen Sullivan-Leonard                                                                                         
ALSO PRESENT                                                                                                                  
Ed  Sniffen, Deputy  Attorney  General,  Department of  Law;                                                                    
John Skidmore,  Deputy Attorney General,  Criminal Division,                                                                    
Department  of Law;  Valerie  Rose, Administrative  Services                                                                    
Director,  Department  of  Law,  Office  of  Management  and                                                                    
Budget,   Office   of    the   Governor;   Julie   Anderson,                                                                    
Commissioner,   Department   of  Commerce,   Community   and                                                                    
Economic   Development;   Micaela   Fowler,   Administrative                                                                    
Services  Director, Department  of  Commerce, Community  and                                                                    
Economic  Development,  Office  of  Management  and  Budget,                                                                    
Office  of  the  Governor; Jim  Andersen,  Deputy  Director,                                                                    
Division  of Economic  Development, Department  of Commerce,                                                                    
Community  and Economic  Development; Tom  Boutin, Executive                                                                    
Director,   Alaska   Industrial   Development   and   Export                                                                    
PRESENT VIA TELECONFERENCE                                                                                                    
HB 205      APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                
            HB 205 was HEARD and HELD in committee for                                                                          
            further consideration.                                                                                              
HB 206      APPROP: MENTAL HEALTH BUDGET                                                                                        
            HB 206 was HEARD and HELD in committee for                                                                          
            further consideration.                                                                                              
FY 21 BUDGET OVERVIEW: DEPARTMENT OF LAW                                                                                        
FY 21 BUDGET OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY                                                                        
AND ECONOMIC DEVELOPMENT                                                                                                        
Co-Chair Foster reviewed the agenda for the meeting.                                                                            
HOUSE BILL NO. 205                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs;    capitalizing   funds;    making                                                                    
     appropriations under art.  IX, sec. 17(c), Constitution                                                                    
     of the State of  Alaska, from the constitutional budget                                                                    
    reserve fund; and providing for an effective date."                                                                         
HOUSE BILL NO. 206                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
1:33:01 PM                                                                                                                    
^FY 21 BUDGET OVERVIEW: DEPARTMENT OF LAW                                                                                     
1:33:09 PM                                                                                                                    
ED  SNIFFEN, DEPUTY  ATTORNEY  GENERAL,  DEPARTMENT OF  LAW,                                                                    
introduced himself. He was pleased  to provide the committee                                                                    
with an  overview of the responsibilities  of the Department                                                                    
of Law. He provided a  brief introduction of himself. He had                                                                    
been  with the  state  for over  20 years.  He  came to  the                                                                    
department in  2000 to enforce Alaskas   consumer protection                                                                    
and trust laws. He was in  that position for 15 years before                                                                    
moving into  his current position.  He had  testified before                                                                    
the  legislature numerous  times.  He  began the  PowerPoint                                                                    
Presentation: "Department of Law:  Budget Overview" (copy on                                                                    
file)  with discussing  the mission  of  the department.  He                                                                    
turned to slide 2.                                                                                                              
Mr. Sniffen  reviewed the mission  of the Department  of Law                                                                    
on slide  2. The departments   mission was to  provide legal                                                                    
services  to state  government and  prosecute crime  for the                                                                    
protection and benefit of  Alaskas  citizens. The department                                                                    
was  responsible  for  providing   legal  advice  and  legal                                                                    
services  to  all state  agencies.  The  department had  two                                                                    
operating  divisions, the  Criminal Division  and the  Civil                                                                    
Division.   The  department   also  had   an  administrative                                                                    
services division.                                                                                                              
Mr. Sniffen moved to slide  3 which showed the core services                                                                    
of  the Civil  Division.  The  division protected  Alaskans                                                                     
safety  and financial  well-being,  fostered conditions  for                                                                    
responsible  development  of   Alaskas   natural  resources,                                                                    
protected the  fiscal integrity of  the state,  and promoted                                                                    
good governance.  He would discuss  each of the items  as he                                                                    
reviewed the slides.                                                                                                            
Mr.  Sniffen  elaborated  that the  Civil  Division  had  14                                                                    
different  sections that  provided legal  services to  every                                                                    
executive branch  agency, public corporation, and  board and                                                                    
commission  with  the  exception  of the  railroad  and  the                                                                    
university  system which  had their  own legal  counsel. The                                                                    
services fell  into two basic  buckets. First,  the division                                                                    
had a  litigation side where  it defended cases  and pursued                                                                    
claims. Second, the division  provided transaction advice to                                                                    
all of the state agencies.                                                                                                      
Mr. Sniffen  moved to  slide 4  which detailed  the services                                                                    
provided  by  the  Civil  Division  relating  to  protecting                                                                    
Alaskans  and  included  four of  the  sections  within  the                                                                    
division:  the Commercial  and  Fair  Business Section;  the                                                                    
Human  Services Section;  the Opinions,  Appeals and  Ethics                                                                    
Section;  and   the  Child  Protection  Section.   The  four                                                                    
sections absorbed  the bulk  of the  divisions  undesignated                                                                    
general fund  (UGF) budget. The  funds were used  to protect                                                                    
children  and   vulnerable  adults.  He  relayed   that  the                                                                    
Commercial   and  Fair   Business  Section   provided  legal                                                                    
services  and advice  to agencies  that monitored  insurance                                                                    
companies   and   licensees,   charitable   gaming,   public                                                                    
utilities,   banks,   securities,   corporations,   mortgage                                                                    
brokers,  payday  lenders,  and  20  different  professional                                                                    
licensing   boards   and   commissions.  The   section   was                                                                    
responsible for a broad bucket of things.                                                                                       
Mr. Sniffen  continued to the  Human Services  Section which                                                                    
provided  advice  to the  Department  of  Health and  Social                                                                    
Services (DHSS)  on all  of its  legal matters.  The section                                                                    
protected  vulnerable adults  in  commitment proceedings  or                                                                    
who had guardians or conservators  appointed to them and who                                                                    
were  unable to  represent  themselves.  The Civil  Division                                                                    
also had an Opinions, Appeals,  and Ethics Section which was                                                                    
the  appellate section.  The section  handled  all types  of                                                                    
appeals including  the states   child-in-need-of-aid appeals                                                                    
and appeals  to the U.S.  Supreme Court which the  state had                                                                    
done a  couple of times in  the last few years.  The section                                                                    
also handled  a variety of  other work including  ethics and                                                                    
Indian Law advice.                                                                                                              
Mr. Sniffen  discussed the  last section  on the  slide, the                                                                    
divisions   Child Protective  Section which  represented the                                                                    
Office  of Children's  Services  and Child  in  Need of  Aid                                                                    
(CINA)  proceedings   statewide.  He  reported   that  about                                                                    
one-third  of  the  departments   UGF  budget  was  used  to                                                                    
support the child protection activities that it engaged in.                                                                     
1:37:47 PM                                                                                                                    
Mr. Sniffen  moved to slide  5 which discussed  the sections                                                                    
of the  division related to protecting  fiscal integrity and                                                                    
fostering   economic   development.    They   included   the                                                                    
Regulatory Affairs  and Public  Advocacy (RAPA)  Section and                                                                    
the  Special  Litigation  Section. He  explained  that  RAPA                                                                    
represented the publics  interest  in proceedings before the                                                                    
Regulatory Commission of Alaska.  The Regulatory Affairs and                                                                    
Public  Advocacy Section  argued  on behalf  of Alaskans  to                                                                    
ensure  that  utility rates  were  just  and reasonable.  In                                                                    
FY 19   RAPAs    efforts   resulted  in   saving   consumers                                                                    
approximately  $17 million  in the  form of  reduced utility                                                                    
Mr. Sniffen  continued that  the Special  Litigation Section                                                                    
handled  the states   high-profile,  expedited, and  complex                                                                    
litigation.  He referred  to the  group  as the   Litigation                                                                    
S.W.A.T.  Team.   The  group was  often  assigned  to  cases                                                                    
addressing important constitutional  challenges and election                                                                    
matters.   Most   of   the  states    high-profile,   larger                                                                    
litigation was assigned to the section.                                                                                         
Mr. Sniffen reviewed  the Natural Resources and  Oil and Gas                                                                    
sections  within  the  division  turning to  slide  6.  Both                                                                    
sections  protected the  states  natural  resources and  the                                                                    
states  revenues  from oil and  gas activities. The  Oil and                                                                    
Gas Section  protected state revenue streams  in three large                                                                    
areas  including production  taxes, corporate  income taxes,                                                                    
and  royalties.  They  protected  the  state  from  improper                                                                    
refund demands,  pursued collections of unpaid  or underpaid                                                                    
taxes and  royalties, and ensured  that tariff rates  on the                                                                    
Trans   Alaska   Pipeline   System  (TAPS)   pipeline   were                                                                    
reasonable. In  calendar year 2019  the Oil and  Gas Section                                                                    
represented  the state  in a  confidential  tax and  royalty                                                                    
dispute  which  netted  the  state   over  $300  million  in                                                                    
additional revenue.                                                                                                             
Co-Chair Foster recognized Representative Carpenter.                                                                            
Mr. Sniffen advanced  to the pictures on  slide 7 indicating                                                                    
he  would talk  about  the responsibilities  of the  Natural                                                                    
Resources  Section.  The  section  represented  the  states                                                                     
interest  in  statehood   defense  which  included  ensuring                                                                    
access  to responsible  resource development  and protection                                                                    
of state  sovereignty. Some examples of  the accomplishments                                                                    
within  the section  included  achieving  the land  exchange                                                                    
through  the Izembek  National  Wildlife  Refuge to  connect                                                                    
King Cove and  Cold Bay. The section  also litigated against                                                                    
the roadless  rule trying  to open  up Southeast  Alaska for                                                                    
additional timber  activity   the efforts  were ongoing. The                                                                    
section  was   also  responsible  for  ensuring   access  to                                                                    
easements,  known   as  RS2477s,   including  a   number  of                                                                    
easements that  traversed wild  and scenic  river corridors.                                                                    
The  section  also  litigated   to  defend  against  federal                                                                    
overreach in  fish and game  management and  against federal                                                                    
overreach in  Endangered Species Act cases.  He provided the                                                                    
example  of the  over-designation of  critical habitat  that                                                                    
prevented  responsible   resource  development   in  certain                                                                    
Mr.  Sniffen  continued  to  slide  8  indicating  that  the                                                                    
Environmental  Law  Section,   Transportation  Section,  and                                                                    
Torts and  Workers' Compensation Section also  protected the                                                                    
states  fiscal integrity  and fostered economic development.                                                                    
The  divisions  Environmental  Law  Section represented  the                                                                    
Department of Environmental Conservation  in clean water and                                                                    
air  matters  and  hazardous  waste  discharge  cases.  They                                                                    
recovered state  costs and  penalties related  to violations                                                                    
of state environmental law every  year. In FY 19 the section                                                                    
recovered about  $2.5 million for state  costs and penalties                                                                    
related to violations of state  environmental laws. It was a                                                                    
section that  provided revenue to  the state in a  number of                                                                    
Mr.  Sniffen   conveyed  that  the   Transportation  section                                                                    
represented  the  Department  of Transportation  and  Public                                                                    
Facilities  (DOT)  in all  of  its  work. The  section  also                                                                    
represented  other agencies  that involved  construction and                                                                    
operation  of  the  states  public  facilities,  the  Alaska                                                                    
Marine Highway  System, and airports. He  continued that the                                                                    
Torts and  Workers  Compensation Section defended  the state                                                                    
in tort  cases and suits. It  also defended the state  as an                                                                    
employer  in   Workers   Compensation  cases.   The  section                                                                    
defended the state  in a wide range of tort  claims and also                                                                    
defended  the  state as  an  employer.  The section  handled                                                                    
prisoner litigation, construction litigation,  and a host of                                                                    
different lawsuits directed at the state.                                                                                       
Mr. Sniffen advanced to slide  9 showing the last 3 sections                                                                    
within the department including  the Labor and State Affairs                                                                    
Section, the  Legislation and  Regulations Section,  and the                                                                    
Information Project  Support Section. The  sections provided                                                                    
fundamental  support  in  state   government  in  the  areas                                                                    
mentioned. He  elaborated that the  Labor and  State Affairs                                                                    
Section   ensured   compliance    with   state   employment,                                                                    
procurement,  contracting,  occupational safety,  employment                                                                    
security, and  workers  compensation laws. The  section also                                                                    
represented   the   Department   of  Education   and   Early                                                                    
Development (DEED), the  Department of Administration (DOA),                                                                    
the  Department of  Military  and  Veterans Affairs  (DMVA),                                                                    
Alaska Industrial Development  and Export Authority (AIDEA),                                                                    
and Alaska Energy Authority (AEA).                                                                                              
Mr. Sniffen  continued that  the Legislation  and Regulation                                                                    
Section  was  currently  very busy.  The  section  housed  a                                                                    
statutorily  required regulations  attorney and  oversaw all                                                                    
legislation  drafting   and  regulation  projects   for  the                                                                    
executive  branch.  He  relayed  that  the  Information  and                                                                    
Project Support  Section was often overlooked.  However, the                                                                    
section  provided a  critical  function  advising all  state                                                                    
agencies on  Alaska Public Records Act  and record retention                                                                    
requirements.  The   section  advised  what   was  protected                                                                    
information and on legal issues  involving the use of social                                                                    
media.  The section  was very  busy with  public information                                                                    
requests  in  the age  of  social  media, emails  and  other                                                                    
digital   data   platforms.   The  section   also   provided                                                                    
litigation  and  project  support.  He  cited  a  couple  of                                                                    
examples. He concluded the brief  overview of the Department                                                                    
of  Laws  Civil  Division. He  deferred to  Mr. Skidmore  to                                                                    
review the Criminal Division.                                                                                                   
1:44:25 PM                                                                                                                    
JOHN SKIDMORE,  DEPUTY ATTORNEY GENERAL,  CRIMINAL DIVISION,                                                                    
DEPARTMENT  OF LAW,  reviewed the  mission  of the  Criminal                                                                    
Division  on  slide  10.  He  indicated  that  the  Criminal                                                                    
Division was  where the third  bucket of general  funds came                                                                    
into  play.  Mr. Sniffen  had  talked  about the  first  two                                                                    
buckets found  in the  Civil Division.  The main  mission of                                                                    
the Criminal Division  was to prosecute crime  with the goal                                                                    
of  seeking  justice. The  divisions   mission  was to  seek                                                                    
justice,  promote   public  safety,  and  ensure   that  the                                                                    
criminal   justice  system   functioned  appropriately.   He                                                                    
clarified  that  the  division tried  to  make  things  move                                                                    
through in  a timely  fashion, help manage  costs associated                                                                    
with  the  criminal  justice system,  and  ensure  that  the                                                                    
constitutional   and  legal   rights   were  protected   for                                                                    
witnesses, victims, and the accused.                                                                                            
Mr. Skidmore  moved to  slide 11  to discuss  the duty  of a                                                                    
prosecutor.  Prosecutors were  unlike any  other lawyers  in                                                                    
the  legal  system.  In the  Alaska  Rules  of  Professional                                                                    
Conduct  (3.8) there  was one  rule of  professional conduct                                                                    
that   applied  only   to   prosecutors.   It  stated   that                                                                    
prosecutors  had   the  responsibility  of  a   minister  of                                                                    
justice, not simply that of  an advocate. He highlighted the                                                                    
two quotes on  the slide. The first came from  the Canons of                                                                    
Professional  Ethics from  the American  Bar Association  in                                                                    
1908  where  it  discussed  the primary  duty  of  a  lawyer                                                                    
engaged in public prosecution. It  was not to convict but to                                                                    
ensure that  justice was done.  The second quote  by Justice                                                                    
Southerland  from  a famous  case  in  1935 talked  about  a                                                                    
prosecutor being able  to strike vigorous or  hard blows but                                                                    
not  foul  blows  regarding liberty.  He  continued  that  a                                                                    
prosecutor did  not simply represent a  client, rather, they                                                                    
represented  the  public -  the  communities  at large.  The                                                                    
prosecutors  goal  could not and  should not only  be driven                                                                    
by  seeking  convictions.  A prosecutors   goal  was  public                                                                    
safety  and justice  for  the public,  the  victim, and  the                                                                    
Mr. Skidmore turned to a map  on slide 12. He indicated that                                                                    
the  Criminal Division  was  broken  into regional  district                                                                    
attorneys   offices.  There  were  nine  district  attorneys                                                                    
represented  on the  left-hand side  and the  bottom of  the                                                                    
slide.  The slide  showed the  faces  and the  names of  the                                                                    
district  attorneys   and  the  locations  of   the  offices                                                                    
throughout the  state. The  attorneys listed  supervised and                                                                    
managed  the offices  that  handled  anything from  criminal                                                                    
trespass to  a murder prosecution.  He pointed to  the upper                                                                    
right-hand corner  showing the head of  the Criminal Appeals                                                                    
Section,  Tamara  DeLucia,  and  the  head  of  the  Special                                                                    
Prosecutions  Section, Jack  McKenna.  The Criminal  Appeals                                                                    
Section  handled  all  of the  criminal  appeals  and  post-                                                                    
conviction relief  for cases that  went to federal  court or                                                                    
habeas cases. The Special  Prosecutions Section handled what                                                                    
he  called  boutique  cases.  In  other  words, the  section                                                                    
focused on certain types of  cases related to issues such as                                                                    
child  welfare,  environmental  crimes,   and  a  number  of                                                                    
different crimes.  The section also housed  prosecutors that                                                                    
provided support  to the other offices.  For instance, there                                                                    
were  prosecutors   that  generally  provided   support  for                                                                    
Western Alaska  and Northern  Alaska    some of  the states                                                                     
smaller offices. All  of the state prosecutors  were on call                                                                    
365 days per year, 24-hours  per day. They were available to                                                                    
help law  enforcement with a charging  decision, obtaining a                                                                    
search warrant,  a decision  related to  a homicide,  or any                                                                    
other  law-related   query.  The  prosecutor's   office  was                                                                    
available to responded.                                                                                                         
Mr. Skidmore  indicated slide 13 provided  more detail about                                                                    
the  core  services  the  Criminal  Division  provided.  The                                                                    
division frequently  provided investigation  assistance. For                                                                    
example, in Anchorage the  division had prosecutors assigned                                                                    
to respond to  murder scenes. Prosecutors went  out with law                                                                    
enforcement   to   crime  scenes   at   the   start  of   an                                                                    
investigation which  helped to build better  cases. He noted                                                                    
informal referrals,  informal referrals, and  screenings. He                                                                    
reiterated   the   prosecutors     office   helped   provide                                                                    
assistance to  law enforcement. He  noted the  importance of                                                                    
the  support  staff  to prosecutors  in  the  processing  of                                                                    
cases.  For  example,  support  staff  in  the  prosecutors                                                                     
office contacted  victims to  update them  on the  status of                                                                    
their  cases. They  also helped  to  gather all  appropriate                                                                    
documentation and  made related filings with  the court. The                                                                    
support  staff  provided core  services  8:00  a.m. to  5:00                                                                    
p.m., Monday  through Friday. However,  in every one  of the                                                                    
prosecutors   offices   someone  typically  worked   on  the                                                                    
weekends  as well.  Charges  had to  be  filled quickly,  as                                                                    
crime did not stop on the  weekends. He argued that the work                                                                    
did not stop at the point of conviction.                                                                                        
Mr.  Skidmore  reported that  the  office  also handled  the                                                                    
appellate  process, post-conviction  release, and  petitions                                                                    
to revoke probation. All work  required the resources of the                                                                    
divisions  people. Recruitment and  retention were areas the                                                                    
division  was focusing  on more.  The division  had filed  a                                                                    
report with  the legislature earlier in  February 2020 which                                                                    
highlighted  some of  the  challenges  the department  faced                                                                    
particularly in  the Criminal Division. The  report laid out                                                                    
national trends,  Alaska trends, and how  the department was                                                                    
trying to  respond to  the trends. He  was happy  to address                                                                    
any  questions legislators  might have  about the  report or                                                                    
the  Criminal  Division.  He  would   be  deferring  to  the                                                                    
administrative  services director  to address  the last  two                                                                    
slides that show the departments overall budget.                                                                                
1:51:30 PM                                                                                                                    
Representative  Carpenter  asked  which section  within  the                                                                    
Criminal  Division  handled  public  corruption  cases.  Mr.                                                                    
Skidmore  responded   that  public  corruption   cases  were                                                                    
typically  handled by  the Special  Prosecutions Office,  as                                                                    
they  required  intensive   investigation.  The  cases  were                                                                    
usually  related to  persons in  a  public office  requiring                                                                    
more resources in their prosecution.                                                                                            
1:52:10 PM                                                                                                                    
VALERIE ROSE,  ADMINISTRATIVE SERVICES  DIRECTOR, DEPARTMENT                                                                    
OF  LAW, OFFICE  OF  MANAGEMENT AND  BUDGET,  OFFICE OF  THE                                                                    
GOVERNOR, introduced herself and  indicated it was her first                                                                    
time testifying before the committee.  She had been employed                                                                    
with  the department  for more  than 5  years as  the budget                                                                    
analyst. She  reviewed slide 14  showing the  FY 19 -  FY 20                                                                    
operating  budget  comparison.   She  reported  that  during                                                                    
FY 16,  FY 17,  and FY  18 the  department took  significant                                                                    
reductions but  had remained fairly  flat over  the previous                                                                    
several years. Some  of the major changes  that affected the                                                                    
departments   FY 20  budget were  in the  Criminal Division.                                                                    
She  relayed that  with the  passage of  HB 49  [Legislation                                                                    
passed  in 2019    Short  Title: Crimes;  Sentencing; Drugs;                                                                    
Theft;  Reports] there  was an  increase  to the  designated                                                                    
general  funds (DGF)  in the  FY 20  management plan  column                                                                    
that was  fairly significant  but dropped  back down  in the                                                                    
FY 21  governors  request.  The  change was  from the  Power                                                                    
Cost Equalization (PCE)  funding that was funded  as part of                                                                    
HB 49 to UGF.                                                                                                                   
Ms. Rose highlighted that between FY  19 and FY 20 there was                                                                    
not a full difference in  UGF because the Civil Division had                                                                    
a fund source  change of $750,000. The  Civil Divisions  UGF                                                                    
appropriation  was reduced  by $750,000  and the  divisions                                                                     
interagency  receipt authority  was  increased  by the  same                                                                    
amount.  She pointed  out  there was  a  request before  the                                                                    
legislature  to increase  the  departments  federal  receipt                                                                    
authority   for  the   Criminal  Division.   Currently,  the                                                                    
department  had  a  federal grant  for  its  Medicaid  Fraud                                                                    
Control Unit  that investigated  welfare, fraud,  and abuse.                                                                    
The department  also had a request  in the FY 21  budget for                                                                    
an  increase  to  accommodate  a   grant  from  the  federal                                                                    
government, commonly  referred to as  the AG Barr  Grant, to                                                                    
expand rural prosecutions in Alaska.  The request included 2                                                                    
prosecutors and 1 support staff  to focus on sexual assault,                                                                    
domestic violence, and violent felonies in rural areas.                                                                         
Representative  Carpenter  asked  about the  grant  for  the                                                                    
rural law  enforcement activities. He queried  the length of                                                                    
the   grant.  Ms.   Rose  responded   that  the   grant  was                                                                    
approximately 3 years. However,  in the departments  initial                                                                    
discussions  with  the  U.S.  Department  of  Justice,  they                                                                    
indicated  a willingness  to be  flexible with  the timeline                                                                    
extending it if  necessary and beginning the  grant once the                                                                    
state had authority.                                                                                                            
Co-Chair Johnston  asked if most  of the  departments  other                                                                    
funds  were interagency  receipts. Ms.  Rose responded  that                                                                    
she was correct.                                                                                                                
Co-Chair  Johnston  pointed  to  the increase  of  about  $1                                                                    
million.  She  asked  what  drove  the  increase.  Ms.  Rose                                                                    
responded that the majority of  the amount, $750,000, was an                                                                    
increase to  the department's interagency  receipt authority                                                                    
during FY  20. The department also  had additional authority                                                                    
for  the   statutory  designated  program   receipts  (SDPR)                                                                    
related to the Criminal Division  in the amount of $300,000.                                                                    
The  department would  be able  to  take in  money from  the                                                                    
North Slope Borough  to help support the  cost of re-opening                                                                    
the Utqiagvik office in the 2 Judicial District.                                                                                
Co-Chair   Johnston  asked   about  the   increased  receipt                                                                    
authority  for the  $750,000  and whether  it  was a  budget                                                                    
phenomenon  or something  else.  Ms. Rose  replied that  the                                                                    
interagency receipt  increase was  related to a  fund source                                                                    
change she  had mentioned.  The department took  a reduction                                                                    
in its  UGF appropriation within  the Civil Division  and an                                                                    
equal  amount  of  interagency   receipt  authority  so  the                                                                    
department could  bill client agencies for  the departments                                                                     
legal services.                                                                                                                 
1:56:54 PM                                                                                                                    
Representative  Wool asked  about  an  increased request  in                                                                    
federal  funds for  welfare fraud  investigations. He  asked                                                                    
Ms. Rose to elaborate. Ms.  Rose responded that the increase                                                                    
was not  for Medicaid  fraud but, it  was what  the existing                                                                    
federal authority  was for. She  further explained  that the                                                                    
increase was  for a different federal  grant. Representative                                                                    
Wool asked  for specifics.  Ms. Rose  responded that  it was                                                                    
for the AG BARR Grant.                                                                                                          
Co-Chair Foster  asked Ms. Rose  to expand on  the positions                                                                    
that would  be funded. Ms.  Rose responded that  the funding                                                                    
would pay for 2 prosecutors  and 1 support staff. They would                                                                    
be focused on  sexual assault and domestic  violence as well                                                                    
as violent felonies.                                                                                                            
Co-Chair Foster  asked where  the additional  position would                                                                    
be posted. Ms. Rose thought  the positions would be based in                                                                    
Anchorage. She  also thought the  positions would  be cross-                                                                    
deputized  with the  U.S.  District  Attorneys  office.  Mr.                                                                    
Skidmore added  that the 2  positions would be  in Anchorage                                                                    
within the  special prosecutor's office. He  reiterated that                                                                    
the  special  prosecutors   office focused  on  support  for                                                                    
other  area, particularly  rural locations.  Co-Chair Foster                                                                    
was just curious.                                                                                                               
Representative Josephson  noted that  just over half  of the                                                                    
operating year had transpired and,  the department had about                                                                    
the same  number of vacant  attorney positions as  the prior                                                                    
year. The state  had a vacancy factor for FY19  and FY 20 of                                                                    
about 4 percent. However,  the departments  actual vacancies                                                                    
were  about 12  percent.  He wondered  how  much in  general                                                                    
funds would  the department be  likely to spend  on personal                                                                    
Mr. Sniffen  answered that it  was difficult to  predict, as                                                                    
the department  was actively  trying to  recruit for  all of                                                                    
the  vacant  positions.  He continued  that  the  timing  of                                                                    
hiring the vacant positions would  determine how much of the                                                                    
vacancy  monies would  be  used for  a  particular year.  He                                                                    
relayed  that   the  Criminal  Divisions    recruitment  and                                                                    
retention  issues  were  important  and  were  a  focus.  He                                                                    
indicated  the  Civil  Division was  experiencing  the  same                                                                    
challenges and was trying to  fill its current vacancies. He                                                                    
hoped the  departments  renewed efforts would  help fill the                                                                    
positions  quickly  avoiding  the   vacancy  rate  into  the                                                                    
future. He  reported active  recruitments for  six positions                                                                    
presently within the Civil Division.                                                                                            
2:00:41 PM                                                                                                                    
Representative   Josephson   suggested  that   relative   to                                                                    
retention   and  recruitment,   he  had   engaged  in   long                                                                    
conversations  in the  finance  subcommittee meetings  about                                                                    
the difficulty  of adjusting pay scales  because of built-in                                                                    
statutory  rules that  required  a process  be followed  for                                                                    
partially exempt  personnel and  the like, for  example. The                                                                    
subcommittee had talked about  creating an incentive related                                                                    
to  the  paydown of  student  loans.  He  asked if  such  an                                                                    
incentive  would  be  an  effective  tool  to  help  in  the                                                                    
departments recruitment efforts.                                                                                                
Mr. Sniffen  gave credit to  Mr. Skidmore who  had suggested                                                                    
the  idea  to  him  earlier  in  the  year  when  they  were                                                                    
brainstorming on ways  to incentivize people to  work in the                                                                    
departments   rural  offices.  He recalled,  when  going  to                                                                    
college, that if  a person took out student  loans to attend                                                                    
college and upon completion wanted  to work in a rural area,                                                                    
Alaska  student loans  could  be forgiven  up  to a  certain                                                                    
amount. He was  unsure if the program still  existed. He and                                                                    
Mr. Skidmore  were thinking  of a  similar incentive  to get                                                                    
lawyers  to work  in areas  such as  Bethel and  other rural                                                                    
areas. He  had not spent  time looking into the  legality of                                                                    
such and incentive but thought it was worth exploring.                                                                          
Representative   Josephson   asked    about   the   upcoming                                                                    
supplemental.  The   legislature  was  always   looking  for                                                                    
offsets  because   of  increases  to  Medicaid.   The  state                                                                    
experienced  fires and  other things  as well.  He suggested                                                                    
that the department had used  the vacancy factor opportunity                                                                    
to hire  expensive outside contractors.  He asked  about the                                                                    
terms  of the  Consovoy contract  that was  signed in  early                                                                    
January. He also queried the  negative impact of using it as                                                                    
an offset.                                                                                                                      
Mr.  Sniffen  responded  that the  contract  was  issued  in                                                                    
January.  The  department  was not  far  into  the  contract                                                                    
presently, just over a month.  The work for the contract was                                                                    
not particularly  active currently.  He was unsure  how much                                                                    
of the  contract would be  spent, it depended  on litigation                                                                    
in the year. In terms of  adjusting the budget in a way that                                                                    
might inhibit the departments  ability  to pay the contract,                                                                    
he  was  unclear what  the  Attorney  General would  do.  He                                                                    
suggested  that  if  the  department   had  a  general  fund                                                                    
reduction,  the  reductions might  have  to  come from  some                                                                    
other  places  so  that  it could  continue  to  pursue  the                                                                    
matters the  Attorney General felt were  most important. The                                                                    
department would have to look  at its overall budget picture                                                                    
and decide where its priorities  were and how it would spend                                                                    
its money going forward.                                                                                                        
2:04:40 PM                                                                                                                    
Co-Chair Johnston asked how much  of the department's budget                                                                    
was  wrapped up  in contract  services. Mr.  Sniffen thought                                                                    
the outside counsel contracts for  the Department of Law was                                                                    
about 1 percent of the Civil Divisions Budget.                                                                                  
Co-Chair Johnston asked  if the rate was  fairly stable from                                                                    
year-to-year. Mr.  Sniffen responded that looking  back 5 or                                                                    
6  years the  department used  to spend  much more  money on                                                                    
outside counsel  contracts when it was  litigating large oil                                                                    
and gas  cases. The  return on  that money  was significant.                                                                    
Such matters had  gone away resulting in a  dramatic drop in                                                                    
outside  counsel  spending  over   the  prior  5  years.  He                                                                    
suggested  that at  any point  an  unanticipated case  could                                                                    
come along.  He reminded  members of  the BP  corrosion case                                                                    
that  had arisen  a few  years prior  where outside  counsel                                                                    
assistance was  needed, as  it was too  large to  handle in-                                                                    
house.  Other cases  arose that  the  Attorney General  felt                                                                    
were important to pursue.  Overall, the departments  outside                                                                    
counsel  spend had  decreased and,  the department  was very                                                                    
judicial  about the  use of  outside counsel.  Even when  it                                                                    
used outside  counsel, the in-house  lawyers did as  much of                                                                    
the work  as possible saving  the billing rates  for outside                                                                    
counsel for only necessary things.                                                                                              
Co-Chair  Johnston  noticed  earlier  in  the  week  a  case                                                                    
between  the  legislature and  the  governor  that would  be                                                                    
going on to  the Supreme Court. She asked  if the accounting                                                                    
for such a case involved  interagency receipts or whether it                                                                    
would  be assumed  by the  department. Mr.  Sniffen believed                                                                    
all of  the money was assumed  in the department as  part of                                                                    
its general fund spending.                                                                                                      
Representative Carpenter  asked about current  vacancy rates                                                                    
and how they  compared to the previous 5  years. Mr. Sniffen                                                                    
was aware that  the department sent out a  recruitment for 3                                                                    
positions in  the Natural Resources Section  and was waiting                                                                    
for the recruitment  to run its course.  The department also                                                                    
had  recruitments posted  in the  Environmental Conservation                                                                    
Section to replace  some individuals who had  left, and also                                                                    
for  a paraprofessional  in the  same section.  There was  a                                                                    
recruitment out  for the Transportation Section  for someone                                                                    
who had left recently to  assist with airport work. He noted                                                                    
the  department recently  filling  2 positions  in the  CINA                                                                    
Section, a  section which now  had a full slate  of lawyers.                                                                    
It was one  of the most difficult sections  to keep staffed.                                                                    
He thought the department had  recently filled a position in                                                                    
the Labor and  State Affairs Section. He was  unsure if that                                                                    
recruitment  was still  active. There  were recruitments  in                                                                    
various sections and in different stages of process.                                                                            
Representative  Carpenter  thought   that  Mr.  Sniffen  had                                                                    
talked about  approximately 8 positions.  He asked  if those                                                                    
were the  only vacancies.  Mr. Sniffen responded  that there                                                                    
were about 10 vacancies in the Civil Division.                                                                                  
Ms.  Rose turned  to the  final slide  of the  presentation,                                                                    
slide 15, which showed a  breakdown of the departments  fund                                                                    
sources by fund category.  She highlighted the more detailed                                                                    
listing of  the fund  sources within  the department  on the                                                                    
bottom  left  of the  slide.  She  relayed that  there  were                                                                    
significant changes  as a  result of the  passage of  HB 49:                                                                    
the federal grant  for the AG Barr  expansion of prosecution                                                                    
in rural  Alaska and the  reopening of the  Utqiagvik Office                                                                    
in the 2   Judicial District. Both items were related to the                                                                    
Criminal  Division and,  the changes  could  be seen  across                                                                    
FY 20  and  FY 21.  She  also  indicated that  overall,  the                                                                    
department  had a  variety of  different  fund sources.  She                                                                    
noted  the   department  having  a  significant   amount  of                                                                    
interagency receipt authority, most  of which resided within                                                                    
the  Civil   Division  to  allow  for   interagency  receipt                                                                    
billings  for  its client  agencies.  The  remainder of  the                                                                    
funding was most significantly unrestricted general funds.                                                                      
^FY 21  BUDGET OVERVIEW:  DEPARTMENT OF  COMMERCE, COMMUNITY                                                                  
AND ECONOMIC DEVELOPMENT                                                                                                      
2:10:06 PM                                                                                                                    
Co-Chair Foster  invited testifiers  from the  Department of                                                                    
Commerce, Community and Economic Development to the table.                                                                      
JULIE  ANDERSON,   COMMISSIONER,  DEPARTMENT   OF  COMMERCE,                                                                    
COMMUNITY AND  ECONOMIC DEVELOPMENT, introduced  herself and                                                                    
thanked  members  for the  opportunity  to  come before  the                                                                    
committee.  She  began  with  the  PowerPoint  Presentation:                                                                    
"FY2021 Department and Budget  Overview" (copy on file). She                                                                    
turned to slide  2 to discuss the mission  and core services                                                                    
of  the  department.  She  began   that  the  Department  of                                                                    
Commerce, Community, and Economic  Development (DCCED) was a                                                                    
small but  diverse department comprised of  6 core divisions                                                                    
and 7  corporations. The departments  functions  touched the                                                                    
lives of  Alaskans in more  ways than most  people realized.                                                                    
The  department handled  day-to-day functions  like ensuring                                                                    
that  physicians  were  licensed through  the  Corporations,                                                                    
Business,  and  Professional Licensing  Division,  examining                                                                    
financial institutions to  large scale activities regulating                                                                    
the price of  power and utilities through  RCA and providing                                                                    
loan financing  for the local hydroelectric  project through                                                                    
the  Alaska  Industrial  Development  and  Export  Authority                                                                    
Commissioner  Anderson continued  that while  the department                                                                    
put  each of  its programs  into buckets  including economic                                                                    
growth, affordable  energy, strong communities,  or consumer                                                                    
protection, most of its agencies  would fall into several of                                                                    
the   buckets.  One   of  the   highlights  of   serving  as                                                                    
commissioner  was  seeing how  all  of  the agencies  worked                                                                    
together towards  their common goals and  seeing the passion                                                                    
people  had  in  providing  services  to  the  residents  of                                                                    
Commissioner  Anderson moved  to slide  3 which  provided an                                                                    
overview of  the department's organization. She  relayed the                                                                    
6  core  divisions  within  the  department:  Administrative                                                                    
Services;  Banking and  Securities;  Community and  Regional                                                                    
Affairs;    Corporations,    Business,   and    Professional                                                                    
Licensing;   Economic   Development;  and   Insurance.   The                                                                    
department also  had 7  corporations within  the department:                                                                    
the  Alaska Energy  Authority (AEA),  the Alaska  Industrial                                                                    
Development  and   Export  Authority  (AIDEA),   the  Alaska                                                                    
Gasline Development  Corporation (AGDC), the Alaska  Oil and                                                                    
Gas  Conservation  Commission  (AOGCC), the  Alaska  Seafood                                                                    
Marketing  Institute  (ASMI),   the  Alcohol  and  Marijuana                                                                    
Control  Office (AMCO),  and  the  Regulatory Commission  of                                                                    
Alaska(RCA).  The  Alaska  Railroad Corporation  was  housed                                                                    
within  the department  but was  exempt  from the  Executive                                                                    
Budget  Act. She  would turn  the presentation  over to  the                                                                    
Administrative Services Director, Michaela Fowler.                                                                              
2:13:27 PM                                                                                                                    
MICAELA    FOWLER,    ADMINISTRATIVE   SERVICES    DIRECTOR,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
OFFICE  OF MANAGEMENT  AND BUDGET,  OFFICE OF  THE GOVERNOR,                                                                    
turned  to  slide  4,  which   showed  the  changes  in  the                                                                    
departments  budget  from FY  19 to FY  21. She  pointed out                                                                    
that the  department's unrestricted general fund  budget had                                                                    
steadily  decreased.  In  FY  20  there  was  a  $1  million                                                                    
reduction in the Community and  Regional Affairs Division as                                                                    
well as in the Economic  Development Division. The Community                                                                    
and  Regional  Affairs Division  reduction  was  made up  of                                                                    
entirely  general funds.  The Reduction  to the  Division of                                                                    
Economic  Development  was  a   mix  of  fund  sources.  She                                                                    
indicated  that when  she got  to the  division slides,  she                                                                    
would  go into  additional detail  about how  the reductions                                                                    
had been managed internally.                                                                                                    
Ms.  Fowler continued  that  the increase  seen  in DGF  was                                                                    
primarily the  result of  AOGCC having  moved to  DCCED from                                                                    
the Department of  Administration. The significant reduction                                                                    
in   Other   funds for  FY  21  was  the AGDC  $6.2  million                                                                    
decrease  proposed  in  the   governors   budget.  She  also                                                                    
highlighted  the  significant  bump in  federal  funding  in                                                                    
FY 20. The Alaska Seafood Marketing  Institute was awarded a                                                                    
$7.5  million  USDA foreign  agricultural  grant  for FY  19                                                                    
through  FY 23.  The grant  was booked  in FY  20 and  was a                                                                    
multi-year  appropriation. Multi-year  appropriations showed                                                                    
up in year one but not in the out years.                                                                                        
Ms. Fowler  moved to  slide 5 which  provided a  deeper look                                                                    
into the fund sources  within the department. The department                                                                    
had 4  formula programs,  the largest of  which was  the PCE                                                                    
Program. The  three revenue sharing  programs that  were run                                                                    
through  the Division  of Community  and Regional  Affairs -                                                                    
payment  in lieu  of taxes,  national  forest receipts,  and                                                                    
shared fisheries  taxes    made up  the  other   and federal                                                                    
line.  She reported  that the  department  received over  50                                                                    
percent of  its funding  through DGF.  She pointed  out that                                                                    
the slide  reflected the  departments  contributions  to the                                                                    
general   fund  through   program   receipts,  third   party                                                                    
collections,   fines  and   forfeitures,  settlements,   and                                                                    
insurance premium  taxes. In FY 19  the department deposited                                                                    
more than $102  million into the general  fund not including                                                                    
the  AIDEA dividend.  The department  had  been diligent  in                                                                    
identifying areas  where it could gain  efficiencies but had                                                                    
been  cautious to  avoid areas  that would  have an  adverse                                                                    
effect  on  its  contributions  to  the  general  fund.  For                                                                    
example,  if  resources  were reduced  in  the  Division  of                                                                    
Banking  and   Securities,  they   could  not   conduct  the                                                                    
examinations  that would  result in  program receipts  which                                                                    
contributed approximately $15 million  into the general fund                                                                    
purse per year.                                                                                                                 
2:16:33 PM                                                                                                                    
Representative Knopp referenced slide  4 and asked about the                                                                    
AGDC  reduction  of  $6.2  million.   He  wanted  to  better                                                                    
understand how  the funding  for AGDC  worked and  asked for                                                                    
clarification  around  the  reduction. He  wondered  if  the                                                                    
money  was  ghost  money.  Ms.  Fowler  responded  that  the                                                                    
decrease  was a  reduction  to AGDCs   operating costs.  She                                                                    
reported  that AGDC  anticipated needing  significantly less                                                                    
staff in FY  21. There would be less funding  drawn from the                                                                    
AGDC fund. It was effectively a  slowing down of a draw from                                                                    
AGDCs fund. The money would remain in the fund.                                                                                 
Representative Knopp  clarified that the money  would remain                                                                    
in the fund  but, AGDC would not be spending  it. Ms. Fowler                                                                    
responded, "That's correct."  Representative Knopp suggested                                                                    
that  they were  not UGF  dollars, they  just stayed  in the                                                                    
fund. Ms. Fowler responded affirmatively.                                                                                       
Vice-Chair Ortiz referred  to slide 4. He asked  if he would                                                                    
see a larger reduction in UGF  if the chart went as far back                                                                    
as FY 16,  compared to what he was seeing  between FY 19 and                                                                    
FY 21. Ms. Fowler  responded affirmatively. She offered that                                                                    
a  significant  reduction  would  be  seen  over  the  years                                                                    
Representative Ortiz specified.  The departments  UGF budget                                                                    
had  been reduced  approximately 30  percent to  40 percent.                                                                    
She  could  get   back  to  the  committee   with  an  exact                                                                    
percentage at a later time.                                                                                                     
Vice-Chair  Ortiz asked  about  opportunity costs  resulting                                                                    
from  the previous  reductions.  Ms.  Fowler responded  that                                                                    
there used to  be grants to the  Alaska Regional Development                                                                    
Organizations   (ARDOR)  program   that  came   through  the                                                                    
department that were  no longer being given  to the program.                                                                    
She  noted that  the  Division of  Economic Development  had                                                                    
been  reduced from  an  agency  that, in  FY  16,  was a  $3                                                                    
million  agency. However,  currently, they  were a  $564,000                                                                    
agency.  The department  had had  significant reductions  in                                                                    
the  area  being discussed.  The  department  had also  seen                                                                    
significant  reductions in  the  Division of  Administrative                                                                    
Services.  The division  used to  have  general funds  which                                                                    
were  presently  interagency  receipt  authority.  She  gave                                                                    
credit  to the  previous  Administrative Services  Director,                                                                    
Catherine Reardon, for managing  the reductions with minimal                                                                    
impact to the public.                                                                                                           
Vice-Chair  Ortiz referred  to the  organizational chart  on                                                                    
slide 3.  He asked about  ASMIs  connection with  DCCED. Ms.                                                                    
Fowler  responded  that ASMI  was  housed  within DCCED  for                                                                    
administrative purposes. She noted  she had been remiss when                                                                    
speaking  to significant  areas  of  reductions. The  Alaska                                                                    
Seafood Marketing  Institute no longer had  any general fund                                                                    
dollars  contributed  to its  agency     they were  entirely                                                                    
funded through receipts.                                                                                                        
Vice-Chair Ortiz  thought that  at one point,  ASMI received                                                                    
about $3  million in  UGF dollars. He  was uncertain  of the                                                                    
amount but  was aware of  a significant contribution  of UGF                                                                    
dollars towards the ASMI program. Ms. Fowler concurred.                                                                         
2:22:08 PM                                                                                                                    
Representative Josephson  noted that the department  used to                                                                    
have oversight  over random grants  like Legal  Services. He                                                                    
asked if  DCCED still housed and  administered those grants.                                                                    
Ms.  Fowler  responded  that  the   grant  to  Alaska  Legal                                                                    
Services was still in the  departments  operating budget and                                                                    
the department still administered  the grants. She mentioned                                                                    
that  on the  capital  side there  were significantly  fewer                                                                    
grants  being administered  than there  were some  years ago                                                                    
when the  department had more  robust capital  programs. The                                                                    
operating grants remained.                                                                                                      
Representative  Josephson asked  if  the  grants would  have                                                                    
been previously  identified as being under  the departments                                                                     
prevue.  He asked  if he  was accurate.  Ms. Fowler  replied                                                                    
that the  Alaska Legal Services  grant was  operating. There                                                                    
were some grants that were  operating grants and some grants                                                                    
that  were  capital grants.  She  restated  that the  Alaska                                                                    
Legal Services  grant was an  operating grant.  Whereas, the                                                                    
other  grants were  identified within  the department  under                                                                    
the capital budget.                                                                                                             
Ms. Fowler  continued to  slide 6 which  showed a  visual of                                                                    
the  budget   by  fund  source.   She  highlighted   that  a                                                                    
significant portion of the departments   budget was DGF and,                                                                    
a very small portion was UGF.                                                                                                   
Ms.  Fowler advanced  to  the  pie chart  on  slide 7  which                                                                    
showed   the   budget  by   line   item.   In  response   to                                                                    
Representative Josephsons   questions regarding  grants, she                                                                    
pointed out  that grants  made up almost  30 percent  of the                                                                    
departments  budget.  She added  that Personal  Services was                                                                    
the bulk of the remainder of the departments budget.                                                                            
Ms. Fowler advanced to slide  8 regarding noteworthy changes                                                                    
made  to  the FY  20  operating  budget. She  reported  that                                                                    
during  the  previous  budget  cycle   the  budget  for  the                                                                    
Division of  Community and Regional  Affairs was  reduced by                                                                    
$1  million. The  division had  been active  in reorganizing                                                                    
its  local government  staff and  had established  a central                                                                    
resource   desk   to   improve   responsiveness   to   local                                                                    
governments in order to manage  the reduction. She indicated                                                                    
that when  the decrement was  before the legislature  in the                                                                    
FY 20  budget cycle, the division  anticipated approximately                                                                    
$450,000 of the reduction  would apply to personal services.                                                                    
However, the  reduction was closer to  $650,000 for personal                                                                    
services based on  where the division had been  able to save                                                                    
money. The  Division of Community  and Regional  Affairs had                                                                    
experienced significant  attrition over  the prior  year and                                                                    
had been managing within that  attrition in order to achieve                                                                    
the  budget decrement  without impacting  services to  local                                                                    
communities to the greatest extent  possible. She noted that                                                                    
in FY  21 there  was a  request to  delete 6  positions that                                                                    
were  currently  vacant  in  order  to  align  the  personal                                                                    
services with the divisions funding level.                                                                                      
Ms. Fowler  addressed the reduction  of $239,500 UGF  in the                                                                    
Division of  Economic Development. In  FY 20 all  other fund                                                                    
sources for the  division were deleted. The  division use to                                                                    
receive funds  related to  vehicle rental  taxes as  well as                                                                    
having   some  empty   federal  authority.   Currently,  the                                                                    
Division of  Economic Developments  budget was  $546,600. As                                                                    
part  of   the  reduction,  3  of   5  economic  development                                                                    
positions   were   deleted.   The   Division   of   Economic                                                                    
Development currently  had 2 positions  as well as  a shared                                                                    
director  position. She  reported that  the investments  and                                                                    
the economic development components  were both housed within                                                                    
the  Division  of  Economic  development.  The  Division  of                                                                    
Economic  Development director  position was  shared between                                                                    
the two.                                                                                                                        
2:27:29 PM                                                                                                                    
Ms. Fowler  explained the notable  changes to DCCED's  FY 21                                                                    
operating budget on slide 9.  She explained that the Kawerak                                                                    
Inc. named  recipient grant was  eliminated in  the proposed                                                                    
budget.  It  was  a  grant for  federal  DOT  essential  air                                                                    
service that used  to require the state  to provide matching                                                                    
funds. The federal government had  revised its essential air                                                                    
service  listing  and  had added  Diomede  to  that  listing                                                                    
negating  the need  for the  grant.  The federal  government                                                                    
would be paying  for 100 percent of the  service without any                                                                    
match requirement.                                                                                                              
Ms. Fowler continued that there  was a proposal to eliminate                                                                    
the economic development funding and  to replace it with the                                                                    
Alaska  Development  Team,  a multi-year  pilot  program  to                                                                    
establish  a  501(c)(3)  or   an  alternative  structure  to                                                                    
outsource  economic development  functions and  to design  a                                                                    
new  model  for  economic  development  in  the  state.  The                                                                    
commissioner would  speak to the  idea in greater  detail in                                                                    
the  near  future.  She  reported  that  there  was  also  a                                                                    
proposal to  eliminate the Capstone Avionics  Revolving Loan                                                                    
Fund, a loan  fund that would be sunsetting. As  a result of                                                                    
the  sunset  it  would  no   longer  be  necessary  for  the                                                                    
operating funds to continue in FY 21.                                                                                           
Representative  LeBon  asked  Ms.   Fowler  to  explain  the                                                                    
Capstone Avionics Loan Fund. He  wondered how it worked. Ms.                                                                    
Fowler  responded that  it was  a  loan fund  for pilots  to                                                                    
comply with  new federal  requirements for  their navigation                                                                    
systems.  Pilots   had  several   years  to   upgrade  their                                                                    
aircrafts  to comply  with the  new federal  standards which                                                                    
took  effect  on January  1,  2020,  the  same time  of  the                                                                    
program sunset.                                                                                                                 
Representative LeBon  noted that the aviation  community met                                                                    
the expectations of the revolving  loan fund. He wondered if                                                                    
providing financial  assistance was no longer  required. Ms.                                                                    
Fowler  replied that  the aviation  community had  made some                                                                    
use of the  program. However, the program had  not been used                                                                    
heavily. The deputy director of  the division reached out to                                                                    
the aviation  community to  make sure  there was  no concern                                                                    
with  the program  being allowed  to sunset.  Representative                                                                    
LeBon commented that his interest  was perked anytime he saw                                                                    
the term revolving loan fund used.                                                                                              
Representative Josephson noted Ms.  Fowler had indicated the                                                                    
commissioner  would go  into further  detail about  what was                                                                    
meant by outsourcing economic  development functions. He was                                                                    
open to  hearing about  the topic.  However, he  thought the                                                                    
committee would be  looking at HB 205  (the operating budget                                                                    
legislation) in earnest within 2  weeks. He wanted to better                                                                    
understand  what  she meant  in  terms  of a  timeline.  Ms.                                                                    
Fowler clarified she meant in a couple of slides.                                                                               
Ms.  Fowler   continued  to  review   the  changes   to  the                                                                    
department's  FY  21  operating  budget  on  slide  10.  She                                                                    
relayed  that   there  was  a  proposal   to  reduce  AGDCs                                                                     
operating expenditures  by $6.2  million which  would result                                                                    
in  the  deletion  of  10 full-time  positions  and  1  non-                                                                    
permanent  position  within  AGDC.   The  objective  of  the                                                                    
reduction  was to  align with  AGDCs   expectations for  the                                                                    
level of  service necessary after the  completion of Federal                                                                    
Energy  Regulatory Commission  (FERC)  licensing. There  was                                                                    
also a proposal to reduce  PCE endowment funding in order to                                                                    
align  it  with  historic  actuals.  It  would  not  have  a                                                                    
material  impact on  the program.  Rather,  it would  reduce                                                                    
excess authority in the PCE appropriation.                                                                                      
2:32:48 PM                                                                                                                    
Representative Carpenter  asked how many positions  would be                                                                    
left with  the reduction  of 11  positions within  AGDC. Ms.                                                                    
Fowler responded that 9 full-time  positions and 6 part-time                                                                    
positions  would remain  with  an operating  budget of  $3.4                                                                    
Co-Chair  Foster clarified  that  the PCE  Program would  be                                                                    
fully funded according  to the formula that  had existed for                                                                    
many years.  He explained  that the  earnings from  the fund                                                                    
would  first go  to pay  for  PCE and,  the remaining  funds                                                                    
would go  towards community assistance. If  additional funds                                                                    
were  left  over,  they  would  fund  renewable  energy.  He                                                                    
reassured the public that there  was no funding reduction to                                                                    
the PCE program.                                                                                                                
Commissioner Anderson addressed  the state's economic growth                                                                    
on slide  11 and slide 12.  She would be discussing  some of                                                                    
the divisions within the department.  She indicated that the                                                                    
department  focused  many  of  its  activities  on  economic                                                                    
growth.  The  Division  of  Economic  Development  with  the                                                                    
investment component was a great  job creator for the state.                                                                    
The revolving  loan funds were keeping  Alaskans and Alaskan                                                                    
fisheries   as    its   permit   holders    and   supporting                                                                    
entrepreneurs  throughout  the  state.  She  continued  that                                                                    
while talking  about economic  development in  rural Alaska,                                                                    
it  was important  to  note that  the  Division of  Economic                                                                    
Development   and   the    Division   of   Investments   had                                                                    
administrated  dozens of  loan  funds over  the previous  50                                                                    
years.  In FY  19, the  loan funds  created or  retained 731                                                                    
jobs through new loan  requests, assumptions, and extensions                                                                    
and  had created  or  retained over  21,000  jobs since  the                                                                    
department started  tracking employment beginning  in FY 96.                                                                    
The  jobs   were  created  from  small   business  startups,                                                                    
expansion, or  diversification. There were  currently active                                                                    
loans in  132 communities across Alaska.  The department had                                                                    
9 revolving loan programs.                                                                                                      
Representative  LeBon  commented  that many  years  ago  the                                                                    
division  engaged   in  direct   lending  to   small  Alaska                                                                    
businesses. He asked what type  of activities the department                                                                    
was  engaged in  currently.  He wondered  if  the state  was                                                                    
involved  in any  direct lending  programs  to small  Alaska                                                                    
Commissioner  Anderson spoke  to the  departments  revolving                                                                    
loan funds.  In addition  to Capstone Avionics,  which would                                                                    
be sunsetting, there  was the bulk fuel  revolving loan fund                                                                    
that provided  loan funds to  communities within  Alaska and                                                                    
other  entities  for fuel.  She  noted  several other  funds                                                                    
including  the Commercial  Charter  Fishery  Loan Fund,  the                                                                    
Commercial  Fishing  Revolving   Loan  Fund,  the  Fisheries                                                                    
Enhancements Fund,  the Mariculture  Fund, the  Alaska Micro                                                                    
Loan, the  Rural Development Initiative Fund,  and the Small                                                                    
Business Economic Development Fund.                                                                                             
Representative  LeBon  asked  if   any  of  the  loan  funds                                                                    
required bank participation.  Commissioner Anderson wanted a                                                                    
2:37:15 PM                                                                                                                    
JIM   ANDERSEN,  DEPUTY   DIRECTOR,  DIVISION   OF  ECONOMIC                                                                    
DEVELOPMENT, DEPARTMENT OF  COMMERCE, COMMUNITY AND ECONOMIC                                                                    
DEVELOPMENT, introduced  himself. He  responded that  all of                                                                    
the loan funds  had a bank denial requirement  on them other                                                                    
than  the  Rural  Development  Initiative  Fund.  The  Rural                                                                    
Development  Initiative Fund  was a  direct lending  program                                                                    
only in rural communities  with 2,500 people, in communities                                                                    
connected by  rail or  road to  Anchorage or  Fairbanks with                                                                    
2,500 people, or  communities not connected by  rail or road                                                                    
to Anchorage or Fairbanks with 5,000 people.                                                                                    
Representative Knopp was  not sure to whom  he should direct                                                                    
his  question. He  was confused  about the  multi-year pilot                                                                    
program   establishing  a   501(c)(3)  that   was  discussed                                                                    
earlier. He thought the money  from the Capstone project was                                                                    
being  funneled to  the pilot  program. He  asked if  he was                                                                    
correct. He  queried who was  putting the  program together.                                                                    
He wanted additional details.                                                                                                   
Commissioner  Anderson  was  happy  to  discuss  the  Alaska                                                                    
Development  Team  next.  She wondered  if  there  were  any                                                                    
further  questions for  the deputy  director. Representative                                                                    
Knopp   asked   for   further  information   regarding   the                                                                    
development team and the $200  million for in-state projects                                                                    
through  McKinley   Capital  and  other   organizations.  He                                                                    
wondered if there were any interties.                                                                                           
Commissioner Anderson responded  that the Alaska Development                                                                    
Team was the economic  development component of the Division                                                                    
of Economic  Development. The  department was  proposing for                                                                    
the Alaska Development Team to  focus on doing new business,                                                                    
investing in Alaska, and working  with private industries to                                                                    
help grow  Alaska. The  funding proposal  was to  take money                                                                    
from  the Capstone  Aviation Fund  and use  $2.8 million  to                                                                    
fund a 3-year pilot program  for the Alaska Development Team                                                                    
to  pursue different  opportunities  and  models to  provide                                                                    
long-term  economic development  through in  the state.  The                                                                    
department  was  contemplating  whether  the  pilot  program                                                                    
should  be done  through a  public/private partnership  with                                                                    
the  potential of  creating a  501(c)(3) non-profit  entity.                                                                    
The model was being carried out  in other states. One of the                                                                    
things  the department  had started  doing was  benchmarking                                                                    
what other  states had  done. She  was a  part of  the State                                                                    
Economic  Executives Network,  an organization  of statewide                                                                    
economic  development  professionals who  were  benchmarking                                                                    
the current  practices of other  states. She wanted  to find                                                                    
out  what   the  best  model   would  be  for   Alaska.  She                                                                    
anticipated  that the  $2.8 million  would be  used for  the                                                                    
3-year   pilot    program   continuing    current   economic                                                                    
development activities  and looking  at what model  would be                                                                    
best  for  Alaska  into  the future.  She  would  bring  the                                                                    
information   back  to   the   legislature   for  a   robust                                                                    
conversation.  She   explained  that   some  states   had  a                                                                    
partnership  with private  industry  similar  to the  Alaska                                                                    
Travel  Industry Association.  Her goal  for the  department                                                                    
was to look at long-term economic development efforts.                                                                          
Representative  Knopp  noted   the  commissioner's  comments                                                                    
about  remaining  politically  neutral.  He  commented  that                                                                    
politics  accompanied any  appropriation.  He  asked if  the                                                                    
department was simply in the  exploratory stages relating to                                                                    
the  development team.  Commissioner  Anderson replied  that                                                                    
the department was  in the exploratory stages  of the Alaska                                                                    
Development  Team.  She  noted   a  chart  that  showed  the                                                                    
department  in  the  planning  stages.  The  department  was                                                                    
currently  looking  at  all of  the  possible  options.  She                                                                    
welcomed any input from legislators.                                                                                            
2:43:17 PM                                                                                                                    
Co-Chair  Johnston  understood  the department  was  in  the                                                                    
exploratory  stage. She  was familiar  with what  some other                                                                    
states  did   such  as  a   co-investment.  She   asked  for                                                                    
clarification  as   to  how  the  department   intended  for                                                                    
companies to  move in. Commissioner Anderson  explained what                                                                    
she meant by  co-investment. It was possible  that a private                                                                    
501(c)(3) organization could be  funded partially by private                                                                    
money and  partially with state funding  to provide economic                                                                    
development  efforts. The  entity  would be  looking at  the                                                                    
different available  incentive programs the state  could use                                                                    
to attract investment. Currently,  she was talking about the                                                                    
initial  organization model  for  the  delivery of  economic                                                                    
development programs in Alaska.                                                                                                 
Co-Chair   Johnston   highlighted  the   Alaska   Industrial                                                                    
Development  and Export  Authority  (AIDEA)  and the  Alaska                                                                    
Housing Finance Corporation (AHFC)  both doing various parts                                                                    
of  economic  development.  She also  mentioned  the  Alaska                                                                    
Regional Development  Organizations (ARDORS) still  being in                                                                    
existence but  no longer affiliated  with the  state without                                                                    
funding. She  suggested that  while it  was always  good for                                                                    
the state to  be open for business and to  always be looking                                                                    
into   further  economic   development,   she  thought   the                                                                    
department seemed  to be in  the planning stages.  She asked                                                                    
why the  state would  be looking at  a 3-year  pilot program                                                                    
outside of the  department. She thought it might  be best to                                                                    
do the planning and vetting in-house.                                                                                           
Commissioner  Anderson responded  that AIDEA  was doing  one                                                                    
piece. Both of  the funds the department  was requesting was                                                                    
to fund  the team the  department was proposing  to continue                                                                    
to  work  with industry  to  find  out Alaskas   competitive                                                                    
advantages.  The team  was  currently  working towards  such                                                                    
efforts in  addition to looking  at a model for  the future.                                                                    
The reason  the department was  calling the project  a pilot                                                                    
program  was because  the intent  was to  continue with  its                                                                    
current  economic  development   efforts  working  with  all                                                                    
entities  at the  state, federal,  and local  levels and  to                                                                    
find  the  best  model  of delivery  into  the  future.  The                                                                    
department would continue on its  current path while looking                                                                    
for alternatives for the future.                                                                                                
2:47:00 PM                                                                                                                    
Co-Chair Johnston  indicated there were a  couple of aspects                                                                    
that gave  her pause.  First, she  noted the  disfunction of                                                                    
the  state  and  the  many   silos  within  government.  She                                                                    
wondered how  the project  would not  be just  another silo.                                                                    
She  mentioned economic  development  within the  University                                                                    
and in  communities. She reiterated her  question about what                                                                    
made the pilot project different.                                                                                               
Commissioner   Anderson  responded   that   what  made   the                                                                    
particular  team  different  was  that  the  department  was                                                                    
already working with  all of the entities.  She talked about                                                                    
working  with  ARDORS  Program which  was  moved  under  the                                                                    
Division of Community and Regional  Affairs in order to have                                                                    
a closer connection  to knowing what was going on  in all of                                                                    
Alaska.  It was  important to  her that  the department  was                                                                    
growing the economy in all  regions of Alaska. She mentioned                                                                    
that the  Alaska Development Team  was working  closely with                                                                    
the Division  of Community and  Regional Affairs.  They were                                                                    
finding tools  and ways  to bring the  whole picture  of the                                                                    
state  into one  area  to  maximize on  what  people had  to                                                                    
contribute.  She  noted  working   with  the  Department  of                                                                    
Natural  Resources (DNR),  the Department  of Fish  and Game                                                                    
(DFG), and  all of the  economic agencies within  the state.                                                                    
She  noted   that  one   of  the   departments   development                                                                    
executives was  working with  the University  regarding what                                                                    
it  could do  to spur  economic development.  The University                                                                    
was looking  at the  programs it  provided to  coalesce some                                                                    
capitalization of  its resources and assets  to attract more                                                                    
research  and  industry  to  the   state.  She  thought  the                                                                    
difference  of the  team was  that it  was working  to knock                                                                    
down the silos by working  together. She provided an example                                                                    
regarding   the  mariculture   industry.   There  had   been                                                                    
difficulties  obtaining permits.  The department  intervened                                                                    
by meeting with  the taskforce and other  entities to figure                                                                    
out  how  to  resolve  the  issue. The  group  was  able  to                                                                    
streamline the  process and added 2  additional positions to                                                                    
move  permitting forward.  She  also  noted working  closely                                                                    
with AIDEA and all entities collaboratively.                                                                                    
Representative  Josephson   appreciated  the  commissioner's                                                                    
comments.  He  had  met  with  members  of  the  mariculture                                                                    
industry earlier  in the day.  They had indicated  that they                                                                    
needed additional  financial help in the  amount of $500,000                                                                    
for  their shellfish  poisoning testing.  They did  not have                                                                    
any  other  request.  The  aide would  help  to  grow  their                                                                    
2:51:12 PM                                                                                                                    
Representative Knopp  appreciated what the  commissioner and                                                                    
the department were trying to  do. However, he thought there                                                                    
was a  communication discrepancy.  He mentioned  that within                                                                    
the  budget  documents he  noticed  that  the Department  of                                                                    
Environmental Conservation  (DEC), for example,  was scaling                                                                    
back  its budget  trying to  eliminate federal  mandates for                                                                    
PSP testing of  shellfish. Otherwise, they would  not get to                                                                    
move  anything  to market.  There  were  about 400  seasonal                                                                    
workers and  26 farms  in the industry.  He thought  that if                                                                    
Alaska was  open for  business, the state  was going  in the                                                                    
wrong direction. He had had  problems in communications with                                                                    
DEC trying to  kill the dairy program rather  than trying to                                                                    
incentivize it to  expand and capture a larger  share of the                                                                    
market.  He  suggested that  the  actions  of eliminating  1                                                                    
position, putting a dozen people  out of work, and closing 3                                                                    
businesses were  not helping Alaska stay  open for business.                                                                    
He continued  that DNR had  a request for about  $300,000 to                                                                    
add  additional  people to  process  permits  for the  farms                                                                    
while other  agencies were trying  to kill the  industry. He                                                                    
wondered if  the departments  were really  communicating. He                                                                    
was dumbfounded as to what the state was doing.                                                                                 
Commissioner Anderson  understood and would take  the issues                                                                    
Representative Knopp  had mentioned back to  the agencies to                                                                    
see about  coordinating efforts.  She thought  that although                                                                    
the lift was heavy, it was worth pursuing.                                                                                      
Commissioner   Anderson   continued  to   discuss   economic                                                                    
development turning to  slide 13. She would  talk about some                                                                    
of the corporations within  the economic development bucket.                                                                    
The  Alaska  Industrial  Development  and  Export  Authority                                                                    
financed   and   developed   commercial,   industrial,   and                                                                    
infrastructure projects that created  jobs and grew Alaskas                                                                     
economy. One  of the  states  stellar  examples was  the Red                                                                    
Dog Mine  infrastructure which continued to  provide revenue                                                                    
and  was a  good model  for how  AIDEA could  invest in  the                                                                    
states  infrastructure  for future projects. She  also noted                                                                    
that ASMI was another successful model.                                                                                         
Representative  LeBon  asked  if   AIDEA  had  any  granting                                                                    
authority or  just lending  authority. Ms.  Fowler responded                                                                    
that AIDEA was not a granting entity.                                                                                           
Representative LeBon  asked if AIDEA could  only make direct                                                                    
loans. He wondered  if it could do  participation loans with                                                                    
banks. Ms.  Fowler asked Representative LeBon  to repeat his                                                                    
Representative LeBon indicated  AIDEAs  primary activity was                                                                    
direct  lending. They  could initiate  loans  on their  own.                                                                    
They  also  had a  loan  participation  program with  Alaska                                                                    
banks. Ms. Fowler responded in the affirmative.                                                                                 
Representative  LeBon asked  that between  the 2  components                                                                    
whether  most of  AIDEAs  activity  was participation  loans                                                                    
with  banks. Ms.  Fowler  believed the  answer  was yes  but                                                                    
deferred to Mr. Boutin of AIDEA.                                                                                                
2:55:22 PM                                                                                                                    
TOM BOUTIN,  EXECUTIVE    DIRECTOR,     ALASKA    INDUSTRIAL                                                                    
DEVELOPMENT  AND EXPORT  AUTHORITY,  introduced himself.  He                                                                    
agreed with Ms. Fowler's  response. He elaborated that AIDEA                                                                    
did not  have any  grant programs. The  entity had  the loan                                                                    
participation program where every  loan was brought to AIDEA                                                                    
by  a bank  and  the bank  participated.  He continued  that                                                                    
AIDEA did  up to 90  percent, both banks and  credit unions.                                                                    
It was a program of about  $400 million, as AIDEA did a loan                                                                    
about every  10 days  including refinances. The  program did                                                                    
not own any real estate and  was a very low risk program for                                                                    
AIDEA,  which  was  reflected  by  the  interest  rates.  He                                                                    
reported AIDEA  having a number  of other loan  programs. It                                                                    
also  took  equity  positions.  The  Alaska  Industrial  and                                                                    
Export  Authority  owned  the   Skagway  Ore  Terminal,  the                                                                    
Ketchikan  Shipyard, the  Federal  Express  Hanger, and  the                                                                    
DeLong Mountain Transportation Project  Road and Port at Red                                                                    
Representative LeBon asked Mr.  Boutin to briefly talk about                                                                    
the Ambler Road Project. Mr.  Boutin noted that he was happy                                                                    
to provide  information. He  indicated at  3:30 p.m.  in the                                                                    
current  day he  was  doing a  presentation  for the  Senate                                                                    
Community and  Regional Affairs  Committee. He  relayed that                                                                    
the environmental  impact study  (EIS) was  due on  March 5,                                                                    
2020. The  Bureau of  Land Management (BLM)  did the  EIS on                                                                    
behalf of  the State of  Alaska. A record of  decision would                                                                    
follow  30 days  later. The  record of  decision would  also                                                                    
include a  U.S. Army Corps.  404 Clean Water Act  Permit. It                                                                    
was  a   200  mile,  50-year,  50-foot   right-of-way  which                                                                    
included 10  miles across a national  park. It had 12  to 13                                                                    
identified mineralized properties and  was a multiple of Red                                                                    
Dog Mine  of any measure.  It would  be a toll  road revenue                                                                    
bond exactly  like the  Red Dog.  He had  been on  the AIDEA                                                                    
Board at  the inception of  the mine.  It was fairly  new at                                                                    
the  time   to  use   public  finance  to   develop  natural                                                                    
resources.  It was  still something  that could  be seen  in                                                                    
Alaska more often  than any other place. He  wondered if the                                                                    
committee had additional questions.                                                                                             
Representative  LeBon  asked  about the  AIDEA  divided.  He                                                                    
thought  it  was a  percentage  of  AIDEAs  net  profit.  He                                                                    
wondered if  AIDEAs  capital level worked  into the dividend                                                                    
or whether  it was  strictly based on  AIDEAs  profitability                                                                    
from year-to-year.                                                                                                              
Mr. Boutin  responded that  the law  stated the  board could                                                                    
appropriate up to  50 percent of earnings.  He reported that                                                                    
at  the  December  board  meeting  members  appropriated  50                                                                    
percent of  earnings for 2021.  He thought it  equaled $14.5                                                                    
million.  He noted  that AIDEA  had not  had a  general fund                                                                    
appropriation for  operations since  1986. So far  AIDEA had                                                                    
given $422  million to  the general  fund with  the upcoming                                                                    
dividends  bringing  that  to  the  $450  million  mark.  He                                                                    
relayed that AIDEA was essentially  a bank that took half of                                                                    
its earnings and gave it  to its shareholders, the people of                                                                    
Alaska. It  preserved its capital,  lent its  capital, lived                                                                    
off  of its  own earnings,  and contributed  to the  general                                                                    
fund each year.                                                                                                                 
Representative LeBon  asked for  AIDEA's capital  level. Mr.                                                                    
Boutin responded  that AIDEAs  capital that  corresponded to                                                                    
a  commercial bank  presently was  just  over $400  million.                                                                    
Representative LeBon commented, Pretty healthy.                                                                                 
Co-Chair Foster clarified the amount  for the dividend which                                                                    
was reflected on the slide  at $14.5 million. Mr. Boutin had                                                                    
mentioned it was about half. He  asked if it was up to half.                                                                    
He  wondered if  there  was  a minimum  and  a maximum.  Mr.                                                                    
Boutin believed there was a  minimum but was hard-pressed to                                                                    
say. However,  there was a  range and, most often  the board                                                                    
approved the total - the cap which was 50 percent.                                                                              
Co-Chair  Foster asked  if the  full cap  of 50  percent had                                                                    
been reached  in the current  year. Mr. Boutin  responded in                                                                    
the affirmative.  Co-Chair Foster  thought the cap  had been                                                                    
25 percent in the prior year. He was not sure.                                                                                  
3:00:20 PM                                                                                                                    
Representative  Josephson  mentioned  that in  the  previous                                                                    
year  the  administration sought  to  take  some of  AIDEAs                                                                     
receipts  to  help  balance   the  budget.  The  legislature                                                                    
contemplated  doing  so as  well.  He  asked Mr.  Boutin  to                                                                    
Mr.  Boutin  responded  that   part  of  the  administration                                                                    
proposed using  $254 million of AIDEAs   capital. He thought                                                                    
AIDEA  would  be  a  much  different  organization  if  $254                                                                    
million was taken from its  purse of $400 million. The money                                                                    
would  have  funded  oil  tax  credits.  The  administration                                                                    
decided  not  to   use  the  $254  million   after  a  brief                                                                    
conversation. There were a  couple of smaller appropriations                                                                    
taken from AIDEA funds, one  of which was vetoed and another                                                                    
was not.  The amount was $2  million. As a result  of the $2                                                                    
million  appropriation,  Moodys   downgraded  AIDEA  2  full                                                                    
notches. Returning to the topic  of the Ambler Road Project,                                                                    
AIDEAs    longtime  financial   firm   estimated  that   the                                                                    
downgrade would  cost the Ambler Road  Project financing $25                                                                    
million. The  appropriation of $2 million  would cost Alaska                                                                    
$25 million. Moodys  had been  looking at AIDEA for a 2-year                                                                    
period  without  a specific  date  when  they would  release                                                                    
their rating.  Moodys  had expressed concerns  with AIDEA no                                                                    
longer  being  as  independent  as  it  had  been  over  the                                                                    
decades.  Moodys    worried  that  AIDEA  had   a  different                                                                    
relationship than they had been  rating. Standard and Poors                                                                     
had also been looking at AIDEA  for about the same length of                                                                    
time. He reported that AIDEA  approached Standard and Poors                                                                     
and  asked  whether  they  would  withdraw  the  rating  and                                                                    
discontinue the  rating review if  AIDEA defeased  its debt.                                                                    
Standard and Poors  agreed to  AIDEAs  request. He explained                                                                    
that AIDEA currently had no  credit rating because of the $2                                                                    
million appropriation from the previous year.                                                                                   
3:04:01 PM                                                                                                                    
Representative   Carpenter    thought   that    the   Alaska                                                                    
Development Team  had a similar  purpose to AIDEA.  He asked                                                                    
how  it  was  different.   Mr.  Boutin  responded  that  the                                                                    
commissioner of DCCED was on the  board and most of the team                                                                    
members  reported to  her.  He continued  that  AIDEA was  a                                                                    
financing   organization.  The   development  team   brought                                                                    
financing  questions  and  ideas  to AIDEA.  The  team  also                                                                    
brought some  private financing  to a  road project  in West                                                                    
Susitna.  They brought  participation  money in  combination                                                                    
with  money  from the  Mat-Su  Borough  and the  state.  The                                                                    
Alaska Industrial Development  Authority worked very closely                                                                    
together  with the  team. He  noted that  the Department  of                                                                    
Revenue had  a seat on the  AIDEA Board and was  part of the                                                                    
development   team.  Some   of   AIDEAs   equity   ownership                                                                    
positions  had  challenges and  the  team  had been  helping                                                                    
AIDEA to  look at  alternatives. He  was not  concerned with                                                                    
redundancy or tripping over each other.                                                                                         
Commissioner  Anderson added  that they  were two  different                                                                    
activities:  economic  development   versus  financing.  She                                                                    
concurred  that the  entities worked  closely together.  The                                                                    
mission of DCCED and growing  the economy was different from                                                                    
the  mission of  AIDEA. She  noted the  importance of  AIDEA                                                                    
similar  to Alaska  Housing  Finance  Corporation and  other                                                                    
agencies in the state.                                                                                                          
Mr.  Boutin added  that 5  of the  AIDEA board  members were                                                                    
from  the  private  sector. He  thought  having  5  business                                                                    
people on  the board  provided an anchor  in the  reality of                                                                    
private sector commerce.                                                                                                        
Co-Chair Johnston  noted that there  was a  contract between                                                                    
AIDEA and the  development team. She thanked  Mr. Boutin for                                                                    
telling the  story of AIDEA  receipts being used  to balance                                                                    
the budget.  Co-Chair Johnston asked  Mr. Boutin  to comment                                                                    
on  AIDEA's  equity  participation. She  wondered  what  the                                                                    
average was of AIDEAs equity participation.                                                                                     
Mr. Boutin did not know  how meaningful the information was.                                                                    
He indicated AIDEA  had the equity position  in Ketchikan at                                                                    
the  direction of  the legislature.  He reported  that AIDEA                                                                    
carried it on the books in  the amount of about $72 million.                                                                    
A  fair market  value was  just  a few  million dollars.  He                                                                    
elaborated that  it was  to provide  jobs for  Ketchikan and                                                                    
was created in the wake of  the closure of Ketchikan Pulp, a                                                                    
600 ton per-day pulp mill and associated saw mills.                                                                             
Co-Chair Johnston admitted her  question was somewhat unfair                                                                    
because she  was aware of  the historic equity  positions of                                                                    
AIDEA. She was  trying to tie the knot  between the economic                                                                    
team and AIDEA  and the discussion of P3s   and other tools.                                                                    
She  hoped  AIDEA  was  looking  to  take  a  lesser  equity                                                                    
position  in many  of  its projects  so  that its  resources                                                                    
could be used more broadly without much exposure.                                                                               
3:08:38 PM                                                                                                                    
Mr. Boutin  responded that  AIDEA would  be using  toll road                                                                    
revenue bonds  for the Ambler  Road Project very  similar to                                                                    
Red  Dog.  The Federal  Express  Hanger  was the  result  of                                                                    
financing  advise    Federal  Express  preferred a  decision                                                                    
based  on depreciation  details. He  noted that  the Skagway                                                                    
Ore  Terminal  was a  project  that  came  to AIDEA  with  a                                                                    
special  story.  He  noted  that  ore  was  currently  being                                                                    
shipped  into Skagway  again. Each  equity position  had its                                                                    
own  story.  In  most  cases,  the  market  value  was  much                                                                    
different   than   the   book   value.   Alaska   Industrial                                                                    
Development and Export Authority  would not normally look at                                                                    
an equity  position in any  kind of investment.    AIDEA was                                                                    
best in  a certain space in  lending and getting in  and out                                                                    
in a short period of time.  He continued that AIDEA was best                                                                    
recalibrating the risk  in a way that a  commercial bank was                                                                    
reluctant to do.                                                                                                                
Co-Chair  Johnston  commented  that  the  shining  star  had                                                                    
always been the  Red Dog Mine. She  appreciated Mr. Boutins                                                                     
intent. Mr. Boutin  reported that the Red Dog  Mine paid the                                                                    
Northwest Arctic Borough $18 million in FY 18.                                                                                  
Vice-Chair  Ortiz referred  to  the dividend  line of  $14.5                                                                    
million, an increase  of $4 million. He asked  if the figure                                                                    
was  a  record   amount.  He  queried  the   basis  for  the                                                                    
significant increase  of $4 million.  Mr. Boutin  was unsure                                                                    
if the  sum was a record  amount. It was a  dark period when                                                                    
AIDEA had the  $2 million appropriation which  resulted in a                                                                    
2-notch downgrade.  The agency would  like to return  to the                                                                    
model where  AIDEA could assure  the credit  rating agencies                                                                    
that it was an independent state agency.                                                                                        
Vice-Chair Ortiz  asked if the  $4 million was  an arbitrary                                                                    
figure.  Mr.   Boutin  could   not  accurately   answer  the                                                                    
question,  as he  was not  in  his current  position at  the                                                                    
Representative  LeBon  noted  that  AIDEA  had  an  internal                                                                    
lending  limit  for  business loans  in  participation  with                                                                    
banks. His understanding was that  AIDEAs  cash position and                                                                    
capital  position were  so  strong that  it  could make  its                                                                    
participation  loans  without  having  to  go  to  the  bond                                                                    
market. He asked if it was true.                                                                                                
Mr. Boutin  confirmed that  it was  true. He  indicated that                                                                    
AIDEA was  in the  bond market frequently.  The organization                                                                    
would  be in  the  bond  market in  a  couple  of weeks.  He                                                                    
thought that  the present day  was the date of  the Interior                                                                    
Gas  Utilities (IGU)  board meeting  at which  members would                                                                    
approve  up  to  $78  million worth  of  bonds.  The  Alaska                                                                    
Industrial Development Export Authority  would be having its                                                                    
next  board  meeting on  March  4   at  which time  the  $78                                                                    
million would be approved. The  organization would be in the                                                                    
bond  market  for  the  IGU  within just  a  few  weeks.  He                                                                    
reported   that   recently   the  authority   had   done   a                                                                    
significantly  large  bond  issue   for  Tanana  Chiefs  and                                                                    
another  more  recently  for  Fairbanks  Memorial  Hospital.                                                                    
Alaska  Industrial  Development  and  Export  Authority  was                                                                    
actually  in the  bond market  almost continually.  However,                                                                    
AIDEA did not  access the private bond markets  for the loan                                                                    
participation program in which every  loan had to be brought                                                                    
to AIDEA by an Alaska bank or credit union.                                                                                     
3:14:06 PM                                                                                                                    
Representative   Wool    asked   about   the    $2   million                                                                    
appropriation   to  the   Kotzebue  School   District  which                                                                    
attributed to the credit rating  downgrade. As a result, the                                                                    
Ambler Road  Project would cost  an additional  $25 million.                                                                    
He  asked if  he was  correct.  Mr. Boutin  answered in  the                                                                    
affirmative. He relayed  that over the life of  the debt the                                                                    
estimated interest  cost would be an  additional $25 million                                                                    
because of the  2-notch downgrade. It was a  surprise to the                                                                    
Representative Wool asked  if there was a way  to dispose of                                                                    
the downgrade. He clarified that  AIDEA would go to the bond                                                                    
market  for the  Ambler Road  Project and  the rating  would                                                                    
affect the  payback. Mr.  Boutin responded,   Thats  exactly                                                                    
right.  He supposed  that if the $2 million  was returned to                                                                    
AIDEA,  the organization  would approach  Moodys  to  see if                                                                    
the  downgrade could  be  reversed. However,  realistically,                                                                    
Alaska had to start rebuilding with the rating agencies.                                                                        
Representative  Wool  understood  in some  situations  AIDEA                                                                    
partnered with  a bank making  a loan. In  other situations,                                                                    
AIDEA  went  to  the  bond market,  such  as  for  Fairbanks                                                                    
Memorial Hospital.  He assumed  that AIDEA  did not  use its                                                                    
own money, rather, it used  its borrowing capability to bond                                                                    
on behalf of Fairbanks Memorial Hospital.                                                                                       
Mr.  Boutin  had  not  talked   about  AIDEA's  direct  loan                                                                    
programs. For instance, AIDEA created  a direct loan program                                                                    
in 2019  to assist  Alaska shipyards  to compete  in Seattle                                                                    
and  especially  in Canada  because  of  exchange rates.  He                                                                    
explained that  when a  ship was repaired  or rebuilt  in an                                                                    
Alaska  shipyard and,  the shipyard  and client  agreed that                                                                    
there were  no change orders,  AIDEA would buy  the invoice.                                                                    
It was a  way of lending to a ship  owner. He indicated that                                                                    
AIDEA  had  been  doing such  transactions  for  Seward  and                                                                    
Ketchikan  Shipyards,  although  it  could be  done  in  any                                                                    
Alaska shipyard.  The money was  lent directly  from AIDEAs                                                                     
capital, a direct loan not financed with bonds.                                                                                 
Representative Wool  asked if something like  AIDEAs  direct                                                                    
loan program might help stimulate  business at the Ketchikan                                                                    
shipyard.  If  he  were  a boat  owner  getting  his  vessel                                                                    
repaired, he  could finance  the work  done at  the shipyard                                                                    
through  AIDEA. Mr.  Boutin indicated  that the  program was                                                                    
designed for the  Ketchikan Shipyard but was  not limited to                                                                    
Ketchikan. It  was a way of  enticing people to stay  in the                                                                    
state for repairs.                                                                                                              
3:17:54 PM                                                                                                                    
Representative Wool  relayed that sometimes when  AIDEA came                                                                    
up  in  conversation, AIDEA  did  not  make money  with  the                                                                    
exception  of  the  Red  Dog  Mine. He  was  unsure  it  the                                                                    
information was  accurate. He was  also uncertain if  it was                                                                    
AIDEAs   goal   to  make  money.  He   understood  that  the                                                                    
organization did  not want to  be in an equity  position. He                                                                    
mentioned  some  projects  that   had  not  been  successful                                                                    
including the  Healy Coal Mine.  He did not think  AIDEA was                                                                    
focused  on putting  up a  bunch of  money on  projects that                                                                    
would not  hold their market  value of their  investment. He                                                                    
queried AIDEAs focus.                                                                                                           
Mr. Boutin responded that the  Healy Clean Coal was given to                                                                    
AIDEA to sell.  He happened to be on the  board at the time.                                                                    
Sometimes administrations brought AIDEA  fish plants. He had                                                                    
been on the  board when Governor Hickel  instructed AIDEA to                                                                    
purchase three  Mark Air Hangers. Sometimes  AIDEA was drawn                                                                    
into projects at  the end. At the same time,  nothing in the                                                                    
statutes directed AIDEA to look  at return on investment. It                                                                    
was entirely  focused on jobs  and economic  development. He                                                                    
had mentioned earlier that AIDEA  had not had a general fund                                                                    
appropriation since 1986. He furthered  that AIDEA lived off                                                                    
its  income  and   gave  half  of  it  to   the  state.  The                                                                    
organization  was  keenly  interested in  its  projects  not                                                                    
losing money,  otherwise it would  evaporate. He  noted that                                                                    
not even the prudent investor  rule was part of the statutes                                                                    
related to AIDEA. He reiterated  that AIDEA lived off of its                                                                    
earnings. Even  the low-interest  loan programs  made money.                                                                    
The  loan participation  program  was based  on the  Federal                                                                    
Home Loan  Bank of  Des Moines  interest  rate plus  38 base                                                                    
points for AIDEAs  costs. It  provided a rate of return that                                                                    
helped the organizations bottom line.                                                                                           
Representative  Knopp  commented   that  the  committee  was                                                                    
getting off track.                                                                                                              
Co-Chair  Foster indicated  that  the  House Finance  Chairs                                                                    
would be leaving  at 3:30 PM and, Vice-Chair  Ortiz would be                                                                    
chairing the meeting.                                                                                                           
3:22:05 PM                                                                                                                    
Commissioner Anderson continued to slide  14 and slide 15 to                                                                    
discuss the Division of Community  and Regional Affairs. The                                                                    
division had  experienced the greatest  restructuring within                                                                    
the department.  The division experienced a  reduction of $1                                                                    
million  and  had  taken  the   challenge  of  managing  the                                                                    
workload  and  meeting   its  constitutional  and  statutory                                                                    
requirements.  The  division  had restructured  its  service                                                                    
delivery   model   for   local   government   services.   It                                                                    
implemented a resource desk in  which communities had direct                                                                    
access to  local government specialists to  assist them when                                                                    
needed. The  divisions  community linkage and  focus had led                                                                    
to  moving  the  reporting  requirements  previously  housed                                                                    
within  the Division  of Economic  Development  such as  the                                                                    
Made  in Alaska  Program, the  Forest Products  Program, and                                                                    
the ARDOR Program to the  Division of Community and Regional                                                                    
Affairs.  The   Division  was  working  to   provided  local                                                                    
government support as well as  support to local communities.                                                                    
The   division  also   worked   closely   with  the   Alaska                                                                    
Development   Team  to   increase  the   awareness  of   the                                                                    
competitive  advantages  of  the  different  regions  within                                                                    
Alaska. She wanted  to make sure that as the  state grew the                                                                    
economy the benefits went to all residents of Alaska.                                                                           
Commissioner  Anderson  continued  to slide  16  to  address                                                                    
Serve  Alaska and  revenue sharing.  She relayed  that Serve                                                                    
Alaska was a program that  leveraged $1.8 million in federal                                                                    
funds that  were sub-granted through the  agency. The agency                                                                    
managed   the  AmeriCorps   Programs  and   served  as   the                                                                    
designated  state  service  agency   for  the  program.  The                                                                    
program  provided  several   volunteers  throughout  Alaska.                                                                    
Additionally,  the   Division  of  Community   and  Regional                                                                    
Affairs  administered revenue  sharing for  fisheries taxes,                                                                    
national  forest  receipts, the  payment  of  lieu of  taxes                                                                    
program, and the community assistance program.                                                                                  
Commissioner Anderson  advanced to  the divisions  listed on                                                                    
slide 17  and slide  18: the  Alaska Energy  Authority (AEA)                                                                    
and the  Alaska Gasline Development Corporation  (AGDC). She                                                                    
relayed that their mission was  to reduce the cost of energy                                                                    
within  Alaska. The  Alaska Energy  Authority owned  Bradley                                                                    
Lake  Hydroelectric Project  out  of Homer  as  well as  the                                                                    
Alaska  Intertie Project.  The Alaska  Energy Authority  was                                                                    
considered  the  states   energy  office and  was  the  lead                                                                    
agency for statewide energy  policy and program development.                                                                    
The department  was working with  AEA to clarify the  use of                                                                    
renewable  resources  in the  funding  formula  for the  PCE                                                                    
Program. It  had been  an item  of considerable  interest to                                                                    
different communities.                                                                                                          
Commissioner Anderson  noted the Alaska  Gasline Development                                                                    
had been  touched on briefly.  She noted that the  final EIS                                                                    
was due  in 2020 and,  the record of decision  should follow                                                                    
shortly thereafter.                                                                                                             
Commissioner  Anderson  discussed   consumer  protection  on                                                                    
slide 19. She relayed  that the consumer protection agencies                                                                    
included:    Corporations,   Business,    and   Professional                                                                    
Licensing;  the  Division  of  Insurance;  the  Division  of                                                                    
Banking and  Securities; the  Alcohol and  Marijuana Control                                                                    
Office; the Alaska Oil and  Gas Conservation Commission; and                                                                    
the Regulatory Commission of Alaska.                                                                                            
Commissioner Anderson  moved to  slide 20. She  relayed that                                                                    
within   the  Division   of   Corporations,  Business,   and                                                                    
Professional    Licensing    professional   licensure    was                                                                    
administered  by boards  with  departmental  support for  21                                                                    
programs.  The  remaining   22  programs  were  administered                                                                    
solely   by  the   division.  The   division  also   managed                                                                    
registration  for   corporations,  business   licenses,  and                                                                    
tobacco  endorsements.  Over  the  past  several  years  the                                                                    
division   had  been   working   closely  with   information                                                                    
technology to launch online  licensure to allow professional                                                                    
licensees to apply, renew, and check their status online.                                                                       
Commissioner   Anderson  continued   to   the  Division   of                                                                    
Insurance. She  conveyed that  the division  was responsible                                                                    
for licensing  and the compliance of  insurers and insurance                                                                    
products  throughout  Alaska.  The division  worked  closely                                                                    
with other  entities to ensure  that credible  agencies were                                                                    
doing work  within Alaska. The division  was very successful                                                                    
in brining another health insurer  into the state, Moda. She                                                                    
gave kudos to the director, Lori Wing-Heier.                                                                                    
3:27:25 PM                                                                                                                    
Commissioner  Anderson  turned to  slide  21  to review  the                                                                    
Division  of Banking  and Securities  duties which  included                                                                    
regulating   the  states    depository  and   non-depository                                                                    
financial   institutions,    administering   and   enforcing                                                                    
Alaskas  financial  services laws, providing  information to                                                                    
consumers,  investors, and  entrepreneurs  in the  financial                                                                    
industry.   The  division   included  three   sections  that                                                                    
administered   12  statutory   programs.   In  addition   to                                                                    
licensing  examination  and   enforcement  duties,  division                                                                    
staff   answered   inquiries,  investigated   and   resolved                                                                    
complaints, and contributed to education and outreach.                                                                          
Commissioner  Anderson reviewed  the duties  of the  Alcohol                                                                    
and  Marijuana Control  Office. The  office was  responsible                                                                    
for  enforcing  alcohol  and marijuana  commerce  laws.  The                                                                    
office  served  both  the   Alcohol  and  Marijuana  Control                                                                    
boards.  Both were  quasi-judicial agencies  responsible for                                                                    
the regulation  of legal  sales of  alcohol or  Marijuana in                                                                    
Alaska.  In FY  21  the Marijuana  Control Boards   programs                                                                    
were 100 percent DGF funding.                                                                                                   
Commissioner Anderson  continued to  slide 22.  She reported                                                                    
that the Alaska  Oil and Gas Conservation  Commission was an                                                                    
independent  quasi-judicial agency  of the  State of  Alaska                                                                    
and  it  was  established  under  the  Alaska  Oil  and  Gas                                                                    
Conservation  Act.  The  commission   oversaw  oil  and  gas                                                                    
drilling   development,  production,   reservoir  depletion,                                                                    
metering operations,  and all lands  subject to  the states                                                                     
police  powers.  The  commission  acted  to  prevent  waste,                                                                    
protect correlative  rights, improve ultimate  recovery, and                                                                    
protect  underground   fresh  water.  It   administered  the                                                                    
underground  injection  control  program  for  enhanced  oil                                                                    
recovery,  and underground  disposal of  oil-filed waste  in                                                                    
Alaska. It served in a  judiciary form for resolving certain                                                                    
oil  and gas  disputes between  owners including  the state.                                                                    
The commission  carried forth statutory  mandates consistent                                                                    
with the protection of health,  safety, and the environment.                                                                    
It strived  for cooperation with industry  while maintaining                                                                    
well defined and essential regulatory requirements.                                                                             
Commissioner  Anderson discussed  the Regulatory  Commission                                                                    
of Alaska.  The commission  had broad authority  to regulate                                                                    
utilities and  pipeline carriers  throughout the  state. The                                                                    
commission   monitored   active  certificates   for   public                                                                    
utilities and  pipelines. The  certificates covered  a broad                                                                    
range of  activities including provisional  certificates for                                                                    
small  village   water  and   waste  water   systems,  fully                                                                    
regulated   telecommunications,   and   electric   and   gas                                                                    
monopolies. She concluded the department's presentation.                                                                        
Vice-Chair Ortiz  thanked the Commissioner and  reviewed the                                                                    
agenda for the following meeting.                                                                                               
HB  205  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  206  was  HEARD  and   HELD  in  committee  for  further                                                                    
3:30:48 PM                                                                                                                    
The meeting was adjourned at 3:30 p.m.                                                                                          

Document Name Date/Time Subjects
DCCED House Finance Overview 2.11.20.pdf HFIN 2/11/2020 1:30:00 PM
LAW FY21 Full-HFIN_Budget Presentation_2-11-20.pdf HFIN 2/11/2020 1:30:00 PM
LAW Overview HFIN