Legislature(1997 - 1998)
08/21/1997 04:55 PM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES{PRIVATE }
SENATE FINANCE COMMITTEE
21 August 1997
4:55 p.m.
TAPES
SFC-97, 158, Sides A and B
[NOTE: Tape quality is very poor.]
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 4:55 p.m. at the Alaska Legislative Information
Office, Anchorage, Alaska.
PRESENT
In addition to Co-chair Pearce, Senators Phillips, Donley,
Torgerson, Parnell, and Adams were present. Senator Sharp was
excused.
ALSO ATTENDING:
Mike Greany, Director, Division of Legislative Finance; Randy
Welker, Legislative Auditor, Division of Legislative Audit;
Annalee McConnell, Director, Office of Management and Budget,
Office of the Governor; Nancy Slagle, Director, Division of
Administrative Services, Department of Transportation and Public
Facilities; Morton Plumb, Jr., Director, Anchorage International
Airport; John Ungar, Controller, Alaska International Airport
System.
SUMMARY INFORMATION
^Budget Overview
Mr. Mike Greany addressed the committee regarding the budget
downtrend. Annalee McConnell addressed the committee and
advised the status of the Canadian fishermen blockade of the
ferry Malaspina. Mr. Morton Plumb presented a slide review of
the Anchorage International Airport.
Co-chair Pearce provided an overview of the agenda and stated her
intent to think about the coming year's budget. She highlighted
her interest in the different training programs. She hoped to have
at least one meeting each month in the time period before the
legislative session to address budget cuts.
MIKE GREANY, DIRECTOR, DIVISION OF LEGISLATIVE FINANCE, addressed
the revenue downtrend as the government obligation (GO) debt was
paid off. He noted that there were two more years left under the
existing debt. A payment would be made in FY 99 ($5.4 million) and
the last payment would be made in 2000. During the last session,
money had been appropriated to the retirement fund to pre-pay some
of the debt service. He anticipated an overall general fund
reduction of approximately $10.4 million in debt service.
Mr. Greany addressed other elements of the debt service cost,
including the school debt reimbursement. He emphasized that
funding needs could only be estimated.
Senator Adams queried the numbers for the GO debt and the school
debt. Mr. Greany responded that the FY 98 GO debt was $14.2
million; the debt in FY 99 would be $8.8 million. In 2000, the
last payment would be $2.4 million. The school debt reimbursement
number for the current year was $62.3 million and the number for
FY 99 was approximately the same.
Mr. Greany pointed to major foundation programs that were going
down, including the longevity-bonus program. He reported that the
Department of Administration was working on numbers; he estimated
the cost would be a reduction of $2 million to $5 million from the
current year's level of approximately $70 million.
Mr. Greany turned to Medicaid, which he characterized as
"complicated." In the current year, $30 million in general funds
were replaced with federal funds; language was added to the budget
stipulating that $30 million would be appropriated back if there
was not a different federal match rate. He informed the committee
that the state had gotten a better federal-match rate, so the $30
million appropriation would not kick in to replace the previous
fund switch; however, there would probably be a supplemental
appropriation to put $8 million in general funds back for FY 98,
because in the current year there was not a one-to-one ratio. He
did not know the implications for FY 99, but assumed the same
funding level. He pointed out that more information would be
available as time passed.
Mr. Greany spoke to the impact of welfare reform on caseloads,
another formula piece that could be affected.
Mr. Greany turned to the subject of agency non-formula programs in
the operations side of the budget. He noted that there would be
both costs and savings. On the cost side, the third year of the
employee contracts would cost approximately $8 million general
funds. He emphasized the number would be refined. He recalled the
salary increases implemented by the legislature: $5 million from
investment-loss trust fund money had been put in to fund the
contract. The funds were one-time and could be replaced with
general funds, or the built-in salary increases would be
underfunded by the amount. Considering the two items, he suggested
there was a potential of a $13 million increase related to state
employee salaries.
Mr. Greany recalled that during the previous legislative session,
there had been a reduction in the Public Employee Retirement
System (PERS) from 13 to 9.32 percent, which had saved the state
$16 million. He had found out that there was another rate
reduction pending; the new rates for FY 99 would be approximately
8.5 percent, which would provide general fund savings of about $3
million to $3.5 million.
[Unintelligible discussion regarding windfalls and revenue
projections]
Mr. Greany explained that the state was below the spring forecast
for the current fiscal year. He warned that oil prices could
change, although he expected them to go down. He pointed to the
surplus of $60 million.
Co-chair Pearce requested an update regarding the ferry system.
She noted that each committee member had a copy of the August 21
letter from the governor to Senator Miller, and a copy of the
August 21 memo from Commissioner Perkins to the governor's office.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR (via teleconference), provided the
committee with an overview of state expenses resulting from the
blockade in Prince Rupert. She reported that the governor had
prepared a letter to legislators updating the situation.
Senator Adams queried the status of negotiations and of the safe
passage of personnel. Ms. McConnell answered that there had not
yet been a satisfactory response and that there would be a lawsuit
to get money back to private-sector people who had sustained
damage. She added that the governor's office had not received
assurance that the Canadian government would step in if there were
future problems.
Senator Torgerson asked whether ferries would be run to Bellingham
for the remainder of the year. He wondered what the anticipated
financial loss would be. Ms. McConnell did not know and offered to
get more information.
Senator Torgerson stated that he agreed with the governor about
pulling out of Prince Rupert, a position he had taken in the past.
He did not think simply keeping the ferries running was the
mission of the Alaska Marine Highway System, which was losing
money. He was concerned that there would be a supplemental
request.
Co-chair Pearce referred to estimated costs and asked why re-
routing would cost so much.
NANCY SLAGLE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, replied that
the issue was the timing of crew changes, overtime expenses,
transfer costs, and other costs resulting from a schedule change.
Co-chair Pearce queried the number of people on the ferry out of
Bellingham. Ms. Slagle did not have the information and offered to
get it.
Senator Phillips queried the pre-condition letter to the federal
and provisional authorities. Ms. Slagle did not know the date and
offered to find out. She reported that there had been many
communications between the Canadian government and Alaska as well
as the State Department; discussion had been on-going since the
blockade began. She pointed to the August 1 letter [from the
governor] to Mr. Clark and the foreign affairs minister; there had
also been much verbal communication.
Senator Torgerson referred to the governor's letter about economic
claims being sent to the Alaska Marine Highway System and asked
whether there had been claims filed by businesses in Southeast.
Ms. Slagle responded that she had heard informal talk in briefings
and from the attorney general about losses suffered by small
businesses that had been expecting shipments, including perishable
goods and parts needed for repairs. She did not think
documentation had been received regarding the losses, but stated
that initial information had been logged. The losses had been
communicated to the Canadian government, and would be part of the
lawsuit information.
Senator Torgerson asked for copies of the information. Ms. Slagle
agreed to get the information.
Co-chair Pearce wondered whether lease payments for the Prince
Rupert dock had been stopped. Ms. Slagle did not know.
Co-chair Pearce strongly suggested that the administration sit
down with key members of the legislature and talk through plans
for the M.V. Malaspina, and not wait until January and bring a
supplemental request. Ms. Slagle agreed.
Co-chair Pearce discussed scheduling of another meeting. She
thought the meeting would be September 8.
Co-chair Pearce reported meetings with the director of the
Anchorage International Airport and staff regarding changes at the
terminal facility. She had queried the process and the cost of
proposed plans. She hoped to build political support at the
legislative level as well as public support.
MORTON PLUMB, JR., DIRECTOR, ANCHORAGE INTERNATIONAL AIRPORT,
introduced staff and provided an overview of the project. He
directed attention to pictures of what the airport used to look
like. He pointed out that the airport currently served over 5
million people each year and was a large cargo port (first in the
country for total gross weight) and that there were over 90,000
float-plane operations. He gave other statistics.
Mr. Plumb detailed that over 440 cargo planes had been coming
through the airport each week; he expected the numbers to increase
because of the airport's geographical location. [Testimony unclear
related to cargo; maximizing yield and costs.]
Mr. Plumb informed the committee that the C Concourse at the
airport was a little over 45 years old; without the concourse, the
airport had about 75 percent of what was needed. He felt the
nominal growth-rate would be about 3.6 percent. He noted that the
baggage-claim area was about 43 percent of what was needed, the
ticket lobby was 40 percent, and the gate was 31 percent.
Mr. Plumb pointed to slides illustrating C Concourse problems,
including rusting bolts. The city had decided not to renew a
permit. Another photo illustrated the use of duct tape and the
existence of asbestos. In addition, the roof leaked and was over-
extended. He described the airport as a "very wet cardboard box"
and stated that it was unsafe. He pointed to slides of the
domestic terminal, which [unintelligible]. The parking areas were
stacked all the way out, requiring double-parking; a study had
shown there was a need for up to seven additional overnight
parking areas.
Mr. Plumb explained that there were 50 to 70 passenger planes
coming through the international terminal each week; charter
flights increased in the summer. He noted that over 95 percent of
the terminal was leased out or utilized. He discussed the duty-
free area with revenue decreasing from $8 million to $1 million
[unclear]. There was a lot of activity in the terminal in the
middle of the night; there was not enough area for the planes to
park. The entire lobby of the north terminal was filled during the
tourist season.
[SFC-97, Tape 158, Side B]
Mr. Plumb reported that they were working closely with the cruise
companies. He addressed the baggage-claim area in the north
terminal.
Mr. Plumb maintained that review of the "C" Concourse had revealed
that it would not be prudent to refurbish the 45-year-old
building. In addition, the north terminal did not provide the
solution needed, so they met with the airlines and requested
assistance in coming up with a plan. The first thing decided was
that the concourse had to come down and that a plan was necessary
regarding where everyone would be located. A needs assessment was
conducted. The partnership with the airlines had continued,
including selecting consultants and meeting with the technical
committee, which advised the executive board and the board. He
reported that the goal was to meet passenger demands by the year
2005, and noted that the project should reflect the culture of
Alaska, including aviation history and wildlife.
Mr. Plumb wanted to maximize passenger convenience. Surveys were
being taken from passengers. He mentioned other members of the
team. [Unintelligible testimony about a challenge] He listed
numbers of people passing through the airport. The master plan
completed at the end of 1995 had forecast that there would be
300,000 people going through the international terminal through
the year 2012; last year there were close to 700,000, indicating
that the numbers had changed significantly since the last master
plan.
Mr. Plumb spoke to plans for the airport, including:
Expansion to the north
·
Five new jet gates
·
300 additional linear feet of baggage claims
·
New ticket areas
·
Additional concession space for restaurants
·
Mr. Plumb pointed to an illustration of plans and detailed how the
changes would be made relative to the existing facility. He
described the strategic-planning process. He noted that there was
an additional plan for 2015 already in existence; the current
development was the part that would be built by 2005. He touched
on security plans.
Mr. Plumb explained the relationship of the roadway with the
airport and the importance of getting the relationship right
between the two from the outset.
Co-chair Pearce queried the location of the airport tower. Mr.
Plumb indicated the location on the slide.
Mr. Plumb underlined that more than 75 percent of the people
coming to Alaska come through Anchorage International Airport,
making the airport a steppingstone to many other Alaskan
communities.
Mr. Plumb addressed costs, detailing that the airport was self-
funding and did not use any general funds. The cost of the project
was expected to be between $150 million and $200 million. He added
that the road area could get expensive. He did not think the
airport/airlines portion of the road system would cost over $13
million. The ballpark figure for the whole road system could be up
to $70, if flyovers were used. He indicated some expected road
changes. [Unintelligible testimony on costs]
Mr. Plumb provided an overview of the process and the expected
timelines and costs. He expected something to be built by the
following July 1. [Unintelligible]
Co-chair Pearce asked a question regarding involvement of cargo
carriers. [Response garbled.] Mr. Kepner (?) thought the two large
carriers (UPS and FedEx) were part of the process. He spoke to the
involvement of air carriers.
Mr. Plumb reported that relevant Anchorage authorities and
legislative people had been briefed about the process. He thought
that the project plans could be unveiled in October. He did not
know about the public-hearing process yet.
Co-chair Pearce stated that the situation was unique because the
airport was state-owned and there was no local government process
to put projects on a list before coming to the Department of
Transportation and Public Facilities and then the legislature. She
believed there needed to be a public process on such a large
project.
Senator Torgerson queried the need for revenue bonds for the
project. Mr. Plumb responded that the issue had not been
addressed, but he thought some portion of the funding would come
through revenue bonds.
JOHN UNGAR, CONTROLLER, ALASKA INTERNATIONAL AIRPORT SYSTEM, added
that financial scenarios would be developed once the final
construction plans were reached; he thought the worst-case
scenario would be the need for revenue bonds for the whole
project. He added that currently the only other option would be
federal money, although there were more projects pending than
there was federal money available. He opined that the bulk of the
project would be paid through revenue bonds.
[Unintelligible discussion] Unidentified speaker believed a
consensus should be reached regarding a finance plan.
Senator Adams queried various bonds needed and hoped there would
not be a fee to Alaskan residents. He did not want new taxes. Mr.
Ungar responded that the carriers would pick up part of the
revenue bonds with landing fees, but would pass those costs on to
Alaska residents through increased ticket prices.
[Garbled discussion regarding funding sources]
Senator Adams noted that the international side of the airport was
not utilized as much due to fewer flights. He asked whether the
international portion had been considered. Mr. Plumb responded
that the international part had been looked at, but he did not
think that more flights or other operations could fit in the
summer as the space was fully utilized. He remarked on other
possible approaches (garbled testimony). He stated that further
using the international terminal would mean cutting international
traffic back and affecting income. There was a discussion about
possible revenue from the duty-free store.
Co-chair Pearce commented on the importance of the ferry and
airport projects.
Co-chair Pearce reported that there would be another meeting
September 8.
ADJOURNMENT
The meeting was adjourned at 11:00 a.m.
| Document Name | Date/Time | Subjects |
|---|