Legislature(2001 - 2002)
01/25/2002 01:43 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT HOUSE AND SENATE FINANCE COMMITTEE
January 25, 2002
1:43 PM
TAPE HFC 02 - 15, Side A
TAPE HFC 02 - 15, Side B
CALL TO ORDER
Representative Con Bunde, Vice-Chair called the House
Finance Committee meeting to order at 1:43 PM.
HOUSE MEMBERS PRESENT
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative John Davies
Representative Bill Hudson
Representative Ken Lancaster
Representative Carl Moses
HOUSE MEMBERS ABSENT
Representative Eldon Mulder, Co-Chair
Representative Bill Williams, Co-Chair
Representative Richard Foster
Representative John Harris
Representative Jim Whitaker
SENATE MEMBERS PRESENT
Senator Kelly, Co-Chair
Senator Austerman
Senator Olsen
Senator Wilkens
SENATE MEMBERS ABSENT
Senator Dave Donley, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Green
Senator Lyman Hoffman
Senator Loren Leman
ALSO PRESENT
Representative Mary Kaspner; Jeff Staser, Federal Co-Chair,
Denali Commission; Krag Johnsen, Staff Designee to the
Denali Commission, Legislative Budget and Audit Committee
PRESENT VIA TELECONFERENCE
There were no teleconference participants.
SUMMARY
DENALI COMMIISSION
JEFF STASER, FEDERAL CO-CHAIR, DENALI COMMISSION provided
information on the Commission, which is a federal/state
partnership. The Commission was created in 1999 as a result
of legislation drafted by Senator Stevens in 1998. The law
provided for five statewide organizations to participate as
voting members along with two co-chairs: one state and one
federal. He observed that the members of the Commissioner
are Co-chairs Jeff Staser (federal) and Fran Ulmer (state),
Julie Kitka (AFN), Mano Frey (AFL/CIO), Dick Cattanach
(AGC), Kevin Ritchie (AML) and Mark Hamilton (UAF). The
purpose of the Act is to reduce the cost of living
throughout Alaska, especially in rural areas and to raise
the standard of living. There is a 5 percent cap on
overhead. The Commission has been performing at a 2.5
percent overhead level.
KRAG JOHNSEN, STAFF DESIGNEE TO THE DENALI COMMISSION,
LEGISLATIVE BUDGET AND AUDIT COMMITTEE provided members with
a Denali Commission update for January 2002, an annual
report for FY01 and an executive summary of a Ditman poll
(copies on file).
Mr. Johnsen reviewed appropriations and expenditures for
FY01. He noted that the Commission had approximately $65
million dollars in various funding sources in FY01. The
Commission received:
$30 million in general appropriations
$10 million from TAPL interest (bulk fuel)
$10 million from health clinic construction
$15 million from rural utility service - energy project
upgrades
Mr. Johnsen reviewed the expenditures made by the
Commission. He noted that $20.7 million dollars went to the
Alaska Village Electric Cooperative to deliver energy
projects. The Commission supported health care and primary
care facilities. He explained that 10 percent of their base
budget goes to and training and operations.
Mr. Johnsen reviewed their FY02 appropriations. They
received approximately $101 million dollars in new funding.
The Commission expended $50 million dollars for energy
projects along with [$28.35 million dollars in] funding for
health clinics. There is a new focus, dictated through
federal appropriation law, for a consolidated community
facility or washeteria. There is also $8 million dollars for
other infrastructure projects outside of health care or
energy.
Mr. Johnsen observed that energy projects account for 60
percent of their expenditures. The majority of funding has
been directed toward bulk fuels. He noted that there are 169
communities in need of bulk fuel facilities. Fifteen
projects have been constructed toward meeting this need. The
goal is to increase planning and construction of future
projects. Thirty-nine other energy projects have begun
construction. [Four have been completed].
Mr. Johnsen clarified that health clinic construction is a
new area of focus. There are a number in progress. There are
separate processes for small and large clinics.
Mr. Johnsen reviewed employment on Denali Commission
projects. He stated that the local hire rate for rural
residents is 60 percent. They track every wage on every
project with the intent to bring more funding to rural
residents. He noted that there are projects throughout the
state of Alaska. The greatest need is in western Alaska. The
Denali Commission only trains in construction, operation and
maintenance fields.
Mr. Staser recounted meetings with Secretary of Health and
Human Services, Tommy Thompson. He observed that the
Commission received $10 million federal dollars, which was
matched with $10 million dollars from the Commission for
[health care clinics] grants. Thirty-three projects were
proposed. He noted that Secretary Thompson observed, while
reviewing the proposals, that there is no transportation
west of Anchorage. The Secretary subsequently doubled the
Commission's budget. He emphasized the need for teamwork.
Communities must be involved and a strong business plan must
be in place. Sustainability is a major value.
Representative Lancaster commended the work and effort of
the Commission. Mr. Staser noted that a memorandum of
agreement is in place with the USDA Rural Development.
Representative John Davies observed that there has been
approximately a 50 percent match and asked what constitutes
a matching fund. Mr. Staser noted that $100 million dollars
were leveraged. The power program does not have the same
cost/share arrangement. He noted that the state of Alaska
has to show why problems are not being addressed [on the
state level]. The state's lack of income tax and sales tax
has been noted on the federal level. The Commission is a
federal agency; therefore they cannot use other federal
funds for certain programs as their match. The 50/50 cost
share is on the aggregate of all items. The state's
contribution to bulk fuels is counted as part of its match.
Every piece of the pie is critical. The Commission works
with HUD and USDA where possible to be counted as a
cost/share match.
Senator Austerman complimented the work and method of
sustainability of the Commission. He asked for more
information regarding local hiring practices.
Mr. Johnsen noted that every employee on every project is
counted. Less than one percent of the employees are from out
of state. There is a distinction between rural and urban
workers.
Mr. Staser added that the intent was to only train were jobs
exist. Training is not for training's sake. Alaskans make
the decisions. He observed that there was a 70 percent local
hire rate in the first year, but only 35 percent of the
salaries stayed in the local community. The local hire rate
is currently 70 percent with 50 percent of the salaries
staying in the local communities. There is only 36 months of
experience. The Commission is trying to be flexible and
responsive to changes. There have been 9 state/partner
funding forums, which brought agencies to regional hubs with
villages attending. Eighty percent of the villages' top two
priorities made progress and 40 percent of them were fully
funded though other agencies. The Commission continues to
act as a coordinator between other agencies, both state and
federal. He suggested that priorities should be set and not
changed according to who has money.
Representative Hudson also commended the work of the
Commission and asked if the state has to provide a general
fund match. Mr. Staser explained that the local match is
defined as anything that is non-federal. He emphasized that
jealousy occurs between other states and noted that the
Commission would be damaged if the state backed out funds
from programs because of Commission support. He emphasized
that the federal government and other states are examining
the Commission. He pointed out that the Commission would
have to go through a reauthorization hearing.
Representative Hudson suggested that state entities could
benefit from use of the system that has contributed to the
success of the Commission.
Representative Lancaster asked if training was done on site.
Mr. Staser explained that training is done on site when
possible through their partners. On site training is
preferred. Mr. Johnsen added that the Denali Training Fund
with the Department of Labor and Workforce Development
provides training for bulk fuel operations at Alaska
Vocational Technical Center (AVTEC). Heavy construction
equipment training is done locally where possible or at the
Wasilla at the operator's facility.
In response to a question by Vice-Chair Bunde, Mr. Johnsen
explained that people are put through training programs at
existing centers such as AVTEC.
Vice-Chair Bunde stressed the need for sustainability. Mr.
Staser explained the concept of a backup operator. The
presumption is made that the community has or can achieve
the skill set. If tanks are not being maintained then the
backup operator is called. He explained that the Yukon Barge
Company delivers fuel to the bulk fuel tanks. They have
formed a partnership to form a limited liability corporation
to be the backup operators for communities along the river
system. He noted that they have a vested interest in the
quality of the storage facility. He observed that the EPA
could hold the corporation accountable for problems. Backup
operators are not expected to take over ownership of the
asset. He noted that one of the first completed projects had
an alarm go off during the middle of the night. The local
maintenance operator didn't know what to do so he cut the
power off to the horn and went back to sleep because there
was no one to call. He noted training programs provide
someone to call such as a master electrician or plumber.
Regional facilities with backup responsibilities can be
called. Members would call their cooperative with problems.
Isolated communities must identify who would be called
before funds are made available.
Vice-Chair Bunde expressed concern that Ditman polls would
not be a true test. Mr. Staser noted that the questions were
directed to the people at large.
Vice-Chair Bunde observed that at some time the stream of
money would be depleted. He cautioned that Alaska could
suffer from a lack of federal funding in the future. Mr.
Staser acknowledged that the state must look at long-term
solutions. After the Environmental Protection Agency (EPA)
set standards for leaking fuel tanks the Coast Guard
threatened 90 communities with cutting off fuel supplies. He
emphasized that there would be a sunset. He stressed that a
business plan and backup operators would be left behind. The
intent is not to leave a legacy of projects that must be
replaced. He acknowledged that a subsidy is implied and
emphasized that there is an issue of sustainability versus
affordability.
Vice-Chair Bunde stated that memories are short when it
comes to subsidies.
Vice-Chair Bunde asked if drug testing is required for
training programs. Mr. Staser noted that they work within
the programs requirements. He stressed that communities must
be alerted of future projects in order to have an
opportunity to clean up. Mr. Johnsen noted that there was a
98 percent success rate [completion of the program] in
training during the first year. Training statistics are
provided through the Department of Labor and Workforce
Development.
TAPE HFC 02 - 15, Side B
Senator Wilkens referred to a pilot sewer and water project
in three interior villages near Fairbanks.
Mr. Staser reviewed the project. He noted that the concern
was to get local communities to participate under a higher
level of accountability. Data is not yet available on the
success of the project. There have been several requests for
proposals. They received more applications than they could
fund. Six were selected for investment. He observed that the
Regulatory Commission of Alaska's (RCA) mission is to
protect ratepayers. The Commission does not make decisions
on policy but they only offer advice.
Senator Olsen questioned if there is a plan to create a
maintenance fund for the projects. Mr. Staser responded that
there is no plan to continue through an endowment fund. The
intent is to create [sustainable] infrastructure and then
withdraw. He observed that Alaska was not part of several
large federal projects, which took place in other states and
indicated that it is time for Alaska to catch up. He
reiterated that the Commission does not set policy.
Senator Olsen cautioned that they could create a dinosaur
that cannot be maintained by the rural communities. Mr.
Staser acknowledged the concern and emphasized that they
have learned their lesson from others. He noted that plans
must exist to continue the project and plan for maintenance.
Bulk fuel programs have encouraged communities to work
together so that they can afford to pay for maintenance.
They are concerned with these issues. They coordinate with
all entities and are open to suggestions.
Vice-Chair Bunde concluded that the intent is not to replace
federal subsidies with state or local subsidizes. He
suggested that the state match and the Denali funding be
considered in regards to the question of whether the state
is funding rural Alaska on an equitable level.
ADJOURNMENT
The meeting was adjourned at 2:42 PM
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