Legislature(2005 - 2006)SENATE FINANCE 532
04/26/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB174 | |
| SB97 | |
| SB171 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 171 | TELECONFERENCED | |
| + | SB 174 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 97 | TELECONFERENCED | |
MINUTES
SENATE FINANCE COMMITTEE
April 26, 2005
9:05 a.m.
CALL TO ORDER
Co-Chair Wilken convened the meeting at approximately 9:05:07 AM.
PRESENT
Senator Gary Wilken, Co-Chair
Senator Lyda Green, Co-Chair
Senator Fred Dyson
Senator Bert Stedman
Senator Donny Olson
Senator Lyman Hoffman
Also Attending: SENATOR CHARLIE HUGGINS; DEBORAH GRUNDMANN, Staff
to Senator Huggins; JOHN NORRIS, President, U-Haul Company of
Alaska; JAMES ARMSTRONG, Staff to Co-Chair Wilken; ERIC SWANSON,
Director, Division of Administrative Services, Department of
Administration; BRAD THOMPSON, Director, Division of Risk
Management, Department of Administration; JOELLEN HANRAHAN,
Director, Division of Administrative Services, Department of
Community and Economic Development; JANET CLARKE, Assistant
Commissioner, Division of Finance and Management Services,
Department of Health and Social Services; STEVE ASHMAN, Director,
Division of Senior and Disabilities Services, Department of Health
and Social Services; NANCY SLAGLE, Director, Division of
Administrative Services, Department of Transportation and Public
Facilities; LINDA PEREZ, Administrative Director, Division of
Administrative Services, Office of the Governor; MIKE BLACK,
Director, Division of Community Advocacy, Department of Commerce,
Community and Economic Development;
Attending via Teleconference: From an offnet location: SYDNEY
SWENSON, MJ Rentals
SUMMARY INFORMATION
SB 174-EXEMPT UHAULS FROM VEHICLE RENTAL TAX
The Committee heard from the sponsor and industry representatives.
The bill was reported from Committee.
SB 97-SUPPLEMENTAL APPROPRIATIONS/CBR
The Committee heard from each department with amended supplemental
budget requests. The bill was held in Committee.
SB 171-NPR-A COMMUNITY GRANT PROGRAM
The Committee heard from the sponsor and the bill was held in
Committee.
9:06:17 AM
SENATE BILL NO. 174
"An Act excluding certain trucks from the definition of
'passenger vehicle' for purposes of the passenger vehicle
rental tax; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR CHARLIE HUGGINS, Sponsor of the bill, testified that in
2003, a consequence of the rental vehicle passenger tax legislation
imposed the tax to rental vehicles used to move personal property.
He was told this was not the intent of the bill and concluded it
reasonable that U-Haul type vehicles are not in the same category
as rental cars. He detailed the types of vehicles used for hauling.
This legislation would repeal the tax for moving vehicles and would
have a fiscal impact of approximately $275,000.
9:08:26 AM
Senator Dyson served in the legislature when the original tax
legislation was considered. He agreed with the sponsor of this
bill's characterization that the intent was that the rental tax
would apply to visitors and would not penalize Alaska residents.
9:08:55 AM
DEBORAH GRUNDMANN, Staff to Senator Huggins was available for
questions.
9:09:02 AM
SYDNEY SWENSON, MJ Rentals, testified via teleconference from an
offnet location, as a dealer of U Haul vehicles, in support of this
bill. Most customers of her business are military families. This
tax has caused a hardship for dealers because members of the
military determine that the rental costs are too high and opt to
have their belongings moved by the military.
9:10:14 AM
Senator Huggins added that statistically the rental truck industry
has experienced a reduction in business as a result of this tax.
9:10:50 AM
JOHN NORRIS, President, U-Haul Company of Alaska testified that the
intent of the tax was to only apply to visitors and rental cars.
Passage of HB 271 had unintended consequences of taxing Alaska
businesses and citizens using trucks for transporting personal
property. Year to date, 17 percent fewer customers are using the
company's services, and the company has experienced a 29 percent
reduction in March 2005. Over one half of the customers are Alaskan
residents. Moving is a stressful time and additional tax adds to
that stress. Municipal taxes and other charges significantly
increase the rental costs. This bill would provide the same
"relief" granted to taxi cabs in previously adopted legislation.
Consumer has other options. Industry associations support this
legislation and no associations oppose this legislation. This is
the first year his company has experienced decreased sales and he
surmised that the additional burden of this tax is a factor.
9:14:58 AM
Senator Olson asked the number of U Haul operators in Alaska.
9:15:05 AM
Mr. Norris replied that the company has 49 locations in the State.
9:15:10 AM
Senator Olson asked if the same decline has been experienced in all
locations.
9:15:15 AM
Mr. Norris responded that the severity of the decline varies by
region: a higher decline has occurred in Sitka, and Anchorage and
Fairbanks dealers have had the most significant decline. He noted
that the company also has services in the Yukon Territory and that
no declines have occurred in the Canadian location.
9:15:48 AM
Senator Olson commented that this tax has had an impact.
9:16:04 AM
Senator Dyson offered a motion to report the bill from Committee
with individual recommendations and accompanying fiscal note.
There was no objection and SB 174 MOVED from Committee with a zero
fiscal note #1 from the Department of Revenue indicating a negative
$275,000 change in revenues.
9:16:40 AM
SENATE BILL NO. 97
"An Act making supplemental, capital, and other
appropriations, and reappropriations; amending appropriations;
making appropriations to capitalize funds; making an
appropriation under art. IX, sec. 17(c), Constitution of the
State of Alaska, from the constitutional budget reserve fund;
and providing for an effective date."
This bill had been previously heard in the Senate Finance
Committee.
Co-Chair Wilken noted suggested amendments to the FY 06 proposed
supplemental appropriations budget had been received from Governor
Murkowski. Co-Chair Wilken determined that departmental
representatives should speak to the changes. The Committee reviewed
a spreadsheet titled "FY2005 Supplementals" updated April 22, 2005
[copy on file.]
9:18:14 AM
Co-Chair Wilken commented that statute requires that the
gubernatorial administration submit all amendments to the
governor's supplemental appropriations budget request by the 60th
day of each session. Accommodating these amendments that were
submitted as late as the prior day has caused a hardship. He
informed that he would work with the Murkowski Administration to
ensure the deadline is adhered to in the future.
9:19:28 AM
JAMES ARMSTRONG, Staff to Co-Chair Wilken, pointed out that
proposed amendments submitted prior to February 28 have been
addressed in previous hearings. Proposed amendments received after
that date would be discussed at this hearing.
9:19:50 AM
Department of Administration
Item: 6
Section (in SB 97): 1(d)
Results Delivery Unit (RDU): Public Defender Agency
Supplemental Need: Projected annual caseload increase - PD was
reappointed to several hundred old cases associated with the
Blakely decision which rendered some aspects of the State of
Alaska's sentencing framework unconstitutional. Also,
increases in travel to remote courts, expert witness,
discovery and file storage costs. Funding of $24,900 in
General Fund/Program Receipts is from the Department of Law
from collections under Criminal Rule 39 and Appellate Rule
209. Also includes therapeutic court funding coming from
federal funds received by the National Council on Alcohol and
Drug Dependency and allocated to State agencies.
April 22: Updated projection reduces the amount of
general funds needed by $87,200.
$800,000 general funds
$20,000 Statutory Designated Program Receipts
$820,000 Total Funds
ERIC SWANSON, Director, Division of Administrative Services,
Department of Administration, testified that the Department is
continuing to determine the exact amount necessary and this
amendment represents the most current estimate.
9:20:34 AM
Item: 7
Section: 1(e)
RDU: Risk Management
Supplemental Need: Two major claims against the State's self-
insurance deductible ($1 million per loss) for catastrophic
losses have been incurred: Fairbanks Correctional Center
$1,000,000 (total cost is just over $1 million) and
Fairweather hull damage $350,000.
March 9: Cost estimate for the Fairbanks Correctional
Center is reduced by $150,000 to $850,000.
April 5: Two more claims have occurred: damage to P/V
Enforcer $225,000 and Dillingham DOT equipment storage
building fire on Feb 12 $670,000.
$2,095,000 general funds
Mr. Swanson noted the two incidences that occurred after the
initial supplemental budget request was submitted.
9:21:16 AM
Senator Dyson asked if this supplemental request includes funding
required as the result of the State losing a wrongful discharge
lawsuit.
9:21:29 AM
Mr. Swanson replied that funding is not included in this request.
9:21:39 AM
Co-Chair Wilken asked if the State would be reimbursed the $225,000
necessary to repair the P/V Enforcer.
9:21:50 AM
Mr. Swanson responded that the Division of Risk Management is
pursuing recovery of this expense. He was unsure whether the State
would receive any reimbursement.
9:22:05 AM
Co-Chair Wilken suggested it would be appropriate to withhold
funding for this item in the current fiscal year. If recovery is
not received, the legislature could allocate funds as a FY 06
supplemental appropriation. He understood that straps holding the
vessel at the shipyard broke and that this occurred before the
State took possession of the new vessel. He intended to convey that
the State did not intend to pay the resulting repair costs.
9:22:32 AM
Mr. Swanson noted the expectation that the State would receive
partial reimbursement. The matter would continue to be addressed.
9:22:56 AM
Item: 9
Section: None
RDU: Personnel
Supplemental Need: April 5: Costs related to investigation of
alleged violation of Ethics Act $40,000.
April 22: Cost increase of $20,000 to a new total of
$60,000.
$60,000 general funds
Mr. Swanson outlined this request.
9:23:29 AM
Senator Dyson requested a representative from the Division of Risk
Management address the matter of the aforementioned wrongful
termination lawsuit.
9:24:19 AM
BRAD THOMPSON, Director, Division of Risk Management, Department of
Administration, testified that the wrongful termination lawsuit is
not included in this funding request and that any judgment would
not be paid from this insurance fund.
9:24:40 AM
Senator Dyson asked if the department would pay the judgment costs.
9:24:45 AM
Mr. Thompson explained that the Tort Section does not defend in
these types of litigation. He was unsure if the ruling would be
appealed.
Mr. Thompson then addressed the matter of damage to the P/V
Enforcer, informing that if the support straps did break, the
Division would aggressively pursue every effort to recover the
repair expenses from the manufacturer. However, he noted
contractual limitations within the manufacturing agreement could
limit options available for recovery.
9:25:46 AM
Co-Chair Wilken requested this information in written format.
Department of Community and Economic Development
9:26:09 AM
Item: 12
Section: None
RDU: Alaska Seafood Marketing Institute
Supplemental Need: April 5: Additional federal funds awarded
1/11/05 for the export market access program, which must
be spent in FY 05.
April 22: Increase by $20,000 RSS for match.
$1,500,000 federal funds
$20,000 Receipt Supported Services funds
$1,520,000 Total Funds
JOELLEN HANRAHAN, Director, Division of Administrative Services,
Department of Community and Economic Development outlined this
request.
9:27:03 AM
Item: 13
Section: None
RDU: Alaska Seafood Marketing Institute
Supplemental Need: April 15: $750,000 of SDPR for herring
promotion in the overseas market. Funding coming from the
Alaska Fisheries Marketing Board.
$750,000 Statutory Designated Program Receipts
Ms. Hanrahan noted this funding was awarded during the April Board
meeting.
9:27:37 AM
Item: 11
Section: None
RDU: Capital
Supplemental Need: Feb. 28: Manufacturing Extension Program
capital project is moved from the FY 06 capital budget to
the FY 05 supplemental in order to begin the project
earlier.
$800,000 federal funds
$800,000 BLIC & Corp Receipts
$1,600,000 Total Funds
Mr. Armstrong noted this item was overviewed at a previous hearing.
Department of Corrections
9:28:09 AM
Item: 16
Section: None
RDU: Inmate Health Care
Supplemental Need: April 22- Costs of unanticipated
catastrophic medical cases
$490,000 general funds
MARK ANTRIM, Commissioner, Department of Corrections, testified to
the difficulty of the Department to control catastrophic health
care issues. To date, the Department has "absorbed the expense of
five or six of these instances including treatment of a gunshot
wound, hip surgery, heart bypass surgery and a patient requiring
Medivac from Nome. Three new cases requiring kidney dialysis would
cost approximately $90,000 and hospitalization expenses must be
paid for treatment of an inmate with liver disease who has since
died. One prisoner is under review for release on medical parole,
which should reduce expenses to the State.
9:30:11 AM
Co-Chair Wilken asked these expenses would be paid from the general
fund and that no other funding source is anticipated.
9:30:22 AM
Mr. Antrim affirmed and informed the inmates in these cases do not
have other insurance coverage. He noted that payment of medical
expenses is secured from insurance companies in instances in which
an inmate has such coverage.
9:30:41 AM
Department of Education and Early Development
Item: 18
Section: 4(b)
RDU: Foundation Program
Supplemental Need: Reduce the FY 05 entitlement for public
school funding by $14,145,500 due to a decrease in projected
enrollment; an increase in the amount of federal impact aid
that reduces the amount of state aid; and the actual cost of
the supplemental funding floor.
March 9: An additional decrease of $47,000
-$14,192,500 general funds
Co-Chair Wilken commented that because this item represents a
funding reduction, no explanation is necessary at this time.
9:30:50 AM
Item: 22
Section: 7(a)
RDU: Debt Retirement Fund
Supplemental Need: Increased capitalization of the Debt
Retirement Fund to supplant a shortfall in cigarette tax
revenue into the School Fund - the estimate for cigarette tax
revenue is reduced by $800,000 from $30.2 million to $29.4
million. This fully funds the School Construction Debt
Reimbursement program in FY 05. (Original request consisted of
$551,100 general funds, $3,500 federal UR Rcpts, and $254,400
DEED CIP Equity Account.)
$0 DEED CIP Equity funds
Co-Chair Wilken noted this section of the bill would be deleted.
9:30:58 AM
Department of Health and Social Services
Item: 29
Section: 8(e)
RDU: Public Assistance: Adult Public Assistance
Supplemental Need: Savings due to caseload reduction and
programmatic changes, particularly last year's changes to
interim assistance.
April 22: Additional savings of $500,000 to be used to
fund the breast and cervical cancer screening
supplemental request of $500,000.
-$2,538,800 general funds
JANET CLARKE, Assistant Commissioner, Division of Finance and
Management Services, Department of Health and Social Services,
explained the suggestion of utilizing the additional $500,000
savings to fund the breast and cervical cancer program; funding
that was originally requested in the FY 05 Fast Track supplemental
proposal.
9:31:48 AM
Co-Chair Wilken clarified that the need for funding the Adult
Public Assistance program has decreased and the Department is
requesting the funds be transferred to the breast and cervical
cancer-screening program.
Ms. Clarke affirmed.
9:32:05 AM
Senator Dyson again asked about the lawsuit claiming wrongful
discharge of an employee. He asked Ms. Clarke if the State is
appealing the court decision.
Ms. Clarke did not know.
9:32:26 AM
Senator Dyson asked if the ruling were not overturned, whether the
judgment would be paid from the Department of Health and Social
Services budget.
9:32:35 AM
Ms. Clarke surmised that a funding request would be made to the
legislature by the Department of Law as a judgment and claims item.
9:32:58 AM
Item: 34
Section: None
RDU: Behavioral Health: Behavioral Health Medicaid Svc
Supplemental Need: Medicaid caseload growth above FY 05 budget
projections. At current expenditure rate, the existing
appropriation will be gone in April or May. (Originally
requested as part of the Fast Track supplemental, but was not
included in the final version because funds were not yet
needed.)
$2,653,700 general funds
$3,517,700 federal funds
$6,171,400 Total Funds
Mr. Armstrong explained the determination that this item could be
funded in this bill rather than the fast track supplemental
appropriation.
Co-Chair Wilken assumed that the funds would be required.
Ms. Clarke affirmed.
9:33:41 AM
Item: 35
Section: None
RDU: Health Care Services: Women's and Adolescents Services
Supplemental Need: Feds reduced FFY 05 funding in the Breast
and Cervical Cancer screening program. The $500,000 general
funds will continue services to 1,600 enrolled women that
otherwise would not be served. (Originally requested in the
Fast Track supplemental bill, but not funded.)
$500,000 general funds
Co-Chair Wilken noted this item relates to the aforementioned Item
#29.
9:33:47 AM
Item: 36
Section: None
RDU: Behavioral Health: Srvcs to Chronically Mentally Ill
Supplemental Need: April 15: Reappropriation of expected FY 05
lapse of MHTAAR funds to complete the Community Planning and
the Independent Case Management projects in FY 06, in the
amounts of $110,000 and $89,200, respectively.
$0
Ms. Clarke explained this request would extend the lapse date of
Mental Health Trust Authority authorized receipt funds previously
appropriated for these projects. The Mental Health Trust Authority
approved this action.
9:34:17 AM
Item: 37
Section: None
RDU: Pioneers Homes
Supplemental Need: April 22- Appropriate excess receipts for
the purchase of needed equipment for the Pioneer Homes
$450,000 Receipt Supported Services funds
Ms. Clarke stated these receipts were collected in FY 04 and FY 05
and discovered in a March 2005 budget review to have not been
appropriated. Some dispute exists in the amount of receipt
supported services funds that should be included in the operating
budget. The Department is therefore suggesting appropriation of
these funds as a one time capital appropriation for the purchase of
equipment. She noted the extensive list of equipment needs.
9:35:36 AM
Item: 38
Section: None
RDU: Sr. Dis. Srvcs: Sr Res Srvcs
Supplemental Need: April 22: Additional funding for the
Kotzebue Senior Citizens Center residential care grant.
$200,000 general funds
Ms. Clarke informed that the Department became aware of a reduction
in FY 05 for the residential senior services program at this senior
center. It was anticipated that this shortfall would be replaced
with Medicaid funding. However it has been difficult to get those
residents eligible for Medicaid coverage. This request is to
utilize general funds
9:36:23 AM
Co-Chair Wilken asked if the expectation was that federal funding
would be received but those funds were not appropriated.
Ms. Clarke affirmed.
9:36:30 AM
Co-Chair Green asked if the situation would be rectified for FY 06.
Ms. Clarke assured the Department and the Kotzebue center would
diligently pursue reinstatement of the funding. General funds would
therefore not be requested for this purpose for FY 06.
9:36:45 AM
Co-Chair Green asked if legislative intent language on this matter
would be "rigorously enforced statewide."
Ms. Clarke answered it would.
9:36:58 AM
Item: 39
Section: None
RDU: Senior and Disabilities Medicaid Services
Supplemental Need: April 22: Additional funding needed
$7,621,400 general funds
$10,345,300 federal funds
$17,966,700 Total Funds
Ms. Clarke pointed out this is the largest funding request and
commented it is her least favorite program that includes the
personal care attendant program that funds the waiver and nursing
home services. She reminded that the original request in the Fast
Track supplemental was for $53 million, and that the legislature
already has appropriated that amount. Projections at that time
estimated expenditures at approximately $20 million per month;
however, the actual cost has been higher for each month since
December 2004. Therefore, the Department had no option but to
request additional funding.
Ms. Clarke stressed this program requires regulation changes to
reduce eligibility access. She told of an audit report on the
program that she would share with the legislators. The report
determined that the entire program requires reform, including
significant management controls. The program has expanded at a rate
faster than current regulations have the ability to control.
Legislative intent language proposed for the FY 06 operating budget
directing the Department to adopt regulations to close loopholes
has the support of the Department. These efforts must be monitored.
Ms. Clarke warned that legislators would likely hear from
constituents as these regulations and management controls are
implemented. The Department is committed to making necessary
changes to ensure the same appropriation requests are not submitted
for FY 07.
Ms. Clarke qualified that a portion of the increased expenses,
relating to nursing home costs, was unanticipated. The Department
is reviewing the matter to determine if this is the result of new
"beds" being made available. Some cost increase was expected, but
the actual increase is ten percent, which is higher than the
predicted amount.
9:41:16 AM
Co-Chair Wilken informed that intent language included in the FY 06
operating budget appropriation would hopefully assist in containing
this expense.
9:41:25 AM
Senator Dyson commented that this program represents an instance in
which the good intentions of empowering families to care for their
senior members has instead enabled people to take advantage of the
program. He expressed willingness to assist in correcting this.
9:42:15 AM
Co-Chair Green asked the consequences if this request were not
funded.
9:42:24 AM
Ms. Clarke replied that if the $18 million requested in this
legislation were not appropriated, the funding for this program
would be exhausted as of June 2005 and the Department would be
unable to pay the assisted living facilities, nursing homes and
other service providers.
9:42:52 AM]
Co-Chair Green asked if the expenditures could be prorated for this
program.
Ms. Clarke answered that this was not an option.
Co-Chair Green suggested this could be considered for future years
to avoid similar appropriation requests.
9:43:18 AM
Ms. Clarke spoke of questions to the legality of prorating Medicaid
services. When such options have been considered in the past, the
Department has been advised of the "difficulty" in prorating
Medicaid payments.
9:43:48 AM
Co-Chair Green clarified the State has no ability to adjust rates
in the event of this situation.
9:44:00 AM
Ms. Clarke affirmed that the Department of Law has advised that
emergency regulations could not be adopted to prorate payments as
the result of a budget crisis.
9:44:21 AM
Senator Hoffman noted the anticipated public "backlash" that would
result from the upcoming regulation changes to the program. He
asked how those changes would affect the program and the amount of
costs savings projected for FY 07.
9:44:57 AM
Ms. Clarke told of 14 intent language items discussed by the
Department of Health and Social Services budget subcommittee that
basically relate to reducing and controlling eligibility and access
to the program.
9:45:30 AM
STEVE ASHMAN, Director, Division of Senior and Disabilities
Services, Department of Health and Social Services, testified that
the Division is in the process of drafting regulations to implement
the 14 intent language items. The most significant change would
clearly define eligibility for this program. This would involve
determining whether the personal care attendant would serve as a
substitute for the patient entering a nursing home or respite care
facility, in that the patient would otherwise require such care.
The Division is also reviewing the definitions of qualifying
disabilities.
9:46:34 AM
Senator Hoffman asked the percentage of the current $240 million
cost of this program would be reduced as a result of these changes.
9:46:50 AM
Mr. Ashman replied that the cost analysis has yet to be completed.
9:47:04 AM
Senator Hoffman asked if the estimate was two percent, five
percent, or other general amount.
9:47:09 AM
Mr. Ashman estimated that a minimum savings of ten percent is
expected and that the intent is that the amount would be higher.
9:47:23 AM
Senator Hoffman calculated a ten-percent reduction to the program
at $24 million.
9:47:28 AM
Ms. Clarke clarified that the cost of the personal care attendant
portion of the program is approximately $80 million.
9:47:50 AM
Department of Law
Item: 40
Section: 9
RDU: Civil Division, Deputy Attorney General's Office
Supplemental Need: Judgments and claims as of 2/7/05 are
$1,108,900
March 9: adds $209,700 for a new total of $1,318,600
April 15: adds $621,400 for a new total of $1,940,000
April 22: adds $51,900 ($2,700 general funds and $49,200
PSTF) for a new total of $1,991,900
$1,942,700 general funds
$49,200 Public School Trust Fund
$1,991,900 Total Funds
Senator Dyson asked if the aforementioned wrongful discharge
lawsuit is reflected in this item.
9:48:27 AM
KATHRYN DAUGHHETEE, Director, Administrative Services Division,
Department of Law, asked if Senator Dyson was referencing the case
resulting from the dismissal of an employee from the position of
Long Term Care Ombudsman.
Senator Dyson corrected the lawsuit he spoke to involved a former
human resources employee of Department of Health and Social
Services
Ms. Daughhettee replied that this item includes payment for one
employment related litigation, which is different from the case
Senator Dyson referenced. She noted that funding for a judgment or
claim is not requested until a case is resolved; if that case were
appealed, it would not be included in this supplemental
appropriation request.
9:49:11 AM
Senator Dyson clarified this.
9:49:31 AM
Item: 47
Section: None
RDU: Environmental Law
Supplemental Need: April 15: Analysis of continuing injury
from the Exxon Valdez Oil Spill and development of
restoration options; FY 06 lapse date.
$75,000 Exxon Valdez Oil Spill Rest.
Co-Chair Wilken outlined this item and it was established there was
no interest in discussion at this time.
9:49:45 AM
Department of Natural Resources
Item: 58
Section: None
RDU: Agricultural Dev
Supplemental Need: April 15: Scope change to sec. 24(n), ch.
159, SLA 2004, for the Alaska dairy industry and the
statewide economic disaster related to the border closure
against ruminants.
$0
Co-Chair Wilken defined "ruminants" are "cud chewing animals."
9:50:11 AM
Department of Revenue
Item: 64
Section: None
RDU: Child Support Services Division
Supplemental Need: Feb 28: Replacement funds for FFY 02
incentives that were wrongfully withheld due to a delay
on the part of the federal government. Original request
of $602,000 federal funds.
March 11: Delete request
$0
Co-Chair Wilken stated that because this item is deleted,
discussion was not warranted at this time.
9:50:15 AM
Item: 66
Section: 16(a)
RDU: School Debt Reimbursement
Supplemental Need: Fund source change due to a shortfall in
cigarette tax revenue deposits into the School Fund. The
School Fund is reduced from $30.2 million to $29.4 million and
the Debt Retirement Fund is increased from $51,670,084 to
$52,470,084.
March 9: Amendment due to final reconciliation of FY 05
school debt reimbursement needs: overall the amount is
reduced $8,838,900 to $73,031,200; Debt Retirement Fund
is reduced by $11,620,684 from $51,670,084 to
$40,049,400; and School Fund is increased by $2,781,800
from $30,200,000 to $32,981,800
April 5- School Fund revenue is expected to be $400,000
less than originally anticipated, which requires a fund
source switch between the School Fund and the Debt
Retirement Fund in the same amount.
-$8,838,900 Debt Ret Fund and School Fund
Co-Chair Wilken remarked that discussion on this item is not
necessary at this hearing.
9:50:23 AM
Department of Transportation and Public Facilities
Item: 70
Section: 17(c)
RDU: Capital
Supplemental Need: Emergency and Non-routine Maintenance:
Failed railroad crossings, $305,000
Winter ice storm and avalanche damage, $50,000
Johnson River bridge damage, $218,400
April 15: Wolverine Road on Lazy Mountain, $170,000
$743,400 general funds
NANCY SLAGLE, Director, Division of Administrative Services,
Department of Transportation and Public Facilities, testified that
a portion of the roadway of Wolverine Road near Palmer, slid
downhill as a result of the spring thaw. This portion of the
request is to undertake emergency repairs until permanent repairs
could be made in a future project.
9:51:30 AM
Item: 85
Section: None
RDU: Fairbanks Airport Operations
Supplemental Need: March 11: Utility cost and consumption
increases.
$127,700 International Airports Revenue Fund
Ms. Slagle noted this is similar to other supplemental
appropriation requests for funding to address increased costs of
electricity and natural gas. The airport staff has been attempting
to absorb these increases in its regular budget with savings from
position vacancies, etc., but determined this would not be
possible.
Item: 76
Section: 17(i)
RDU: Central Region Highways and Aviation
Supplemental Need: Anchorage snowhaul and equipment fuel.
Utilities, sand and steel cost increases.
$1,374,400 general funds
Ms. Slagle understood the concerns about proposed amendments to the
supplemental appropriation request submitted after the deadline.
She announced that the final expenses for this item have been
determined and therefore the originally requested amount would be
reduced by $100,000 to reflect actual usage. The amended amount,
not shown on the spreadsheet would be $1,274,400.
9:53:13 AM
Office of the Governor
Item: 102
Section: None
RDU: Contingency Fund
Supplemental Need: March 11: Reimbursement of funds provided
To the Department of Commerce, Community and Economic
Development for emergency bulk fuel loans made to small
communities, $319,500.
April 22: Increased costs of $65,700 for two additional
small community loans brings the total to $358,200.
$385,200 general funds
LINDA PEREZ, Administrative Director, Division of Administrative
Services, Office of the Governor, noted the members had a list of
the communities and loan amounts [copy not provided.]
Co-Chair Wilken asked if these loans were made through the Denali
Commission program, or a different program.
Ms. Perez deferred to the Department of Community and Economic
Development.
9:54:08 AM
Co-Chair Wilken asked if this request is in addition to the $65,700
appropriated in the fast track supplemental legislation.
9:54:19 AM
MIKE BLACK, Director, Division of Community Advocacy, Department of
Commerce, Community and Economic Development, testified that these
loans were made through the Department's bridge loan program. The
funds requested in this legislation are separate from the earlier
fast track supplemental appropriation. The bridge loan program was
developed the previous year to address high fuel costs.
9:55:25 AM
Co-Chair Wilken asked what agency receives the loan repayments.
9:55:30 AM
Mr. Black explained the revolving loan program that is repaid over
three years. Communities borrow from their account held within this
program and could borrow again once the outstanding balances are
repaid.
9:55:52 AM
Senator Hoffman asked if the Office of the Governor ascertained
that a commitment was received from the legislature and therefore
allocated these contingency funds based on the expectation that the
program would be funded.
Mr. Black affirmed.
9:56:28 AM
Item: 103
Section: None
RDU: Executive Office
Supplemental Need: April 5: Additional funding for the
Northern Forum.
$100,000 general funds
Co-Chair Wilken noted this appropriation is necessary to comply
with a commitment made by the legislature.
9:56:40 AM
Item: 104
Section: None
RDU: Executive Office
Supplemental Need: April 13: Work related to the state gas
pipeline and to brining North Slope natural gas to market
for FY 05 and FY 06.
$500,000 general funds
Ms. Perez told of the accelerated focus on securing a contract for
a natural gas pipeline and the need for additional funding for
extra travel expenses and other costs.
9:57:03 AM
Item: 105
Section: None
RDU: Multiple
Supplemental Need: April 22: Reappropriation of any FY 05
general fund balances within the Office of the Governor
for FY 06 operating costs.
$0
Co-Chair Wilken asked if this provision is standard language
included in all supplemental appropriation legislation.
Mr. Armstrong affirmed.
Ms. Perez also affirmed.
The bill was HELD in Committee.
AT EASE 9:57:47 AM / 10:01:02 AM
Co-Chair Green chaired the remainder of the meeting.
SENATE BILL NO. 171
"An Act amending the National Petroleum Reserve - Alaska
special revenue fund; and establishing the Special Legislative
Oil and Gas NPR-A Development Impact Review Committee and
defining its powers and duties."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken, sponsor of the bill, overviewed the documents
contained in the bill packets provided to members [copies on file].
10:02:11 AM
Co-Chair Wilken read the sponsor statement into the record as
follows.
Senate Bill 171 examines the National Petroleum Reserve -
Alaska (NPR-A) Mitigation Grant Program administered by the
Department of Commerce, Community, and Economic Development
(DCCED) and modifies the selection process to provide for
active oversight by the legislature.
The bounty of NPR-A is thought by many to match or exceed the
oil and gas deposits found at Prudhoe Bay or Kuparuk. As was
mentioned in the Anchorage Daily News, February 15, 2005,
"(The) Bureau of Land Management estimates NPR-A northeast
corner could hold more that 2 billion barrels of crude oil and
3.5 trillion cubic feet of natural gas."
All Alaskans look forward to the time when they can enjoy the
benefits of reasonable and responsible development of these
natural resources.
When members of the United State Congress authorized
When members of the United State Congress authorized
competitive leases in NPR-A in 1980, they recognized that
competitive leases in NPR-A in 1980, they recognized that
development in the petroleum reserve might severely impact
development in the petroleum reserve might severely impact
communities in or near the area. The federal legislation
communities in or near the area. The federal legislation
directed that the revenue generated through NPR-A development
directed that the revenue generated through NPR-A development
be used first to mitigate direct impacts, if any, to
be used first to mitigate direct impacts, if any, to
municipalities, and then by the rest of the State of Alaska.
municipalities, and then by the rest of the State of Alaska.
This federal directive in 1980 created two troubling issues
This federal directive in 1980 created two troubling issues
that today pose significant problems.
that today pose significant problems.
First, the federal legislation is in direct conflict with the
First, the federal legislation is in direct conflict with the
Alaska State Constitution. The State of Alaska receives from
Alaska State Constitution. The State of Alaska receives from
the federal government 50 percent of royalties and lease
the federal government 50 percent of royalties and lease
payments from the oil and gas development in NPR-A. As
payments from the oil and gas development in NPR-A. As
required by federal law, these funds are available, before
required by federal law, these funds are available, before
consideration of any other public purpose, to communities that
consideration of any other public purpose, to communities that
demonstrate impact from resource development in NPR-A. This
demonstrate impact from resource development in NPR-A. This
directive is at odds with Article IX, Section 15 of our
directive is at odds with Article IX, Section 15 of our
constitution.
constitution.
"At least twenty-five per cent of all mineral lease rentals,
royalties, royalty sale proceeds, federal mineral revenue
sharing payments and bonuses received by the State shall be
placed in a permanent fund."
Senate Bill 171 recognizes this unsettling conflict, but does
not overtly address or remedy the conflict between our State
Constitution and federal law. This issue, while bothersome,
is set aside for another day. Instead, this legislation
speaks to the second troublesome issue of how the federal NPR-
A payments are distributed to Alaska communities that may be
severely impacted by oil and gas development within the
National Petroleum Reserve. With the sizeable increase in
NPR-A lease payments since 2000 and with the clear expectation
of future and profitable growth, now is the time to revisit
how the NPR-A payments are distributed and why. It is the
charge of the legislature to devise a method to fairly
allocate the financial benefits of NPR-A to all citizens of
Alaska while, at the same time, recognize and mitigate the
direct impact of development on certain communities as
required by federal law.
In response to a 1986 Alaska Superior Court decision, Senate
Bill 171 sets in place a system to grant impact assistance to
municipalities most directly or severely impacted by oil and
gas activity within the National Petroleum Reserve - Alaska.
First, the Department of Commerce, Community, and Economic
Development shall review and conduct a preliminary evaluation
of each grant application to determine whether the community
can demonstrate "extraordinary municipal and educational
operating expenditures attributable to oil and gas development
in NPR-A that are beyond the municipality's reasonable
capability to meet." (See SB 171, page 3, lines 3-6) The
department will submit a list of all qualifying projects to
the legislature.
Second, the Special Legislative Oil and Gas NPR-A Development
Impact Review Committee, composed of three Senate finance
members and three House of Representative finance members,
will review the submitted applications and within 45 days
forward the committee's recommendation to the respective
finance committees for possible funding.
Third, twenty-five percent of the NPR-A payments will be
deposited to the principal of the Alaska Permanent Fund and .5
percent to the Public School Trust Fund, as required in AS
37.14.110. If the amounts awarded to qualified municipalities
as grants exceed the available money, each deposit in the
previously mentioned funds and each grant will be reduce
proportionately.
And last, a successful grantee shall submit to the Department
of Commerce, Community, and Economic Development a financial
report and a copy of an independent audit or review covering
any previous grants before any subsequent grants are awarded.
I would appreciate your support for Senate Bill 171.
10:07:13 AM
Co-Chair Wilken gave a presentation titled, "NPR-A Impact
Mitigation Program" [copy on file] as follows.
Page 1
"The duty imposed by the federal government ultimately falls
upon the Alaska Legislature…"
Barrow vs. State
Judge Walter Carpeneti, March 18, 1986
10:07:31 AM
Page 2
Alaska Constitution vs. Alaska Statute
· Current Impact Mitigation Program
· Importance of "Impact"
· Senate Bill 171
Co-Chair Wilken outlined the topics that would be addressed in the
presentation.
10:07:40 AM
Page 3
National Petroleum Reserve - AK
[Map of northern Alaska showing NPRA, the Alaska National
Wildlife Refuge, the Trans-Alaska Pipeline, Native owned
lands, certain oil fields and other points of reference]
· 23.5 million-acre petroleum reserve (~ Indiana)
· NW third of Alaska's arctic between the Brooks Range and
the Arctic Ocean
Co-Chair Wilken identified this area of conflict is approximately
the size of the state of Indiana.
10:08:16 AM
Page 4
The history of NPR-A
1923 President Warren Harding established the Navel
Petroleum Reserve
1976 Dept. of Interior assumed jurisdiction and changed
the name
1980 Congress addressed changes to National Petroleum
Reserve - AK
10:08:36 AM
Page 5
Changes in 1980
· Congress authorized competitive leases in NPR-A (42
U.S.C. Sec. 6508)
· Federal law cleared the way for the private development
of NPR-A resources
· State of Alaska to receive 50% of the total revenue from
NPR-A leases
10:08:54 AM
Page 6
The legislature responded
To the new federal law: "The State is required to give
priority to communities 'most directly or severely impacted'
by development."
· Established an NPR-A Special Revenue Fund within the
Department of Revenue (CS SB 835 am H, 1982)
o Half of NPR-A receipts appropriated to communities
affected by leasing
o Other half available for state appropriation
10:09:19 AM
Page 7
But Governor Hammond Vetoed
"The dedication of such federal monies appears to be …
inconsistent with the dedication of revenue to the Alaska
Permanent Fund." Governor Hammond, Veto Message, June 24, 1982
Alaska State Constitution
Article IX Section 15
Alaska Permanent Fund
"At least twenty-five percent of all mineral lease rentals,
royalties, royalty sale proceeds, federal mineral revenue
sharing payments and bonuses received by the State shall be
placed in a permanent fund." (Adopted in 1976)
Co-Chair Wilken submitted that few Alaskans are aware that four
communities and one borough have "jumped ahead" of deposits into
the Alaska Permanent Fund in receiving appropriations. Most
Alaskans assume the royalties are shared equally.
10:10:08 AM
Co-Chair Wilken noted that some would argue that the royalties are
"received" after the four communities are allotted a portion. He
contended that the funds should be considered "received" once the
federal government appropriates them.
10:10:31 AM
Page 8
And so the legislature…
Without a specific state law on the books…
· Received $48.6M during the early 1980s
· Deposited half of the State's share into the Permanent
Fund and .5% to the Public School Fund
· Deposited the remainder of the funds in the General Fund
10:10:52 AM
Page 9
Calculation by Alaska Constitution
In 1982, the Legislature appropriated the NPR-A receipts
according to the Alaska State Constitution
NPR-A Receipts $48,600,000
50% of gross receipts to Perm Fund (24,300,000)
.5 of gross receipts to Public School
Trust (243,000)
Available to General Fund for Impacted
Communities 24,057,000
10:11:05 AM
Page 10
But what about the federal law?
· In 1985, the North Slope Borough and NPR-A communities
sued the state
· The plaintiffs wanted:
1. A "rational process" for communities to apply for the
grants
2. Declaration that all NPR-A funds be automatically
deposited into the special revenue fund and available for
grants
3. A system to separately account the receipt of NPR-A
funds and to reconstitute the special revenue fund
Co-Chair Wilken emphasized the reference to a revenue fund as
opposed to the Alaska Permanent Fund. The special revenue fund is
not unlike the Alaska Mental Health Trust fund.
10:11:39 AM
Page 11
The Superior Court said…
Barrow v. State, Alaska Superior Court, Judge Walter
Carpeneti, March 18, 1986
1. The State is required to establish a system to grant
impact assistance to subdivisions most directly or
severely impacted by NPR-A activity.
2. Automatic deposits into the Permanent Fund and General
Fund violates the federal law.
3. Under the supremacy clause of the federal
constitution, federal law controls.
Co-Chair Wilken identified this as "tension" between the Alaska
State Constitution and federal law.
10:12:14 AM
Page 12
The legislature listened
· Adopted legislation to implement the court findings (CS
HB 491(FIN), 1986)
o Established the Impact Mitigation Program
o Authorized DCCED to adopt regulations setting
eligibility criteria for NPR-A grants
· Appropriated $24.5 million to the NPR-A special revenue
fund
Judge Carpeneti ruled that the NPR-A special revenue fund be
reconstituted. The $24.5 million payment was in response to
this ruling.
10:12:38 AM
Page 13
Where did the money go?
First and foremost, grants to four impacted communities
After that…
1. 50 percent to the principal of the Perm Fund
2. .5 percent to the Public School Trust Fund
3. Remaining amounts to the General Fund
Note: In 1999, HCS CS SB 157 (FIN) am H (1999) passed the
legislature and requires a 25% deposit to the Permanent Fund
and allows a deposit to the Power Cost Equalization fund
before the General Fund.
10:12:57 AM
Page 14
Calculation by Alaska Statute
(AS 37.05.530(g))
Conforms with 1980 federal law which conflicts with our Alaska
Constitution
NPR-A Federal Receipts $31,623,800
Grants to NPR-A Communities (DCCED Rec) (24,706,500)
Net NPR-A Receipts 6,917,300
25% of Net Receipts to Permanent Fund (1,729,300)
.5% of Net Receipts to Public School Trust (34,600)
Available Receipts for PCE (May be approp.) 5,153,400
Available for General Fund Remainder if any
(Example uses requested FY 06 numbers)
Co-Chair Wilken revealed that the premise that NPR-A receipts are
"sacred to the Permanent Fund" is untrue.
10:14:00 AM
Page 15
Comparison of Two Methods
AK Constitution vs. AK Statutes
AK Constitution AK Statutes
Art. IX, Sec. 15 (per fed law)
NPR-A Federal Receipts $31,623,800 $31,623,800
25% of Gross Rcpts to Perm Fund (7,906,000)
.5% of Gross Rcpts to School Fund (158,100)
Grants to Communities (DCCED Rec) (23,559,700) (24,706,500)
25% of Net Receipts to Perm Fund (1,729,300)
.5% of Net Receipts to School Fund (34,600)
Available Rcpts for PCE (May Approp) 0.0 5,153,400
Available Receipts for GENERAL FUND 0.0 Remainder if any
Example uses requested FY 06 amount.
Co-Chair Wilken remarked this demonstrates the conflict between the
Constitution and statute. The affect is "shorting my grandkids by
80 percent" of the amount stipulated by the Constitution. "The
future is being shorted by this federal law" that provides the
Permanent Fund could receive NPR-A receipts only after the requests
of four communities and one borough government are provided. He
noted this issue is not addressed in this bill and is a matter for
future consideration.
10:15:30 AM
Page 16
NPR-A
Impact Mitigation Program
Alaska Constitution vs. Alaska Statute
Current Impact Mitigation Program
Importance of "Impact"
Senate Bill 171
10:15:36 AM
Page 17
The Current Mitigation Program
Committee Substitute for House Bill 491 (FIN), 1986
U.S. Dept of Interior notifies Dept. of Commerce, Community
and Economic Development regarding possible NPR-A Federal
Receipts
[Flow Chart demonstrating subsequent process as follows:
NPR-A Communities
1. Public Notice & Request for Applications
DCCED
2. Requests
Review Committee
3. Evaluate & Recommend Proposals
Legislature
4. Commissioner Requests Funding
DCCED
5. OK Funding?]
10:16:12 AM
Page 18
Where are the Communities?
[Map of NPRA and surrounding area with four communities
identified as follows:
City of Barrow
Population - 4,351
Median Household Income - $67,097
City Responsibilities - Bingo, Community Center, Roller
and Ice Rink, Teen and Recreation Center, Housing, City
Hall, Little Dribblers, Taxis, Summer Youth Employment,
Gravel Sales
City of Wainwright
Population - 531
Median Household Income - $54,722
City Responsibilities - None listed
City of Nuiqsut
Population - 430
Median Household Income - $48,036
City Responsibilities - Community Hall, Dock, Cable TV
City of Atqasuk
Population - 218
Median Household Income - $66,607
City Responsibilities - Bingo, Room Rentals, Community
Center, Recreation, Cable TV
Source: DCCED and Alaska Municipal League - Alaska
Municipal Officials Directory]
10:17:01 AM
Page 19
Total Distribution to Date
…and FY 07 projections
[Bar graph showing Amount of the Grant Awards in amounts
between $0 and $50,000 for the years 1980 through 1986 and FY
87 through FY 08. A notation states: FY 06 is the requested
amount. FY 07 is the projected amount from the proposed NPR-A
summer lease sales.]
Since 1980, a total of $117,249,388 has been awarded to 4
communities.
(Total includes the FY 06 requested amount of $24,706,500)
(FY 87 and FY 91 include 5 communities)
Co-Chair Wilken noted the years with significantly higher
distributions. The amount for FY 05 is expected to be almost $50
million and future distributions would increase further.
10:18:15 AM
Page 20
A Perspective in Statewide Terms
What if … the FY 06 requested grant amount was computed on a
per person basis, what would that mean for other AK
communities on 7/1/05?
Anchorage
Population - 277,498
$1.2 billion
Fairbanks
Population - 84,979
$379.7 million
NW Arctic Borough
Population - 7,306
$32.6 million
Bethel
Population - 5,888
$26.3 million
Sitka
Population - 8,805
$39.4 million
The FY 06 requested amount, $24,706,539, is divided by the
total population of NPR-A grant recipients, 5,530, for a per
person amount, $4,468.
Co-Chair Wilken commented that this demonstrates the imbalance. A
large area of the State with a small population has "jumped in
front of the Permanent Fund" and has benefited from a system that
"is far above the spirit of the law." Although following the
"letter of the law", the current practice does not reflect "the
spirit of the law." This is big money.
10:19:55 AM
Page 21
NPR-A
Impact Mitigation Program
Alaska Constitution vs. Alaska Statute
Current Impact Mitigation Program
Importance of "Impact"
Senate Bill 171
10:20:02 AM
Page 22
Where is NPR-A O&G Activity?
[Map of northern Alaska showing NPRA, the Alaska National
Wildlife Refuge, the Trans-Alaska Pipeline, Native owned
lands, certain oil fields and other points of reference]
Proximity to Current NPR-A Oil and Gas Activity
Wainwright - 220 miles
Barrow - 160 miles
Nuiqsut - 6 miles
Atqasuk - 160 miles
Co-Chair Wilken noted on map.
10:20:39 AM
Page 23
And the main O&G Activity?
[Map showing area of North Slope Oil and Gas Activity between
the eastern boundary of the National Petroleum Reserve -
Alaska and the western boundary of the 1002 Area of ANWAR.
Highlighted are: Units, Drill Pad, Town Location, Dalton
Highway, Trans-Alaska Pipeline, Oil Accumulations, and Gas
Accumulations.]
10:21:28 AM
Page 24
Today "IMPACT" is rated as a minimum consideration
FY 01 NPR-A
Impact Mitigation Program
Basis for Recommendation
Description - 15 points
Impact - 50 points
Budget - 15 points
Readiness - 15 points
Capability - 5 points
FY 03 NPR-A
Impact Mitigation Program
Basis for Recommendation
Description - 30 points
Impact - 30 points
Budget - 20 points
Sustain - 15 points
Capability - 5 points
FY 05 NPR-A
Impact Mitigation Program
Basis for Recommendation
Description - 25 points
Impact - 25 points
Budget - 20 points
Sustain - 20 points
Capability - 10 points
As administered by the Department of Commerce, Community and
Economic Development
Co-Chair Wilken stated that the federal government requires that a
community must be impacted to receive these grants. This slide
demonstrates the point system applied for grant applications. He
noted that in FY 01, one-half of the criteria was based on impact
compared to current standards, in which impact accounts for only 25
percent. In 1980, the federal government established that impact is
the "bar that must be passed". This legislation addresses how to
define and determine impact.
10:22:40 AM
Page 25
What does the law say?
· Federal Law - 42 U.S.C. 6508
o In allocation of the NPR-A funds, the State shall
give priority to use by subdivisions of the State
most directly or severely impacted by the
development of oil and gas leased in NPR-A.
· Alaska State Law - AS 37.05.530
o A municipality may use the NPR-A funds only for
services to alleviate the impact of oil and gas
development within NPR-A.
· Alaska Regulations - 3 AAC 150.050
o Impact means an effect reasonably attributable to
NPR-A oil and gas activities under 42 U.S.C. 6508.
Co-Chair Wilken pointed out the language provides that the impact
must result from oil and gas activities in NPR-A and not activities
on the North Slope or Prudhoe Bay.
10:23:22 AM
Page 26
Rags Define Impact to Mean
Reasonably attributable to NPR-A oil and gas activities on the
following (3 AAC 150.050):
· Population
· Employment
· Finances
· Social/Cultural Values
· Air & Water Quality
· Fish & Wildlife Habitat
· Ability to Provide Services
· Other Demonstrable Important Things
Co-Chair Wilken commented to the broadness of these criteria,
remarking that there is not any activity that could not be
attributed to a category in some manner.
10:23:46 AM
Page 27
Impact is the First Criteria
[Flow chart following a project request as follows.
Impacted??:
Municipality?
Directly or severely impacted?
Reasonably attributable to…?
No - Application Rejected
Yes - Scored
Description
Budget
Sustainability
Capability
No - Request not Funded
Yes - Funded
Appropriation by the Legislature]
The State shall give priority to subdivisions of the State
most directly or severely impacted (42 U.S.C. 6508)
Co-Chair Wilken explained that SB 171 proposes to rearrange how
project requests are considered.
10:24:47 AM
Page 28
An example for review
Wainwright Lagoon Boat Launce - $525,000 - To replace or
renovate the Wainwright Lagoon Boat Ramp
"Impact" on Population
Applicant
"Construction of the oil production infrastructure and
pipeline has driven up the growth of population."
But…
The population of Wainwright has increased from 492 to
546 in 1990 - 2000.
"Impact" on Employment and Finances
Applicant
"Due to decline in property tax revenues from aging oil
and gas infrastructure, the Borough cannot financially
help the community."
But…
The reduction in revenue is not due to NPR-A development.
In fact, NPR-A development will increase the borough
revenues.
Co-Chair Wilken clarified the "but" represents his interpretation.
The population increase of Wainwright is negligible.
10:25:57 AM
Page 29
…and to continue
Wainwright Lagoon Boat Launch - $525,000
"Impact" on Social and Cultural Values
Applicant
"The social disruption prompted by oil and gas
development affects many traditional activities."
But…
Wainwright is 220 miles from NPR-A development.
"Impact" on Fish and Wildlife Habitat
Applicant
"Access to hunting areas would change in oil development
reduces the availability of subsistence resources."
But…
Past experience at Prudhoe Bay has shown that O&G
activities and wildlife can co-exist.
Question: Were the listed impacts reasonably attributable to
oil and gas development within NPR-A?
A review committee of three rated "Impact" only 20 points out
of 100, the project was recommended.
Co-Chair Wilken concluded that the impact of NPR-A was not
significant to warrant this project.
10:26:34 AM
Page 30
And another example…
City of Barrow Impound and Disposal Site Project - $174,389
"Impact" on Visual Resources
Applicant
"Many of the abandoned vehicles that the City of Barrow
has allowed people to dump on city land were brought to
Barrow during the oil boom in the last quarter of the
20th century."
But…
The "oil boom" discussed was outside NPR-A. The impact
must be "reasonably attributable" to oil and gas
development within NPR-A.
No other impact was stated by the applicant
Question: Was the listed impact reasonably attributable to oil
and gas development within NPR-A?
The review committee rated "Impact" between 20 - 24 points out
of 100; the project was recommended.
10:27:00 AM
Page 31
And another one…
Roller Rink Renovation Feasibility Study - $63,556 - to
identify the costs to renovate the Barrow Roller Rink
"Impact" on Employment
Applicant
"Although an estimated 4.000 jobs exist on the N. Slope
in the O&G industry only a fraction are held by Inupiat."
But…
The vast majority of the jobs in the O&G industry are not
reasonably attributable to NPR-A development.
"Impact" on Unemployment
Applicant
"As the economic benefits of O&G development begin to
decline, it leaves members less able to survive…"
But…
The decline in O&G development is not in NPR-A; this
petroleum reserve is just beginning to be explored.
10:27:37 AM
Page 32
…and to continue
City of Barrow Roller Rink Renovation Feasibility Study -
$63,556
"Impact" on Social and Cultural Values
Applicant
"The decline in subsistence resources due to NPR-A O&G
development negatively impacts the Inupiat culture."
But…
Studies are currently undertaken to determine the impact
to wildlife, if any, to Barrow residents 160 miles from
Alpine.
"Impact" on Public Services
Applicant
Although the population has had a small, net loss in the
previous five years, the burden on the City of Barrow has
not been reduced.
But…
Most of the workers connected with NPR-A development
reside on the oil company's production sites and not in
local towns.
Question: Were the listed impacts reasonably attributable to
oil and gas development within NPR-A?
A review committee of three rated "Impact" between 15 - 25
points out of 100; the project was recommended.
Co-Chair Wilken suggested that the roller rink project was not
qualified to receive NPR-A funds.
10:28:23 AM
Co-Chair Green asked if the project is to renovate the roller rink
for a different function that would either provide increased
employment or address cultural impact, etc.
10:28:48 AM
Co-Chair Wilken replied that this project is intended to study the
feasibility of renovating a roller rink.
10:29:00 AM
Page 33
Additional Concerns
· Grants are all funded as capital projects and the dollars
do not lapse (AS 37.25.020)
o But less than 40% of the grants are for capital
projects (the majority of grants are for operating
expenses)
· Funds are approved before old grants for the same purpose
are expended…
o As an example of many grants, only 15% of an FY 04
group operating grant of $1,759,484 to survey
wildlife is disbursed, but an FY 06 grant for
$2,461,368 is recommended for the same purpose
10:29:45 AM
Co-Chair Green asked if the two grants are intended to study
wildlife in different areas.
10:29:50 AM
Co-Chair Wilken responded that the description for the FY 06 grant
is identical to that of the earlier request and that he could
therefore not determine whether the surveys are intended for
different geographical areas.
10:29:59 AM
Page 34
To continue
· Few grants follow timelines
o Only 40% of grant funds scheduled for completion on
6/30/05 has been spent
· Awards are not based on successful completion of previous
grants
FY 00 - Nuiqsut Cultural Center Construction
$939,800 - Not Started as of 4/26/05
But
FY 02 - Nuiqsut Cultural Center Operating $288,000
These grants funds will be used for new projects without
notice to or approval from the legislature.
Co-Chair Wilken remarked that this "speaks to" the requirement for
oversight of the grant program.
Page 35
NPR-A
Impact Mitigation Program
Alaska Constitution vs. Alaska Statute
Current Impact Mitigation Program
Importance of "Impact"
Senate Bill 171
10:30:45 AM
Page 36
Now is the time
To listen to the Alaska Superior Court (Barrow v. State, March
18, 1986):
"The duty imposed by the federal government ultimately falls
upon the Alaska Legislature and it includes the duties to
examine the claimed needs of the subdivisions arising from oil
and gas development impacts, to evaluate them and, if the
claimed needs are found to exist, to rate them in order of
priority, and to meet them out of NPR-A revenues."
Co-Chair Wilken stated that this legislation is based on this court
opinion.
10:31:20 AM
Page 37
Legislature has authority…
1. To examine the claims for financial assistance
2. To evaluate and rank the grant requests
3. To determine the appropriate amount of NPR-A revenue for
use by impacted municipalities
4. To determine the specific projects that are funded
Legal Services memorandum, March 18, 2005
10:31:38 AM
Page 38
Senate Bill 171
"It is the intent of the legislature to provide temporary
emergency financial assistance to municipalities for the
purpose of meeting certain extraordinary operating and capital
improvement expenditures necessitated by NPR-A oil and gas
development." (Section 1. LEGISLATIVE INTENT in the proposed
legislation.
· Establishes a Legislative Impact Review Committee
(composed of 3 finance members of each body)
o Consults with DCCED and then approves and forwards
grant recommendations to respective finance
committees.
Co-Chair Wilken explained the proposed review committee is modeled
after the legislative conference committee process. Two members of
the majority and one member of the minority party from each body
would serve and two affirmative votes from each body would be
required to fund an award. This standing committee would review
all requests and submit recommendations to the full finance
committees for inclusion in the annual capital appropriation.
10:32:15 AM
Page 39
And to continue
· Deposits to unique funds are based on the total federal
NPR-A receipts
o Perm Fund and Public School Trust
· Grants are awarded for one year, unless otherwise noted
· Lapse money is appropriated to the Permanent Fund, School
Trust, or General Fund
10:32:44 AM
Page 40
Now is the time…
To consider SB 171
…and establish a method to fairly allocate the financial
benefits of NPR-A to all Alaskans while, at the same time,
mitigate the direct impact of development on certain
communities as required by federal law.
10:33:11 AM
Co-Chair Green asked if any language in this bill would amend
current statute.
10:33:36 AM
Co-Chair Wilken replied that as a result of a hearing on this bill
by the Senate Community and Regional Affairs Committee, it was
determined that a committee substitute would be necessary to
provide "clean up". No subsequent changes are required.
Co-Chair Wilken informed that some interested parties were unable
to attend this meeting and desire to provide testimony to the
Senate Finance Committee. Upon hearing these comments a new
committee substitute could be drafted to incorporate suggestions.
Valid suggestions were offered to the Senate Community and Regional
Affairs Committee.
10:34:51 AM
Senator Hoffman referenced page 20 of the presentation and
commented that it represents the "wishful thinking" if all
communities in the State were included in the NPR-A grant program.
Co-Chair Wilken affirmed.
10:35:18 AM
Co-Chair Green asked the communities located within a 220-mile
circumference of the Alpine development.
10:35:48 AM
Co-Chair Wilken offered to prepare such a map, referencing the map
on page 22.
10:36:13 AM
Co-Chair Green asked which additional communities would be included
in such a radius.
10:36:27 AM
Senator Olson responded that the area would be limited to the North
Slope. He pointed out that the Brooks Range is not shown on the
aforementioned map, which includes an area approximately 150-miles
south of the Alpine development.
Co-Chair Wilken demonstrated on the map the approximate 220-mile
radius from the Alpine development.
10:37:29 AM
Senator Stedman asked the intended timeframe for this legislation
as it brings up concerns of local residents. He wanted to know if
the bill would be reviewed over the legislative interim with
recommendations implemented and passage expected in January or
February 2006.
10:38:02 AM
Co-Chair Wilken suggested that a subcommittee could be established
comprised of Senator Stedman, Senator Dyson, Senator Olson and
himself. It would be beneficial to have the Department overview the
24 grants awarded and the "thought process" as to how it was
determined that the communities were impacted by NPR-A development.
Whether changes are made to the allocation of the current $24.6
million is a discussion for the full Committee, after it
understands the projects involved.
Co-Chair Wilken characterized this legislation as a "marathon"
rather than a "sprint" and that NPR-A receipts would provide a
long-term funding source for the State. He wanted to ensure that
all residents of Alaska benefit, not just a few. He did not expect
this legislation would pass during the current year, but was
confident it would pass during the second session of the Twenty-
fourth Legislature.
10:39:20 AM
Senator Olson remarked that the sponsor made a "compelling"
presentation; however, he surmised, "there's more to the story". He
noted the map on page 22 and argued that a community located 220-
miles from a full production oil site is likely not significantly
impacted.
10:40:13 AM
Co-Chair Wilken relayed that oil and gas development activities are
"reaching out" approximately 30 west of the current site of the
Alpine development. Exploration is going no further because, if
discoveries are made there is no infrastructure for developments.
He indicated other areas within the NPR-A that have been surveyed,
although the oil companies have not reported on any findings.
Resources are expected to be present as far north as the City of
Barrow.
Co-Chair Wilken detailed the three-dimensional seismic survey
process in which no explosives are used. A probe is set up during
winter months and a "thumper" is used during summer months. This
process has no impact on terrain. Caribou populations are
reportedly growing exponentially since the 1970s. Oil and gas
activities are assisting the caribou population. The survey
activities are occurring in a small portion of the area depicted on
the map.
10:42:55 AM
Senator Olson disagreed with Co-Chair Wilken's assertion that the
communities are not significantly impacted because of their
distance from oil development. Senator Olson indicated a map [copy
not provided] showing areas of seismic activities throughout the
NPR-A area. He agreed that older technology was more harmful;
however, the newer method involving thumping has an impact on land
animals and a yet unmeasured impact on marine mammals and whales.
Before a company spends millions of dollars on oil leases, it would
intend to gather additional data and conduct more seismic testing.
Senator Olson shared that he has flown over the affected areas and
told of the "cat trains" and impact on vegetation throughout the
entire NPR-A. He had no misconception that this would affect the
residents of Wainwright.
10:45:32 AM
Co-Chair Wilken responded that the map Senator Olson referenced
shows seismic testing done during the 1970s and 1980s. No further
activities have occurred since.
10:45:53 AM
Senator Olson noted the reference to the amount of money
appropriated to the communities since the 1980s. He asked if all
the funds had been expended or if any had lapsed and were returned
to the State.
10:46:23 AM
Co-Chair Wilken replied that data indicates $18.7 million has
reverted to the State general fund over the life of the program. He
qualified that the accounting of the funds allocated in the early
1980s is difficult to ascertain because funds were transferred
between the North Slope Borough and the communities.
10:46:54 AM
Senator Dyson remarked that the potential impact to marine mammals
is a valid issue. He understood that all seismic activities occur
during winter months and would therefore only impact those mammals
present in the region at that time. Therefore, the whale population
would not be impacted.
Senator Dyson relayed the rhetoric that Alaska's wealth is mostly
located in rural Alaska that that benefits should therefore be
allocated only to rural communities. However, the State
constitution stipulates that the resources are held in trust for
all citizens, which results in some constraints. He commented to
the premise that two sides exist to every story. He anticipated
testimony from the Department of Commerce, Community and Economic
Development and other parities.
10:49:08 AM
Senator Stedman admitted to his limited experience with the oil
industry. In the region of State he represents, noises created by
jets and gunshots do not result in significant change in animal
behavior. He qualified that the animals in Northern Alaska could
react differently.
10:50:12 AM
Senator Olson agreed that the resources must be held for the
benefit of all Alaskans, but contended that the responsibilities
must also be considered. For example, some villages have no water
and sewer services.
Senator Olson pointed out an acoustical difference in the impact of
sound traveling through air compared to a different medium such as
the ground or water. This could cause a greater impact.
10:51:11 AM
Senator Stedman anticipated receiving information on the impact of
oil development directly from the affected communities and the
reasoning for the proposed projects. It is clear that the State
must assist in mitigating the impacts to local residents. He
surmised this legislation did not intent to ignore this obligation,
rather to review the details of the grant program.
10:51:47 AM
Co-Chair Wilken referenced the fiscal note of $20,000. The intent
is that the proposed committee would travel to the four communities
to experience the impact directly. No one should serve on that
committee without having visited the areas.
10:52:19 AM
Co-Chair Green noted the application process that declares the
impact and the named project. She asked if the proposed project is
required to have a relationship to the impact, or whether the
funding source could be utilized for any purpose.
10:53:05 AM
Co-Chair Wilken noted the NPR-A Grant Status Report as of 13/31/04
and stated the Members could review that grant applications and
make their own conclusions as to the relationship of the projects
to the impact from oil and gas development. He suggested that some
have no relationship.
Co-Chair Green intended that projects demonstrating a legitimate
cause and affect from oil and gas activities should be granted.
However, some of the projects "don't lend a great deal of
confidence of what's been done in the past; therefore we have to
worry about what's going to be done in the future."
10:54:04 AM
Co-Chair Wilken agreed.
Co-Chair Wilken then informed that to conduct seismic testing, a
permit must be obtained from the North Slope Borough. He cited one
such permit #LMR05142, and read the "seismic stipulations", which
stipulate that operations must not interfere with subsistence
activities and that fuel must be provided to hunters and trappers
in the event they must travel to alternate hunting and trapping
sites. The seismic activities are limited in the impact it could
have on the tundra, must not interfere with polar bear or grizzly
bear denning, and an observer must be present during testing. These
stipulations ensure that seismic activities do not impact the
resources of the area.
Co-Chair Green asked if a fee is imposed for the permits.
Co-Chair Wilken did not know.
10:55:56 AM
Senator Olson requested the Department of Commerce, Community and
Economic Development answer questions relating to this bill.
10:56:08 AM
Co-Chair Green noted this hearing is the first segment of the
process in considering this legislation.
The bill was HELD in Committee.
ADJOURNMENT
Co-Chair Green adjourned the meeting at 10:57 AM
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