Legislature(1993 - 1994)
05/10/1994 10:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE May 10, 1994 10:10 a.m. TAPES SFC-94, #88, Side 1 (000-end) SFC-94, #88, Side 2 (575-end) SFC-94, #90, Side 1 (000-542) CALL TO ORDER Co-chair Drue Pearce convened the meeting at approximately 10:10 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Kelly, Kerttula, Rieger, and Sharp were present. Senator Jacko arrived as the meeting was in progress. ALSO ATTENDING: Senator Adams; Senator Taylor; Representative Grussendorf; Representative Olberg; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Wendy Redman, Vice President for University Relations, University of Alaska; Ron Lind, Director, Administrative Services, Dept. of Transportation and Public Facilities; Duane Guiley, Director, School Finance, Dept. of Education; Bob Poe, Director, Division of Information and Administrative Services, Dept. of Environmental Conservation; Mike Greany, Director, Legislative Finance Division; Dana LaTour and Susan Sorensen, fiscal analysts, Legislative Finance Division; and aides to committee members and other members of the legislature. SUMMARY INFORMATION HB 441 - An Act making, amending, and repealing capital and operating appropriations; and providing for an effective date. Extensive discussion was had and numerous amendments were adopted. SCS CSHB 441 (Finance) was REPORTED OUT of committee with a "do pass" recommendation. HB 455 - APPROP: GOVERNOR'S SUPPLEMENTAL Discussion was had and two amendments were adopted. SCS CSHB 455 (Finance) was REPORTED OUT of committee with a "do pass" recommendation. HB 441 - ACT MAKING,AMENDING,AND REPEALING CAP. AND OPT. APPROPS. Upon convening the meeting, Co-chair Pearce directed attention to CSHB 441 (Fin)am and noted a number of amendments: Amendment No. 1 Co-chair Pearce advised that Amendment No. 1 was proposed by the administration. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, explained that the amendment would reappropriate the unexpended $1,094,439 balance of an old DOTPF project for partial completion of the Natural Sciences Building at the University of Alaska. It also reappropriates balances from three other DOTPF projects for completion of the new Tok School. Funding for the school consists of $142,445 from statewide space planning, $126,030 from facilities planning, and $124,791 from the Kuskokwim Delta regional transportation study for a total of $393,267. Senator Frank MOVED to insert the word "partial" between "for" and "completion" in language relating to the Natural Science building. The reappropriation would thus be made "to the University of Alaska for partial completion of the Natural Science building. Senator Kelly questioned whether moneys to be reappropriated dated from past appropriations or were new moneys. Nancy Slagle attested to the fact that $1,094,439 of the original $1,350,000 DOTPF appropriation remains unexpended. Senator Rieger inquired concerning the cost of completion of the Natural Science building. WENDY REDMAN, Vice President for University Relations, University of Alaska, advised that the legislature funded $22 million of the original $27 million cost for the building and told the University to come back for completion. The cost to finish the facility is approximately $5 million. With the proposed reappropriation, the University hopes to open a classroom and "a couple of labs." Co-chair Pearce called for objections to Senator Frank's amendment to Amendment No. 1. No objection having been raised, the amendment to Amendment No. 1 was ADOPTED. RON LIND, Director, Administrative Services, Dept. of Transportation and Public Facilities, came before committee in response to a question from Senator Jacko concerning the status of projects slated to provide reappropriation funding for the Tok School. Mr. Lind explained that funding derives from "old statewide space planning projects" that are no longer active. Senator Jacko inquired specifically about the $220,000 for the Kuskokwim Delta study, and Mr. Lind explained that the $124,791 scheduled for reappropriation reflects unused planning funds. Senator Jacko asked if the department was abandoning need for a regional transportation system in the area. Mr. Lind said that he could not speak to need for the project. The department was merely asked to provide the general fund balance and did so. The original scope of the work was done. The above-mentioned balance remains. It could be used for continued planning. Senator Kelly voiced his disbelief that actual cash remains from projects dating back to 1981. Co-chair Pearce advised that cash remains from statewide projects back to 1977. Senator Rieger asked if the Barnette/Illinois/Phillips Field/College Road project slated to provide funding for the Natural Science Building had been completed. Mr. Lind answered affirmatively. He explained that it was a federal construction project. Additional portions of the project may be undertaken in the future, but they will be part of the "regular federal construction program . . . ." Co-chair Pearce called for a show of hands on adoption of Amendment No. 1. Senator Jacko OBJECTED, advising of continued need for a regional transportation study in the Kuskokwim Delta. The motion CARRIED on a vote of 5 to 2 (Senators Jacko and Kelly objected), and Amendment No. 1 was ADOPTED. (See page 5 of these minutes for further action on this amendment. Amendment No. 2 Co-chair Pearce explained that Amendment No. 2 was proposed by the Office of Management and Budget. The House used lapsing moneys from Arctic Power for public radio but tied the two together. The Office of Management and Budget has asked that the appropriations be separated in order for each to stand on its own merits. Senator Sharp MOVED for adoption of Amendment No. 2. Co-chair Pearce called for a show of hands. The motion FAILED on a vote of 3 to 4. Amendment No. 3 SENATOR ADAMS explained that the $5,000,000 appropriation would fund a portion of the reconstruction cost for the Newtok School which burned down in early May. Reconstruction will cost approximately $10 million. The district will receive $3.5 million from insurance proceeds. The intent is to construct a K-12 facility for the village. The Newtok school is number two on the Dept. of Education's Priority I list. Senator Adams urged support for construction of the school to house the 94 students in the area. Co-chair Frank inquired concerning the administration's approach toward solving the problem. DUANE GUILEY, Director, School Finance, Dept. of Education, explained that the Newtok High School was totally destroyed by the May 1 fire, and the elementary school was partially destroyed. Insurance proceeds are based on replacement cost and will rebuild the high school and refurbish the elementary school. There is potential for the state to save $3.8 million in reconstructing the two schools as one K-12 facility by simultaneously utilizing insurance proceeds and state revenue. Further discussion followed between committee members and Mr. Guiley. He explained that the elementary school at Newtok is currently number two on the department's priority list. It is a former BIA school constructed in 1963 and is overcrowded and out of compliance with current codes. The department planned to construct an elementary addition to the high school. In response to a question from Co-chair Pearce, Mr. Guiley said that the department supports construction of a single facility but does not support the proposed fund source. Senator Kelly voiced concern that costs for the proposed school appear to total $100,000 per student. Mr. Guiley said that the estimate for replacement of the elementary school is $10.8 million. Utilization of the same contractor to both rebuild the high school and refurbish the elementary school would reduce costs to $7 million. Construction costs average slightly over $220.00 per square foot. Discussion of responsibility for insurance coverage followed between Mr. Guiley and Senator Kelly. Mr. Guiley advised that the Newtok school board had adequate insurance in accordance with statutes. Noting that statewide moneys are involved, Senator Rieger suggested that, in the event the school is not constructed, funding should not be considered district discretionary reappropriation moneys in future years. He then MOVED for adoption of the following intent as an amendment to Amendment No. 3: It is the intent of the legislature that this appropriation is not subject to district reappropriation. Co-chair Frank voiced OBJECTION to the intent, saying that the Governor should provide a plan for reconstruction of the school rather than registering opposition through staff from the Dept. of Education. SHELBY STASTNY, Director, Office of Management and Budget, advised that the issue had only recently been raised. The administration has not yet developed a plan. Mr. Stastny advised that he had no objection to the proposed fund source as long as the committee understands that more general funds will be needed in the future. Earnings proposed for reappropriation were to be used for the foundation formula next year. Mr. Stastny concurred that the problem at Newtok must be rectified. He voiced his belief that the Governor would have no objection to Senator Adams' proposal. Co-chair Pearce called for a show of hands on adoption of the foregoing intent as an amendment to Amendment No. 3. The motion carried on a vote of 5 to 2, and the intent was ADOPTED. Discussion followed between Co-chair Frank and Mr. Stastny concerning the department's position on the proposal and whether or not the Governor would be likely to veto the appropriation. Co-chair Frank requested that action on Amendment No. 3 be HELD* to the bottom of the agenda. No objection having been raised, IT WAS SO ORDERED. (*See page 15 for further action on this amendment.) Amendment No. 1 Co-chair Frank MOVED to RESCIND committee action adopting Amendment No. 1. No objection having been raised, adoption of Amendment No. 1 was RESCINDED. Co-chair Frank then MOVED to delete language relating to the Kuskokwim Delta regional transportation study. No objection having been raised, the motion CARRIED and reappropriation of funds from the Kuskokwim Delta regional transforation study was DELETED from Amendment No. 1. Co-chair Frank then MOVED for adoption of Amendment No. 1, as amended. No objection having been raised, Amendment No. 1 was ADOPTED AS AMENDED. Amendment No. 4 Co-chair Pearce advised that Amendment No. 4 was proposed by the Fairbanks delegation. Co-chair Frank MOVED for adoption of Amendment No. 4. No objection having been raised, Amendment No. 4 reappropriation of funds for Festival Fairbanks and Noyes Slough cleanup and upgrade was ADOPTED. Amendment No. 5 Senator Rieger MOVED for adoption of Amendment No. 5. Senator Sharp OBJECTED. Senator Rieger explained that some residents of the Sutton/Glennallen area object to an appropriation for the power transmission intertie made last year. Rather than dispute the merits of the $35 million appropriation from the Railbelt energy fund, Amendment No. 5 provides additional flexibility in selection of a power project. Senator Rieger advised that both preliminary and final studies have made clear there are alternatives for power generation in the area. The amendment thus adds "and for the design and construction of the Allison Lake hydroelectric project" as an alternative that could be funded by the $35 million, zero interest loan. Senator Rieger suggested that allowing flexibility represents a more "open-minded" attitude toward power needs. Senator Kerttula acknowledged opposition to the proposed intertie in part of the region. He further noted that studies do not "bear out the economics of the intertie." Senator Rieger stressed that the proposed amendment would not impact last year's division of funding. The region remains entitled to the $35 million, zero interest loan. Amendment No. 5 merely provides the flexibility to consider the Allison Lake hydro project as well. REPRESENTATIVE OLBERG came before committee voicing concern that Amendment No. 5 appears to give equal status to two projects that are far from equal. The intertie will cost $2.6 million per megawatt. Allison Lake will cost $5.3 million per megawatt. Further, the intertie is connected to the Railbelt; Allison Lake is not. The intertie will place several million dollars into the Railbelt for purchased power; Allison lake will not. Three million gallons of diesel will not be burned in Glennallen if the intertie is constructed, however, diesel will continue to be burned without the intertie since Allison Lake would not replace the diesel generators. There is potential to put energy back into the Railbelt system through Solomon Gulch via the intertie. Turbidity has the potential to destroy the Solomon Gulch hatchery. The watershed on the Allison Lake project is 5.8 square miles and is not always adequately snowed upon. The Allison Lake project leaves no room for expansion in the event growth occurs in the area. Senator Sharp added his understanding that the tie line could potentially offer up to over five times the deliverable kilowatt capacity, if insulated and upgraded at a later time. Allison Lake does not contribute anything of value toward the statewide power grid, and it does not allow for transfer and exchange of existing power sources or the mix of gas, hydro, coal, and liquid fired generating units. Allison Lake would create another small generating site that is expensive to operate. Senator Rieger took exception to the foregoing assertions. Amendment No. 5 would only allow the question to be decided in an informed manner by those who understand and manage utilities. Legislators should not be afraid that the original project might not turn out, in the end, to be the best project. Co-chair Pearce called for a show of hands on adoption of Amendment No. 5. Amendment No. 5 FAILED on a vote of 2 to 5 (Senators Rieger and Kerttula were in support). Amendment No. 6 Senator Rieger MOVED for approval of Amendment No. 6. Co- chair Frank OBJECTED. Senator Rieger attested to conference committee action, in the FY 95 operating budget, which targeted reductions at the University of Alaska, Anchorage. He then questioned whether it was appropriate to target reductions to one campus, particularly for the WAMI program which brings grant moneys to the state. Amendment No. 6 would maintain the statewide reductions enacted by the conference committee report but would undue targeted reductions for the Anchorage campus. Co-chair Frank contended that University regents should set policy rather than the legislature. He suggested that addition of requested funding for WAMI and a Masters of Social Work program should be left to the regents. End, SFC-94, #88, Side 1 Begin, SFC-94, #88, Side 2 Speaking specifically to WAMI, Co-chair Frank said that University regents could allocate funding for the program if they determine that doing so is important. Senator Kelly MOVED that the funding source for WAMI and the Masters of Social Work program set forth in Amendment No. 6 be changed from the general fund to moneys reappropriated to the University for completion of the Natural Sciences building. Co-chair Pearce voiced her understanding that the amendment to Amendment No. 6, as proposed by Senator Kelly, would remove $360,700 from the $1,094,439 reappropriation in Amendment No. 1 and apply it to WAMI and the Masters program rather than the Natural Science building. Co-chair Frank OBJECTED. Co-chair Pearce asked if the original DOTPF funding was statewide or discretionary money from the Fairbanks delegation. Nancy Slagle responded that such a determination would be impossible to make. Co-chair Pearce called for a show of hands on Senator Kelly's amendment to Amendment No. 6. The amendment FAILED on a vote of 1 to 6. Co-chair Pearce then called for a show of hands on adoption of Amendment No. 6. The amendment FAILED on a vote of 3 to 4 (Senators Kelly, Kerttula, and Rieger were in support). Amendment No. 6-A Senator Rieger MOVED for appropriation of $100,000 in general funds for WAMI. Senator Kelly voiced support for the program but lack of support for use of general funds. Co-chair Frank advised of conference committee discussions wherein it was learned that the House reduction of $700.0 would be disastrous to both the WAMI program and other classes taught by WAMI instructors. The conference committee sought to discontinue the WAMI program. The response from the University was that reduction of $200.0 would eliminate WAMI. The remaining $500.0 would continue efforts by WAMI instructors in other programs. The conference committee was somewhat inconsistent in accepting a compromise House proposal for an arbitrary $100.0 reduction. Co-chair Frank disagreed with use of general funds for the program. Senator Rieger said that the proposed funding was no different than other amendments before committee, it would simply utilize general funds rather than a "fifteen-year-old lapse." Senator Rieger subsequently MOVED to withdraw Amendment No. 6-A. No objection having been raised, IT WAS WITHDRAWN. (See page 15 (Amend. No. 14) for WAMI funding.) Amendment No. 7 Senator Rieger advised that he would not offer Amendment No. 7 relating to a $115,000 general fund appropriation to the Dept. of Natural Resources for Chugach State Park, Glen Alps Road access, maintenance, and improvements. Amendment No. 8 Co-chair Pearce explained that Amendment No. 8 which would reappropriate the unobligated balance of some FY 84 appropriations to the Dept. of Environmental Conservation for purchase of laboratory equipment and supplies was proposed by the administration. BOB POE, Director, Division of Information and Administrative Services, Dept. of Environmental Conservation, advised that as of April 13 the department drinking water lab was placed on provisional certification by EPA because of lack of key equipment. The state lab certifies nine of the twelve private labs in Alaska to conduct public drinking water studies. When HB 441 was in House Finance, the department sought reappropriation of three appropriations from FY 84. It is not clear whether the projects were discretionary or advanced by the administration. The reappropriation was changed in the House to allocate funds for the Fairbanks Health Center. Discussions with both the city manager of Fairbanks and the borough mayor indicate that only $93,000 is needed for the center. The department is thus asking that the balance be used to acquire the necessary laboratory equipment to maintain certification. Without that certification, private labs will have to be certified by either the EPA or facilities outside of Alaska. That will add considerably to costs and may curtail the extent of their testing. In response to a question from Senator Jacko, Mr. Poe explained that reappropriated funds would flow from two completed projects in Fairbanks and one in Sand Point. Senator Rieger OFFERED Amendment No. 8. Co-chair Pearce called for a show of hands. Amendment No. 8 FAILED on a vote of 2 to 5. Amendment No. 9 Co-chair Pearce advised that Amendment No. 9 was also proposed by the Dept. of Environmental Conservation. Senator Rieger OFFERED Amendment No. 9. Co-chair Pearce explained that Alaska has signed an emergency services agreement and an agreement to conduct nuclear waste monitoring with states in Eastern Russia. Two "Chernobyl- type" nuclear plants are located in Eastern Russia, and Alaska has signed agreements "to actually respond." The agreement to conduct research and development of monitoring radionuclides and contaminants in Alaska and the Arctic environment was signed last fall. The $250,000 appropriation from the oil and hazardous substance release response fund, contained in Amendment No. 9, would provided funding for that effort. Senator Kerttula voiced support for the amendment. Co-chair Pearce advised that she had seen photos of lakes in Eastern Russia containing radiation pollution. The lakes are contained by weakening earthen dams that could release radiation into the Arctic Ocean and ruin Alaska fisheries. The above-noted project would also determine how to stop that release. In response to a question from Senator Kelly, BOB POE again came before committee. He explained that requested funding would flow from the (3-cent) prevention account within the response fund. Discussion followed among committee members and Mr. Poe concerning the separation of prevention and response moneys within the oil and hazardous substance release response fund as well as Legislative Budget and Audit funding of programs between Alaska and the Russian coast. Co-chair Frank posed questions concerning state versus federal government responsibility for protection of national borders. Mr. Poe advised that the Russian rapid assessment project, approved by LBA, was federally funded. Alaska is the only state likely to be impacted by nuclear contaminants in Eastern Russia. Co-chair Pearce called for a show of hands on adoption of Amendment No. 9. The amendment FAILED* on a vote of 3 to 4 (Senators Kerttula, Pearce, and Rieger were in support). (*See page 11 for action subsequently ADOPTING Amendment No. 9.) Amendment No. 9-A Senator Kerttula MOVED for adoption of Amendment No. 9-A by Senator Rieger. Senator Rieger explained that the amendment would reappropriate moneys from a Fireweed Lane project opposed by local neighborhoods and utilize the funding for Seward Highway safety turnouts. Both Co-chair Pearce and Senator Kelly questioned whether or not funding within the repealer had previously been allocated elsewhere. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, again came before committee. She voiced her understanding that the reappropriation relates to federal funds that have not otherwise been reauthorized. The funds cannot be spent without approval of Anchorage AMATS. Senator Rieger said the proposed reappropriation reflects one of three steps needed to construct a federally funded highway project in Anchorage. In response to a question from Co-chair Pearce asking why Sec. 66 was included in the House bill, DEBORAH DRIVER, aide to Representative MacLean, came before committee. She explained that Representative Brown incorporated repeal of the Fireweed Lane project because residents in the district are opposed to it. The Dept. of Transportation and Public Facilities has included the project in its six-year-plan for the past three years and intends to pursue it. Repeal relates to authorization only. No funding is yet in place. Responding to further inquiry by Co-chair Pearce questioning lack of support for the original project by local residents, Senator Rieger explained that while the department described the project as "safety upgrades," the community regards conversion of the four-lane road to three lanes as a downgrade. Co-chair Pearce acknowledged correspondence from the community council opposing the department's center-turn- lane project. She then called for a show of hands on adoption of Amendment No. 9-A. The amendment was ADOPTED on a vote of 5 to 1 (Co-chair Pearce was in opposition, and Co- chair Frank was temporarily absent from the meeting). Amendment No. 10 Senator Rieger MOVED for adoption of Amendment No. 10. He explained that, for a number of years, the legislature has grappled with proposed construction of a new Alaska Psychiatric Institute (API). The original proposal called for a $90 million, 114-bed facility. Legislators balked at the price, and the proposal has continually been designed down. The House took the approach that the per bed cost should be no more than $300,000, and the facility should be limited to 72 beds. Senator Rieger attested to conjecture within the mental health community as to size and need for a new facility. The conflict between the legislature and the department has been over downsizing and reducing costs. Senator Rieger said he was not yet convinced the new facility needs 72 beds, but he stressed that the most important thing to guard against is the project becoming a "hole in the ground which would be the start of a $90 million facility." Amendment No. 10 thus limits the facility to "no larger than 72 beds" and states that capital costs shall not exceed $28,961,992 (consisting of the $22,861,992 appropriation within Amendment No. 10 and an earlier $6,100,000 appropriation). Co-chair Pearce called for a show of hands on adoption of Amendment No. 10. Senator Rieger's motion CARRIED and Amendment No. 10 was ADOPTED. Co-chair Pearce next directed that the meeting be briefly recessed. RECESS - 11:45 a.m. RECONVENE - 12:00 noon Upon reconvening the meeting, Co-chair Pearce directed attention to the next amendment. Amendment No. 11 She explained that the amendment to insert "67" in capital project lapse language in Sec. 76 would apply AS 37.05.020 lapse provisions to appropriation of $550,000 in accrued interest (through June 30, 1995) from the Exxon Valdez oil spill restoration fund to the Dept. of Transportation and Public Facilities for maintenance and repair of oil spill response equipment storage facilities and docks at Tatilik and Chenega. Co-chair Pearce referenced DOTPF construction of docks in both communities. Because the docks are overbuilt for the size of the villages, the communities are not willing to assume ownership unless assistance in maintenance and operating costs is provided. Interest income is available to establish a fund to be used for operation and maintenance of the docks. Amendment No. 11 corrects an oversight in the House bill. It provides for a five-year rather than one-year lapse. Senator Kerttula MOVED for adoption of Amendment No. 11. In response to a question from Senator Jacko, Co-chair Pearce explained that while neither community has sufficient harbor activity at this time to support operation and maintenance of the docks, there is hope for future contracts from both the marine highway system and Alyeska. Amendment No. 11 is intended to assist the communities in the initial few years. Co-chair Pearce called for a show of hands on adoption of Amendment No. 11. No objection having been raised, it was ADOPTED UNANIMOUSLY. Amendment No. 9 Senator Jacko MOVED to rescind committee action failing to adopt Amendment No. 9. No objection having been raised, prior committee action was RESCINDED. Senator Jacko then MOVED for adoption of the amendment. Senator Kelly OBJECTED, voicing his belief that the Dept. of Environmental Conservation received sufficient FY 95 funding to cover the $250,000 cost of research and monitoring for radionuclides and other contaminants in Alaska and the Arctic environment. Co-chair Pearce called for a show of hands. The motion CARRIED on a vote of 6 to 1 (Senator Kelly was opposed), and Amendment No. 9 was ADOPTED. Amendment No. 12 Co-chair Pearce explained that Amendment No. 12 contains language providing supplementary funding for municipal assistance and revenue sharing. End, SFC-94, #88, Side 2 Start, SFC-94, #90, Side 1 Co-chair Pearce said that a spread sheet listing unlapsed and unobligated general fund capital appropriations available for reappropriation from 1977, 1979, and 1981 through 1990 was in the process of being copied for distribution to members. Unencumbered amounts to be reappropriated total $3,636,100. Addition of that amount to operating budget appropriations for municipal assistance and revenue sharing will result in a 10% reduction from FY 94 funding. The FY 95 operating budget effects a 15% reduction. Amendment No. 12 provides the additional funding needed to lower the reduction to 10%. The Co-chair explained that legal service drafters are presently working on actual amendment language. A conceptual amendment could be adopted by committee based on distributions set forth on the aforementioned spread sheet. Co-chair Pearce directed that Amendment No. 12 be temporarily set aside pending arrival of the spread sheet. (See pages 14 and 15 for adoption of Amend. No. 12.) Amendment No. 13 Co-chair Pearce referenced Sec. 69 of the House bill and explained that in light of recent closure of the pulp mill at Sitka, the city has requested forgiveness of interest on its portion of the four-dam-pool hydroelectric loan for the life of the loan. The city is current on both its interest and principal payments. Sec. 69 provides interest forgiveness through the year 2018, the remaining life of the loan. Co-chair Pearce voiced a preference for a shorter period of forgiveness, directed attention to blank spaces within Amendment No. 13, and proposed that forgiveness be provided for two years (January 1, 1994, through January 1, 1996). That would forgive $1 million in interest. If the economic downturn in Sitka continues at that time, the city would have the opportunity to return to the legislature and request further forgiveness. SENATOR ROBIN TAYLOR and REPRESENTATIVE BEN GRUSSENDORF came before committee. Co-chair Frank inquired concerning the net impact of closure of the mill. Senator Taylor attested to the uncertainty of preliminary estimates but suggested that closure would result in a significant loss of utility revenues of approximately 30%. The city does not yet know what the trickle down effect will be as the impact moves through the economy. Since the early 1950s, Sitka has never suffered unemployment above 5%. Unemployment is now 16% and continues to rise. Closure of the mill has also impacted the tax base. While the mill has agreed to continue to pay taxes for a year or two, the tax rolls will be significantly impacted by loss of approximately 25% of the base In response to a question from Senator Jacko, Senator Taylor explained that the city would continue to make principal payments on the $15 million loan. Interest payments presently accrue to repayment of the loan fund--part of last year's energy package. Interest reveue is part of the Dept. of Community and Regional Affairs, division of energy, operating budget and is used for numerous projects. If the interest income is not forthcoming, the money would have to be replaced by other funds. Senator Jacko inquired concerning what projects would suffer as a result of reduced interest payments. Senator Taylor advised that he did not know. Co-chair Pearce noted that interest forgiveness over the remaining life of the loan, per Sec. 69, would total $7.4 million. Senator Sharp voiced his willingness to provide forgiveness for "a couple of years or whatever it takes," but he requested that information on profits made on power sales to the mill be made available prior to the next legislative session. He acknowledged that large power contracts have a "very slim margin of profit." As additional background information, Representative Grussendorf explained that approximately $52 million in municipal bonds have been sold. Sitka also received a $15 million power loan and has paid $6 million in interest to date. The remaining balance is $12 million. The city and borough acknowledges its obligation for repayment to the state. When the bonds were sold, it was understood that the "dump power" would be purchased by the mill (which has ability to generate its own power). The mill purchased dump power generated between 11:00 p.m. and 5:00 a.m. and paid a reasonable, flat price for it. Moneys in question are in a utilities enterprise fund. Forgiveness would not necessarily reflect upon the general fund of the city and borough. Forgiveness would assist with annual utility operation and maintenance costs of $800,000 and provide flexibility for payments on municipal bonds. Sitka floated its bond issue at a time when other communities sought grants. With cancellation of the 17-year timber contract, there is no way another entity will consume "that power." Senator Kelly voiced his understanding that since the mill purchased only dump power, energy revenues were not primarily generated by the mill. Representative Grussendorf concurred. He added, however, that utility rates have increased as have property assessments. He asked that if a limitation is placed on the interest forgiveness, it be of a length that would allow the municipality time to adjust. Leniency has been given on a number of power projects. Discussion of educational funding for Sitka schools followed between committee members and Senator Taylor. Senator Sharp OFFERED Amendment No. 13 with a three-year interest forgiveness period through December 31, 1996. It would thus cover calendar years 1994, 1995, and 1996. Senator Jacko voiced his understanding that reduced interest revenues would impact the 20% of power development revolving loan funds flowing through the four-dam-pool fund to the account for statewide power projects. Discussion of Sitka's return of municipal airport operations and maintenance to the Dept. of Transportation and Public Facilities followed. Co-chair Pearce next advised that the amount of forgiveness provided by the three-year period suggested by Senator Sharp would total $1,482,819.80. Discussion ensued between Senator Kelly and Representative Grussendorf regarding actions taken by the city of Sitka to reduce costs in response to reduced revenues. Representative Grussendorf stressed that an $18 million annual payroll was lost when the mill closed. That loss does not account for losses that will be sustained by vendors who provided goods and services to the mill and its employees. In response to a question from Senator Sharp, Representative Grussendorf advised of a current property tax of 6 mills but added that his assessment increased $11,000.00. Senator Kelly voiced support for forgiveness for two rather than three years. Co-chair Pearce called for a show of hands on Senator Sharp's proposal that Amendment No. 13 provide interest forgiveness for three years. The proposal was UNANIMOUSLY ADOPTED. Amendment No. 12 Co-chair Pearce redirected attention to Amendment No. 12-- relating to municipal assistance and revenue sharing--and noted distribution of an accompanying spread sheet (copy on file in the original bill file for HB 441). Senator Kerttula MOVED for adoption of listed reappropriation items as a conceptual amendment. Co-chair Pearce reiterated that reappropriated items total $3,638,300. She then explained that capture of reappropriation amounts commences on page 12 of the spread sheet and continues forward through Dept. of Education, state museum security (underlined on page 1). She then referenced the $218.0 for Dept. of Corrections roof repair and renovation (page 3 of the tabulation) and advised that it was lined out in error. The $218.0 is included in the reappropriation total. Other projects that have been lined out with appended sectional notes have already been reappropriated to the indicated sections within SCS CSHB 441 (Finance). Co-chair Pearce advised that a copy of the spread sheet would be attached to the bill when it is delivered to the Senate Secretary. Legal Services will draft the final SCS CSHB 441 (Finance) with the appropriate repealers. In response to a question from Senator Kerttula, Co-chair Pearce said that a total of $3,636.1 had to be achieved to lower municipal assistance and revenue sharing reductions to 10%. The actual total reappropriated on the spread sheet is $3,638,300. That is approximately $22,000 in excess of the amount needed for the 10% reduction. Co-chair Pearce called for objections to Senator Kerttula's motion for conceptual Amendment No. 12. Senator Jacko OBJECTED. The Co-chair called for additional objections. None were forthcoming, and conceptual Amendment No. 12 was ADOPTED. Amendment No. 14 Senator Rieger directed attention to page 1 of the spread sheet accompanying Amendment No. 12, and MOVED to reappropriate $100,000 of the unencumbered $103.0 shown for SLA 90, Ch 208, Dept. of Health and Social Services, API, to cover the WAMI shortfall. Co-chair Pearce called for objections. No objection having been raised, Amendment No. 14 was ADOPTED. Amendment No. 3 Senator Jacko MOVED for adoption of Amendment No. 3, as amended by intent language. Senator Kelly OBJECTED, advising that the Newtok school could be reconstructed from insurance proceeds. Co-chair Pearce called for a show of hands. The motion CARRIED on a vote of 6 to 1 (Senator Kelly was opposed), and Amendment No. 3 was ADOPTED. Co-chair Frank MOVED that SCS CSHB 441 (Finance) pass from committee with individual recommendations. Senator Kelly OBJECTED. Co-chair Pearce called for a show of hands. The motion CARRIED on a vote of 6 to 1 (Senator Kelly was opposed), and SCS CSHB 441 (Finance) was REPORTED OUT of committee. All members signed the committee report with a "do pass" recommendation with the exception of Senator Kelly who signed "no rec." HB 455 - APPROP: GOVERNOR'S SUPPLEMENTAL Co-chair Pearce directed that CSHB 455 (Fin)am be brought on for discussion and referenced a work draft SCS CSHB 455 (Finance) (8-GH2040\X, Cramer/Utermohle, 5/10/94). Co-chair Frank further referenced a May 10, 1994, memorandum (copy on file) listing reductions to the House bill reflected in the above work draft. He then enumerated the reductions. Speaking to selected, specific reductions, Senator Frank explained that the reduction in general relief medical is intended to place additional pressure on the Dept. of Health and Social Services. Funding to the Alaska Psychiatric Institute was reduced by the amount of new federal disproportionate share moneys ($400.0). The Harborview Development Center request for certification was not funded. Fire suppression was also reduced by ($400.0), since the request represents an estimate of what might be needed. Funding of $200.0 for Spring Creek Correctional Center was deleted because new money for new beds was not included in the operating budget. Deletion of $36.7 for air quality/solid waste management reflects prior intent language asking that the Dept. of Environmental Conservation cover small appropriation items within its existing budget. Deletion of $163.9 for Spring Creek Correctional Center relates to settlement of litigation involving the canine unit. Co-chair Frank voiced his understanding that department staff sought overtime pay for voluntarily taking department dogs home with them and caring for them overnight. The Co-chair recommended that the settlement not be funded. The $50.0 reduction to family and youth services within the Dept. of Health and Social Services was made because the supplemental request was small in comparison to the overall department budget. In his concluding remarks, Co-chair Frank referenced a proposed amendment by Senator Jacko for funding for RATNET. Co-chair Frank MOVED for adoption of the work draft X version of SCS CSHB 455 (Finance). No objection having been raised, SCS CSHB 455 (Finance) was ADOPTED. Co-chair Frank then MOVED for adoption of Amendment No. 1 appropriating $55,000 in general funds to the Dept. of Administration for operating costs of the Rural Alaska Television Network for the fiscal year ending June 30, 1994. No objection having been raised, Amendment No. 1 was ADOPTED. Co-chair Frank then MOVED, as Amendment No. 2, reinstatement of the $163,861 in general funds for settlement of canine unit overtime litigation. Senator Rieger asked if funding of a court settlement is different than funding for labor agreements in that the Dept. of Corrections would have to pay the settlement even if the legislature does not appropriate the funds. Co-chair Frank concurred in that understanding but advised that he would conduct additional research prior to a floor vote on the bill. He acknowledged his preference for denying the funding. Co-chair Pearce voiced her understanding that the pending motion would reinstate the following Sec. 51 language from the House bill: The sum of $163,861 is appropriated from the general fund to the Department of Corrections for settlement of the canine unit overtime litigation for the year ending June 30, 1994. Senator Sharp voiced his preference for removal of the appropriation if the settlement is found to be something the state does not have to pay. Co-chair Pearce called for a show of hands on Amendment No. 2. The motion CARRIED with no opposition, and the amendment was ADOPTED. Co-chair Frank MOVED that SCS CSHB 455 (Finance) pass from committee with individual recommendations. No objection having been raised, SCS CSHB 455 (Finance) was REPORTED OUT of committee with a unanimous "do pass" recommendation. ADJOURNMENT Co-chair Pearce extended her thanks and appreciation to committee members and staff for the cooperative working relationship during the past two sessions. The meeting was adjourned at approximately 1:15 p.m.