Legislature(2001 - 2002)

02/20/2001 07:01 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 20, 2001                                                                                    
                              7:01 PM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-01 # 19,  Side A                                                                                                            
SFC 01 # 19,  Side B                                                                                                            
SFC-01 # 20,  Side A                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Dave Donley convened  the meeting at approximately 7:01 PM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Lyda Green                                                                                                              
Senator Gary Wilken                                                                                                             
Senator Lyman Hoffman                                                                                                           
Senator Loren Leman                                                                                                             
                                                                                                                                
Also Attending:  JANET  CLARKE, Director, Division of Administrative                                                          
Services,  Department  of Health  and  Social Services;  BOB  LABBE,                                                            
Director, Division  of Medical Assistance, Department  of Health and                                                            
Social Services;  MIKE MAHER, Director,  Division of Administrative                                                             
Services,  Department  of Revenue;  DEVIN  MITCHELL,  Debt  Manager,                                                            
Treasury  Division,  Department  of  Revenue;  KURT  PARKAN,  Deputy                                                            
Commissioner,  Department of Transportation  and Public Facilities;                                                             
DWAYNE  PEEPLES,  Director,  Division  of Administrative   Services,                                                            
Department of Corrections;  CHRIS CHRISTENSEN, Staff Counsel, Office                                                            
of the Administrative  Director, Alaska  Court System; DAN  SPENCER,                                                            
Director,  Division   of  Administrative  Services,   Department  of                                                            
Administration;  ALISON ELGEE,  Deputy Commissioner,  Department  of                                                            
Administration;  TOM LAWSON,  Director, Division  of Administrative                                                             
Services, Department of  Community and Economic Development; ANNALEE                                                            
MCCONNELL, Director, Office  of Management and Budget, Office of the                                                            
Governor                                                                                                                        
                                                                                                                                
Attending via  Teleconference: From  Anchorage: BRANT MCGEE,  Public                                                          
Advocate, Office  of Public Advocacy, Department of  Administration;                                                            
BARBARA  BRINK,  Director,  Public Defender  Agency,  Department  of                                                            
Administration;  GREG  WOLF,  Director,  Division  of International                                                             
Trade  and  Marketing  Development,   Department  of  Community  and                                                            
Economic  Development;   NAN  THOMPSON,   Commissioner  and   Chair,                                                            
Regulatory  Commission   of Alaska,   Department  of  Community  and                                                            
Economic Development                                                                                                            
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB  73-SUPPLEMENTAL APPROPRIATIONS/AMEND APPROP.                                                                                
                                                                                                                                
The  Committee  heard  from  the Department  of  Health  and  Social                                                            
Services  and   the  Department  of   Revenue,  the  Department   of                                                            
Transportation   and  Public  Facilities.  The   bill  was  held  in                                                            
Committee.                                                                                                                      
                                                                                                                                
SB  74-FAST TRACK SUPPLEMENTAL APPROPRIATIONS                                                                                   
                                                                                                                                
The Committee  heard from the Office  of Management and Budget,  the                                                            
Department of  Corrections, the Alaska Court System,  the Department                                                            
of Administration,  and  the Department  of Community  and  Economic                                                            
Development. The bill was held in Committee.                                                                                    
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 74                                                                                                         
     "An Act making supplemental and other appropriations; and                                                                  
     providing for an effective date."                                                                                          
     ."                                                                                                                         
                                                                                                                                
                                                                                                                                
Department of Health and Social Services                                                                                      
                                                                                                                                
     Section 5 (a)                                                                                                              
     Department of Health and Social Services                                                                                   
     Energy Assistance Program Budget Review Unit (BRU)                                                                         
     Additional federal funds for Low Income Heating and Energy                                                                 
     Assistance (LIHEAP) grants.                                                                                                
     $3,351,300 federal funds                                                                                                   
                                                                                                                                
JANET  CLARKE,  Director,   Division  of  Administrative   Services,                                                            
Department  of Health  and  Social Services,  testified  that  these                                                            
federal funds  are a result  three unbudgeted  releases in  December                                                            
2000. One release,  she explained,  came about after an increase  in                                                            
the block  grant  by the US  Congress as  a result  of the  Balanced                                                            
Budget  Act. She  stated  that the  other  two increases  relate  to                                                            
contingency  funds that were  released to all  50 states due  to the                                                            
high costs of fuel.                                                                                                             
                                                                                                                                
Ms. Clarke remarked  that the entire amount would  be distributed as                                                            
grants to  approximately  8,600 households  and that all  households                                                            
that qualify  under the  low-income guidelines  would receive  these                                                            
funds.                                                                                                                          
                                                                                                                                
     Section 5 (b)                                                                                                              
     Department of Health and Social Services                                                                                   
     Medicaid BRU                                                                                                               
     Replace FY 01 funds, which had to be used in July to pay prior                                                             
     year Medicaid claims to assure continuous payment of claims in                                                             
     April.                                                                                                                     
     $8,970,100 federal funds                                                                                                   
     $6,030,000 statutory designated program receipts                                                                           
                                                                                                                                
Ms. Clarke  testified this  request is for  claims received  in June                                                            
2000, which the department  did not have sufficient authorization to                                                            
pay. She noted  that the item has been "pushed forward"  into FY 01.                                                            
                                                                                                                                
Co-Chair  Donley asked if  the department,  "used 2001 funds  to pay                                                            
off 2000 debt."                                                                                                                 
                                                                                                                                
Ms. Clarke  explained  that in  the state's  accounting system,  the                                                            
Medicaid program is operated  on a "cash-basis". She elaborated that                                                            
the department  pays bills  when they are  received rather  than the                                                            
date of service.  She stated that these bills were  received in June                                                            
2000, and that  because the department  did not have adequate  funds                                                            
to pay them, the department delayed payment until July 2001.                                                                    
                                                                                                                                
Senator Leman  wanted to know if any  of the payments made  were for                                                            
services  not authorized  by  the legislature  within  the last  two                                                            
years.                                                                                                                          
                                                                                                                                
Ms Clarke assured  that they were not. She stated  that the services                                                            
are all authorized under the Medicaid statute.                                                                                  
                                                                                                                                
Senator  Green  asked if  the  supplemental  request arose  from  an                                                            
underestimate  of the  need  for services,  the number  of  patients                                                            
served, or increased expenses.                                                                                                  
                                                                                                                                
Ms.  Clark  replied  all  were  a  factor   and  remarked  that  the                                                            
department "severely  underestimated" the amount of  Medicaid claims                                                            
in FY 00.  She noted that  although the  legislature appropriated  a                                                            
supplemental request  during the last legislative  session, the cost                                                            
of Medicaid  services consistently  rose above  what the  department                                                            
predicted.                                                                                                                      
                                                                                                                                
Senator  Green  commented  that $22  million  was  appropriated  the                                                            
previous session  and, added to the  $15 million request  before the                                                            
Committee, the FY 00 underestimation totals $37 million.                                                                        
                                                                                                                                
Ms. Clarke  stressed that  the original appropriation  was  based on                                                            
the lowest possible caseload and expenditure scenario.                                                                          
                                                                                                                                
Senator Green  wanted to know if the increases were  a reflection in                                                            
the  number of  people requiring  services,  if more  services  were                                                            
being  provided  to  a  static  number  of  patients,  a  matter  of                                                            
increased medical costs, or a combination.                                                                                      
                                                                                                                                
Ms. Clarke  replied that it is a combination  of an increase  in the                                                            
number of patients being  served and higher medical costs. She noted                                                            
the   increases  in   pharmaceutical   costs  plus   the   increased                                                            
utilization of medical services.                                                                                                
                                                                                                                                
Senator  Green  asked  if  a  particular  state  or  federal  action                                                            
accounted for the increase in the number of participants.                                                                       
                                                                                                                                
BOB LABBE, Director,  Division of Medical Assistance,  Department of                                                            
Health  and Social  Services, explained  that  federal requirements                                                             
play a part in  the increase. He gave prescription  drug mandates as                                                            
an example  where the state  has little choices.  He also noted  the                                                            
increasing  costs of  health care  for the disabled  along with  the                                                            
larger elderly  caseload.  However, he pointed  out the legislative                                                             
decision  to expand  coverage  to more  children  under the  KidCare                                                            
program.  He stated  that medical  costs  are going  up faster  than                                                            
anticipated and that the  percentage increases are consistent across                                                            
the nation.                                                                                                                     
                                                                                                                                
Senator Green  asked how much of the  underestimation is  attributed                                                            
to KidCare costs.                                                                                                               
                                                                                                                                
Mr. Labbe responded it would take time to get that information.                                                                 
                                                                                                                                
Senator Green requested those figures.                                                                                          
                                                                                                                                
Co-Chair  Donley   asked  for  an  explanation  of  the   $6,030,000                                                            
statutory  designated  program  receipts  (SDPR).  "Where  did  that                                                            
number come from?" he asked.                                                                                                    
                                                                                                                                
Ms. Clarke offered a brief explanation of the Pro-share program.                                                                
                                                                                                                                
Co-Chair  Donley expressed  that he was more  interested in  knowing                                                            
why that dollar amount was requested.                                                                                           
                                                                                                                                
Ms. Clarke responded that  the $15 million that the department could                                                            
not  pay in  FY 01  is  a combination  of  federal funds  and  state                                                            
matching funds.  She explained the $6 million SDPR  would be used as                                                            
a state match  to claim the $8.9 million  federal funds,  which is a                                                            
60/40 percent  ratio. She  continued that the  revenue, or  the cash                                                            
the department would receive  for the SDPR, comes from the Pro-share                                                            
program.                                                                                                                        
                                                                                                                                
Co-Chair Donley again asked  if the $6 million figure is an estimate                                                            
and if the state already has that amount in SDPRs.                                                                              
                                                                                                                                
Ms. Clarke  referred  to testimony  given the  previous legislative                                                             
session where  the department stated that the Pro-share  receipts it                                                            
could generate  are governed by the  "upper limit calculation."  She                                                            
reminded that  if the department pays  out $18 million, $10  million                                                            
is returned which could  be freed for state match purposes. She said                                                            
the department calculated  that upper limit in the spring of 2000 to                                                            
be $20  million.  She relayed  that over  the previous  summer,  the                                                            
federal  government became  interested  in states'  use of the  Pro-                                                            
share funds and  considered shutting down the program.  As a result,                                                            
she stated that  the department recalculated its upper  limit as $28                                                            
million in July 2000.                                                                                                           
                                                                                                                                
Ms. Clark spoke of the  overlap between the state and federal fiscal                                                            
years. She remarked that  it is in the state's best interest to make                                                            
an additional Pro-share  payment to offset the increased upper limit                                                            
calculation during the  first quarter of the state's FY 01, which is                                                            
the final quarter of the federal fiscal year.                                                                                   
                                                                                                                                
Senator Wilken  relayed that his office  has been contacted  several                                                            
times with  complaints that  the Family Centered  Services  has been                                                            
closed for  the remainder of the fiscal  year due to lack  of funds.                                                            
He asked if any  of the supplemental appropriation  would be used to                                                            
reopen the center                                                                                                               
                                                                                                                                
Ms.  Clarke   replied  that  the   facility  was  impacted   by  the                                                            
department's  action  the previous  summer  to immediately  pay  all                                                            
valid  Medicaid  claims.  She admitted  that  there  was  a "gap  in                                                            
payment" to nonprofit agencies  such as the Family Centered Services                                                            
and as a result of cash-flow problems.                                                                                          
                                                                                                                                
Senator  Wilken wanted  to know  if the  facility  would be  further                                                            
affected before the end of FY 01.                                                                                               
                                                                                                                                
Ms. Clarke stated that  assistance, including technical training and                                                            
support,  has been  given to  the facility  to ensure  the  Medicaid                                                            
claims are correct so they could be paid promptly.                                                                              
                                                                                                                                
Mr. Labbe added that several  meetings have been held and a plan was                                                            
being devised  to maintain the facility's viability.  He warned that                                                            
without  adequate funding  through  the supplemental  budget,  there                                                            
would  continue to  be cash-flow  problem in  the Medicaid  program,                                                            
which impacts the provider community.                                                                                           
                                                                                                                                
Senator  Wilken  then asked  if the  $15  million requested  in  the                                                            
governor's  fast track supplemental  budget  is adequate funding  to                                                            
avoid future shut downs.                                                                                                        
                                                                                                                                
Mr. Labbe  stated that the  $15 million request  only addresses  the                                                            
Pro-share  payment made in  July 2000. He  stressed that  additional                                                            
funds  were requested  in  SB 73,  the regular  supplemental  budget                                                            
request.                                                                                                                        
                                                                                                                                
Senator  Green did  not understand  why  this request  needed to  be                                                            
included in the fast track supplemental.                                                                                        
                                                                                                                                
Ms. Clarke  responded that  the department  has a cash-flow  problem                                                            
with the Medicaid  program because the department  was making larger                                                            
Pro-share payments than anticipated.                                                                                            
                                                                                                                                
Senator Green referred  to the method under which Pro-share operates                                                            
and  how the  funds  are  reinvested,  and asked  if  federal  funds                                                            
replace state funds.                                                                                                            
                                                                                                                                
Co-Chair  Kelly  explained,  "We are  matching  federal  money  with                                                            
federal money."                                                                                                                 
                                                                                                                                
Senator Green then asked  if there is a net use of state funds or if                                                            
the federal funds were just shifted.                                                                                            
                                                                                                                                
Ms. Clarke  replied  that the state  funds are  needed initially  to                                                            
make the first payment.                                                                                                         
                                                                                                                                
Senator Green  wanted to know if the  state really needed  to expend                                                            
funds.                                                                                                                          
                                                                                                                                
Ms. Clarke answered the  state had to make the up-front payment to a                                                            
government  operated  hospital, which  would retain  ten-percent  of                                                            
that payment and return  90-percent to the state. She continued that                                                            
the 90-percent could then  be used as a state match to reimburse the                                                            
initial payment, and therefore requiring no general funds.                                                                      
                                                                                                                                
Senator  Green  found  it difficult  to  consider  this  fast  track                                                            
request, without  also considering the regular supplemental  request                                                            
at the same  time. She expressed that  the state could not  continue                                                            
to pay  for Medicaid  in this manner.  She was  concerned about  the                                                            
impact in the future.                                                                                                           
                                                                                                                                
Ms. Clarke  stressed  that the  department operates  the program  in                                                            
accordance with  all requirements and would continue  to do so until                                                            
the rules  change.  She emphasized  that eligible  participants  are                                                            
entitled to services.                                                                                                           
                                                                                                                                
Senator Green  asked if the guidelines  were set in federal  mandate                                                            
or state statute.                                                                                                               
                                                                                                                                
Mr. Labbe  replied that it  is a combination  of both and  explained                                                            
there are mandatory  services and mandatory client  groups under the                                                            
federal Medicaid  program and that  there are also state  options on                                                            
services and groups.                                                                                                            
                                                                                                                                
Senator  Green wanted  to  know if  the state  has cost-containment                                                             
control only over the state-option portions of the program.                                                                     
                                                                                                                                
Mr. Labbe mentioned the  options including reimbursement levels paid                                                            
to providers.                                                                                                                   
                                                                                                                                
Senator  Green  asked  if  the  state  or  the  federal   government                                                            
determines  "how you get in the front  door", or "who qualifies  for                                                            
what services".                                                                                                                 
                                                                                                                                
Mr. Labbe  responded  that the  state chose  to  participate in  the                                                            
Medicaid  program  several   years  after  the  federal  system  was                                                            
established.  As a result,  he said,  in order  to participate,  the                                                            
state had to  agree to cover certain  people and to provide  certain                                                            
services.  He noted  that the state  added additional  services  and                                                            
groups of people who qualify for the program.                                                                                   
                                                                                                                                
Senator  Green  then  asked  if  the  state  has  investigated  cost                                                            
containment options to possibly curtail this "upward spiral".                                                                   
                                                                                                                                
Mr.  Labbe shared  that the  department  has a  "fairly aggressive"                                                             
utilization management  program and he detailed the provider reviews                                                            
conducted and  software packages utilized.  He stressed that  Alaska                                                            
has one  of the better  systems in the county  for editing  incoming                                                            
claims from providers.  He qualified that there is  a large caseload                                                            
and  general service  costs.  He spoke  of  the state  statutes  and                                                            
regulations  that govern  reimbursement  for hospitals  and  nursing                                                            
homes.  He opined  that the state's  reimbursement  rates were  "not                                                            
unreasonable".                                                                                                                  
                                                                                                                                
Co-Chair Kelly  referenced action  taken by the legislature  and the                                                            
department for  FY 99 to refrain from funding abortions  through the                                                            
state. He asked  if the funds in question  were being used  for that                                                            
purpose.                                                                                                                        
                                                                                                                                
Ms. Clarke  responded that none of  the funds contained in  the fast                                                            
track supplemental were intended for that purpose.                                                                              
                                                                                                                                
Co-Chair Kelly then asked  if during the exchange of Pro-share funds                                                            
with the federal  government, the  funds are always contained  under                                                            
the Hyde  Amendment or whether  at any time  they could be  used for                                                            
public funding of abortion.  He wanted to know, "does it ever change                                                            
from federal money?"                                                                                                            
                                                                                                                                
Ms. Clarke did not know.                                                                                                        
                                                                                                                                
Co-Chair  Kelly requested  the witness  provide  an answer  sometime                                                            
during the legislative session.                                                                                                 
                                                                                                                                
Ms. Clarke  delved into  one reason  this item  was included  in the                                                            
fast track supplemental.  She stated that the US Congress  has taken                                                            
steps to shut  down the Pro-share  program, and that the  program is                                                            
in  a transition   stage.  She pointed  out  that  the  Health  Care                                                            
Financing Administration  (HCFA) issued regulations  in January 2001                                                            
that would severely  curtail the Pro-share program.  She shared that                                                            
the  Department of  Law advises  that  if the  additional  Pro-share                                                            
payment  were  made within  60  days, when  the  regulations  become                                                            
effective,  the payment would fall  under the upper limit  contained                                                            
in the current guidelines.  If payment were delayed, she warned, the                                                            
payment would  be subject to the updated  regulations and  therefore                                                            
only be eligible for $20 million federal funds.                                                                                 
                                                                                                                                
Department of Revenue                                                                                                         
                                                                                                                                
     Section 9 (b)                                                                                                              
     Department of Revenue                                                                                                      
     Administration and Support BRU                                                                                             
     Emergency replacement of air conditioner in computer room                                                                  
     $31,500 general funds                                                                                                      
                                                                                                                                
MIKE  MAHER,   Director,   Division  of   Administrative   Services,                                                            
Department of Revenue,  testified that the current system is over 19                                                            
years  old and  has  been experiencing  malfunctions.   He spoke  of                                                            
$13,000 in repairs  invested in the system and the  $3,000 to $4,000                                                            
damage  caused  to  computer  systems as  a  result  of overheating                                                             
malfunctions.  He shared  that the  servicing  company has  stressed                                                            
that the unit  has exceeded its usefulness. He listed  the permanent                                                            
fund program and the Tax  Division as important programs that depend                                                            
upon the system.                                                                                                                
                                                                                                                                
Co-Chair  Donley asked  if the  department had  existing funds  that                                                            
could be used for this purpose.                                                                                                 
                                                                                                                                
Mr.  Maher responded  that  the department  did not  have  dedicated                                                            
funds and  had planned to  upgrade the system  to try to extend  its                                                            
life for a couple more years, before the recent troubles arose.                                                                 
                                                                                                                                
Senator Leman  referred to mineral deposits found  in the water flow                                                            
system  and wondered  if that  could  be the  cause of  some of  the                                                            
malfunctions.                                                                                                                   
                                                                                                                                
Mr. Maher  was unsure  whether the  system had  a water filter,  but                                                            
stated that  part of the  difficulties were  with the water  flow as                                                            
well as the  building's booster pump  failures, which automatically                                                             
cause the system to shut down.                                                                                                  
                                                                                                                                
Senator Leman  asked if the  corrosion of  piping was a problem  for                                                            
the entire building or just this area.                                                                                          
                                                                                                                                
Mr. Maher answered that  it was affecting the entire building, which                                                            
he stressed is over 30 years old.                                                                                               
                                                                                                                                
     Section 10 (a)                                                                                                             
     State Debt                                                                                                                 
     Appropriate remaining balance of the general obligation bond                                                               
     redemption fund to the debt retirement fund                                                                                
     $102,200 other funds (source not specified)                                                                                
                                                                                                                                
     Section 10 (b)                                                                                                             
     State Debt                                                                                                                 
     Additional appropriation needed to meet FY 01 debt service                                                                 
     obligations.                                                                                                               
     $639,800 general funds                                                                                                     
                                                                                                                                
                                                                                                                                
DEVIN  MITCHELL,  Debt Manager,  Treasury  Division,  Department  of                                                            
Revenue stressed  the need to meet  the state's obligations  related                                                            
to  its   Certificates   of  Participation   in   the  School   Debt                                                            
Reimbursement  program. He  testified that  the reason this  item is                                                            
included  in the  fast track  supplemental  request  is because  the                                                            
payment   is  due   before  the   regular  supplement   funding   is                                                            
appropriated.  He warned that  if the funds  were not provided  in a                                                            
timely manner, the state  would be unable to pay on its obligations.                                                            
                                                                                                                                
Mr. Mitchell explained  that because two different  programs utilize                                                            
the debt retirement  fund, one being  the School Debt Reimbursement                                                             
program, which  reimburses municipalities for their  debt, the state                                                            
has issued  a large amount  of debt in the  past several years  as a                                                            
result  of  HB 281  and  SB 11  from  the twenty-first  legislative                                                             
session.  He detailed  that the  Department of  Education and  Early                                                            
Development  must   make  an  appropriation  request   based  on  an                                                            
estimation   of   the   required   reimbursement    based   on   the                                                            
municipalities'  estimates of their annual debt issuance.  He stated                                                            
that the Department  of Education  and Early Development's  estimate                                                            
is $4 million,  but that part of the  appropriation appears  to have                                                            
been  accounted  twice in  the  FY 01  budget.  He stated  that  the                                                            
department had been able  to use funds carried forward from previous                                                            
years  to address  this in  the past,  but  that this  would not  be                                                            
possible in  the current year, due  to the double accounting  of the                                                            
funds.                                                                                                                          
                                                                                                                                
Department of Transportation and Public Facilities                                                                            
                                                                                                                                
     Section 11 (4)                                                                                                             
     Department of Transportation and Public Facilities                                                                         
     Northern Region Facilities BRU                                                                                             
     Deadhorse Combined Facilities project funded from the                                                                      
     Federal Aviation Administration lease                                                                                      
     $53,600 federal funds                                                                                                      
                                                                                                                                
KURT PARKAN, Deputy  Commissioner, Department of Transportation  and                                                            
Public Facilities,  testified  that the  department anticipated  the                                                            
Federal Aviation  Administration  (FAA) funds  for the joint  use of                                                            
the  Deadhorse  facility for  the  FAA flight  service  station.  He                                                            
stated that  the department has a  Memorandum of Understanding  with                                                            
the FAA regarding the 35-year  lease of a portion of the state-owned                                                            
facility. He added  that the FAA pays the maintenance  costs of that                                                            
building, which is the reason for this appropriation.                                                                           
                                                                                                                                
     Section 11 (3)                                                                                                             
     Department of Transportation and Public Facilities                                                                         
     Capital BRU                                                                                                                
     Delong Mountain airport access study                                                                                       
     $281,900 federal funds                                                                                                     
                                                                                                                                
Mr.  Parkan  detailed  the  "earmarked"   project  from  the  Alaska                                                            
Congressional  delegation, which is located on the  Chukchi Sea near                                                            
Kotzebue and  serves as the port for  the Red Dog Mine. He  spoke of                                                            
the difficult  access to  the mine, noting  that the funds  would be                                                            
used  to  study the  feasibility  of  constructing  an  airstrip  to                                                            
provide access to the mine  and surrounding communities. He stressed                                                            
the need for the  fast track approval due to the impending  lapse of                                                            
the grant.                                                                                                                      
                                                                                                                                
Senator Austerman  noted the $9.4 million construction  estimate and                                                            
wanted assurance that there  is no match requirement from the state.                                                            
                                                                                                                                
Mr. Parkan affirmed  that there is no state funding  requirement and                                                            
listed  other projects  that also  qualified. He  stressed that  the                                                            
department would  not conduct the study but rather  funnel the funds                                                            
to the Alaska  Industrial Development and Export Authority  (AIDEA).                                                            
                                                                                                                                
Senator Wilken  wanted to know if  the constructed airport  would be                                                            
restricted to certain users.                                                                                                    
                                                                                                                                
Mr. Parkan  did not  know specifically,  but  noted that  facilities                                                            
built with federal funds are required to be publicly accessible.                                                                
                                                                                                                                
Senator  Wilken understood  that  the Delong  Mountain  Road is  not                                                            
accessible for  all users and requested the witness  investigate the                                                            
matter.                                                                                                                         
                                                                                                                                
Mr. Parkan agreed to do so.                                                                                                     
                                                                                                                                
Senator  Wilken  then  asked  who would  maintain  and  operate  the                                                            
facility once it was constructed.                                                                                               
                                                                                                                                
Mr. Parkan  responded that AIDEA is  taking full responsibility  and                                                            
would contract for that service.                                                                                                
                                                                                                                                
Senator  Wilken   asked  if  the  Red  Dog  Mine/Cominco   would  be                                                            
responsible.                                                                                                                    
                                                                                                                                
Mr. Parkan stated he would  ask about the relationship between AIDEA                                                            
and  Cominco  and   whether  the  corporation  would   provide  some                                                            
reimbursement.                                                                                                                  
                                                                                                                                
Senator Wilken requested answers to these questions.                                                                            
                                                                                                                                
Senator  Hoffman  asked if  this  project  were approved,  would  it                                                            
affect other airport projects contained in the six-year plan?                                                                   
                                                                                                                                
Mr. Parkan answered that it would not.                                                                                          
                                                                                                                                
     Section 11 (1)                                                                                                             
     Department of Transportation and Public Facilities                                                                         
     Capital BRU                                                                                                                
     Fairbanks International Airport equipment storage maintenance                                                              
     facility to be funded with Passenger Facility Charges                                                                      
     $905,000 International Airports Revenue Fund                                                                               
                                                                                                                                
     and                                                                                                                        
                                                                                                                                
     Section 11 (2)                                                                                                             
     Department of Transportation and Public Facilities                                                                         
     Capital BRU                                                                                                                
     Fairbanks International Airport safety and maintenance                                                                     
      equipment to be funded with Passenger Facility Charges                                                                    
     $1,065,000 International Airports Revenue Fund                                                                             
                                                                                                                                
Mr. Parkan  explained that  the state's  international airports  had                                                            
begun to charge  Passenger Facility  Charges (PFC) maintenance  fees                                                            
to passengers  after  receiving  approval  from the  FAA in  October                                                            
1999. He shared  that the department  submitted a request  to exempt                                                            
those  travelers residing  in communities  not connected  by a  road                                                            
system and the  subsequent decision to delay collection  of the fees                                                            
until  this  exemption  was  enacted. He  detailed  the  process  of                                                            
gaining approval, which was received in April 2000.                                                                             
                                                                                                                                
Mr. Parkan  then  addressed the  need for  the fast  track  approval                                                            
caused  by the  FAA requirement  that the  state  must expend  funds                                                            
within two  years of the initial approval  date of October  1999. He                                                            
noted that  the department  must have a contract  in place,  and the                                                            
equipment purchased before  the deadline. He continued that a second                                                            
reason for fast tracking  the funds is to capture part of the summer                                                            
2001  construction  season and  build  an enclosed  building  before                                                            
winter with final work  completed during the winter of 2001. He said                                                            
that if  the project were  delayed a year,  the cost of the  project                                                            
would rise due to inflation.                                                                                                    
                                                                                                                                
     Section 11 (5)                                                                                                             
     Department of Transportation and Public Facilities                                                                         
     Capital BRU                                                                                                                
     Copper River Highway work done under the Consent Agreement                                                                 
     $400,000 general funds                                                                                                     
                                                                                                                                
Mr. Parkan explained  this is the final piece of the  consent decree                                                            
of the  lawsuit pertaining  to  construction along  the highway  and                                                            
that it would settle the  lawsuit and allow construction projects to                                                            
continue. He warned  that if this payment were not  made, the matter                                                            
would return to court and all previous progress would be lost.                                                                  
                                                                                                                                
Senator Hoffman wanted  to know the cost of not making this payment.                                                            
                                                                                                                                
Mr. Parkan  could  not anticipate  the  amount, but  noted that  the                                                            
department's  attorney's  fees  are "extraordinary"   even when  not                                                            
involved in a lawsuit.                                                                                                          
                                                                                                                                
Senator  Hoffman  wanted  information  from the  Department  of  Law                                                            
regarding the consequences if the case were to continue.                                                                        
                                                                                                                                
Senator  Green  assumed  that  some  of  the  Copper  River  Highway                                                            
projects  included  in  the  supplemental  budget  could  have  been                                                            
anticipated  and  therefore spared  from  the supplemental  or  fast                                                            
tracked budgets.                                                                                                                
                                                                                                                                
Mr. Parkan replied  that discussions with the US Corps  of Engineers                                                            
occurred  in  the  fall  of  2000  and  that  the  funds  should  be                                                            
appropriated to capture the summer construction season.                                                                         
                                                                                                                                
Co-Chair  Donley commented,  "We're finally  trying to build  a road                                                            
somewhere and this is what happens."                                                                                            
                                                                                                                                
                                                                                                                                
SFC 01 # 19, Side B 07:48 PM                                                                                                    
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 73                                                                                                         
     "An Act making supplemental appropriations and making and                                                                  
     amending other appropriations; and providing for an effective                                                              
     date."                                                                                                                     
                                                                                                                                
Department of Corrections                                                                                                     
                                                                                                                                
     Section 3                                                                                                                  
     Department of Corrections                                                                                                  
     Correctional Industries Production Cost BRU                                                                                
     Increase for materials used in the Correctional Industries                                                                 
     programs                                                                                                                   
     $650,000 Correctional Industries fund                                                                                      
                                                                                                                                
DWAYNE  PEEPLES,  Director,  Division  of Administrative   Services,                                                            
Department of  Corrections noted that this item is  also included as                                                            
an increment  the governor's  proposed FY  02 operating budget.  Mr.                                                            
Peeples detailed  the funds would be used for selling  meat products                                                            
in the Mt. McKinley Meat  Plant, flat goods production in the Hiland                                                            
Mountain Woman's  Facility, and for  increased furniture  production                                                            
at the Wildwood and Spring Creek Correctional Centers.                                                                          
                                                                                                                                
Alaska Court System                                                                                                           
                                                                                                                                
     Section 4                                                                                                                  
     Alaska Court System                                                                                                        
     Judicial Conduct BRU                                                                                                       
     Legal fees for formal disciplinary hearing                                                                                 
     $41,900                                                                                                                    
                                                                                                                                
CHRIS  CHRISTENSEN,  Staff  Counsel, Office  of  the Administrative                                                             
Director, Alaska Court  System, stated that he did not represent the                                                            
Judicial Conduct Commission.                                                                                                    
                                                                                                                                
ANNALEE  MCCONNELL,  Director,  Office  of  Management  and  Budget,                                                            
Office  of  the Governor,  explained  that  the  Commission  held  a                                                            
disciplinary hearing for  a judge and that this supplemental request                                                            
is  to pay  the  Commission's  legal expenses  associated  with  the                                                            
hearing.                                                                                                                        
                                                                                                                                
Department of Administration                                                                                                  
                                                                                                                                
     Section 1(a)                                                                                                               
     Department of Administration                                                                                               
     Leasing BRU                                                                                                                
     Shortfall in amount funded for leases with the private sector                                                              
     $1,678,700 general funds                                                                                                   
                                                                                                                                
DAN  SPENCER,   Director,  Division   of  Administrative   Services,                                                            
Department  of  Administration,   stressed  this  request  would  be                                                            
approximately  $2  million  less  than  any  year since  FY  88.  He                                                            
reminded  how the  legislature  has consistently  appropriated  less                                                            
than   the  projected   costs   for   leasing  expenses   with   the                                                            
understanding that savings would be sought.                                                                                     
                                                                                                                                
[Note:  teleconference  connection  extremely  poor.  Mmost  of  the                                                            
testimony is inaudible.]                                                                                                        
                                                                                                                                
     Section 1(b)                                                                                                               
     Department of Administration                                                                                               
     Office of Public Advocacy BRU                                                                                              
     Shortfall in current year funding exacerbated by increased                                                                 
     costs, especially for Child in Need of Aid and guardian ad                                                                 
     litem cases                                                                                                                
     $1,791,000 general funds                                                                                                   
                                                                                                                                
BRANT MCGEE, Public Advocate,  Office of Public Advocacy, Department                                                            
of Administration, testified  via teleconference from Anchorage that                                                            
for the 16  of the past 17 years,  a supplemental appropriation  has                                                            
been necessary due to the  inability to precisely predict the number                                                            
of cases  the Office would  receive each year.  He stated that  this                                                            
request would fund operations  for the remainder of the fiscal year.                                                            
                                                                                                                                
MR. McGee explained  that the caseload  increased 28.8 percent  from                                                            
FY 00. He remarked  that this increase is primarily  a result of the                                                            
balloon project  to move children  through the state custody  system                                                            
and into  permanent  placement. The  OPA's statutory  obligation  in                                                            
this process,  he continued,  is to provide  a guardian ad  litem to                                                            
the children involved and  council to many of the parent's involved,                                                            
particularly when  the custody rights of one parent  are challenged,                                                            
but that  the other  parent's are  not necessarily  in question.  He                                                            
elaborated  that this occurs with  some cases of abuse inflicted  by                                                            
one parent, because the  other parent is entitled to OPA assistance.                                                            
                                                                                                                                
Mr. McGee  noted that  these cases  are primarily  civil matters  as                                                            
well as  are Child  in Need of  Aid cases. He  detailed the  subsidy                                                            
costs as well  as the percentage of  full attorney fees paid  by the                                                            
OPA. He  noted that the OPA  contracts pay  between $65 and  $80 per                                                            
hour.  He  stressed  that the  sole  advantage  of  the OPA  in  the                                                            
marketplace  is its practice of paying  in a timely manner  on a 30-                                                            
day cycle.                                                                                                                      
                                                                                                                                
     Section 1 (c)                                                                                                              
     Department of Administration                                                                                               
     Office of Public Advocacy BRU                                                                                              
     Replenish current year funding used to pay remaining FY 00                                                                 
     costs                                                                                                                      
     $77,400 general funds                                                                                                      
                                                                                                                                
Mr.  McGee  testified that  this  request  is  to cover  payment  of                                                            
services provided in FY 00, but not invoiced until FY 01.                                                                       
                                                                                                                                
Senator  Green relayed  discussions  in a  recent  meeting with  the                                                            
Department  of Health  and  Social Services  regarding  the  balloon                                                            
project  and  asked  if  the  OPA  has  received  funding  from  the                                                            
Department of  Health and Social Services to cover  costs related to                                                            
the project.                                                                                                                    
                                                                                                                                
Mr. McGee affirmed.                                                                                                             
                                                                                                                                
Senator Green asked if  this supplemental request is for expenses in                                                            
addition  to those  the Department  of  Health and  Social  Services                                                            
funds cover.                                                                                                                    
                                                                                                                                
Mr. McGee 's referred to cost overruns.                                                                                         
                                                                                                                                
Senator  Green asked  if the  balloon project  payments  to the  OPA                                                            
appear in the regular budget.                                                                                                   
                                                                                                                                
Mr. McGee affirmed.                                                                                                             
                                                                                                                                
Co-Chair Donley inquired  about the 28 percent increase in caseload.                                                            
                                                                                                                                
Mr. McGee clarified that  in addition to an increased caseload, some                                                            
cases were lasting longer than anticipated.                                                                                     
                                                                                                                                
Co-Chair Donley  asked why the cases were taking longer  to resolve.                                                            
                                                                                                                                
Mr.  McGee  replied  there  is  no  proof,  but anecdotal   evidence                                                            
indicates  that  Child in  Need of  Aid  cases are  more  vigorously                                                            
litigated,  and therefore  require more guardian  ad litem  time. He                                                            
explained that the Balloon  project cases involve the termination of                                                            
custody and because of this are seriously litigated.                                                                            
                                                                                                                                
Mr. McGee  expounded on the  reason for the  lengthier cases  due to                                                            
provisions contained  in HB 375, passed by the previous  legislature                                                            
that impose  strict time  limits for obtaining  permanent  placement                                                            
for the children  in question. He stated that the  OPA had predicted                                                            
that the caseloads  could be handled  within the shorter  timeframes                                                            
because  the  amount  of  work  would not  increase  significantly.                                                             
However, he said the shorter  timeframes increased the likelihood of                                                            
litigation.  He  opined  that   the  parents  were  more  likely  to                                                            
challenge  the termination  of  custody,  when actually  faced  with                                                            
loosing their children.                                                                                                         
                                                                                                                                
Senator Green  commented that the intent of the Balloon  project was                                                            
to eliminate the  back log of cases, process the cases  more quickly                                                            
and eventually reduce the  number of cases; knowing that there would                                                            
always be some  incoming cases. She wanted to know  if a decrease in                                                            
the number of cases could be expected.                                                                                          
                                                                                                                                
Mr. McGee  agreed it could  and noted that  the Balloon project  has                                                            
been successful  and the backlog has  been significantly  decreased.                                                            
He detailed the office  is on the third set of cases, but that these                                                            
would have  a higher  cost to resolve.  He added  that this  program                                                            
includes  the Department  of Law,  Department of  Health and  Social                                                            
Services, the  OPA, the Public Defender Agency and  the Alaska Court                                                            
System.                                                                                                                         
                                                                                                                                
Senator  Green  wanted  to  know if,  because  the  backlog  is  now                                                            
eliminated and  the OPA is only handling the new cases,  would there                                                            
be an advantage to reconsidering the provisions of HB 375.                                                                      
                                                                                                                                
Mr.  McGee clarified  that  the backlog  has  been reduced  but  not                                                            
eliminated  and that  he thought  the  timeline should  actually  be                                                            
shorter.  He qualified  that  no one  has agreed  with  him on  that                                                            
point. He predicted that  if the adjudication time were closer to 30                                                            
days, there might a decrease  in litigation over time. He also noted                                                            
that with  the Balloon project  as well as  in other cases,  the OPA                                                            
not only provides  a guardian ad litem, but also is  responsible for                                                            
paying contractors to represent  one or both parents in those cases.                                                            
He stated that  it is more common that the OPA provides  council for                                                            
one parent, but that it does occasionally provide for two.                                                                      
                                                                                                                                
Co-Chair  Donley asked  the  percentage of  the attorneys  in  these                                                            
cases are not paid by the state.                                                                                                
                                                                                                                                
Mr. McGee replied that  there are not very many cases. He spoke of a                                                            
recent  case  that involved  a  private  attorney  representing  the                                                            
adoptive family.                                                                                                                
                                                                                                                                
Co-Chair Donley wanted  to know the "standard" and asked if there is                                                            
an economic  standard  that determines  with  the OPA  does not  get                                                            
involved.                                                                                                                       
                                                                                                                                
Mr. McGee replied that  the court makes such a determination subject                                                            
to the same indingency  standards that apply to qualification  for a                                                            
public defender  in criminal cases. He noted that  the Child in Need                                                            
of Aid cases involve an "overwhelming majority" of poor people.                                                                 
                                                                                                                                
Co-Chair Donley  asked the success  ratio of cases with the  state's                                                            
involvement.                                                                                                                    
                                                                                                                                
Mr. McGee  answered,  "It depends  on how you  measure success."  He                                                            
elaborated that in some  instances, the parents involved are able to                                                            
correct the behavior that precipitated the custodial challenge.                                                                 
                                                                                                                                
Co-Chair Donley  asked if the OPA  was pursuing more of these  cases                                                            
then necessary.  He again  asked the witness  what he considered  an                                                            
appropriate success ratio.                                                                                                      
                                                                                                                                
Mr. McGee  phrased, "how  many of  these cases  does the court  find                                                            
that  the same  justice  to be  to take  custody  of  the child,  is                                                            
unjustified." He answered  there are very few such cases. Typically,                                                            
he added that  those cases are resolved at the probable  cause phase                                                            
where  the judge  determines the  family was  improperly  interfered                                                            
with.                                                                                                                           
                                                                                                                                
     Section 1 (d)                                                                                                              
     Department of Administration                                                                                               
     Public Defender BRU                                                                                                        
     Provide remaining funds needed for basic operations in current                                                             
     year                                                                                                                       
     $380,300 general funds                                                                                                     
                                                                                                                                
BARBARA BRINK,  Director, Public Defender  Agency (PDA),  Department                                                            
of  Administration,  testified  via  teleconference  from  Anchorage                                                            
explaining  the  reason  for the  request  is  due to  an  increased                                                            
caseload and an increased  workload. She stated that in the previous                                                            
year,  the agency  handled  over 19,200  new  cases  in addition  to                                                            
approximately  6,000  pending cases.  She cautioned  that  half-year                                                            
projections indicate a continued caseload growth.                                                                               
                                                                                                                                
Ms. Brink stressed  that the types of cases that are  increasing are                                                            
the  most  time  consuming  and  resource  intensive  cases  usually                                                            
requiring extensive litigation  and forensic work. These, she noted,                                                            
include Child in Need of  Aid cases. She informed the Committee that                                                            
the  PDA represents  parents  in situations  where  the Division  of                                                            
Family and Youth  Services removes a child from the  home. She cited                                                            
the Alaska Court System  2000 Annual Report as showing a six percent                                                            
increase of these cases  in Anchorage, 17 percent increase in Bethel                                                            
and  47 percent  increase  in  Ketchikan.  She stated  that  serious                                                            
consequences,  such as the loss of a child, and shorter  time frames                                                            
due  to new  legislation,  appear to  have increased  litigation  in                                                            
these cases.                                                                                                                    
                                                                                                                                
Ms. Brink  continued  that serious  felony cases  have increased  as                                                            
well. She  again cited  data from  the Alaska  Court System  report:                                                            
cases  in  Anchorage   have  increased  nine  percent,   Palmer  has                                                            
increased  12  percent and  Bethel  has increased  36  percent.  She                                                            
pointed  out that  because  of  the serious  consequences  in  these                                                            
cases, such as  mandatory imprisonment, these cases  are less likely                                                            
to settle without litigation.                                                                                                   
                                                                                                                                
Ms. Brink emphasized that  the PDA cannot control caseload increases                                                            
or workload  increases. She explained  the process where  the Alaska                                                            
Court System  makes an indigency determination,  stressing  that the                                                            
PDA cannot  decline  a case.  Rather, she  said, the  US and  Alaska                                                            
Constitutions,  statutes and  Rules of  Professional Responsibility                                                             
require work be  done to satisfy providing the effective  assistance                                                            
of counsel.                                                                                                                     
                                                                                                                                
Ms. Brink detailed the increasing contractual costs as follows.                                                                 
                                                                                                                                
        · Discovery: the costs of police reports and other evidence                                                             
          from the Department of Law                                                                                            
        · Travel: 13 offices cover 45 additional remote courts                                                                  
          sites for regular court sessions with few competitive                                                                 
          travel providers                                                                                                      
        · Interpreters/Forensic Experts                                                                                         
        · Telecommunications:                                                                                                   
                Many clients are incarcerated hundreds of miles                                                                 
                from their lawyer (e.g. Anchorage-Palmer, Kenai,                                                                
                Seward; Barrow-Fairbanks)                                                                                       
                The Department of Corrections Evercom entails                                                                   
                expensive long-distance charges for basic attorney                                                              
                client consultation                                                                                             
                                                                                                                                
Ms. Brink  pointed out that  none of the  funds in the supplemental                                                             
request address  the serious deficiencies  noted in the Division  of                                                            
Legislative  Budget  and  Audit  report  issued  the  previous  year                                                            
identifying  inadequate staffing,  uncompensated  overtime,  support                                                            
staff ratio  and lack  of technology.  She spoke  of the  maintained                                                            
vacancies in Anchorage,  Palmer, Barrow, Kotzebue and Ketchikan. She                                                            
cautioned  that the PDA could  not continue  this practice  for much                                                            
longer. She noted that  each lawyer is currently responsible for 80-                                                            
150 clients  at any given time, many  with immediate court  hearings                                                            
and other pressing needs.                                                                                                       
                                                                                                                                
     Section 1 (e)                                                                                                              
     Department of Administration                                                                                               
     Longevity Bonus BRU                                                                                                        
     Current estimate of amount needed to fully fund Longevity                                                                  
     Bonus formula program                                                                                                      
     $1,100,000 general funds                                                                                                   
                                                                                                                                
Mr.  Spencer  noted  that  the  language   detailing  this  item  is                                                            
different than previous  longevity bonus related language. He stated                                                            
that this  request appropriates  from the  general fund, the  amount                                                            
necessary to fund  the Longevity Bonus Grants program,  however much                                                            
that may  be. He  reminded that  in the previous  year, a  projected                                                            
amount  was calculated,  but  was  then amended  several  times.  He                                                            
explained  that the legislature,  over the  past several years,  has                                                            
under-funded the  grants appropriation for this item  in the initial                                                            
budget. As  grant payments  are made, he  said, the department  then                                                            
revises the  forecast based on the  last check run to calculate  the                                                            
amount needed  through the end of the fiscal year.  He gave examples                                                            
of how the estimated need  of $1.1 million made in December 2000 has                                                            
changed after the last check run and is currently $1.3 million.                                                                 
                                                                                                                                
Mr. Spencer  stated  that the department  could  not anticipate  how                                                            
many checks  would be written  in any given  month. He stressed  the                                                            
inability  to predict  what  participants  would travel  out of  the                                                            
state  and  for how  long.  He assured  that  the  department  would                                                            
continue to provide monthly  forecasts to the legislature. He warned                                                            
that if this  item were not appropriated,  the department  would not                                                            
be able to provide  the last payment to the program's  participants.                                                            
                                                                                                                                
Senator  Green asked  about  "pro-ration"  language  and asked  what                                                            
would be necessary to implement such a system.                                                                                  
                                                                                                                                
Co-Chair  Donley explained  that statutory  changes that provided  a                                                            
pro-ration  formula  for  the  Longevity   Bonus  Program  would  be                                                            
required.                                                                                                                       
                                                                                                                                
     Section 1 (f) and (g)                                                                                                      
     Department of Administration                                                                                               
     Pioneer Homes BRU                                                                                                          
     Complete the Anchorage Pioneer Home emergency heating and                                                                  
     ventilation system repairs, including replacing the unrealized                                                             
     program receipts previously appropriated.                                                                                  
     $1,000,000 general funds                                                                                                   
     ($595,000) Receipt Support Services                                                                                        
                                                                                                                                
Mr. Spencer  reminded the  Committee of  the previous legislature's                                                             
appropriation of $250,000  Alaska Housing Finance Corporation (AHFC)                                                            
receipts, and  up to $880,000 pioneer home receipts,  to upgrade the                                                            
ventilation  and humidification  systems at  the Anchorage  Pioneers                                                            
Home. He  stressed that  the existing  system is  in poor  condition                                                            
with temperatures  reaching  100-degrees in  the bathing areas  that                                                            
serve a  clientele with  an average  age of 87  years old. He  noted                                                            
that  the original  request  was  for  $1.4 million,  and  that  the                                                            
$880,000 appropriation  was based  on a projection of the  collected                                                            
pioneer home receipts  without spending authority,  made at the time                                                            
the budget was  passed. This projection, he elaborated,  was made in                                                            
April 2000 and  calculated an over-collection in FY  00 of $440,000.                                                            
In fact, he shared,  $285,000 was over-collected.  He continued that                                                            
the  appropriation   was  for  two  years  and  used   the  $440,000                                                            
assumption for the second year as well.                                                                                         
                                                                                                                                
Mr. Spencer  summarized  that the  (f) supplemental  budget  request                                                            
would fully  fund the first phase  using the existing $250,000  AHFC                                                            
receipts plus the $285,000  pioneers home receipts and an additional                                                            
$1 million general  fund. He stated that completion  of phase one of                                                            
the project would alleviate the more urgent problems.                                                                           
                                                                                                                                
Mr. Spencer then addressed  the companion supplemental request, (g),                                                            
explaining  this item adjusts  fund receipts  in another portion  of                                                            
the operating  budget.  He said  that in  addition  to allowing  the                                                            
project to  proceed, this  item would reduce  the amount of  program                                                            
receipt  authority in  the case  of excess program  receipts,  those                                                            
funds  would lapse  to the  general fund  to offset  the $1  million                                                            
general  fund  contribution  to this  project.  He stated  that  the                                                            
intent is that  to the maximum extent  possible ensure that  pioneer                                                            
home receipts pay for this project.                                                                                             
                                                                                                                                
     Section 1 (h)                                                                                                              
     Department of Administration                                                                                               
     Retirement and Benefits BRU                                                                                                
     Trial preparation for retired employees' lawsuit concerning                                                                
     changes in group health benefits.                                                                                          
     $87,000 Benefit Systems Receipts                                                                                           
                                                                                                                                
ALISON ELGEE,  Deputy Commissioner,  Department  of Administration,                                                             
testified that these funds  would come from the Teachers' Retirement                                                            
System (TRS) and  the Public Employees' Retirement  System (PERS) to                                                            
assist the department in  preparations for a trial set for September                                                            
2001. She reminded the  Committee of a decision made two years prior                                                            
by the Retirement  Board following  a review of the health  benefits                                                            
in an attempt  to update medical coverage  for retirees.  She shared                                                            
that the board  compiled a benefit plan that was "cost  neutral" and                                                            
would not increase costs.  She stated that three groups representing                                                            
the covered  retirees filed suit against  the state contending  that                                                            
the change is  a diminishment of benefits. She noted  that the funds                                                            
would  be  used  to  cover  actuarial  costs,   and  other  expenses                                                            
necessary for trial preparation.                                                                                                
                                                                                                                                
     Section (i)                                                                                                                
     Department of Administration                                                                                               
     Senior Services BRU                                                                                                        
     Fully fund current projections for the senior General Relief                                                               
     Grants                                                                                                                     
     $150,000 general funds                                                                                                     
                                                                                                                                
Ms. Elgee explained that  this request funds the costs of protective                                                            
services for vulnerable  adults and represents payments  to assisted                                                            
living facilities.  She noted that  the payments cover the  costs of                                                            
participants  of the  adult protection  system  administered by  the                                                            
Division of Senior Services.  She referred to the fiscal note for SB                                                            
73 from  the Twenty-first  Legislature  that  increased funding  for                                                            
assisted living  homes. However, she  said the program's  growth was                                                            
underestimated by approximately 20 participants.                                                                                
                                                                                                                                
[Note: Section  1 (j) contains  two items  listed separately  in the                                                            
explanatory  spreadsheet provided  by the  Office of Management  and                                                            
Budget. Copy of spreadsheet on file.]                                                                                           
                                                                                                                                
     Section 1 (j)                                                                                                              
     Department of Administration                                                                                               
     Senior Services BRU                                                                                                        
     Additional federal funds to expand Family Caregivers Grants.                                                               
     $564,000 federal funds                                                                                                     
                                                                                                                                
Ms. Elgee explained  this request reflects the federal  government's                                                            
reauthorization  of the Older Americans Act, which  includes funding                                                            
for a new program  called the Family Caregivers Act.  She noted that                                                            
the funds in this  item are in addition to on-going  federal funding                                                            
for  this program  and are  directed  specifically  for services  to                                                            
support family caregivers, such as respite care.                                                                                
                                                                                                                                
Ms.  Elgee  qualified that  because  the  program  is in  its  early                                                            
stages,  the federal government  has not  completed regulations  and                                                            
guidelines. However, she  stressed, the funds have been appropriated                                                            
effective October 1, 2000,  and the department hoped to issue grants                                                            
in 2001. She noted  there would be a corresponding  budget amendment                                                            
to the governor's  proposed FY 02  operating budget to reflect  this                                                            
on-going program funded by the federal government.                                                                              
                                                                                                                                
     Section 1 (j)                                                                                                              
     Department of Administration                                                                                               
     Senior Services BRU                                                                                                        
     Robert Wood Johnson Foundation grant to work with community                                                                
     partners in rural Alaska to develop affordable assisted living                                                             
     for seniors.                                                                                                               
     $50,000 Statutory Designated Program Receipts                                                                              
                                                                                                                                
Ms.  Elgee  shared   that  this  item  reflects  the   recent  award                                                            
notification of  a Robert Wood Johnson Foundation  grant. She stated                                                            
this would  fund a  three-year program  to allow  the department  to                                                            
expand efforts  to develop assisted living and other  long-term care                                                            
services throughout rural Alaska.                                                                                               
                                                                                                                                
Co-Chair Donley asked how the $50,000 would be used.                                                                            
                                                                                                                                
Ms. Elgee replied  that a second long-term,  non-permanent  position                                                            
would  be added  to  the Rural  Long  Term  Care Project,  which  is                                                            
currently funded  by the Mental Health  Trust Authority (MHTA).  She                                                            
spoke  to the  tremendous  amount of  travel and  community  contact                                                            
required by the  existing staff to determine an appropriate  program                                                            
for the  particular  communities involved.  She  continued that  the                                                            
staff  provides assistance  to communities  by  helping them  obtain                                                            
financing from AHFC. She  stated that the goal is to "bring services                                                            
closer to the  people where it is  both cheaper to provide  them and                                                            
much more satisfactory to the participants."                                                                                    
                                                                                                                                
Co-Chair Donley asked if  the funds would be used to develop another                                                            
program.                                                                                                                        
                                                                                                                                
Ms. Elgee  explained  that the  total grant  award  is $350,000  and                                                            
$50,000 would be used this  year. She assured that the program would                                                            
cease after  three years and the efforts  would supplement  existing                                                            
efforts. She elaborated  that the department applied  for this grant                                                            
to expand  on-going efforts  currently funded  by the MHTA  to bring                                                            
rural long-term care delivery to rural communities.                                                                             
                                                                                                                                
Ms. Elgee  noted the various  grant programs  operated by the  AHFC,                                                            
assisted  living facilities  being one of  them. The grants  provide                                                            
low-income  loans  in  the form  of  mortgages,  or  refinancing  to                                                            
private  individuals to operate  assisted  living homes. She  stated                                                            
that this  program is  to work with  communities  to assess  what is                                                            
most  appropriate  and  to  help  interested  individuals  in  those                                                            
communities  obtain funding for the  services best suited  for them.                                                            
She stressed  that  the financing  packages already  exist and  that                                                            
this program assists individuals  to obtain that funding. She talked                                                            
of a new assisted living  facility in Dillingham that operates using                                                            
no state funding  except for possible  participation in the  state's                                                            
waiver program.  She remarked,  "To the degree  that we can  provide                                                            
this opportunity  in rural  Alaska, it prevents  those people,  when                                                            
they need long-term care  services, from having to relocate into one                                                            
of our urban centers and  end up in a nursing home bed, which is way                                                            
more expensive and much less desirable on their part."                                                                          
                                                                                                                                
Senator Hoffman  told of residents in his district  and their desire                                                            
to remain in their community and out of nursing homes.                                                                          
                                                                                                                                
Senator Green  knew of two or three senior-service  oriented groups,                                                            
one being the Older Persons  Action Group, that visit pioneers homes                                                            
and wondered  if  there was  an overlap  between  this function  and                                                            
those groups.  She said these organizations  visit senior  groups to                                                            
learn what services are available in the community.                                                                             
                                                                                                                                
Ms. Elgee explained  the federal charge of the Alaska  Commission on                                                            
Aging  to  serve as  the  advisory  board  and to  make  grants  for                                                            
nutrition, transportation  and support services, to make requests to                                                            
the MHTA for  funds for the development  of long-term care  services                                                            
and to represent people  with Alzheimer and dementia. She noted that                                                            
this  board  is a  part  of  the Division  of  Senior  Services  and                                                            
therefore has oversight for this project among other programs.                                                                  
                                                                                                                                
Senator  Green  asked  if  the  project  could  result  in  expanded                                                            
Medicaid waiver costs to the state.                                                                                             
                                                                                                                                
Ms. Elgee responded  that the Medicaid  waiver program has  expanded                                                            
and would  continue  to expand  as community  resources become  more                                                            
available.  However, she  stressed that  this is  a "cost  avoidance                                                            
situation" because  no one is admitted to the waiver  program unless                                                            
also  eligible  for  nursing  home  services  by  meeting  financial                                                            
eligibility  and medical need criteria.  Therefore, she stated  that                                                            
to  the degree  that the  state  is providing  service  in a  waiver                                                            
environment,  this  program provides  the  care at  a significantly                                                             
lower cost.                                                                                                                     
                                                                                                                                
     Section 1 (k)                                                                                                              
     Department of Administration                                                                                               
     Motor Vehicles BRU                                                                                                         
     Replace boating registration  receipts shortfall during startup                                                            
     of  program and  renew Polaroid  contract  for drivers  license                                                            
     photos  due to lack  of response to  digital photo Request  For                                                            
     Proposals.                                                                                                                 
     $287,200 general funds                                                                                                     
                                                                                                                                
Mr. Spencer  explained the  two elements of  the request. He  stated                                                            
that $68,000  of the  funds would  be used to  offset the  increased                                                            
costs  of the  Polaroid contract  for  driver's license  photos.  He                                                            
noted  the extended  contract is  necessary to  continue  operations                                                            
until the Division of Motor  Vehicles can install a digital driver's                                                            
licensing system. He spoke  of the unsuccessful efforts of obtaining                                                            
a contract for a digital system.                                                                                                
                                                                                                                                
                                                                                                                                
SFC-01 # 20, Side A                                                                                                             
                                                                                                                                
                                                                                                                                
Mr. Spencer then  detailed the other portion of the  request for the                                                            
boating registration  program. He reminded the Committee  of HB 108,                                                            
passed  the previous  session that  established  the boating  safety                                                            
program and instituted  a registration requirement for all unpowered                                                            
vessels over ten feet in length.                                                                                                
                                                                                                                                
Mr. Spencer  stated that  the fund source  of the attached  $411,000                                                            
fiscal note was  changed from general fund program  receipts to boat                                                            
registration  receipts, a  non-general fund  source. While  over the                                                            
long-term,  he said,  this  change is  beneficial,  the program  was                                                            
short-funded  in  the first  year  due  to start-up  costs  and  the                                                            
inability  to  utilize  other  general  fund  program  receipts.  He                                                            
explained  that the projections  for the fiscal  note were  based on                                                            
the US Coast  Guard (USCG) database  of powered boats and  estimates                                                            
of the number  of unpowered boats.  He qualified that the  number of                                                            
canoes and  kayaks, etc. that would  be registered in the  remainder                                                            
of the  fiscal year is  unknown. However,  he stated that all  would                                                            
not be  registered.  Therefore, he  said, this request  is based  on                                                            
estimated   receipts  of  $192,000   and  the  additional   $219,000                                                            
necessary to run the program in the first fiscal year.                                                                          
                                                                                                                                
Mr.  Spencer shared  that  the  program has  already  incurred  over                                                            
$180,000  in  start-up  costs, which  includes  upgrading  the  USCG                                                            
database  and  hiring of  additional  staff  to  cover registration                                                             
activities.                                                                                                                     
                                                                                                                                
Co-Chair Donley wanted to know what would happen the next year.                                                                 
                                                                                                                                
Mr. Spencer  predicted  it would  be a self-supported  program,  but                                                            
reiterated  there is no figure for  the number of unpowered  vessels                                                            
and related registration  revenue. He noted that calculating revenue                                                            
for most powered vessel  registration would be easy since these boat                                                            
owners are used to registering  these vessels. He added that powered                                                            
vessels operating  on non-navigable  waters were not required  to be                                                            
registered under USCG regulations,  but are required under the state                                                            
program.                                                                                                                        
                                                                                                                                
Senator Wilken  commented that HB 108 was a difficult  bill and that                                                            
some legislators  voted for it only  because of the assurance  there                                                            
would be no general fund  requirement. He hoped the department could                                                            
find another  way to  fund the start-up  costs  due to the  promises                                                            
made. He suggested  not funding this  request and shutting  down the                                                            
program.                                                                                                                        
                                                                                                                                
Senator  Hoffman  pointed  out  that the  last  minute  fund  source                                                            
changes were made not at the fault of the department.                                                                           
                                                                                                                                
Co-Chair  Donley surmised  that  the department  had  wanted to  use                                                            
motor vehicle receipts  for this boating program. He remarked, "once                                                            
again,  people  who  are  paying  the  motor  vehicle  receipts  are                                                            
subsidizing other people around the state."                                                                                     
                                                                                                                                
Mr.  Spencer  clarified  that  the  last  minute  changes  were  not                                                            
challenged  but  that  the department   was unable  to  explain  the                                                            
implications.  He affirmed that the  original intent was  to utilize                                                            
motor  vehicle and  other  division receipts  to  fund the  start-up                                                            
costs of the  program. He stated that  the program is "melded"  into                                                            
the  division's  operations  and it  is difficult  to  separate  all                                                            
operating costs.  As an example, he pointed out that  the same staff                                                            
processes all  mailed in registrations,  whether for automobiles  or                                                            
boats.                                                                                                                          
                                                                                                                                
Co-Chair  Donley   rebutted  that  while  the  same   staff  may  be                                                            
processing the  registrations, the boating program  serves different                                                            
people.  He noted  that  some areas  of the  state  are exempt  from                                                            
paying motor vehicle registrations.                                                                                             
                                                                                                                                
     Section 9 (a) and (b)                                                                                                      
     Various Agencies                                                                                                           
     Increased Fuel Costs BRU                                                                                                   
     Increased fuel costs in various agencies for heating,                                                                      
     vehicles, aircraft, ferries, etc. due to higher oil and gas                                                                
     prices.                                                                                                                    
     $2,123,000 general funds                                                                                                   
        457,600 International Airport Revenue Fund                                                                              
                                                                                                                                
Mr. Spencer  stated  that this item  pertains to  the Department  of                                                            
Administration  with regard to the  increased fuel costs  to operate                                                            
the Pioneers  Homes. He admitted the  winter weather has  been mild,                                                            
but emphasized fuel prices have been higher.                                                                                    
                                                                                                                                
     Section 18                                                                                                                 
     Various Agencies                                                                                                           
     Miscellaneous Claims and Stale-dated Warrants BRU                                                                          
     Stale-dated warrants and miscellaneous claims.                                                                             
     $85,500 general funds                                                                                                      
     141,100 federal funds                                                                                                      
                                                                                                                                
Mr. Spencer noted  the stale-dated warrants item appears  every year                                                            
in the supplemental budget  to cover lost or stashed checks that are                                                            
over two  years old.  He reminded  that by  statute, the  department                                                            
could  not pay these  warrants  without separate  appropriation.  He                                                            
explained  the miscellaneous  claims  represents  invoices  received                                                            
after a fiscal  year is over and, for various reasons,  could not be                                                            
paid from the current year's  appropriation.  As an example, he gave                                                            
programs that have no lapsed funds.                                                                                             
                                                                                                                                
Senator Hoffman  asked if other states refuse to pay  warrants older                                                            
than two years.                                                                                                                 
                                                                                                                                
Mr. Spencer answered that he would check.                                                                                       
                                                                                                                                
Senator Green asked how many departments had these claims.                                                                      
                                                                                                                                
Mr.  Spencer  responded  that  all departments   have miscellaneous                                                             
claims, but  that only the Department  of Administration  has stale-                                                            
dated warrants.                                                                                                                 
                                                                                                                                
     Section 19 (a)(1)                                                                                                          
     Department of Administration                                                                                               
     Older Alaskans Commission BRU                                                                                              
     AR3530-90 Older Alaskan Commission                                                                                         
     $683.00 general funds                                                                                                      
                                                                                                                                
Mr. Spencer explained  this ratification item as a  "clean up of the                                                            
accounting  system."  He  detailed  that  a  reimbursable   services                                                            
agreement (RSA) was established  in FY90 and the funds were expended                                                            
for  personal  services.   He  continued  saying  that   "there  are                                                            
frequently  timing issues  between when revenues  comes in  and when                                                            
the costs have  been expended." He stated that this  is a case where                                                            
the RSA  was set up on  the expectation  of federal receipts,  which                                                            
never materialized.                                                                                                             
                                                                                                                                
Department of Community and Economic Development                                                                              
                                                                                                                                
     Section 2 (a)                                                                                                              
     Department of Community and Economic Development                                                                           
     International Trade and Marketing BRU                                                                                      
     International Trade seed potato storage facility feasibility                                                               
     study.                                                                                                                     
     $16,000 federal funds                                                                                                      
                                                                                                                                
TOM  LAWSON,   Director,   Division  of   Administrative   Services,                                                            
Department of  Community and Economic Development  testified to this                                                            
US Department of Agriculture  (USDA) grant for an Alaska Seed Potato                                                            
Storage  Facility Feasibility  Study.  He  stated the  intent is  to                                                            
conduct the  study in the upcoming  spring with completion  early in                                                            
the summer. He explained  the purpose is to review the market demand                                                            
in  Taiwan  and  China   for  these  items,  to  research   Alaska's                                                            
production  capability  and the  interest  in growing  this type  of                                                            
crop, and to assess the storage facility needs.                                                                                 
                                                                                                                                
Co-Chair  Donley wanted  to know the  amount of  general funds  that                                                            
were  included in  the  FY 01  capital budget  for  the seed  potato                                                            
project. He commented that  inclusion of this item was the reason he                                                            
voted against  the House  of Representative's  version of the  FY 01                                                            
capital budget.                                                                                                                 
                                                                                                                                
Mr.  Lawson replied  $120,000  was  appropriated  in the  form of  a                                                            
grant.                                                                                                                          
                                                                                                                                
Senator Green remarked, "Too much."                                                                                             
                                                                                                                                
GREG WOLF, Director,  Division of International Trade  and Marketing                                                            
Development,  Department  of  Community  and  Economic Development,                                                             
testified via teleconference  from Anchorage to the three components                                                            
of the  study. He stressed  that Alaska has  the ability to  produce                                                            
virus-free, pest-free  seed potatoes, and is the only  state allowed                                                            
to ship seed potatoes to  Taiwan. He added that representatives from                                                            
the Peoples  Republic  of China  have traveled  to  Alaska and  that                                                            
Alaska may  become the first state  permitted to ship seed  potatoes                                                            
to China.                                                                                                                       
                                                                                                                                
Mr.  Wolf then  addressed  the second  component  of  the study:  to                                                            
assess  Alaska's capability  to  meet that  demand.  This, he  said,                                                            
entails  reviewing  current  and  potential  acreage  available  for                                                            
production.                                                                                                                     
                                                                                                                                
Mr. Wolf spoke  of a task force formed  in November 1998  to address                                                            
the storage  issue of these seed potatoes.  He stated that  the task                                                            
force  reviewed  progress  for  seed  potato   exports,  noting  the                                                            
successful  efforts to  date. He noted  another  charge of the  task                                                            
force is to  identify obstacles to  this program. Among the  four or                                                            
five obstacles  identified, he shared; one was the  lack of storage.                                                            
He summarized that this  study would determine what type of storage,                                                            
and location of such storage, would be necessary.                                                                               
                                                                                                                                
Co-Chair Donley wanted  to know if the study could be completed with                                                            
$16,000.                                                                                                                        
                                                                                                                                
Senator  Green asked  if the  division  would perform  the study  or                                                            
contract out.                                                                                                                   
                                                                                                                                
Mr.  Wolf replied  that  the division  is  preparing  a request  for                                                            
proposal (RFP). He stated  the intention to match this appropriation                                                            
with  $15,000  of existing  division  funds,  $5000 of  which  would                                                            
actually be in-kind staff  support services. He calculated the total                                                            
cost of the study to cost $30,000 to $35,000.                                                                                   
                                                                                                                                
Senator Green wanted to know the number of interested bidders.                                                                  
                                                                                                                                
Mr. Wolf anticipated  there would  be some interest once  the RFP is                                                            
issued.  He  presumed  that  there  would  be  sufficient   interest                                                            
considering the amount of the contract.                                                                                         
                                                                                                                                
Senator Green  suggested that instead of conducting  this study, the                                                            
division  contact the  USDA and  the Plant Materials  Center,  which                                                            
already has much of this information.                                                                                           
                                                                                                                                
Mr.  Wolf responded  that  while  some  of the  information  may  be                                                            
readily  available,  other data  needed in  the study,  such as  the                                                            
demand-side aspects, are not known.                                                                                             
                                                                                                                                
Senator Green  agreed that  the witness could  be correct  regarding                                                            
the  lack of  information  regarding  adequate  storage facilities.                                                             
However, she  again stressed that  most of the information  could be                                                            
obtained from the USDA.                                                                                                         
                                                                                                                                
Senator Wilken  asked who would build  and operate the seed  storage                                                            
facility, if the need for one were identified.                                                                                  
                                                                                                                                
Mr. Wolf hoped the study would identify this.                                                                                   
                                                                                                                                
Senator Wilken asked if  the witness envisioned that the state would                                                            
own and operate the facility.                                                                                                   
                                                                                                                                
Mr. Wolf responded  that he was not  specifically proposing  a state                                                            
operated facility and did  not know whether it would be appropriate.                                                            
                                                                                                                                
Senator Wilken  next referred  to the FY01  funding request  for the                                                            
seed  data project.  He  stated  that he  had  asked for  an  income                                                            
statement showing  where the previously appropriated  money had gone                                                            
and where the  requested funds would  be spent in the current  year.                                                            
He assumed the  FY 02 budget contains a request for  this project as                                                            
well and he asserted  that before he would vote for  the funding, he                                                            
wanted that information.  He also wanted to know the  state's return                                                            
on investment.                                                                                                                  
                                                                                                                                
Mr. Wolf replied  he would request  that information, and  noted the                                                            
University of Alaska is the main recipient of the grant.                                                                        
                                                                                                                                
Senator Leman  noted that funding  for virus free seed potatoes  has                                                            
been provided for at least  ten years and asked that the information                                                            
Senator Wilken requested  reflect this time period. He then asked if                                                            
the division  would  have the consultant  assess  the commitment  of                                                            
Taiwan  and   China  to  honor  their   financial  obligations.   He                                                            
referenced the new Taiwanese  government that chose to not honor its                                                            
commitment to the seafood processing facility in Anchorage.                                                                     
                                                                                                                                
Mr. Wolf  did not know  that ascertaining  the credit worthiness  of                                                            
countries  was  appropriate.  He stated  that  the  division  always                                                            
advises  companies  to exercise  good  judgment when  entering  into                                                            
contracts.                                                                                                                      
                                                                                                                                
Senator  Leman  agreed,  but  stressed  that  the  seafood  facility                                                            
involves the government of Taiwan and not a private business.                                                                   
                                                                                                                                
Mr. Wolf assured  that the buyers of seed potatoes  would be private                                                            
businesses rather than the government.                                                                                          
                                                                                                                                
Senator   Green  advised   that  this  item   has  been   considered                                                            
agriculture  revolving  loan  funds  rather than  general  funds,  a                                                            
practice she has disagreed with.                                                                                                
                                                                                                                                
     Section 2 (b)                                                                                                              
     Department of Community and Economic Development                                                                           
     Regulatory Commission of Alaska BRU                                                                                        
     Unanticipated increases in costs for personnel, office move                                                                
     and management information system.                                                                                         
     $144,800 Regulatory Commission Receipts                                                                                    
                                                                                                                                
Mr. Lawson explained this  authorization request to cover relocation                                                            
of the  office, increased  lease costs,  increased pipeline-related                                                             
workloads,  unexpected  management  information  system  costs,  and                                                            
costs for hiring new staff.                                                                                                     
                                                                                                                                
Co-Chair Donley wanted  to know if there would be an increase in the                                                            
existing fee structure.                                                                                                         
                                                                                                                                
NAN  THOMPSON,  Commissioner  and Chair,  Regulatory  Commission  of                                                            
Alaska, Department of Community  and Economic Development, testified                                                            
via teleconference from  Anchorage that the funds would be recovered                                                            
through regulatory  commission receipts, not through  general funds.                                                            
She assured  that even with the increase,  the division would  still                                                            
meet the statutory cap.                                                                                                         
                                                                                                                                
Co-Chair  Donley  asked  the  amount  of the  increase  in  the  fee                                                            
structure.                                                                                                                      
                                                                                                                                
Ms. Thompson replied that  it would be nominal and that the ordinary                                                            
consumer wouldn't notice.                                                                                                       
                                                                                                                                
     Section 12 (a)                                                                                                             
     Department of Community and Economic Development                                                                           
     Community and Business Development BRU                                                                                     
     Lapse extension to June 30, 2004 of National Petroleum                                                                     
     Reserve-Alaska grant appropriation in sec. 63, ch. 2, FSSLA                                                                
     1999.                                                                                                                      
     No dollar amount                                                                                                           
                                                                                                                                
     Section 12 (b)                                                                                                             
     Department of Community and Economic Development                                                                           
     Capital BRU                                                                                                                
     Appropriate grants from National Petroleum Reserve-Alaska                                                                  
     receipts.                                                                                                                  
     $1,728,000 federal funds                                                                                                   
                                                                                                                                
Mr.  Lawson reminded  the  Committee that  in 1999  the legislature                                                             
appropriated   National  Petroleum   Reserve-Alaska  (NPRA)   funds,                                                            
through the  NPRA Impact Grant Fund  program to address the  impacts                                                            
of oil and gas  exploration and development in communities  near the                                                            
reserve. He  stated that the funds  were providing in the  operating                                                            
budget and  the supplemental request  converts the funds  to capital                                                            
funds and inserts  a lapse date of June 30, 2004.  He explained that                                                            
the grants offered, are mostly construction-type grants.                                                                        
                                                                                                                                
Co-Chair Donley asked if  the amount reflected in the request is the                                                            
amount that would lapse.                                                                                                        
                                                                                                                                
Mr. Lawson  answered the  amount reflects the  NPRA funds the  state                                                            
would receive in the current year and in FY 01.                                                                                 
                                                                                                                                
Co-Chair  Donley asked  who decides  what projects  the grants  fund                                                            
would  and which  communities  receive them.  He  asserted that  the                                                            
funds were to help cover  the $8 million shortfall in the power cost                                                            
equalization (PCE) program.                                                                                                     
                                                                                                                                
Mr.  Lawson  agreed  that  "a fairly  large  amount  of  money"  was                                                            
appropriated to  PCE. However, he noted that federal  and state laws                                                            
dictated that funds must first be spent for impact grants.                                                                      
                                                                                                                                
Senator  Wilken,  referring  to grant  applications,  asked  for  an                                                            
explanation  of what a  wooden deck  ball court has  to do with  oil                                                            
exploration.  He remembered,  during his first  year as a member  of                                                            
the Committee,  a promise  that this  fund source  would be  used to                                                            
help  PCE.   He  stated that  the  promise  had been  forgotten  and                                                            
recommended  returning to  the intent of  that promise. He  stressed                                                            
that he would  support these projects if he felt they  were actually                                                            
linked to NPRA.  He gave as an example,  the City of Nuiqsut,  which                                                            
is hundreds of miles from NPRA.                                                                                                 
                                                                                                                                
Senator Leman commented  that Mr. Lawson was right, but that Senator                                                            
Wilken and  Co-Chair Donley were also  correct. He recalled  Senator                                                            
Adams' promise  on behalf  of the communities  he represented,  that                                                            
they would make a good  faith effort not to consume all of the funds                                                            
on  grant   projects   so  funds   would  be   available  for   PCE.                                                            
Unfortunately,  Senator  Leman  opined,  not  all  communities  were                                                            
following through.                                                                                                              
                                                                                                                                
Senator Hoffman  had the same recollection.  He expanded  that these                                                            
communities  all had "first  call" on the  funds and any  unutilized                                                            
funds  could  be used  for  other  purposes.  He  addressed  Senator                                                            
Wilken's  comment regarding  the location  of Nuiqsut, pointing  out                                                            
that the  eligible communities  are listed  in federal law.  Senator                                                            
Hoffman did not  know the authority of "what those  dollars could be                                                            
spent on."                                                                                                                      
                                                                                                                                
Senator Green  asked if the 1999 projects  were authorized  prior to                                                            
the conversations about using these funds to assist PCE.                                                                        
                                                                                                                                
Ms. McConnell  responded that  the original  list of grant  requests                                                            
far exceeded what  was available under the NPRA grant.  She affirmed                                                            
that Senator Adams worked  with communities to reduce their requests                                                            
to make funds available for PCE, which occurred.                                                                                
                                                                                                                                
Ms. McConnell  pointed out that statutes  governing the approval  of                                                            
projects provide  for not only the  environmental impacts,  but also                                                            
social,  economic  and  cultural  impacts  of  oil  exploration  and                                                            
development. This is the  reason for such projects as Senator Wilken                                                            
mentioned,  she stated. She stressed  that all the projects  met the                                                            
statutory requirements.                                                                                                         
                                                                                                                                
Ms.  McConnell  spoke to  the  conversion  from operating  funds  to                                                            
capital grant funds, as  an oversight, emphasizing that the projects                                                            
are "clearly capital projects."                                                                                                 
                                                                                                                                
Senator Wilken  asked if the statutes  the witness referred  to were                                                            
state or federal.                                                                                                               
                                                                                                                                
Ms. McConnell  answered these are state statutes,  and was unsure if                                                            
the federal guidelines are statutory or regulatory.                                                                             
                                                                                                                                
Senator Wilken  remembered  that the issue  was addressed two  years                                                            
prior, when the  funds first became available, rather  than one year                                                            
ago.  He  suggested  reviewing  and  possibly   amending  the  state                                                            
statute.                                                                                                                        
                                                                                                                                
Ms. McConnell stressed  that there were funds that were appropriated                                                            
to PCE in cooperation with  the communities. Therefore, she surmised                                                            
that the commitment was kept.                                                                                                   
                                                                                                                                
Co-Chair  Donley countered  that  the PCE  program still  has an  $8                                                            
million shortage in the current year.                                                                                           
                                                                                                                                
Ms. McConnell  clarified  that the  shortage is  not in the  current                                                            
fiscal year.  She explained that the  full effects of the  endowment                                                            
would not have begun by  FY 02, when it was estimated that the state                                                            
would  need to  provide  $1.8 million  annually.  As  a result,  she                                                            
continued,  the state would have to  provide greater support  before                                                            
the effects of the endowment  would be realized. She noted that this                                                            
information was  provided to the Committee in the  previous session,                                                            
and that she would redistribute those spreadsheets.                                                                             
                                                                                                                                
Senator  Wilken wanted  a list  of those communities  that  received                                                            
grants  and the projects  the grants  funded. He  noted that  in the                                                            
previous  year, a certain  amount of funds  were available  but that                                                            
there were  five times as many requests  as available funds.  He was                                                            
interested  in knowing which  communities  forewent their  requested                                                            
projects.                                                                                                                       
                                                                                                                                
Senator  Hoffman  relayed discussions  held  during  US Senator  Ted                                                            
Stevens'  last visit. Senator  Hoffman recalled  there was  House of                                                            
Representatives'  legislation to use  substantially more  NPRA grant                                                            
funds  for PCE.  Senator Stevens  had argued  that such  use of  the                                                            
funds went against  the original intent of the grants,  according to                                                            
Senator Hoffman.                                                                                                                
                                                                                                                                
Ms. McConnell understood the same.                                                                                              
                                                                                                                                
Senator Austerman requested  that the PCE information be supplied to                                                            
all Committee members.                                                                                                          
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Dave Donley adjourned the meeting at 09:16 PM.                                                                         

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