Legislature(2001 - 2002)

02/21/2002 09:36 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 21, 2002                                                                                    
                              9:36 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-02 # 13,  Side A                                                                                                            
SFC 02 # 13,  Side B                                                                                                            
SFC 02 # 14,  Side A                                                                                                            
SFC 02 # 14,  Side B                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Pete  Kelly convened the meeting at approximately  9:36 AM.                                                            
                                                                                                                                
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                                                                                                             
Senator Donald Olson                                                                                                            
                                                                                                                                
Also  Attending:    SENATOR  GENE THERRIAULT;   REPRESENTATIVE  FRED                                                          
DYSON;  EDDIE JEANS,  School  Finance  Manager, School  Finance  and                                                            
Facilities  Section,  Education  Support   Services,  Department  of                                                            
Education  and  Early  Development;  DARROLL  HARGRAVES,   Executive                                                            
Director, Alaska Council  of School Administrators; DARWIN PETERSON,                                                            
staff  to Senator  Torgerson; SALLY  SADDLER,  Business Development                                                             
Specialist/Legislative  Liaison, Division of International Trade and                                                            
Market   Development,   Department   of   Community   and   Economic                                                            
Development;  CHIP DENNERLEIN,  Director,  Division  of Habitat  and                                                            
Restoration,  Department   of Fish  and  Game;  ANNALEE   MCCONNELL,                                                            
Director, Office  of Management and Budget, Office  of the Governor;                                                            
                                                                                                                                
Attending   via  Teleconference:     From   Fairbanks:  TIM   DORAN,                                                          
President, Alaska  Association of Elementary School  Principals, and                                                            
Principal,  Denali  Elementary  School;  From Off-Net  Site:  DEBBIE                                                            
OSSIANDER,  Member and Legislative  Chair,  Anchorage School  Board;                                                            
JUDY BITTNER,  Chief/State Historic Preservation Officer,  Office of                                                            
History and  Archaeology Alaska Historical  Commission, Division  of                                                            
Parks and Outdoor Recreation,  Department of Natural Resources; From                                                            
Anchorage:  WILL  ABBOTT,  Commissioner,  Regulatory  Commission  of                                                            
Alaska; GARY PROKOSCH,  Water Resources Section, Division of Mining,                                                            
Land  and Water,  Department  of Natural  Resources;  JACK  HESSION,                                                            
Alaska Public Water Coalition                                                                                                   
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB  11-COMPULSORY SCHOOL AGE                                                                                                    
                                                                                                                                
The Committee  heard from the sponsor,  the Department of  Education                                                            
and Early  Development and  representatives  from school  districts.                                                            
The bill was held in Committee.                                                                                                 
                                                                                                                                
SB 140-SMALL WATER-POWER DEVELOPMENT PROJECTS                                                                                   
                                                                                                                                
The Committee  heard from the sponsor, the Regulatory  Commission of                                                            
Alaska,  the Department  of  Natural  Resources, the  Department  of                                                            
Community and Economic  Development, the Department of Fish and Game                                                            
and  the  Alaska  Public  Water Coalition.   The bill  was  held  in                                                            
Committee.                                                                                                                      
                                                                                                                                
HB 349-AGENCY PROGRAM AND FINANCIAL PLANS                                                                                       
                                                                                                                                
The Committee  heard from the sponsor  and the Office of  Management                                                            
and Budget. The bill was held in Committee.                                                                                     
                                                                                                                                
HB  96-ACQUIRING JESSE LEE HOME                                                                                                 
                                                                                                                                
The Committee  heard from  the Department  of Natural Resources.  An                                                            
amendment was adopted and the bill moved from Committee.                                                                        
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 11                                                                                                         
     "An Act relating to the legal age for attending school; and                                                                
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
SENATOR GENE THERRIAULT,  sponsor, testified this  legislation is in                                                            
response  to  conversations   he  had  with  the  principal   of  an                                                            
elementary  school located in his  district. He was told  of parents                                                            
enrolling  their  children  in  school  at  age  six,  although  the                                                            
mandatory  school  age  requirement  is  age seven.  He  stated  the                                                            
problem  arises when  some  of these  six-year-old  students  attend                                                            
class  inconsistently and  the school  has no  authority to  require                                                            
attendance.  He said this  causes a hardship  for the teachers,  who                                                            
invest time and  resources attempting to "keep these  children up to                                                            
speed" with the rest of the class.                                                                                              
                                                                                                                                
Senator  Therriault indicated  the benefits  of early education  and                                                            
informed  this bill  lowers the  mandatory attendance  age from  age                                                            
seven to age  six. He stressed this  legislation does not  amend the                                                            
list of  12 exemptions currently  in statute  that allow parents  to                                                            
withhold their  children from the  public education system.  He gave                                                            
illness, home  schooling, and private  schooling as examples  of the                                                            
exemptions.                                                                                                                     
                                                                                                                                
Senator Therriault  spoke to misconceptions  that this bill  negates                                                            
the exemptions  and  requires all  children in Alaska  to enter  the                                                            
public  school  system.  Rather,  he  remarked,  this  legislation,                                                             
stipulates  that  once a  child is  enrolled  in the  public  school                                                            
system, that  child must  attend. He emphasized  the intent  is that                                                            
parents  do not treat  the school  system as a  convenient day  care                                                            
system, or baby-sitter, for six year olds.                                                                                      
                                                                                                                                
Senator Therriault  pointed out the effective date  contained in the                                                            
bill that was  introduced in the first session of  the Twenty-Second                                                            
Legislature, must be amended to reflect the current year.                                                                       
                                                                                                                                
Senator Olson asked the  affect on those children who attend private                                                            
school or who are home schooled.                                                                                                
                                                                                                                                
Senator  Therriault   replied  this  legislation   only  applies  to                                                            
children in  public school and has  no impact on private  schools or                                                            
home school systems.  He stated that the parents in  these instances                                                            
are  utilizing their  own  financial  resources rather  then  public                                                            
funds.  He reiterated  the intent  is to  minimize the  impact  on a                                                            
public  school classroom  caused  from a  student who  has missed  a                                                            
significant  amount  of school  because of  the amount  of time  the                                                            
teacher must refocus toward that student.                                                                                       
                                                                                                                                
TIM  DORAN,  President,  Alaska  Association  of  Elementary  School                                                            
Principals, and  Principal, Denali Elementary School,  testified via                                                            
teleconference  from Fairbanks  to strongly  support the change  for                                                            
mandatory school attendance  to age six. He noted the average seven-                                                            
year-old is in second grade  and because this is the earliest age of                                                            
mandatory attendance, a  child could begin school for the first time                                                            
two  years  behind   his  peers.  He  spoke  to  the   physical  and                                                            
developmental  levels of  seven-year-olds compared  to five  and six                                                            
year olds.                                                                                                                      
                                                                                                                                
Mr. Doran  stressed  that starting  children  in school  at age  six                                                            
would  give  educators  "a real  benefit  in  working  with  parents                                                            
throughout  first  grade  and even  kindergarten."  He  stated  that                                                            
studies show that  exposure to the school environment  at an earlier                                                            
age has an impact on a student's future education.                                                                              
                                                                                                                                
Mr. Doran gave  examples of his experiences  teaching in  both rural                                                            
and urban schools.  He told of the disadvantages some  children face                                                            
when they do not  attend school until a later age.  He stressed that                                                            
under  current  law,  school  districts   could  not  require  these                                                            
children to attend school.                                                                                                      
                                                                                                                                
Mr. Doran  also noted the  name of the Department  of Education  was                                                            
changed a  few years prior  to add Early Development.   He  saw this                                                            
bill  "as another  way for  us to really  promote  good solid  early                                                            
education for  kids; really helps them in the process  as we are all                                                            
trying to be accountable  for the education for students  throughout                                                            
the community, not just within the school system."                                                                              
                                                                                                                                
Co-Chair  Donley surmised  the witness'  main concern  is that  once                                                            
children are enrolled  in the public school system,  they are at the                                                            
same level  as other  students. He  expressed that  to achieve  this                                                            
goal, the mandatory  attendance age does not have  to be lowered. He                                                            
suggested requiring that  attendance is mandatory for those enrolled                                                            
students, regardless of their age.                                                                                              
                                                                                                                                
Mr. Doran agreed Co-Chair  Donley's recommendation would address the                                                            
issue of student  attendance. He remarked that currently  the school                                                            
district  has no  authority  in enforcing  truancy  rules for  those                                                            
students below the age of seven.                                                                                                
                                                                                                                                
Co-Chair  Donley stressed  the legislature  has the ability  to "re-                                                            
craft  the law"  to require  attendance  of those  children who  are                                                            
enrolled, yet still allow  parents the flexibility to determine when                                                            
their children should begin school.                                                                                             
                                                                                                                                
Mr. Doran  agreed  this would  be beneficial  to  students who  have                                                            
enrolled,  but would  not benefit  those children  who do not  begin                                                            
school  before the age  of seven.  He stressed  the disadvantage  of                                                            
children  who have no  early schooling  then enter  the school  at a                                                            
later  age then  their peers.  He clarified  the issue  is not  with                                                            
parents  who chose  to home  school their  children,  but for  those                                                            
children who receive no education.                                                                                              
                                                                                                                                
Co-Chair  Kelly stated  there  are two  issues involved.  The  first                                                            
relates  to parents  who  treat  the school  system  as  a day  care                                                            
center,  "which interrupts  the education  process."  The other,  he                                                            
said, relates to the best  age to begin education. He understood the                                                            
sponsor is  intending to address the  first, more practical,  issue.                                                            
                                                                                                                                
Senator  Therriault affirmed  and  noted this  legislation does  not                                                            
affect the exemptions  for delaying schooling. He  expressed, "those                                                            
12 things pretty  much cover anything"  and if a parent wants  their                                                            
child out of school at least one of the exemptions could apply.                                                                 
                                                                                                                                
Senator  Therriault  reiterated  this  legislation  addresses  those                                                            
parents who  enroll their child in  school but then do not  have the                                                            
child attend  regularly. He  stated the language  is the  "cleanest"                                                            
way to address the issue.                                                                                                       
                                                                                                                                
Co-Chair  Donley referenced  the list of  exemptions and noted  they                                                            
are broad.  He asked about regulations  that interpret the  statute.                                                            
                                                                                                                                
EDDIE JEANS, School  Finance Manager, School Finance  and Facilities                                                            
Section,  Education Support  Services, Department  of Education  and                                                            
Early Development,  testified there are no regulations  that further                                                            
interpret the 12 exemptions.                                                                                                    
                                                                                                                                
Co-Chair  Donley  asked which  exemption  would  apply  if a  parent                                                            
"simply didn't feel their child was ready to attend school."                                                                    
                                                                                                                                
Mr. Jeans  listed number  12: the child is  educated in the  child's                                                            
home by  the parent  or legal guardian.  He explained  there  are no                                                            
specific  requirements   as  to  what  kind  of  education  must  be                                                            
provided.                                                                                                                       
                                                                                                                                
Co-Chair Donley  asked if there are  interpretations of the  quality                                                            
of  education  imposed by  the  Department  of Education  and  Early                                                            
Development or local school districts.                                                                                          
                                                                                                                                
Mr. Jeans was unaware of any.                                                                                                   
                                                                                                                                
Co-Chair  Donley asked  if  school districts  or  the Department  of                                                            
Education  and  Early Development   have authority  to  impose  such                                                            
requirements.                                                                                                                   
                                                                                                                                
Mr. Jeans answered the Department could adopt regulations.                                                                      
                                                                                                                                
Mr. Jeans suggested consideration  of other statutes relating to age                                                            
requirements in education,  specifically AS 14.03.070 commonly known                                                            
as  the  School  Age  Law.  He detailed  the  provision   identifies                                                            
children  between the age  of six years by  August 16 and 20  years,                                                            
                              th                                                                                                
who have not  completed the 12   grade. Therefore,  he said amending                                                            
the compulsory  attendance age from  seven to six years old,  "makes                                                            
sense to me." He noted kindergarten is not required in Alaska.                                                                  
                                                                                                                                
Senator Ward  asked how many  children started  school last  year at                                                            
the age of seven.                                                                                                               
                                                                                                                                
Mr. Jeans answered he did not have this information.                                                                            
                                                                                                                                
Senator Therriault  cited the most  recent data available  from 1995                                                            
showing  that of  the total  population,  98.7 percent  of  children                                                            
between the ages  of seven to nine were enrolled in  school and that                                                            
96 percent  of children aged five  and six were enrolled  in school.                                                            
                                                                                                                                
Senator Ward  wanted to know how many  children begin school  at age                                                            
seven.  He understood  the  1995 figures,  as  well  as Mr.  Doran's                                                            
experience  with one student,  but stated they  do not describe  the                                                            
problem.                                                                                                                        
                                                                                                                                
Mr.  Jeans  noted  the Department   has records  of  the  number  of                                                            
students enrolled,  but does not monitor  the number of seven-year-                                                             
olds enrolled for the first time,                                                                                               
                                                                                                                                
Co-Chair  Donley shared  he had reviewed  AS 14.03.070,  which  is a                                                            
definition of  "school age". He asked if this definition  serves any                                                            
function in other statutes.                                                                                                     
                                                                                                                                
Mr. Jeans  replied the purpose  of the definition  is for  providing                                                            
state  funds for  public  schools.  He referenced  AS  14.03.080  as                                                            
stipulating  the  right to  attend  school  without the  payment  of                                                            
tuition.  He noted  one provision  of the  right  to attend  school,                                                            
allows a child to attend kindergarten at the age of five years.                                                                 
                                                                                                                                
Co-Chair  Donley  clarified   that  AS 14.03.070   is  utilized  for                                                            
financial  purposes   only  and  does  not  relate   to  the  policy                                                            
established in AS 14.03.010, which sets the mandatory age.                                                                      
                                                                                                                                
Mr. Jeans affirmed  but noted this  legislation would align  the two                                                            
statutes.                                                                                                                       
                                                                                                                                
Senator  Therriault  stressed the  parent's  flexibility  of when  a                                                            
child attends  school is not removed. He reiterated  the child could                                                            
attend kindergarten  at age six, or the parent could  utilize one of                                                            
the 12 exemptions  and withhold the child from school  until the age                                                            
of seven.                                                                                                                       
                                                                                                                                
Senator   Therriault  stressed   the  expenditure   of  efforts   to                                                            
accommodate those  students who only periodically  attend school. He                                                            
understood  and  sympathized   with  other  efforts  to  enroll  all                                                            
children in school at an  earlier age, but qualified that is not the                                                            
purpose of this legislation.                                                                                                    
                                                                                                                                
Co-Chair  Kelly asked  for clarification,  noting  that if a  parent                                                            
does  not take  advantage of  one of  the 12 exemptions,  the  child                                                            
would be required to be enrolled in school at the age of six.                                                                   
                                                                                                                                
Senator  Therriault  emphasized that  a parent,  who  does not  want                                                            
their child  to attend  school until  the age  of seven, could  take                                                            
advantage of one of the  exemptions. He reiterated the 12 exemptions                                                            
are "all encompassing."                                                                                                         
                                                                                                                                
Co-Chair  Kelly agreed with  Co-Chair Donley's  suggestion  to amend                                                            
the language  to provide that once  a child is enrolled,  attendance                                                            
is  mandatory, regardless  of  age.  Co-Chair Kelly  commented  that                                                            
parents, who determine  their six-year-old is not  ready for school,                                                            
must attest  to one of  the exemptions, essentially  "making  a liar                                                            
out of them." Although  he assumed some form of instruction would be                                                            
provided by the parent  during this time, he questioned whether this                                                            
is "in  the spirit"  of these exemptions.  He  asked if the  sponsor                                                            
would oppose such an amendment.                                                                                                 
                                                                                                                                
Senator  Therriault replied  such an amendment  would be  "workable"                                                            
although it would be "less clear" in statutes.                                                                                  
                                                                                                                                
Mr.  Jeans  cautioned the  Committee  against  such  action  because                                                            
currently there is no kindergarten  attendance requirement, and this                                                            
legislation  would set the precedent  of mandatory kindergarten.  He                                                            
spoke to  reimbursable transportation  issues  involved in  full-day                                                            
and half-day kindergarten programs.                                                                                             
                                                                                                                                
Co-Chair Kelly acknowledged  and suggested language could be drafted                                                            
to accommodate these concerns.                                                                                                  
                                                                                                                                
Senator Therriault  asked if this would require the  school district                                                            
to track  the  enrollment  date for  children who  transfer  schools                                                            
within the district.                                                                                                            
                                                                                                                                
Co-Chair Kelly understood this is required already.                                                                             
                                                                                                                                
Senator Green  asserted none of these  issues are pertinent  because                                                            
at any  time a parent could  remove their  children from the  public                                                            
school  system, and educate  them how  they see  fit. She said  this                                                            
language  would further restrict  parents  because once enrolled,  a                                                            
student could  not be transferred  to different education  settings.                                                            
She told of tutoring  children suffering from learning  difficulties                                                            
and their movement from school to school.                                                                                       
                                                                                                                                
Co-Chair Kelly did not agree.                                                                                                   
                                                                                                                                
Co-Chair  Donley   offered  to  draft  language  to  address   these                                                            
concerns, which could be discussed on their merits.                                                                             
                                                                                                                                
Co-Chair  Donley  was encouraged  the  Department of  Education  and                                                            
Early Development  does not have regulations in place  at this time.                                                            
However, he pointed out  the Department does have such authority and                                                            
was  concerned that  a  future governor  could  be opposed  to  home                                                            
schooling and  could adopt regulations  to restrict home  schooling,                                                            
which he emphasized is very important to many Alaskans.                                                                         
                                                                                                                                
DEBBIE OSSIANDER,  Member  and Legislative  Chair, Anchorage  School                                                            
Board, testified via teleconference  from an off-net site in support                                                            
of the  bill. She  informed  the Board  has passed  a resolution  in                                                            
favor of lowering the mandatory  age for school attendance, which is                                                            
important for  the "academic preparation of children".  She detailed                                                            
state and locally adopted  performance standards that establish high                                                            
criteria  for mathematics,  reading  and writing  for children  ages                                                            
five   through  seven.   She  listed   the  language   and   reading                                                            
expectations  of  young  children  and  the  difficulties   children                                                            
without adequate  preparation could have in obtaining  these skills.                                                            
                                                                                                                                
Ms. Ossiander also spoke  to the intent of instilling the importance                                                            
of regular  school  attendance  at an early  age. She  said this  is                                                            
difficult to encourage  when attendance is required  of some but not                                                            
of others.                                                                                                                      
                                                                                                                                
Ms. Ossiander  told of children  who entered  the school system  for                                                            
the  first  time  at  the age  of  seven  with  no  other  education                                                            
experience  and the  difficulties  in  placing these  children.  She                                                            
referenced the Bush Administration  focus on the importance of early                                                            
education.                                                                                                                      
                                                                                                                                
DARROLL  HARGRAVES, Executive  Director,  Alaska  Council of  School                                                            
Administrators,  testified  in Juneau  that superintendents  are  on                                                            
record in  support of this  bill. He stressed  the need to  focus on                                                            
what is in the  best interest of children. He cautioned,  "it we put                                                            
too many vagaries  in here," the matter could become  too complex at                                                            
the school level.  He supported the mandatory age  change from seven                                                            
to six years  of age, asserting the  average six and seven  year old                                                            
is different today  then when this provision was originally  enacted                                                            
prior to statehood.  He explained  six-year-olds "from a  social and                                                            
education standpoint"  need to be  in school noting that  they learn                                                            
faster then  six-year-olds did a decade  before. He stated  research                                                            
supports this. He qualified  that if a child needs to delay starting                                                            
school for certain reasons, it would still be allowed.                                                                          
                                                                                                                                
Co-Chair  Donley asked  the process  for enrolling  a child in  home                                                            
school.                                                                                                                         
                                                                                                                                
Mr. Hargraves  was unsure  but noted the  process for six-year-olds                                                             
would  be the same  as for  seven-year-olds.  He understood  statute                                                            
requires  that parents  must  notify the  school  district of  their                                                            
intent to home school their child.                                                                                              
                                                                                                                                
Co-Chair Kelly stated there  are concerns within the Committee about                                                            
changing  the school  age. He  assigned  Senator Leman  to draft  an                                                            
amendment  that  would  satisfy  the  sponsor's  intent  to  require                                                            
attendance of  enrolled students without changing  the mandatory age                                                            
requirement.                                                                                                                    
                                                                                                                                
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 140                                                                                                        
     "An Act relating to  regulation and licensing of certain water-                                                            
     power development projects."                                                                                               
                                                                                                                                
                                                                                                                                
DARWIN PETERSON,  staff to Senator  Torgerson read a statement  into                                                            
the record as follows.                                                                                                          
                                                                                                                                
                th                                                                                                              
     In the 106   Congress, Senator Murkowski  sponsored Senate Bill                                                            
     422  amendment  the Federal  Power Act  to provide  for  Alaska                                                            
     state  jurisdiction  over small  hydroelectric  projects.  This                                                            
     legislation  transferred  to  Alaska,  and  only the  state  of                                                            
     Alaska, licensing  and regulatory authority over  hydroelectric                                                            
     projects that are 5,000 kilowatts or less.                                                                                 
                                                                                                                                
     Bringing  this regulatory authority closer to  home will reduce                                                            
     the great  time and expense associated  with federal  licensing                                                            
     and regulation of  small hydro projects in Alaska. The time and                                                            
     money  required for federal licensing  is virtually  prohibited                                                            
     for some small utility and personal projects.                                                                              
                                                                                                                                
     Before  Alaska  can acquire  jurisdiction  from  FERC  (Federal                                                            
     Energy  Regulatory Commission),  the  Legislature must  approve                                                            
     this  bill and the  Governor must submit  a program  satisfying                                                            
     FERC's  regulatory   requirements.  As  SB  140   is  currently                                                            
     drafted,  the  Regulatory  Commission of  Alaska  would be  the                                                            
     regulatory  agency responsible.  All the current environmental                                                             
     protections  required under  federal law  will still apply  and                                                            
     cannot be preempted by this legislation.                                                                                   
                                                                                                                                
Senator Wilken  referred to Section 1(b)(2)(E) on  page 2, line 9 of                                                            
the  bill  and questioned  the  necessity  of  the  language,  which                                                            
includes  "the interest of  Alaska Natives"  as one of six  criteria                                                            
that must be given  "equal consideration" in the establishment  of a                                                            
regulatory program.                                                                                                             
                                                                                                                                
Mr.  Peterson  referred  to the  set  of criteria  included  in  the                                                            
federal  enabling  legislation  [copy  on file]  that  Congress  has                                                            
established   the  state  must  meet   before  the  Federal   Energy                                                            
Regulatory Commission (FERC)  would authorize transfer of regulatory                                                            
authority to the state.  Included in this criterion, he pointed out,                                                            
the  interest  of Alaska  Natives  is specifically  listed.  He  was                                                            
unsure why  Congress chose this language,  but asserted that  by not                                                            
"mirroring  the federal  enabling  legislation,"  transfer could  be                                                            
denied.                                                                                                                         
                                                                                                                                
                                                                                                                                
SFC 02 # 13, Side B 10:24 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator  Wilken  understood  the need  for  this legislation  to  be                                                            
identical   to  the  federal  law;   however,  he  argued   that  no                                                            
consideration  is  given  to  the  private  landowner   unless  that                                                            
landowner  is  Alaska Native.  He  noted  the  other considerations                                                             
include protection  of the environment,  recreation activities,  and                                                            
energy  conservation   and  asserted  the  omission   of  landowners                                                            
represents  "a gap". He proposed that  additional language  be added                                                            
to  this  subsection  to  require  equal  consideration  for  nearby                                                            
residents and landowners.                                                                                                       
                                                                                                                                
Co-Chair Kelly  asked if "the interest of Alaska Natives  is defined                                                            
somewhere" that the Committee could reference.                                                                                  
                                                                                                                                
Mr.  Peterson was  unsure  but surmised  there  could  be a  process                                                            
contained elsewhere in  FERC regulations for addressing the interest                                                            
of landowners. He deferred to the next witness.                                                                                 
                                                                                                                                
WILL  ABBOTT,   Commissioner,  Regulatory   Commission  of   Alaska,                                                            
testified via  teleconference from Anchorage that  he could offer no                                                            
explanation  either.  He  stated   that  the  process  to  establish                                                            
regulations for this program would have to define the matter.                                                                   
                                                                                                                                
Co-Chair Kelly  clarified the process of adopting  regulations would                                                            
have  to consider  the interest  of Alaska  Natives,  and only  once                                                            
regulations  are adopted,  would those interests  be determined.  He                                                            
again asked if there is no definition already in place.                                                                         
                                                                                                                                
Mr. Abbott stated  that is his understanding, but  qualified he does                                                            
not have  definitive  knowledge because  the program  is new  to the                                                            
Regulatory  Commission  of Alaska (RCA).  He stated  that FERC  must                                                            
define the language,  pointing out the federal law  "leaves an awful                                                            
lot of  authority with FERC"  in that this  agency could approve  or                                                            
not approve, the state regulations.                                                                                             
                                                                                                                                
Co-Chair Kelly  was more concerned that a Native organization  or an                                                            
Alaska Native individual  could argue that a proposed project is not                                                            
in its best interest and  the project would be denied on that basis.                                                            
                                                                                                                                
Mr. Abbott  predicted such an argument  would be considered  equally                                                            
along with the  other criterion relating to mitigation  of wildlife,                                                            
the  environment,  and  etc.,  during the  process  of  licensing  a                                                            
hydroelectric project.  He stated the decision would then be made by                                                            
the RCA.                                                                                                                        
                                                                                                                                
Co-Chair  Kelly remarked  that an African-American,  a Filipino,  or                                                            
white person  would not have the same  input. He commented,  "Sounds                                                            
like Alabama 1952 in reverse."                                                                                                  
                                                                                                                                
Senator Olson  informed there is a  federal definition of  "interest                                                            
of  Alaska  Natives".   He  understood  Senator  Wilken's   concerns                                                            
regarding  landowners,  but  ascertained  other issues  beside  land                                                            
ownership are involved.                                                                                                         
                                                                                                                                
Senator  Ward  shared  that  initially,  he approved  of  the  equal                                                            
consideration  granted to Alaska Natives.  He asked if shareholders                                                             
          th                                                                                                                    
of the  13  Region  of the Alaska  Native Lands  Claim Act  (ANLCA),                                                            
those Alaska  Natives who do not reside  in Alaska, are included  in                                                            
this provision.                                                                                                                 
                                                                                                                                
Mr.  Abbott  guessed  the  criteria  would  apply  to  those  Alaska                                                            
Natives, but stressed that  all parties would have an opportunity to                                                            
comment  during  the licensing  process.  He  stated that  how  much                                                            
weight  is given  to each  argument  would be  the  decision of  the                                                            
Commission.                                                                                                                     
                                                                                                                                
Senator  Ward asked if  a project  were challenged  by any of  these                                                            
shareholders,  as not in their best  interest, whether Alaska  would                                                            
be in violation of federal law if the arguments were ignored.                                                                   
                                                                                                                                
Mr. Abbott predicted this could be the case.                                                                                    
                                                                                                                                
Senator Ward asked  if SB 140 could be "corrected"  to eliminate the                                                            
potential for "non-residents controlling resources in Alaska."                                                                  
                                                                                                                                
Mr. Abbott replied  that how much weight is given  to each criterion                                                            
could be considered.                                                                                                            
                                                                                                                                
Senator Ward  interjected he did not  want the specific interest  of                                                            
this group of people given  any weight because they do not reside in                                                            
Alaska.                                                                                                                         
                                                                                                                                
Co-Chair  Donley  wanted  a  sense  of the  amount  of  power  5,000                                                            
kilowatts generates. He  requested an example of the diesel turbines                                                            
that supply the City of Bethel.                                                                                                 
                                                                                                                                
Mr.   Abbott  responded   the   Bethel   facility   is  larger.   He                                                            
characterized a 5,000 kilowatt  project as "relatively small, run of                                                            
the river-type"  containment dam "with  a pipe coming down  into the                                                            
turbines" but no large  dam behind.  He gave a project by Lake Clark                                                            
as an  example, noting  it provides  the villages  of Illiamna,  New                                                            
Haven and Nondalton  with approximately  two-thirds of their  power.                                                            
Another  example, he  noted, is near  Haines and  would augment  the                                                            
Goat Lake Hydroelectric Power source for Skagway and Haines.                                                                    
                                                                                                                                
Co-Chair Kelly  referenced data included in the member's  bill files                                                            
lists several such projects [copy on file].                                                                                     
                                                                                                                                
Co-Chair Donley  asked if the term  "five megawatt" originates  from                                                            
the federal legislation.                                                                                                        
                                                                                                                                
Mr.  Abbott   affirmed  and  noted   five  megawatts  is   the  same                                                            
measurement as 5,000 kilowatts.                                                                                                 
                                                                                                                                
Co-Chair Donley next asked  if five megawatts is the maximum size of                                                            
a project that  would qualify for  this program, whether  there is a                                                            
minimum size  requirement that would  provide that smaller  projects                                                            
are exempt from these regulations.                                                                                              
                                                                                                                                
Mr. Abbott answered no,  that all projects less than 5,000 kilowatts                                                            
are included in the federal law.                                                                                                
                                                                                                                                
Co-Chair  Donley asked  if there  are provisions  for exempting  any                                                            
projects from regulation.                                                                                                       
                                                                                                                                
Mr. Abbott said there are not.                                                                                                  
                                                                                                                                
Co-Chair Donley  next asked the status of federal  regulatory reform                                                            
legislation under congressional consideration.                                                                                  
                                                                                                                                
Mr. Abbott did not know the status.                                                                                             
                                                                                                                                
Co-Chair Donley  asked if SB 140 or the federal enabling  act allows                                                            
the  RCA  to  modify  its  regulations   in  the  event  the  reform                                                            
legislation  is adopted in order to  "lessen the regulatory  burden"                                                            
on the public.                                                                                                                  
                                                                                                                                
Mr. Abbott  responded the  federal enabling  legislation contains  a                                                            
provision to allow the  RCA to modify regulations with approval from                                                            
FERC.                                                                                                                           
                                                                                                                                
Senator  Olson clarified  that currently FERC  approval is  required                                                            
for a  one-kilowatt hydroelectric  project,  such as those  found in                                                            
mining sites that provide power for only one or two residents.                                                                  
                                                                                                                                
Mr.  Abbott was  only  familiar  with the  recent  federal  enabling                                                            
legislation.  He  reiterated  the  RCA  must consult  with  FERC  to                                                            
determine the perimeters of the state authority.                                                                                
                                                                                                                                
Senator Olson asked if  miners operating small systems are currently                                                            
in violation.                                                                                                                   
                                                                                                                                
Mr.  Abbott   again  noted  the  projects   are  still  under   FERC                                                            
jurisdiction and that he was unfamiliar with specifics.                                                                         
                                                                                                                                
Co-Chair Donley  noted Congress occasionally  exempts hydroelectric                                                             
projects from FERC regulations  primarily because a local government                                                            
owns them. He asked if  there are any exemptions in the proposed RCA                                                            
program.                                                                                                                        
                                                                                                                                
Mr.  Abbott  affirmed  there  currently  are  such  exemptions,  but                                                            
informed this legislation  does not address the matter and that this                                                            
is another issue to be determined with the FERC.                                                                                
                                                                                                                                
Co-Chair Kelly  commented that locally  owned projects regulated  by                                                            
the RCA are exempt.                                                                                                             
                                                                                                                                
Co-Chair Donley  corrected that some are exempt but  others are not.                                                            
                                                                                                                                
Co-Chair Donley  understood the policy is straightforward  regarding                                                            
privately owned  systems, but that  policy differs when government-                                                             
owned systems  are involved.  He wanted  consideration for  possibly                                                            
reducing the amount of regulations for government-owned systems.                                                                
                                                                                                                                
Senator  Green  asked  if  this  legislation  should  reference  the                                                            
federal enabling  statute, so that  in the event regulatory  reforms                                                            
are enacted,  the RCA  regulations would  be amended automatically.                                                             
She said this would eliminate  the need for the regulatory amendment                                                            
process each time the federal laws are changed.                                                                                 
                                                                                                                                
Mr. Peterson responded  this would be acceptable.  He noted the only                                                            
action necessary to enact  this program is a state statute providing                                                            
for the transfer of this authority from FERC to the RCA.                                                                        
                                                                                                                                
Senator Wilken informed  that a five-megawatt plant is one-forth the                                                            
size of the power plant  located on the Chena River in Fairbanks. He                                                            
calculated  a five-megawatt  system would  provide enough energy  to                                                            
power 50,000  100-watt light bulbs.  Therefore, he predicted  future                                                            
projects could be larger then the Committee understood.                                                                         
                                                                                                                                
Mr. Peterson stated there  are currently 53 proposed projects in the                                                            
permit application  process. Of those projects, he  said, 42 are for                                                            
projects five megawatts or less.                                                                                                
                                                                                                                                
Senator Ward asked if current  regulations apply to small electrical                                                            
generating  operations on mining  claims that  do not sell  power to                                                            
others.                                                                                                                         
                                                                                                                                
GARY PROKOSCH,  Water Resources  Section,  Division of Mining,  Land                                                            
and  Water,   Department   of  Natural   Resources,  testified   via                                                            
teleconference  from Anchorage that FERC allows exemptions  for many                                                            
small  projects  in  Alaska,  including  the  example  Senator  Ward                                                            
provided.                                                                                                                       
                                                                                                                                
Senator Ward asked  if the new program would remove  the exemptions.                                                            
                                                                                                                                
Mr. Prokosch  replied that  if this law passed,  the small  projects                                                            
would  be regulated  by  the  state  RCA rather  then  under  direct                                                            
supervision  of FERC.  He surmised  the  implementation regulations                                                             
could include exemptions.                                                                                                       
                                                                                                                                
Senator Ward expressed that Senator Green's comments are valid.                                                                 
                                                                                                                                
SALLY SADDLER, Business  Development Specialist/Legislative Liaison,                                                            
Division of International  Trade and Market Development,  Department                                                            
of Community and  Economic Development testified in  Juneau and read                                                            
talking points as follows.                                                                                                      
                                                                                                                                
     ·    Bill calls for RCA to adopt regulations, licenses and                                                                 
          regulate  water power plants of 5 mw or  less, essentially                                                            
          creating  a state version of the Federal Energy Regulatory                                                            
          Commission  program.  We  believe  RCA is  an appropriate                                                             
          agency  to  assume  these  duties.  It does  represent  an                                                            
          expansion  of their current mission, and accordingly costs                                                            
          are  outlined in  our fiscal note  and in fiscal  notes of                                                            
          other agencies.                                                                                                       
     ·    Administration has an interagency team (Department of                                                                 
          Natural  Resources, Department of Fish  and Game, CZM, RCA                                                            
          and  Department  of Community  and  Economic Development)                                                             
          analyzing  the bill. Want to share today the common points                                                            
          emerging from our review.                                                                                             
     ·    We believe development of small hydro projects can                                                                    
          support    economic    development    and   improve    the                                                            
          availability/cost  of power in rural Alaska. We understand                                                            
          a  state program  may have  advantages  in allowing  us to                                                            
          focus the process on issues pertinent to Alaska.                                                                      
     ·    When federal legislation was pending, the Governor                                                                    
          supported  giving  Alaska jurisdiction.  At the same  time                                                            
          the   Governor   recognized   that  this   is  a   complex                                                            
          undertaking  and we must  be sure a state program  results                                                            
          in  proper design and construction,  and at the  same time                                                            
          protects  fish, wildlife  and the environment at  least as                                                            
          well,  or as rigorously,  as does FERC. The Governor  also                                                            
          acknowledged    the   importance   of   establishing    an                                                            
          appropriate  funding  mechanism  that  could  be either  a                                                            
          direct appropriation or be based on a user fee system.                                                                
     ·    Each agency fiscal note (RCA, Department of Natural                                                                   
          Resources,  and Department  of Fish  and Game) assumes  it                                                            
          will  take  two years  to  develop regulations  that  will                                                            
          define  program  operations.  Once state  regulations  are                                                            
          recommended,  FERC must  approve our state program  before                                                            
          ceding authority to the state.                                                                                        
     ·    Costs of operating the program in FY 05 and beyond are a                                                              
          bit   more  difficult  to  estimate.  Agencies   currently                                                            
          understand  their  existing  role  with FERC  process  but                                                            
          expect  during  the  regulations  process to  outline  the                                                            
          additional  duties, statutes and regulatory authority they                                                            
          may  need  to  operate a  program  as  well as  FERC  (for                                                            
          example,  FERC  has jurisdiction  over  entire  watersheds                                                            
          while FG currently has oversight only of streambeds.)                                                                 
     ·    The State of Oregon currently has a hydro project program                                                             
          that  operates in addition to FERC for  all hydro projects                                                            
          in  that  state,  and  we  will  examine  their  extensive                                                            
          statutes  and regulations, as well as  work with FERC, for                                                            
          ideas.                                                                                                                
                                                                                                                                
Senator  Ward  asked  the witness  to  comment  on  Senator  Green's                                                            
suggestion.                                                                                                                     
                                                                                                                                
Ms. Saddler stated  she was not in a position to respond.  She noted                                                            
however,  that some regulations  in the existing  FERC program  "may                                                            
not be totally  appropriate for Alaska."  She understood  the intent                                                            
of this program  change is to "allow  us to focus on those  that are                                                            
Alaska  specific."  In adopting  state  regulations,  she  explained                                                            
projects in Alaska would  not be subject to all the FERC provisions.                                                            
                                                                                                                                
Senator Leman  expressed that the  state should have the  ability to                                                            
grant exemptions given that FERC currently does so.                                                                             
                                                                                                                                
Senator  Leman also questioned  the "equal  consideration"  language                                                            
discussed  earlier.  He  was  unsure  if  this  would  be  possible,                                                            
realistic  or appropriate.  He  noted the  provision  also does  not                                                            
allow consideration  of other interests  that could be involved.  He                                                            
presumed the  state statute could  allow for this and remain  within                                                            
the requirements of the federal law.                                                                                            
                                                                                                                                
Senator  Leman then  referenced the  general funds  included in  the                                                            
Department of Fish and  Game and the Department of Natural Resources                                                            
fiscal  notes and  asked if  federal funding  would  be provided  to                                                            
operate the program  or whether the only benefit is  the transfer of                                                            
oversight to the state.                                                                                                         
                                                                                                                                
Ms.  Saddler  responded  she  understood  the  RCA  would  have  the                                                            
opportunity to develop  regulations that could include consideration                                                            
for other interests, provided  these regulations "meet the intent of                                                            
the FERC regulations."  She was unsure  about the amount  of federal                                                            
funds available for this program.                                                                                               
                                                                                                                                
Mr. Abbott  explained  the current  process in which  FERC does  not                                                            
collect funds from the  applicant until the project is permitted and                                                            
begins to operate.  At this time, he detailed, a charge  is assessed                                                            
based  on  the  amount  of  kilowatts  produced.  He  assumed  these                                                            
revenues would  be allocated to the RCA. He noted  the program would                                                            
operate using  revenue generated from  completed projects,  although                                                            
it is unknown  how the program would  be funded before any  projects                                                            
are completed and supplying revenue.                                                                                            
                                                                                                                                
Senator  Leman asked  if no revenues  were generated  from  projects                                                            
proposed  but never  completed,  the  state would  subsequently  not                                                            
recover expenses incurred in the permitting process.                                                                            
                                                                                                                                
Mr. Abbott affirmed.                                                                                                            
                                                                                                                                
JACK  HESSION,   Alaska  Public  Water   Coalition,  testified   via                                                            
teleconference  from Anchorage and read a statement  into the record                                                            
as follows.                                                                                                                     
                                                                                                                                
     The  Coalition  includes  sport  fishing  groups, conservation                                                             
     organizations,  former  members of the  Alaska Water Board  and                                                            
     other individuals,  all of whom share an interest  in the sound                                                            
     management  and proper disposition  of Alaska's publicly  owned                                                            
     water resources.                                                                                                           
                                                                                                                                
     In  summary, the  Coalition strongly  opposes  enactment  of SB
     140,  which would establish  a state  hydroelectric  regulatory                                                            
     program  with  authority  to accept  license  applications  for                                                            
     hydroelectric projects  on state, private, and federal lands in                                                            
     Alaska, including  state and federal conservation system units.                                                            
     The  Coalition  supports  the continuation  of  Federal  Energy                                                            
     Regulatory Commission jurisdiction on all lands in Alaska.                                                                 
                                                                                                                                
      Impact on state and national conservation system units                                                                  
                                                                                                                                
     Under SB  140 a state license or exemption from  licensing in a                                                            
     national  conservation  system  unit would  be  subject to  the                                                            
     approval  of the Secretary of the Interior or  Agriculture, and                                                            
     licensing  conditions could be imposed. The provision  provides                                                            
     insufficient  protection for  the national conservation  system                                                            
     units, as a Secretary  favoring hydropower could be expected to                                                            
     endorse  projects  in  the units.  The  bill  does not  have  a                                                            
      similar provision for state conservation system units.                                                                    
                                                                                                                                
     Alaska   jurisdiction   over   projects  located   in   federal                                                            
     conservation  system  units would  be unprecedented;  no  state                                                            
     currently  has such jurisdiction.  Under the Federal  Power Act                                                            
     and   other  applicable   federal  law,   the  Federal   Energy                                                            
     Regulatory   Commission  does   not  accept  applications   for                                                            
     hydropower  projects located  within national  parks, wild  and                                                            
     scenic rivers, or  wilderness areas, all of which are closed to                                                            
     new hydropower development.                                                                                                
                                                                                                                                
     If a state  regulatory authority accepted license  applications                                                            
     for  hydropower projects  within these  national conservations                                                             
     system,   it  would  be  met   with  intense  controversy   and                                                            
     litigation  from citizens  determined  to protect the  purposes                                                            
     and  natural values  for which  these lands  were set aside  by                                                            
     Congress. With equal  determination, citizens would also defend                                                            
     state conservation  system units from destructive hydroelectric                                                            
     dams.                                                                                                                      
                                                                                                                                
     The State  should not assume the cost of hydropower  regulation                                                          
                                                                                                                                
     SB  140  would  establish  a  state  hydroelectric   regulatory                                                            
     program  within the  Regulatory  Commission of  Alaska for  the                                                            
     purpose of  licensing, re-licensing, exempting  from licensing,                                                            
     and regulating  hydroelectric  projects of 5 megawatts  or less                                                            
     on all  lands in Alaska, with  the exception of national  study                                                            
     rivers. The  new regulatory program would be  modeled after the                                                            
     licensing   requirements  of  the  Federal  Energy   Regulatory                                                            
     Commission  (FERC). To ensure that the state  program met these                                                            
     federal requirements,  the program would have to be approved by                                                            
     FERC.                                                                                                                      
                                                                                                                                
     Putting this state  regulatory program in place would require a                                                            
     professional staff  capable of matching FERC's expertise, and a                                                            
     substantial  annual  expenditure  of state  funds. Because  the                                                            
     federal   law  requires  the  state's  regulatory   program  to                                                            
     "…protect the public  interest, purposes…and the environment to                                                          
     the same extent provided  by the requirements for licensing and                                                          
     regulation  by [FERC],"  the State  would be  obliged to  spend                                                            
     approximately as much  on a regulatory program as FERC now does                                                            
     for its Alaska  regulatory responsibilities.  (Emphasis added).                                                            
     The State's  cost could even exceed FERC's if  state regulators                                                            
     accepted applications  for dams in national conservation system                                                            
     units.                                                                                                                     
                                                                                                                                
     To get a  realistic estimate of the cost of a  state regulatory                                                            
     program,  the Committee should consult FERC on  the cost of the                                                            
     Commission's Alaska regulatory program.                                                                                    
                                                                                                                                
     In  any  event,  we  question  whether  it is  in  the  State's                                                            
     interest  to take on a new and  costly responsibility  when the                                                            
     State is facing a  fiscal crisis and the Legislature is seeking                                                            
      to reduce, not increase, the cost of state government.                                                                    
                                                                                                                                
     Federal Energy Regulatory Commission                                                                                     
                                                                                                                                
     Expanding  an existing  state  bureaucracy such  as the  Alaska                                                            
     Regulatory  Commission, or creating  an entirely new  agency or                                                            
     division  in an existing department makes no  sense at all when                                                            
     licensing   of  hydroelectric  projects  is  being   completely                                                            
     administered  by FERC. The "small"  hydropower industry,  which                                                            
     was the  moving force behind  the federal law and now  supports                                                            
     SB 140,  has failed to show that  FERC's licensing process  for                                                            
     small hydro  is flawed or somehow fails to protect  the State's                                                            
     interest   in  hydropower  license  procedures.   The  industry                                                            
     complains of its costs  and the length of the FERC process, but                                                            
     to  our knowledge,  the  industry  has been  unable  to cite  a                                                            
     single instance  of an Alaska license application  being denied                                                            
     by the federal commission.                                                                                                 
                                                                                                                                
     Ironically,    the   Alaska    Rural   Electric   Co-Operative                                                             
     Association,  which supports SB 140, had some  kind words about                                                            
     the  existing  FERC process.  In  testimony before  the  Senate                                                            
     Resources  Committee's  February  8  hearing  on SB  140,  Eric                                                            
     Yould,  the Associations's Executive  Director, said  that "Our                                                            
     members  have taken  a certain  amount  of solace  in having  a                                                            
     third independent  body, FERC, with the ability  to stand up to                                                            
     the federal and state  agencies. We have found ourselves at the                                                            
     mercy of  the state agencies that sometime are  not friendly at                                                            
     all to the very notion  of hydro projects and make the lives of                                                            
     people  trying to do this quite  miserable." He said  that FERC                                                            
     is a "known"  and "trusted" entity that acts  as an independent                                                            
     arbiter.                                                                                                                   
                                                                                                                                
     His observations  bear on the  fundamental question  before the                                                            
     Alaska Legislature  as it considers SB 140: Given that the FERC                                                            
     process  is working  satisfactorily, should  the State  rush to                                                            
     replace it  and assume the financial burden now  carried by the                                                            
     federal government? We think the answer is clearly "no."                                                                   
                                                                                                                                
     Thus as  it considers SB 140,  we recommend that the  Committee                                                            
     and  the Legislature as  a whole apply  the adage "if  it ain't                                                            
     broke,  don't  fix  it."  FERC's program  is  not  broken;  the                                                            
     Commission  is  adequately carrying  out  the responsibilities                                                             
     assigned to it by Congress.                                                                                                
                                                                                                                                
     Furthermore, a state  takeover of FERC's responsibilities would                                                            
     amount  to a voluntarily  accepting an  unfunded mandated  from                                                            
     the federal government.  By contrast, other federal mandates to                                                            
     the  State are  accompanied by  substantial  federal funds,  an                                                            
     example of which is  the generous federal funding of the Alaska                                                            
     Surface  Mining Control and Reclamation  Act. Thus in  order to                                                            
     adequately  fund  a state  hydropower regulatory  program,  the                                                            
     Legislature   would  be  obliged  to  increase   overall  state                                                            
     spending,  or take the necessary  funds from other vital  state                                                            
     services  and  programs.   Neither  course  is  in  the  public                                                            
     interest.  Congress's offer of "small" hydropower  jurisdiction                                                            
     is an offer the State should politely but firmly refuse.                                                                   
                                                                                                                                
     In conclusion,  a state regulatory program would  likely result                                                            
     in  intense controversy  if hydropower  projects were  proposed                                                            
     for  units of  the  state and  national  conservation  systems.                                                            
     Because the  existing FERC licensing and regulatory  process is                                                            
     performing  satisfactorily  and at  minimum cost  to the  state                                                            
     government, it is  not fiscally prudent for the State to assume                                                            
     FERC's  responsibilities and  costs, particularly at  a time of                                                            
     major shortfalls in state revenues.                                                                                        
                                                                                                                                
     We recommend  that the Committee  take no further action  on SB
     140.                                                                                                                       
                                                                                                                                
     Thank you for considering our views.                                                                                       
                                                                                                                                
CHIP  DENNERLEIN, Director,  Division  of Habitat  and Restoration,                                                             
Department  of  Fish and  Game,  testified  he is  a member  of  the                                                            
interagency  team  referenced   by  Ms.  Saddler.  He  informed  the                                                            
Department of Fish and  Game is participating in this effort because                                                            
the management  and resolution of fish and wildlife  issues, both in                                                            
resource protection  and in public use, are "central  to the current                                                            
FERC process" as well as  central to this legislation. He stated the                                                            
intent  is  to establish  a  state  program  that  "effectively  and                                                            
efficiently hits the targets."                                                                                                  
                                                                                                                                
Mr. Dennerlein  pointed out Governor Tony Knowles  wrote Congress in                                                            
support of  the federal  enabling legislation  and "expressed  a few                                                            
conditions  on  funding"  including  "adequate  state  authority  in                                                            
legislation,"  a source  of  funding sufficient  to  ensure "a  real                                                            
program",  and  protection   of fish  and  wildlife   resources  for                                                            
Alaskans at least as well as the current process.                                                                               
                                                                                                                                
Mr.  Dennerlein  clarified  his remarks  "support  the  concept"  of                                                            
transferring regulatory authority to the RCA.                                                                                   
                                                                                                                                
Mr. Dennerlein noted no  hydropower projects proposed in Alaska that                                                            
have "passed the  basic economic analysis" have been  opposed by the                                                            
Department.  He listed a hydroelectric  dam on Kodiak Island  as one                                                            
major project that had potential impact on fish and wildlife.                                                                   
                                                                                                                                
Mr. Dennerlein  described  the duties of  FERC including  licensing,                                                            
economic analysis,  due diligence, independent review  and serves as                                                            
the "coordinating point  for all concerns." He continued, the agency                                                            
performs  monitoring and compliance  over the  life of projects,  as                                                            
well as  re-licensing  existing projects,  such  as those  involving                                                            
restoring salmon  runs in previously dry creek beds,  and ensure dam                                                            
safety.                                                                                                                         
                                                                                                                                
Mr. Dennerlein  instructed  on the application  process and  partial                                                            
exemptions  whereby the applicant  agrees to abide by the  "resource                                                            
agency  stipulations"  and full  exemptions "for  relatively  benign                                                            
projects that do not involve significant federal land interest."                                                                
                                                                                                                                
Mr.  Dennerlein   then   detailed  the   relationship  between   the                                                            
Department and  FERC to obtain necessary data for  the Department to                                                            
make decisions  relating to salmon spawning and hydrology.  He noted                                                            
the Department  "helps  frame questions"  for  environmental  impact                                                            
statements,  according  to the provision  in the  Fish and  Wildlife                                                            
Service  Coordination  Act. He  elaborated  on this  process  giving                                                            
examples  of determining  whether a proposed  project impacts  marsh                                                            
"where the Coho  are rearing" and watershed where  "the deer hunters                                                            
are concerned."                                                                                                                 
                                                                                                                                
Mr. Dennerlein then spoke  to the impacts of this legislation on the                                                            
Department   listing  front-end  costs,   the  permitting   process,                                                            
operating  expenses  of the  program,  participation  of the  Native                                                            
corporations  and other Native  organizations.  He opined that  more                                                            
work is necessary to avoid  an "unintended result." He qualified the                                                            
Department  supports small hydropower  projects, but stressed  there                                                            
are many  affected  parties in  such a  project, many  of which  are                                                            
competing.                                                                                                                      
                                                                                                                                
Senator Leman asked if  this legislation provides specific authority                                                            
to allow  for partial  and full  exemptions that  are comparable  to                                                            
those granted by FERC that the witness mentioned.                                                                               
                                                                                                                                
Mr. Dennerlein answered  it does. He indicated the decision would be                                                            
deferred to the Department.  He was unsure whether federal law would                                                            
allow the state to exempt a privately owned project.                                                                            
                                                                                                                                
Senator Olson  asked if this bill would make securing  a permit less                                                            
cumbersome for small operators and or seasonal users.                                                                           
                                                                                                                                
Mr. Dennerlein  answered, "That's  the million dollar question."  He                                                            
stated  the "state  is  uncertain  at this  moment."  He surmised  a                                                            
program could be "crafted", which could accomplish this.                                                                        
                                                                                                                                
Mr. Dennerlein  next addressed the fiscal note, stressing  it is not                                                            
possible to accurately  predict the cost of operating  this program.                                                            
He listed many variables  and suggested a consultant with experience                                                            
in this  matter  could be  retained. He  noted the  State of  Oregon                                                            
operates a similar program,  which could be a source for locating an                                                            
expert.                                                                                                                         
                                                                                                                                
                                                                                                                                
SFC 02 # 14, Side A 11:12 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Mr. Dennerlein  continued speaking  to the number of staff  required                                                            
to establish this  program, including a full-time  "team leader" and                                                            
staff from  the Department of Law,  Department of Fish and  Game and                                                            
Department of Natural Resources.                                                                                                
                                                                                                                                
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
                                                                                                                                
                                                                                                                                
     HOUSE BILL NO. 349                                                                                                         
     "An Act relating to agency programs and financial plans."                                                                  
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  FRED  DYSON,  sponsor,  testified  this  bill  would                                                            
require the  Executive Branch  submit to  the legislature,  a budget                                                            
that prioritizes  the "activities  and outputs"  of departments.  He                                                            
informed  he had served  on the Municipality  of Anchorage  Assembly                                                            
and that Annalee  McConnell, currently director of  the state Office                                                            
of  Management  and Budget,  while  working  for  the Municipality,                                                             
instituted  a similar process in that  body, which he said  has been                                                            
effective. He  opined the process "has a great deal  of utility" and                                                            
would provide "another useful tool in our hands."                                                                               
                                                                                                                                
Representative  Dyson relayed that some concerns were  raised during                                                            
House of Representative  hearings  on this bill. He gave  an example                                                            
of  two  programs  that  a  department  determines   to  have  equal                                                            
priority.  He predicted this  would be rectified  as the process  is                                                            
implemented,  with an assignment  of equal  priority as one  option.                                                            
He noted  law  mandates some  functions  and that  the Municipality                                                             
system  included  a  method  for  quantifying   these  programs.  In                                                            
addition,  he  noted  a  process  was implemented   for identifying                                                             
programs that received  significant funding contributions from other                                                            
sources, such as the federal government.                                                                                        
                                                                                                                                
Representative  Dyson qualified  this legislation  does not  require                                                            
the Administration  to delineate the  cost for each item.  He shared                                                            
that in  conferring  with Ms. McConnell,  she  told of frustrations                                                             
with the Municipal  process in the  amount of time and effort  spent                                                            
identifying all  costs for some programs that were  undisputed as to                                                            
their  continuance. He  assured this  legislation  does not  require                                                            
this expenditure of effort.                                                                                                     
                                                                                                                                
Representative  Dyson also  referenced arguments  made in the  House                                                            
Finance  Committee  and  by  the  media   that  the  legislature  is                                                            
responsible  for setting budget priorities  and he agreed.  However,                                                            
he stressed  that  in many instances  department  personnel is  more                                                            
knowledgeable  on these  issues  and it  is "disrespectful"  to  not                                                            
include them  in the process.  He emphasized  the legislation  would                                                            
retain  the authority  to  change the  priorities  submitted by  the                                                            
Executive Branch.                                                                                                               
                                                                                                                                
Representative  Dyson summarized the purpose of this  legislation is                                                            
to, "respectfully  get the input from the people who  are delivering                                                            
the  services,  have far  more  experience  and frankly  are  better                                                            
qualified to  make those judgments  than any of us. It's  our job to                                                            
set the  priorities. We  deserve to have  the best information-best                                                             
tools to make those."                                                                                                           
                                                                                                                                
Co-Chair Kelly  reiterated the criticism  raised by the director  of                                                            
the Office  of Management and Budget,  is that some programs  within                                                            
one  department  have  different   but  equal  value.  He  gave  the                                                            
Department  of Administration  as an example,  as it implements  the                                                            
Pioneers' Homes  and the Permanent Fund Dividend programs.  He asked                                                            
if  consideration   had  been  given   to  a  different   method  of                                                            
prioritization to accommodate for such instances.                                                                               
                                                                                                                                
Representative Dyson analogized  the Olympic Games pointing out that                                                            
if there is a  tie in an event, the top two contestants  are awarded                                                            
gold medals  and the third-place finisher  receives a bronze  medal.                                                            
He further  described  the Anchorage  process, which  he stated  was                                                            
done in  good faith, although  "never ensconced  in a law."  He told                                                            
how that process evolved as necessary.                                                                                          
                                                                                                                                
Co-Chair  Kelly  asked  if  the  sponsor   had  consulted  with  the                                                            
Department  of  Law about  the  constitutionality  of  this law  and                                                            
whether a constitutional  amendment would be necessary  to enact it.                                                            
                                                                                                                                
Representative Dyson had not.                                                                                                   
                                                                                                                                
Co-Chair Kelly  remarked he wanted this bill to proceed  through the                                                            
legislative  process, but he was concerned  about the separation  of                                                            
powers  involved  because "as  we've  seen in  the past,  you  can't                                                            
really make  the agencies  do exactly what  you want; they  can just                                                            
say no and they  have the constitutional authority."  He ascertained                                                            
that a constitutional  amendment might  be required before  this law                                                            
could  be enforced.  He  informed  he has  introduced  a  resolution                                                            
providing for  such a constitutional amendment. He  stated HB 349 is                                                            
an  example   of  how   this  constitutional   amendment  would   be                                                            
implemented.                                                                                                                    
                                                                                                                                
Senator  Olson  referenced  the  title  of the  bill  and  expressed                                                            
concern that  it is too broad and  that unintended changes  could be                                                            
made to the bill itself.                                                                                                        
                                                                                                                                
Co-Chair Kelly  pointed out no changes to the bill  had been made to                                                            
date.                                                                                                                           
                                                                                                                                
Representative  Dyson did not consider this a concern.  He noted the                                                            
bill  drafter  at  the  Division  of  Legal  and  Research  Services                                                            
recommended the title name.                                                                                                     
                                                                                                                                
Senator  Leman  supported  the  concept   of  the Executive   Branch                                                            
prioritizing  budget  expenditures,  but  had  questions  about  the                                                            
implementation.  He referenced programs  that operate using  funding                                                            
sources other  then the general  fund, which  may not have  a higher                                                            
priority,  but could  be treated as  such because  of the  alternate                                                            
funding.                                                                                                                        
                                                                                                                                
Senator   Leman  suggested   dividing  some   programs  into   "sub-                                                            
activities"   to  clarify   their  importance.   He  predicted   the                                                            
Administration  would  claim  that  all  activities   are  important                                                            
because the legislature directed the agencies to perform them.                                                                  
                                                                                                                                
Representative  Dyson referenced an  example of the Municipality  of                                                            
Anchorage  budget priority  provided  in the bill  packets [copy  on                                                            
file.] He pointed  out the items included  "their output,"  which he                                                            
stated make prioritization  easier. He assumed most discussion would                                                            
involve a  few items at the  top of the  priority list. He  asserted                                                            
the Committee  is "part way there  already" with the utilization  of                                                            
the missions  and  measures practice  as well  as impact  statements                                                            
submitted  by department.  Practicably speaking,  he qualified  this                                                            
prioritization process  would be valuable for evaluating only ten to                                                            
15 percent of a department's activities.                                                                                        
                                                                                                                                
Representative  Dyson  expressed the  intent  of this  bill, "is  to                                                            
build  an even more  cooperative  working relationship  between  the                                                            
Administration  and the legislature." He opined this  legislation is                                                            
reasonable  and that the  process itself  has been successful  under                                                            
Ms. McConnell's direction at the Municipality of Anchorage.                                                                     
                                                                                                                                
Senator  Ward  asked   if  any  other  state  practices   a  similar                                                            
prioritization method.                                                                                                          
                                                                                                                                
Representative  Dyson answered  yes,  but admitted  he did not  have                                                            
specific information  as to which states. However,  he stressed, all                                                            
businesses  and individuals  practice  some method  of prioritizing                                                             
expenditures.                                                                                                                   
                                                                                                                                
Senator Wilken shared Senator  Leman's concerns about implementation                                                            
and warned  "I fear we're  going to spend  more time worrying  about                                                            
what is number  35 and whether it  should be 45 or 25." He  spoke of                                                            
operating his  own business and the practice of rating  expenditures                                                            
in categories of ABC. He  explained "A" items are those expenditures                                                            
that must  be made, such  as fuel; a "B" item  might be a  new truck                                                            
that should  be purchased; and a "C"  rating would be given  to "the                                                            
things  we'd like  to have"  such  as painting  that  new truck.  He                                                            
suggested  this system  could  be applied  to budget  request  items                                                            
(BRU) within the state budget.                                                                                                  
                                                                                                                                
Senator Wilken  next referenced page 1, lines 6 and  7, "Toward that                                                            
end,  each state  agency shall,  on  a semi-annual  basis,  identify                                                            
results-based   measures…"  He  said  this  is  currently   provided                                                            
annually and asked why it should be increased to bi-annual.                                                                     
                                                                                                                                
Co-Chair Kelly  corrected that the  reporting is already  done semi-                                                            
annually as established in statute.                                                                                             
                                                                                                                                
Co-Chair Kelly  informed that he requested an "ABC  list" of the two                                                            
agencies  for  which he  serves  as budget  subcommittee  chair.  He                                                            
anticipated   enacting    this   statute   and   then   adopting   a                                                            
constitutional  amendment that  would, "bridge  the legislative  and                                                            
the Executive Branch."                                                                                                          
                                                                                                                                
ANNALEE  MCCONNELL,  Director,  Office  of  Management  and  Budget,                                                            
Office  of the Governor,  testified  she is very  familiar with  the                                                            
proposed  system because she  developed it  for the Municipality  of                                                            
Anchorage. She stated she  knows the advantages and disadvantages of                                                            
the system.  She stressed  those programs  "around the margins"  are                                                            
the issue.                                                                                                                      
                                                                                                                                
Ms.  McConnell clarified  the  Municipality  system  focuses on  the                                                            
level of service  and whether the service should be  discontinued as                                                            
opposed  to which services  are of  least important.  She said  this                                                            
process "breaks activities into lots of sub-elements."                                                                          
                                                                                                                                
Ms. McConnell informed  that if she were to recreate this system for                                                            
the Municipality,  she would do it  differently because of  the time                                                            
spent  on  some  unnecessary   efforts.  She  gave   an  example  of                                                            
attempting  to determine  an  acceptable level  of  service for  the                                                            
Alaska State Troopers;  whether there should be ten or two troopers,                                                            
whether  to include  the  crime lab.  She  stressed  this is  wasted                                                            
energy if "you  accept the premise  that we are going have  a public                                                            
safety function."                                                                                                               
                                                                                                                                
Ms. McConnell  opined "the service level concept"  is similar to the                                                            
current impact statement  process whereby the department provides an                                                            
analysis  of  the   possible  impact  a  proposed  specific   budget                                                            
reduction  could   have.  She  remarked  this  is  a  significantly                                                             
different process  then that proposed by Senator Wilken.  She agreed                                                            
that determining  whether  an item is  number 35  or number 42  on a                                                            
priority list  is irrelevant if it has been determined  that all the                                                            
activities must be part of the basic structure.                                                                                 
                                                                                                                                
Ms. McConnell pointed out  there are instances where the legislature                                                            
could  consider eliminating  an entire  program,  which would  occur                                                            
through  the statutory process.  She said  the Administration  could                                                            
make suggestions  as  to which  programs should  be eliminated.  She                                                            
pointed  out that  most  "activities"  are established  in  statute.                                                            
Otherwise,  she warned,  process would  involve  "the silliness  of"                                                            
determining  whether the Division  of Family  and Youth Services  is                                                            
more or less important  than juvenile corrections  or public health.                                                            
She reiterated  this is a waste of  time in that it does  not foster                                                            
productive discussion  about what level of service  is acceptable in                                                            
each of those programs.                                                                                                         
                                                                                                                                
Ms. McConnell  stressed the  Executive Branch  proposed budget  does                                                            
reflect  the  governor's  priorities.  She  expressed  there  is  an                                                            
"inherent  misunderstanding  that  we don't  share  priorities."  In                                                            
fact, she remarked,  the proposed  budget does reflect the  opinions                                                            
the  sponsor  characterized  as  the most  qualified  to  make  such                                                            
recommendations.                                                                                                                
                                                                                                                                
Ms.  McConnell  listed  the  Smart Start  initiative  and  K-12  and                                                            
University of  Alaska education as examples of the  Administration's                                                            
priorities.  She  pointed  out the  legislature  has a  process  for                                                            
determining its  priorities and noted there has been  agreement with                                                            
many of the Administration's priorities.                                                                                        
                                                                                                                                
Ms. McConnell  suggested  the governor's  proposed  budget  reflects                                                            
more  prioritizing  results  then  is realized.   She spoke  to  the                                                            
"phenomenal   exercise"   the  prioritizing   provisions   of   this                                                            
legislation would  entail. She compared the state  budget to that of                                                            
the Municipality,  stressing that  a municipality has comparatively                                                             
limited functions  and geographic  area to  govern. She told  of the                                                            
importance of public safety and nurses.                                                                                         
                                                                                                                                
Ms. McConnell recommended  continuing with the missions and measures                                                            
process  to determine  priorities  and to establish  the  acceptable                                                            
level of service.  She listed caseloads and number  of people served                                                            
as measures.  She noted  that the  current level  of service  is the                                                            
level  of  service  the  public  has  generally   determined  to  be                                                            
acceptable.                                                                                                                     
                                                                                                                                
Ms. McConnell  addressed the "ABC list" idea. She  expressed that in                                                            
theory it seems  simple, but that greater issues,  such as the level                                                            
of service, are  involved. She asked how such distinctions  would be                                                            
made for  youth correction  programs,  as the  quality of  resources                                                            
invested is apparent when measuring success.                                                                                    
                                                                                                                                
Ms.  McConnell cautioned  of  the amount  of detailed  material  the                                                            
Committee  would have to  review if this  legislation were  enacted.                                                            
She  stated that  information  that would  not add  to constructive                                                             
discussions  about what budget changes  is a wasted effort  for both                                                            
those who prepare the budget and for the Committee.                                                                             
                                                                                                                                
Ms.  McConnell  asserted  the  impact  statement   process  is  more                                                            
efficient.  She stated this  is a more direct  method for  obtaining                                                            
the information  the legislature needs  to make effective  decisions                                                            
then generating  information  for "every level  of state  government                                                            
activity in every department…in every nook and cranny."                                                                         
                                                                                                                                
Ms. McConnell  commented that the practice of categorizing  programs                                                            
into  ABC priorities  would  be  done with  the  intent  that all  C                                                            
programs  would be eliminated.  "I  doubt you'd  want to go  through                                                            
that  horrific pain  for all  C activities  even  assuming we  could                                                            
split them…and arbitrarily make a split."                                                                                       
                                                                                                                                
Ms.  McConnell pointed  out  that not  every department  request  is                                                            
included  in the Governor's  proposed budget  because the Office  of                                                            
Management and Budget determines priorities already.                                                                            
                                                                                                                                
Co-Chair Kelly  remarked that Representative Dyson  is frustrated by                                                            
the process. He  made an analogy of performing surgery  with mittens                                                            
on, noting  that some agency  representative  have been helpful  but                                                            
others have been  resistant in offering information.  He stated this                                                            
is the situation in the  governmental system in that the legislature                                                            
does not  have the  authority to  fire the  president. He  continued                                                            
that because of  the separation of powers the legislation  could not                                                            
direct the governor.                                                                                                            
                                                                                                                                
Co-Chair Kelly  stressed that another  method should be established                                                             
to obtain information so  the legislature could make decisions. This                                                            
prioritization,  he expressed,  could  provide a  "clearer view"  in                                                            
making the "mittens" less cumbersome.                                                                                           
                                                                                                                                
Co-Chair Kelly addressed  the witness' statement that the governor's                                                            
proposed budget is prioritized.  He pointed out that the legislature                                                            
has rarely  received  recommendations  from the  Administration  for                                                            
where budget reductions could be made.                                                                                          
                                                                                                                                
Co-Chair  Kelly remarked,  "we've  been in  a war  for seven  years"                                                            
explaining,   "we can't get the information  from you; we  can't get                                                            
the prioritization from  you; I'm sure there's things that you can't                                                            
get from us."                                                                                                                   
                                                                                                                                
Co-Chair Kelly  remarked this legislation  is an attempt  to "force"                                                            
the legislature  and the administration  to "work together  a little                                                            
more  cooperatively  and  in  the  best interest  of  the  State  of                                                            
Alaska."  He encouraged  the  witness "to  get on  board with  this,                                                            
because for  one thing, you're not  going to have to live  with it."                                                            
He continued,  "Frankly this Administration  isn't going  to have to                                                            
deal with this."  However, he surmised  the witness experienced  the                                                            
usefulness  of the prioritization  process  for the Municipality  of                                                            
Anchorage.                                                                                                                      
                                                                                                                                
Ms. McConnell clarified  she would "do it very differently if I were                                                            
doing it again in Anchorage."                                                                                                   
                                                                                                                                
Co-Chair  Kelly responded  he wanted Ms.  McConnell's assistance  so                                                            
that  she could  assist  in  making necessary  adjustments  for  the                                                            
benefit of future administrations.                                                                                              
                                                                                                                                
Ms. McConnell noted that  what Co-Chair Kelly had characterized as a                                                            
"war", she considered  were disagreements over whether  there should                                                            
be budget reductions.                                                                                                           
                                                                                                                                
Co-Chair Kelly agreed there are two sides of the issue.                                                                         
                                                                                                                                
Ms. McConnell  noted that if the Administration's  judgment  is that                                                            
increased resources  were necessary, the Administration  would relay                                                            
that to the Legislature.  She did not perceive the  controversy as a                                                            
war but  rather  a public  policy difference  of  opinion, which  is                                                            
valid to discuss.  She opined it is appropriate for  the legislature                                                            
to determine  where to cut.  She added that  it is inappropriate  to                                                            
require  the  Administration  to  implement  an  unallocated  budget                                                            
reduction  if the Administration  has determined  that reduction  is                                                            
unadvisable.                                                                                                                    
                                                                                                                                
Ms. McConnell  detailed the process  undertaken before any  increase                                                            
is included in  the Governor's proposed budget, because  an increase                                                            
is not  an easy aspect  for to  the legislature  or the public.  She                                                            
pointed out these efforts  have not been acknowledged and emphasized                                                            
the  difficulty  in  "keeping  up  with  inflation"  and  population                                                            
increases,   specifically   the   senior   population   and   inmate                                                            
population.   She  indicated  that   the  Administration   would  do                                                            
everything possible  to minimize the amount of requested  increases.                                                            
                                                                                                                                
Ms. McConnell  referenced the comments  of Co-Chair Kelly  regarding                                                            
the  "board of  directors".  She commented  that  the  state is  not                                                            
similar to  a private corporation,  because  in a private  business,                                                            
during times  of economic difficulties,  there is no requirement  to                                                            
answer to the  public for its actions. In contrast,  she stated, the                                                            
public continues  to expect the state  to educate children  and plow                                                            
roads. She  added that roads must  be maintained despite  the number                                                            
of commuters traveling them.                                                                                                    
                                                                                                                                
Co-Chair  Kelly  interjected   that  the  witness  had  listed  high                                                            
priority  items  and he  emphasized  the  legislature  needs  advice                                                            
regarding those  lower priority items. He stated that  was the level                                                            
of communication  that the legislature  has never been able  to get.                                                            
He understood  agency  directors do  not want  make reductions  this                                                            
way.  He  agreed that the  state is not  a corporation. He  stressed                                                            
the  frustration   is  that   the  legislature   has  many   of  the                                                            
responsibilities  of a board of directors  and the Executive  Branch                                                            
has many of  the responsibilities  of a manager, "yet it's  slightly                                                            
out of whack."                                                                                                                  
                                                                                                                                
Co-Chair Kelly reiterated  the prioritization process could begin to                                                            
bridge that gap in order  to be able to operate in a more reasonable                                                            
fashion.  He  continued,  there  needs  to  be  a  higher  level  of                                                            
communication  with  the  Executive  Branch.  The  Executive  Branch                                                            
should not be able to "thumb their nose" at the Legislature.                                                                    
                                                                                                                                
Ms.  McConnell explained  that  the  Executive Branch  has  proposed                                                            
budget reductions  in response and  the Administration's  advice has                                                            
been disregarded.  She gave  the proposed  budget reductions  to the                                                            
Department  of Transportation  and Public  Facilities as an  example                                                            
where the Administration  recommended  closing maintenance  stations                                                            
located along  least used  roads. The Legislature  has directed  the                                                            
Department against such actions, she said.                                                                                      
                                                                                                                                
Ms. McConnell  advised that the Governor is not suggesting  that the                                                            
budget be  cut at this  point, but rather  he is acknowledging  that                                                            
the State does have some  needs for increases in the budget, to keep                                                            
up with current commitments and to take on new challenges.                                                                      
                                                                                                                                
Ms. McConnell  pointed  out that  spending increases  have not  been                                                            
proposed  by  the   Administration  to  account  for   increases  in                                                            
population and/or  inflation. She cited the Kato study,  which found                                                            
that between 1990  and 1997, the average increase  in state spending                                                            
after  adjusting  for inflation,  was  27  percent among  all  fifty                                                            
states. During that time  period, she continued, Alaska was the only                                                            
state  with a  reduction,  which was  .6  percent. She  noted  three                                                            
states  increased spending  by over  50 percent.  She also  informed                                                            
that Alaska's  general funds/per capita  expenditures, adjusted  for                                                            
inflation, are  $1,100 less in the Governor's proposed  FY 03 budget                                                            
then in 1979 before the oil revenues were available.                                                                            
                                                                                                                                
Ms.  McConnell  addressed  government  efficiency.  She  listed  the                                                            
Division  of   Banking,  Securities   and  Corporations   and  their                                                            
"enormous backlog"  for processing  corporate filings. She  informed                                                            
that  without requesting  additional  funding,  the Division  "saved                                                            
money by doing  things differently  so they could cut down  that lag                                                            
time."                                                                                                                          
                                                                                                                                
Ms. McConnell concluded  that budget increase requests were only for                                                            
those  areas "we  feel we  have absolutely  gone  as far  we can  to                                                            
squeeze the turnip."                                                                                                            
                                                                                                                                
Co-Chair  Kelly restated  the intent  is for  the Administration  to                                                            
inform  the  Legislature  of  areas  where  budget   reductions  are                                                            
possible. He  reiterated that the  Committee members do not  know of                                                            
the internal budget reductions.                                                                                                 
                                                                                                                                
Co-Chair  Kelly   mentioned  frustrations   in  dealing   with  some                                                            
employees of the  Administration who would not provide  information.                                                            
He qualified there is a "difference of opinion."                                                                                
                                                                                                                                
Representative  Dyson  recommended  ending  the discussions  on  the                                                            
budget   reductions   and   return  to   determining   whether   the                                                            
prioritization  issue is preferred. He pointed out  this legislation                                                            
would  require  less  labor  then detailed  cost  analysis  of  each                                                            
program.                                                                                                                        
                                                                                                                                
Representative Dyson acknowledged  that he is not in favor of across                                                            
the  board  budget  reductions  because   it  is the  legislature's                                                             
responsibility  to establish  priorities  and determine  whether  an                                                            
activity should  be eliminated. He  stressed this bill would  assist                                                            
the Legislature in making decisions regarding priorities.                                                                       
                                                                                                                                
Co-Chair  Kelly noted  the bill is  "well into  the process"  and he                                                            
intended  to hold it in  Committee to allow  consideration  of other                                                            
prioritizing  methods. He  indicated it  is his  intent to pass  the                                                            
bill.                                                                                                                           
                                                                                                                                
Co-Chair Donley voiced support of the bill.                                                                                     
                                                                                                                                
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 96(STA)                                                                                
     "An Act relating to acquisition and development of the Jesse                                                               
     Lee Home; and providing for an effective date."                                                                            
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
                                                                                                                                
SFC 02 # 14, Side B 11:59 AM                                                                                                    
                                                                                                                                
                                                                                                                                
JUDY BITTNER,  Chief/State Historic Preservation Officer,  Office of                                                            
History and  Archaeology Alaska Historical  Commission, Division  of                                                            
Parks  and Outdoor  Recreation,  Department  of  Natural  Resources,                                                            
testified  via teleconference  from an off-net  site to address  the                                                            
revised fiscal note. She  noted the $30,000 general fund match would                                                            
be used  for the architectural  assessment  and that the $30,000  to                                                            
$35,000  federal funds  it secures  is not reflected  on the  fiscal                                                            
note  because  the Division  has  already  received the  funds.  She                                                            
explained the  general fund reduction  from $35,000 as indicated  in                                                            
the previous fiscal note  is possible due to a grant already awarded                                                            
to the  City  of Seward  to perform  the environmental  assessment,                                                             
which would be matched from the historic preservation fund.                                                                     
                                                                                                                                
Ms. Bittner  then explained the proposed  Jesse Lee Home  Commission                                                            
was  originally   envisioned   as   a  "stand   alone"  group   with                                                            
representation  from Seward and other areas of the  state. This, she                                                            
stated  would require  a significant  travel  budget  of $4,500  per                                                            
meeting.   She  informed   that  instead,   the  Seward   Historical                                                            
Commission  would serve as the core  group working with the  City of                                                            
Seward "and enhance  that as we see needed with certain  expertise."                                                            
As  a  result  of this  change,  she  noted  the  travel  budget  is                                                            
decreased  and  general  funds  would be  utilized  for  travel  and                                                            
Commission  support expenses incurred  by the Department  of Natural                                                            
Resources.                                                                                                                      
                                                                                                                                
Co-Chair Kelly  asked how much the $30,000 general  fund match would                                                            
secure in federal funding.                                                                                                      
                                                                                                                                
Ms. Bittner answered $30,000 to $35,000.                                                                                        
                                                                                                                                
Co-Chair Kelly asked specifically how those funds would be used.                                                                
                                                                                                                                
Ms.  Bittner replied  the  funds  would pay  for  the architectural                                                             
assessment of the large  building, which would provide an assessment                                                            
of the structural  condition as well  as advice on appropriate  uses                                                            
and  cost  estimates   for  the  facility.  She  noted   it  is  the                                                            
architectural  assessment that would provide the information  needed                                                            
"to provide some  good advice to Seward, to the state  of Alaska, to                                                            
the legislature, about some feasible options."                                                                                  
                                                                                                                                
Co-Chair  Kelly asked  if  the $30,000  federal funds  were  already                                                            
appropriated.                                                                                                                   
                                                                                                                                
Ms. Bittner affirmed  and explained the State Historic  Preservation                                                            
Office  has authorization  to  receive and  expend  these funds  for                                                            
grants.                                                                                                                         
                                                                                                                                
Amendment #2: This amendment  inserts "if practical" on page 1, line                                                            
12  of the  committee  substitute.  The amended  language  reads  as                                                            
follows.                                                                                                                        
                                                                                                                                
          (c) It is the intent of the legislature that, if                                                                      
     practical, the Jesse Lee Home and the real property on which                                                               
     it is located be preserved and managed in a manner that                                                                    
     recognizes its place in the state's history…                                                                               
                                                                                                                                
This amendment  also inserts,  "the possible"  on page 2, line  9 of                                                            
the committee substitute. The amended language reads as follows.                                                                
                                                                                                                                
     …The  department   shall  report  to  the  governor,   and  the                                                            
     legislature    by   November    1,    2003,   concerning    its                                                            
     recommendations   as  to the  procedures  to  be  used  and  an                                                            
     estimate  of costs involved  for the  possible preservation  of                                                            
     the home, erection of an appropriate monument, …                                                                           
                                                                                                                                
Co-Chair Donley moved for adoption.                                                                                             
                                                                                                                                
Representative  Lancaster  indicated  no  objection,  stressing  the                                                            
intent of the bill is to determine whether the building is                                                                      
salvageable.                                                                                                                    
                                                                                                                                
Without objection the amendment was ADOPTED.                                                                                    
                                                                                                                                
Co-Chair Donley offered a motion to report SCS CS HB 96 (FIN) from                                                              
Committee with $45,000 fiscal note from the Department of Natural                                                               
Resources.                                                                                                                      
                                                                                                                                
There was no objection and the bill MOVED from Committee.                                                                       
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Pete Kelly adjourned the meeting at 12:07 PM                                                                           

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