Legislature(2001 - 2002)

04/19/2002 09:14 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 19, 2002                                                                                      
                              9:14 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-02 # 70,  Side A                                                                                                            
SFC 02 # 70,  Side B                                                                                                            
SFC 02 # 71,  Side A                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Dave Donley convened  the meeting at approximately 9:14 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Dave Donley, Co-Chair                                                                                                   
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Lyda Green                                                                                                              
Senator Gary Wilken                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Lyman Hoffman                                                                                                           
Senator Donald Olson                                                                                                            
Senator Leman                                                                                                                   
                                                                                                                                
Also Attending:   ALISON ELGEE, Deputy  Commissioner, Department  of                                                          
Administration;  DAN SPENCER, Director,  Division of Administrative                                                             
Services,   Department   of  Administration;   JEFF   BUSH,   Deputy                                                            
Commissioner, Department  of Community and Economic Development; TOM                                                            
LAWSON, Director,  Division of Administrative  Services,  Department                                                            
of Community and Economic  Development; MARGARET PUGH, Commissioner,                                                            
Department  of Corrections;  DWAYNE PEEPLES,  Director, Division  of                                                            
Administrative  Services, Department of Corrections;  KAREN REHFELD,                                                            
Director, Education  Support Services,  Department of Education  and                                                            
Early   Development;   KURT   FREDRIKSSON,   Deputy   Commissioner,                                                             
Department of  Environmental Conservation; FRANK RUE,  Commissioner,                                                            
Department of Fish and Game;                                                                                                    
                                                                                                                                
Attending via  Teleconference:  From Off-Net: LARRY  PERSILY, Deputy                                                          
Commissioner, Department of Revenue                                                                                             
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB 403-APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                     
SB 289-APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                     
HB 404-APPROP: MENTAL HEALTH BUDGET                                                                                             
SB 288-APPROP:MENTAL HEALTH BUDGET                                                                                              
                                                                                                                                
The Committee  heard from the Department of Revenue,  the Department                                                            
of  Administration,   the  Department  of  Community   and  Economic                                                            
Development,  the  Department  of  Corrections,  the  Department  of                                                            
Education  and Early Development,  the Department  of Environmental                                                             
Conservation, and the Department  of Fish and Game on the impacts of                                                            
the budget subcommittees' recommendations.                                                                                      
                                                                                                                                
     CS FOR HOUSE BILL NO. 403(FIN) am(brf sup maj fld)(efd fld)                                                                
     "An  Act  making appropriations   for the  operating  and  loan                                                            
     program  expenses of  state government,  for certain  programs,                                                            
     and to capitalize funds."                                                                                                  
                                                                                                                                
     SENATE BILL NO. 289                                                                                                        
     "An  Act  making appropriations   for the  operating  and  loan                                                            
     program  expenses of  state government,  for certain  programs,                                                            
     and to capitalize  funds; making appropriations  under art. IX,                                                            
     sec.  17(c), Constitution  of  the State  of  Alaska, from  the                                                            
     constitutional   budget reserve  fund;  and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
     CS FOR HOUSE BILL NO. 404(FIN)                                                                                             
     "An  Act making appropriations  for the  operating and  capital                                                            
     expenses of the state's  integrated comprehensive mental health                                                            
     program; and providing for an effective date."                                                                             
                                                                                                                                
     SENATE BILL NO. 288                                                                                                        
     "An  Act making appropriations  for the  operating and  capital                                                            
     expenses of the state's  integrated comprehensive mental health                                                            
     program; and providing for an effective date."                                                                             
                                                                                                                                
                                                                                                                                
Department of Revenue                                                                                                         
                                                                                                                                
LARRY  PERSILY,   Deputy   Commissioner,   Department  of   Revenue,                                                            
testified via  teleconference from an off-net location  in Anchorage                                                            
that  the  impacts  of  the proposed  $300,000   unallocated  budget                                                            
reduction,  in addition to no funding  for certain expenses  such as                                                            
contracted  salary increases, would  likely be decreased  revenue to                                                            
the State.  He explained  that the  efforts to  collect the  maximum                                                            
amount of revenue  could not be maintained at the  current level. He                                                            
reminded the Committee  that the Department is statutorily  mandated                                                            
to collect revenue and invest it for gain.                                                                                      
                                                                                                                                
Mr. Persily  noted that several divisions  rely on general  funds to                                                            
operate,  as well  as to  secure funds  from different  sources.  He                                                            
stated that each  dollar of general funds reduced  results in a loss                                                            
of two to three dollars in other funds.                                                                                         
                                                                                                                                
Mr. Persily spoke  to the impacts of the proposed  budget to the Tax                                                            
Division, informing  that the historical practice  has been to audit                                                            
every  oil company's  corporate tax  return annually.  He  explained                                                            
that  despite the  stability  of tax  laws under  Alaska's  modified                                                            
apportionment formula,  the allowable deductions each corporation is                                                            
permitted in other jurisdictions,  i.e. other countries, affects the                                                            
amount Alaska  receives.  This, he stated, is because  the State tax                                                            
is calculated  as a portion of the corporation's "worldwide  income"                                                            
and the tax  laws in other countries  are constantly changing,  thus                                                            
necessitating annual audits.  He gave England as an example, stating                                                            
the country  recently announced  a ten-percent  tax increase  to oil                                                            
and  gas income,  which  would impact  the  amount of  taxes  Alaska                                                            
collects, because  the profits of  British Petroleum, Inc  and North                                                            
Sea would be lower.  He noted that the audits are  used in the event                                                            
of disputes over allowable deductions.                                                                                          
                                                                                                                                
Mr. Persily remarked that  the Department oversees charitable gaming                                                            
activities,  the   smallest  revenue  producer   for  the  State  at                                                            
approximately  $2.3 million  annually in fees  and taxes  collected,                                                            
countered by approximately  $819,000 expended in FY 01 to administer                                                            
the program.  However, he  stressed charitable  gaming produced  $28                                                            
million in FY 01 to licensed non-profit organizations.                                                                          
                                                                                                                                
Mr. Persily  next addressed the Child  Support Enforcement  Division                                                            
and qualified  that  although the  activities of  this Division  are                                                            
considered primarily  collecting money for others,  a portion of the                                                            
revenue is  paid to the State. He  informed that in FY 01,  a record                                                            
amount of $91  million was collected and of that amount,  $7 million                                                            
was retained  for the  State general  fund as  repayment for  public                                                            
assistance.  He explained  that in  instances  of custodial  parents                                                            
receiving  public  assistance,  delinquent  child  support  payments                                                            
collected from  non-custodial parents  are assigned to the  State to                                                            
allow the State  to recover the cost  of that public assistance.  He                                                            
noted  the FY  01 budget  for this  Division is  approximately  $3.1                                                            
million general funds,  thus the Division generated approximately $4                                                            
million for the State.                                                                                                          
                                                                                                                                
Senator  Hoffman  asked  the amount  of  the  reduction from  FY  02                                                            
proposed in this budget.                                                                                                        
                                                                                                                                
Mr.  Persily  listed  an  unallocated  reduction   of  $334,100,  in                                                            
addition  to  the  increased  costs  of  funding  salary   increases                                                            
stipulated in labor contracts.                                                                                                  
                                                                                                                                
Senator Hoffman  clarified the Department's  impact statement  [copy                                                            
on  file] asserting  that  reduced funding  and  increased  expenses                                                            
would impact the  Department's efforts to collect  $3.6 million from                                                            
the Salmon Enhancement  Tax at a cost to the State  of $36,000; $3.1                                                            
million  from  the  Seafood  Marketing  Assessment,  at  a  cost  of                                                            
$66,000;  and $2.6 million  the Salmon Marketing  Tax, at a  cost of                                                            
$36,000.                                                                                                                        
                                                                                                                                
Mr. Persily  answered  that the  expenses of  the contracted  salary                                                            
increases and  the unallocated budget  reduction must be  "absorbed"                                                            
by the Department.  He emphasized  that this would require  fewer or                                                            
less aggressive  audits and  less enforcement  efforts, which  would                                                            
result in less revenue.                                                                                                         
                                                                                                                                
Senator  Hoffman  commented as  a "businessman"  that  the  proposed                                                            
budget for this Department "makes bad business sense."                                                                          
                                                                                                                                
Department of Administration                                                                                                  
                                                                                                                                
ALISON ELGEE,  Deputy Commissioner,  Department  of Administration,                                                             
testified that  the reductions proposed  to the Division  of Finance                                                            
budget would  eliminate an  increment recommended  by Governor  Tony                                                            
Knowles to address  on-going maintenance needs of  the AKPAY system.                                                            
She stressed the  AKPAY system is over twelve years  old and that it                                                            
is "becoming extremely  difficult" to maintain the  system to ensure                                                            
payroll obligations.  She detailed  the requirements to convert  the                                                            
existing  database  system, as  the vendor  no longer  supports  the                                                            
current system.                                                                                                                 
                                                                                                                                
Ms. Elgee next addressed  the Division of Motor Vehicles, noting the                                                            
proposed budget would reduce  the Division's appropriation $382,300.                                                            
As  a result,  she stated,  the  Division would  be  forced to  hold                                                            
positions  vacant,   not  fill  seasonal  positions,   and  possibly                                                            
consolidate  the Downtown Anchorage  office into the Benson  office.                                                            
She surmised these actions  would increase the waiting time required                                                            
by customers.                                                                                                                   
                                                                                                                                
Senator Hoffman  asked if the $382,000 reduction is  compared to the                                                            
FY 02 appropriation.                                                                                                            
                                                                                                                                
Ms.  Elgee  clarified  the FY  03  appropriation  would  be  reduced                                                            
$200,000  from FY 02,  and the balance  is the  result of  increased                                                            
postage costs and personnel services expenses.                                                                                  
                                                                                                                                
DAN  SPENCER,   Director,  Division   of  Administrative   Services,                                                            
Department  of  Administration,  also clarified  that  the  seasonal                                                            
positions would  not be filled and the impacts would  be experienced                                                            
the following  summer because  the seasonal  positions have  already                                                            
been filled for the upcoming summer.                                                                                            
                                                                                                                                
Ms. Elgee  informed  the Committee  that the  Alaska Public  Offices                                                            
Commission (APOC)  incurs additional costs during  an election year.                                                            
In addition  to normal election expenses,  she pointed out  that the                                                            
proposed budget provides  no funds to implement the campaign finance                                                            
reform statutes,  which the Governor had vetoed and  the Legislature                                                            
overrode.  She warned that  training of the  new requirements  might                                                            
not  occur and  that increased  complaints  of  noncompliance  would                                                            
result.                                                                                                                         
                                                                                                                                
Ms. Elgee next addressed  the Public Defender Agency (PDA) reminding                                                            
of the over $2  million general funds requested by  the Governor for                                                            
FY 03  as well as  a $600,000  supplemental request  of the  current                                                            
year to compensate  for short-funding  for attorneys handling  Smart                                                            
Start  cases and  Driving  Under  the Influence  (DUI)  Courts.  She                                                            
listed  services  that  have been  eliminated,  along  with  shorted                                                            
business hours,  reduced training and travel. She  stressed there is                                                            
no more ability to further  reduce costs and that caseloads continue                                                            
to increase.  She  predicted  at least  $1 million  in supplemental                                                             
funding  would  be  needed  the  next  year  to  meet  the  Agency's                                                            
constitutional mandate to provide legal defense for indigents.                                                                  
                                                                                                                                
Ms. Elgee  continued  that the Office  of Public  Advocacy (OPA)  is                                                            
also underfunded  in  the proposed  FY 03 budget  by $2,270,000  and                                                            
additionally,  supplemental   funding  for  FY  02  is  needed.  She                                                            
detailed  how the Alaska  Court System  appoints attorneys  directly                                                            
through  the OPA  and the  Department has  little  control over  the                                                            
expenses.                                                                                                                       
                                                                                                                                
Ms.  Elgee noted  the proposed  reductions  to the  Pioneers'  Homes                                                            
would  result in  reduced  revenues. She  told  of new  beds in  the                                                            
Palmer Pioneers'  Home that could not be filled because  of staffing                                                            
limitations. She noted  most residents require 24-hour care and that                                                            
staffing is not  available to ensure safety. She stated  another ten                                                            
beds  must  be  eliminated   through  attrition  in  the   Anchorage                                                            
Pioneers' Home.                                                                                                                 
                                                                                                                                
Ms.  Elgee concluded  with  the proposed  funding  reduction to  the                                                            
Public Broadcasting  System. She informed  that the System  has been                                                            
operating with  continued budget reductions and has  been able to do                                                            
"remarkable things" despite  these reductions. However, she stressed                                                            
the reserves are  gone and the Department would be  unable to secure                                                            
$130,000 federal  matching funds,  which would result in  loss of at                                                            
least eight full-time positions.                                                                                                
                                                                                                                                
Senator  Hoffman  commented  the Committee  has  spent considerable                                                             
effort on HB  4 relating to drunk  drivers, noting he supports  this                                                            
legislation.  However,  he stressed  that adequate  funding must  be                                                            
provided  to the PDA and  OPA to implement  this and other  criminal                                                            
offense  statutes. He suggested  the budget  include matching  funds                                                            
for  public broadcasting  to  allow the  Department  to receive  the                                                            
federal funds  "that our congressional  delegation has fought  for."                                                            
                                                                                                                                
Co-Chair  Donley  requested  concise  written  statements  from  the                                                            
departments summarizing the testimony presented at this meeting.                                                                
                                                                                                                                
Senator Hoffman  suggested the statements include  identification of                                                            
requests for "new" funds.                                                                                                       
                                                                                                                                
Department of Community and Economic Development                                                                              
                                                                                                                                
JEFF  BUSH,  Deputy   Commissioner,  Department  of   Community  and                                                            
Economic Development,  testified about  the Power Cost Equalization                                                             
(PCE) program.  He understood  the proposed  FY 03 operating  budget                                                            
would  likely  not be  the final  appropriation  for  this  program;                                                            
however, he noted it contains  virtually no funding for PCE. He also                                                            
pointed out  the budget legislation  does not contain the  necessary                                                            
language  to appropriate   funds from  the  PCE Endowment  fund.  He                                                            
stated  that, according  to  the current  seven  percent  allocation                                                            
formula, $12.8 million  is available in the endowment for use in the                                                            
program.  In addition,  he  informed $2  million  general funds  are                                                            
necessary  to partially  fund  the program,  as well  as $3  million                                                            
general  funds, as  requested  by the Governor,  to  fully fund  the                                                            
program.                                                                                                                        
                                                                                                                                
Mr. Bush  warned that if  adequate funds  were not forthcoming,  the                                                            
program  services must  be pro  rated.  He remarked  that with  full                                                            
funding of  PCE, the average  rate paid  by participating  customers                                                            
would be approximately  18.67 cents  per kilowatt hour; compared  to                                                            
an average rate of 9.9  cents per kilowatt hour paid by residents of                                                            
Anchorage,  Fairbanks  and  Juneau.   He  explained  that  if  $15.7                                                            
million were  allocated to  the program, the  pro-rated rate  of the                                                            
average  PCE  customer  would  be  approximately   21.85  cents  per                                                            
kilowatt-hour.                                                                                                                  
                                                                                                                                
Mr. Bush next addressed  the proposed $284,000 unallocated reduction                                                            
to the Department, pointing  out it is $99,300 more than the cost of                                                            
the  third-year  salary  increase,   as  required  in  the  employee                                                            
contracts.  He shared  that  the "labor  cost reductions"  would  be                                                            
allocated  to the  divisions  that are  funded with  general  funds,                                                            
which are primarily  the economic development agencies.  He remarked                                                            
this would require  the elimination of one position  responsible for                                                            
25 to 30 percent  of the tourism planning  efforts in the  State. In                                                            
addition he listed the  reductions would be made to the Rural Energy                                                            
Program and  the Circuit  Rider Programs.  He explained the  Circuit                                                            
Rider  Program  received  an  appropriation  in  FY  02  to  perform                                                            
additional  outreach, including  on-site training  of operators  and                                                            
preventive maintenance activities.                                                                                              
                                                                                                                                
Mr. Bush next  addressed two increments  proposed in the  Governor's                                                            
FY  03 operating  budget  that are  not  included in  the  committee                                                            
substitute. The first,  $275,000 for the Alaska Economic Information                                                            
System,   he  explained   as  a  new  web-based   digital   economic                                                            
information  system that provides  economic data related  to various                                                            
regions  of the  State.   He stated  this system  requires  on-going                                                            
maintenance and warned  that it would rapidly become outdated if the                                                            
program  were not  funded. He  listed $90,000  for  the Division  of                                                            
International   Trade  and  Market  Development  to   provide  trade                                                            
representation  in China  as the  second request.  He informed  that                                                            
China is  currently the fastest  growing economy  in the world  with                                                            
eight to  nine percent  annual growth  to the  national product.  He                                                            
stressed  that Alaska is  not fully capitalizing  on this  potential                                                            
market,  although the State  exports approximately  $100 million  in                                                            
goods to China.                                                                                                                 
                                                                                                                                
Senator  Austerman  referred  to  the  proposed  unallocated  budget                                                            
reduction and clarified  the reductions would be made to tourism and                                                            
international trade.                                                                                                            
                                                                                                                                
Mr. Bush  affirmed  and added  the circuit  rider  program would  be                                                            
reduced  to account  for the  unallocated  budget  reduction to  the                                                            
Department.                                                                                                                     
                                                                                                                                
Senator Hoffman  asked if a $100,000 reduction to  the circuit rider                                                            
program would  result in reduced training and a subsequent  increase                                                            
of power outages and costly repairs in rural areas.                                                                             
                                                                                                                                
Mr. Bush agreed  and noted on-site training would  be eliminated and                                                            
maintenance and operations would be reduced.                                                                                    
                                                                                                                                
Department of Corrections                                                                                                     
                                                                                                                                
MARGARET PUGH,  Commissioner, Department  of Corrections,  testified                                                            
why she found the proposed  budget "unreasonable and illogical". She                                                            
told the  Committee  that the Department  and  the Legislature  have                                                            
made continued  efforts  to accommodate  the  increasing prison  and                                                            
probation  and  parole  populations.  She reminded  of  the  adopted                                                            
short-range  and  long-range  plans  to meet  these  challenges  and                                                            
emphasized  that the Department  has acted  in good faith to  manage                                                            
the  Department  as mandated.  She  noted  the  Governor's  proposed                                                            
budget includes funding increases to continue these efforts.                                                                    
                                                                                                                                
Ms. Pugh stated  the Alaska prison population has  continued to grow                                                            
and would increase  approximately  four percent this year  and three                                                            
percent the following year,  despite lower crime rates and less than                                                            
average number  of bookings.  She noted the  average national  crime                                                            
rate  has increased  one-percent  this  year,  which is  the  lowest                                                            
growth percentage since  1972. She attributed Alaska's larger inmate                                                            
growth to legislation  that "increases,  strengthens and  lengthens"                                                            
incarceration and sanctions.                                                                                                    
                                                                                                                                
Ms. Pugh  stressed it has  been known for  three years that  the new                                                            
Anchorage jail  would open this year, and informed  that it did open                                                            
earlier in  the week. She  reminded that with  the passage of  SB 53                                                            
several  years  prior,  the  Legislature   dictated  the  amount  of                                                            
operating  funds for this  facility, which  are reflected as  a $1.8                                                            
million increase in the governor's proposed budget.                                                                             
                                                                                                                                
Ms. Pugh furthered that  the Legislature insisted that federal funds                                                            
that the Department  intended for capital projects,  be used instead                                                            
for  operating  expenses.  She informed  that  these funds  are  now                                                            
discontinued  and $4 million  reflected in  the governor's  proposed                                                            
budget are to compensate for this.                                                                                              
                                                                                                                                
Ms. Pugh  spoke to  increased medical  expenses,  which continue  to                                                            
rise across  the nation as  well as in Alaska's  prison system.  She                                                            
noted  the  Department  has  submitted  a significant  supplemental                                                             
budget request for FY 02 medical expenses.                                                                                      
                                                                                                                                
Ms.  Pugh remarked  that  the  Legislature  has  been aware  of  the                                                            
increased  labor costs  mandated in  the contracts  with  collective                                                            
bargaining units.                                                                                                               
                                                                                                                                
Ms. Pugh addressed  legislation adopted the previous  session, which                                                            
require funding to continue to implement.                                                                                       
                                                                                                                                
Ms. Pugh noted  the appropriation  limitation imposed by  the Senate                                                            
Majority   is   higher  than   that   imposed   by  the   House   of                                                            
Representatives  Majority, but that the Senate amount  includes $4.8                                                            
million to fund community  jails, which the House of Representatives                                                            
proposed funding through HB 20.                                                                                                 
                                                                                                                                
Ms. Pugh summarized  this budget "virtually  ensures the  erosion of                                                            
public safety." She assured  she makes this statement after thorough                                                            
review.                                                                                                                         
                                                                                                                                
Ms. Pugh  shared that  the Department  had considered  a process  of                                                            
transferring   offenders   directly  from   prisons  to   electronic                                                            
monitoring  and home furlough  programs and  thus bypassing  halfway                                                            
houses, or Community  Residential Centers (CRC). She  stated this is                                                            
the practice in some other  jurisdictions and is less expensive, but                                                            
also  riskier.  She  noted  the  budget  subcommittee  rejected  the                                                            
proposal and recommended  the Department be required to hold the CRC                                                            
component   harmless   when   absorbing   the   unallocated   budget                                                            
reductions.                                                                                                                     
                                                                                                                                
Ms. Pugh  remarked,  "I'm at  a loss to  the logic  of reducing  the                                                            
budget below  the 02 level,  ignoring the  increases in population,                                                             
which we've  known about,  ignoring past  year's authorizations  and                                                            
directions,  and continuing to consider  pieces of legislation  that                                                            
will in fact  increase the work in  the Department of Corrections."                                                             
She stated  the  committee substitute  provides  approximately  $3.2                                                            
million less  than needed not including  the increased labor  costs.                                                            
                                                                                                                                
Ms.  Pugh listed  the  109 correctional   officer positions  and  16                                                            
probation officer  positions that  must be held vacant to  allow the                                                            
Department  to fund  the increased  labor costs,  asserting this  is                                                            
unmanageable.                                                                                                                   
                                                                                                                                
Senator  Ward referenced  an impact  statement  [copy not  provided]                                                            
regarding funding to the  Correctional Industries Programs, which he                                                            
stressed  has not been  reduced from  FY 02. He  qualified that  the                                                            
Correctional  Industries  Administration component  is appropriated                                                             
$1.55 million,  a reduction of 3.9  percent from the previous  year.                                                            
He noted  the intent language  to retain  the McKinley Meat  Packing                                                            
Plant for one  more year. He asked the Department  why this facility                                                            
would be closed if the budget were reduced only $47,000.                                                                        
                                                                                                                                
DWAYNE  PEEPLES,  Director,  Division  of Administrative   Services,                                                            
Department  of  Corrections,   responded  that  operations   of  the                                                            
facility  require  three  product  managers   and  two correctional                                                             
officers.  He  explained  that  approximately  20  inmates  must  be                                                            
transported from the Palmer  Correctional Center to the meat packing                                                            
plant  and  overseen  by Department  staff.  He  stressed  that  the                                                            
proposed budget  would impact the Department to such  an extent that                                                            
funding  would  no longer  be  available  for the  additional  staff                                                            
required for all correctional  industries operations. He stated that                                                            
the three correctional  officer positions  must be relocated  to the                                                            
Palmer prison  because over 80 Department positions  statewide would                                                            
be unfunded.  He informed that the  McKinley Meat Packing  Plant has                                                            
been State subsidized for  fifteen years. He spoke of the 1,000 cows                                                            
and pigs slaughtered  each year and the intention  to transition the                                                            
operation  to  the  Department  of  Natural  Resources  Division  of                                                            
Agriculture or to private ownership.                                                                                            
                                                                                                                                
Senator  Ward remarked that  the matter  of transitioning  ownership                                                            
has been discussed  for three years and should have  been completed.                                                            
He charged that the Department  of Corrections has been disingenuous                                                            
in  failing  to  negotiate   the  transfer  with  the   Division  of                                                            
Agriculture.  He  stressed  he  is  not  a  supporter  of  the  meat                                                            
packaging  plant and  asserted it  should be closed  along with  the                                                            
Matanuska Maid dairy and other State-operated facilities.                                                                       
                                                                                                                                
Senator Ward then commented  on the testimony asserting that certain                                                            
laws are overburdening  the Department of Corrections.  He suggested                                                            
that if  the Department  supports  the release  of inmates  directly                                                            
into  communities   under   an  electronic   monitor  program,   the                                                            
Department should submit  a proposal directly to the Legislature for                                                            
consideration.  He stated  the existing CRC  system is adequate  and                                                            
that he  would not  trust "rapists  and murders  with their  word of                                                            
honor." He expressed,  "If that means that people  are gonna have to                                                            
do a  little  bit extra  in order  to make  this  whole thing  work,                                                            
they're gonna have to do  a little bit extra." He asserted, "This is                                                            
a tremendous  budget…  The public  demands to have  safety and  they                                                            
will have safety under this budget."                                                                                            
                                                                                                                                
Senator Hoffman  agreed the public demands safety  and he noted this                                                            
is the point the  Commissioner is stressing. Senator  Hoffman stated                                                            
that if the Legislature  intends for the Division  of Agriculture to                                                            
operate the McKinley Meat  Packing Plant, funds must be appropriated                                                            
to that Division  to do so." He furthered that the  Legislature must                                                            
take appropriate  action to  make such transfers  occur because  "it                                                            
just does not happen instantaneously because we wish it."                                                                       
                                                                                                                                
Senator Hoffman  asked the number of correctional  officer positions                                                            
necessary to operate the new Anchorage Jail.                                                                                    
                                                                                                                                
Ms. Pugh replied  she would provide the information.  She noted that                                                            
$1.8 million of the requested  funding increase is to fully fund the                                                            
operations  of the new facility  and a significant  portion  of this                                                            
amount is for personnel costs.                                                                                                  
                                                                                                                                
Senator Hoffman shared  that 35-40 positions are required to operate                                                            
a 200-bed facility.  He calculated that the omission  of funding for                                                            
108  positions  could  threaten  the  operation   of  three  100-bed                                                            
facilities,  such  as  the  one  located  in  Bethel,  thus  further                                                            
contributing to overcrowding conditions in other facilities.                                                                    
                                                                                                                                
Ms. Pugh affirmed.                                                                                                              
                                                                                                                                
Senator  Hoffman  commented  that  legislators'  campaign  they  are                                                            
"tough  on crime," noting  23 bills  relating to  public safety  are                                                            
currently under  consideration. He specified HB 4  relating to drunk                                                            
driving.                                                                                                                        
                                                                                                                                
                                                                                                                                
SFC 02 # 70, Side B 10:01 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Hoffman  opined that  legislators "need  to put the  dollars                                                            
behind our words."                                                                                                              
                                                                                                                                
Ms. Pugh  informed that  83 new  positions are  associated with  new                                                            
Anchorage Jail;  in addition to the  positions transferred  from the                                                            
Fifth Avenue Jail.                                                                                                              
                                                                                                                                
Senator Ward  asked the number  of positions  at the new jail  would                                                            
not  be  filled  because  of  the  funding  level  proposed  in  the                                                            
committee substitute.                                                                                                           
                                                                                                                                
Ms. Pugh calculated  that "the Anchorage  Jail impact" would  result                                                            
in a  reduction of  five and  one-half to six  correctional  officer                                                            
positions.                                                                                                                      
                                                                                                                                
Senator Ward clarified  that rather than the requested  87 positions                                                            
the facility would operate with 82.                                                                                             
                                                                                                                                
Ms. Pugh  corrected that  83 positions are  required to operate  the                                                            
facility  and that the impact  of the proposed  funding level  would                                                            
reduce five to six positions.                                                                                                   
                                                                                                                                
Senator Ward asked  if intention is to station five  fewer positions                                                            
at the new facility.                                                                                                            
                                                                                                                                
Ms. Pugh responded this  would be the impact of the proposed funding                                                            
level, emphasizing  that the legislature would force  the Department                                                            
into this situation if this budget were passed.                                                                                 
                                                                                                                                
Senator  Ward asked  if the  intention  is to take  the unallocated                                                             
budget reductions from correctional officer positions.                                                                          
                                                                                                                                
Ms. Pugh answered yes.                                                                                                          
                                                                                                                                
Senator Green  proposed a solution  to the transfer of the  McKinley                                                            
Meat Packing  Plant, to operate  the program  with a sunset  date to                                                            
encourage  a transition.   She agreed  with  Senator Ward  that  the                                                            
Legislature  should not be required  to make the transfer  decision,                                                            
but  rather  it  should   be  "internal"  within  the   Division  of                                                            
Agriculture. She  acquiesced that the Department of  Corrections has                                                            
been  drawn into  the matter  as an  "enabler, through  no fault  of                                                            
theirs," to assist  the operation of the facility.  She stressed the                                                            
time has passed for a resolution  and suggested addressing the issue                                                            
as a capital project  to "have more definitive language  and ratchet                                                            
it down".                                                                                                                       
                                                                                                                                
Senator Hoffman opined  that the Committee should be concerned about                                                            
public  safety,  but  questioned   the  logic  of  not  funding  109                                                            
positions as it  could jeopardize that safety. He  was concerned for                                                            
the safety of the remaining correctional officers and inmates.                                                                  
                                                                                                                                
Ms. Pugh pointed  out the Department  has a good safety record.  She                                                            
indicated that unsupervised  inmates would cause problems, including                                                            
assaults,  and have  greater  opportunity  to attempt  suicide.  She                                                            
warned that when  an institution is understaffed,  there is not only                                                            
increased risk to inmates,  but to staff as well. She credited well-                                                            
trained personnel  and adequate  staffing for  the fact that  Alaska                                                            
has not  had prison riots  and other volatile  situations that  have                                                            
occurred in facilities located in other states.                                                                                 
                                                                                                                                
Senator Hoffman  asked if the witness anticipated  this would impact                                                            
the personnel  turnover rate due to concern for personal  safety. He                                                            
asked what is the current turnover rate in Alaska.                                                                              
                                                                                                                                
Ms. Pugh affirmed  the turnover rate  would likely increase  and she                                                            
cited studies  on the factors  that influence  the turnover  rate of                                                            
correctional  officers   and  probation  officers  nationally.   She                                                            
emphasized  that working  with  offenders  is well  documented as  a                                                            
"high stress job"  in any situation. She relayed a  conversation she                                                            
recently had with  an Alaska State Trooper who informed  her that he                                                            
"loved his job as a Trooper"  and did not know how others could work                                                            
"behind  the bars" in  a correctional  center. She  listed a  factor                                                            
impacting staff  turnover, as well  as difficulty in personal  lives                                                            
such as  divorce and  substance abuse,  is the  increased amount  of                                                            
work and the number of  hours that correctional officers are exposed                                                            
to the conditions  of prison life.  She noted the national  turnover                                                            
rate  varies by  job class  and averages  20 percent  annually.  She                                                            
anticipated the  rate in Alaska would be similar if  facilities were                                                            
understaffed.                                                                                                                   
                                                                                                                                
Senator Austerman  cited the budget  subcommittee recommendation  to                                                            
allocate $1.8  million general funds  to the new Anchorage  Jail. He                                                            
pointed out this  is the amount requested by the Governor.  He asked                                                            
why the witnesses  were testifying  that positions at this  facility                                                            
would not be funded due to budget reductions.                                                                                   
                                                                                                                                
Mr. Peeples  answered, "The  increment goes  in, it's acknowledged,                                                             
and  then there's  a series  of component  by  component  percentage                                                            
point  cuts. In  the Anchorage  Jail, which  the final  budget  is a                                                            
composite  of the Sixth  Avenue Jail being  closed out-monies  being                                                            
transferred over  there and then an increment of $1.8  $1.9 million.                                                            
That's cut  by $350,000. So it does  go down; the money comes  in in                                                            
the first  action, and  then the allocated  reductions by  component                                                            
reduces it down."                                                                                                               
                                                                                                                                
Senator Olson  surmised from the discussion  regarding the  McKinley                                                            
Meat Packing  Plant that it should  be operated differently  because                                                            
of the expense to the State.  He asked about positive impacts of the                                                            
meat  packing plant  operation  on inmates  and why  the program  is                                                            
continued.                                                                                                                      
                                                                                                                                
Ms. Pugh  relayed  that the  previous day,  she  spoke with  program                                                            
manager  about the many  inmates who  have worked  in the plant  and                                                            
their employment  after release. She  learned that many are  working                                                            
at grocery stores  and as butchers across the State.  She then asked                                                            
the manager  if former inmates who  had participated in the  program                                                            
could be hired to work  at the plant. She was told that most who had                                                            
been through  program are  employed elsewhere  and that competitive                                                             
salaries would be necessary to entice these workers.                                                                            
                                                                                                                                
Senator Olson  asked if there  are plans  to eliminate the  McKinley                                                            
Meat Packing Plant program.                                                                                                     
                                                                                                                                
Mr. Peeples  recalled  that the  Department of  Corrections  assumed                                                            
operation  of  the McKinley  Meat  Packing  Plant from  the  private                                                            
sector  after  the   company  lost  approximately   $1  million  and                                                            
defaulted on loans  from the Agriculture Revolving  Loan program. He                                                            
furthered  that inmate  labor has  been used  to maintain  operation                                                            
with  oversight of  two  correctional  officers and  two  production                                                            
managers.   He  stated  that  updated   regulations  require   three                                                            
production managers. He  shared, "historically, it's not been a real                                                            
viable  operation,"  and the  main  purpose  has been  using  culled                                                            
cattle from the  dairy herds and to make hamburger  to feed inmates.                                                            
                                                                                                                                
Senator  Olson  again  asked  if there  is  no  intention  to  close                                                            
operation because of the social benefits to the State.                                                                          
                                                                                                                                
Mr. Peeples  replied the intention  is to discontinue management  of                                                            
the facility because  of the sizeable overhead. He  spoke to efforts                                                            
of  the Department,  along  with  the Division  of  Agriculture,  to                                                            
locate an  alternate party  to operate the  facility. He noted  that                                                            
all attempts to date have been unsuccessful.                                                                                    
                                                                                                                                
Department of Education and Early Development                                                                                 
                                                                                                                                
KAREN REHFELD,  Director, Education Support Services,  Department of                                                            
Education  and  Early  Development,  testified  that  the  committee                                                            
substitute  reduces  the  Department's  budget  approximately   $5.9                                                            
million  from the Governor's  amended  FY 03 request  and over  $1.8                                                            
million from  the FY 02  allocation. She  listed the reductions  as:                                                            
$930,000 for  personnel services and  travel, $350,000 for  the Head                                                            
Start  program,  $130,000 for  the  alternative  assessment  program                                                            
authorized in  SB 133 the previous year, $100,000  for the statewide                                                            
library electronic doorway,  $130,000 for Kotzebue Technical Center,                                                            
and $200,000 for the community schools program.                                                                                 
                                                                                                                                
Ms. Rehfeld addressed the  alternate assessment program, noting that                                                            
the fiscal  note adopted  for SB  133 did not  reflect the  on-going                                                            
cost of  the program. She  surmised this was  an oversight  and that                                                            
the  Legislature intended  to  retain the  position  created in  the                                                            
fiscal note as well provide  the necessary resources to continue the                                                            
program.                                                                                                                        
                                                                                                                                
Ms.  Rehfeld  spoke to  the  costs  of the  high  school  qualifying                                                            
examination and the related  contract with McGraw Hill. She reminded                                                            
the Committee  of the pending $500,000  supplemental budget  request                                                            
for the current  year contract and  the projected need for  $770,000                                                            
in FY 03.  She noted FY  03 amount includes  funds for benchmarking                                                             
efforts to be undertaken  in the summer to determine the "refocused"                                                            
minimum  competency  of  reading,   writing  and  math  skills.  She                                                            
qualified the  committee substitute provides approximately  $429,000                                                            
for this effort  and requested the Committee consider  providing the                                                            
balance.                                                                                                                        
                                                                                                                                
Ms. Rehfeld  next reminded that the  Legislature and the  public are                                                            
asking the  Department and school  districts to be accountable.  She                                                            
referenced  the reporting  requirements and  the use of performance                                                             
data.   She stated  the Department  is requesting  $730,000  general                                                            
funds for staffing  and contractual  resources to collect,  analyze,                                                            
validate and report  information. She stated this  would provide the                                                            
Legislature information on the State's public education system.                                                                 
                                                                                                                                
Ms. Rehfeld  informed the proposed  reduction to personnel  services                                                            
and travel  includes the third-year  contract salary increases.  She                                                            
stressed this  is "a significant reduction in a very  small agency."                                                            
She  reminded that  approximately  94 percent  of  the general  fund                                                            
budget is distributed  as grants and that the agency  is operated by                                                            
a small  number of  staff. She  anticipated  this funding  reduction                                                            
would result in the loss  of 16 positions throughout the Department,                                                            
including  the  Alaska  Vocational  Technical   Center,  the  School                                                            
Finance   and   Facilities   Section,  which   manages   the   pupil                                                            
transportation  system and the school  debt retirement program,  the                                                            
State   library   and  museum,   and   the   Department's   internal                                                            
administrative  services. She detailed the consequences  of the loss                                                            
of these positions,  specifically  the impact on securing  computers                                                            
and resources from the Gates Foundation for the State library.                                                                  
                                                                                                                                
Senator Hoffman commented  the funding for this Department should be                                                            
at least the same amount as appropriated in FY 02.                                                                              
                                                                                                                                
Department of Environmental Conservation                                                                                      
                                                                                                                                
KURT FREDRIKSSON,  Deputy Commissioner, Department  of Environmental                                                            
Conservation,  testified that the  proposed budget reductions  would                                                            
impact five major programs  within the Department. He began with the                                                            
food safety program, thanking  the Committee for "restoring" most of                                                            
the  funding requested  for  this program,  despite  the  reductions                                                            
passed by the  House of Representatives. However,  he informed that,                                                            
although  it was proposed  in the budget  subcommittee to  utilizing                                                            
federal  funding,  it has  since  been  learned  this would  not  be                                                            
possible.  He  indicated  that  Senator   Leman  was  attempting  to                                                            
identify an alternate funding source.                                                                                           
                                                                                                                                
Co-Chair  Donley  asked  about  the efforts  of  the  Department  to                                                            
encourage local governments  to assume food safety responsibilities.                                                            
He understood  that  local or county  governments  operate the  food                                                            
safety program in every state except Alaska.                                                                                    
                                                                                                                                
Mr. Fredriksson  and  Co-Chair Donley  debated this  topic with  Mr.                                                            
Fredriksson  stating that  efforts have been  made and pointing  out                                                            
that  the  Municipality  of  Anchorage   oversees  its  food  safety                                                            
inspections, and  with Co-Chair Donley asserting this  was occurring                                                            
before the Knowles Administration.                                                                                              
                                                                                                                                
Mr. Fredriksson  next addressed  the funding  source change  for the                                                            
solid waste  program from general  fund program receipts  to general                                                            
funds as stipulated  in the provisions  of HB 361. He explained  the                                                            
"fair share" of  program receipts on permitted activities.  He noted                                                            
the fund source change  was not reflected in the budget subcommittee                                                            
recommendations. He informed  the Committee that the impact would be                                                            
a reduction of  services in the larger municipal landfills  to allow                                                            
a  focus  on   "those  high  risk   facilities"  located   in  rural                                                            
communities. .                                                                                                                  
                                                                                                                                
Mr. Fredriksson  then  spoke of  the $715,000  reduction in  federal                                                            
receipts  to   provide  grants  to   local  communities   and  local                                                            
organizations for non point  source water pollution control efforts.                                                            
He listed stream  cleanup and stream  monitoring as activities  that                                                            
would not be addressed with the grant funding.                                                                                  
                                                                                                                                
Mr.  Fredriksson  informed  of the  Governor's  budget  request  for                                                            
general funds  to operate the water-permitting program,  noting that                                                            
federal funds  have not been available  to rebuild this program.  He                                                            
qualified  that efforts are  being made to  secure $175,000  federal                                                            
funds from  the federal Environmental  Protection Agency  (EPA), but                                                            
expressed  he  did  not expect  the  funds  would  be  realized.  He                                                            
furthered that  the budget subcommittee  recommended a reduction  of                                                            
$98,000  to the water-permitting  program,  which he informed  would                                                            
cause  a  reduction  in  the certification   of  federal  wastewater                                                            
permits.                                                                                                                        
                                                                                                                                
Mr.  Fredriksson   concluded  by  describing  the   oil  safety  and                                                            
development initiative.  He told of the "major increase"  in oil and                                                            
gas development activities,  exploration on the North Slope, in Cook                                                            
Inlet,  and federal  leasing  across  the  State. He  explained  the                                                            
initiative,  proposed by the Governor  to provide funds for  air and                                                            
water permitting  and spill prevention and response,  in addition to                                                            
the creation  of a  North Slope office.   He  remarked that  the new                                                            
office would  allow field workers  to provide direct monitoring  and                                                            
interaction with oil companies.                                                                                                 
                                                                                                                                
Senator Leman  noted the intent to  utilize the $715,000  of Section                                                            
"319  federal  non point  source"  funds  for Forest  Practices  Act                                                            
activities within  the Department of Natural Resources  and soil and                                                            
water conservation efforts.  Therefore, he assured the funds are not                                                            
eliminated, but appropriated elsewhere.                                                                                         
                                                                                                                                
Senator Hoffman  clarified  that the reductions  to the solid  waste                                                            
management  program would result in  discontinuation of services  to                                                            
Anchorage, Juneau, Fairbanks,  Mat-Su, Kenai, Fort Wainwright, North                                                            
Slope  Borough;   those  communities   with  Class  1  solid   waste                                                            
facilities.  He asked  if these facilities  could  fail to meet  EPA                                                            
requirements  without the services.  He recalled threats  by the EPA                                                            
to close some landfills located in his election district.                                                                       
                                                                                                                                
Mr.  Fredriksson  replied  the facilities  would  likely  not  close                                                            
because the municipalities  would interact directly  with the EPA to                                                            
meet the necessary standards.  He explained the Department intent to                                                            
address the higher risk  "less capable" landfills due to the risk of                                                            
closure of the smaller  facilities and the inability for the smaller                                                            
communities to interact with the federal agency.                                                                                
                                                                                                                                
Senator   Hoffman  surmised   this  is  a   transfer  of   financial                                                            
responsibility to the aforementioned local governments.                                                                         
                                                                                                                                
Mr.  Fredriksson   affirmed  the  municipal  governments   would  be                                                            
assigned the responsibility.                                                                                                    
                                                                                                                                
Senator  Leman noted  the  witness is  testifying  to the  committee                                                            
substitute,  although Mr. Fredriksson  is aware the subcommittee  is                                                            
continuing  efforts  to secure  general funds  for  the solid  waste                                                            
program. Senator  Leman indicated draft legislation  relating to the                                                            
appropriation  of receipt  supported services  funds, and  expressed                                                            
intent  that  the  funds  would be  utilized  for  food  safety  and                                                            
sanitation programs.  He furthered that the general  funds currently                                                            
appropriated  to these programs, could  be transferred to  the solid                                                            
waste program.                                                                                                                  
                                                                                                                                
Senator Olson  asked Senator Leman  if it is his assertion  that the                                                            
funds  in question  that are  considered  budget  reductions by  the                                                            
Department are actually a redistribution of funds.                                                                              
                                                                                                                                
Senator  Leman  affirmed  and  explained  proposal  to  utilize  the                                                            
federal non point source  funds for other programs in the Department                                                            
of Natural Resources.                                                                                                           
                                                                                                                                
Senator Olson asked how the redistribution was prioritized.                                                                     
                                                                                                                                
Senator Leman replied he  would provide details, commenting it was a                                                            
matter of determining higher priorities.                                                                                        
                                                                                                                                
AT EASE 10:33 AM / 10:36 AM                                                                                                     
                                                                                                                                
Department of Fish and Game                                                                                                   
                                                                                                                                
FRANK RUE, Commissioner,  Department of Fish and Game, testified the                                                            
Department budget  has been reduced approximately  27 percent or $20                                                            
million  general  funds  in the  past  ten  years.  He told  of  the                                                            
accommodations  the Department has made to adjust  to these changes,                                                            
including transferring  hatchery operations  to the private  sector.                                                            
He  furthered  that funding  source  changes  have also  been  made,                                                            
giving  increased crewmember  license  fees and the  use of  limited                                                            
entry  permit fees  for Department  programs, as  examples. He  also                                                            
listed an increased use  of federal funds, noting the Department now                                                            
receives more  federal funds than  State general funds. As  a result                                                            
of these changes,  he informed that it has become  more difficult to                                                            
adjust for further  budget reductions. He stated that  approximately                                                            
80  percent of  the  general funds  received  are allocated  to  the                                                            
Division of Commercial  Fisheries, which is important to the State's                                                            
economy.                                                                                                                        
                                                                                                                                
Mr.  Rue reminded  that  the fishing  industry  pays  taxes "far  in                                                            
excess of the  management costs." He furthered that  the use of test                                                            
fishing  receipts  to fund  Department  programs causes  "a  certain                                                            
irritant to the fishermen."                                                                                                     
                                                                                                                                
Mr. Rue  stated  that the  proposed funding  for  the Department  as                                                            
reflected in  the committee substitute  is approximately  $2 million                                                            
less than that proposed  in the Governor's FY 03 budget. He remarked                                                            
that  $1.7   million   of  the  reduction   is   below  the   FY  02                                                            
appropriation.                                                                                                                  
                                                                                                                                
Mr.  Rue listed  $741,000  general  funds for  the Bering  Sea  Crab                                                            
Fishery  located  in federally  managed  waters  near  the  Aleutian                                                            
Islands,  as one  of the  three funding  reductions.  He  emphasized                                                            
these general  funds leverage  the receipt  of "a couple of  million                                                            
dollars of" federal funds  in addition to fish test receipts to fund                                                            
observers. He  relayed a conversation he held with  a representative                                                            
of the National Marine  Fisheries Service, where he learned that the                                                            
federal  government  is currently  unable  to assume  the duties  of                                                            
managing  this  fishery.  Mr.  Rue indicated  that  US  Senator  Ted                                                            
Stevens is  experiencing increasing  difficulty in securing  federal                                                            
funds  for   fishery  programs,  due   in  part  to  reduced   state                                                            
contributions.   Mr.  Rue  explained   the  State  would   chose  to                                                            
discontinue funding  this program because the fishery  is located in                                                            
federally  managed  waters,  although  the  State  has  managed  the                                                            
program since statehood.                                                                                                        
                                                                                                                                
Mr.  Rue then  stated that  the committee  substitute  budget  would                                                            
reduce  $744,000  general  funds for  the  genetics  laboratory.  He                                                            
compared  this  proposal  to  the  loss  of  the  limnology  program                                                            
eliminated  through  funding   reductions  a  few  years  prior.  He                                                            
emphasized  these programs  provide  "basic science"  and  necessary                                                            
information  to allow  the  Department to  identify  which fish  are                                                            
harvested and subsequently  manage and protect stocks adequately. He                                                            
informed  that the  science  conducted  in the  genetics  laboratory                                                            
relates to  fisheries that  intercept King  salmon and other  salmon                                                            
species,  the  North  Pacific  Salmon  Treaty   issues,  and  Alaska                                                            
fisheries management issues.   He warned that without this research,                                                            
the Department  would have less information about  harvested stocks,                                                            
which would  "threaten our ability  to maintain" healthy  stocks, as                                                            
well as defend  against "pressures from the Lower  48 and Canada" in                                                            
fisheries negotiations.                                                                                                         
                                                                                                                                
Mr. Rue next addressed  the reduction of $223,000 general funds from                                                            
the Division  of Wildlife for watchable  wildlife programs.  He told                                                            
of research  conducted on goshawks  in the Tongass National  Forest,                                                            
which  demonstrated  that the  species is  not endangered  and  thus                                                            
prevented   the  goshawk  from  being   listed  under  the   federal                                                            
Endangered  Species  Act.  He  stated  this   benefited  the  timber                                                            
industry.  He  also   listed  other  watchable  wildlife   programs,                                                            
including bear viewing  at Pack Creek and McNeil River. He noted the                                                            
loss  of these  general funds  would result  in a  loss of  $671,000                                                            
federal matching funds.                                                                                                         
                                                                                                                                
Mr.  Rue  specified  that  the  aforementioned   programs  would  be                                                            
eliminated  if  the budget  proposed  in  the  committee  substitute                                                            
passed unchanged.                                                                                                               
                                                                                                                                
Mr. Rue  then told  of a proposed  oil safety  increment within  the                                                            
Division of  Habitat and Restoration  to address the impacts  of oil                                                            
exploration, funding to  monitor the affects of development near the                                                            
Kenai River and  the creation of a permitting center  in the Mat-Su.                                                            
                                                                                                                                
Senator Austerman  shared  he has been concerned  for several  years                                                            
about the best method to  manage wildlife and fisheries. He approved                                                            
of  eliminating   programs  rather   than  "weakening"  the   entire                                                            
Department.  He spoke  of the declining  population  of stellar  sea                                                            
lions and  the impact the  closure of the  genetic laboratory  would                                                            
have on  determining the  causes. He stressed  that funding  must be                                                            
provided to agencies to allow functions to continue.                                                                            
                                                                                                                                
Senator Hoffman commended  the commissioner's approach to the budget                                                            
given the funding  constraints. Senator  Hoffman noted his  12 years                                                            
of  experience  in  drafting  the budget  for  this  Department  and                                                            
questioned  the "business sense" of  the appropriation contained  in                                                            
the  committee  substitute.   He  pointed  out  that   the  industry                                                            
contributes  a  significantly  greater  amount  of  revenue  to  the                                                            
Department than  the cost of operating the programs.  He stated this                                                            
Department  has been successful at  adapting to fewer general  funds                                                            
and  securing  funds  from  other  sources.  He  noted  the  fishing                                                            
industry  provides thousands  of  jobs and  generates approximately                                                             
$65.8 million  and the Department should therefore  be supported. He                                                            
asserted that the "reward"  given to the Department for adjusting to                                                            
previous  budget   reductions  has   been  further  reductions.   He                                                            
reiterated that the reductions  threaten the Department's ability to                                                            
generate other revenue.                                                                                                         
                                                                                                                                
Co-Chair  Donley  remarked  that the  fishing  industry  utilizes  a                                                            
public resource  and that the State's goal should  not be to balance                                                            
the cost of operating  that industry with the revenue  it generates.                                                            
He explained "it's the  people's resource that's being used" and the                                                            
State is  entitled to  a fair return  in the  form of taxation  that                                                            
could then be used to benefit the entire State.                                                                                 
                                                                                                                                
Senator Hoffman commented  the State should receive "maximum return"                                                            
rather  than simply  a fair  share. He  remarked that  to realize  a                                                            
maximum  return,  consideration   must  be  given  to  the  cost  of                                                            
administering the programs.  He surmised that the commissioner would                                                            
agree  the Department  is  currently  unable  to achieve  a  maximum                                                            
return.                                                                                                                         
                                                                                                                                
Senator Leman  opined that this Department manages  a budget for the                                                            
"largest  sector  of Alaskans"  and  that competition  and  conflict                                                            
between  user  groups  are prevalent.   He shared  the  concerns  of                                                            
Senator Austerman  and Senator Hoffman  about "hemorrhaging"  within                                                            
the Department.  He spoke  to the "substantial  loss to the  federal                                                            
government" in the past several years.                                                                                          
                                                                                                                                
Senator  Austerman   stressed  that  fisheries  utilizes   renewable                                                            
resources, which must be  managed in manner of economic value to the                                                            
State.                                                                                                                          
                                                                                                                                
                                                                                                                                
SFC 02 # 71, Side A 10:53 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator  Austerman continued  that  all industries  must be  treated                                                            
fairly, and that the fishing  industry has contributed a significant                                                            
portion  to the  State's general  fund  while other  industries  are                                                            
continually subsidized  using general funds. He warned that once the                                                            
non-renewable  resources, such as  oil, are depleted, dependence  on                                                            
the State's renewable resources would increase.                                                                                 
                                                                                                                                
Senator Hoffman  expressed that the Bering Sea Crab  Fishery must be                                                            
managed due to the number of jobs the fishery provides.                                                                         
                                                                                                                                
Mr. Rue  summarized that  in a number  of fisheries  in Alaska,  the                                                            
Department has attempted  to leverage federal funds and other funds.                                                            
He assured that Senator Ted Stevens has assisted in this effort.                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Dave Donley adjourned the meeting at 10:56 AM                                                                          

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