Legislature(2003 - 2004)

04/16/2003 09:04 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 16, 2003                                                                                      
                              9:04 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 54,  Side A                                                                                                            
SFC 03 # 54,  Side B                                                                                                            
SFC 03 # 55,  Side A                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:04 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Lyda Green, Co-Chair                                                                                                    
Senator Con Bunde, Vice Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Donny Olson                                                                                                             
Senator Ben Stevens                                                                                                             
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
Also Attending:   TOM CHAPPLE, Director,  Division of Air  and Water                                                          
Quality, Department  of Environmental Conservation;  JOHN KUTERBACH,                                                            
Program Manager,  Air Permits,  Division of  Air and Water  Quality,                                                            
Department    of   Environmental    Conservation;    MARK    ANTRIM,                                                            
Commissioner,  Department of Corrections;  JERRY BURNETT,  Director,                                                            
Division of Administrative  Services, Department of Corrections; DEE                                                            
HUBBARD, Sterling Resident and Citizen Activist;                                                                                
                                                                                                                                
Attending   via  Teleconference:     *teleconference   participants                                                           
testifying on  the FY 04 Operating Budget are listed  in the body of                                                            
the minutes in  the order they testified* From an  off net location:                                                            
MARILYN CROCKET,  Deputy Director,  Alaska Oil and Gas Association;                                                             
From   Anchorage:   STEVE  MULDER,   Assistant   Attorney   General,                                                            
Environmental  Section,  Civil  Division,  Department  of  Law;  JIM                                                            
LECRONE, Retired Correctional  Officer, testified via teleconference                                                            
from Anchorage                                                                                                                  
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB  75-APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                     
HB  76-APPROP:MENTAL HEALTH BUDGET                                                                                              
                                                                                                                                
The  Committee heard  public  testimony  and the  bill  was held  in                                                            
Committee.                                                                                                                      
                                                                                                                                
HB 160-EMISSION CONTROL PERMIT PROGRAM                                                                                          
                                                                                                                                
The   Committee  heard   from   the  Department   of  Environmental                                                             
Conservation  and  the  Department  of  Law.  The  bill  moved  from                                                            
Committee.                                                                                                                      
                                                                                                                                
SB  65-CORRECTIONAL FACILITY EXPANSION                                                                                          
                                                                                                                                
The Committee  heard from the Department of Corrections  and members                                                            
of the public.  An amendment  was adopted and  the bill was  held in                                                            
Committee.                                                                                                                      
                                                                                                                                
HB  59-CLEANUP OF ILLEGAL DRUG SITES                                                                                            
                                                                                                                                
This bill was scheduled but not heard.                                                                                          
                                                                                                                                
Senator  Olson  introduced   Close-up  participants   visiting  from                                                            
communities in his election district.                                                                                           
                                                                                                                                
                                                                                                                                
     CS FOR SS FOR HOUSE BILL NO. 75(FIN) am(brf sup maj fld)                                                                   
     "An  Act  making appropriations   for the  operating  and  loan                                                            
     program  expenses of  state government,  for certain  programs,                                                            
     and to capitalize  funds; and providing for an effective date."                                                            
                                                                                                                                
     CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 76(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."                                                                             
                                                                                                                                
                                                                                                                                
Offnet public testimony                                                                                                         
                                                                                                                                
ROGER JENKINS  testified via teleconference  from an offnet  site in                                                            
Nikolai to suggest a wholesale sales tax.                                                                                       
                                                                                                                                
FRANK  KELTY, Resource  Analyst,  City  of Unalaska,  testified  via                                                            
teleconference  from an offnet location regarding  the Department of                                                            
Public Safety  patrol vessels and  the areas they oversee.  He spoke                                                            
to the importance of the fisheries these vessels protect.                                                                       
                                                                                                                                
RICK KINGIKOWSKY, Member,  Unalaska City School Board, testified via                                                            
teleconference from an  offnet location in Unalaska about reductions                                                            
to education funding.  He asserted that school districts  across the                                                            
State  have   made  significant  efforts   to  meet  accountability                                                             
requirements.                                                                                                                   
                                                                                                                                
GEORGE HILLER  testified via teleconference from an  offnet location                                                            
in Central to the importance  of the Power Cost Equalization program                                                            
to rural  residents.  He warned of  the consequences  of failing  to                                                            
subsidize the program.                                                                                                          
                                                                                                                                
ANDY DURNY, Employee, City  of Nulatto, testified via teleconference                                                            
from  an offnet  site  in  Nulatto  that permanent  fund  should  be                                                            
utilized for state  services rather than paying annual  dividends to                                                            
state residents.                                                                                                                
                                                                                                                                
DR. MICHAEL DICKENS,  Superintendent, Skagway City  School District,                                                            
testified via  teleconference from  an offnet site in Skagway  about                                                            
the budget for  education and the impact reduced funding  would have                                                            
on students.                                                                                                                    
                                                                                                                                
Senator Taylor  asked if the witness's suggestion  is to include the                                                            
Learning  Opportunity  Grants  (LOG)  in  the education   foundation                                                            
formula.                                                                                                                        
                                                                                                                                
Dr. Dickens agreed this was an option.                                                                                          
                                                                                                                                
This concluded the public testimony for these bills.                                                                            
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 160(FIN)                                                                                             
     "An  Act  relating  to the  emission  control  permit  program;                                                            
     relating  to fees  for that program  and to  the accounting  of                                                            
     receipts  deposited  in the  emission control  permit  receipts                                                            
     account; and providing for an effective date."                                                                             
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken stated  that this bill, introduced at the request of                                                            
the Governor, "establishes  standardized air permit conditions based                                                            
on  best  management  practices.   The  legislation  differentiates                                                             
between  major  and minor  sources  air pollution  and  focuses  the                                                            
Department   of  Environmental  Conservation   accordingly.   Senate                                                            
companion   bill  116  passed  out   of  Senate  Resources   with  a                                                            
recommendation of seven 'do passes'."                                                                                           
                                                                                                                                
TOM  CHAPPLE,   Director,  Division   of  Air  and  Water   Quality,                                                            
Department  of  Environmental   Conservation,  testified   that  the                                                            
Governor is committed to  resource development as well as protecting                                                            
the  environment.  Mr.  Chapple asserted  these  are  not  exclusive                                                            
goals. He told  of a legal dispute  "to ensure that Alaska's  rights                                                            
are not  eroded", relating  to a mining operation  with the  federal                                                            
Environmental  Protection  Agency  (EPA)  that  is  currently  under                                                            
consideration by the United States Supreme Court.                                                                               
                                                                                                                                
Mr. Chapple  stressed this  technical legislation  would not  change                                                            
the  air quality  standards  relative to  the protection  of  public                                                            
health, but would  rather change the permitting process  "to be more                                                            
responsive  to our economic development,  while also preserving  our                                                            
excellent air quality."                                                                                                         
                                                                                                                                
Mr. Chapple  stated this  legislation would  change the terminology                                                             
used  in  Alaska   to  match  national   terminology.  He   exampled                                                            
"contaminant", a term utilized  in the State, would be replaced with                                                            
"pollutant", a  national term. He expressed this would  simplify the                                                            
process of adopting  federal "rules" and increases  understanding by                                                            
Department  staff,  the regulating  community  and  consultants.  He                                                            
predicted this would result in efficiencies.                                                                                    
                                                                                                                                
Mr. Chapple  continued that  this bill  distinguishes between  major                                                            
and  minor sources  of pollution  for  the purposes  of permitting,                                                             
pointing out that  current State statute addresses  all pollution as                                                            
major sources.  He listed major sources as oil and  gas development,                                                            
larger  mines,   power  plants   in  most   cities  and  rural   hub                                                            
communities, military  bases and seafood processing  plants. He then                                                            
listed minor sources  as many rural community power  plants, asphalt                                                            
plants, rock  crushers, and  fuel storage  tanks. He explained  that                                                            
this bill would  allow the Department  to streamline the  permitting                                                            
process for minor sources  and implement standardized conditions. He                                                            
predicted this would also improve efficiencies.                                                                                 
                                                                                                                                
Mr.  Chapple  furthered  that  this  legislation  would  change  the                                                            
structure  of  permit fees,  to  "accomplish  more  predictable  and                                                            
reliable fees."                                                                                                                 
                                                                                                                                
Mr.  Chapple   informed   that  this  legislation   represents   the                                                            
recommendations  of a working  group comprised  of "the oil  and gas                                                            
community, mining  industry, military, seafood processors  and power                                                            
industries" made the previous summer.                                                                                           
                                                                                                                                
Senator  Olson understood  the intent to  streamline the  permitting                                                            
process.  He asked  how this  would  affect operations  of  existing                                                            
industries.                                                                                                                     
                                                                                                                                
Mr.  Chapple  replied  that  this  bill  would  result  in  timelier                                                            
permitting.  He commented  on the  irony that the  EPA has  recently                                                            
adopted changes to its  permitting laws that are consistent with the                                                            
permits  the State  granted  to the  mining  operation  in the  case                                                            
currently before the US Supreme Court.                                                                                          
                                                                                                                                
Senator  Hoffman  asked if  this legislation  addresses  the  sulfur                                                            
emissions from aircraft.                                                                                                        
                                                                                                                                
Mr. Chapple replied that this bill is unrelated to aircraft.                                                                    
                                                                                                                                
Senator  Taylor referenced  Sections  33 and  34 on  page 17 of  the                                                            
committee substitute,  surmising that these provisions  would create                                                            
a  dedicated fund  within  the  Department.  He cited  the  language                                                            
stipulating  that all funds generated  from permit fees may  only be                                                            
utilized  to  cover  the  "reasonable  direct  and  indirect"  costs                                                            
required to support the  permit program. He asked if this would also                                                            
provide receipt authority  to expend those funds without legislative                                                            
authority.                                                                                                                      
                                                                                                                                
Mr. Chapple  responded  that receipt  authority  would be  requested                                                            
though the operating budget  process. He noted this bill changes the                                                            
fund  management  and accounting  structure.  He reported  that  the                                                            
Clean  Air Protection  fund was  appropriated $2.7  million for  the                                                            
current fiscal year to support the program.                                                                                     
                                                                                                                                
Senator Taylor  asked how this legislation would improve  efficiency                                                            
in issuance of permits.                                                                                                         
                                                                                                                                
Mr. Chapple  answered  that by  streamlining the  process to  better                                                            
match  the federal  permitting  guidelines  for  larger industries,                                                             
uncertainties  would be removed and  dialog improved. He  noted that                                                            
the Department  has reviewed the processes employed  in other states                                                            
to identify efficient methods.  He furthered that the Department has                                                            
not been timely  in permitting due to inefficiencies  and inadequate                                                            
staffing   levels.  He   informed   that  to   improve  timeliness,                                                             
contractors would  be utilized during periods when  more permits are                                                            
pending.                                                                                                                        
                                                                                                                                
Senator Taylor  requested  a quantitative example  of the length  of                                                            
time required to issue  a permit under the existing statute compared                                                            
to the length of time required under the proposed statute.                                                                      
                                                                                                                                
Mr.  Chapple  listed the  construction  permit,  which  is  required                                                            
before  construction  begins, and  the  operating permit,  which  is                                                            
issued  after construction  is  completed  and pertains  to  ongoing                                                            
operations.  He  reported  that  construction  permits  are  usually                                                            
issued 254  days after application  and that  the goal is to  reduce                                                            
the amount  of time  to between 90  and 110 days.  He remarked  that                                                            
this bill,  the subsequent regulatory  changes, as well as  adequate                                                            
staffing  assignments  would  allow  this  goal to  be  reached.  He                                                            
expressed this would be  "responsive to resource development and our                                                            
business needs in Alaska."                                                                                                      
                                                                                                                                
Senator Hoffman asked if  a sectional analysis is available for this                                                            
legislation.  He  also asked  for  an explanation  of  the  proposed                                                            
terminology change of "facility" to "stationary sources".                                                                       
                                                                                                                                
JOHN KUTERBACH,  Program Manager,  Air Permits, Division  of Air and                                                            
Water Quality,  Department of Environmental Conservation,  explained                                                            
the change in definition  from "facility" to "stationary sources" is                                                            
intended to make  the State terminology consistent  with the federal                                                            
terminology  as  well as  that  of "most  other  jurisdictions".  He                                                            
pointed out  that the federal definition  does not specify  property                                                            
as a designator  for the  facility and also  considers a  stationary                                                            
source using the  standard industrial code in determining  whether a                                                            
permit  is required,  which  differ from  the State  definition.  He                                                            
stated that this differences  hamper the Department's ability to use                                                            
federal case law and decisions  rendered in other jurisdictions when                                                            
making determinations in Alaska.                                                                                                
                                                                                                                                
Mr. Kuterbach assured that  most facilities that currently require a                                                            
major  permit would  continue to  require such,  although  technical                                                            
difference would  occur in the grouping of those operations.  He was                                                            
unable  to  predict which  specific  facilities  would  have  permit                                                            
requirement changes.                                                                                                            
                                                                                                                                
Senator  Taylor   opined  that  differences  in  permit   types  are                                                            
insignificant,  given  the  limited industrial  development  in  the                                                            
State and therefore questioned  the length of time required to issue                                                            
permits.                                                                                                                        
                                                                                                                                
Mr. Chapple  assured  that not  every permit  issuance requires  254                                                            
days,  giving examples  of general  permits for  asphalt plants  and                                                            
rock crushers  that are handled rapidly.  He stated that  the longer                                                            
time periods  are related to more  complex projects, such  as a mine                                                            
or  oil  and  gas development   needing  a  Review  for Significant                                                             
Deterioration   of   Air  Quality.   He   stressed   that   industry                                                            
representatives  are  aware  of these  time  requirements  and  plan                                                            
accordingly.                                                                                                                    
                                                                                                                                
Senator Taylor asked if  the permits in question also apply to those                                                            
"sources that move", such as a large ship.                                                                                      
                                                                                                                                
Mr. Chapple answered that  this permitting rule generally applies to                                                            
stationary  sources with exceptions  including portable oilrigs  and                                                            
portable asphalt plants.  He stated that this program does not cover                                                            
ships unless  that ship is part of  a permanent facility,  such as a                                                            
near shore-based  seafood processing plant. He noted  that the State                                                            
is prohibited  from imposing  air quality  regulations to  aircraft,                                                            
which are regulated by the EPA.                                                                                                 
                                                                                                                                
Senator Hoffman asked whether  fees would be imposed or increased as                                                            
a result of this legislation.                                                                                                   
                                                                                                                                
Mr. Chapple  affirmed that fees would  change. He informed  that the                                                            
current  hourly rates  for "a  direct service  on  a permit  review"                                                            
would become a  flat rate, although he expected the  amount paid for                                                            
a  permit would  be  reduced  due  to the  efficiencies  gained.  He                                                            
continued that emission  fees could increase. He told of significant                                                            
discussions on this matter.                                                                                                     
                                                                                                                                
Senator Hoffman asked the current fee amounts.                                                                                  
                                                                                                                                
Mr. Chapple  listed the hourly  fee of $78,  qualifying that  he was                                                            
unable to predict the amount  of the proposed fee. He indicated that                                                            
the total fees of average  projects would be reviewed to determine a                                                            
reasonable  amount  for the  flat fee.  He explained  a correlation                                                             
between  the amount  of emissions  measured  and the  amount of  the                                                            
emissions fee imposed.  He reported that because emissions have been                                                            
reduced  the fees  paid  have also  reduced,  and although  this  is                                                            
positive,  the  amount  of revenue  collected  does  not  cover  the                                                            
operating costs of the program.                                                                                                 
                                                                                                                                
Senator Olson  asked why these changes were not implemented  earlier                                                            
to avoid the "dire straits" of promoting resource development.                                                                  
                                                                                                                                
Mr. Chapple  informed  that the  original statute  was created  nine                                                            
years prior in 1993 and  that the permitting procedures were adopted                                                            
five years  ago. He  stated that  three years  ago serious  problems                                                            
were  identified  and internal  reviews  and benchmark  analyses  of                                                            
other states were conducted.                                                                                                    
                                                                                                                                
Senator  B. Stevens  asked  if the  designation  of  major or  miner                                                            
project  was  applied  to  both  the  construction  permit  and  the                                                            
operating permit.                                                                                                               
                                                                                                                                
Mr. Kuterbach  replied that only major  projects would require  both                                                            
an operating  and a construction  permit.  The minor permit  program                                                            
would apply  to the construction and  operation of minor  sources or                                                            
minor modifications to a major source.                                                                                          
                                                                                                                                
Senator  B. Stevens  clarified that  major sources  are governed  by                                                            
different regulations than minor sources.                                                                                       
                                                                                                                                
Mr. Chapple affirmed.                                                                                                           
                                                                                                                                
AT EASE 9:43 AM / 9:43 AM                                                                                                       
                                                                                                                                
Senator Hoffman  referenced Section  23 of the committee  substitute                                                            
and asked what  the proposed changes would accomplish.  The language                                                            
on page 11, lines 18 - 26 read as follows.                                                                                      
                                                                                                                                
     Sec. 23 AS 46.14.200 is amended to read:                                                                                   
                Sec. 46.14.200. Review of permit action. A person                                                               
          who   has  a  private,   substantive,  legally   protected                                                            
          interest  under state law  that may be adversely  affected                                                            
          by  the permit actions,  the owner  or operator, or,  if a                                                          
          public  comment process is required or solicited, a person                                                          
          who  participated   in  the  public  comment  process  may                                                            
          request  an adjudicatory  hearing  under the department's                                                             
          adjudicatory  hearing procedures. After the issuance of an                                                            
          adjudicatory  hearing decision, a party to the hearing may                                                            
          obtain  judicial review  of that  decision as provided  in                                                            
          the Alaska Rules of Appellate Procedure.                                                                              
                                                                                                                                
     New Text Underlined                                                                                                      
                                                                                                                                
Mr. Chapple relayed that  it was "envisioned" that some of the minor                                                            
permits  would not  have a  public  comment process.  Therefore,  he                                                            
stated  that this  language would  retain  the right  to appeal  for                                                            
those projects that involve a public comment process.                                                                           
                                                                                                                                
Senator  Hoffman  clarified  that  under  current   statute,  public                                                            
comment is required and  the proposed language allows the Department                                                            
to  determine  whether  the  public would  have  an  opportunity  to                                                            
comment.                                                                                                                        
                                                                                                                                
Mr. Chapple affirmed.                                                                                                           
                                                                                                                                
Co-Chair Green  offered a motion to  report the bill from  Committee                                                            
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
MARILYN CROCKET,  Deputy Director,  Alaska Oil and Gas Association,                                                             
testified via  teleconference from an off net location  to emphasize                                                            
this legislation  represents the recommendations of  the stakeholder                                                            
group that met to address  the permitting issue. She stated that the                                                            
Association supports the bill.                                                                                                  
                                                                                                                                
Senator  Taylor noted  that  the provision  of Section  23  provides                                                            
"jurisdictional grant of  opportunity" for stakeholders and asked if                                                            
it  also provides  an  individual  the  right  to request  a  public                                                            
comment hearing.                                                                                                                
                                                                                                                                
STEVE MULDER,  Assistant  Attorney General,  Environmental  Section,                                                            
Civil  Division, Department  of  Law, testified  via teleconference                                                             
from  Anchorage,  and  agreed  the Section  provides  the  right  to                                                            
request a hearing. However,  he emphasized that the requestor of the                                                            
hearing  must demonstrate  that a  decision on the  issuance  of the                                                            
permit would  impact him. He clarified  that the "commenter"  is not                                                            
required  to have  ownership  interest in  the property  but  rather                                                            
"could  have standing  if  they're  an adjacent  property  owner  or                                                            
they're a user of parklands in the vicinity."                                                                                   
                                                                                                                                
Senator Taylor  characterized those who own neighboring  property as                                                            
having  a legally  protected  interest and  has "every  right to  be                                                            
there" as a truly affected  party in the matter. He compared this to                                                            
others,  who occasionally  visit a  nearby park,  and he  determined                                                            
these parties do not have the same legal qualification.                                                                         
                                                                                                                                
Mr. Mulder spoke to Department  regulations relating to adjudicatory                                                            
hearings and  commissioner determinations  of whether the  requestor                                                            
is impacted  and would  be adversely  affected  by the Department's                                                             
decision.                                                                                                                       
                                                                                                                                
Senator Taylor requested  this information be provided to his office                                                            
and he  indicated he might  offer an amendment  on the subject  when                                                            
the bill is before the full Senate.                                                                                             
                                                                                                                                
There was no objection  and CS HB 160(FIN) MOVED from Committee with                                                            
zero  fiscal   note  #2   from  the  Department   of  Environmental                                                             
Conservation.                                                                                                                   
                                                                                                                                
AT EASE 9:51 AM / 9:52 AM                                                                                                       
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 65                                                                                                         
     "An  Act authorizing  the Department  of  Corrections to  enter                                                            
     into agreements with  municipalities for new or expanded public                                                            
     correctional  facilities in the  Fairbanks North Star  Borough,                                                            
     the Matanuska-Susitna  Borough, Bethel, and the Municipality of                                                            
     Anchorage."                                                                                                                
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken stated  that this bill "authorizes the Department of                                                            
Corrections  to enter into a twenty-five  year lease agreement  with                                                            
the Fairbanks  North Star Borough,  the Mat-Su Borough, Bethel,  and                                                            
Anchorage  for   a  total  of  1,160  beds  at  State  correctional                                                             
facilities and a new State correctional facility."                                                                              
                                                                                                                                
Co-Chair Green referenced the sponsor statement.                                                                                
                                                                                                                                
                                                                                                                                
SFC 03 # 54, Side B 09:53 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Co-Chair Green  emphasized the need for additional  prison beds. She                                                            
reminded  of the over  650 prisoners  currently  housed outside  the                                                            
State, which  she characterized as  "the least of the worries".  She                                                            
explained the  primary concern is  the need for additional  pretrial                                                            
facilities  in Bethel and Fairbanks  due to the significant  expense                                                            
incurred in  transporting prisoners  between holding facilities  and                                                            
court proceedings.  She furthered that the need exists  for a larger                                                            
complex,  informing  that  that  it has  been  determined  the  most                                                            
efficient  method to  accomplish this  would be  to expand  existing                                                            
facilities.                                                                                                                     
                                                                                                                                
Co-Chair Green shared that  under the provisions of this legislation                                                            
local  governments would  issue bonds  to generate  revenue for  the                                                            
construction  costs. Under a release  agreement with the  Department                                                            
of Corrections,  she stated  that the Department  would oversee  the                                                            
operations of the facilities, as is the current practice.                                                                       
                                                                                                                                
Co-Chair  Green remarked that  Sutton is  a preferable location  for                                                            
expansion  because  of  the existing  minimum  and  medium  security                                                            
facilities.  The presence  of the two facilities,  she stated  would                                                            
provide  "immediate  backup" in  the event  of additional  needs  or                                                            
emergencies.  She furthered  that inmates  in this  location are  in                                                            
close proximity  to hospitals, courts and the city  of Anchorage "in                                                            
tolerable instances."                                                                                                           
                                                                                                                                
Co-Chair  Green  stressed  that  regardless  of  whether  additional                                                            
prisons are constructed  in Alaska the State would  incur $40 to $45                                                            
million in  debt within four  years for the  care of prisoners.  She                                                            
explained this  is due to the need to contract with  private prisons                                                            
to house  inmates.  She pointed  out that  these  funds "leave"  the                                                            
State and that  the funds could instead  be used to employ  Alaskans                                                            
if additional prison space were constructed in Alaska.                                                                          
                                                                                                                                
Co-Chair Green  for adoption of CS  SB 65, 23-LS0392\S as  a working                                                            
draft.                                                                                                                          
                                                                                                                                
There was no objection  and the committee substitute  was ADOPTED as                                                            
a working draft.                                                                                                                
                                                                                                                                
Amendment  #1:  This  amendment  lowers  the  maximum  annual  lease                                                            
payment for the  proposed facility from $14,600 to  $11,000 per bed.                                                            
The  amended  language  in Section  1,  on page  2  line  19 of  the                                                            
committee substitute reads as follows.                                                                                          
                                                                                                                                
                (2) if construction of a new facility of a new                                                                  
     facility  is authorized, the  municipality shall initially  own                                                            
     the  facility,  and the  state  shall  enter into  a  long-term                                                            
     lease-purchase not  to exceed 25 years with the municipality to                                                            
     operate the  facility and to receive ownership  of the facility                                                            
     at the  end of the lease;  the annual  lease payment for  a new                                                            
     facility may not exceed $11,000 a bed;                                                                                     
                                                                                                                                
Co-Chair Green moved for adoption.                                                                                              
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Co-Chair Green explained  this amendment conforms the $11,000 amount                                                            
to language contained elsewhere in the committee substitute.                                                                    
                                                                                                                                
Senator  B. Stevens  asked how  the reduction  in  the annual  lease                                                            
payment was achieved.                                                                                                           
                                                                                                                                
Co-Chair  Green replied  this change  is the result  of an  "overall                                                            
calculation".                                                                                                                   
                                                                                                                                
MARK ANTRIM,  Commissioner, Department  of Corrections testified  to                                                            
the ongoing  process to make the project  more cost efficient  since                                                            
this bill was first introduced.                                                                                                 
                                                                                                                                
Senator  B. Stevens  asked  why  the maximum  lease  payment  amount                                                            
authorized for the Bethel facility was not reduced as well.                                                                     
                                                                                                                                
JERRY  BURNETT,  Director,  Division  of  Administrative   Services,                                                            
Department of Corrections,  replied that although the estimated cost                                                            
to  operate  the  facility  in the  Mat-Su  area  was  reduced,  the                                                            
facilities located in the other areas remains unchanged.                                                                        
                                                                                                                                
Senator  B. Stevens  clarified  that  the  operating cost  would  be                                                            
$16,000  per bed annually  at the  Bethel facility,  $14,600  at the                                                            
Anchorage location, and $11,000 at the Mat-Su location.                                                                         
                                                                                                                                
Mr. Burnett affirmed.                                                                                                           
                                                                                                                                
Senator B. Stevens  asked why the Mat-Su and Anchorage  amounts were                                                            
different.                                                                                                                      
                                                                                                                                
Mr. Burnett  responded that construction  of the Anchorage  facility                                                            
would be 100 percent federally funded.                                                                                          
                                                                                                                                
Mr.  Antrim  furthered  that  the  differing  figures  also  reflect                                                            
different construction  costs, as well as the different  missions of                                                            
the three  facilities.  He explained  that the Anchorage  Jail  is a                                                            
"booking  facility"  and that  the "booking  function"  is the  most                                                            
expensive activity of the Department.                                                                                           
                                                                                                                                
Co-Chair  Green  added  that  examination   of  operating  costs  of                                                            
existing  facilities   across  the   State  demonstrates   variation                                                            
depending on the mission  and size of a facility and type of inmates                                                            
housed. She pointed  out that the Mat-Su facility  is less costly to                                                            
operate because of the  number of inmates housed and also because it                                                            
is not generally used as a pretrial facility.                                                                                   
                                                                                                                                
Mr. Antrim  informed that  pretrial facilities  must be build  to be                                                            
indestructible,  explaining  that when  first arrested,  people  are                                                            
most combative.                                                                                                                 
                                                                                                                                
Senator  Bunde  referenced  the spreadsheet  titled  "Department  of                                                            
Corrections  FY 2008  Prison Bed  Cost Comparison"  [copy on  file],                                                            
which  lists the  costs of  housing inmates  at  a private  facility                                                            
located  in Arizona,  a private facility  located  in Alaska,  and a                                                            
public prison located in  Alaska.  He compared the operating/capital                                                            
costs per  day of $94 per  inmate at a private  prison in  Alaska to                                                            
$51.36  operating  costs  for  a  public  prison.  He  relayed  that                                                            
arguments in favor  of a private prison in Alaska  attest that wages                                                            
would be lower than those paid by the State.                                                                                    
                                                                                                                                
Senator  Taylor  asked  the relation  of  construction  expenses  to                                                            
future lease  amounts, asserting  that operating  expenses  of other                                                            
facilities have not been based on construction costs.                                                                           
                                                                                                                                
Co-Chair Wilken  the question applies to bill itself  rather than to                                                            
the amendment.                                                                                                                  
                                                                                                                                
Co-Chair  Wilken  removed  his  objection  to the  adoption  of  the                                                            
amendment and the amendment was ADOPTED.                                                                                        
                                                                                                                                
Mr.  Antrim gave  testimony  to  the bill,  referencing  a  handout,                                                            
titled "Department of Corrections"  [copy on file]. He attested that                                                            
the State of Alaska  is "approaching crisis level",  noting that the                                                            
inmate facilities  operate at 98 to  100 percent of capacity  on any                                                            
given day.  He reported  that currently  four of  the 13  facilities                                                            
were  over capacity.  He opined  that  operating  the facilities  at                                                            
levels  close to full  capacity is  advisable given  that the  State                                                            
also contracts with private  facilities located outside the State to                                                            
house inmates.                                                                                                                  
                                                                                                                                
Mr.   Antrim  indicated   the   chart  titled   "Inmate   Population                                                            
Statistics,"  included  in  the handout,  is  based on  an  accurate                                                            
mathematical  model, and  the "Institution  Activity 1997-2002"  bar                                                            
graph  shows the large  number,  over 30,000,  of inmate  "bookings"                                                            
each year.  He informed that 20,000  of the bookings involve  people                                                            
new to the Department  system. He also pointed out  the large number                                                            
of  annual  transfers,  which  he  explained   as movement   between                                                            
facilities. He compared  the amount of bookings and transfers to the                                                            
Average Daily Count, or static population of 3,055.                                                                             
                                                                                                                                
Mr. Antrim clarified  the information on the bar graph  for Co-Chair                                                            
Wilken,  showing that  in the year  2000, the  Department  conducted                                                            
over 30,000 admissions  to all facilities, 22,000  transfers between                                                            
facilities and  that the total population was over  3,000. He stated                                                            
that the average daily  count has not changed significantly since no                                                            
new construction has occurred to increase capacity.                                                                             
                                                                                                                                
Senator  Bunde asked  why  the significant  number  of transfers  is                                                            
conducted.                                                                                                                      
                                                                                                                                
Mr. Antrim stated that  inmate transfers are the Department's effort                                                            
to  "balance  accounts"  between  the  overcrowded   facilities.  He                                                            
detailed  the daily  process  of analyzing  the population  of  each                                                            
facility  and determining  which  inmates  would be  transferred  to                                                            
which locations  to ensure each facility  remain below its  capacity                                                            
level. He reiterated this is an expensive process.                                                                              
                                                                                                                                
Senator Bunde  surmised that the rate of recidivism  is considerable                                                            
given that only 3,000 remain incarcerated.                                                                                      
                                                                                                                                
Mr. Antrim agreed the recidivism rate is high.                                                                                  
                                                                                                                                
Senator Bunde  asked the percentage of inmates booked  who are found                                                            
not guilty or are not sentenced to jail terms.                                                                                  
                                                                                                                                
Mr.  Antrim stated  he would  provide  the information,  noting  the                                                            
number varies  each year.  He estimated  approximately one-third  of                                                            
the bookings  are the result of recidivism  based on the  20,000 new                                                            
bookings.                                                                                                                       
                                                                                                                                
Senator Hoffman  noted the  Department has  little control  over the                                                            
number  of bookings  and the average  daily count.  He detailed  the                                                            
process by which an inmate  at the Bethel facility is transferred to                                                            
another  facility due to  overcrowding in  Bethel, and subsequently                                                             
transferred  back for  each  court hearing.  He asked  the  expected                                                            
reduction  of  transfers   that  would  result  from   the  proposed                                                            
construction.                                                                                                                   
                                                                                                                                
Mr. Antrim  assured  a reduction would  occur, although  he did  not                                                            
know  the  exact  amount.  He  explained  that  a  large  number  of                                                            
transfers  occur  between  the Bethel  area  facility  and  outlying                                                            
villages and that  due to the large percentage of  pretrial inmates,                                                            
those inmates  must be transferred to Anchorage to  create space for                                                            
new arrestees.  He stated this situation exists in  Nome as well. He                                                            
predicted that  additional beds at  the two facilities would  reduce                                                            
the number of transfers necessary.                                                                                              
                                                                                                                                
Senator  Hoffman  furthered  that  the expansion  would  also  allow                                                            
correctional  officers  to  remain  at the  facilities  rather  than                                                            
accompanying transferring inmates.                                                                                              
                                                                                                                                
Mr.  Antrim  clarified  that  Alaska  State   Troopers  execute  the                                                            
transfers of  pretrial detainees with  the expenses incurred  by the                                                            
Department of Public Safety.  He indicated that the transfer figures                                                            
listed in the  handout represent both  pretrial detainees  and other                                                            
inmates transferred to  reduce overcrowding, which the Department of                                                            
Corrections  is  responsible  for. He  noted that  the  data in  the                                                            
handout is  intending to  show the institutional  activity  and that                                                            
expansion  of the Bethel  and Nome facilities  would result  in cost                                                            
reductions  to  the Department  of  Public  Safety  as well  as  the                                                            
Department of Corrections.                                                                                                      
                                                                                                                                
Senator  Taylor  asked the  percentage  of  the transfers  that  are                                                            
necessary to avoid overcrowding.                                                                                                
                                                                                                                                
Mr. Antrim was uncertain  and qualified that the number of necessary                                                            
transfers varies daily.  He assured that efforts are made to conduct                                                            
transfers as "economically  possible". He stated that almost half of                                                            
the inmates housed at the  Lemon Creek Correctional Center in Juneau                                                            
are from the Anchorage  area and are housed in Juneau  to make space                                                            
available  in Anchorage for  inmates from  other outlying areas.  He                                                            
characterized the transfer process as "quite a shell game".                                                                     
                                                                                                                                
Senator Taylor  commented on the amount  of "juggling" required  and                                                            
the  "horrendous"  cost  of  these efforts.  He  surmised  the  only                                                            
solution  would be adequate  facilities in  each community  and that                                                            
construction  one or more large facility  in one location  would not                                                            
address  the issue. He  shared that  when he served  as a judge,  he                                                            
chose community  service over incarceration  as sentencing  to avoid                                                            
the expense of inmate transfer.                                                                                                 
                                                                                                                                
Senator Olson  asked whether private  prisons should be part  of the                                                            
discussion.                                                                                                                     
                                                                                                                                
Senator Bunde asked if  the projected inmate population figures take                                                            
into account  the aging  of the  general population  as well  as the                                                            
possibility  that the  population  in Alaska  could  decline in  the                                                            
event of a  discontinuation of the  permanent fund dividend  program                                                            
or increased taxation.                                                                                                          
                                                                                                                                
Mr.  Burnett explained  that  the data  utilizes  the Department  of                                                            
Labor and Workforce  Development demographic  statistics  as well as                                                            
further analysis conducted by the Department of Corrections.                                                                    
                                                                                                                                
Mr.  Antrim  next  addressed  a bar  graph  in  the  handout  titled                                                            
"Comparison  of  Facilities  with  Varying   Missions"  listing  the                                                            
different costs  of four existing  correctional facilities  based on                                                            
their  mission, and  another  page in the  handout,  which reads  as                                                            
follows.                                                                                                                        
                                                                                                                                
     General Specs                                                                                                              
     Draft CS SB 65                                                                                                             
                                                                                                                                
        · 1250 beds                                                                                                             
        · 1000 medium custody beds (est.)                                                                                       
        · 190 close custody beds (est.)                                                                                         
        · 60 maximum/segregation beds                                                                                           
                                                                                                                                
Mr. Antrim  spoke to  other pages  in the handout,  which lists  the                                                            
total  cost of  this legislation  as  $94.94: $51.36  for  operating                                                            
costs, $22.92  for capital  costs and $20.66  "other direct  costs",                                                            
assuming a  25-year term in debt issue.  He indicated these  figures                                                            
apply to  a proposed facility  located in  Sutton within the  Mat-Su                                                            
Borough.                                                                                                                        
                                                                                                                                
Senator Taylor asked how the capital costs were determined.                                                                     
                                                                                                                                
Mr. Burnett  responded that the amounts  are "based on the  language                                                            
of SB 65 that  would have the Department  entering into a  lease for                                                            
this  facility".  He  clarified  that  the  capital  cost  would  be                                                            
included in the State's  cost and that the estimated capital cost of                                                            
$22.92 assumes  that the total capital cost for a  1250-bed facility                                                            
is $132 million financed with a revenue bond for 25 years.                                                                      
                                                                                                                                
Mr. Antrim indicated this  is detailed on the page titled "Estimated                                                            
Debt Service."                                                                                                                  
                                                                                                                                
Senator Taylor asked who would own the facility.                                                                                
                                                                                                                                
Mr. Burnett  replied  that under the  provisions  of this bill,  the                                                            
facilities  would be  a lease/purchase  arrangement  with the  State                                                            
paying the  Borough lease and assuming  ownership at the  end of the                                                            
lease term.                                                                                                                     
                                                                                                                                
Senator Taylor  asked if  the Borough would  earn a profit  from the                                                            
lease.                                                                                                                          
                                                                                                                                
Mr. Burnett answered it would not.                                                                                              
                                                                                                                                
Senator Bunde asked for  a breakdown of the "other costs" indicated.                                                            
                                                                                                                                
Mr. Burnett  replied that  the earlier referenced  "Prison  Bed Cost                                                            
Comparison"  spreadsheet details  these costs  for inmate  programs,                                                            
medical costs, administrative costs and statewide direct costs.                                                                 
                                                                                                                                
Senator Bunde calculated the medical costs at $11.88.                                                                           
                                                                                                                                
Mr.  Burnett  detailed  the estimates  of  medical  staffing  levels                                                            
comparing differed scenarios.                                                                                                   
                                                                                                                                
Senator B. Stevens  asked how the $22.92 capital cost  listed on the                                                            
handout relates to Amendment #1.                                                                                                
                                                                                                                                
Mr. Burnett responded that  this amount only relates to the proposed                                                            
facility in the Mat-Su Borough.                                                                                                 
                                                                                                                                
Senator B. Stevens calculated the daily amount at $30.                                                                          
                                                                                                                                
Mr. Burnett stated he would  review the figures, but pointed out the                                                            
$11,000 limit adopted in the amendment is a maximum amount.                                                                     
                                                                                                                                
Mr.   Antrim  interjected   that   the  "Estimated   Debt   Service"                                                            
spreadsheet  calculates $30.62 for  a 15-year debt term,  and stated                                                            
that  if  the term  were  lengthened,  the  daily  amount  would  be                                                            
reduced.                                                                                                                        
                                                                                                                                
Mr. Antrim  then  referenced the  pages titled  "Bethel Expansion",                                                             
"Fairbanks   Expansion"  and   "Anchorage   Expansion"  as   showing                                                            
justification for the projects.  He noted the presence of a Superior                                                            
Court in  Bethel, resulting  in a  number of  pretrial detainees  at                                                            
that location and the United  States Marshall's expected increase in                                                            
the number of  federal detainees housed in Anchorage  and Juneau. He                                                            
also  indicated   diagrams  illustrating   the  expansions   in  the                                                            
Fairbanks Correctional Center and the Anchorage Jail.                                                                           
                                                                                                                                
                                                                                                                                
SFC 03 # 55, Side A 10:41 AM                                                                                                    
                                                                                                                                
                                                                                                                                
JIM   LECRONE,   Retired   Correctional   Officer,   testified   via                                                            
teleconference   from  Anchorage,   about  the  dangers   of  prison                                                            
overcrowding.                                                                                                                   
                                                                                                                                
DEE HUBBARD,  Sterling Resident and  Citizen Activist, testified  in                                                            
person in support of this legislation.                                                                                          
                                                                                                                                
Senator Olson  asked of Mr.  Lecrone ever feared  for his life  as a                                                            
result of overcrowding.                                                                                                         
                                                                                                                                
Mr.  Lecrone informed  that  he  was stationed  in  lesser  security                                                            
facilities and although  wrestling occurred, he never feared for his                                                            
life.                                                                                                                           
                                                                                                                                
Senator Olson asked if  weapons were therefore not found on inmates.                                                            
                                                                                                                                
Mr. Lecrone  corrected that inmates  were found to have weapons  and                                                            
described these weapons.                                                                                                        
                                                                                                                                
Senator Taylor requested  a comparison of the number of escapees and                                                            
assaults  committed  by Alaskan  inmates at  the  private prison  in                                                            
Arizona versus public facilities in Alaska.                                                                                     
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 10:51 AM                                                                          

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