Legislature(2005 - 2006)SENATE FINANCE 532

02/14/2005 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 60 EXTEND SUICIDE PREVENTION COUNCIL TELECONFERENCED
Moved SB 60 Out of Committee
*+ SB 97 SUPPLEMENTAL APPROPRIATIONS/CBR TELECONFERENCED
Scheduled But Not Heard
*+ SB 98 SUPPLEMENTAL APPROPRIATIONS: FAST TRACK TELECONFERENCED
Heard & Held
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 14, 2005                                                                                    
                             9:04 a.m.                                                                                        
                                                                                                                                
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Green convened the meeting at approximately 9:04:12 AM.                                                              
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Bert Stedman                                                                                                            
Senator Donny Olson                                                                                                             
Senator Fred Dyson                                                                                                              
                                                                                                                                
Also Attending:  SHANNON STRAUBE, Staff to Senator  Ben Stevens; PAT                                                          
DAVIDSON,   Legislative   Auditor,   Legislative   Audit   Division,                                                            
Legislative  Affairs  Agency;  CHERYL FRASCA,  Director,  Office  of                                                            
Management  and  Budget,  Office  of  the  Governor;  ERIC  SWANSON,                                                            
Director,  Division   of  Administrative  Services,   Department  of                                                            
Administration;  AL  CLOUGH,  Deputy  Commissioner,   Department  of                                                            
Commerce,  Community  and Economic  Development;  JOELLEN  HANRAHAN,                                                            
Director,  Division   of  Administrative  Services,   Department  of                                                            
Commerce, Community and  Economic Development; PORTIA PARKER, Deputy                                                            
Commissioner,  Department of Corrections;  CHARLINE GRIFFIN,  Acting                                                            
Director,  Division   of  Administrative  Services,   Department  of                                                            
Corrections;  KAREN  REHFELD,  Deputy  Commissioner,  Department  of                                                            
Education  and Early  Development;  EDDY JEANS,  Manager,  Education                                                            
Supports Services,  Department of  Education and Early Development;                                                             
KRISTIN   RYAN,  Director,   Division   of   Environmental   Health,                                                            
Department  of Environmental Conservation;  NANCY SLAGLE,  Director,                                                            
Division of  Administrative Services,  Department of Transportation                                                             
and  Public  Facilities;   JOHN  CRAMER,  Director,  Administrative                                                             
Services  Division, Department  of  Military and  Veterans  Affairs;                                                            
JOHN   MACKINNON,  Deputy   Commissioner   of   Highways  &   Public                                                            
Facilities, Department of Transportation and Public Facilities                                                                  
                                                                                                                                
Attending  via  Teleconference:   From  Offnet  Sites:   JOHN  KATZ,                                                          
Director of State/Federal  Relations and Special Counsel, Washington                                                            
District  of   Columbia  Office,   Office  of  the  Governor;   From                                                            
Anchorage:  DAN  SEAMOUNT,  Commissioner/Chair,  Alaska  Oil  &  Gas                                                            
Conservation Commission,  Department of Administration;  JACK HARTZ,                                                            
P.E.,  Senior Reservoir  Engineer,  Alaska  Oil &  Gas Conservation                                                             
Commission, Department  of Administration; KATE GIARD, Commissioner,                                                            
Regulatory  Commission  of  Alaska (RCA),  Department  of  Commerce,                                                            
Community and Economic Development                                                                                              
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 60-EXTEND SUICIDE PREVENTION COUNCIL                                                                                         
                                                                                                                                
The  Committee   heard  from  the   sponsor  and  the  Division   of                                                            
Legislative Audit. The bill reported from Committee.                                                                            
                                                                                                                                
SB 98-SUPPLEMENTAL APPROPRIATIONS: FAST TRACK                                                                                   
                                                                                                                                
The Committee  heard  fast track  supplemental  request information                                                             
from the Office  of the Governor; the Department of  Administration;                                                            
the Department of Commerce,  Community and Economic Development; the                                                            
Department  of Corrections;  the Department  of Education and  Early                                                            
Development;  the  Department  of  Environmental  Conservation;  the                                                            
Department  of  Transportation   and  Public  Facilities;   and  the                                                            
Department  of Military and Veterans  Affairs. The bill was  held in                                                            
Committee.                                                                                                                      
                                                                                                                                
SB 97-SUPPLEMENTAL APPROPRIATIONS/CBR                                                                                           
                                                                                                                                
This bill was scheduled but not heard.                                                                                          
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 60                                                                                                         
     "An Act extending the termination date of the Statewide                                                                    
     Suicide Prevention Council; and providing for an effective                                                                 
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Green  informed that the  intent is to move this  bill from                                                            
Committee  today. Therefore,  she urged  supporters  of the bill  to                                                            
submit   their  comments   in  writing   or  via   other  forms   of                                                            
communication  as  substantial  testimony  might impede  the  bill's                                                            
forward momentum.  She noted  that Fiscal  Note #1, which  specified                                                            
zero funding  requirements  for FY  2006 through  FY 2011, has  been                                                            
replaced  by a  revised Department  of  Health and  Social  Services                                                            
fiscal note, dated February  11, 2005, which "properly" depicts zero                                                            
funding  for FY 06  and $119,000  per year  for FY  2007 through  FY                                                            
2011. The  Council would  be funded in the  Governor's budget  in FY                                                            
06.                                                                                                                             
                                                                                                                                
SHANNON STRAUBE,  Staff to Senator  Ben Stevens, the sponsor  of the                                                            
bill, explained  that this legislative would extend  the termination                                                            
date of  the Suicide Prevention  Council,  which was established  in                                                            
2001, to June  30, 2009. The Division  of Legislative Audit's  audit                                                            
regarding  the  Council,  Audit  Control  Number  06-20037-05  dated                                                            
November 15,  2004 [copy on file],  recommended that the  Council be                                                            
extended.  During a  Senate Health,  Education  and Social  Services                                                            
(Senate H&SS)  committee hearing  on this  bill, the development  of                                                            
"measurable    performance   indicators"    was   discussed.    That                                                            
recommendation  was  forwarded to  the Council.  A  letter [copy  on                                                            
file] to  Senator Fred Dyson,  Chair of the  Senate H&SS  committee,                                                            
from Council  Chair, Jeanine  Sparks, dated  Feb. 3, 2005  indicates                                                            
that the Council  would be addressing the recommendation  during the                                                            
quarterly meeting scheduled for February 22 and 23, 2005.                                                                       
                                                                                                                                
Co-Chair  Green  understood  that  the  Audit  had  been  thoroughly                                                            
discussed  by  the   Senate  H&SS  Committee.  The  development   of                                                            
performance measures is important and should be furthered.                                                                      
                                                                                                                                
PAT  DAVIDSON,  Legislative  Auditor,  Legislative  Audit  Division,                                                            
Legislative  Affairs Agency  stated that she  would be available  to                                                            
answer questions  pertaining to the findings and recommendations  of                                                            
the Audit.                                                                                                                      
                                                                                                                                
Co-Chair  Green asked whether  Ms. Davidson  agreed that the  Senate                                                            
H&SS Audit discussion was thorough.                                                                                             
                                                                                                                                
Ms. Davidson affirmed.                                                                                                          
                                                                                                                                
Co-Chair  Wilken  moved  to  report the  bill  from  Committee  with                                                            
individual recommendations and new fiscal note.                                                                                 
                                                                                                                                
There being no  objection, SB 60 was REPORTED from  Committee with a                                                            
revised  zero  fiscal  note,  dated   February  11,  2005  from  the                                                            
Department of Health and Social Services.                                                                                       
                                                                                                                                
AT EASE 9:10:43 AM / 9:13:04 AM                                                                                             
                                                                                                                                
Co-Chair Wilken chaired the remainder of the meeting.                                                                           
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 98                                                                                                         
     "An   Act   making    supplemental   appropriations,    capital                                                            
     appropriations,  other  appropriations,  and reappropriations;                                                             
     amending  appropriations; making  appropriations to  capitalize                                                            
     funds; and providing for an effective date."                                                                               
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair   Wilken  noted   that  public  testimony   would   not  be                                                            
entertained   today,   as  the   intent   is  to   hear   Department                                                            
presentations  regarding the  Fast Track Supplemental  bill.  It was                                                            
noted that  some of  the Fast  Track Supplemental  items were  self-                                                            
explanatory and would not,  therefore, be discussed. [NOTE: Co-Chair                                                            
Wilken inadvertently referenced  the Fast Track Supplemental bill as                                                            
SB 97 rather than SB 98.]                                                                                                       
                                                                                                                                
CHERYL FRASCA, Director,  Office of Management and Budget, Office of                                                            
the  Governor  budget  informed  that the  FY  2006  budget  package                                                            
presented  by  Governor  Frank  Murkowski   on  December  15,  2004,                                                            
included a  $125 million increment  consisting of $85 million  in FY                                                            
2005   supplemental   requests  and   $40  million   in   Governor's                                                            
Initiatives.  This increment  was "identified  as a placeholder  for                                                            
additional  spending  out  of current  year  revenues."  There is  a                                                            
substantiated   reason  for  the  inclusion  of  each  supplemental                                                             
request, and  while the total supplemental  budget exceeds  the $125                                                            
million  increment by  $17 million,  the Administration  sought  out                                                            
alternative  savings mechanisms  such things  as changes in  formula                                                            
driven programs to offset the additional expenses.                                                                              
                                                                                                                                
Ms.  Frasca stated  that  in addition  to  traditional supplemental                                                             
requests   relating  to   unanticipated  events,   $40  million   of                                                            
Governor's   Initiatives  for  "non-traditional"   items   is  being                                                            
requested:  a  $28  million  sum lump  amount  for  additional  work                                                            
relating to the  gas pipeline, a significant portion  of which would                                                            
address Department  of Law pipeline  related expenses; $6.5  million                                                            
to support "the  Governor's commitment" to assist  small cities with                                                            
elevated fuel  costs via the Small  City Energy Assistance  Program;                                                            
and another  $5.5 million  to provide for  Department of Health  and                                                            
Social Services programs  the Governor would like to implement prior                                                            
to FY 2006. In regards  to the Small City Energy Assistance Program,                                                            
it was noted  that while escalating  market prices for oil  increase                                                            
revenues  to the  State, "the  downside  is that  it also  increases                                                            
utility costs throughout the State."                                                                                            
                                                                                                                                
Ms. Frasca  stated that $37 million  of the approximate $97  million                                                            
in  general   funds  being  requested   would  address  traditional                                                             
supplemental  needs  relating  to  fire  suppression  efforts.  Cost                                                            
containment  measures being  developed by  the Department of  Health                                                            
and Social Services  to address increased costs associated  with the                                                            
Medicaid program  have not been completely finalized,  and therefore                                                            
$36  million of  the Department's  total  $39  million supplemental                                                             
request  is for  general funds.  Seven  million dollars  of the  $11                                                            
million  supplemental request  of the Alaska  Marine Highway  System                                                            
(AMHS)  would address  higher fuel  costs. Several  million  dollars                                                            
would support  Department  of Transportation  and Public  Facilities                                                            
highway and aviation  expenses; and $6.5 million would  address such                                                            
things  as  legal  expenses  and  the  Department   of Corrections'                                                             
contractual obligations relating to out-of-State prison costs.                                                                  
                                                                                                                                
Co-Chair  Wilken  noted  that  the  requests   being  presented  are                                                            
outlined  in  the  eight-page   "Summary  of  Major  FY  05  Funding                                                            
Requests"  handout  [copy  on  file],  prepared  by  the  Office  of                                                            
Management and Budget on February 7, 2005.                                                                                      
                                                                                                                                
Office of the Governor                                                                                                        
                                                                                                                                
     Item: 33                                                                                                                   
     Section: 8                                                                                                                 
     RDU: Arctic National Wildlife Refuge                                                                                       
     Supplemental Need: Funds for support of national efforts to                                                                
     open ANWR for oil and gas exploration and development                                                                      
     $500,000 General Funds                                                                                                     
                                                                                                                                
JOHN KATZ, Director of  State/Federal Relations and Special Counsel,                                                            
Washington,  District of  Columbia Office,  Office of the  Governor,                                                            
testified via teleconference  from an offnet site and expressed that                                                            
this  is a good  time to  further  Arctic National  Wildlife  Refuge                                                            
(ANWR) legislation  at the Congressional  level because it  could be                                                            
addressed during their  Budget Reconciliation Process deliberations.                                                            
These  deliberations  are  "cleaner  and  simpler  than  the  normal                                                            
legislative process and  it is not subject to a veto in the Senate."                                                            
However,  passage  of  a  Budget  Resolution   this  year  could  be                                                            
questionable  due to the potential  failure of Congress to  agree on                                                            
issues  unrelated  to  ANWR.  Congress   has  not  passed  a  Budget                                                            
Reconciliation  Bill in two  of the last  three years. Nonetheless,                                                             
the  fact  that  the  Congressional  leadership   is  supportive  of                                                            
including ANWR legislation  in the Budget Reconciliation Bill should                                                            
be recognized  as a major step forward.  Deliberations on  this bill                                                            
are "protracted" and could extend through August.                                                                               
                                                                                                                                
Mr. Katz  noted  that "the  second major  vehicle  for dealing  with                                                            
ANWR" at  the Congressional  level is through  comprehensive  energy                                                            
legislation.  This  issue  also  has some  obstacles  in  its  path,                                                            
unrelated to ANWR. He spoke  in support of Arctic Power and stressed                                                            
that either  it or  something similar  to it would  be necessary  to                                                            
further ANWR  as "the government does  not provide in public  policy                                                            
advocacy; they are the  one entity in the process that's supposed to                                                            
think  about  ANWR  24/7." Arctic  Power  "has  made  major  strides                                                            
forward" in  the last few weeks in  that there has been improvement                                                             
in its  coordination with  the Alaska Congressional  delegation  and                                                            
the Governor's Office;  experienced personnel have joined the staff;                                                            
and  improved   public   policy  campaigns   have  been   developed.                                                            
Nonetheless,  discussions  are  continuing  between  the  State  and                                                            
Arctic Power  regarding the  State's position  that some  additional                                                            
changes  must be made.  In addition  to this  $500,000 Supplemental                                                             
Budget request,  separate FY 06 legislation  is being proposed  that                                                            
could provide  an additional $1.1 million or $1.3  million to Arctic                                                            
Power. The  most prudent  manner through which  to view the  funding                                                            
for Arctic  Power would  be to divide  it into  two components.  The                                                            
first phase would  focus on efforts regarding the  inclusion of ANWR                                                            
legislation in  the Budget Resolution process. Were  the Legislature                                                            
to  appropriate  $500,000,  it would  be  combined with  other  fund                                                            
sources consisting  of prior State  allocations and private  funding                                                            
that could amount  to approximately $225 million.  The initial phase                                                            
of this effort could cost  $750,000. Also occurring during this time                                                            
would  be  efforts  regarding   the  energy  bill,  which  would  be                                                            
addressed via the normal  Congressional process. "A much better idea                                                            
of how  ANWR and  the energy  legislation"  would be  faring in  the                                                            
109th  Congress  would  be  available  about  the  time  the  Alaska                                                            
Legislature  adjoins in May. At that  time, Arctic Power  would have                                                            
"a better handle"  on the outcome of its efforts and  how to proceed                                                            
in the future.  The second phase would  consist of "whatever  Arctic                                                            
Power requires  to complete the efforts  in the aftermath  of Budget                                                            
Reconciliation."                                                                                                                
                                                                                                                                
Co-Chair  Wilken  asked  regarding  the projected  timeline  of  the                                                            
Budget Reconciliation process.                                                                                                  
                                                                                                                                
Mr. Katz  responded that  a timeframe for  Budget Reconciliation  is                                                            
difficult  to estimate.  Were  it to operate  "in  pristine form"  a                                                            
Budget Resolution could  be presented to the President in late April                                                            
or  May. However,  past  history  depicts  that this  process  could                                                            
extend to Congress's  August recess  or beyond. It is also  possible                                                            
that a Budget  bill might not transpire this year.  Its status would                                                            
be clearer in late April or May.                                                                                                
                                                                                                                                
Department of Administration                                                                                                  
                                                                                                                                
     Item: 7                                                                                                                    
     Section: 1                                                                                                                 
     RDU: Non-Public Building Fund Facilities                                                                                   
     Supplemental Need: Increased costs for heating fuel and other                                                              
     utilities for Non-Public Building Fund buildings                                                                           
     $110,000 General Fund                                                                                                      
                                                                                                                                
ERIC  SWANSON,  Director,   Division  of  Administrative   Services,                                                            
Department of Administration  stated that this request would provide                                                            
funding to  address increased fuel  and utilities costs.  Facilities                                                            
provided for by this Fund  include the Governor's Mansion, the Third                                                            
Floor of the Capitol  Building, the Dimond Courthouse,  the Archives                                                            
and Records  Center,  the State Museum  and Annex,  and the  Subport                                                            
Building,  all  of  which are  located  in  Juneau.  Increased  snow                                                            
removal expenses also impacted the budget.                                                                                      
                                                                                                                                
     Item: 24                                                                                                                   
     Section: 7(a)                                                                                                              
     RDU: Capital                                                                                                               
     Supplemental Need: AOGCC costs for gas pipeline reservoir                                                                  
     studies and depletion plan evaluations                                                                                     
     $1,200,000 General Funds                                                                                                   
                                                                                                                                
Mr. Swanson reviewed the supplemental need summary.                                                                             
                                                                                                                                
DAN SEAMOUNT,  Commissioner/Chair,  Alaska  Oil  & Gas Conservation                                                             
Commission  (AOGCC),  Department of  Administration,  testified  via                                                            
teleconference  from Anchorage and  noted that AOGCC has  provided a                                                            
handout [copy on file],  dated February 14, 2005, that describes the                                                            
duties of AOGCC,  the areas of study  that are being furthered,  the                                                            
reason  for General  Fund rather  than regulatory  cost charge  fund                                                            
support, and the reason  for this request being included in the Fast                                                            
Track supplemental  request. The primary issue is  the conducting of                                                            
"a  study  to  evaluate  the  effects  of  major  gas  sales  taking                                                            
reservoir  energy  off of  the  Prudhoe Bay  reservoir  which  could                                                            
result in hundreds  of millions of barrels of oil  loss if it is not                                                            
conducted in the correct  manner." The purpose of the study would be                                                            
to determine methods "through  which to mitigate the costs." Because                                                            
studies  of this  magnitude  require  approximately  three years  to                                                            
complete, AOGCC desires  to advance its responsibilities in order to                                                            
avoid being  a "bottleneck"  in a project  "that is so important  to                                                            
the State."                                                                                                                     
                                                                                                                                
Co-Chair  Wilken, noting  that  the project  is slated  to begin  on                                                            
March 1, 2005  and terminate in 2010,  asked why this request  could                                                            
not be included as part of the FY 2006 normal budgeting process.                                                                
                                                                                                                                
Mr.  Seamount  responded  that  AOGCC  must  complete  the  required                                                            
studies it could  approve any gas line operators'  plans. Once plans                                                            
are approved,  equipment  and other essential  operational  expenses                                                            
could be ordered. These  elements must be addressed years prior to a                                                            
gas pipeline becoming operational.                                                                                              
                                                                                                                                
Co-Chair  Wilken  continued  to puzzle  over  the reason  that  this                                                            
funding request  could not be delayed  until the start of  the FY 06                                                            
fiscal year on July 1, 2005.                                                                                                    
                                                                                                                                
Mr. Seamount responded  that in order to begin "the planning process                                                            
on the  project," AOGCC must  have its budget  developed prior  to a                                                            
March 3, 2005 hearing.                                                                                                          
                                                                                                                                
Co-Chair Green asked whether  any reservoir study expenses have been                                                            
incurred to date.                                                                                                               
                                                                                                                                
Mr. Seamount  expressed that "no direct  costs" have been  incurred.                                                            
                                                                                                                                
Co-Chair  Green asked  whether  the studies  would  be performed  in                                                            
house or by contract.                                                                                                           
                                                                                                                                
Mr. Seamount specified  that the studies would be contracted out "to                                                            
experts in  these types of  reservoir evaluations  … these  are very                                                            
specific kinds of studies."                                                                                                     
                                                                                                                                
Co-Chair  Green asked  whether  a Request  for Proposals  (RFP)  for                                                            
these studies has been developed at this time.                                                                                  
                                                                                                                                
Mr. Seamount answered in the negative.                                                                                          
                                                                                                                                
Co-Chair  Green joined  Co-Chair Wilken  in questioning  the  reason                                                            
that  this request  could  not be  addressed  in the  regular FY  06                                                            
budgeting process.                                                                                                              
                                                                                                                                
Co-Chair  Wilken asked  the reason  for  this being  a General  Fund                                                            
request.                                                                                                                        
                                                                                                                                
Ms.  Frasca  explained  that  all  gas  pipeline  related  expenses,                                                            
regardless  of their timeframes, were  included in the Supplemental                                                             
bill. Each Department  could identify which project's  funding could                                                            
be delayed. In other words, "there is some discretion".                                                                         
                                                                                                                                
Co-Chair  Wilken  asked the  reason  that  the AOGCC  request  seeks                                                            
General Funding.                                                                                                                
                                                                                                                                
M. Frasca  expressed  that  because AOGCC  is funded  by  production                                                            
taxes and  these studies  are not production  related it was  deemed                                                            
inappropriate to utilize that traditional funding source.                                                                       
                                                                                                                                
Senator Olson questioned  what might occur where the request denied.                                                            
                                                                                                                                
Ms. Frasca deferred to Mr. Seamount.                                                                                            
                                                                                                                                
Mr.  Seamount  reiterated  that,  "AOGCC  does  not  want  to  be  a                                                            
bottleneck   in  this  very   important   project."  Expediency   in                                                            
undertaking  the  studies  to  determine  what  the  reasonable  gas                                                            
production  rate  would increase  the  likelihood that  the  forward                                                            
movement of the project would not be impeded.                                                                                   
                                                                                                                                
Co-Chair Wilken  asked regarding the  aforementioned AOGCC  handout.                                                            
                                                                                                                                
JACK  HARTZ, P.E.,  Senior  Reservoir  Engineer,  Alaska  Oil &  Gas                                                            
Conservation  Commission,  Department of  Administration,  testified                                                            
via  teleconference  from Anchorage  and  confirmed  that the  AOGCC                                                            
handout was provided to Committee members.                                                                                      
                                                                                                                                
     Item: 43                                                                                                                   
     Section: 13(a)-(c)                                                                                                         
     RDU: Salary & Benefits Adj.                                                                                                
     Supplemental Need: FY 05 costs for the General Government Unit                                                             
     collective bargaining agreement.                                                                                           
          $2,571,500 General Funds                                                                                              
          $1,138,200 Federal Funds                                                                                              
          $1,856,500 Other Funds                                                                                                
     Total Funds: $5,566,200                                                                                                    
                                                                                                                                
Mr. Swanson stated that  due to the fact that the General Government                                                            
Unit (GGU)  FY 05  contract had  not been ratified  until after  the                                                            
Legislature  had adjourned last year,  the monetary terms  for FY 05                                                            
are  included  in this  supplemental  request.  Theses  funds  would                                                            
provide for GGU health insurance cost increases.                                                                                
                                                                                                                                
Co-Chair Green  asked for confirmation that the funds  were specific                                                            
to GGU health insurance expenses.                                                                                               
                                                                                                                                
Mr. Swanson affirmed.                                                                                                           
                                                                                                                                
Department of Commerce                                                                                                        
                                                                                                                                
     Item: 8                                                                                                                    
     Section: 2(a)                                                                                                              
     RDU: Community Advocacy                                                                                                    
      Supplemental Need: Small city energy assistance program                                                                   
     $6,450,000 General Funds                                                                                                   
                                                                                                                                
AL CLOUGH,  Deputy Commissioner, Department  of Commerce,  Community                                                            
and  Economic Development  stated  that  this request  reflects  the                                                            
Governor's  commitment  to  provide  relief funds  to  offset  small                                                            
communities'  high fuel costs. Approval  of the request would  allow                                                            
communities to  receive shipments of fuel in the Spring  when rivers                                                            
have high water  levels as opposed to later in the  year when levels                                                            
are low and harder  to navigate. This request also  corresponds with                                                            
efforts being undertaken  by the Governor's Energy Council to evolve                                                            
the energy position of small communities.                                                                                       
                                                                                                                                
Senator Stedman  noted that  while the title  of the request  states                                                            
that this  is a  Small City Energy  Impact  Assistance Program,  the                                                            
last line  of the  description in  the SB 98  detailed summary  book                                                            
[copy on file]  states that, "the cities may use the  monies for any                                                            
public  purpose for  which the city  has authority  to spend."  This                                                            
language  insinuates  that  the money  would  be provided  "with  no                                                            
strings attached."  Were that the  case, "the title does  not match"                                                            
the usage of the money.                                                                                                         
                                                                                                                                
Mr.  Clough could  not  speak to  the  concern, as  he  was not  the                                                            
drafter  of the language.  He allowed  that this  would provide  the                                                            
communities  with flexibility, especially  were a community  to have                                                            
such things as federal  Internal Revenue Service (IRS) problems that                                                            
would make it difficult  to route energy assistance programs through                                                            
"without having them attached by the IRS."                                                                                      
                                                                                                                                
Co-Chair Wilken asked whether  altering the language to specify that                                                            
this  funding should  be "a  reimbursement  for fuel  costs …  would                                                            
conform with  the original intent  rather than just a reinstitution                                                             
of revenue sharing."                                                                                                            
                                                                                                                                
Mr. Clough voiced no objection.                                                                                                 
                                                                                                                                
Co-Chair  Wilken  stated  therefore   that  this  would  be  further                                                            
discussed.                                                                                                                      
                                                                                                                                
Senator  Stedman  agreed  that specific  language  would  bring  the                                                            
funding "back on point." The current language is "conflicting."                                                                 
                                                                                                                                
Co-Chair  Wilken agreed and  stated that the  funding should  not be                                                            
approved unless it specifically provided for fuel assistance.                                                                   
                                                                                                                                
Senator  Olson  asked the  number  of communities  that  have  taken                                                            
advantage of this program.                                                                                                      
                                                                                                                                
Mr. Clough  replied that this "formula  driven appropriation"  would                                                            
be  available  to  125  communities  with  small  communities   each                                                            
receiving a  $25,000 payment and larger  communities each  receiving                                                            
$75,000.  As this  is a new  program, no  funds have,  of yet,  been                                                            
appropriated or distributed.                                                                                                    
                                                                                                                                
Co-Chair Wilken  understood that a maximum of 125  communities would                                                            
be subject to the legislation.  He asked that a list of the affected                                                            
communities be provided.                                                                                                        
                                                                                                                                
Mr.  Clough stated  that  the names  of  the communities  and  other                                                            
associated specifics are  included in Section 2(a) beginning on line                                                            
eight, page one of the bill.                                                                                                    
                                                                                                                                
Co-Chair  Wilken asked  whether this  program would  continue  in FY                                                            
2007.                                                                                                                           
                                                                                                                                
Mr. Clough  responded that  this would be  a policy decision  rather                                                            
than a Department  decision. The Department's role  in this endeavor                                                            
is to assist  in making "systemic  changes" that would, in  addition                                                            
to lowering  the cost of delivered  fuel to the communities,  assist                                                            
in  improving  the  overall  energy  costs  to  these  communities.                                                             
Successes in this regard  have been achieved through such mechanisms                                                            
as the  establishment of  fuel cooperatives,  bulk buying,  and bulk                                                            
management of  fuel. Such efforts would, over the  long run, provide                                                            
both "community and economic  enhancements throughout the Bush." The                                                            
savings generated  from these endeavors "could allow  the program to                                                            
essentially  support itself." The  Department views this  as "a one-                                                            
time opportunity to make positive changes."                                                                                     
                                                                                                                                
Co-Chair  Wilken  noted  that,   for  the  past  year,  any  freight                                                            
transiting  through the Port of Anchorage  and onto the road  system                                                            
has  been assessed  a  ten-percent fuel  surcharge.  Therefore,  the                                                            
people  of the District  he represents  have been  "paying extra  to                                                            
live in  their chosen  community."  Therefore,  he voiced  concerned                                                            
that this  program  is community  specific when  fuel expenses  have                                                            
impacted numerous  others. He does  not support this program,  which                                                            
he  viewed  as an  arbitrary  "selective  grant"  program  "with  no                                                            
basis." This "very divisive,  very disturbing" request is his "least                                                            
favorite" request in the Supplemental Bill.                                                                                     
                                                                                                                                
Co-Chair Wilken  asked the reason that the funding  for this program                                                            
is not being presented in the FY 06 budget proposal.                                                                            
                                                                                                                                
Mr. Clough  responded  that funding  this program,  which was  first                                                            
presented in  the Fall by Governor  Murkowski, via the Supplemental                                                             
approach would  allow fuel to be transported  in the Spring  to take                                                            
advantage of high water  levels. Delaying the funding to FY 06 would                                                            
eliminate that  opportunity, as smaller shipments  in the Fall would                                                            
result. Larger savings would be incurred by Spring transits.                                                                    
                                                                                                                                
Senator Bunde  commented that the  detailed summary booklet  denotes                                                            
that this request would  assist small cities that "have taken on the                                                            
financial  responsibilities  of a city  yet lack  the population  or                                                            
commercial sector to generate  revenue through increasing local fees                                                            
or taxes." He  asked regarding a [unspecified] report  that Co-Chair                                                            
Wilken  had, at  a separate  time,  developed regarding  the  earned                                                            
income of residents in unorganized areas of the State.                                                                          
                                                                                                                                
Co-Chair  Wilken recalled  that  18,000 individuals  in unorganized                                                             
Alaska had earned a total of $505 million in FY 04.                                                                             
                                                                                                                                
Co-Chair  Green furthered  earlier  questions  regarding  the FY  07                                                            
funding of this  program; specifically whether its  funding would be                                                            
"rolled"  into  the  base funding  for  FY  06 with  the  intent  of                                                            
continuing the program in FY 07.                                                                                                
                                                                                                                                
Co-Chair Green observed  that Ms. Frasca was "shaking her head, no."                                                            
                                                                                                                                
Senator  Stedman asked, for  procedural clarity,  whether line  item                                                            
language changes  such as specifying  that this funding be  utilized                                                            
specifically "for fuel" is allowable.                                                                                           
                                                                                                                                
Co-Chair Wilken  asked the Administration  to provide the  Committee                                                            
"with  the  procedure  by  which we  would  restrict  this  to  fuel                                                            
purchases only."                                                                                                                
                                                                                                                                
Senator  Olson commented  that,  due to the  high price  of fuel,  a                                                            
"large  portion  of  the  small  communities"   he  represents  "are                                                            
desperate  for some of these  funds." He  asked whether any  studies                                                            
have  been conducted  regarding  the  cost to  the State  were  this                                                            
funding not forthcoming.                                                                                                        
                                                                                                                                
Mr. Clough  responded that while no  studies have been conducted  in                                                            
this regard,  the issue has  been discussed.  "The basic premise  is                                                            
certainly  if small communities  do not have  adequate fuel;  public                                                            
facilities are  at risk." The end result is not good.  Acquiring the                                                            
data  for  such a  study  would  be a  challenge  as  a lot  of  the                                                            
information is  antidotal. However, the situation  is of concern and                                                            
therefore, this request is supported by the Department.                                                                         
                                                                                                                                
Co-Chair  Wilken  noted  that  these  questions   would  be  further                                                            
addressed.                                                                                                                      
                                                                                                                                
     Item: 10                                                                                                                   
     Section: 2(c)                                                                                                              
     RDU: Regulatory Commission of Alaska                                                                                       
     Supplemental  Need: Legal service  costs of $190.0 provided  by                                                            
     the  Department  of Law  were inadvertently  omitted  from  the                                                            
     Regulatory  Commission  of  Alaska's FY  05 budget.  $75.0  for                                                            
     outside  counsel costs and $258.0  to implement the  Regulatory                                                            
     Commission  of  Alaska's  improvement  initiative  to meet  its                                                            
     mission more efficiently and effectively are also included.                                                                
     $523,000 RCA Rcpts                                                                                                         
                                                                                                                                
JOELLEN  HANRAHAN, Director,  Division of  Administrative  Services,                                                            
Department   of  Commerce,   Community  and   Economic  Development                                                             
commented that,  in addition to providing  funding to support  legal                                                            
expenses  that  were  inadvertently   omitted  from  the  Regulatory                                                            
commission of Alaska (RCA)  FY 05 budget, this request would provide                                                            
funds "for the TAPS appeal  on RCA orders" as well as to provide the                                                            
funding for an Improvement Initiative.                                                                                          
                                                                                                                                
Co-Chair  Wilken asked whether  this request  could be addressed  in                                                            
the FY 06 budget.                                                                                                               
                                                                                                                                
Ms.  Hanrahan expressed  that  of the  total request,  $190,000  was                                                            
inadvertently  unfunded  in FY  05  and the  initial  phases of  the                                                            
Improvement Initiative should be undertaken now.                                                                                
                                                                                                                                
KATE  GIARD, Commissioner/Chair,   Regulatory Commission  of  Alaska                                                            
(RCA), Department  of Commerce, Community and Economic  Development,                                                            
testified  via teleconference  from Anchorage  and shared that  when                                                            
she was elected  to her position as Chair of the Commission  on July                                                            
1, 2004, unprecedented  discussions were undertaken with utility and                                                            
pipeline companies  "to address the issues that seem  to come before                                                            
the  Legislature" each  time  the Commission  is  due to  terminate.                                                            
Approval  of this  funding  request  would provide  the Commission,                                                             
which  is due  to terminate  in  2007,  two years  in  which to  re-                                                            
evaluate, "identify and  fix issues" gleamed from the discussions to                                                            
include:  timeliness, accountability,  public  access, and fair  and                                                            
equitable rates.  Continued funding of this Improvement  Initiative,                                                            
which started  in 2004,  would continue  the "significant  momentum"                                                            
towards the  goal of addressing  concerns before  the review  of the                                                            
next RCA  extension in 2007.  She reviewed  some of the issues  that                                                            
are currently being addressed.                                                                                                  
                                                                                                                                
Department of Corrections                                                                                                     
                                                                                                                                
     Item: 12                                                                                                                   
     Section: 3(a)                                                                                                              
     RDU: Office of the Commissioner                                                                                            
     Supplemental  Need: Support for  enhanced correctional  officer                                                            
     and  probation officer  recruiting efforts  in urban and  rural                                                            
     Alaska.   Workplace  Alaska   alone  is  not  bringing   enough                                                            
     applicants.  The department will  purchase TV and radio  spots,                                                            
     and advertisements  in smaller  publications in locations  such                                                            
      as Seward, Bethel, Nome, Kenai, Eagle River and Mat-SU.                                                                   
     $50,000 General Funds                                                                                                      
                                                                                                                                
PORTIA  PARKER,  Deputy  Commissioner,  Department  of Corrections,                                                             
explained   that  this  funding  would   be  required  to   fund  an                                                            
advertising  campaign  to  recruit  new  correction   and  probation                                                            
officers,  as the Department  is currently  experiencing  difficulty                                                            
filling these  positions. This is the first time the  Department has                                                            
had to conduct such a campaign.                                                                                                 
                                                                                                                                
Senator Dyson  questioned the reason  for these difficulties,  as he                                                            
understood  that these  positions'  employee contracts  are some  of                                                            
"the most attractive" in the State.                                                                                             
                                                                                                                                
Ms. Parker  replied that  one issue is that  people "are unaware  of                                                            
the career  opportunities"  in the  Department  of Corrections.  The                                                            
advertising campaign would  assist in publicizing that component. In                                                            
addition  to working  with  the Department  of Labor  and  Workforce                                                            
Development  and  the  University  of  Alaska,  the  Department  has                                                            
conducted, among  other efforts, career and job fairs.  Nonetheless,                                                            
it is "still  having a difficult time"  with receiving a  sufficient                                                            
number of applicants who meet the required qualifications.                                                                      
                                                                                                                                
Senator  Dyson  asked  the  annual   salary  range  of  a  five-year                                                            
correctional officer.                                                                                                           
                                                                                                                                
CHARLINE  GRIFFIN,  Acting  Director,  Division   of Administrative                                                             
Services, Department  of Corrections responded that,  with benefits,                                                            
the salary  would be approximately  $70,000.  She would verify  this                                                            
information.                                                                                                                    
                                                                                                                                
Co-Chair  Wilken asked the  Department to  investigate whether  this                                                            
funding request could be addressed with annual lapsed funds.                                                                    
                                                                                                                                
Ms. Griffin  responded that "no large"  Results Delivery  Unit (RDU)                                                            
lapsed  funds  are  projected  this  year.  A large  amount  of  the                                                            
Department's  money  has been  expended on  overtime  due to  vacant                                                            
positions, leave, and worker's compensation situations.                                                                         
                                                                                                                                
Senator Olson asked about  recruitment efforts targeting local hire,                                                            
specifically in Rural Alaska.                                                                                                   
                                                                                                                                
Ms. Porter responded  that consistent and strong local  hire efforts                                                            
have been conducted as  exampled by the hiring of seven correctional                                                            
officers in Nome during  the recruitment campaign that was conducted                                                            
during the Iditarod Sled  Dog Race last year. Local hire efforts are                                                            
also conducted  in Bethel, which has an 80-percent  local hire rate.                                                            
The  continuance  of Rural  Alaska local  hire  recruitment  efforts                                                            
would be enhanced by this advertising campaign.                                                                                 
                                                                                                                                
     Item: 13                                                                                                                   
     Section: 3(b)                                                                                                              
     RDU: Administrative Services                                                                                               
     Supplemental  Need: The department is seeking  an e-procurement                                                            
     application    to  lower   purchasing    prices   and   improve                                                            
     efficiencies   within  the  buying  process  for  commodities,                                                             
     equipment, food, and services.                                                                                             
     $225,000 General Funds                                                                                                     
                                                                                                                                
Ms. Griffin  noted that the  Department developed  its FY 05  budget                                                            
based upon the  implementation of "a spend management  e-procurement                                                            
type system"  that has  not, of yet,  come to  fruition. An  RFP has                                                            
been developed with the  goal of advancing a system akin to either a                                                            
spend management  program or  a Procurement  Pilot Project in  FY 05                                                            
that would produce savings and efficiencies in FY 06.                                                                           
                                                                                                                                
Co-Chair Wilken  asked the reason the Department decided  to advance                                                            
its own  program  rather than  to wait  for the  State's  e-commerce                                                            
pilot program to be developed.                                                                                                  
                                                                                                                                
Ms. Griffin  responded that  both options  are being explored,  with                                                            
the  possibility  that the  Department  "might  end up  waiting  for                                                            
that." However,  due to the fact that the FY 05 budget  was based on                                                            
the assumption  that the Department would be utilizing  some type of                                                            
e-procurement  system, funds are unavailable to support  any system.                                                            
                                                                                                                                
Co-Chair Wilken stated  that this request would be further analyzed.                                                            
                                                                                                                                
     Item: 14                                                                                                                   
     Section: 3(c)                                                                                                              
     RDU: Out-of-State Contractual                                                                                              
     Supplemental  Need: The new contract with the  Arizona facility                                                            
     started  November  1, 2004. With  the increased  bed cost  from                                                            
     $53.99 to $57.15 and  the projected population at the facility,                                                            
     the  department needs  additional funds  to pay the  contractor                                                            
     for housing Alaskan offenders.                                                                                             
     $2,292,900 General Funds                                                                                                   
                                                                                                                                
Ms. Porter stated that  this request is included in the supplemental                                                            
bill  because  negotiations   regarding  out-of-state  correctional                                                             
facility housing had not  concluded until after the FY 05 budget was                                                            
finalized.                                                                                                                      
                                                                                                                                
     Item: 15                                                                                                                   
     Section: 3(d)                                                                                                              
     RDU: Parole Board                                                                                                          
     Supplemental  Need: Funding  needed to  conduct discretion  and                                                            
     mandatory   parole  hearings  through  the  fiscal   year.  The                                                            
     anticipated savings  from conducting hearings telephonically or                                                            
     using video conferencing equipment were insufficient.                                                                      
     $65,000 General Funds                                                                                                      
                                                                                                                                
Ms. Griffin  shared that  $75,000 in Travel  Funds had been  removed                                                            
from the Parole Board's  FY 05 funding due to the understanding that                                                            
savings would  be incurred by conducting hearings  telephonically or                                                            
via video-conferencing.  However,  this has not proved feasible,  as                                                            
these systems  "do not have the capacity"  to support the  number of                                                            
participants  who need to  or want to attend  those hearings.  These                                                            
include such individuals  as the family of the offender,  the Board,                                                            
attorneys,  and the  victims. This  money would  support the  Parole                                                            
Board's operations  through the end of the fiscal  year. Absent this                                                            
money, hearings would not  be heard and potentially an additional 20                                                            
prisoners  could  be held  in  custody rather  than  possibly  being                                                            
released  on discretionary  parole. This could  incur an  additional                                                            
$195,000 in expenses to the Department.                                                                                         
                                                                                                                                
Co-Chair Green asked whether  the Parole Board must address a parole                                                            
request  within   a  certain  period  of  time.  In  addition,   she                                                            
questioned  the impact that short  funding of the Board might  have.                                                            
                                                                                                                                
Ms. Griffin  responded that  short funding  would negatively  affect                                                            
the Board. The  Board must conduct Mandatory Parole  hearings within                                                            
120  days of  the individual's  being  remanded.  Approximately  425                                                            
Mandatory  Parole  hearings  and  175  Discretionary   hearings  are                                                            
conducted annually.                                                                                                             
                                                                                                                                
Co-Chair  Wilken revisited  Item  13 and  asked whether  any of  the                                                            
$225,000  request for  the e-commerce  system has  been expended  to                                                            
date.                                                                                                                           
                                                                                                                                
Ms. Portia  responded that no expenditures  have been made  to date.                                                            
                                                                                                                                
Department of Education and Early Development                                                                                 
                                                                                                                                
     Item: 17                                                                                                                   
     Section: 4(a)                                                                                                              
     RDU: School Finance and Facilities                                                                                         
     Supplemental Need: Legal and expert services due to the Noon                                                               
     v. State funding lawsuit; extended lapse date to June 30, 2006                                                             
     $230,000 General Funds                                                                                                     
                                                                                                                                
KAREN  REHFELD, Deputy  Commissioner,  Department  of Education  and                                                            
Early Development  corrected the information in the  request in that                                                            
Moore  V. State  rather  than Noon  V.  State is  the  focus of  the                                                            
request. "This  lawsuit was filed last Fall challenging  the State's                                                            
public school  funding formula." The State has "retained  a national                                                            
firm of experts"  to assist State  attorneys in their preparations.                                                             
This  request has  an  extended  lapse date  into  FY 06,  as it  is                                                            
anticipated that the case would "take some time."                                                                               
                                                                                                                                
Co-Chair Wilken  asked whether additional funding  might be required                                                            
in FY 06.                                                                                                                       
                                                                                                                                
Ms. Rehfeld responded  that an amendment from the  Governor would be                                                            
presented in this regard.                                                                                                       
                                                                                                                                
Senator Stedman  noted that $800,000 in total costs  is anticipated.                                                            
                                                                                                                                
EDDY  JEANS, Manager,  Education  Support  Services,  Department  of                                                            
Education  and Early  Development,  replied  that $800,000  is  "the                                                            
preliminary estimate." It might increase as the case advances.                                                                  
                                                                                                                                
Co-Chair  Wilken   understood  that  this  request   pertains  to  a                                                            
disability rather than an adequacy lawsuit.                                                                                     
                                                                                                                                
Ms. Rehfeld  clarified  that  the Noon  V. State  lawsuit, which  is                                                            
incorrectly  referenced  in Item 17,  is a disability  lawsuit.  The                                                            
correct lawsuit  being addressed  in Item 17  is the Moore  V. State                                                            
lawsuit.                                                                                                                        
                                                                                                                                
Co-Chair  Wilken  understood  therefore  that  the  Moore  V.  State                                                            
lawsuit is an adequacy study lawsuit.                                                                                           
                                                                                                                                
Ms. Rehfeld concurred.                                                                                                          
                                                                                                                                
Co-Chair Green  asked for confirmation  that this is a General  Fund                                                            
request.                                                                                                                        
                                                                                                                                
Ms. Rehfeld affirmed.                                                                                                           
                                                                                                                                
Co-Chair  Green opined  that this  "sizable amount  that could  have                                                            
gone toward increasing" the student allocation funding formula.                                                                 
                                                                                                                                
Co-Chair Wilken agreed.                                                                                                         
                                                                                                                                
     Item: 18                                                                                                                   
     Section: 4(b)                                                                                                              
     RDU: Mt. Edgecumbe Boarding School                                                                                         
     Supplemental Need: Residential operating costs related to                                                                  
     expanded student population                                                                                                
     $800,000 General Funds                                                                                                     
                                                                                                                                
Ms. Rehfeld  stated that  this expense relates  to the Department's                                                             
Mt. Edgecumbe  Boarding School project.  This expense is  associated                                                            
with  the residential  housing  program  "including  food  services,                                                            
dormitory  services,   janitorial  services  and   supplies"  as  an                                                            
additional  30 students  are  enrolled in  the School  this year.  A                                                            
corresponding  increase for an additional  30 students is  requested                                                            
in the FY 06 budget.                                                                                                            
                                                                                                                                
Co-Chair Green asked whether  this funding had been requested in the                                                            
FY 05 budget.                                                                                                                   
                                                                                                                                
Ms. Rehfeld acknowledged  that this is the second  time this request                                                            
had  been  submitted.  The Committee  had  discussed,  but  had  not                                                            
approved, a similar request in the budgetary process last year.                                                                 
                                                                                                                                
Co-Chair  Green   asked  whether  "anything  happened"   that  would                                                            
indicate that the Committee  might have changed its position on this                                                            
issue.                                                                                                                          
                                                                                                                                
Ms. Rehfeld was uncertain  as to whether the Committee's "minds have                                                            
been changed."  The School is serving  additional students  and does                                                            
have the additional expenses this year.                                                                                         
                                                                                                                                
Co-Chair  Green asked  for  confirmation that  an  increase is  also                                                            
anticipated for the next school year.                                                                                           
                                                                                                                                
Ms. Rehfeld  affirmed. She noted that  the Legislature had  approved                                                            
capital funds  for an addition to a classroom building  the previous                                                            
year. In addition,  funding has been  approved to renovate  an older                                                            
building  to   serve  as  a  60-bed   dormitory.  Discussions   have                                                            
transpired  regarding whether  or not funding  for an additional  30                                                            
students should  have been included in the FY 05 budget.  Currently,                                                            
students are  being housed on the  third floor of the Sitka  Pioneer                                                            
Home, which had  been vacant. This arrangement "has  worked out very                                                            
well" with  both the students  and the Pioneer  Home residents.  The                                                            
School recently experienced  its highest student retention rate with                                                            
only nine students  choosing to leave the School by  Christmas time.                                                            
"There is  a lot of  excitement and  a lot of  very positive  things                                                            
happening  at Mt.  Edgecumbe  right now.  So the  discussion at  the                                                            
table, I think,  is about the timing, but we do have  the additional                                                            
costs this year."                                                                                                               
                                                                                                                                
Co-Chair Green  commented that it  would be difficult to  approve an                                                            
$800,000 increase  for this School  this year and next year  when no                                                            
other  State  high  school would  be  receiving  a  similar  funding                                                            
"boost". She noted  that money provided to the school  as determined                                                            
by the  number  of students  attending  it should  have assisted  in                                                            
covering  the   operational  cost   of  the  facility.  She   voiced                                                            
disappointment at receiving this supplemental budget request.                                                                   
                                                                                                                                
Co-Chair  Wilken suggested  that a  timeline of  the decisions  that                                                            
have been made  in regards to the School over the  last 18 months be                                                            
developed,  as it would  assist in understanding  how the  situation                                                            
reached  this point. He  voiced that  he was surprised  to see  this                                                            
request.                                                                                                                        
                                                                                                                                
Senator Stedman assumed  that the population increase at this School                                                            
is  due  to  its  caliber  of  performance.  He  asked  whether  the                                                            
corresponding  decrease in the number  of students at other  schools                                                            
would assist in offsetting the costs.                                                                                           
                                                                                                                                
Ms. Rehfeld  responded  that the  School's students  come from  110,                                                            
primarily Rural  Alaska, communities  across the State. While  there                                                            
would  be an  offsetting  decrease  in  those  schools' educational                                                             
student funding  program, the expenses included in  this request are                                                            
for residential  program costs, which  are not provided for  in that                                                            
funding component.  She stressed  that this  funding request  is for                                                            
residential expenses rather than for educational expenses.                                                                      
                                                                                                                                
Senator  Stedman stated that  further information  would be  gleamed                                                            
once the afore-requested  timeline was developed and  discussed. The                                                            
expenses and offsetting  educational components could  be addressed.                                                            
He voiced support for the request.                                                                                              
                                                                                                                                
Senator Olson  also spoke in support of the request.  Continuing, he                                                            
asked how not funding this  request would affect those 30 additional                                                            
students.                                                                                                                       
                                                                                                                                
Ms.  Rehfeld  responded  that,  absent  this  supplemental   request                                                            
funding, the Department's  personal services budget  in its entirety                                                            
would  be  utilized  to  pay  the  residential  and  teaching  staff                                                            
expenses. The students could continue attending the School.                                                                     
                                                                                                                                
Senator  Olson understood  that, absent this  funding, the  School's                                                            
enrollment would decrease by 30 students the next school year.                                                                  
                                                                                                                                
Ms. Rehfeld  responded that  were the Legislature  to disallow  both                                                            
this request  and the FY  06 operating funding  request relating  to                                                            
serving additional  students, and, in light of the  fact that School                                                            
Capital expansion projects  had been approved, the program should be                                                            
re-evaluated.                                                                                                                   
                                                                                                                                
Senator Olson, noting that  he was "a product of the boarding school                                                            
program,"  stated  that  in  addition to  the  challenge  of  having                                                            
increased  enrollment,   efforts  must  be  taken   to  allow  those                                                            
students,  especially students  from  Rural Alaska,  "to survive  in                                                            
college."                                                                                                                       
                                                                                                                                
Senator Stedman  noted that housing  students on the third  floor of                                                            
the Sitka Pioneer Home  should be considered as an offsetting factor                                                            
relating to the finances of the Pioneer Home.                                                                                   
                                                                                                                                
Ms. Rehfeld  characterized the relationship  between the  School and                                                            
the Home as  "a very good relationship."  The utilities and  capital                                                            
improvements  associated   with  preparing  the  facility  to  house                                                            
students  has  worked out  well.  Both  the students  and  the  Home                                                            
residents are happy with the arrangement.                                                                                       
                                                                                                                                
Co-Chair  Wilken  concluded   that  more  work  would  be  conducted                                                            
regarding Item 18.                                                                                                              
                                                                                                                                
     Item: 19                                                                                                                   
     Section: 4(c)                                                                                                              
     RDU: Museum Operations                                                                                                     
     Supplemental Need: Funding shortfall due to unanticipated                                                                  
     decline in program receipts and increased internal                                                                         
     chargebacks.                                                                                                               
     $100,000 General Funds                                                                                                     
                                                                                                                                
Ms. Rehfeld  stated  that this  request would  address the  personal                                                            
costs of operating  Alaska State Museums. One attributing  factor to                                                            
this request was  a $48,000 decrease in program receipts,  which are                                                            
a  major personal  costs  funding  source,  as the  beautiful  sunny                                                            
summer  experienced  in Southeast  Alaska  negatively  impacted  the                                                            
number of museum  visitors. Other  factors include internal  charge-                                                            
backs  for  such  things as  administrative  services,  Information                                                             
Technology (IT)  support, and Board expenses. Internal  charge-backs                                                            
are becoming  more  common as Departments  have  been downsized  and                                                            
general  fund  support  has  decreased.  There  is  also  a  $30,000                                                            
"maximum  vacancy" component  problem. Replacement  funding  options                                                            
are  limited  and offsetting  measures  could  include  closing  the                                                            
museum  for periods  of time.  This  however, would  further  reduce                                                            
program  receipt  revenues.  She voiced  optimism  regarding  FY  06                                                            
funding support for the  museum and the State library as depicted in                                                            
the  Governor's  proposed  budget.  However,   funding  options  are                                                            
limited in FY 05.                                                                                                               
                                                                                                                                
Co-Chair  Green   asked  whether  the  internal  chargebacks   being                                                            
referenced  are  within  the  Department   of  Education  and  Early                                                            
Development or involve other departments.                                                                                       
                                                                                                                                
Ms. Rehfeld  clarified that  the internal  chargebacks are,  for the                                                            
most   part,  within   the  Department   of   Education  and   Early                                                            
Development. There  is a small chargeback component  associated with                                                            
the Department  of Administration. She noted that  relatively little                                                            
general  funds  are  available  within  the Department's   executive                                                            
administration or administrative services divisions.                                                                            
                                                                                                                                
Ms. Rehfeld  characterized the Department  as "a lean organization"                                                             
as,  during  the   past  few  years,  eleven  positions   have  been                                                            
eliminated in its central  administrative office, the Commissioner's                                                            
office,  and   its  Information  Technology   services  components.                                                             
Resorting to  internal chargebacks  was necessary in order  to cover                                                            
Department costs.  Being responsible for chargebacks  prohibited the                                                            
Museum  from  utilizing  funds  to  absorb  this  personal  services                                                            
shortfall.  She  reiterated  that  with  both  the  Legislature  and                                                            
Governor's support, the FY 06 budget would be adequately funded.                                                                
                                                                                                                                
Co-Chair  Wilken noted,  "that  as the  Department  has become  less                                                            
broad with  childcare and  other issues going  to the Department  of                                                            
Labor and Health  and Social Services, the indirect  costs are being                                                            
spread across  those components  that remain."  In this regard,  the                                                            
Legislature  asked that efforts  be made  to unburden the  remaining                                                            
components  from  such  things  as administrative   expenses.  These                                                            
efforts are coming to fruition  in the FY 06 budget. The question as                                                            
to whether  the administrative expenses  are appropriate  is another                                                            
discussion.                                                                                                                     
                                                                                                                                
Senator Stedman  asked whether  the decline  in museum visitors  was                                                            
specific to the Juneau museum.                                                                                                  
                                                                                                                                
Ms. Rehfeld  replied that  the funding request  was not broken  down                                                            
between  the  Juneau  and  Sitka  museums.  She  surmised  that  the                                                            
decrease  in program  receipts  was  primarily attributable  to  the                                                            
Juneau  museum  as  Juneau  typically  receives   a  larger  visitor                                                            
population than Sitka;  however, she allowed that the weather was as                                                            
nice in Sitka as it was in Juneau.                                                                                              
                                                                                                                                
     Item: 43                                                                                                                   
     Section: 13(a)-(c)                                                                                                         
     RDU: Salary & Benefits Adj.                                                                                                
     Supplemental Need: FY 05 costs for the General Government Unit                                                             
     collective bargaining agreement.                                                                                           
          $2,571,500 General Funds                                                                                              
          $1,138,200 Federal Funds                                                                                              
          $1,856,500 Other Funds                                                                                                
     Total Funds: $5,566,200                                                                                                    
                                                                                                                                
Ms.  Rehfeld  noted  that  a  small  portion  of  the  Item  43  GGU                                                            
component, which was discussed  by the Department of Administration,                                                            
pertained  to the Department  of Education  and Early Development's                                                             
GGU employees.                                                                                                                  
                                                                                                                                
Department of Environmental Conservation                                                                                      
                                                                                                                                
     Item: 20                                                                                                                   
     Section: 5(a)                                                                                                              
     RDU: Capital                                                                                                               
     Supplemental  Need: Due to safety  issues relating to  emerging                                                            
     bioterrorism  threats  and animal diseases,  changes in  design                                                            
     were necessary  to meet original intent and provide  a safe and                                                            
     secure laboratory  facility. This amendment provides additional                                                            
     funding to cover those design changes and complete                                                                         
      construction of the new Environmental Health Laboratory                                                                   
          $355,000 General Funds                                                                                                
          $500,000 Federal Unrestricted Rcpts                                                                                   
     $855,000 Total Funds                                                                                                       
                                                                                                                                
     Item: 21                                                                                                                   
     Section: 5(b)                                                                                                              
     RDU: Capital                                                                                                               
     Supplemental Need: Agriculture economic disaster match of                                                                  
     $500.0 of federal unrestricted receipts in DNR for non-                                                                    
     existent  federal funds is reappropriated from  sec. 24(n), ch.                                                            
     159,  SLA  2004,  page  81,  to  Department  of  Environmental                                                             
     Conservation  for the Seafood  and Food Safety Lab Replacement                                                             
     project.                                                                                                                   
     ($500,000) Federal Unrestricted Rcpts                                                                                      
                                                                                                                                
KRISTIN   RYAN,  Director,   Division   of   Environmental   Health,                                                            
Department   of  Environmental  Conservation,   stated  that   these                                                            
requests, which would complete  the construction of the Department's                                                            
Environmental  Health laboratory  that is due  to open in the  Fall,                                                            
are  the result  of  changes required  to  respond to  today's  bio-                                                            
terrorism climate.  These efforts were not a consideration  when the                                                            
building  was  originally  designed.   The  design  changes  include                                                            
providing the State's veterinarian  the ability to conduct autopsies                                                            
on animals  for dangerous diseases  in that he necropsy tables  used                                                            
for these  autopsies had  to be  relocated to  a bio-safety  level 3                                                            
area of the facility. In  addition, the location of the shipping and                                                            
receiving area  was changed in order to accommodate  a "safety hood"                                                            
containment  system.  These  improvements  would  serve  to  protect                                                            
employees, customers,  and the community from exposure  to dangerous                                                            
contaminates.                                                                                                                   
                                                                                                                                
Senator   Olson  asked   how  necropsies   have  historically   been                                                            
conducted.                                                                                                                      
                                                                                                                                
Ms. Ryan  responded that  animals were previously  autopsied  at the                                                            
State's virology  laboratory in Fairbanks. The construction  of this                                                            
facility  would provide  the State  "the capacity"  to process  such                                                            
things more expeditiously in Anchorage.                                                                                         
                                                                                                                                
Senator Olson  understood that a new laboratory was  also slated for                                                            
Fairbanks.  Therefore,  he  asked whether  this  might  result in  a                                                            
redundancy of biology and technical staff.                                                                                      
                                                                                                                                
Ms. Ryan responded  that some redundancy  might occur, however,  the                                                            
intention  is  that animals  would  be autopsied  at  the  Anchorage                                                            
environmental  health facility  and  the virology  testing would  be                                                            
confirmed in  the Fairbanks virology  laboratory. Other benefits  of                                                            
this system  would include developing  base sampling to which  other                                                            
subsequent testing could be compared.                                                                                           
                                                                                                                                
AT EASE 10:29:00 AM / 10:29:03 AM                                                                                           
                                                                                                                                
Department of Transportation and Public Facilities                                                                            
                                                                                                                                
     Item: 22                                                                                                                   
     Section: 6(a)                                                                                                              
     RDU: Marine Hwy Stabilization                                                                                              
     Supplemental Need: Fuel cost increases                                                                                     
     $6,813,200 General Funds                                                                                                   
                                                                                                                                
NANCY  SLAGLE,  Director,   Division  of  Administrative   Services,                                                            
Department  of Transportation  and  Public Facilities,  stated  that                                                            
this appropriation would  provide funds to address the Alaska Marine                                                            
Highway System's  FY 05  increased fuel expenses.  The System  would                                                            
experience  appropriately  "a 90-percent  increase"  in fuel  prices                                                            
over  its FY 05  budget.  The System  typically consumes  9.5 to  11                                                            
million  gallons of fuel  each year;  this request  is based  upon a                                                            
usage  projection of  10.2  million gallons.  A graph  titled  "AMHS                                                            
Weekly  OPIS Fuel  Prices"[copy on  file] that  depicts fuel  prices                                                            
from FY 99 through FY 05 was distributed.                                                                                       
                                                                                                                                
Co-Chair Wilken  understood that rather  than lapsing at  the end of                                                            
the  fiscal  year, the  expectation  is  that  this money  would  be                                                            
exhausted by June 30, 2005.                                                                                                     
                                                                                                                                
Ms. Slagle voiced  that this amount should sufficiently  provide for                                                            
FY 05 fuel expenses.                                                                                                            
                                                                                                                                
Co-Chair Wilken  understood therefore that there are  outstanding FY                                                            
05 fuel expenses.                                                                                                               
                                                                                                                                
Ms. Slagle expressed  that the System receives weekly  invoices from                                                            
fuel suppliers.                                                                                                                 
                                                                                                                                
Co-Chair Wilken asked whether the System "hedges" its fuel.                                                                     
                                                                                                                                
Ms. Slagle explained that  there is a Statewide vessel fuel contract                                                            
in  effect  that applies  to  fuel  utilized  by all  State  vessels                                                            
including  the Department  of Transportation  and Public  Facilities                                                            
and the  Department of  Fish and  Game. Fuel price  is dependent  on                                                            
OPIS prices, which  change on a weekly basis. In addition,  delivery                                                            
charges are applied based on location.                                                                                          
                                                                                                                                
Senator  Bunde voiced  the understanding  that  some Marine  Highway                                                            
System employees  attest that,  "due to the  light construction"  of                                                            
the new fast  ferries they would not  operate "as fast as  they were                                                            
intended."  To that  point, he asked  how this  would affect  future                                                            
fuel consumption.                                                                                                               
                                                                                                                                
Ms.   Slagle  stated   that  the   Department's   fuel  consumption                                                             
projections  are  based upon  the  experience to  date  for the  M/V                                                            
Fairweather. While  no change is anticipated regarding  the speed at                                                            
which  the vessel  would operate,  the  recent rough  sea damage  it                                                            
experienced  is being investigated  by the  Department and  the ship                                                            
builder  to   determine  whether   "management  changes"   might  be                                                            
required.  Were  the operating  speed  of  the vessel  reduced,  the                                                            
amount of fuel required would lower rather than increase.                                                                       
                                                                                                                                
Senator  Stedman  stressed  "how  vital"  the  ferry  system  is  to                                                            
Southeast  Alaska and  its "economic  base", and  that he  supported                                                            
efforts that  would make the System  "more effective, and  efficient                                                            
and user-friendly going  forward." However, he questioned the reason                                                            
that fuel consumption  projections would continue  at the historical                                                            
nine to eleven million  gallon level considering the addition of one                                                            
"fast ferry that consumes  substantially more fuel" with another one                                                            
anticipated  to be in operation shortly.  In addition to  the amount                                                            
of fuel that the  fast ferry would consume being underestimated,  he                                                            
understood   that   its  associated   labor   expenses   were   also                                                            
underestimated.                                                                                                                 
                                                                                                                                
Ms.  Slagle  replied that  since  the  second  fast ferry,  the  M/V                                                            
Chenega, would not be operational  until approximately the end of FY                                                            
05 its  expenses  "would not  be taken  into account  as much."  She                                                            
acknowledged  that the System's annual  fuel consumption  has varied                                                            
and assured  that such things as weather  conditions and  the larger                                                            
amount of fuel  required by the M/V  Fairweather have been  factored                                                            
into the System's  projections. While  the M/V Fairweather  requires                                                            
"less personal  services than" the mainliners, it  does require more                                                            
fuel. The  Department is  "conservative in  its approach" as  to how                                                            
the M/V Fairweather would  be operating when placed back in service.                                                            
                                                                                                                                
Senator  Stedman  asked  the  reason  that  the  fast  ferries  were                                                            
furthered since,  in the analysis of the entire ferry  system, "fuel                                                            
is an issue of non impact"  in that with or absent the fast ferries,                                                            
fuel consumption is unaffected.                                                                                                 
                                                                                                                                
Ms. Slagle asked for further clarification of the question.                                                                     
                                                                                                                                
Senator Stedman  expressed that with  the arrival of the  fast ferry                                                            
he would  "have expected  to see  totally higher  fuel consumption,                                                             
regardless of  price for the Marine Highway System  above and beyond                                                            
the historical use"                                                                                                             
                                                                                                                                
Ms. Slagle clarified that  the System is using more fuel with eleven                                                            
million gallons of fuel  being projected for FY 05. Prior to the M/V                                                            
Fairweather  being  operational,   annual  fuel consumption   ranged                                                            
between   nine  and  ten   million  gallons.   She  apologized   for                                                            
"misdirecting" the Committee.                                                                                                   
                                                                                                                                
Senator Olson asked whether  the increase in fuel price has impacted                                                            
ferry customers' fees.                                                                                                          
                                                                                                                                
     Item: 44                                                                                                                   
     Section: 14(a)                                                                                                             
     RDU: Marine Vessel Operations                                                                                              
     Supplemental Need: Fuel cost increases and other increasing                                                                
     operating costs.                                                                                                           
     $12,000,000 AMHS Fund                                                                                                      
                                                                                                                                
Ms. Slagle stated  that the $12 million increase identified  in Item                                                            
14(a) reflects  the System's fuel  and operating cost increases.  In                                                            
addition to a  ten-percent fuel surcharge being added  to passenger,                                                            
car deck, and staterooms  fares, a seven-percent labor rate increase                                                            
went into  effect in  the Summer  of 2005. These  fee increases  are                                                            
projected  to generate $1.7  million for the  System. The System  is                                                            
attempting  to increase its revenues  to offset higher fuel  prices.                                                            
                                                                                                                                
Senator Olson  questioned the reason for implementing  "only" a ten-                                                            
percent surcharge,  as the $1.7 million it might generate  would not                                                            
offset the System's $12 million increase in expenses.                                                                           
                                                                                                                                
Ms.  Slagle  responded  that  it  is  difficult  "to  determine  the                                                            
elasticity of demand" in  that how much could fares increase without                                                            
the System loosing further money due to declining ridership.                                                                    
                                                                                                                                
Co-Chair Wilken  noted that the funding for this item  is the Marine                                                            
Highway Fund. Therefore  he asked whether the System is requesting a                                                            
total of  $18.8 million:  $12 million from  the Marine Highway  Fund                                                            
and $6.8  million from  the General  Fund. He  opined that the  AMHS                                                            
Fund is essentially General Fund money.                                                                                         
                                                                                                                                
Ms.  Slagle clarified  that  the  $12 million  Marine  Highway  Fund                                                            
request  "is the  authorization  to expend  from  the Fund  itself."                                                            
Approval  of the $6.8 million  general fund  request would  serve to                                                            
deposit  that money  "directly into  the Fund."  The Marine  Highway                                                            
Fund consists  of general fund money  as well as revenues  generated                                                            
by the System. Since the  Fund had a carry forward amount going into                                                            
FY 05,  "the amount of  subsidization" being  requested in  6(a) for                                                            
the Fund is less than the  authority to spend as specified in 14(a).                                                            
                                                                                                                                
Co-Chair Wilken  calculated therefore that the carry  forward amount                                                            
must be approximately five million dollars.                                                                                     
                                                                                                                                
Ms. Slagle concurred.                                                                                                           
                                                                                                                                
Co-Chair  Wilken stated that  the Department  of Transportation  and                                                            
Public Facilities' supplemental  request presentation would continue                                                            
following   the  Department  of  Military   and  Veterans   Affairs'                                                            
presentation.                                                                                                                   
                                                                                                                                
Department of Military and Veterans Affairs                                                                                   
                                                                                                                                
     Item: 23                                                                                                                   
     Section: 6(b)                                                                                                              
     RDU: Disaster Relief Fund                                                                                                  
     Supplemental Need: Base capitalization of fund $1,000.0; 2004                                                              
     Bering Strait Sea Storm $4,054.4; Interior Earthquake                                                                      
     shortfall $259.3; and Kaktovik Winter Storm $2,363.5                                                                       
     $7,677,200 general fund                                                                                                    
                                                                                                                                
JOHN CRAMER, Director,  Administrative Services Division, Department                                                            
of  Military  and  Veterans  Affairs,  read  the  Supplemental  Need                                                            
language.  The Interior  Earthquake  shortfall is  the result  of an                                                            
earthquake  that  occurred  a  few  years prior  and  to  which  the                                                            
Department successfully  argued "to secure federal  funding for some                                                            
airports." The Kaktovik Winter Storm disaster occurred recently.                                                                
                                                                                                                                
Co-Chair   Wilken   asked   regarding   the   one   million   dollar                                                            
capitalization portion of the request.                                                                                          
                                                                                                                                
Mr. Cramer responded that  it is prudent to have funds in reserve in                                                            
order to address a disaster as it arises.                                                                                       
                                                                                                                                
Co-Chair Wilken asked regarding  the Kaktovik disaster; specifically                                                            
as to  whether the  source of what  caused the  town's generator  to                                                            
malfunction has been identified.                                                                                                
                                                                                                                                
Mr. Cramer responded that this investigation is continuing.                                                                     
                                                                                                                                
Co-Chair  Wilken  hoped that,  when  finalized,  a report  would  be                                                            
provided.                                                                                                                       
                                                                                                                                
     Item: 41                                                                                                                   
     Section: 11                                                                                                                
     RDU: National Guard Military Headquarters                                                                                  
     Supplemental Need:  National Guard Audit Disallowance - Federal                                                            
     auditors  have disallowed  state  expenditures  in FFY05  for a                                                            
     total  of $937,234.  This request  will cover  October 2004  to                                                            
     June 2005. An amendment  will be offered in the FY 06 budget to                                                            
     cover these expenditures  for the remainder of FFY05 and FFY06.                                                            
     The department estimates  they will run out of general funds by                                                            
     the end of March.                                                                                                          
     $446,000 General Funds                                                                                                     
                                                                                                                                
Mr.  Cramer read  the Supplemental  Need.  The Department  would  be                                                            
absorbing a large portion  of the total shortfall through such means                                                            
as not filling vacant positions.                                                                                                
                                                                                                                                
Co-Chair  Wilken asked  for an  example  of the  things the  federal                                                            
audit disallowed.                                                                                                               
                                                                                                                                
Mr. Cramer responded that  a large portion "of the fallout" resulted                                                            
from the disallowance  of expenses associated with  some "people who                                                            
provide supervision to  the workers that are performing functions at                                                            
the bases." This  supervisory scenario has been routine  since 1994.                                                            
The Department  has been working with the auditors  for the past two                                                            
years to "develop methodology that would be more appropriate."                                                                  
                                                                                                                                
Co-Chair Wilken  asked Senator Dyson,  the Committee's Chair  of the                                                            
Department  of  Military  and  Veterans  Affairs   subcommittee,  to                                                            
further address  this issue and provide  a report to the  Committee.                                                            
                                                                                                                                
Senator Dyson concurred.                                                                                                        
                                                                                                                                
Senator  Olson asked  whether the  Department  had anticipated  that                                                            
some of the supervisory expenses might be disallowed.                                                                           
                                                                                                                                
Mr. Cramer responded "no."  The Department has been working with the                                                            
auditors  to address  this  situation.  The  audit review  began  in                                                            
September  2004. In  addition, some  of the federal  money that  has                                                            
been disallowed  is the result of the federal fiscal  year differing                                                            
from the State's,  which required  expenses "to be extrapolated  out                                                            
for the  State's fiscal year."  The federal  fiscal year is  October                                                            
first through September thirtieth.                                                                                              
                                                                                                                                
Senator  Olson  asked whether  significantly   smaller supplemental                                                             
requests would be anticipated  in the future due to the negotiations                                                            
being undertaken.                                                                                                               
                                                                                                                                
Mr. Cramer affirmed.                                                                                                            
                                                                                                                                
Department of Transportation and Public Facilities                                                                            
                                                                                                                                
     Item: 44                                                                                                                   
     Section: 14(a)                                                                                                             
     RDU: Marine Vessel Operations                                                                                              
     Supplemental Need: Fuel cost increases and other increasing                                                                
     operating costs.                                                                                                           
     $12,000.0 AMHS Fund                                                                                                        
                                                                                                                                
Ms. Slagle  stated that this request  is again the authorization  to                                                            
expend from the  AMHS Fund. In addition to providing  funds to cover                                                            
expenses  resulting  from  higher  fuel  prices,  the authorization                                                             
provides  for "unanticipated  costs" resulting  from such things  as                                                            
the  M/V  LeConte  grounding  which  required   the  Department  "to                                                            
contract  out services  so that we  could continue  to maintain  the                                                            
level of service that has  been provided previously." Other expenses                                                            
would include  approximately  $500,000 in  expenses associated  with                                                            
crew training for the new  fast ferry, the M/V Chenega in the spring                                                            
2005.  She noted  that federal  funding  provided  for the  training                                                            
expenses  associated  with  the  M/V  Fairweather.  Risk  management                                                            
premium expenses  and overall  expenses of  the M/V LeConte  and the                                                            
M/V Fairweather have also increased.                                                                                            
                                                                                                                                
Co-Chair  Green asked  for further  information  regarding the  AMHS                                                            
Fund, as like  Co-Chair Wilken, she  viewed it as being essentially                                                             
general funds  rather than "a pot of money sitting  there waiting to                                                            
be spent for this."  Discussion regarding the Fund  should "reflect"                                                            
this.                                                                                                                           
                                                                                                                                
Co-Chair  Wilken understood  that at  one time, there  was a  pot of                                                            
money  as $100,000,000  had been  deposited  into the  AMHS Fund  to                                                            
support the System. That "has been whittled away" to zero.                                                                      
                                                                                                                                
Ms. Slagle  shared that the AMHS Fund  had been established  in 1991                                                            
and  "seeded"  with  $41  million  "with  the  intent  of  providing                                                            
stability  to the AMHS."  That amount equated  to approximately  the                                                            
revenues  the System generated  at the time.  "The revenues  came in                                                            
and the  subsidy went  into the  Marine Highway  Fund; therefore  we                                                            
could have some stability  as to the expenditure of those funds over                                                            
the  year,  and  not  have  to  come  back   for  large  amounts  of                                                            
supplementals  in the meantime." That  balance has been eroded  over                                                            
the years due to such things  as "increased costs, loss of revenues,                                                            
a variety of  things." The Fund is  "to the point now of  just going                                                            
from year to year almost."                                                                                                      
                                                                                                                                
Senator Stedman  asked the  impact of the  M/V LeConte grounding  on                                                            
the risk management insurance premium.                                                                                          
                                                                                                                                
Ms.  Slagle informed  that  the risk  management  premium  increases                                                            
reflected  in this request  result from the  Department's desire  to                                                            
hold  the  AMHS  accountable   for  such  expenses.  Currently   the                                                            
Department's Catastrophic  Reserve Fund is being utilized to pay for                                                            
basic insurance  premium coverage  as well as the insurance  premium                                                            
increases.  However, with  "the reduction of  lapsed monies  and the                                                            
availability  of funds  going into  the Catastrophic  Reserve  Fund"                                                            
diminishing,  the desire is to curtail  such expenditures  from that                                                            
Fund and  have the  AMHS be more  accountable  for them. She  voiced                                                            
being unsure  as to  how the  M/V LeConte grounding  incident  would                                                            
affect premiums.  This might be reflected  in the next responses  to                                                            
the  Request  for  Proposal  (RFP)  for  risk management   insurance                                                            
coverage  contract.  Lloyds  of  London  coordinates  the  insurance                                                            
coverage for AMHS vessels.                                                                                                      
                                                                                                                                
Senator Bunde opined that,  as specified in the detailed information                                                            
regarding  this request, applying  the term  "overhaul" to  the work                                                            
being conducted  on the M/V Fairweather,  is inappropriate  for that                                                            
insinuates that the vessel  has been in operation for a while and is                                                            
being upgraded. Therefore,  he asked whether this term in regards to                                                            
that new vessel  would apply to the  repair work being conducted  to                                                            
address the rough sea damage it experienced.                                                                                    
                                                                                                                                
Ms. Slagle  responded  that it  would apply  to such  things as  the                                                            
vessel's  engine  replacement and  cowling  repairs.  It would  also                                                            
address the  "fix-its:" oil changes  and other things that  occur in                                                            
the  new  vessel,  similar  to  such  things  experienced  when  one                                                            
purchases a new vehicle.                                                                                                        
                                                                                                                                
     Item: 45                                                                                                                   
     Section: 14(b)                                                                                                             
     RDU: Central Region Highways and Aviation                                                                                  
     Supplemental Need: King Salmon airport - prior year invoices                                                               
     outstanding for air traffic control costs.                                                                                 
     $44,500 General Funds                                                                                                      
                                                                                                                                
Senator Olson  asked regarding the Control Tower at  the King Salmon                                                            
airport.                                                                                                                        
                                                                                                                                
Ms. Slagle  stated that an agreement  was recently reached  with the                                                            
Federal Aviation  Administration (FAA)  to continue the air  traffic                                                            
control tower at King Salmon,  as the FAA had planned to discontinue                                                            
that service  due to the  airport's limited  number of flights.  The                                                            
State 's  position is that  this action "would  have caused  a great                                                            
deal of problems."  In addition to  the agreement with the  FAA, the                                                            
Department is paying for a contractor to provide services.                                                                      
                                                                                                                                
Senator Olson,  a pilot, noted that he has flown in  and out of King                                                            
Salmon  and Naknek numerous  times.  He asked the  type of  problems                                                            
that not having a control tower there would create.                                                                             
                                                                                                                                
Ms.  Slagle  understood  that  difficulties  have  been experienced                                                             
during  the  fishing  season  in getting  fish  to  market.  Further                                                            
information would be provided.                                                                                                  
                                                                                                                                
     Item:  46                                                                                                                  
     Section: 14(c)                                                                                                             
     RDU: Program Development                                                                                                   
     Supplemental Need: Legal costs for defense of SB 260, which                                                                
     changed the membership makeup of the policy board for                                                                      
     metropolitan planning organizations.                                                                                       
     $85,000 General Funds                                                                                                      
                                                                                                                                
Senator Bunde asked whether this item might be "premature" as he                                                                
understood that this legal challenge is pending.                                                                                
                                                                                                                                
Ms. Slagle  replied  that the  lawsuit  concerning SB  260 has  been                                                            
filed, and the State is  in the process of delivering a reply brief.                                                            
This would be the legal  cost as estimated by the Department of Law,                                                            
to address  this issue  between now  and the end  of FY 05.  The law                                                            
enacted by SB 260 would become effective July 1, 2005.                                                                          
                                                                                                                                
     Item:  48                                                                                                                  
     Section: 15(a)(1)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental Need: Kotzebue: Obstruction Removal and Safety                                                                
     Area                                                                                                                       
     $5,300.0 Federal Funds                                                                                                     
                                                                                                                                
     Item:  49                                                                                                                  
     Section: 154(a)(2)                                                                                                         
     RDU: Capital                                                                                                               
     Supplemental    Need:   Tenakee    Springs:   Seaplane    Float                                                            
     Rehabilitation.                                                                                                            
     $550.0 Federal Funds                                                                                                       
                                                                                                                                
     Item:  50                                                                                                                  
     Section: 15(b)                                                                                                             
     RDU: Capital                                                                                                               
     Supplemental Need: Surface Transportation Program increase pf                                                              
     $44,150.0 in federal funds as allocated below:                                                                             
                                                                                                                                
     Item:  51                                                                                                                  
     Section: 15(b)(1)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental Need: Alaska Marine Highways: Coffman Cove                                                                    
     Terminal                                                                                                                   
     $1,600,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  52                                                                                                                  
     Section: 15(b)(2)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental  Need:  Alaska  Marine  Highways:  Mitkof  Island;                                                            
     South Mitkof Island Terminal                                                                                               
     $3,500,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  53                                                                                                                  
     Section: 15(b)(3)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental   Need:   Dalton  Highway:   Milepost  37   to  49                                                            
     Reconstruction - Hess Creek to Yukon River                                                                                 
     $1,400,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  54                                                                                                                  
     Section: 15(b)(4)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental   Need:  Glenn  Highway:  Milepost  41  -  Dogwood                                                            
     intersection                                                                                                               
     $1,400,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  55                                                                                                                  
     Section: 15(b)(5)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental  Need: Haines: Ferry Terminal through  town to Old                                                            
     Haines Highway                                                                                                             
     $13,000,000 Federal Funds                                                                                                  
                                                                                                                                
     Item:  56                                                                                                                  
     Section: 15(b)(6)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental Need: Haines Highway: Revetment Reinforcement                                                                 
     $2,400,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  57                                                                                                                  
     Section: 15(b)(7)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental  Need: Ketchikan:  Tongass Highway - Third  Avenue                                                            
     to Tunnel Resurfacing                                                                                                      
     $5,000,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  58                                                                                                                  
     Section: 15(b)(8)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental   Need:   Parks  Highway:   Milepost   72  to   83                                                            
     Reconstruction    -   Willow    Creek   to   Kashwitna    River                                                            
     Reconstruction                                                                                                             
     $1,250,000 Federal Funds                                                                                                   
                                                                                                                                
     Item:  59                                                                                                                  
     Section: 15(b)(9)                                                                                                          
     RDU: Capital                                                                                                               
     Supplemental Need: Parks Highway: Milepost 204 - Summit                                                                    
     Railroad Overcrossing                                                                                                      
     $4,900,000 Federal Funds                                                                                                   
                                                                                                                                
     Item: 60                                                                                                                   
     Section: 15(b)(10)                                                                                                         
     RDU: Capital                                                                                                               
     Supplemental Need: Petersburg: Mitkof Highway - Ferry Terminal                                                             
     South Resurfacing                                                                                                          
     $1,600,000 Federal Funds                                                                                                   
                                                                                                                                
     Item: 61                                                                                                                   
     Section: 15(b)(11)                                                                                                         
     RDU: Capital                                                                                                               
     Supplemental Need: Richardson Highway: Milepost 341 - Eielson                                                              
     Access Ramps                                                                                                               
     $500,000 Federal Funds                                                                                                     
                                                                                                                                
Co-Chair  Wilken stated  that  the requests  described  in Items  48                                                            
through  61  would  amount to  approximately  "$50  million  in  re-                                                            
allocated spending."                                                                                                            
                                                                                                                                
JOHN   MACKINNON,  Deputy   Commissioner   of   Highways  &   Public                                                            
Facilities,  Department  of Transportation  and  Public Facilities,                                                             
informed the  Committee that the Department  is processing  projects                                                            
faster and  therefore, the  authorization to  expend these  funds is                                                            
being  requested.  It is  anticipated  that  the entirety  of  these                                                            
projects would be put out to bid before the end of April 2005.                                                                  
                                                                                                                                
Co-Chair Wilken understood  that this funding would not be new money                                                            
and therefore  asked whether approval of these funds  would displace                                                            
other projects.                                                                                                                 
                                                                                                                                
Mr. MacKinnon  responded that no other  project would be  negatively                                                            
impacted by this request.                                                                                                       
                                                                                                                                
In  response to  a  question  from Co-Chair  Wilken,  Mr.  MacKinnon                                                            
responded that all of these projects have federal match funding.                                                                
                                                                                                                                
Co-Chair Wilken  asked regarding the federal match  for the Kotzebue                                                            
project, Item 48, Section 15(a)(1).                                                                                             
                                                                                                                                
Mr. MacKinnon  responded that its funding would consist  entirely of                                                            
federal funds.                                                                                                                  
                                                                                                                                
Co-Chair Wilken understood  therefore that no general funds would be                                                            
required and no other projects would be displaced.                                                                              
                                                                                                                                
Mr. MacKinnon agreed and  reiterated that the basis for this request                                                            
is that "these projects  had moved up in the pipeline in our ability                                                            
to get these projects  out to bid and out to construction  quicker."                                                            
                                                                                                                                
Co-Chair Wilken  asked for assurance that no other  project would be                                                            
displaced.                                                                                                                      
                                                                                                                                
Mr. MacKinnon affirmed that no other project would be displaced.                                                                
                                                                                                                                
Senator  Stedman   asked  for  further  information   regarding  the                                                            
Department's action "that accelerated these projects."                                                                          
                                                                                                                                
Mr. MacKinnon  commented that "to a certain extent,"  the Department                                                            
is  experiencing  increased  productivity.  Another  factor  is  the                                                            
endeavor to get  these projects "out to bid in the  winter" in order                                                            
to take advantage of short  summer construction seasons. Approaching                                                            
these projects  in this  manner could  speed the  completion  of the                                                            
project "up  a year" as were  these projects  put out to bid  in the                                                            
Spring, work could  begin in the summer as opposed  to being put out                                                            
to bid in the  summer and having to wait until the  following year's                                                            
summer  construction season.  This  timing would  save a  tremendous                                                            
amount of administrative expenses associated with the projects.                                                                 
                                                                                                                                
Co-Chair Wilken asked whether  these projects were on a list or were                                                            
simply ready to go to bid.                                                                                                      
                                                                                                                                
Mr. MacKinnon  replied  that these  projects were  on the  Statewide                                                            
Transportation  Improvement  Program  (STIP)  project  list  or  the                                                            
State's aviation project list and were ready to bid.                                                                            
                                                                                                                                
Ms.  Slagle noted  that  many of  the projects  such  as the  Haines                                                            
Highway: Revetment Reinforcement  project involve safety issues that                                                            
should be addressed  as expediently as possible. Others  such as the                                                            
Coffman Cove terminal  and the South Mitkof Island  terminal involve                                                            
"timing issues", as work  must begin in order to accommodate another                                                            
ferry  that  the Inter-Island  Ferry  Authority  would  be  bringing                                                            
online.                                                                                                                         
                                                                                                                                
Co-Chair Wilken  recalled that the previous Legislative  Session, it                                                            
had  been  communicated   that  the  federal  airport   and  surface                                                            
transportation   funding  "was  constricting."   This  funding   was                                                            
received unexpectedly.                                                                                                          
                                                                                                                                
Ms. Slagle  acknowledged  that the State's  federal highway  program                                                            
funding has been in turmoil  this past year. It is currently looking                                                            
"very positive" for the State.                                                                                                  
                                                                                                                                
Co-Chair Wilken announced that the bill would be HELD in Committee.                                                             
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Wilken adjourned the meeting at 11:01 AM.                                                                              

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