Legislature(2005 - 2006)SENATE FINANCE 532

04/11/2005 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 66 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ HB 67 APPROP: OPERATING BUDGET/LOANS/FUNDS/CBR TELECONFERENCED
Heard & Held
+ Sub-Committee Reports to Full Committee TELECONFERENCED
Bills Previously Heard/Scheduled
+= SB 130 WORKERS' COMPENSATION TELECONFERENCED
Moved CSSB 130(FIN) Out of Committee
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 11, 2005                                                                                      
                             9:13 a.m.                                                                                        
                                                                                                                                
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Green convened the meeting at approximately 9:13:51 AM.                                                              
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
Also Attending:   SENATOR  RALPH SEEKINS;  PAUL LISANKIE,  Director,                                                          
Division  of   Workers'  Compensation,   Department  of   Labor  and                                                            
Workforce Development;  GREG O'CLARAY,  Commissioner, Department  of                                                            
Labor and Workforce  Development; LINDA HALL, Director,  Division of                                                            
Insurance, Department  of Community and Economic Development;  LYNNE                                                            
SMITH, Staff  to Senator Bunde; JAMES  ARMSTRONG, Staff to  Co-Chair                                                            
Wilken; GUY  BELL, Assistant Commissioner,  Department of  Labor and                                                            
Workforce Development; MILES BAKER, staff to Senator Stedman;                                                                   
                                                                                                                                
Attending via  Teleconference:  From an offnet location:  DR WILLIAM                                                          
PFIEFER, Alaska Chiropractic Society                                                                                            
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
                                                                                                                                
SB 130-WORKERS' COMPENSATION/ INSURANCE                                                                                         
                                                                                                                                
The Committee  heard from the sponsor,  the Department of  Labor and                                                            
Workforce  Development, the  Department of  Commerce, Community  and                                                            
Economic  Development,  and  the  Alaska  Chiropractic  Society.  An                                                            
amendment was adopted and the bill was reported from Committee.                                                                 
                                                                                                                                
HB  66-APPROP: MENTAL HEALTH BUDGET                                                                                             
HB  67-APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                     
                                                                                                                                
The Committee  heard  reports and  recommendations  from the  budget                                                            
subcommittees. The bill was held in Committee.                                                                                  
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 130(JUD)                                                                                            
     "An   Act  relating   to  a   special  deposit   for   workers'                                                            
     compensation  and employers'  liability  insurers; relating  to                                                            
     assigned   risk  pools;  relating   to  workers'  compensation                                                             
     insurers;  stating the intent  of the legislature, and  setting                                                            
     out limitations,  concerning the interpretation,  construction,                                                            
     and implementation  of workers' compensation  laws; relating to                                                            
     the  Alaska  Workers'  Compensation  Board;  assigning  certain                                                            
     Alaska  Workers' Compensation  Board functions to the  division                                                            
     of  workers'  compensation  in  the  Department  of  Labor  and                                                            
     Workforce  Development and to that department,  and authorizing                                                            
     the board to delegate  administrative and enforcement duties to                                                            
     the  division;  providing  for  workers'  compensation  hearing                                                            
     officers  in workers'  compensation  proceedings;  relating  to                                                            
     workers'  compensation medical benefits and to  charges for and                                                            
     payment   of  fees  for  the  medical  benefits;   relating  to                                                            
     agreements  that  discharge  workers'  compensation  liability;                                                            
     relating   to  workers'   compensation   awards;  relating   to                                                            
     reemployment  benefits and job  dislocation benefits;  relating                                                            
     to   coordination   of  workers'   compensation   and   certain                                                            
     disability   benefits;   relating  to   division  of   workers'                                                            
     compensation   records;  relating   to  release  of   treatment                                                            
     records;  relating to an employer's failure to  insure and keep                                                            
     insured or provide  security; relating to workers' compensation                                                            
     proceedings;  providing for a  maximum amount for the  cost-of-                                                            
     living adjustment  for workers' compensation benefits; relating                                                            
     to  attorney  fees  with  respect  to  workers'  compensation;                                                             
     providing  for  the department  to  enter into  contracts  with                                                            
     nonprofit  organizations  to provide  information services  and                                                            
     legal  representation   to injured  employees;   providing  for                                                            
     administrative  penalties  for employers  uninsured or  without                                                            
     adequate  security  for  workers'  compensation;   relating  to                                                            
     fraudulent  acts or false or misleading statements  in workers'                                                            
     compensation   and  penalties  for  the  acts  or  statements;                                                             
     providing  for members  of a  limited liability  company  to be                                                            
     included as an employee  for purposes of workers' compensation;                                                            
     establishing  a workers' compensation  benefits guaranty  fund;                                                            
     making conforming  amendments; providing for a study and report                                                            
     by  the medical  services  review committee;  establishing  the                                                            
     Task  Force  on Workers'  Compensation;  and providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This was the first hearing for this bill in the Senate Finance                                                                  
Committee.                                                                                                                      
                                                                                                                                
SENATOR RALPH  SEEKINS introduced  the bill  as chair of the  Senate                                                            
Judiciary Committee. The  Judiciary Committee, indicating the effort                                                            
invested, considered  approximately 22 amendments  to this bill. The                                                            
Judiciary Committee  discovered the  volatility of the issue  though                                                            
the receipt of  many telephone calls from small business  operators.                                                            
The  increasing  insurance  costs  have  become too  high  for  many                                                            
businesses.                                                                                                                     
                                                                                                                                
Senator  Seekins  reported  that Alaska  companies  pay  the  second                                                            
highest  rates in  the nation  for workers  compensation  insurance,                                                            
following  the state  of California.  The  medium  premium index  is                                                            
approximately  two percent compared to the rates assessed  in Alaska                                                            
of 4.6 percent.  The index for businesses operating  in the state of                                                            
North  Dakota is  the lowest  in the  nation at  1.08 percent.  This                                                            
demonstrates the higher cost to do business in Alaska.                                                                          
                                                                                                                                
Senator  Seekins remarked  that Alaska  has approximately  the  same                                                            
"score" as North  Dakota and asserted, "Something  is terribly wrong                                                            
with the system."                                                                                                               
                                                                                                                                
9:16:47 AM                                                                                                                    
                                                                                                                                
Senator Seekins qualified  that the matter could not be fully solved                                                            
at this  time, but would  rather require  a continuing effort.  This                                                            
legislation  provides that  a task  force would  be formed over  the                                                            
following legislative  interim charged  with identifying  additional                                                            
cost  savings. The  task force  would be  comprised  of an  "optimum                                                            
number of members" to allow  for a "workable task force". However he                                                            
envisioned   additional    professional   input   from    non-voting                                                            
participants would be encouraged.                                                                                               
                                                                                                                                
9:18:49 AM                                                                                                                    
                                                                                                                                
Senator  Seekins understood  concerns would  be raised, but  assured                                                            
the most  important  intent is  to address  needs  of those  injured                                                            
workers.                                                                                                                        
                                                                                                                                
9:20:45 AM                                                                                                                    
                                                                                                                                
Senator Olson  pointed out  that the language  of the bill  does not                                                            
provide for a  timeframe in which recommendations  would be reported                                                            
by the task force.                                                                                                              
                                                                                                                                
9:21:02 AM                                                                                                                    
                                                                                                                                
PAUL  LISANKIE,   Director,  Division   of  Workers'  Compensation,                                                             
Department  of Labor  and Workforce  Development,  replied that  the                                                            
report and any recommendations would be due by December 1, 2005.                                                                
                                                                                                                                
9:21:41 AM                                                                                                                    
                                                                                                                                
GREG  O'CLARAY,  Commissioner,  Department  of Labor  and  Workforce                                                            
Development,   testified  that  the   Murkowski  Administration   is                                                            
"pleased" with the progress made with this legislation.                                                                         
                                                                                                                                
9:22:11 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken asked for  an overview of  the differences  between                                                            
this bill and SB 360 of the previous legislative session.                                                                       
                                                                                                                                
9:22:27 AM                                                                                                                    
                                                                                                                                
Mr.  Lisankie  replied  that  beyond the  intent  of  reforming  the                                                            
workers'   compensation  insurance   system,   the  two  bills   are                                                            
significantly  different.  The earlier  bill, SB  360, dealt  almost                                                            
exclusively  with  procedural  changes  to  solving  disputes.  This                                                            
current  bill attempts  to make  the process  more  efficient in  an                                                            
effort to save money.                                                                                                           
                                                                                                                                
9:23:04 AM                                                                                                                    
                                                                                                                                
Co-Chair  Green asked  the condition  of the  workers' compensation                                                             
insurance  system  in  Alaska  and the  consequences  of  making  no                                                            
changes.                                                                                                                        
                                                                                                                                
9:23:32 AM                                                                                                                    
                                                                                                                                
Mr.  O'Claray  reported  that  three  underwriters  ceased  offering                                                            
insurance   in  Alaska,  two  of   which  are  major  underwriters.                                                             
Escalating  premium rates are putting  pressure on small  businesses                                                            
and  requiring  owners  to  make  decisions   about  providing  this                                                            
insurance.  Some  businesses  are  laying off  workers  or  closing.                                                            
Pressure has  recently been placed  on the Division of Insurance  to                                                            
reduce  or freeze  rates.  If this  occurs,  the State  would be  in                                                            
danger  of loosing  the remaining  three underwriters  operating  in                                                            
Alaska and  would force the State  to provide workers' compensation                                                             
insurance.   The  Murkowski  Administration   is  against   assuming                                                            
additional bureaucracy.                                                                                                         
                                                                                                                                
9:24:59 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman  noted  the language  of  Section  21 of  the  bill                                                            
relating  to penalties  or fines  for employers  who  fail to  carry                                                            
workers'  compensation  insurance. He  asked the  comparison of  the                                                            
proposed  consequences  with the  current  penalties  and fines.  He                                                            
asked the implications  to employers  and their businesses  that are                                                            
unable to obtain the insurance.                                                                                                 
                                                                                                                                
9:25:41 AM                                                                                                                    
                                                                                                                                
Mr.  Lisankie replied  that  the language  of  Section 21  is a  new                                                            
provision.  Currently, no  fines could be  assessed. This  provision                                                            
would give the Division a method for enforcement.                                                                               
                                                                                                                                
9:26:16 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  posed a  scenario in which  drastic changes  in the                                                            
marketplace occur  and an employer is subsequently  unable to secure                                                            
adequate  coverage for  its workers.  In this  event, he  understood                                                            
that business would be  shut down under the provision of Section 21.                                                            
                                                                                                                                
9:26:48 AM                                                                                                                    
                                                                                                                                
Mr. Lisankie  affirmed clarifying  that  current statute  stipulates                                                            
such business closures  for an employer's failure to obtain adequate                                                            
insurance.                                                                                                                      
                                                                                                                                
9:27:07 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  asked if the Division  would investigate  emergency                                                            
measures to allow  businesses to continue operation  if the employer                                                            
was  unable  to obtain  insurance  between  now  and the  date  this                                                            
legislation was enacted.                                                                                                        
                                                                                                                                
9:28:00 AM                                                                                                                    
                                                                                                                                
Mr.  Lisankie  responded that  this  has  not been  considered.  The                                                            
intent  is to  contain  costs. Workers'  compensation  insurance  is                                                            
available to employers, albeit at a high cost.                                                                                  
                                                                                                                                
9:28:20 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  predicted a probability  that some employers  would                                                            
be unable to acquire  the insurance coverage. He asked  what actions                                                            
the Division would take to assist these businesses.                                                                             
                                                                                                                                
9:28:40 AM                                                                                                                    
                                                                                                                                
Mr. O'Claray interjected  that the purpose of this legislation is to                                                            
implement changes  that would contain costs. Statutory  requirements                                                            
exist that  require businesses employing  workers to carry  workers'                                                            
compensation  insurance. The cost  of this insurance is the  current                                                            
concern.  The study is requested  to provide  lead time" to  examine                                                            
the data maintained by  underwriters. This data would be analyzed to                                                            
identify  changes  that  would  address  costs.  No  exemptions  are                                                            
provided to allow an employer to not secure this insurance.                                                                     
                                                                                                                                
9:29:55 AM                                                                                                                    
                                                                                                                                
Senator Stedman  remarked that additional efforts  should be made to                                                            
attract more  underwriters  to offer coverage  within the State.  He                                                            
noted  the  deficit  in  the  "pool"  and  asked  how  it  would  be                                                            
addressed.                                                                                                                      
                                                                                                                                
9:31:00 AM                                                                                                                    
                                                                                                                                
Mr. O'Claray told  of the limited number of underwriters.  The major                                                            
concern of underwriters  considering offering insurance in Alaska is                                                            
the appeals  commission. The Division  has received complaints  from                                                            
employers  asserting  that  cases  are  "skewed  against  them"  and                                                            
therefore  appeals  are  not  pursued.   Another  complaint  is  the                                                            
inconsistency  with the law.  The current  system involves  a three-                                                            
person panel  that hears  a claim and makes  a determination,  which                                                            
could be appealed  in superior court.  If the inconsistency  between                                                            
decisions  were eliminated,  claims  could be  settled faster.  This                                                            
would allow those workers  to make decisions sooner about whether to                                                            
remain in their current career or to change professions.                                                                        
                                                                                                                                
9:33:17 AM                                                                                                                    
                                                                                                                                
LINDA  HALL,   Director,  Division   of  Insurance,  Department   of                                                            
Community  and  Economic Development,  introduced  herself  for  the                                                            
record.                                                                                                                         
                                                                                                                                
9:33:44 AM                                                                                                                    
                                                                                                                                
Senator Stedman  inquired about the  impending deficit in  the event                                                            
the current system was not restructured.                                                                                        
                                                                                                                                
9:34:01 AM                                                                                                                    
                                                                                                                                
Ms. Hall clarified the  deficit in question related to the guarantee                                                            
association  and was addressed  in legislation  passed the  previous                                                            
session.  Reassessment of  the situation revealed  that the  changes                                                            
were successful  and that  a deficit no longer  exists. Workers  and                                                            
employers are no longer  at risk of unpaid claims. The intent of the                                                            
bill  currently before  the  Committee is  to implement  reforms  to                                                            
reduce  the cost  of claims.  Until the  overall cost  of claims  is                                                            
reduced, premiums would continue to rapidly increase.                                                                           
                                                                                                                                
9:35:13 AM                                                                                                                    
                                                                                                                                
Ms. Hall  referenced an annual  report issued  by the Division,  the                                                            
latest of which identified  96 insurance providers approved to write                                                            
claims in  Alaska. Of those  only five seek  to write claims  in the                                                            
State.  If premium rates  are not  sufficient to  cover the  cost of                                                            
claims,  the potential  exists that  insurance  companies would  not                                                            
offer policies.  "Extremely" high claim costs have  been incurred in                                                            
the last five  years with insurances  companies paying out  $1.54 in                                                            
claims for every  $1 collected in premium. An assigned  risk plan is                                                            
the "last resort".                                                                                                              
                                                                                                                                
9:37:41 AM                                                                                                                    
                                                                                                                                
Senator Stedman  noted the proposed  fine of $1,000 per day  that an                                                            
employer fails  to carry workers'  compensation insurance.  He asked                                                            
if a subcontractor  on a project were found to be  without coverage,                                                            
what  party  would be  responsible  for  payment  of the  fine:  the                                                            
subcontractor,  the general  contractor  or another  party. He  also                                                            
asked whether the fine  would be imposed on each project an employer                                                            
is working.                                                                                                                     
                                                                                                                                
9:38:24 AM                                                                                                                    
                                                                                                                                
Mr.  Lisankie  replied  that  the subcontractor   would be  fined  a                                                            
maximum of $1,000 per day  per employee. The proposed board would be                                                            
given  discretion to  determine the  circumstances  and whether  the                                                            
full  amount  would   be  levied.  For  example,  an   employer  who                                                            
inadvertently  allowed the policy to lapse would be  fined less than                                                            
an employee identified as a repeat offender.                                                                                    
                                                                                                                                
9:39:13 AM                                                                                                                    
                                                                                                                                
Senator  Olson  asked  if any  small  businesses  have  been  denied                                                            
workers' compensation insurance coverage.                                                                                       
                                                                                                                                
9:39:27 AM                                                                                                                    
                                                                                                                                
Ms.  Hall  explained  the  "assigned  risk  pool",   which  requires                                                            
insurers  to offer coverage  to all  employers.  The only reason  an                                                            
employer did not have this  insurance would be from a failure to pay                                                            
the premium                                                                                                                     
                                                                                                                                
9:39:48 AM                                                                                                                    
                                                                                                                                
Senator Olson  asked the  number of employers  included in  the risk                                                            
pool.                                                                                                                           
                                                                                                                                
9:39:50 AM                                                                                                                    
                                                                                                                                
Ms. Hall answered  that approximately  9,000 employers are  included                                                            
in the assigned risk pool.                                                                                                      
                                                                                                                                
9:40:00 AM                                                                                                                    
                                                                                                                                
Senator Olson  asked the number of employers that  did not pay their                                                            
premium or were unable to secure the insurance.                                                                                 
                                                                                                                                
9:40:08 AM                                                                                                                    
                                                                                                                                
Ms. Hall was unaware  of any. She qualified that some  disputes over                                                            
eligibility for coverage did occur.                                                                                             
                                                                                                                                
9:40:25 AM                                                                                                                    
                                                                                                                                
Senator  Olson told  of a  medical field  pool utilized  to  provide                                                            
opportunity  for  physicians  to obtain  malpractice  insurance.  He                                                            
asked if such  an arrangement had  been considered for the  workers'                                                            
compensation insurance system to make premiums more affordable.                                                                 
                                                                                                                                
9:40:57 AM                                                                                                                    
                                                                                                                                
Ms.  Hall   replied  that  the  matter   has  been  discussed.   The                                                            
aforementioned  medical pool for doctors was purchased  by a company                                                            
and no  longer qualified  for tax-exempt  status.  As a result,  the                                                            
program has  been discontinued. She  reiterated that until  the cost                                                            
of  claims  is  reduced,  the  basic  cost  of  providing   workers'                                                            
compensation  insurance would not  decrease. Some states,  including                                                            
California  and  Utah  have  a  high percentage   of state-provided                                                             
coverage.  However,   the  intent  for  Alaska  is  to  establish  a                                                            
"healthy"  competitive marketplace,  which  a state-provided  system                                                            
would not accomplish.                                                                                                           
                                                                                                                                
9:42:06 AM                                                                                                                    
                                                                                                                                
Senator  Olson  surmised  this  legislation   attempts  to  decrease                                                            
premium amounts;  however if  a worker is  injured, the system  must                                                            
still have the ability to compensate that worker.                                                                               
                                                                                                                                
9:42:45 AM                                                                                                                    
                                                                                                                                
Ms. Hall stressed that  the provisions in this legislation would not                                                            
change benefits as to do  so is not the intention. Providing medical                                                            
care and prescription drug  costs in Alaska is the second highest in                                                            
the nation. Every  employer would be required to maintain  a minimum                                                            
level of benefits.  The intent is  to provide good medical  care for                                                            
injured workers to allow them to return to work.                                                                                
                                                                                                                                
9:43:46 AM                                                                                                                    
                                                                                                                                
Senator  Olson  asked  if unions  and  employees  would  agree  that                                                            
adoption  of  this   legislation  would  not  result   in  decreased                                                            
benefits.                                                                                                                       
                                                                                                                                
9:44:09 AM                                                                                                                    
                                                                                                                                
Mr.  Lisankie qualified  that  some  changes would  be  made to  the                                                            
maximum reimbursement  amount allowed  for certain procedures.  This                                                            
could  be considered  as  affecting  benefits.  However,  the  basic                                                            
underlying structure would not be "radically" changed.                                                                          
                                                                                                                                
9:44:56 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken shared  his experience  with the  business he  owns                                                            
that  employs  23 people.  The  cost of  his  workers' compensation                                                             
premium rose  23 percent in the past  year, 20 percent the  previous                                                            
year and  20 percent  the year before  that. The  total cost  of his                                                            
premium is "up to six figures".  This funding must be taken from the                                                            
company's "bottom line".                                                                                                        
                                                                                                                                
Co-Chair  Wilken stressed  that this  legislation  is an attempt  to                                                            
"stop that hemorrhage",  which affects the "backbone of our economy"                                                            
i.e. small  businesses. Premium  rates are  assessed based  on claim                                                            
experience  with the  rates  of an  "unsafe shop"  higher;  however,                                                            
discounts for infrequent  claims have been eliminated as well as the                                                            
option of employing an  agent provider to "shop around" for the best                                                            
policy at  the lowest cost  is no longer viable  due to the  lack of                                                            
competition.  This affects business  operations and causes  managers                                                            
to  delay purchase  of  inventory,  new equipment  and  to  increase                                                            
wages,  which contribute  to a  successful business.  Instead  these                                                            
funds must  be utilized to pay the  workers' compensation  insurance                                                            
premium.                                                                                                                        
                                                                                                                                
Co-Chair  Wilken  remarked  upon the  continued  testimony  received                                                            
emphasizing,  "the worker  does  not get hurt"  as a  result of  the                                                            
provisions  proposed in this legislation,  as well as the  statutory                                                            
changes  enacted after the  previous legislative  session.  The bill                                                            
before the Committee  however, would make the workers'  compensation                                                            
program  more   "rigorous".  Therefore,   he  concluded   that  this                                                            
legislation  would have no negative  impact, while not changing  the                                                            
current system would result in "damage."                                                                                        
                                                                                                                                
9:48:31 AM                                                                                                                    
                                                                                                                                
Amendment #1:  This amendment deletes the language  of Section 34 on                                                            
page 21, lines 7 through 11, which reads as follows.                                                                            
                                                                                                                                
          Sec. 34. AS 23.30.205 is amended by adding a new                                                                      
     subsection to read:                                                                                                        
          (g) Claims for reimbursement may not be submitted to the                                                              
     fund after  September 1, 2005. The fund shall  continue to make                                                            
     reimbursement payments  on claims accepted before July 1, 2006,                                                            
     or ordered  by the board, until the fund's liabilities  for the                                                            
     claim are extinguished.                                                                                                    
                                                                                                                                
Co-Chair Green  explained that department  representatives  proposed                                                            
this  amendment  as a  correction  to  changes  made by  the  Senate                                                            
Judiciary Committee.                                                                                                            
                                                                                                                                
Co-Chair Wilken moved for adoption.                                                                                             
                                                                                                                                
The amendment was ADOPTED without objection.                                                                                    
                                                                                                                                
9:49:20 AM                                                                                                                    
                                                                                                                                
DR  WILLIAM PFIEFER,  Alaska  Chiropractic  Society,  testified  via                                                            
teleconference  from an offnet location to four proposed  amendments                                                            
that the Society requests  be adopted. The first relates to the lack                                                            
of a chiropractic  professional  in the membership  of the  proposed                                                            
task force  on workers' compensation.  Senator Seekins announced  in                                                            
the Senate  Judiciary Committee  that chiropractic  care would  be a                                                            
major focus  of the task force. However,  Dr. Phiefer noted  certain                                                            
injuries that  chiropractors treat  comprise a large portion  of the                                                            
number of workplace  injuries. The  Society requests that  a seat on                                                            
the task force be designated  for a chiropractor and be granted full                                                            
voting privileges.                                                                                                              
                                                                                                                                
Dr. Phiefer  next  addressed the  proposed medical  services  review                                                            
study  and   requested  that  the   review  committee  include   the                                                            
professionals  who provide chiropractic  services. The study  should                                                            
also include  data collection of valid  and detailed information  in                                                            
which  recommendations   could  be based.   Without  accurate  data,                                                            
recommended  changes to the workers'  compensation program  would be                                                            
of  "little value."  He  told  of the  access  the Society  and  the                                                            
American Chiropractic  Association  have to research scientists  and                                                            
study results.                                                                                                                  
                                                                                                                                
Dr. Phiefer  opposed the guidelines  proposed for inclusion  in this                                                            
legislation,  as they  have been  proven  to be  inaccurate and  not                                                            
comprehensive. The guidelines  are narrow in scope and lack complete                                                            
analysis  of the current  research. The conclusions  do not  reflect                                                            
the studies  listed in  the bibliography.  The Society recommends  a                                                            
compromise  to allow for  the Workers' Compensation  Board  to adopt                                                            
regulations and  new that reflect the most recent  research findings                                                            
when appropriate.  The proposed guidelines  should not be  specified                                                            
in statute. He  understood the intent of the legislative  committees                                                            
hearing this bill to establish  that treatment be in accordance with                                                            
standards based on scientific and evidence-based medicine.                                                                      
                                                                                                                                
Dr. Phiefer  requested that "major"  be replaced with "significant"                                                             
in reference to  "the aggravation question". This  would reflect the                                                            
status quo. The  definition of major requires at least  a 51 percent                                                            
burden  and such  determination  should not  be made  at this  time.                                                            
Another option  would be consideration  of imposing a higher  burden                                                            
in the determination of "disability" for preexisting conditions.                                                                
                                                                                                                                
9:54:27 AM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken offered  a motion  to report  CS SB  130 (JUD),  as                                                            
amended, from Committee  with individual recommendations and new and                                                            
accompanying fiscal notes.                                                                                                      
                                                                                                                                
There was  no objection  and CS  SB 130 (FIN)  MOVED from  Committee                                                            
with zero fiscal  note #5 from the Alaska Court System,  zero fiscal                                                            
note #7  from the  Department of  Commerce,  Community and  Economic                                                            
Development,  a  new  zero  fiscal   note  dated  4/11/05  from  the                                                            
Legislative  Affairs  Agency and  a fiscal  note  of $420,000  dated                                                            
4/9/05 from the Department of Labor and Workforce Development.                                                                  
                                                                                                                                
AT EASE 9:55:05 AM/10:03:01 AM                                                                                              
                                                                                                                                
Co-Chair Wilken chaired the remainder of the meeting                                                                            
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 66(FIN)                                                                                              
     "An Act making appropriations for the operating and capital                                                                
     expenses of the state's integrated comprehensive mental health                                                             
     program; and providing for an effective date."                                                                             
                                                                                                                                
     CS FOR HOUSE BILL NO. 67(FIN)(brf sup maj fld)                                                                             
     "An  Act  making appropriations   for the  operating  and  loan                                                            
     program  expenses of  state government,  for certain  programs,                                                            
     and to capitalize  funds; and providing for an effective date."                                                            
                                                                                                                                
                                                                                                                                
This was  the first hearing  for these bills  in the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken gave an  overview of the process to date of drafting                                                            
a  proposed   budget.   The  FY   05  budget   total  spending   was                                                            
approximately  $6.8  billion,   including  all  funding  sources  of                                                            
federal funds,  general funds, permanent funds, etc.  The Governor's                                                            
proposed  FY 06 budget  submitted  to the legislature  December  15,                                                            
2004  was  approximately   $3.33  billion,  which  Co-Chair   Wilken                                                            
calculated to  be approximately $470 million or 6.44  percent higher                                                            
than  the previous  budget.  General  fund spending  for  FY 05  was                                                            
approximately  $2.32 billion compared to the Governor's  proposed FY                                                            
06 budget  of $2.57 billion;  an increase  of about $252 million  or                                                            
10.9 percent.                                                                                                                   
                                                                                                                                
Co-Chair  Wilken  noted  that   some  expenses  are  fixed  and  the                                                            
Committee would  accept them and appropriate the necessary  funding.                                                            
Labor contracts  have been settled  at a cost of $29 million  to the                                                            
State and  a policy call  was made to fund  those increases  and not                                                            
require  agencies to  absorb  the increases.  Due  to actions  taken                                                            
three years  prior regarding debt  financing for education  projects                                                            
through   general  obligation   bonds  would   require  payment   of                                                            
approximately  $132 million in FY 06. Medicaid costs  have increased                                                            
approximately  $60 million,  although cost  containment efforts  are                                                            
underway.  Funding  for  K-12 education  would  increase  about  $60                                                            
million.  These  increases  total  approximately   $210  million  in                                                            
increased  expenses.  The budget  subcommittees  had little  control                                                            
over determinations regarding the funding of these expenses.                                                                    
                                                                                                                                
Co-Chair  Wilken   stated  the  Committee  has  discretion   in  the                                                            
allocation  of approximately $80 million.  The budget subcommittees                                                             
were  charged  with  the task  of  making  recommendations  on  this                                                            
funding.  The subcommittees  were  directed  to scrutinize  any  new                                                            
programs  and  justify  any  funding   allocated  above  the  FY  05                                                            
Management Plan amount.  The subcommittees were to be "aware" of any                                                            
significant  general fund  increases, as well  as programs  in which                                                            
general  funds were  expected  to be appropriated  as  a default  to                                                            
"back-fill" the reduction of federal funding.                                                                                   
                                                                                                                                
Co-Chair  Wilken  expressed   concern  about  the  addition  of  124                                                            
positions   created  between   the  adjournment   of  the   previous                                                            
legislative  session  and  the start  of  the current  session.  The                                                            
Governor has also proposed  creating another 264 positions in FY 06.                                                            
                                                                                                                                
10:08:46 AM                                                                                                                   
                                                                                                                                
Senator Hoffman questioned  Co-Chair Wilken's statement that funding                                                            
for K-12  education would  increase $60 million  for FY 06.  Senator                                                            
Hoffman had understood the amount would be $70 million.                                                                         
                                                                                                                                
Co-Chair  Wilken affirmed  Senator Hoffman's  understanding  was the                                                            
correct amount.                                                                                                                 
                                                                                                                                
10:09:15 AM                                                                                                                   
                                                                                                                                
Senator Dyson  appreciated the value  of Co-Chair Wilken's  overview                                                            
and requested he repeat some of the information.                                                                                
                                                                                                                                
Co-Chair Wilken  indicated the information  would be distributed  to                                                            
members in written format.                                                                                                      
                                                                                                                                
10:10:36 AM                                                                                                                   
                                                                                                                                
Senator Bunde  remarked that the misunderstanding  of some  agencies                                                            
that  the FY  06  budget would  be  a "recovery  budget"  to  offset                                                            
earlier economizing and  budget reduction efforts had compounded the                                                            
challenges presented to  the budget subcommittees. Some agencies are                                                            
expecting that  funding would return  to previous amounts.  Instead,                                                            
he intended to provide  the greatest return to the public. The least                                                            
amount necessary  to maintain  quality of  life should be  expended.                                                            
Department staff  must understand the need to be efficient  and that                                                            
any  increased funding  allocated  for  FY 06  would  not likely  be                                                            
available in future years.  While the price of oil has increased and                                                            
is  projected to  stay  high, the  market  is always  uncertain.  In                                                            
addition, less oil would be produced the following year.                                                                        
                                                                                                                                
The  Committee  then  heard  the  budget  subcommittee  reports  and                                                            
recommendations.                                                                                                                
                                                                                                                                
10:13:29 AM                                                                                                                   
                                                                                                                                
Department of Fish and Game                                                                                                   
                                                                                                                                
     Senator Bunde, Chair                                                                                                       
     Senator B. Stevens                                                                                                         
     Senator Ralph Seekins                                                                                                      
     Senator Hoffman                                                                                                            
                                                                                                                                
     Introduction                                                                                                               
     The  Department of Fish  and Game subcommittee  used the  FY 06                                                            
     adjusted   base  when  determining  appropriation   levels  and                                                            
     accepted  all  departmental  budget  transactions  from  FY  05                                                            
     Management Plan to the FY 06 adjusted base.                                                                                
     Our  subcommittee reviewed  the following  motions and  adopted                                                            
     them at our close  out meeting on April 4, 2005. This narrative                                                            
     lists  the proposed changes to  the Governor's FY 06  requested                                                            
     budget.  Those  components  not listed  in this  narrative  are                                                            
     proposed  at the same level as  the Governor's FY 06  requested                                                            
     budget.                                                                                                                    
                                                                                                                                
     Departmental Spending Levels                                                                                               
     General Funds                                                                                                              
          Senate Subcommittee        $30,806,400                                                                                
          Governor's Proposed         31,456,400                                                                                
     Federal Funds                                                                                                              
          Senate Subcommittee         60,099,600                                                                                
          Governor's Proposed         59,249,600                                                                                
     Other Funds                                                                                                                
          Senate Subcommittee         60,584,400                                                                                
          Governor's Proposed         61,045,900                                                                                
     Totals                                                                                                                     
          Senate Subcommittee        151,490,400                                                                                
          Governor's Proposed        151,751,900                                                                                
                                                                                                                                
     Subcommittee Recommendations                                                                                               
     In  Central  Region  Fisheries  Management,  an  increment  for                                                            
     $150,000  was accepted.  This  general fund  increment will  be                                                            
     used for sonar on the Kenai River.                                                                                         
     In Westward Region  Fisheries Management, $225,000 in Test Fish                                                            
     Receipts  was  approved to  support  the Kodiak  Crab  Observer                                                            
     Program.                                                                                                                   
     In  Headquarters Fisheries  Management,  a technical change  of                                                            
     $383,600  from  Fish  and Game  Funds  to  Fish and  Game  Non-                                                            
     dedicated  Funds was  adopted. This  technical change  replaces                                                            
     the  dedicated portion  of the F&G funding  with new fund  code                                                            
     for Non-dedicated F&G funding.                                                                                             
     In Commercial  Fisheries Special  Projects, the same  technical                                                            
     change of $1,156,900  from Fish and Game Funds to Fish and Game                                                            
     Non-dedicated Funds was adopted.                                                                                           
     In  the same  section,  an increment  for $850,000  in  federal                                                            
     receipts  to support the Kodiak Crab Observer  Program was also                                                            
     adopted.                                                                                                                   
     In  Sport Fisheries,  another technical  change of $9,000  from                                                            
     Fish and  Game Funds to Fish  and Game Non-dedicated  Funds was                                                            
     adopted.                                                                                                                   
     In Wildlife  Conservation, another technical  change of $80,400                                                            
     from Fish  and Game Funds to Fish and Game Non-dedicated  Funds                                                            
     was adopted.                                                                                                               
     In  Wildlife Conservation  Shooting Facilities,  a transfer  of                                                            
     $636,100  and the  corresponding  PCNs to  a new appropriation                                                             
     called Wildlife Education  Public Shooting Ranges was approved.                                                            
     In  State Subsistence,  the general fund  request for  $400,000                                                            
     was denied.                                                                                                                
                                                                                                                                
     Position Analysis                                                                                                          
     In the FY 06 adjusted  base budget, the department had 851 full                                                            
     time  positions, 818  part time, and  101 temporary  employees.                                                            
     The  subcommittee approved  the reduction  of 1 permanent  full                                                            
     time position, 2 permanent  part time positions and 1 temporary                                                            
     position for FY 06.                                                                                                        
                                                                                                                                
     Missions and Measures                                                                                                      
     The  subcommittee  applauds the  efforts of  the department  in                                                            
     establishing  their  mission  and working  on  achieving  their                                                            
     measures. We dedicated  two meetings to have the agency discuss                                                            
     their  measures with us. It is  clear that they understand  the                                                            
     importance  of using this tool  to measure their progress,  not                                                            
     only for them, but for us as well.                                                                                         
                                                                                                                                
     FY 06 Intent Language                                                                                                      
     FY 06 - The department  did not have any FY 06 intent language.                                                            
                                                                                                                                
Senator  Bunde  shared that  the  Department  was receptive  to  the                                                            
priorities  established by the subcommittee,  as well as  the intent                                                            
that the Department's missions  and measures more accurately portray                                                            
its activities.                                                                                                                 
                                                                                                                                
Senator Bunde  reported the subcommittee recommended  an increase of                                                            
3.9 percent  from  the FY 05  appropriation,  although the  Governor                                                            
requested a 6.1 percent  increase. Most of the increases recommended                                                            
were "built into the system", as indicated by Co-Chair Wilken.                                                                  
                                                                                                                                
Senator Bunde overviewed the subcommittee report.                                                                               
                                                                                                                                
10:18:32 AM                                                                                                                   
                                                                                                                                
Senator  Hoffman  challenged  the assertion  that  the subcommittee                                                             
recommendation  reflects general fund  reductions to the  Governor's                                                            
proposed FY 06 budget.  He contended the incremental reductions were                                                            
actually  made  to the  FY  05 funding  amounts  and  therefore  the                                                            
subcommittee report  recommends an overall budget  reduction for the                                                            
Department.                                                                                                                     
                                                                                                                                
10:19:51 AM                                                                                                                   
                                                                                                                                
Senator Bunde stated the  Governor's proposed budget contained a 6.1                                                            
percent increase  to the  FY 05 appropriation  and the subcommittee                                                             
recommendation is for a 3.9 percent increase.                                                                                   
                                                                                                                                
10:20:14 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  gave the Kodiak observer  program as an  example of                                                            
an increment that would receive reduced funding for FY 06.                                                                      
                                                                                                                                
10:20:29 AM                                                                                                                   
                                                                                                                                
Co-Chair Wilken noted the increments are from the FY 05 Management                                                              
Plan.                                                                                                                           
                                                                                                                                
10:20:41 AM                                                                                                                   
                                                                                                                                
Senator Stedman asked for elaboration of the recommended transfer                                                               
of $636,000 related to the shooting facilities component.                                                                       
                                                                                                                                
10:20:58 AM                                                                                                                   
                                                                                                                                
Senator Bunde replied that the funds in question are "existing                                                                  
funds". This program would receive no funding increase or decrease                                                              
from the FY 05 appropriation.                                                                                                   
                                                                                                                                
10:21:31 AM                                                                                                                   
                                                                                                                                
Department of Labor and Workforce Development                                                                                 
                                                                                                                                
     Senator Con Bunde, Chair                                                                                                   
     Senator Tom Wagoner                                                                                                        
     Senator Bettye Davis                                                                                                       
                                                                                                                                
     Introduction                                                                                                               
     The Department of  Labor and Workforce Development subcommittee                                                            
     used  the FY 06 adjusted  base when  determining appropriation                                                             
     levels and  accepted all departmental budget  transactions from                                                            
     FY 05 Management Plan to the FY 06 adjusted base.                                                                          
                                                                                                                                
     Our  subcommittee reviewed  the following  motions and  adopted                                                            
     them at our close  out meeting on April 7, 2005. This narrative                                                            
     lists  the proposed changes to  the Governor's FY 06  requested                                                            
     budget.  Those  components  not listed  in this  narrative  are                                                            
     proposed  at the same level as  the Governor's FY 06  requested                                                            
     budget.                                                                                                                    
                                                                                                                                
     Departmental Spending Levels                                                                                               
     General Funds                                                                                                              
          Senate Subcommittee        $14,653,800                                                                                
          Governor's Proposed         15,192,600                                                                                
     Federal Funds                                                                                                              
          Senate Subcommittee         92,431,300                                                                                
          Governor's Proposed         92,431,300                                                                                
     Other Funds                                                                                                                
          Senate Subcommittee         46,909,400                                                                                
          Governor's Proposed         46,553,300                                                                                
     Totals                                                                                                                     
          Senate Subcommittee        $153,994,500                                                                               
          Governor's Proposed         154,177,200                                                                               
                                                                                                                                
     Subcommittee Recommendations                                                                                               
     In  the Labor  Market  Information  section, an  increment  for                                                            
     $120,000  to establish funding  to support preparation  for the                                                            
     2010 federal census was accepted.                                                                                          
     In Wage  and Hour Administration,  the general fund  request of                                                            
     $65,000 and one new  full time position for a new Wage and Hour                                                            
     Technician  to  review  certified payrolls  for  resident  hire                                                            
     enforcement was denied.                                                                                                    
     In Employment  and Training Services,  $50,900 in General  Fund                                                            
     Match  was accepted to  supplement the  STEP funding in  Senior                                                            
     Community  Services Employment Program in order  to fund at the                                                            
     Governor's level.                                                                                                          
     In the Office of Citizenship  Assistance, $126,200 was deleted.                                                            
     Funding  the  "Jobs  are Alaska's  Future  Initiative"  is  the                                                            
     agency's  top priority and the  subcommittee supported  them in                                                            
     their goal to get more Alaskans in our workplace.                                                                          
     In  Alaska  Vocational  Technical   Center,  an  increment  for                                                            
     $325,000  for expansion  of the LPN  the Allied Health  Program                                                            
     was accepted.                                                                                                              
                                                                                                                                
     Position Analysis                                                                                                          
     In the FY 06 adjusted  base budget, the department had 875 full                                                            
     time positions, 107  part time, and 10 temporary employees. The                                                            
     subcommittee  approved  the addition of  1 permanent full  time                                                            
     position,  1  permanent  part  time position  and  1  temporary                                                            
     position  for  FY  06. The  new  positions  are paid  from  the                                                            
      Workers Safety and Compensation Administration Account.                                                                   
                                                                                                                                
     Missions and Measures                                                                                                      
     The  subcommittee  applauds the  efforts of  the department  in                                                            
     establishing   their  previous   missions  and  measures.   The                                                            
     department  has shown success  in their efforts to both  assist                                                            
     Alaskans in obtaining  training that leads to employment and to                                                            
     improve  their health  and safety once  on the job. Success  in                                                            
     these  programs  is measured  by the  percentage  of those  who                                                            
     receive   training  and  subsequently  either   enter  into  or                                                            
     maintain  employment. In FY 04  95.1% of those trained  went on                                                            
     to  become employed.  For  comparison  this is  an increase  of                                                            
     nearly 5% over the FY 01 rate of 90.3%.                                                                                    
                                                                                                                                
     FY 05 and FY 06 Intent Language                                                                                            
     FY 05 - The department  did not have any FY 05 intent language.                                                            
     FY 06 - The department  did not have any FY 06 intent language.                                                            
                                                                                                                                
Senator Bunde expressed appreciation with the Department in working                                                             
with him to make budget reductions and in establishing priorities                                                               
based on the Department's needs.                                                                                                
                                                                                                                                
Senator Bunde overviewed the subcommittee report.                                                                               
                                                                                                                                
LYNNE SMITH, Staff  to Senator Bunde, was available  for assistance.                                                            
                                                                                                                                
AT EASE 10:23:52 AM/10:24:05 AM                                                                                             
                                                                                                                                
Senator  Bunde   stated  the  subcommittee   recommended   a  budget                                                            
reduction  of 3.1  percent  to the  adjusted  base, which  is a  0.1                                                            
percent  reduction  from  the Governor's  requested  FY  06  budget.                                                            
General fund  spending would be reduced  by $538,800; appropriation                                                             
of other funds  would be increased $356,100, with  a total reduction                                                            
of $182,700 appropriated to the Department.                                                                                     
                                                                                                                                
10:27:16 AM                                                                                                                   
                                                                                                                                
Senator Stedman  pointed out that figures cited in  the subcommittee                                                            
report and stated by Senator  Bunde are different from those printed                                                            
in the commonly  referred to "short forms" outlining  the Governor's                                                            
proposed FY 06 operating budget.                                                                                                
                                                                                                                                
10:28:11 AM                                                                                                                   
                                                                                                                                
JAMES ARMSTRONG, Staff  to Co-Chair Wilken, testified that the short                                                            
form budget books  contain the data reflecting the  Governor's FY 06                                                            
budget  request  submitted  on  December  15, 2004.  The  Office  of                                                            
Management  and Budget  has  submitted  amendments  to the  original                                                            
request   since  that  date,   which  are   accounted  for   in  the                                                            
subcommittee report.                                                                                                            
                                                                                                                                
10:28:51 AM                                                                                                                   
                                                                                                                                
Senator  Stedman  clarified that  the  FY 06  adjusted  base is  the                                                            
calculation of  the Governor's original request plus  all amendments                                                            
submitted by  the Office of Management  and Budget to that  request.                                                            
                                                                                                                                
10:29:06 AM                                                                                                                   
                                                                                                                                
Senator  Olson  asked  if the  additional  funding  for  the  Alaska                                                            
Vocational  Technology  Center  (AVTC) would  affect  the number  of                                                            
registered  nurses  (RN) that  would  be licensed  in  the State  of                                                            
Alaska.                                                                                                                         
                                                                                                                                
10:29:26 AM                                                                                                                   
                                                                                                                                
Senator Bunde  replied that registered nurses are  certified through                                                            
the  University of  Alaska.  The nurses  trained  though AVTC  would                                                            
receive a Licensed Practical Nurse (LPN) certification.                                                                         
                                                                                                                                
10:29:43 AM                                                                                                                   
                                                                                                                                
Senator Olson  asked if the $325,000  would result in the  licensing                                                            
of more  LPNs or only expended  to increase  the number of  teaching                                                            
staff, purchase new equipment, etc.                                                                                             
                                                                                                                                
10:29:59 AM                                                                                                                   
                                                                                                                                
Senator  Bunde  responded  that the  funding  would be  utilized  to                                                            
increase  the number  of  classes and  reduce  the time  spent on  a                                                            
waiting list to get into classes.                                                                                               
                                                                                                                                
10:30:12 AM                                                                                                                   
                                                                                                                                
Senator Olson favored this expenditure.                                                                                         
                                                                                                                                
10:30:16 AM                                                                                                                   
                                                                                                                                
Senator Hoffman requested  an explanation of the increased number of                                                            
positions.                                                                                                                      
                                                                                                                                
10:30:37 AM                                                                                                                   
                                                                                                                                
Ms. Smith told  of the subcommittee recommendation  for the addition                                                            
of  one  full  time Wage  and  Hour  Technician  to  be  located  in                                                            
Fairbanks.                                                                                                                      
                                                                                                                                
10:30:59 AM                                                                                                                   
                                                                                                                                
Senator  Hoffman  understood that  the  requested position  was  not                                                            
recommended.                                                                                                                    
                                                                                                                                
10:31:03 AM                                                                                                                   
                                                                                                                                
Ms. Smith clarified that  the Department requested more than one new                                                            
Wage and Hour Technician position.                                                                                              
                                                                                                                                
10:31:38 AM                                                                                                                   
                                                                                                                                
GUY BELL, Assistant Commissioner,  Department of Labor and Workforce                                                            
Development,  testified  that  the  new  position  is  necessary  to                                                            
address the backlog in the Fairbanks office.                                                                                    
                                                                                                                                
10:32:00 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  asked if once the backlog is under  control whether                                                            
the position would  be eliminated, or whether an increased  workload                                                            
was anticipated to continue.                                                                                                    
                                                                                                                                
Mr. Bell anticipated that the workload would continue.                                                                          
                                                                                                                                
10:32:33 AM                                                                                                                   
                                                                                                                                
Department of Natural Resources                                                                                               
                                                                                                                                
     Senator Con Bunde, Chair                                                                                                   
     Senator  Ben Stevens                                                                                                       
     Senator  Tom Wagoner                                                                                                       
     Senator  Donny Olson                                                                                                       
                                                                                                                                
     Introduction                                                                                                               
     The Department  of Natural Resources  subcommittee used  the FY                                                            
     06  adjusted base  when determining  appropriation  levels  and                                                            
     accepted  all  departmental  budget  transactions  from  FY  05                                                            
     Management Plan to the FY 06 adjusted base.                                                                                
                                                                                                                                
     Our  subcommittee reviewed  the following  motions and  adopted                                                            
     them at our close  out meeting on April 5, 2005. This narrative                                                            
     lists  the proposed changes to  the Governor's FY 06  requested                                                            
     budget.  Those  components  not listed  in this  narrative  are                                                            
     proposed  at the same level as  the Governor's FY 06  requested                                                            
     budget.                                                                                                                    
                                                                                                                                
     Departmental Spending Levels                                                                                               
     General Funds                                                                                                              
          Senate Subcommittee        $52,303,600                                                                                
          Governor's Proposed         53,257,100                                                                                
     Federal Funds                                                                                                              
          Senate Subcommittee         13,749,200                                                                                
          Governor's Proposed         13,749,200                                                                                
     Other Funds                                                                                                                
          Senate Subcommittee         43,736,600                                                                                
          Governor's Proposed         42,914,200                                                                                
     Totals                                                                                                                     
          Senate Subcommittee        109,789,400                                                                                
          Governor's Proposed        109,920,500                                                                                
                                                                                                                                
     Subcommittee Recommendations                                                                                               
     In  the Commissioner's  Office,  a  general fund  increment  of                                                            
     $81,100 for a Communications Officer was denied.                                                                           
     In Oil and  Gas Development, an increment for  $978,600 for Gas                                                            
     line Commercialization  and Expanding Investment in Exploration                                                            
     was  accepted. The  increment is  being funded  by $733,900  in                                                            
     general fund and $244,700 in permanent fund receipts.                                                                      
     In the Office  of Habitat Management and Permitting,  a general                                                            
     fund  increment for  $50,000 for research  projects  throughout                                                            
     the state was denied.                                                                                                      
     In  Claims, Permits  and Leases, the  subcommittee approved  an                                                            
     $87,900 fund source  switch from general fund to permanent fund                                                            
     receipts.                                                                                                                  
     In  Geological  Development,  an  increment  for  $300,000  was                                                            
     approved  in Geological Data  for Frontier Hydrocarbon  Basins.                                                            
     This increment is  being funded by $225,000 in general fund and                                                            
     $75,000 in permanent fund receipts.                                                                                        
     In  Geological Development,  a fund source  change for  $99,200                                                            
     was adopted. To realign  funding sources to reflect actual work                                                            
     activities,  the increment will  be switched from general  fund                                                            
     to permanent fund receipts.                                                                                                
     In  Agricultural  Development, a  $315,600  fund source  change                                                            
     from  general  fund to  Agricultural  Revolving  Loan Fund  was                                                            
     adopted.                                                                                                                   
     In Parks  and Recreation Management, per AS 37.05.144,  program                                                            
     receipts  are to  be used only  by the  program generating  the                                                            
     receipts.  Department of Natural Resources requested  RSS in an                                                            
     allocation  that  does  not generate  RSS.  This  $99,400  fund                                                            
     source  change  swaps GF  and RSS  between  allocations  (Parks                                                            
     Management and Parks  & Recreation Access) in order to meet the                                                            
     requirements of AS 37.05.144.                                                                                              
                                                                                                                                
     Positions Analysis                                                                                                         
     In the FY 06 adjusted  base budget, the department had 729 full                                                            
     time positions, 260  part time, and 94 temporary employees. The                                                            
     subcommittee approved  a net addition of 11 permanent full time                                                            
     positions,  4 permanent part  time positions and the  reduction                                                            
     of 3 temporary positions  for FY 06. The new positions are paid                                                            
     from  a mixture  of funding  sources: general  fund,  permanent                                                            
     fund  receipts, federal,  state  land fund,  CIP receipts,  I/A                                                            
     receipts and RSS (the 4 part time positions).                                                                              
                                                                                                                                
     Missions and Measures                                                                                                      
     The  subcommittee  applauds the  efforts of  the department  in                                                            
     establishing   their  previous   missions  and  measures.   The                                                            
     department   accepts   the   responsibility   of   being   held                                                            
     accountable  to their goals and  is diligently working  to that                                                            
     end.  As the department  leads  the way into  more oil  and gas                                                            
     development  in the state, we anticipate they  will continue to                                                            
     strive towards meeting the missions and measures.                                                                          
                                                                                                                                
     FY 06 Intent Language                                                                                                      
     FY 06 - The subcommittee adopted the following language:                                                                   
          It  is the  intent  of the  legislature  that two  natural                                                            
          Resource   Specialist  II  positions  (one  PFT,  one  PPF                                                            
          [PPT?])  shall be dedicated to preference leases until the                                                            
          backlog is fully addressed.                                                                                           
     The  Senate  subcommittee   adopted  this  language,   however,                                                            
     funding  of the $106,700 using  the State Land Income  Fund and                                                            
     adding  1 full time  and 1  part time position,  which  was not                                                            
     included in the subcommittee's budget.                                                                                     
                                                                                                                                
Senator  Bunde  applauded  the  Department's  understanding  of  the                                                            
budgetary  challenges faced  by the subcommittee  in making  funding                                                            
recommendations. The subcommittee  recommended a .1 percent decrease                                                            
in  the appropriation  of  all funding  source  with  a .18  percent                                                            
decrease  in general  funds. Resource  development  is necessary  to                                                            
ensure that Alaska continue as a "resource state".                                                                              
                                                                                                                                
Senator Bunde  overviewed the subcommittee report.  He noted that if                                                            
the funding source  for the Gasline Commercialization  and Expanding                                                            
Investment  in  Exploration   project  needed  to   be  changed,  he                                                            
recommended the item not be funded.                                                                                             
                                                                                                                                
10:37:10 AM                                                                                                                   
                                                                                                                                
Co-Chair Wilken highlighted the proposed intent language.                                                                       
                                                                                                                                
10:37:26 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  requested justification for increasing,  by 11, the                                                            
number of permanent full time positions for this Department.                                                                    
                                                                                                                                
10:37:36 AM                                                                                                                   
                                                                                                                                
Senator  Bunde  replied that  permitting  and  resource development                                                             
activities require additional efforts.                                                                                          
                                                                                                                                
10:37:54 AM                                                                                                                   
                                                                                                                                
Ms. Smith listed the proposed  positions: four would be added to the                                                            
Division  of Oil and Gas,  one Gasline  Office Coordinator  position                                                            
for the Gas Pipeline  Office, a new Executive Director  position for                                                            
the  North  Slope  Science  Initiative   within  the  Large  Project                                                            
Permitting  Section,  a total  of  six new  positions  dedicated  to                                                            
General Mine Permitting  in the Claims, Permits and  Leases Section,                                                            
one new  position to support  the Large  Projects Manager  position,                                                            
two new  Land Surveyor positions  would be  added to the Land  Sales                                                            
and Municipal Entitlements  Section, one new position for Geological                                                            
Development to address  Geological Data Frontier for the Hydrocarbon                                                            
Basins,  one new  position  for Agricultural  Development,  and  one                                                            
Natural Resource Conservation  Development Board Project Coordinator                                                            
position for Conservation and Development.                                                                                      
                                                                                                                                
Ms. Smith noted  the total of 16 newly created positions  qualifying                                                            
that  six existing  positions  would be  eliminated  from Parks  and                                                            
Recreation Access.                                                                                                              
                                                                                                                                
10:39:15 AM                                                                                                                   
                                                                                                                                
Senator Hoffman asked if  the elimination of the six positions would                                                            
result in less access to State parks.                                                                                           
                                                                                                                                
10:39:21 AM                                                                                                                   
                                                                                                                                
Ms. Smith  replied that  the positions  in question  were funded  as                                                            
Highway Enhanced  Projects through the Department  of Transportation                                                            
and Public Facilities.                                                                                                          
                                                                                                                                
Co-Chair  Green asked  about the  discussions with  the Division  of                                                            
Agriculture   director    that   resulted   in   the   subcommittee                                                             
recommendations regarding the Agriculture Revolving Loan Fund.                                                                  
                                                                                                                                
10:39:50 AM                                                                                                                   
                                                                                                                                
Senator   Bunde  responded   that  the   Department  supported   the                                                            
recommendation     in    consideration    of    the    Department's                                                             
prioritizations.                                                                                                                
                                                                                                                                
Co-Chair  Green  asserted  that the  Division  did not  support  the                                                            
recommended  change,  as it  would  have a  negative  impact on  the                                                            
revolving loan  fund. The balance  of the fund is likely  the lowest                                                            
in its  history.  She cautioned  against  reducing  the balance  too                                                            
much.                                                                                                                           
                                                                                                                                
10:42:33 AM                                                                                                                   
                                                                                                                                
Department of Commerce, Community and Economic Development                                                                    
                                                                                                                                
     Senator Bert Stedman, Chair                                                                                                
     Senator Gary Stevens                                                                                                       
     Senator Albert Kookesh                                                                                                     
                                                                                                                                
     Introduction                                                                                                               
     The Department of  Commerce, Community and Economic Development                                                            
     subcommittee  used  the FY 06  adjusted  base when determining                                                             
     appropriation    levels.   The   subcommittee    accepted   all                                                            
     departmental budget  transactions from FY 05 Management Plan to                                                            
     the FY 06 adjusted base.                                                                                                   
                                                                                                                                
     Departmental Spending Levels                                                                                               
     General Funds                                                                                                              
          Senate Subcommittee                  $8,220,200                                                                       
          Change to FY 05 Adjusted Base              2.9%                                                                       
          Governor's Proposed                  $8,970,200                                                                       
          Governor to Subcommittee                  (8.4%)                                                                      
     Federal Funds                                                                                                              
          Senate Subcommittee                 $26,590,600                                                                       
          Change to FY 05 Adjusted Base              2.3%                                                                       
          Governor's Proposed                 $26,590,600                                                                       
          Governor to Subcommittee                  (0.0%)                                                                      
     Other Funds                                                                                                                
          Senate Subcommittee                 $95,098,400                                                                       
          Change to FY 05 Adjusted Base              3.7%                                                                       
          Governor's Proposed                $100,811,200                                                                       
          Governor to Subcommittee                  (5.7%)                                                                      
     Totals                                                                                                                     
          Senate Subcommittee                $129,909,200                                                                       
          Change to FY 05 Adjusted Base              3.2%                                                                       
          Governor's Proposed                $136,372,000                                                                       
          Governor to Subcommittee                  (4.7%)                                                                      
                                                                                                                                
     Departmental Structure                                                                                                     
     The subcommittee moved  the entire appropriation for the Office                                                            
     of Economic  Development from the Commissioner's  Office to the                                                            
     Community  Assistance & Economic  Development section  where it                                                            
     will be more appropriately situated.                                                                                       
                                                                                                                                
     The subcommittee  changed the  name of the Banking,  Securities                                                            
     and Corporations  appropriation name to Banking  and Securities                                                            
     to more accurately reflect the mission of that group.                                                                      
                                                                                                                                
     The subcommittee  transferred  all Community Development  Quota                                                            
     (CDQ)  positions and funding  from Banking and Securities  to a                                                            
     new  appropriation  called  the  Community   Development  Quota                                                            
     Program.  This  allows better  tracking  and ensures  that  all                                                            
     funding spent  on the CDQ program is generated  by the program.                                                            
                                                                                                                                
     Subcommittee Recommendations                                                                                               
     In the  Commissioner's Office,  the subcommittee moved  $54,000                                                            
     from  Personal  Services and  $25,000  from Services  into  the                                                            
     Travel  line to more accurately  reflect the commissioner's  FY                                                            
     06   travel  plans.   Although  the   Department  expects   the                                                            
     commissioner's  travel  expenses to approach  $110,000,  it had                                                            
     only budgeted $31,000.                                                                                                     
                                                                                                                                
     In Community  Advocacy, a $60,000 fund source  change from Fish                                                            
     Fund Income  to a newly created  Special Vehicle Receipts  fund                                                            
     source  was accepted.  This  funding will  be used  to pay  for                                                            
     statewide marine safety and education programs.                                                                            
                                                                                                                                
     Also   in  Community   Advocacy,   a  $650,000   decrement   in                                                            
     Interagency  Receipts to  reflect the  FY 05 sunsetting  of the                                                            
     Alaska  Regional Development  Organization Program (ARDOR)  was                                                            
     accepted.  The subcommittee also  applied a matching  decrement                                                            
     of  $650,000  in AIDEA  Receipts  from  the  Alaska  Industrial                                                            
     Development & Export Authority for the same reason.                                                                        
                                                                                                                                
     In  the Qualified Trade  Association  Contract with the  Alaska                                                            
     Travel  Industry Association,  $250,000  of a total  $1,000,000                                                            
     General  Fund  increment  request was  accepted.  $750,000  was                                                            
     denied. These  state funds must be matched with  private sector                                                            
     dollars.  The  $350,000  increment  still  represents  a  6.25%                                                            
     increase for tourism marketing over FY 05.                                                                                 
                                                                                                                                
     At the Alaska  Energy Authority (AEA), the subcommittee  denied                                                            
     the governor's $5,030,000  increment in PCE funds for the Power                                                            
     Cost  Equalization  Program.  The  request  represented  a  32%                                                            
     increase  over FY 05 management plan and would  have required a                                                            
     $4.3  million  general  fund  offset to  recapitalize  the  PCE                                                            
     Endowment.                                                                                                                 
                                                                                                                                
     Also  at AEA,  the  subcommittee  moved $64,000  from  Personal                                                            
     Services  back into the Grants line. The cost  of administering                                                            
     the Power  Cost Equalization  program should come out  of Grant                                                            
     funds, no Personal Services.                                                                                               
                                                                                                                                
     At  the Alaska Seafood  Marketing Institute,  the subcommittee                                                             
     changed   $4,000,000   from  Receipt   Supported  Services   to                                                            
     Statutory  Designated  Program Receipts  to reflect the  proper                                                            
     funding source of this federal funding.                                                                                    
                                                                                                                                
     In the Occupational  Licensing section, the subcommittee change                                                            
     $700,800  from Receipts  Supported Services  (RSS) to  Business                                                            
     License  and  Corporation  Receipts  to  properly  reflect  the                                                            
     relocation   of  the  Corporations   group  from  Banking   and                                                            
     Securities into Occupational Licensing.                                                                                    
                                                                                                                                
     Also in  Occupational Licensing,  the subcommittee decremented                                                             
     $32,800  of Receipts Supported  Services funding for  the Board                                                            
     of Real  Estate Appraisers.  HB 47 will  extend this board  and                                                            
     funding is  reflected in the fiscal note for  that legislation.                                                            
                                                                                                                                
     Positions Analysis                                                                                                         
     The subcommittee  approved a net addition of  8 permanent full-                                                            
     time  positions for  FY 06. One  of these  positions is  funded                                                            
     with general funds.                                                                                                        
        · In community Advocacy, a $75,100 GF increment was                                                                     
          accepted to fund a new Local Government Specialist                                                                    
          position to assist the Local Boundary Commission.                                                                     
        · At the Alaska Industrial Development and Export Authority                                                             
          (AIDEA),   a GF  decrement  of  $76,200  was  accepted  to                                                            
          eliminate  a  Grants  Administrator  position  that is  no                                                            
          longer required.                                                                                                      
        · In the Community Development Quota Program, a $101,900                                                                
          RSS  increment  was accepted  to  fund a  new CDQ  Manager                                                            
          Position.                                                                                                             
        · At the Alaska Aerospace Development Corporation (AADC) an                                                             
          AADC  fund  increment totaling  $502,100  was accepted  to                                                            
          hire  four new  support managers  and one new maintenance                                                             
          technician  to work on range  safety and telemetry  system                                                            
          development at the Kodiak Launch Complex.                                                                             
        · At the Regulatory Commission of Alaska, a RCA Receipts                                                                
          increment  of  $192,000 was  accepted to  add an  Advisory                                                            
          Section   Manager   and  a  Commission   Section   Manager                                                            
          position.                                                                                                             
                                                                                                                                
     Missions and Measures                                                                                                      
     The  subcommittee spent  a brief amount  of time reviewing  the                                                            
     department's  top-level missions  and measures. Although  it is                                                            
     clear  that  the  department  has  made  progress  recently  on                                                            
     revising  its  division level  missions  and measures,  it  was                                                            
     recognized that the  department's top-level measures might need                                                            
     some  further  review. The  department  performs  a variety  of                                                            
     diverse functions  and the departmental missions should reflect                                                            
     that variety and enable  it to accurately measure its progress.                                                            
     The department's second  performance result "Increase number of                                                            
     Alaska citizens  who have access to local government  services"                                                            
     seemed particularly  vague and the subcommittee  suggested that                                                            
     it be reviewed.                                                                                                            
                                                                                                                                
     FY 05 and FY 06 Intent Language                                                                                            
     FY  05 - The department  had  no intent language  in the  FY 05                                                            
     budget.                                                                                                                    
     FY 06 - The subcommittee  adopted the following intent language                                                            
     for the FY 06 budget:                                                                                                      
          It  is the intent  of the legislature  that the travel  in                                                            
          the  Commissioner's   Office  be  limited  to  the  amount                                                            
          budgeted in the travel line.                                                                                          
                                                                                                                                
Senator Stedman outlined the subcommittee report.                                                                               
                                                                                                                                
10:49:32 AM                                                                                                                   
                                                                                                                                
                                                                                                                                
Senator Hoffman asked about the proposed new position funded with                                                               
general funds.                                                                                                                  
                                                                                                                                
Co-Chair  Wilken replied  that the  position would  be a  Government                                                            
Specialist to support the Local Boundary Commissions.                                                                           
                                                                                                                                
Senator  Hoffman asked  if the other  seven new  positions would  be                                                            
federally  funded or  a combination  of program  receipts and  other                                                            
funding sources.                                                                                                                
                                                                                                                                
MILES  BAKER, staff  to Senator  Stedman, testified  overviewed  the                                                            
Positions Analysis contained in the subcommittee report.                                                                        
                                                                                                                                
10:51:27 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  asked the  need for an additional  position  in the                                                            
Local Boundary Commission section.                                                                                              
                                                                                                                                
10:51:29 AM                                                                                                                   
                                                                                                                                
Mr. Baker understood considerable  amount of work is associated with                                                            
the  studying  of potential  new  borough  formations.  Most of  the                                                            
additional workload relates to the mandatory borough initiative.                                                                
                                                                                                                                
10:52:08 AM                                                                                                                   
                                                                                                                                
Senator  Olson  questioned  the  permanent  classification  for  the                                                            
position. He surmised the  study of potential new boroughs would not                                                            
continue indefinitely.                                                                                                          
                                                                                                                                
10:52:35 AM                                                                                                                   
                                                                                                                                
Mr. Baker affirmed the position would be permanent full-time.                                                                   
                                                                                                                                
10:52:42 AM                                                                                                                   
                                                                                                                                
Co-Chair  Green predicted  the  study  would require  a significant                                                             
length of time and is progressing slowly.                                                                                       
                                                                                                                                
10:52:50 AM                                                                                                                   
                                                                                                                                
Senator Hoffman characterized  the efforts relating to the potential                                                            
formation  of new  boroughs  as "part  of  the bigger  and  brighter                                                            
bureaucracy budget."                                                                                                            
                                                                                                                                
10:53:03 AM                                                                                                                   
                                                                                                                                
Senator  Olson referenced  the recommendation  for  the transfer  of                                                            
$64,000 within  the Alaska  Energy Authority  (AEA) program  for the                                                            
Power Cost Equalization  (PCE) program. He asked the  administrative                                                            
funding  has historically  been included  in  the Personal  Services                                                            
component.                                                                                                                      
                                                                                                                                
10:53:31 AM                                                                                                                   
                                                                                                                                
Mr. Baker  relayed  that the Department  "made  that judgment  call"                                                            
recently to include  the funding in the Personal Services  component                                                            
rather than the traditional Grant component.                                                                                    
                                                                                                                                
Senator  Olson  clarified   that  the  funding  for  administrative                                                             
expenses  has never  been allocated  through  the Personal  Services                                                            
component.                                                                                                                      
                                                                                                                                
Mr. Baker affirmed.  The subcommittee therefore determined  that the                                                            
administration  of the PCE program  should continue to be  allocated                                                            
through the Grants component.                                                                                                   
                                                                                                                                
AT EASE 10:54:22 AM/10:55:36 AM                                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Wilken adjourned the meeting at 10:55 AM.                                                                              

Document Name Date/Time Subjects