Legislature(2015 - 2016)SENATE FINANCE 532

02/09/2015 09:15 AM FINANCE

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09:16:03 AM Start
09:16:34 AM SB26
10:27:30 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Presentation: Overview FY17 Operating Budget
+= SB 26 Departments: Environmental Conservation and TELECONFERENCED
Heard & Held
Scheduled but Not Heard
Bills Previously Heard/Scheduled
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 9, 2015                                                                                           
                         9:16 a.m.                                                                                              
9:16:03 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Senator Anna MacKinnon called the Senate Finance Committee                                                                      
meeting to order at 9:16 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Pat Pitney, Director, Office of Management and Budget,                                                                          
Office of the Governor.                                                                                                         
SB 26     BUDGET: CAPITAL                                                                                                       
          SB 26 was HEARD and HELD in committee for further                                                                     
SB 40     SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS                                                                             
          SB 40 was SCHEDULED but not HEARD.                                                                                    
SENATE BILL NO. 26                                                                                                            
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations   and   other   appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
9:16:34 AM                                                                                                                    
Co-Chair  MacKinnon referred  committee  members to  capital                                                                    
budget detail sheets.                                                                                                           
9:17:00 AM                                                                                                                    
AT EASE                                                                                                                         
9:19:31 AM                                                                                                                    
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE  OF THE  GOVERNOR, addressed  the governor's  capital                                                                    
budget.  She  began with  amendments  on  a document  titled                                                                    
"FY2016  Capital Gov  Amended  Items  Only Project  Summary"                                                                    
dated February  5, 2015 (copy  on file). She  explained that                                                                    
the discussion  would pertain only to  governor's amendments                                                                    
proposed following the  governor's budget submittal deadline                                                                    
of  December  15, 2014.  She  detailed  that the  governor's                                                                    
initial capital budget of $106  million was limited to items                                                                    
with federal matching funds. Projects  shown in the document                                                                    
before the  committee had been added  subsequent to December                                                                    
15. Page 1  included a $3 million request  for Department of                                                                    
Administration  deferred maintenance,  renewal, repair,  and                                                                    
equipment.  She elaborated  that  the  increment would  come                                                                    
from  the Public  Building  Fund and  would  provide a  very                                                                    
modest  amount to  deferred  maintenance.  She relayed  that                                                                    
page 3 provided a project breakdown.                                                                                            
Co-Chair  MacKinnon  asked if  there  were  two separate  $3                                                                    
million increments.  Ms. Pitney replied that  there was only                                                                    
one $3 million request. She  addressed a $15 million request                                                                    
for the  Alaska Energy Authority (AEA)  under the Department                                                                    
of  Commerce,   Community  and  Economic   Development.  She                                                                    
expounded  that  the  proposed request  would  pay  for  the                                                                    
Renewable  Grant  Program  with  funds  from  the  Renewable                                                                    
Energy  Fund  that had  been  capitalized  in the  operating                                                                    
Vice-Chair Micciche  asked for an explanation  about why the                                                                    
governor believed  each item was  critical and  necessary to                                                                    
include  in  the current  budget.  He  asked Ms.  Pitney  to                                                                    
address the question for each increment.                                                                                        
Ms.  Pitney agreed.  She relayed  that  the Renewable  Grant                                                                    
Program had been  built up over several years  to change the                                                                    
nature of energy in Alaska. The  hope was that the next time                                                                    
oil  prices  increased the  state  would  be utilizing  more                                                                    
renewable  energy sources,  which  would lead  to a  reduced                                                                    
footprint and cost.                                                                                                             
9:23:39 AM                                                                                                                    
Co-Chair  MacKinnon remarked  that she  served on  the REFAC                                                                    
[Renewable  Energy  Fund  Advisory Committee]  with  Senator                                                                    
Hoffman.  She explained  that the  $15  million request  was                                                                    
based on statute. She asked Senator Hoffman to elaborate.                                                                       
Senator  Hoffman  expounded  that  the  statute  had  passed                                                                    
several years earlier  and the target had been  to spend $50                                                                    
million. The  state had a  target of reaching 50  percent by                                                                    
2020. He stated that  the program was incredibly successful;                                                                    
continued funding  would reduce  energy consumption  in many                                                                    
areas,  particularly in  rural  Alaska. He  pointed to  high                                                                    
energy costs in  rural areas, where communities  spent $8 to                                                                    
$9  to  generate electricity  and  similar  amounts for  one                                                                    
gallon of heating  fuel. He relayed that it  was critical to                                                                    
keep  moving  the  program  in  the  current  direction.  He                                                                    
asserted that Alaska was looked  to as a leader on renewable                                                                    
energy given its  high energy costs and its  position as the                                                                    
northernmost state. He believed  the program was well-worthy                                                                    
of the legislature's continued support.                                                                                         
Vice-Chair  Micciche  addressed   the  deferred  maintenance                                                                    
items. He observed that the  state had been waiting 10 years                                                                    
to replace the  water pipeline in the  State Office Building                                                                    
for  a mechanical  upgrade. He  did not  believe it  was the                                                                    
year the  state would catch  up on deferred  maintenance. He                                                                    
did not intend  to discount the importance  of the renewable                                                                    
energy fund.                                                                                                                    
Ms.   Pitney  replied   that   the   amounts  for   deferred                                                                    
maintenance were  significantly lower than in  former years.                                                                    
She  explained that  the  minimal amount  would  be used  to                                                                    
continue the  program. She  communicated the  perspective of                                                                    
the administration that  the situation was a pay  now or pay                                                                    
later scenario.  She discussed that  the item  represented a                                                                    
few steps to continue forward. If  the money was not paid in                                                                    
the  current year  a certain  amount of  expertise would  be                                                                    
lost or projects would be only partially completed.                                                                             
9:26:58 AM                                                                                                                    
Senator  Dunleavy wondered  what would  happen if  the state                                                                    
took one year  off from spending on the  project. Ms. Pitney                                                                    
asked for clarification on the item he was speaking to.                                                                         
Senator  Dunleavy addressed  the renewable  energy fund  and                                                                    
deferred maintenance increments. He  wondered if there would                                                                    
be negative impacts if one  year was taken off from spending                                                                    
on the items.                                                                                                                   
Ms. Pitney  answered that  taking one  year off  would stall                                                                    
the  program, which  could cause  some people  to leave  the                                                                    
program. She  surmised that if  the program was  not running                                                                    
the  administrative  and  science  expertise  would  not  be                                                                    
necessary.  There  were  projects  underway  that  would  be                                                                    
closed  out. Additionally,  there would  be no  planning for                                                                    
the next project; therefore, there  could be an inefficiency                                                                    
gap  between  one project  and  the  next. She  stated  that                                                                    
momentum  would  be  slowed and  it  could  drop  particular                                                                    
Co-Chair MacKinnon referred  to page 79 of  a capital budget                                                                    
review [a Legislative Finance  Division document titled "The                                                                    
Fiscal  Year  2016   Budget:  Legislative  Fiscal  Analyst's                                                                    
Overview  of  the  Governor's   Request"]  that  included  a                                                                    
conversation  about  deferred  maintenance  in  Alaska.  The                                                                    
administration was estimating  deferred maintenance costs of                                                                    
close  to  $1.8 billion.  She  stated  that the  $3  million                                                                    
appropriation  represented a  small  drop in  the bucket  in                                                                    
relation  to the  overall  facility  maintenance needs.  She                                                                    
noted that everything was on the table for consideration.                                                                       
Vice-Chair  Micciche believed  there were  many assets  that                                                                    
the state should probably consider  taking off its books. He                                                                    
would look  for buildings and  assets that were not  as high                                                                    
on the  priority list as  some of the others  where deferred                                                                    
maintenance could be passed on  to the next buyer. He agreed                                                                    
that everything was on the table.                                                                                               
Co-Chair  MacKinnon  observed  in  her  review  of  deferred                                                                    
maintenance spending  that it pertained  to both  public and                                                                    
non-public  buildings. She  believed the  legislature needed                                                                    
to consider  how the state  was investing in  other people's                                                                    
buildings. She acknowledged that  there may be circumstances                                                                    
where the  state had  a long-term  leases that  required the                                                                    
state to contribute in some way.                                                                                                
9:31:11 AM                                                                                                                    
Ms.  Pitney  moved  to a  reappropriation  request  for  the                                                                    
Alternative Energy and Energy  Efficiency Program on page 6.                                                                    
The request focused on public  buildings in communities. She                                                                    
detailed that  the proposed reappropriation would  come from                                                                    
the Mount  Spurr Geothermal  Project and  was not  to exceed                                                                    
$2.2 million.                                                                                                                   
Vice-Chair  Micciche wondered  why  the funds  would not  be                                                                    
deposited back into the general  fund instead of going to an                                                                    
already well-funded state program.  Ms. Pitney answered that                                                                    
the increment  would go towards  continuing the  momentum of                                                                    
the program. She remarked that  the funds could be deposited                                                                    
into the  general fund  and then to  the project.  She added                                                                    
that the method was certainly the legislature's call.                                                                           
Ms. Pitney  continued on  pages 8  through 16.  The requests                                                                    
were included  in the reappropriation  of Mount  Spurr funds                                                                    
to  the   highest  priority   energy  projects,   which  had                                                                    
traditionally  been  funded  through  AEA.  Pages  8  and  9                                                                    
included  funding  for  Kake and  Port  Heiden  rural  power                                                                    
system  upgrades. Page  10 pertained  to Tuluksak  bulk fuel                                                                    
upgrades.  Page   11  included  funds  for   the  Electrical                                                                    
Emergencies Program.  Pages 13  through 16  addressed school                                                                    
district  major  maintenance grants  in  the  amount of  $13                                                                    
million, which  included the top four  projects; $10 million                                                                    
of the request was a reappropriation.                                                                                           
9:35:44 AM                                                                                                                    
Ms.  Pitney  explained  that  there   were  four  pieces  of                                                                    
deferred  maintenance  in   the  amendments,  which  totaled                                                                    
approximately  $25 million  to $30  million. She  noted that                                                                    
the  amount  was significantly  below  the  $100 million  in                                                                    
addition to  school major maintenance  that had  been funded                                                                    
in  the past.  She concluded  that the  funding reflected  a                                                                    
small step  to continue  the program. She  moved to  page 17                                                                    
related  to  the Department  of  Fish  and Game  (DFG).  The                                                                    
request  included  federal  ($375,000)  and  DFG  ($125,000)                                                                    
funds  for deferred  maintenance on  three shooting  ranges;                                                                    
the DFG funds were directed at range maintenance.                                                                               
Senator  Dunleavy asked  about  the amount  of the  required                                                                    
state match  (page 17).  Ms. Pitney  replied that  the state                                                                    
match was $125,000 (25 percent).                                                                                                
Senator Dunleavy wondered  if the funds would  roll into the                                                                    
following year  if they were  not used in the  current year.                                                                    
Ms. Pitney  answered that capital  projects had  a five-year                                                                    
time horizon.                                                                                                                   
Ms.  Pitney  addressed  a funding  request  for  the  Alaska                                                                    
Arctic Policy Leadership  on page 19. She  detailed that the                                                                    
small appropriation  had been requested given  the timing of                                                                    
the U.S.  chairmanship of the Arctic  Council. The increment                                                                    
was to ensure  that Alaska's policy agendas were  at the top                                                                    
of the  Arctic Council's agenda. The  appropriation would be                                                                    
in coordination  with the current legislative  commission on                                                                    
Arctic policy.                                                                                                                  
Vice-Chair  Micciche  asked   where  the  proposed  $500,000                                                                    
increment  would  be  spent  on  the  Alaska  Arctic  Policy                                                                    
Leadership.  Ms.  Pitney  answered that  Craig  Fleener  had                                                                    
taken  on a  special  assistant role  on  Arctic policy;  he                                                                    
would have the details in the coming weeks.                                                                                     
Vice-Chair  Micciche asked  if  the  increment included  Mr.                                                                    
Fleener's salary. Ms. Pitney replied in the negative.                                                                           
Vice-Chair  Micciche  expressed  his interest  in  seeing  a                                                                    
breakdown  of the  expenditures  that would  occur over  the                                                                    
three-year  period.  He  did not  believe  the  state  could                                                                    
afford  contingencies at  present.  He  understood that  the                                                                    
state  had  a bright  future,  but  he believed  that  every                                                                    
dollar spent needed justification.                                                                                              
9:40:30 AM                                                                                                                    
Senator  Olson  wondered  how much  funding  the  state  had                                                                    
allocated  to Alaska  Arctic Policy  Leadership in  the past                                                                    
(when   the   U.S.  did   not   have   the  Arctic   Council                                                                    
chairmanship).  Ms. Pitney  did  not believe  the state  had                                                                    
funded a  special assistant  position in  the past.  She did                                                                    
not know  the amount  that had gone  into the  Arctic Policy                                                                    
Commission; however, she believed  the commission was a good                                                                    
investment for Alaska in order  to put its policies forward.                                                                    
She opined that the progress  made by the legislature on the                                                                    
issue was laudable.                                                                                                             
Ms.  Pitney addressed  a  reappropriation  from a  completed                                                                    
project to  the Alaska  Vocational Technical  Center (AVTEC)                                                                    
for an information technology  systems refresh. She detailed                                                                    
that  $530,000 would  be reappropriated  from a  $16 million                                                                    
dormitory replacement project.                                                                                                  
Co-Chair MacKinnon referred to DSL  services on page 22. She                                                                    
wondered  the item  would be  a one-time  software purchase.                                                                    
She explained that the capital  budget chair tried to ensure                                                                    
there was a  clean line between operating  expenses and one-                                                                    
time capital budget expenses.                                                                                                   
Ms.  Pitney  replied  that  she   would  follow  up  on  the                                                                    
question. She  believed the  item was  potentially bandwidth                                                                    
related  and  was  possibly an  operating  expenditure.  She                                                                    
surmised  that  it may  be  below  the  level at  which  the                                                                    
funding would cover. Co-Chair MacKinnon understood.                                                                             
Ms.  Pitney  highlighted a  $1  million  request to  acquire                                                                    
subsurface lands on northern Afognak  Island with funds from                                                                    
the Exxon Valdez Oil Spill Trustee Council.                                                                                     
Senator Dunleavy  asked for verification  that the  land was                                                                    
state-owned. Ms. Pitney replied that she was not certain.                                                                       
Senator  Dunleavy  made the  assumption  that  the land  was                                                                    
state-owned.  He  asked  for verification  that  the  action                                                                    
would  use  $1  million  to  take  state  land  out  of  the                                                                    
possibility  of development.  Ms.  Pitney  replied that  she                                                                    
would follow up on the question.                                                                                                
Senator Dunleavy  asserted that  it looked like  the request                                                                    
would remove the possibility of  development on the land. He                                                                    
thought it was  a "triple whammy." He elaborated  that 1) it                                                                    
would cost  the state $1  million; 2) it would  remove state                                                                    
land from  development possibilities;  and 3) it  would make                                                                    
the federal  government happy, but  not the state.  He asked                                                                    
for verification that the increment was $1 million.                                                                             
Ms. Pitney  affirmed that  the request  was $1  million. She                                                                    
turned to  a request on page  25 for the Cook  Inlet Oil and                                                                    
Gas  Resources and  Statewide Energy  Database ($400,000  in                                                                    
federal receipts  and $400,000  in general fund  match). She                                                                    
elaborated   that   the   database  would   help   to   find                                                                    
undiscovered resources.                                                                                                         
Co-Chair  MacKinnon asked  if the  request was  an operating                                                                    
budget  item or  a  capital budget  expenditure. Ms.  Pitney                                                                    
replied that  the request was  a capital  budget expenditure                                                                    
for database  development. Future use of  the database would                                                                    
be  funded  through  personnel   within  the  Department  of                                                                    
Natural Resources (DNR).                                                                                                        
9:45:35 AM                                                                                                                    
Ms.  Pitney addressed  a federal  budget  increment for  the                                                                    
upgrade   and   repair   of  critical   volcano   monitoring                                                                    
instruments (page  28). The  $500,000 request  was federally                                                                    
funded and related to emergency and safety.                                                                                     
Vice-Chair  Micciche noted  for  the  public's benefit  that                                                                    
items funded  with federal receipts were  passed through the                                                                    
capital budget.                                                                                                                 
Ms.   Pitney   replied   that  the   legislature   had   the                                                                    
responsibility to appropriate all  funds, which included the                                                                    
authority  to receive  federal funds.  She detailed  that it                                                                    
was  a  "pass  through";  the agency  could  not  spend  the                                                                    
federal funds without the authority  of the legislature. She                                                                    
turned  to  a request  that  would  reappropriate DNR  funds                                                                    
within  the  department  to unified  permit  automation  and                                                                    
document  management  (page  31).  She  expounded  that  the                                                                    
increment   included  four   entities   looking  to   obtain                                                                    
development   permits;   the   database  was   intended   to                                                                    
streamline the process. There had  been prior funding to the                                                                    
project;  no   additional  funding  was   anticipated  going                                                                    
Senator  Hoffman   pointed  to   the  one-time   $1  million                                                                    
reappropriation on  page 31. He observed  that approximately                                                                    
three-quarters  of   the  amount   would  go   to  personnel                                                                    
services. He wondered if  the personnel services designation                                                                    
included  state  employees; if  so,  he  asked whether  they                                                                    
would  be  temporary hires.  He  believed  there were  about                                                                    
eight  positions  that would  be  located  in Anchorage.  He                                                                    
referred to page 34 where  some of the positions were listed                                                                    
as PFT [permanent  full-time], which led him  to believe the                                                                    
funds were not one-time.                                                                                                        
Ms. Pitney  would follow  up on  the question.  She detailed                                                                    
that  the permanent  full-time analyst/programmer  positions                                                                    
would transition to other projects  or would transition out;                                                                    
the  employees   had  been  permanent  full-time   to  date.                                                                    
Additionally,  there  were   three  long-term  non-permanent                                                                    
positions associated with the project development.                                                                              
9:50:08 AM                                                                                                                    
Ms.   Pitney  moved   to  an   $850,000   request  for   the                                                                    
continuation  of the  Alaska  Domestic  Violence and  Sexual                                                                    
Assault Intervention Program under  the Department of Public                                                                    
Safety  (page  35).  The  program  had  received  one  prior                                                                    
appropriation  of  $850,000  the   previous  year.  Page  36                                                                    
included  a $2  million  request for  the Empowering  Choice                                                                    
Housing Program  under the Department  of Public  Safety for                                                                    
rental assistance  for victims.  The rental  assistance went                                                                    
towards helping a  victim get out of a  domestic violence or                                                                    
other problem.                                                                                                                  
Co-Chair MacKinnon  remarked that  under the  Alaska housing                                                                    
program  there   had  previously   been  a   preference  for                                                                    
individuals  seeking  shelter  from domestic  violence.  She                                                                    
elaborated  that the  state had  eliminated the  preference.                                                                    
She  believed  general  fund  or   other  dollars  had  been                                                                    
substituted to support that part  of the population that was                                                                    
bottle-necking  other  low-income  families  from  receiving                                                                    
Vice-Chair  Micciche  wondered  if  the  funds  only  passed                                                                    
through  the capital  budget.  More  specifically, he  asked                                                                    
what percentage of the expenditures  were recovered with the                                                                    
Permanent Fund Dividends (PFDs)  of perpetrators. Ms. Pitney                                                                    
replied that  the $2 million increment  was entirely derived                                                                    
from the PFDs of criminals.                                                                                                     
Vice-Chair   Micciche   surmised   that   the   funds   were                                                                    
essentially pass  through funds. Ms. Pitney  answered in the                                                                    
affirmative.  She elaborated  that the  fund source  was the                                                                    
recommendation   of   the   administration;   however,   she                                                                    
acknowledged  that  it  was   the  legislature's  choice  to                                                                    
determine how to best utilize the funds.                                                                                        
Co-Chair MacKinnon  was uncertain that PFD  funds were being                                                                    
used  properly according  to  statute.  The committee  would                                                                    
need  to  explore  the  issue further  related  to  the  two                                                                    
requests  (pages  35  through  37)  to  ensure  statute  was                                                                    
adhered to.  She noted that  it did not mean  the governor's                                                                    
request would not be followed,  but the funding source would                                                                    
need to be examined.                                                                                                            
9:53:29 AM                                                                                                                    
Ms. Pitney turned to a  $350,000 DPS reappropriation request                                                                    
on page 38. She detailed  that funds would be reappropriated                                                                    
from  a  completed  video  arraignment  project  to  upgrade                                                                    
trooper  video equipment  and storage.  Page  40 included  a                                                                    
$4.6  million   request  for  the  Alaska   Housing  Finance                                                                    
Corporation (AHFC)  under the  Department of  Revenue. Funds                                                                    
would  go to  the new  Teacher, Health  Professional, Public                                                                    
Safety and Village Public Safety Officer (VPSO) programs.                                                                       
Co-Chair  MacKinnon  observed  that  the  governor  proposed                                                                    
eliminating some  VPSO positions  that had not  been filled.                                                                    
She  wondered  if  the  elimination  of  the  positions  was                                                                    
reflected in  the housing program.  Ms. Pitney  believed the                                                                    
increment  was   in  alignment   with  the   positions.  She                                                                    
elaborated  that  in  addition to  unfilled  VPSO  positions                                                                    
there  was tremendous  turnover. There  was also  a lack  of                                                                    
housing  in   some  communities   that  had  not   yet  been                                                                    
Co-Chair MacKinnon  requested further detail to  ensure that                                                                    
the construction of housing was  in line with locations that                                                                    
had existing officers.                                                                                                          
9:56:06 AM                                                                                                                    
Ms. Pitney  relayed that  beginning on page  43 there  was a                                                                    
list  of  projects  in various  communities  over  the  past                                                                    
several years.                                                                                                                  
Co-Chair MacKinnon  observed that  the state was  creating a                                                                    
significant amount of  housing. She wondered if  it was safe                                                                    
to  assume that  any  appropriation would  actually build  a                                                                    
house to  completion. She wanted  to ensure the  funding did                                                                    
not only  partially fund items.  Ms. Pitney replied  that it                                                                    
was a safe assumption, but she would follow up.                                                                                 
Vice-Chair Micciche  remarked that the proposed  request was                                                                    
$40 million from FY 16 through  FY 21. He was concerned that                                                                    
competition  from  the   private  sector  could  potentially                                                                    
deliver  the  same  result at  a  much  more  cost-effective                                                                    
price. He  also worried that  planning to build that  far in                                                                    
advance in communities that may  or may not continue to have                                                                    
the  need could  result  in a  surplus  of state-owned  real                                                                    
estate. He believed  it was for an honorable  reason, but he                                                                    
wondered  how far  in advance  the project  was planned.  He                                                                    
asked if  it was ongoing  effort for the state  to construct                                                                    
rental units and housing for  state positions when there may                                                                    
be a smaller number of position in the future.                                                                                  
Ms. Pitney answered  that the program had  been ongoing. She                                                                    
relayed  that there  were communities  that were  still with                                                                    
need. She  stated that it  was a  choice the state  faced in                                                                    
the current  environment. She added  that the  increment was                                                                    
much smaller than in past years.                                                                                                
Vice-Chair Micciche  was unsure the smaller  increment would                                                                    
solve  the  problem  if  it  was not  the  right  choice  to                                                                    
continue  building housing  or if  there was  private sector                                                                    
competition. He  wondered how the administration  felt about                                                                    
the  competition  with local  businesses  that  may want  to                                                                    
provide housing  at a  lower cost. He  wondered if  the role                                                                    
was appropriate for the state.                                                                                                  
Ms. Pitney  replied that  the intent of  the program  was to                                                                    
have  housing to  attract qualified  individuals to  service                                                                    
communities.   The  issue   had  been   seen  as   the  most                                                                    
significant barrier  to recruiting qualified  personnel into                                                                    
the communities.                                                                                                                
Senator Dunleavy noted  that the program had  begun in 2001.                                                                    
He detailed that  the program's initial purpose  had been to                                                                    
provide infrastructure  and teacher  housing in many  of the                                                                    
state's rural  villages that had complicated  land ownership                                                                    
issues with  tribes and  tribal corporations.  He elaborated                                                                    
that  it   had  not   been  easily  available   for  private                                                                    
contractors to  go in and  build housing. He  explained that                                                                    
the   teacher  housing   provided   a   Housing  and   Urban                                                                    
Development-like program for  first time homebuyers anywhere                                                                    
in the state.  He highlighted that a portion  of the current                                                                    
request  included a  partnership  between school  districts,                                                                    
tribes, and other  where the money was a loan  that was paid                                                                    
off over  time to teachers  and others. Until 2001  in rural                                                                    
Alaska  operating   dollars  were  used  to   build  teacher                                                                    
housing. He noted that it had  been thought that it was more                                                                    
appropriate  to have  a different  revenue  stream to  build                                                                    
10:01:03 AM                                                                                                                   
Senator Olson stressed  that it was not  possible to recruit                                                                    
VPSOs  to villages  without housing.  He  asserted that  the                                                                    
housing program had been contributing  to the success of the                                                                    
VPSO  and teacher  programs. He  thought  missing the  point                                                                    
would  be  detrimental.  He  spoke  to  tragedies  in  small                                                                    
communities  such   as  Manokotak  and  Tanana   that  would                                                                    
continue  without  first  line  responders  like  VPSOs.  He                                                                    
firmly  believed   that  the   housing  was   justified  and                                                                    
necessary in order to continue the success of VPSOs.                                                                            
Vice-Chair Micciche supported the  value of the housing, but                                                                    
he  wondered  if  it  was   being  done  as  efficiently  as                                                                    
possible.   He  was   interested  in   private  partnerships                                                                    
whenever possible.                                                                                                              
Senator Olson  pointed out that  there were very  few people                                                                    
in villages who could put  money together to build a private                                                                    
facility. He  noted that  Native corporations  had witnessed                                                                    
this  fact and  had primarily  stayed out  of the  issue. He                                                                    
believed  the chance  housing would  be built  that was  not                                                                    
state sponsored was minimal.                                                                                                    
Ms. Pitney turned to an  $11 million request for AHFC energy                                                                    
programs on page  47. The request was made up  of $3 million                                                                    
from the AHFC  dividend, $6.6 million in  general funds, and                                                                    
$1.5 million in  federal receipts. The funds  would keep the                                                                    
weatherization and  home rebate program continuing;  it also                                                                    
provided   funds   to   assist   with   weatherization   and                                                                    
rehabilitation  of  existing  homes  for  low  and  moderate                                                                    
income families. The request  represented one-quarter of the                                                                    
amount  appropriated in  the past  (up to  $100 million  had                                                                    
been appropriated in  the past, but between  $44 million and                                                                    
$51 million  had been appropriated  in the past  few years).                                                                    
She  relayed  that   the  program  had  a   good  return  on                                                                    
investment.  She briefly  highlighted  pages  49 through  52                                                                    
related to  the AHFC  Weatherization and Home  Energy Rebate                                                                    
Programs. She  turned to a  $1 million request for  the Cold                                                                    
Climate  Housing Research  Center  (CCHRC) on  page 54.  The                                                                    
funding  would  go  towards the  ongoing  operation  of  the                                                                    
program;  it   assisted  AHFC   and  with   determining  the                                                                    
appropriate  design  for  Alaska's  climate  at  the  lowest                                                                    
energy footprint possible.                                                                                                      
10:05:42 AM                                                                                                                   
Ms.  Pitney   addressed  a  $29  million   request  for  the                                                                    
Department of Transportation and  Public Facilities (DOT) on                                                                    
page 56. The  request was made up of $24  million in federal                                                                    
highway capital funds and $5  million in capital improvement                                                                    
project  receipts.   The  increment  focused   on  improving                                                                    
traffic  in congested  areas. She  detailed  that the  state                                                                    
equipment fleet  replacement was the primary  component from                                                                    
the highway  capital fund (fleet replacement  occurred after                                                                    
a 5 to 7-year lifecycle).                                                                                                       
Co-Chair MacKinnon  referred page 57.  In her review  of the                                                                    
operating budget  she had observed  an increase in  fish and                                                                    
game and  boats. She  remarked that  the request  would help                                                                    
cover some  of the  cost, which  was related  to replacement                                                                    
vehicles.   She  wondered   what   the  administration   was                                                                    
proposing to  purchase. She requested  detail on  what would                                                                    
be purchased and  how old the vehicles were.  She noted that                                                                    
there was surplus  money coming in from the sale  of some of                                                                    
the equipment. She wondered what  the average mileage was on                                                                    
vehicles that were surplused and  whether the state received                                                                    
the value of items when they were surplused.                                                                                    
Ms. Pitney would  follow up on the questions.  She turned to                                                                    
an  $8   million  request  for  DOT   deferred  maintenance,                                                                    
renewal, repair,  and equipment (page 60).  She communicated                                                                    
that prior  year appropriations had ranged  from $25 million                                                                    
to $27  million. The  increment would address  a few  of the                                                                    
department's highest priority deferred maintenance needs.                                                                       
10:09:11 AM                                                                                                                   
Ms. Pitney  turned to a $12  million reappropriation request                                                                    
on  page 61.  The  increment would  reappropriate the  funds                                                                    
from the  estimated Alaska Aerospace Corporation  balance of                                                                    
$22 million  to Alaska  Marine Highway System  (AMHS) vessel                                                                    
and  terminal overhaul  and rehabilitation.  She added  that                                                                    
the  funds could  just as  easily go  back into  the general                                                                    
fund  for  appropriation  to  AMHS.  She  relayed  that  the                                                                    
increment was an operating item  that could be discussed for                                                                    
future  budgets.  She  added  that  the  annual  maintenance                                                                    
requirement had  traditionally been  in the  capital budget,                                                                    
but could be  transferred to the operating  budget in future                                                                    
Co-Chair  MacKinnon remarked  that  Co-Chair  Kelly did  not                                                                    
want items  moved from the  capital budget to  the operating                                                                    
budget at present.                                                                                                              
Ms.  Pitney   addressed  an  $8  million   request  for  the                                                                    
University  of Alaska  Fairbanks engineering  building (page                                                                    
64). She  detailed that the building  was partially complete                                                                    
(walls  were currently  up); the  increment would  allow for                                                                    
the completion of an additional  floor and a couple of labs.                                                                    
She  added that  the  total amount  needed  to complete  the                                                                    
facility was slightly over $30  million. Page 65 included an                                                                    
$8   million  request,   which   was   the  final   deferred                                                                    
maintenance component. The increment  was for the University                                                                    
of  Alaska   system  for   its  highest   priority  deferred                                                                    
maintenance   requirements.   She  communicated   that   the                                                                    
increment had  been around $37  million in prior  years, but                                                                    
had fluctuated  depending on  the year.  Page 68  included a                                                                    
reappropriation  of $1  million to  capitalize the  Emerging                                                                    
Energy Technology  Fund with  funds previously  allocated to                                                                    
the Mount Spurr Geothermal Project development.                                                                                 
Co-Chair MacKinnon thanked Ms.  Pitney for her presentation.                                                                    
She  informed the  committee that  it would  hear from  each                                                                    
department related to the items discussed.                                                                                      
Senator  Dunleavy  asked  for verification  that  the  items                                                                    
discussed  during   the  meeting  had  been   added  to  the                                                                    
governor's  original budget  dated  December  15, 2014.  Ms.                                                                    
Pitney replied in the affirmative.                                                                                              
Senator Dunleavy asked for the  total cost of the additions.                                                                    
Ms. Pitney replied  that the net was  $43 million; including                                                                    
reappropriations the  total was  closer to $80  million. The                                                                    
additions would increase the capital  budget to $150 million                                                                    
in general funds and over $1.4 billion in federal funds.                                                                        
10:13:44 AM                                                                                                                   
Vice-Chair Micciche  saw the value  in the projects  and did                                                                    
not  want to  come across  as doubting  the administration's                                                                    
approach. As the former mayor  of a small town he understood                                                                    
that it was helpful to  keep buildings for extra storage and                                                                    
other  uses. However,  he wondered  if  the committee  could                                                                    
receive  a comprehensive  evaluation of  property controlled                                                                    
by the state that may not  need to be controlled any longer.                                                                    
He wondered about putting property  up for sale, which would                                                                    
reduce the state's maintenance and holding costs.                                                                               
Ms.  Pitney  answered  that  she  would  follow  up  on  the                                                                    
Vice-Chair  Micciche  wondered  how complicated  the  effort                                                                    
would  be  to  identify  property that  would  be  best  for                                                                    
surplus sale.  He wondered if  there was a running  tally of                                                                    
state properties and how they were used.                                                                                        
Ms. Pitney replied that that  the best source of information                                                                    
to  start with  would be  the deferred  maintenance list  to                                                                    
prioritize the  facilities. She detailed that  the state had                                                                    
a  variety  of  facilities  ranging  from  gravel  coverage,                                                                    
campground  kiosks, a  crime  lab,  fish hatcheries,  office                                                                    
buildings  and   other.  She  agreed  that   the  facilities                                                                    
represented a tremendous  cost to the state and  it would be                                                                    
worth a systemic look.                                                                                                          
Co-Chair  MacKinnon  communicated  that the  Senate  Finance                                                                    
Committee  would  have its  "hands  firmly  on the  steering                                                                    
wheel."  She  recommended  against   the  inclusion  of  any                                                                    
discretionary  funds in  the capital  budget. She  wanted to                                                                    
ensure that  health, life, and safety  issues were addressed                                                                    
in  the  budget.  She asked  committee  members  to  include                                                                    
requests  in   the  Capital  Appropriation   Submission  and                                                                    
Information  System   (CAPSIS).  She  noted   that  requests                                                                    
totaled $1 billion  to date. She added  that there continued                                                                    
to be  communities and entities requesting  money that would                                                                    
benefit  individual projects.  She  recognized the  projects                                                                    
were important to the people  asking for them and served the                                                                    
people  of Alaska  in  many ways.  She  emphasized the  $3.4                                                                    
billion  debt facing  the state.  She  stated that  projects                                                                    
with  matching money  may  have  greater consideration  than                                                                    
those  requesting   general  fund  dollars  only.   She  was                                                                    
interested in  hearing ideas that  could reduce  the state's                                                                    
operating budget  or expenses in  the future. She  wanted to                                                                    
lower  the public's  expectation  related to  what could  be                                                                    
done in  the current  year. She spoke  to the  importance of                                                                    
maintaining the integrity of the  process. She explained her                                                                    
intent  to look  at operating  budget items  and the  use of                                                                    
one-time funds.  She had  requested that  the administration                                                                    
take a high-level  look at its budget to  determine how much                                                                    
had  been  cut in  recurring  dollar  costs versus  one-time                                                                    
expenses; it  appeared to  her that  the capital  budget was                                                                    
taking the majority  of the hit. She discussed  that in past                                                                    
years  the capital  budget had  been used  to stabilize  the                                                                    
economy. She referred  to 2008 and 2009  when capital budget                                                                    
projects  helped to  maintain  the state  from falling  into                                                                    
recession.  She  wanted  to   let  Alaskans  know  that  the                                                                    
committee was working  hard to understand what  would make a                                                                    
10:21:37 AM                                                                                                                   
Senator   Dunleavy  thanked   Co-Chair  MacKinnon   for  her                                                                    
comments.  He believed  that  Alaskans  understood that  the                                                                    
state had an issue with  its revenues. He also believed that                                                                    
Alaskans were  concerned about the legislature's  ability to                                                                    
understand  the problem.  He  thought  the statements  would                                                                    
reassure Alaskans  that the legislature would  be "tight" on                                                                    
the budget. He opined  that many legislators would perfectly                                                                    
understand why  there would be  no discretionary  funding in                                                                    
the  budget   for  projects  in  individual   districts.  He                                                                    
believed it  was the  beginning of  reality. He  thought the                                                                    
state needed to take a year  off from spending and to reduce                                                                    
the size  of government. He  spoke to the need  for reducing                                                                    
and restructuring.                                                                                                              
Vice-Chair  Micciche hoped  all  legislators heard  Co-Chair                                                                    
MacKinnon's  message.  He believed  the  state  would be  in                                                                    
great financial  shape again  in the  future. He  noted that                                                                    
when  adjusting for  inflation per  capita, the  spending in                                                                    
1981  was  higher than  current  spending.  He believed  the                                                                    
state  had  an  incredible  opportunity  to  right-size  its                                                                    
budget. He  did not believe  the situation should  be looked                                                                    
at as  impending doom  and gloom.  He greatly  supported the                                                                    
thoughts  shared  by  Co-Chair MacKinnon.  He  believed  oil                                                                    
prices would rebound.                                                                                                           
Senator Hoffman agreed that the  state needed to tighten its                                                                    
belt; however,  his districts did  not have much in  the way                                                                    
of  state  spending. For  example,  the  state may  only  be                                                                    
providing a small  amount of revenue sharing  and some funds                                                                    
for the school in the  community of Oscarville. He discussed                                                                    
that there were still many  unmet needs in rural Alaska that                                                                    
were  health, life,  and safety  issues (i.e.  water, sewer,                                                                    
and other).  He remarked that  the prior governor  had spent                                                                    
significant  time on  VPSOs. He  elaborated  that without  a                                                                    
VPSO,  entire communities  were at  risk in  the event  of a                                                                    
shooting. He believed  that as the state  tightened its belt                                                                    
it  needed to  remain  cognizant that  health, life,  safety                                                                    
issues existed  in rural areas.  He spoke to  the importance                                                                    
of   remembering  that   many  Alaskans   living  in   rural                                                                    
communities  had  far  different  circumstances  than  those                                                                    
individuals living in urban areas.  He wanted to ensure that                                                                    
individuals were treated fairly.                                                                                                
Senator Bishop  did not disagree  with comments  made around                                                                    
the table, but he wanted  to reassure Alaskans that they had                                                                    
not  been   forgotten.  The   legislature  was   working  to                                                                    
determine the best path forward related to state spending.                                                                      
Co-Chair  MacKinnon   appreciated  members'   comments.  She                                                                    
stated that  "we're in it  together and together we  will be                                                                    
successful." She  discussed the  schedule for  the following                                                                    
SB 26 was HEARD and HELD in committee for further                                                                               
10:27:30 AM                                                                                                                   
The meeting was adjourned at 10:27 a.m.                                                                                         

Document Name Date/Time Subjects
FY2016 Capital Gov Amend Dept Appropriations and Allocations 2-5-15.pdf SFIN 2/9/2015 9:15:00 AM
SB 26
FY2016 Capital Gov Amend Dept Summary 2-5-15.pdf SFIN 2/9/2015 9:15:00 AM
SB 26
FY2016 Capital Gov Amend Priority Summary.pdf SFIN 2/9/2015 9:15:00 AM
SB 26
FY2016 Capital Gov Amend Reapprop Balances.pdf SFIN 2/9/2015 9:15:00 AM
SB 26
FY2016 Capital Gov Amended Items Only Project Summary.pdf SFIN 2/9/2015 9:15:00 AM
SB 26
FY2016 Capital Gov Amended Items Summary.pdf SFIN 2/9/2015 9:15:00 AM
SB 26