Legislature(2015 - 2016)SENATE FINANCE 532

03/11/2015 09:00 AM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
09:05:03 AM Start
09:06:07 AM SB27
09:06:07 AM Overview: Fy 16 Budget Department of Education and Early Development
10:16:43 AM Overview: Fy 16 Budget Department of Law
10:42:14 AM Overview: Fy 16 Budget Department of Commerce, Community and Economic Development
10:50:54 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 27 Presentation: Overview FY17 Operating Budget TELECONFERENCED
Departments: Law; Commerce, Community, and
Economic Development; and Education and Early
Development
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 11, 2015                                                                                            
                         9:05 a.m.                                                                                              
                                                                                                                                
9:05:03 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Kelly  called the Senate Finance  Committee meeting                                                                    
to order at 9:05 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
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                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Michael  Hanley, Commissioner,  Department of  Education and                                                                    
Early Development;  Heidi Teshner,  Director, Administrative                                                                    
Services,  Department of  Education  and Early  Development;                                                                    
James Cantor,  Deputy Attorney  General, Department  of Law;                                                                    
Dave Blaisdell, Director,  Administrative Services Division,                                                                    
Department  of   Law;  Richard  Svobodny,   Deputy  Attorney                                                                    
General,  Criminal Division,  Department  of Law;  Catherine                                                                    
Reardon,  Administrative  Services Director,  Department  of                                                                    
Commerce, Community and Economic Development.                                                                                   
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 27     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          SB 27 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
FY 16 BUDGET OVERVIEWS:                                                                                                         
                                                                                                                                
          DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT                                                                         
          DEPARTMENT OF LAW                                                                                                     
          DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC                                                                        
          DEVELOPMENT                                                                                                           
                                                                                                                                
SENATE BILL NO. 27                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations, and making  appropriations under art.                                                                    
     IX, sec.  17(c), Constitution of  the State  of Alaska,                                                                    
     from  the  constitutional   budget  reserve  fund;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
9:06:07 AM                                                                                                                    
                                                                                                                                
^OVERVIEW: FY  16 BUDGET DEPARTMENT  OF EDUCATION  AND EARLY                                                                  
DEVELOPMENT                                                                                                                   
                                                                                                                                
9:06:07 AM                                                                                                                    
                                                                                                                                
MICHAEL  HANLEY, COMMISSIONER,  DEPARTMENT OF  EDUCATION AND                                                                    
EARLY   DEVELOPMENT,  discussed   the  PowerPoint,   "Alaska                                                                    
Department  of  Education   and  Early  Development,  FY2016                                                                    
Budget Overview" (copy on file).                                                                                                
                                                                                                                                
Commissioner  Hanley  looked  at  slide  5,  "Department  of                                                                    
Education and  Early Development,  FY 2016  Governor Amended                                                                    
Budget." He stated  that the slide gave the  overview in the                                                                    
Department  of Education  and Early  Development (DEED).  He                                                                    
remarked that  DEED was the smallest  department, aside from                                                                    
the Governor's office.  He stated that there  were 359 total                                                                    
employees,  with  126 in  the  "Goldbelt"  who actually  run                                                                    
DEED.                                                                                                                           
                                                                                                                                
Co-Chair  Kelly  queried  the  number  of  students  at  Mt.                                                                    
Edgecumbe  High School.  Commissioner Hanley  responded that                                                                    
there were approximately 400 students at Mt. Edgecumbe.                                                                         
                                                                                                                                
Commissioner  Hanley highlighted  slide 6,  "Budget by  Core                                                                    
Services." He noted  that 80 percent of the  DEED budget was                                                                    
public school  funding, which was  distributed in  a formula                                                                    
to the state's  public schools. He remarked  that 14 percent                                                                    
of  the budget  was for  fiscal accountability,  compliance,                                                                    
and  oversight.  He  explained that  DEED  worked  with  the                                                                    
school districts  on accountability  for the  received state                                                                    
and federal  funds. He stated  that 2 percent of  the budget                                                                    
was  for  school  effectiveness programs,  which  helped  to                                                                    
provide  coaches, mentors,  and other  support programs  for                                                                    
the schools. Lastly, 4 percent  of the budget was for active                                                                    
partnerships, for programs like  Best Beginnings and Parents                                                                    
as Teachers.                                                                                                                    
                                                                                                                                
Commissioner  Hanley  addressed   slide  7,  "Department  of                                                                    
Education and  Early Development,  FY 2016  Governor Amended                                                                    
Budget by  Fund Source."  The DEED  budget was  divided into                                                                    
two  components: K-12  formula programs,  $1.4 billion;  and                                                                    
agency  operations  at  $324 million.  He  noted  that  $211                                                                    
million of the  $324 million was federal funds.  The only GF                                                                    
component for  DEED was the  approximately $73  million. The                                                                    
federal programs within the budget  were title programs like                                                                    
the free  and reduced lunch programs;  services for homeless                                                                    
and impoverished students; and  low performing students. The                                                                    
bottom of the slide displayed  the budget by fund source: 85                                                                    
percent  of  the  overall  budget was  GF;  13  percent  was                                                                    
federal funds; and 2 percent  was other funds that came from                                                                    
interagency  receipts, the  Mental Health  Trust Board,  and                                                                    
certificate renewals.                                                                                                           
                                                                                                                                
9:11:01 AM                                                                                                                    
                                                                                                                                
Commissioner  Hanley  highlighted  slide 8,  "General  Funds                                                                    
Only." The  graph represented  the relationship  between the                                                                    
DEED  agency and  the overall  budget. He  stressed that  95                                                                    
percent  of  the  GF  only   budget  was  for  K-12  formula                                                                    
programs.                                                                                                                       
                                                                                                                                
Commissioner Hanley discussed slide  9, "All Fund Sources by                                                                    
Line  Item." He  noted that  94 percent  of the  funding was                                                                    
distributed in  grants. He  remarked that  the 4  percent of                                                                    
other lines  were for assessment  contracts for  mentors and                                                                    
coaches.  He noted  that 2  percent  of the  budget was  for                                                                    
personal services.                                                                                                              
                                                                                                                                
Commissioner  Hanley  looked  at slide  10,  "Department  of                                                                    
Education  and  Early  Development  Agency  Operations."  He                                                                    
remarked  that  the 63  percent  of  the agency  budget  was                                                                    
federal  funding through  the  title  programs. He  stressed                                                                    
that  the   money  did  not  necessarily   stay  within  the                                                                    
department.  The  federal   funding  was  considered  agency                                                                    
funds, but  most of  the federal  funds were  distributed to                                                                    
the districts.                                                                                                                  
                                                                                                                                
                                                                                                                                
Co-Chair  Kelly   surmised  that  the  federal   funds  were                                                                    
distributed  in  the  form of  grants.  Commissioner  Hanley                                                                    
agreed.                                                                                                                         
                                                                                                                                
Commissioner  Hanley highlighted  slide  11, "Department  of                                                                    
Education  and Early  Development, FY  2015 Management  Plan                                                                    
vs.  FY 2016  Governor  Amended." He  pointed  out that  the                                                                    
budget was  formulated to reflect  a $95  million reduction.                                                                    
He  noted  that the  $95  million  represented the  one-time                                                                    
funding from the  FY 15 budget. He remarked that  it was not                                                                    
a true  "reduction", but  rather represented  an adjustment.                                                                    
He   explained  that   DEED  was   working  extensively   in                                                                    
determining true reductions to  the agency and districts. He                                                                    
noted  that there  were  two  permanent full-time  positions                                                                    
eliminated,  and   three  non-permanent  positions   from  a                                                                    
federal program funding.                                                                                                        
                                                                                                                                
Co-Chair  MacKinnon  opined  that the  full-time  employment                                                                    
positions  were not  currently  filled. Commissioner  Hanley                                                                    
responded  that  the   three  non-permanent  positions  were                                                                    
complete, and the other two positions were vacant.                                                                              
                                                                                                                                
Vice-Chair  Micciche   asked  for  an  explanation   of  the                                                                    
reduction of the $1.88 million in federal receipts.                                                                             
                                                                                                                                
9:15:13 AM                                                                                                                    
                                                                                                                                
HEIDI    TESHNER,    DIRECTOR,   ADMINISTRATIVE    SERVICES,                                                                    
DEPARTMENT OF EDUCATION AND EARLY  DEVELOPMENT, did not know                                                                    
why  there was  a  reductions of  $1.88  million in  federal                                                                    
receipts. She agreed to provide further information.                                                                            
                                                                                                                                
Vice-Chair  Micciche  remarked  that   it  looked  like  the                                                                    
reduction was in the governor's amended budget.                                                                                 
                                                                                                                                
Commissioner  Hanley  discussed  slide  12,  "Department  of                                                                    
Education and  Early Development,  FY 2016  Governor Amended                                                                    
Budget Highlights":                                                                                                             
                                                                                                                                
     Student and School Achievement                                                                                             
                                                                                                                                
          •($53.7) UGF & ($8.0) Federal reduction to remove                                                                     
          one PFT position                                                                                                      
                                                                                                                                
          •($100.0)  UGF  reduction  to  remove  the  Alaska                                                                    
          Mineral   and  Energy   Resource  Education   Fund                                                                    
          (AMEREF) grant funding                                                                                                
                                                                                                                                
          •($300.0)  UGF  reduction  to  the  Alaska  Native                                                                    
          Science  &   Engineering  Program   (ANSEP)  grant                                                                    
          funding                                                                                                               
                                                                                                                                
     Alaska Learning Network (AKLN)                                                                                             
                                                                                                                                
          •($250.3)  UGF  reduction   to  the  AKLN  program                                                                    
          funding                                                                                                               
                                                                                                                                
     Early Learning Coordination                                                                                                
                                                                                                                                
          •($50.0) UGF  reduction for Best  Beginnings grant                                                                    
          funding                                                                                                               
                                                                                                                                
          •($20.0)  UGF reduction  for  Parents As  Teachers                                                                    
          base grant funding                                                                                                    
                                                                                                                                
Commissioner  Hanley  looked  at slide  13,  "Department  of                                                                    
Education and  Early Development,  FY 2016  Governor Amended                                                                    
Budget Highlights":                                                                                                             
                                                                                                                                
     Pre-Kindergarten                                                                                                           
                                                                                                                                
          •($100.0) UGF reduction for Pre-K grant funding                                                                       
          State Facilities Rent                                                                                                 
                                                                                                                                
          •$200.0  UGF  one-time   item  increase  for  dual                                                                    
          occupancy in the last three months of FY2016                                                                          
                                                                                                                                
Co-Chair   Kelly  surmised   that  the   administration  was                                                                    
requiring lease  payments. Commissioner Hanley  replied that                                                                    
there were some facilities in  the State Office Building. He                                                                    
wondered  if they  were all  state  facilities. Ms.  Teshner                                                                    
replied  that  the  leases  were  paid  through  the  public                                                                    
building fund.                                                                                                                  
                                                                                                                                
Co-Chair Kelly understood that the  payments were not actual                                                                    
rent payments.  He felt that  there could be  adjustments in                                                                    
administration. Commissioner Hanley agreed.                                                                                     
                                                                                                                                
Commissioner Hanley continued to discuss slide 13:                                                                              
                                                                                                                                
                                                                                                                                
     Library Operations                                                                                                         
                                                                                                                                
          •($66.3) UGF reduction to remove one PFT position                                                                     
                                                                                                                                
          •($33.8) UGF reduction to reduce one inter-                                                                           
          library loan assistant position to half-time                                                                          
                                                                                                                                
          •($2,000.0) UGF reduction to the Broadband grant                                                                      
          funding from HB278                                                                                                    
                                                                                                                                
9:20:31 AM                                                                                                                    
                                                                                                                                
Co-Chair  MacKinnon understood  that the  federal government                                                                    
required  a  high level  of  broadband,  but DEED  was  only                                                                    
attempting  to meet  the lowest  level. Commissioner  Hanley                                                                    
replied  that the  federal guidelines  had  a higher  levels                                                                    
than the base for most of Alaska.                                                                                               
                                                                                                                                
Co-Chair MacKinnon  remarked that  Alaska was facing  a $3.7                                                                    
billion deficit.  She felt that  there would be  a recurring                                                                    
cost in  future years. She  remarked that there should  be a                                                                    
prioritization  of  programs,  rather than  decreasing  each                                                                    
program a small amount.                                                                                                         
                                                                                                                                
Co-Chair Kelly  felt that eliminating vacant  positions were                                                                    
not  the  best  option  for reducing  the  budget.  Co-Chair                                                                    
MacKinnon agreed.                                                                                                               
                                                                                                                                
Senator Dunleavy  remarked that the House  Finance Committee                                                                    
finalized  their operating  budget. He  anticipated a  final                                                                    
recommendation that would greatly reduce the budget.                                                                            
                                                                                                                                
9:25:53 AM                                                                                                                    
                                                                                                                                
Senator Olson  addressed the broadband issues,  and wondered                                                                    
how much of the reduction  caused a loss of federal funding.                                                                    
Commissioner Hanley replied  that, currently, the governor's                                                                    
request  would  have  zero impact  on  federal  funding.  He                                                                    
furthered that  the House Finance Committee  removed all the                                                                    
funding, but  $3.6 million was  restored. That  number would                                                                    
represent  approximately  what  the combination  of  GF  and                                                                    
federal funding would purchase.                                                                                                 
                                                                                                                                
Senator  Olson  wondered  how the  following  year's  budget                                                                    
would affect the federal  funds. Commissioner Hanley replied                                                                    
that  the e-rate  would be  leveraged, if  the funds  remain                                                                    
intact.                                                                                                                         
                                                                                                                                
Senator Olson wondered why the  affectivity was not analyzed                                                                    
based on  individual programs, rather than  cutting parts of                                                                    
separate  programs. Commissioner  Hanley  replied that  DEED                                                                    
had conducted an analysis of the program affectivity.                                                                           
                                                                                                                                
Vice-Chair Micciche  wondered if  DEED was making  an effort                                                                    
to  create  public/private partnerships  fore.  Commissioner                                                                    
Hanley  replied   that  those  programs   represent  private                                                                    
partnerships.                                                                                                                   
                                                                                                                                
9:30:12 AM                                                                                                                    
                                                                                                                                
Commissioner  Hanley  discussed  slide  14,  "Department  of                                                                    
Education and  Early Development,  FY 2016  Governor Amended                                                                    
Budget Highlights":                                                                                                             
                                                                                                                                
     Online With Libraries (OWL)                                                                                                
                                                                                                                                
          •($42.0) UGF  reduction to reduce funding  for one                                                                    
          University of Alaska position to half-time                                                                            
          Alaska   Commission  on   Postsecondary  Education                                                                    
          (ACPE);                                                                                                               
                                                                                                                                
     Program Administration and Operations                                                                                      
                                                                                                                                
          •$13,802.0   I/A  Receipts   (Other)  for   budget                                                                    
          structure  modification  to represent  ACPE  costs                                                                    
          paid by ASLC                                                                                                          
                                                                                                                                
          •($13,802.0)  ACPE Receipts  (Other) for  transfer                                                                    
          of   receipts   from   ACPE  to   the   new   ASLC                                                                    
          appropriation                                                                                                         
                                                                                                                                
     Alaska Student Loan Corporation (ASLC); Loan Servicing                                                                     
                                                                                                                                
          •$13,802.0 ACPE  Receipts (Other) for  transfer of                                                                    
          receipts from ACPE to the new ASLC appropriation                                                                      
                                                                                                                                
Commissioner  Hanley highlighted  slide  15, "Department  of                                                                    
Education and Early Development, FY2016 Capital Budget":                                                                        
                                                                                                                                
     School Construction Grants -Total $4,604.4 UGF                                                                             
                                                                                                                                
          -Kivalina  K-12 Replacement  School -new  facility                                                                    
          design, $4,604.4 UGF                                                                                                  
                                                                                                                                
                                                                                                                                
9:33:12 AM                                                                                                                    
                                                                                                                                
Senator Dunleavy queried  the origin of the  $63 million for                                                                    
the Kivalina  School. Commissioner  Hanley replied  that the                                                                    
total cost  of the  school was between  $63 million  and $68                                                                    
million. The  Northwest Arctic  Borough School  District had                                                                    
20  percent local  contribution,  so the  state's share  was                                                                    
approximately $48 million.                                                                                                      
                                                                                                                                
Senator Dunleavy wondered  if the school was  designed to be                                                                    
$63 million,  or if  the budget  was only  an approximation.                                                                    
Commissioner  Hanley replied  that the  figure was  based on                                                                    
design  plans, which  following specific  DEED statutes  and                                                                    
regulations.  There  were  various  criteria  that  included                                                                    
square  footage,  and  other  aspects.  He  noted  that  the                                                                    
original  proposal   was  $100  million,  and   DEED  worked                                                                    
extensively with the district  to determine the final budget                                                                    
cost.                                                                                                                           
                                                                                                                                
Senator  Dunleavy asked  how  many  students were  currently                                                                    
enrolled  in   the  Kivalina  School.   Commissioner  Hanley                                                                    
replied that there  were 130 students. He  furthered that it                                                                    
was one of  the few schools that had  shown slight increases                                                                    
to the student population. The  current school was built for                                                                    
65 students.                                                                                                                    
                                                                                                                                
Senator  Dunleavy   queried  the   balance  in   the  school                                                                    
construction  account.   Commissioner  Hanley   wondered  if                                                                    
Senator  Dunleavy  referred   to  the  Regional  Educational                                                                    
Attendance Area (REAA) account.                                                                                                 
                                                                                                                                
Senator Dunleavy  queried the balance  in the  REAA account.                                                                    
Commissioner  Hanley replied  that  the Kivalina  was not  a                                                                    
part   of  the   REAA.  The   school  required   a  specific                                                                    
appropriation.                                                                                                                  
                                                                                                                                
Senator Dunleavy asked if there  were any construction funds                                                                    
in  other  categories  for total  school  construction.  Ms.                                                                    
Teshner replied that there was  approximately $40 million in                                                                    
the  school construction  fund,  and she  would provide  the                                                                    
exact available balance at a later date.                                                                                        
                                                                                                                                
Senator Bishop  asked if the road  construction was included                                                                    
in the $63  million. Commissioner Hanley stated  that it was                                                                    
not included.                                                                                                                   
                                                                                                                                
9:37:09 AM                                                                                                                    
                                                                                                                                
Senator  Olson  wondered  if   the  Kasialie  Case  included                                                                    
ancillary costs  related to building a  school. Commissioner                                                                    
Hanley  replied  that the  case  did  not include  ancillary                                                                    
costs. The  case examined the  top five projects on  the CIP                                                                    
list,  and  determined  that  they would  be  named  in  the                                                                    
Kasialie Case.  He furthered that  prior to  the settlement,                                                                    
the Kivalina School was the top school.                                                                                         
                                                                                                                                
Senator  Olson stated  that it  was  his understanding  that                                                                    
there  were  considerations  for   ancillary  costs  to  the                                                                    
building of  the school. Commissioner Hanley  stated that in                                                                    
the  year that  it took  to settle  the case,  an amount  or                                                                    
price was not negotiated.                                                                                                       
                                                                                                                                
Senator Olson asked if there was  a penalty to the state for                                                                    
not  abiding  to  the  Kasialie Case  in  a  timely  manner.                                                                    
Commissioner   Hanley   responded    that   the   settlement                                                                    
determined  that the  state  would fund  the  school in  the                                                                    
current  year.  He  stated  that   the  case  would  not  be                                                                    
reopened,  as long  as the  school  was funded  in a  timely                                                                    
manner. He felt that there  was a moral and legal obligation                                                                    
to honor the settlement. He  did not believe the state would                                                                    
benefit  from depositing  money into  an account  that could                                                                    
not be accessed for many years.                                                                                                 
                                                                                                                                
9:40:55 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly felt that $63 million  for a school and a $35                                                                    
million for a road that  would only benefit 130 students was                                                                    
absurd.                                                                                                                         
                                                                                                                                
Senator  Dunleavy estimated  that the  cost per  student was                                                                    
$484,615  per student,  which was  $16,153 per  student over                                                                    
thirty   years  -   not  including   the  operating   costs.                                                                    
Commissioner Hanley  concurred that  the cost of  the school                                                                    
was hugely expensive. He remarked  that the cost per student                                                                    
in  the rural  schools  was more  expensive  than the  urban                                                                    
schools.                                                                                                                        
                                                                                                                                
Co-Chair  MacKinnon  stated  that she  felt  a  subcommittee                                                                    
should  be   formed  to  examine  how   schools  were  being                                                                    
constructed, and  perhaps streamline some features  in order                                                                    
to save  costs.  She  referred to design and  development as                                                                    
an area to look for ways to decrease costs.                                                                                     
                                                                                                                                
Commissioner  Hanley noted  that there  was a  study in  the                                                                    
previous year  that was tasked  to examine the  benefits and                                                                    
disadvantages  of a  prototypical  school  design. He  study                                                                    
would be released in June.                                                                                                      
                                                                                                                                
Co-Chair MacKinnon  surmised that  the study was  awarded to                                                                    
the  engineers  that  would   benefit  from  the  individual                                                                    
design.  She  expected that  the  study  would suggest  that                                                                    
every school must be a  standalone project, so the engineers                                                                    
may  not consider  Alaska's  interests or  the  cost of  the                                                                    
standalone projects.                                                                                                            
                                                                                                                                
Senator  Hoffman  noted  a  provision from  a  bill  in  the                                                                    
previous year,  and echoed  concerns with  the high  cost of                                                                    
construction in rural  Alaska. Commissioner Hanley concurred                                                                    
that Senator Hoffman's comments were correct.                                                                                   
                                                                                                                                
9:48:07 AM                                                                                                                    
                                                                                                                                
Co-Chair  Kelly   asked  Senator  Hoffman  to   restate  his                                                                    
question.                                                                                                                       
                                                                                                                                
Senator Hoffman  wondered if the  formula for  urban schools                                                                    
would   be  reflected   in   the   rural  school   formulas.                                                                    
Commissioner Hanley replied in the affirmative.                                                                                 
                                                                                                                                
Senator Hoffman commented that  the Kasialie Case settlement                                                                    
was  specific. He  noted that  the Kivalina  School was  the                                                                    
last on the  list, but it did not mean  that the state would                                                                    
quit funding the construction rural schools.                                                                                    
                                                                                                                                
Senator Dunleavy  opined that a  larger committee  should be                                                                    
formed  to look  at  overall education  policy. He  remarked                                                                    
that  construction  was over  a  $1  billion operation  cost                                                                    
item. He  felt that issue  was not specific to  the Kivalina                                                                    
School, but the  cost of education was  extremely costly. He                                                                    
remarked that  the focus  should be  on providing  a quality                                                                    
education with decreasing funds.                                                                                                
                                                                                                                                
Co-Chair Kelly felt that the  legislature had lost its right                                                                    
to appropriate funds. He furthered  that the legislature did                                                                    
not  have  to fund  the  schools  according to  the  court's                                                                    
settlement. He  felt that the  subcommittee should  not only                                                                    
address school funding, but the rights of the legislature.                                                                      
                                                                                                                                
Senator  Dunleavy shared  that  there may  be an  additional                                                                    
$220 million for education in Ketchikan.                                                                                        
                                                                                                                                
9:53:38 AM                                                                                                                    
                                                                                                                                
Senator Olson  remarked that rural education  was expensive.                                                                    
He furthered that Alaska did  not want federal overreach. He                                                                    
noted that  there was a  mine near Kivalina,  which provided                                                                    
taxes  and  revenues to  the  state.  He declared  that  the                                                                    
hesitancy  to educate  children in  Kivalina was  not unlike                                                                    
the colonial days.                                                                                                              
                                                                                                                                
Co-Chair  Kelly announced  that the  people of  Kivalina had                                                                    
subservice rights  that he did  not enjoy. He felt  that the                                                                    
people of Kivalina had many  rights that other people in the                                                                    
state did not have. He said  that the people of Kivalina did                                                                    
not "necessarily need a school,  they need an education." He                                                                    
remarked that there should be money in distance learning.                                                                       
                                                                                                                                
Senator Olson  felt that the  courts were involved  in order                                                                    
to  determine  what  the communities  were  constitutionally                                                                    
assured.                                                                                                                        
                                                                                                                                
Vice-Chair  Micciche  felt  that   the  decisions  were  not                                                                    
logical. He remarked that schools  in urban areas were built                                                                    
based  on population  density, not  because another  part of                                                                    
the state  had a school.  He felt  that the courts  were not                                                                    
logical in  determining that a  school should be built  in a                                                                    
smaller populated area.                                                                                                         
                                                                                                                                
Co-Chair  Kelly  stressed  that   there  should  be  quality                                                                    
education in rural Alaska.                                                                                                      
                                                                                                                                
9:57:56 AM                                                                                                                    
                                                                                                                                
Commissioner Hanley continued to discuss slide 15:                                                                              
                                                                                                                                
     School Major Maintenance Grants -Total $13,491.2 UGF                                                                       
     ($3,491.2    UGF    direct    appropriation    and    a                                                                    
     reappropriation not to exceed $10,000.0)                                                                                   
                                                                                                                                
          -Petersburg Middle/High School Boiler Repair,                                                                         
          $24.5 UGF                                                                                                             
                                                                                                                                
          -Andrew K Demoski K-12 School Renovation, Nulato,                                                                     
          $10,637.7 UGF                                                                                                         
                                                                                                                                
          -Nome City School District -Districtwide Lighting                                                                     
          Replacement, $192.8 UGF                                                                                               
                                                                                                                                
          -Bethel Campus Boiler Replacement, $2,636.1 UGF                                                                       
                                                                                                                                
Co-Chair  MacKinnon  remarked  that the  legislature  wanted                                                                    
quality education  for Alaskan students. She  noted that the                                                                    
court  determined that  the legislature  must allocated  $38                                                                    
million to  a school. She  surmised that the money  could be                                                                    
allocated to  Kivalina, and the  money would stay  there for                                                                    
several years. The committee could,  however, set that money                                                                    
aside  with  the  plaintiffs  and   move  forward  on  other                                                                    
maintenance projects.                                                                                                           
                                                                                                                                
Senator Olson  looked at slide  15, and wondered  what would                                                                    
happen if  the aerospace  reappropriation was  not approved.                                                                    
Commissioner  Hanley replied  that the  first lest  would be                                                                    
approved, and only part of the second project.                                                                                  
                                                                                                                                
Senator Olson  wondered if  there would  be enough  money to                                                                    
being  the   maintenance  of  Nulato.   Commissioner  Hanley                                                                    
responded that there would be enough money to begin Nulato.                                                                     
                                                                                                                                
Senator  Dunleavy remarked  that  there  were 329  positions                                                                    
authorized within  DEED, and queried the  recommendations if                                                                    
there   were  a   7  percent   or   10  percent   reduction.                                                                    
Commissioner  Hanley replied  that there  were conversations                                                                    
about  further  reductions.  He  stated  that  most  of  the                                                                    
Commission  on   Postsecondary  Education   (CPE)  positions                                                                    
operated under receipts, so reducing  a position there would                                                                    
have very  little gain  for the state.  He stressed  that he                                                                    
wanted to protect Mt. Edgecumbe,  but would look at reducing                                                                    
the  Goldbelt and  library archive  museums. He  stated that                                                                    
there would  be a reduction  of services in support  for the                                                                    
school district.  He would work  directly with  the division                                                                    
directors.                                                                                                                      
                                                                                                                                
Senator  Dunleavy queried  the  most  expensive programs  in                                                                    
DEED  that  did  not  directly  address  the  core  mission.                                                                    
Commissioner   Hanley  responded   that   there  were   some                                                                    
partnerships  that were  not core  to the  K-12 mission.  He                                                                    
stressed, however,  that they  were very  valuable programs.                                                                    
He  announced that  Alaska  Native  Science and  Engineering                                                                    
Program (ANSEP)  was very expensive  program, but  felt that                                                                    
it  was  not   a  core  mission.  He   announced  that  Best                                                                    
Beginnings was  expensive, but not  core to the  mission. He                                                                    
stressed that  they were valuable  programs. He  stated that                                                                    
there  was a  $2 million  Pre-K program,  which had  not yet                                                                    
expanded.  He  felt  that  the  mission  should  fall  below                                                                    
kindergarten.  He stated  that  there was  a mentor  program                                                                    
that supported  new teachers, and  he felt that  the program                                                                    
was core  to the mission.  The program had shown  results in                                                                    
both  retention  and recruitment  of  teachers,  as well  as                                                                    
student improvement.                                                                                                            
                                                                                                                                
10:06:23 AM                                                                                                                   
                                                                                                                                
Senator Dunleavy  wondered if Mt.  Edgecumbe fell  under the                                                                    
core  mission of  DEED. Commissioner  Hanley replied  in the                                                                    
affirmative.  He  furthered  that residential  schools  were                                                                    
core  to  the  mission  of DEED.  He  furthered  that  those                                                                    
schools were tremendous residential programs.                                                                                   
                                                                                                                                
Senator Dunleavy  felt that  the committee  should reexamine                                                                    
the  education policy.  He noted  that the  students at  Mt.                                                                    
Edgecumbe would be able to go  to a different school, if Mt.                                                                    
Edgecumbe were  to close.  He stressed  that Alaska  did not                                                                    
have  the  luxury  of  determining   the  benefits  of  each                                                                    
program. He  remarked that there  was a vast deficit  in the                                                                    
state, so the conversations  needed to occur immediately. He                                                                    
felt that there would be reductions of programs.                                                                                
                                                                                                                                
Senator  Dunleavy  wondered  what   amount  of  the  federal                                                                    
funding went  directly to the  schools. Ms.  Teshner replied                                                                    
that  90 was  delivered  to schools  through  grants, and  5                                                                    
percent was delivered through contracts.                                                                                        
                                                                                                                                
10:09:59 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:16:10 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
^OVERVIEW: FY 16 BUDGET DEPARTMENT OF LAW                                                                                     
                                                                                                                                
10:16:43 AM                                                                                                                   
                                                                                                                                
JAMES  CANTOR,  DEPUTY   ATTORNEY  GENERAL,  DEPARTMENT   OF                                                                    
LAW, introduced himself.                                                                                                        
                                                                                                                                
Co-Chair Kelly stated  that he would be  leaving the meeting                                                                    
early.                                                                                                                          
                                                                                                                                
DAVE BLAISDELL, DIRECTOR,  ADMINISTRATIVE SERVICES DIVISION,                                                                    
DEPARTMENT  OF LAW,  discussed slide  4  of the  PowerPoint,                                                                    
"Department  of  Law  Senate  Finance  Committee  Department                                                                    
Overview"  (copy on  file). He  stated  that the  governor's                                                                    
budget  was  $84.443  million,  which  was  a  reduction  of                                                                    
approximately  $7  million  from   the  FY  15  budget.  The                                                                    
reduction was  in overall  funds, with  $5.4 million  in the                                                                    
civil division;  $1.4 million in the  criminal division; and                                                                    
$172,000 in administrative services.                                                                                            
                                                                                                                                
Mr.  Blaisdell  looked at  slide  5,  "Potential Impacts  of                                                                    
Client Agency Budgets":                                                                                                         
                                                                                                                                
     34 percent  of the  Department's budget is  funded from                                                                    
     sources   other   than   undesignated   general   fund.                                                                    
     Substantially  all  of  those   funds  are  from  other                                                                    
     agencies.                                                                                                                  
                                                                                                                                
     As other  departments draw down or  eliminate programs,                                                                    
     the amount  of legal  support required may  be reduced.                                                                    
     However,   past  experience   indicates  that   program                                                                    
     elimination  or downsizing  generally has  a short-term                                                                    
     uptick in level of legal work that is necessary.                                                                           
                                                                                                                                
          -Legal efforts required by  other agencies are not                                                                    
          predictably  parallel to  reductions  -an area  of                                                                    
          concern is that sister  agencies may "cut corners"                                                                    
          when seeking Law's  expertise, potentially leading                                                                    
          to greater legal trouble in the future.                                                                               
                                                                                                                                
Mr.  Blaisdell addressed  slide 6,  "Budget Comparison:  UGF                                                                    
Only."  The Civil  Division saw  an 18.9  percent reduction,                                                                    
which  factored a  $2  million  multi-year appropriation  in                                                                    
2015.  The Criminal  Division had  a 4.7  percent reduction.                                                                    
The  Administrative Services  saw a  7.3 percent  reduction.                                                                    
There was a  total reduction of 11.6 percent for  FY 16. The                                                                    
largest  piece  of  GF  were oil,  gas,  and  mining;  child                                                                    
protection; labor and state affairs; and natural resources.                                                                     
                                                                                                                                
Mr. Blaisdell  looked at slide  7, "FY 14  Criminal Division                                                                    
Actuals." He  stated that personal services  was the largest                                                                    
cost  driver  at  84  percent. The  core  services  for  the                                                                    
Department  of  Law  was  10   percent  of  the  budget.  He                                                                    
furthered that  the travel was divided  between employee and                                                                    
non-employee,  because over  half of  the travel  budget was                                                                    
for non-employee  travel as related  to moving  witnesses to                                                                    
and from court.                                                                                                                 
                                                                                                                                
10:21:26 AM                                                                                                                   
                                                                                                                                
Mr.  Blaisdell  discussed slide  8,  "FY  14 Civil  Division                                                                    
Actuals." He stated  that adding the outside  council to the                                                                    
personal  services   percentage  totaled   approximately  85                                                                    
percent of the budget. He noted  the 10 percent for the core                                                                    
services   chargeback.  He   stressed  that   most  of   the                                                                    
reductions would be from personal services.                                                                                     
                                                                                                                                
Mr.   Blaisdell   addressed   slide   9,   "FY   16   Budget                                                                    
Development." He  noted that in  the previous year  for one-                                                                    
time  items  there was  $5.315  million.  He explained  that                                                                    
there  was $15  million from  the Mental  Health Budget  for                                                                    
training  dollars. The  $5.3 million  included $3.8  million                                                                    
for outside  council for oil,  gas, and mining  matters; and                                                                    
$1.5 million  for gas  line activity. The  $2 million  was a                                                                    
multi-year  appropriation for  the  Flint Hills  litigation.                                                                    
There  were  statewide  items that  included  the  automatic                                                                    
healthcare  and salary  increases, totaling  $1.318 million.                                                                    
The  adjusted base  for the  Department of  Law was  $89.405                                                                    
million                                                                                                                         
                                                                                                                                
10:26:57 AM                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon wondered  if those  eliminated positions                                                                    
were  currently  filled.  Mr.  Blaisdell  replied  that  the                                                                    
department had  recently implemented  a policy to  keep some                                                                    
positions available.  He stated  that the  Criminal Division                                                                    
had  15  open positions,  but  14  of those  positions  were                                                                    
filled in the current year.  The Civil Division had 9 vacant                                                                    
positions,  but 8  of  those positions  were  filled in  the                                                                    
previous year.                                                                                                                  
                                                                                                                                
Mr.  Cantor  furthered  that  there  would  be  some  filled                                                                    
positions reduced.  He remarked that there  were some shifts                                                                    
in positions.                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon stressed that she  did not want anyone to                                                                    
lose their  jobs. She  wondered if there  was a  strategy to                                                                    
balance  the  positions.  Mr.   Cantor  responded  that  the                                                                    
department was currently adjusting the positions.                                                                               
                                                                                                                                
Co-Chair Kelly handed the gavel to Co-Chair MacKinnon.                                                                          
                                                                                                                                
Mr. Blaisdell discussed slide 10,  FY 15 to FY 16 Department                                                                    
Comparison." The slide showed a  $7 million reduction in the                                                                    
budget, with  $2.3 million from personal  services. The $4.4                                                                    
million from contractual services  was from a one-time prior                                                                    
year appropriation.                                                                                                             
                                                                                                                                
Mr.  Blaisdell   addressed  slide  11,   "Personal  Services                                                                    
Distribution." He remarked that there  would be a loss of 19                                                                    
positions,  with 10  in  the  Civil Division  and  9 in  the                                                                    
Criminal Division.                                                                                                              
                                                                                                                                
10:31:50 AM                                                                                                                   
                                                                                                                                
Senator  Olson wondered  how the  $3.4  million for  outside                                                                    
council  for  oil  and  gas  compared  to  years  past.  Mr.                                                                    
Blaisdell replied  that the number was  substantially higher                                                                    
four  or  five  years  prior. The  number  depended  on  the                                                                    
current  cases. The  number  showed  a reduction  associated                                                                    
with  the  Strategic  Reconfiguration Case,  which  did  not                                                                    
require much outside council.                                                                                                   
                                                                                                                                
Senator  Olson  wondered if  the  outside  council was  from                                                                    
outside of the  state. Mr. Blaisdell replied  that there was                                                                    
some council  from both  in the state  and from  outside the                                                                    
state.                                                                                                                          
                                                                                                                                
Senator  Hoffman looked  at  slide 7,  and  wondered if  the                                                                    
travel  included the  travel of  state troopers.  Mr. Cantor                                                                    
responded  that the  budget did  not  include state  trooper                                                                    
travel.                                                                                                                         
                                                                                                                                
Senator  Hoffman  wondered  who  would cover  the  costs  of                                                                    
someone who  needed to  travel from  Goose Creek  to Bethel.                                                                    
Mr. Blaisdell deferred to Mr. Svobodny                                                                                          
                                                                                                                                
RICHARD   SVOBODNY,   DEPUTY  ATTORNEY   GENERAL,   CRIMINAL                                                                    
DIVISION, DEPARTMENT  OF LAW, explained that  individuals in                                                                    
custody that were transferred for  trial from Goose Creek to                                                                    
Bethel would be  covered by the Department  of Public Safety                                                                    
(DPS). He  stated that the  witness travel would  be covered                                                                    
by the Department of Law.                                                                                                       
                                                                                                                                
Senator  Hoffman  wondered  if   the  individuals  could  be                                                                    
transferred  under   contract  with  someone  with   a  less                                                                    
salaried  position. Mr.  Svobodny  replied that  he did  not                                                                    
know the answer.                                                                                                                
                                                                                                                                
Senator  Hoffman reiterated  that there  may be  other areas                                                                    
that could reduce personnel costs.                                                                                              
                                                                                                                                
10:36:13 AM                                                                                                                   
                                                                                                                                
Senator Bishop wondered  if most cases were  included in the                                                                    
budget. Mr.  Cantor replied that  the state was  not backing                                                                    
away from the cases, but  would continue to work with people                                                                    
outside the  section. The department was  constantly working                                                                    
with  the best  lawyers for  particular cases.  There was  a                                                                    
reduction  from  an  Endangered Species  Act  position,  but                                                                    
there was still expertise in  the department. He stated that                                                                    
a statehood defense positions was  reduced, because it was a                                                                    
remnant  of  the  days  when  there  was  a  section  called                                                                    
"Statehood Defense." The caseload  would still be managed in                                                                    
the  same  way. The  IRS2477  was  complicated, because  the                                                                    
funding  was  established  four   years  prior  through  the                                                                    
Department of  Natural Resources (DNR), which  would pay for                                                                    
the research of  the trails. He stressed that  the case must                                                                    
move forward with the entire unit.                                                                                              
                                                                                                                                
Vice-Chair  Micciche remarked  that most  law firms  had few                                                                    
upper  level partners,  and many  lower level  employees. He                                                                    
wondered if  the Department of  Law had a  higher proportion                                                                    
of  higher   level  staff.  Mr.  Cantor   replied  that  the                                                                    
department had steps and grades  within the attorneys in the                                                                    
department.  The  Attorney 5  position  had  fewer than  the                                                                    
Attorney 3 position.                                                                                                            
                                                                                                                                
10:41:17 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:41:31 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
^OVERVIEW: FY  16 BUDGET  DEPARTMENT OF  COMMERCE, COMMUNITY                                                                  
AND ECONOMIC DEVELOPMENT                                                                                                      
                                                                                                                                
10:42: 14 AM                                                                                                                  
                                                                                                                                
CATHERINE   REARDON,   ADMINISTRATIVE   SERVICES   DIRECTOR,                                                                    
DEPARTMENT OF  COMMERCE, COMMUNITY AND  ECONOMIC DEVELOPMENT                                                                    
(DCCED),  discussed  the  PowerPoint,  "Department  Overview                                                                    
Presented to  Senate Finance Committee" (copy  on file). She                                                                    
shared  that  the  department  has   a  positive  effect  on                                                                    
Alaskans, and  their daily  lives. She  understood, however,                                                                    
that  the department  must see  how it  impacts the  over $3                                                                    
billion deficit.                                                                                                                
                                                                                                                                
Ms. Reardon highlighted  slide 2, "Department Organization."                                                                    
She  shared  that  the  bottom   represented  the  six  core                                                                    
divisions  and the  six corporate  entities. The  department                                                                    
employed 578 Alaskans.                                                                                                          
                                                                                                                                
Ms.  Reardon looked  at slide  3,  "Department Budget."  She                                                                    
stated that  UGF was  only 17 percent  of the  DCCED budget.                                                                    
She remarked  that the department  represented a  very small                                                                    
portion, 2.37 percent, of the  entire state's GF budget. She                                                                    
noted  that there  was  a  3.9 percent  cut  in the  overall                                                                    
budget, 12.3  percent of that  cut came from the  GF budget.                                                                    
She  pointed  out  that  the  percentage  cuts  included  an                                                                    
addition of a  significant cost to the  department: the cost                                                                    
of regulating marijuana. The 12.3  percent cut was outlined,                                                                    
while the department absorbed $1.5  million of new costs for                                                                    
the effective regulation of  marijuana, therefore the actual                                                                    
cuts  in other  areas were  more substantial  than they  may                                                                    
appear.                                                                                                                         
                                                                                                                                
Ms. Reardon addressed slide 4,  "Summary of Budget Changes."                                                                    
She  noted  that the  plan  removed  the following  one-time                                                                    
items:                                                                                                                          
                                                                                                                                
     AEA  -  Reverse  prior-year multi-year  projects:  Data                                                                    
     Collection, Affordable Energy                                                                                              
                                                                                                                                
     AGDC -  Reverse operating costs previously  included in                                                                    
     language section.                                                                                                          
                                                                                                                                
     DCRA  , DED  - Reverse  prior-year one-time-item  named                                                                    
     recipient  grants (Kawerak  for  Diomede Essential  Air                                                                    
     Service,  Bering Sea  Fishermen,  Alaska Marine  Safety                                                                    
     Education   Association,   Ilisagvik  College,   Alaska                                                                    
     Native Arts Marketing)                                                                                                     
                                                                                                                                
     CBPL, AIDEA  - Reverse Fiscal  Notes - SB23  AIDEA LNG,                                                                    
     HB4 AGDC,  SB138 AGDC, HB328 Massage  Therapists, HB160                                                                    
     Athletic Trainers, HB361  Behavior Analysts, HB32 Lines                                                                    
     of Business on a Business License                                                                                          
                                                                                                                                
     RCA - Remove prior-year  language item for the Railbelt                                                                    
    independent electric utilities system determination                                                                         
                                                                                                                                
Ms.  Reardon   highlighted  slide  5,  "Summary   of  Budget                                                                    
Changes."  She noted  the changes  in the  adjusted base  to                                                                    
work in progress;                                                                                                               
                                                                                                                                
     Unallocated reduction                                                                                                      
                                                                                                                                
     CBPL - Fiscal Note Year  2 - Board/Licensing of Massage                                                                    
     Therapists                                                                                                                 
                                                                                                                                
     DCRA /  DED - Restore  named recipient  grants (Kawerak                                                                    
     for   Diomede  Essential   Air   Service,  Bering   Sea                                                                    
     Fishermen, Alaska Marine  Safety Education Association,                                                                    
     Ilisagvik College, Alaska Native Arts Marketing)                                                                           
                                                                                                                                
     DCRA  -  Transfer  named  recipient  grants  previously                                                                    
     funded  in  the  Capital  budget  (Marine  Exchange  of                                                                    
    Alaska, Alaska Air Carriers - Medallion Foundation)                                                                         
                                                                                                                                
     AIDEA -  Project Management, Legal and  Project Support                                                                    
     Services, Building Maintenance                                                                                             
                                                                                                                                
     AEA -  Multi-Year Emerging Energy Technology  Fund Data                                                                    
     Collection - FY2016 to FY2018                                                                                              
                                                                                                                                
     AGDC -  Restore operating  costs for  FY2016 previously                                                                    
     included as language                                                                                                       
                                                                                                                                
     RCA  - Delete  American Reinvestment  and Recovery  Act                                                                    
     (ARRA) funding no longer available                                                                                         
                                                                                                                                
10:48:01 AM                                                                                                                   
                                                                                                                                
Ms. Reardon looked at slide 6, "Summary of Budget Changes."                                                                     
She noted that the slide was a work in progress.                                                                                
                                                                                                                                
Ms. Reardon discussed slide 7, "Summary of Budget Changes."                                                                     
She looked at the department's reductions, which were                                                                           
mostly in the GF budget:                                                                                                        
                                                                                                                                
     DAS  -  Reduce   personal  services,  eliminate  vacant                                                                    
     positions                                                                                                                  
                                                                                                                                
     AEA /  AIDEA - Reduce  personal services for  AEA staff                                                                    
     in AIDEA component                                                                                                         
                                                                                                                                
     AIDEA   -  Reduce   building  maintenance   request  to                                                                    
     estimated actuals                                                                                                          
                                                                                                                                
     ASMI - Reduce Alaska Seafood Marketing Institute                                                                           
                                                                                                                                
     DED -  Remove named  recipient grant for  Alaska Native                                                                    
     Arts Marketing                                                                                                             
                                                                                                                                
     DED - Reduce economic development activities                                                                               
                                                                                                                                
     DED - Reduce tourism marketing activities and                                                                              
     contracts                                                                                                                  
                                                                                                                                
Co-Chair MacKinnon extended a "Happy Birthday" to the                                                                           
committee assistant, Doniece Gott.                                                                                              
                                                                                                                                
SB 27 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:50:54 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:50 a.m.                                                                                         

Document Name Date/Time Subjects
030215 DEED Budget Overview.pdf SFIN 3/11/2015 9:00:00 AM
SB 27
030215 DCCED Budget Overview.pdf SFIN 3/11/2015 9:00:00 AM
SB 27
031115 LAW_FY16_SFIN_Full_Overview.pdf SFIN 3/11/2015 9:00:00 AM
SB 27
031115 DCCED Summary of Changes 03 02 2015- Legal Size.pdf SFIN 3/11/2015 9:00:00 AM
SB 27