Legislature(2005 - 2006)SENATE FINANCE 532
03/10/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB232 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 232 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
MINUTES
SENATE FINANCE COMMITTEE
March 10, 2006
9:05 a.m.
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately
9:05:31 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Bert Stedman
Also Attending: SENATOR CHARLIE HUGGINS; JAMES ARMSTRONG, Staff
to Senator Gary Wilken; JOHN MACKINNON, Deputy Commissioner of
Highways & Public Facilities, Department of Transportation and
Public Facilities; EDDY JEANS, Director, School Finance,
Department of Education and Early Development
Attending via Teleconference: There were no teleconference
participants.
SUMMARY INFORMATION
SB 232-APPROPS: ENERGY-RELATED, PIPELINE & MISC.
The Committee adopted a new committee substitute and considered
but failed to adopt two amendments. The bill reported from
Committee.
SENATE BILL NO. 232
"An Act making special, supplemental, capital, and other
appropriations, amending appropriations, and making
appropriations to capitalize funds; and providing for an
effective date."
This was the fourth hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated that the purpose of today's meeting was
to address the FY 2006 Energy and Fast Track Supplemental bill.
Co-Chair Green moved to adopt committee substitute Version 24-
GS2068\L as the working document.
Without objection, Version "L" was ADOPTED as the working
document.
Co-Chair Wilken informed the Committee that the explanation of
the changes contained in the Senate Finance committee substitute
would be identified by line and section number as depicted on
the spreadsheet titled "FY 2006 Energy and Fast Track
Supplemental" [copy on file] dated March 10, 2006.
Line 6
Section 1
Department of Corrections
Results Delivery Unit (RDU): Inmate Health Care
Supplemental Need: Funding is needed to pay three
contractors and several fee-for-service providers for
services rendered prior to 6/30/2005. These providers have
not been paid and are charging interest for non-payment.
Prompt payment would avoid further interest charges.
$755,000 Senate Finance Committee (SFC) General Funds
Co-Chair Wilken noted that this technical change would clarify
language pertaining to the FY 05 needs of the Department of
Corrections.
Line 15
Section 1
Department of Transportation and Public Facilities
RDU: Marine Vessel Operations
Supplemental Need: Fuel Price and Usage Increase
$12,774,800 SFC General Funds
Co-Chair Wilken stated that after continuing discussion with the
Alaska Marine Highway System (AMHS), the Senate Finance
Committee increased their previous allocation by $500,000. The
needs of the AMHS would continue to be addressed during the
consideration of the AMHS FY 07 budget request. Each time the
AMHS is discussed, "we get a little more comfortable and a
little more uncomfortable." The budget of the AMHS is "a work in
progress." He also voiced appreciation of the work conducted by
Senator Stedman on this issue.
9:08:22 AM
Senator Stedman remarked that the AMHS "is virtually out of
cash." The Marine Highway Fund, which historically provided
"back-up funds" to the AMHS, has been depleted. While the
$12,774,800 allocation recommended by the Senate Finance
Committee is lower than the amount desired by the AMHS, it would
be sufficient to fund the AMHS through the third week of May
2006. Additional assistance would be provided by separate
legislation.
Senator Stedman, noting how "vital" AMHS is to the State's
coastal communities, requested that the AMHS keep Committee
members apprised of its situation by providing "cash flow
updates" every two weeks.
Co-Chair Wilken asked John MacKinnon of the Department of
Transportation and Public Facilities to communicate Senator
Stedman's requests to AMHS officials.
9:10:17 AM
Senator Stedman communicated that the AHMS energy supplemental
request for FY 06 fuel expenses was understandable considering
the increase in fuel costs that have been experienced.
Continuing, however, he shared that he had been unaware that the
AMHS cash flow position was so "tight", and as a result, he had
requested AMHS to provide him with weekly cash flow projections.
The request now is that the cash flow positions be updated on a
biweekly basis.
Senator Stedman stated that additional FY 06 AMHS requests would
be considered in "the Slow Track supplemental". The fact that
AMHS could now provide an independent balance sheet would be
beneficial in addressing their FY 07 budget. Continuing, he
asked that these documents also be provided to Committee
members.
Senator Stedman suggested that the financial balance sheet
provide line item detail by boat. He also requested that "up-
land" expenses be included. The Committee should be able "to
look at the AMHS as an enterprise fund", such as a local water
utility, for example. Otherwise, there is danger that the
Committee might not anticipate "the full impact of changes
within the system" as efforts are undertaken "to decrease"
rather than increase the general fund subsidy.
Senator Stedman stressed that no one should expect the AMHS "to
run at a profit". A balance sheet, an income statement, and a
cash flow statement should be provided. He also requested that
the "Department produce a monthly cash flow analysis for FY 07".
This would address the concern that "the budget that's
presented, modified, and then adopted, is capable of whatever
level of service that the Legislature decides is adequate, is
capable of being delivered." Such things as footnotes on fuel
consumption and fuel prices would be expected. Last year the
budget initially reflected fuel prices of $1.17 or $1.18 per
gallon; the finalized FY 06 budget was based on a price of $1.46
per gallon. Nonetheless, a substantial funding shortfall
occurred. While acknowledging that projecting fuel prices is not
an easy task, efforts must be made to adopt a budget that would
allow AMHS to deliver throughout its fiscal year.
Senator Stedman stated that the cash position of the AMHS is an
area of concern.
9:14:19 AM
Senator Stedman continued that the level of AMHS cash operating
funds at the end of a fiscal year might be a subject of a
Committee policy discussion. He suggested that "as a general
rule" the goal should be for AMHS and other departments to
submit "substantially smaller" supplemental budgets than the
"huge" supplementals that have been the experience.
Senator Stedman appreciated the Legislature's efforts to assist
the AMHS with fuel costs, specifically the Senate Finance
Committee's decision to increase its recommended allocation by
$500,000. The AMHS is "a transportation system that affects the
interior, Anchorage and Fairbanks, … along with the coastal
communities". Were the aforementioned information routinely
provided to members, the Committee could address the fast
ferries and other AMHS issues early in next year's Legislative
session. The discussion at that time should include the seascape
capabilities of the two fast ferries, particularly in respect to
"what was promised to be delivered" and the schedules of the two
vessels.
9:16:39 AM
Co-Chair Wilken appreciated Senator Stedman's "guidance" in this
endeavor.
Co-Chair Wilken related that after the AMHS presentation to the
Committee on March second, his "sense" was that the system "is
at a turning point. We need to decide what to do with seven
different variables, most of which are not very good." While he
had originally thought that a subcommittee should be assigned to
address the AMHS issue, it was decided that, due to the
widespread interest in the issue, the full Senate Finance
Committee should be involved in the discussion. Senator Stedman
has, to date, led the effort to monitor the AMHS. The hope is
that federal funds, State funds, and user's money would result
in "a better ferry system" in the future.
Co-Chair Wilken asked Mr. MacKinnon to communicate to the
Department of Transportation and Public Facilities that the
Senate Finance Committee would "expect to know what's happening,
why, and how we're doing business to make it better." This issue
is "that important."
JOHN MACKINNON, Deputy Commissioner of Highways & Public
Facilities, Department of Transportation and Public Facilities,
communicated that the message would be delivered to Department
management.
9:19:12 AM
Line 16
Section 4
Department of Administration
RDU: Capital
Supplemental Need: Voice-over Internet
$4,000,000 SFC Other Funds
Co-Chair Wilken stated that this item was originally allocated
$5,000,000. That allocation was subsequently reduced to
$1,000,000, and is now specified at $4,000,000. The
determination was that "either you pay it now or you pay it
later." The total investment in this three-year project "to
converge our technologies" into a unified system is expected to
be $22,000,000. This funding would allow investments to be made
to support FY 07 budget activities. This language is located in
the bill on page 7, lines 1 through 3.
Senator Stedman asked for further information regarding the
purchase of a vacant building in the Matanuska-Susitna valley as
specified in Sec. 4(b) page 7 lines 4 through 7 of the bill.
This section reads as follows.
(b) It is the intent of the legislature that the Department
of Administration begin to investigate the purchase of the
vacant Valley Hospital building to provide a centralized
facility for justice-related offices and to reduce overall
rent costs for state agencies in the Matanuska-Susitna
Valley.
Co-Chair Wilken requested that the discussion follow the Section
order presented in the aforementioned spreadsheet. Thus,
discussion on the hospital building would be forthcoming.
Line 17
Sec. 5
Department of Commerce, Community and Economic Development
RDU: Capital - Grant to "2006 Arctic Winter Games Host
Society"
Supplemental Needs: Funding for the Arctic Winter Games
that take place March 5-12, 2006
$250,000 SFC General Funds
Co-Chair Wilken stated this change involved the removal of the
June 30, 2006 effective date.
9:20:52 AM
Senator Bunde pointed out that this money would be going to an
area of the State to which he "most frequently hears that there
is too much State spending and too much government. Ed Martin
Senior and company would be really unhappy with this."
Conceptual Amendment #4: This amendment changes the funding
source for the Arctic Winter Games from General Funds to the
Earnings Reserve Account of the Permanent Fund. The language is
located in Sec. 5 page 7 lines 8 through 11 of the bill.
[NOTE: Even thought this amendment was referred to as Conceptual
Amendment #1 by the Committee, a separate amendment had been
previously submitted and logged as Amendment #1. Therefore this
amendment should be correctly identified as Conceptual Amendment
#4.]
Senator Bunde moved for the adoption of the conceptual
amendment.
Co-Chair Wilken objected.
Senator Bunde communicated that many people support saving the
$1.2 billion revenue surplus the State has experienced this
year. This amendment would further that endeavor. Therefore,
were there serious support for the Arctic Winter Games, this
funding source change would be considered acceptable.
A roll call vote was taken on the motion.
In Favor: Senator Bunde
Opposed: Senator Stedman, Co-Chair Green, and Co-Chair Wilken
Absent: Senator Dyson, Senator Hoffman, and Senator Olson.
The Motion FAILED (1-3-3)
Conceptual Amendment #4 FAILED to be adopted.
Conceptual Amendment #5: This amendment deletes, in its
entirety, the language pertaining to the Arctic Winter Games, as
depicted in Sec. 5 page 7 lines 8 through 11 of the bill.
Senator Bunde moved to adopt the amendment.
[NOTE: Even thought this amendment was referred to as Conceptual
Amendment #2 by the Committee, a separate amendment had been
previously submitted and logged as Amendment #2. Therefore this
conceptual amendment should be correctly identified as
Conceptual Amendment #5.]
A roll call vote was taken on the motion.
In Favor: Senator Bunde and Senator Green.
Opposed: Senator Stedman and Co-Chair Wilken
Absent: Senator Dyson, Senator Hoffman, and Senator Olson.
The Motion FAILED (2-2-3)
Conceptual Amendment #5 FAILED to be adopted.
9:23:46 AM
Senator Stedman stated that "the point" of the two amendments
proposed by Senator Bunde is important: the fact is that many
people in the State support saving the budget surplus as long as
doing so would not "affect them". He supported Senator Bunde's
"philosophical opinion" that efforts to save rather than to
spend the surplus must be made.
Co-Chair Wilken agreed that such an effort should occur.
Senator Bunde remarked that he had not expected his amendments
to be adopted; he had offered them to demonstrate, for the
record, that there are "a great many wants, there are some needs
that we need to fund, and the general public has to be ….
willing to accept the notion that if they want reductions in
State spending, they have to be part of the solution instead of
part of the problem." Some legislators have been frustrated at
"the inconsistency" of the public's message. Rather than
presenting the stance of "Cut the other fellow and pass the
savings on to me", the fact is that unless people become "part
of the solution … we are indeed part of the problem".
Co-Chair Wilken commented, "Well put, Senator Bunde."
9:24:53 AM
Line 19
Section 7
Department of Education and Early Development
RDU: Capital
Supplemental Need: Add White Mountain K-12 School
Replacement project. It had originally been requested as an
FY07 capital budget amendment.
$10,117,800 SFC General Funds
Co-Chair Wilken noted that this component would address two
separate Department of Education and Early Development school
items; the first being the construction of a replacement school
at White Mountain as designated in Sec. 7(a) page 7, lines 15
through 17 of the bill. He noted that additional information
about this project is provided in the handout titled "Alaska
Department of Education and Early Development White Mountain
Briefing Paper" [copy on file} dated March 9, 2006.
9:25:27 AM
EDDY JEANS, Director, School Finance, Department of Education
and Early Development informed the Committee that on February
15, 2006 the building that served as the community of White
Mountain's middle/high school was destroyed by fire. That
building served 30 students. The remaining school facilities
include a 70-plus-year-old elementary school that serves 24
students and a separate gymnasium. The building that burned was
insured for $1,800,000. Due to the fact that the banks of river
near the current school site are eroding, the proposal would be
to construct a new facility in a location one and a half miles
from the current location. This single building would house the
elementary, middle, and high school education programs.
Mr. Jeans stated that, even though a $1,800,000 insurance
payment is expected, the Department has requested that the
entire $10,117,800 construction cost be allocated. The concern
is that a delay in the receipt of the insurance payment would
postpone the construction of the school. The grant agreement
would assure that, once collected, the insurance payment would
be returned to the State.
9:27:31 AM
Senator Bunde asked how much interest the State would receive on
the insurance money, were it collected today rather than in a
few years.
Mr. Jeans voiced being uncertain as to the time it would take to
collect the insurance money. "It's strictly a timing issue" of
when the school construction project must begin."
Senator Bunde understood that the balance of the project beyond
that provided by the insurance would be approximately
$9,000,000.
Mr. Jeans affirmed.
Senator Bunde asked whether the community of White Mountain
would provide a local contribution.
Mr. Jeans communicated that White Mountain is part of the Bering
Strait Regional Education Attendance Area and is required to
contribute two percent toward their capital projects.
9:28:48 AM
Co-Chair Green asked whether the insurance policy on the school
was replacement value coverage.
Mr. Jeans responded that school facilities should have
replacement value insurance coverage. The $1,800,000 insurance
return is based upon the fact that the school was a 70-year-old
wooden structure.
Co-Chair Green understood that replacement value coverage would
"replace a building at today's price for a comparable size
building, not the value of the wooden structure."
Mr. Jeans stated that rather than simply replacing the structure
that burned, the plan is to construct a brand new K-12 facility.
Co-Chair Wilken stated that his office would ask the Division of
Risk Management, Department of Administration, to clarify the
definition and terms of replacement value coverage.
JAMES ARMSTRONG, Staff to Co-Chair Wilken, acknowledged Co-Chair
Wilken's request.
9:30:30 AM
Senator Stedman asked for a capacity comparison between the
structure that burned down and the replacement building.
Mr. Jeans stated that the facility that burned served 30
students. The replacement school would serve between 54 and 60
students.
Co-Chair Wilken understood that the new facility would
consolidate the elementary, middle, and high school into one
building.
Mr. Jeans affirmed.
Co-Chair Wilken continued that the new facility would be 17,000
square feet rather than the other buildings' combined space of
15,000 square feet.
Mr. Jeans stated that the new facility's size would meet the
Department's current space guidelines.
9:31:17 AM
Co-Chair Wilken surmised that this project had undergone the
"vetting process" since it was number 11 on the Department's
list of capital improvement projects (CIP) school construction
grant fund list.
Mr. Jeans affirmed and noted that the school had received
planning and design funds from the State's 2002 General
Obligation Bonds. Thus, the replacement school has been designed
and, were the construction appropriation approved, the project
could move forward immediately.
Senator Stedman understood that due to consolidating the
elementary, middle, and high school into one facility, the
proposed student capacity would be filled.
In response to a question from Co-Chair Wilken, Mr. Jeans noted
that the community had operated an elementary school and a
combined middle and high school. The freestanding gymnasium had
been built in 1982. The proposal would be to consolidate all of
these entities into one structure at a location further from the
river.
9:32:32 AM
Co-Chair Wilken understood that, were the State to reduce the
requested amount to $9,300,000 and allow the insurance payment
to pay the difference, the project would be unable "to march
forward".
Mr. Jeans stated that the total cost of the project would be
$10,100,000. "The District is ready to go to bid with that." It
would not be "very prudent" on the part of the District to "move
forward with a bid when they only have $9,500,000 or
$8,500,000." He assured the Committee that the Department would
"aggressively" pursue the insurance money. That money would be
written into the contract, and "would be part of the grant
agreement when the appropriation is made."
Co-Chair Wilken understood therefore that the Department would
be "motivated to chase the insurance money", as it would be part
of the agreement.
Mr. Jeans affirmed.
Co-Chair Wilken asked the process through which the insurance
money would be reimbursed to the State.
Mr. Jeans explained that when the money was received by the
State, it would be appropriated to the general fund or whatever
funding source had been specified.
Line 19
Section 7
Department of Education and Early Development
RDU: Capital
Supplemental Need: Add Susitna Valley High School Roof
replacement and structural and safety repairs.
$3,850,000 SFC General Funds
Co-Chair Wilken noted that the second portion of this Section
would be the addition of funds to repair the Susitna Valley High
School roof. The amount allocated by the Committee would provide
70 percent of the cost. The allocation is depicted in Sec. 7(b)
page 7, lines 18 through 20 of the bill.
9:34:34 AM
SENATOR CHARLIE HUGGINS, Senate District H Mat-Su Valley,
explained that this junior/senior high school serves
approximately 200 students. Due to the fact that the school roof
"doesn't even meet 50 percent" of the required 120 pound per
square foot load bearing capacity, the school is currently
operating "under a waiver from the State Fire Marshall".
Senator Huggins noted that since the school is located in a high
snow area, one condition of the waiver is that people must be
stationed on the roof to remove snow when it snows. The total
roof replacement cost would be $5,500,000. He understood "the
spirit in which this body" is operating and voiced acceptance
for the 70 percent State, 30 percent local funding model.
Senator Huggins stated that the inclusion of this project in
this bill would allow the construction to be "accelerated". It
would act as "a major cost-savings mechanism," as further delay
would require the school district to spend in excess of one
million dollars for portable classrooms. This allocation would
allow construction to begin in May and conclude by December
2006, thereby reducing portable classroom expenses and student
displacement.
Senator Huggins shared that the discovery of this roof condition
had traumatic impact on the community, as such things as closing
the school had been considered prior to the operating waiver
being issued. Insurance coverage on the school has also been an
issue. This funding should be viewed as "emergency" funding as
it would be unlikely that the Fire Marshall would grant a waiver
for the following year. The new roof would extend the life of
the school by 30 years.
Senator Bunde commented that the fact that the community has
recognized the State's contribution and is willing to provide a
local contribution "weighs" favorably with him.
Senator Stedman believed that "there are times" when the State
must provide these types of appropriations. He also appreciated
the community's decision to provide a 30 percent local
contribution to the project.
Senator Stedman asked the Department to investigate the status
of the Schoenbar Middle School in Ketchikan, which is more than
one year behind its construction schedule. Classes are currently
being held in a local mall.
Co-Chair Wilken noted that his office would follow-up with the
Department.
Co-Chair Wilken thanked Senator Huggins for the information
about the Susitna Valley High School. The fact that the
community is willing to provide a local contribution and the
needs of the school substantiate the project's inclusion in this
bill.
9:40:52 AM
Line 21
Section 8
Office of the Governor
RDU: Branch wide
Supplemental Need: Fuel and Utility costs to be distributed
to agencies (non-AMHS)
$6,736,800 SFC General Funds
Co-Chair Wilken stated that the Department of Environmental
Conservation was added to the Sec. 8 language on page 7, lines
21 through 27 of the bill. In addition, a technical change was
made that would allow the Office of the Governor to distribute
the funds at their discretion.
9:41:46 AM
Line 22
Section 9
Department of Law
RDU: Civil Division, Deputy Attorney General's Office
Supplemental Need: Judgments and Claims - actual amount is
$2,621,985.48 (Amendment increased total to $3,269,100)
$3,269,100 SFC General Funds
Senator Bunde "pointed out again that in this line, we are
funding a quarter of a million dollars to give to a person who
killed his own father and sued the State over it. I just
continue to understand why there's some people who think the
State is not to be trusted."
Line 32
Section 11(b)
Department of Administration
RDU: Information Services Fund
Supplemental Need: Capitalize Information Services Fund for
FY 06 implementation of the telephone system replacement
and stabilization phase 1 capital project.
$4,000,000 SFC General Funds
9:42:12 AM
Co-Chair Wilken remarked that this item would appropriate money
from the general fund to the Information Services Fund to
support the Department of Administration Voice-over Internet
System addressed in Sec. 4(a) page 7, lines 1 through 3 of the
bill.
Line 36
Section 13(a & b)
Lapse Section
RDU: Information Services Fund
$0.0 SFC General Funds
Co-Chair Wilken stated that technical changes were made to this
section.
Sec. 4(b) It is the intent of the legislature that the
Department of Administration begin to investigate the
purchase of the vacant Valley Hospital building to provide
a centralized facility for justice-related offices and to
reduce overall rent costs for state agencies in the
Matanuska-Susitna Valley.
Co-Chair Wilken noted that the Valley Hospital building study,
as specified in Sec. 4(b) page 7 lines 4 through 7 of the bill,
was inadvertently omitted from the spreadsheet. Due to the
completion of a new regional medical center in Palmer, the State
has been presented "the opportunity" to purchase "at a very good
price", the former hospital facility, which is located adjacent
to the Palmer Courthouse. A "placeholder" is required in order
to allow the hospital's owner to "say the State is investigating
purchase".
Co-Chair Green stressed that rather than appropriating or
approving the purchase, the language in the bill would provide
legislative authorization "to investigate" such a purchase. Any
further action in this regard would require legislative
approval.
Co-Chair Wilken stated that were the determination made to
further this issue, the project would be "a good match" as it
would allow "the courthouse and all the people who support the
courthouse" to share a common parking lot. The facilities would
be connected by a sky-bridge.
Senator Stedman recalled that an expansion of the Palmer
Courthouse had been addressed in separate legislation. Therefore
this project would appear "to be a fit within the goals" of
addressing the needs of "the cramped courthouse".
9:44:16 AM
Co-Chair Green agreed that it would be a good fit. She noted
that the recent approval to construct two new courtrooms in the
courthouse maximized the allowable square footage of the
facility. No further additions could be accommodated.
Furthermore, the parking lot demands have exceeded capacity.
Were the investigation to determine that the adjacent hospital
building could not be retrofitted to accommodate court needs,
the process would not proceed.
9:45:52 AM
There being no further topics of discussion or amendments to
come before the Committee in regards to the bill, Co-Chair
Wilken concluded the discussion in regards to the Version "L"
committee substitute.
Co-Chair Green moved to report the bill from Committee with
individual recommendations.
There being no objection, CS SB 232(FIN) was REPORTED from
Committee.
Co-Chair Wilken thanked everyone for the hard work conducted on
the bill.
9:46:56 AM
Senator Stedman announced the schedule for an upcoming
University of Alaska Committee of the Whole subcommittee
meeting.
AT EASE 9:47:24 AM / 9:50:13 AM
Co-Chair Green announced that the Joint Meeting with Senate
Transportation Committee scheduled for Monday March 13, 2006 is
cancelled until further notice.
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 9:50:36 AM.
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