Legislature(2015 - 2016)SENATE FINANCE 532
02/23/2015 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB27 | |
| Overview: Fy 16 Department of Natural Resources | |
| Overview: Fy 16 Department of Environmental Conservation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 27 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 23, 2015
9:01 a.m.
9:01:26 AM
CALL TO ORDER
Co-Chair Kelly called the Senate Finance Committee meeting
to order at 9:01 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
Ed Fogels, Deputy Commissioner, Department of Natural
Resources; Jean Davis, Director, Division of Support
Services, Department of Natural Resources; Larry Hartig,
Commissioner, Department of Environmental Conservation;
Thomas Cherian, Director, Division of Administrative
Services, Department of Environmental Conservation.
SUMMARY
SB 27: APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 27 was HEARD and HELD in committee for further
consideration.
OVERVIEWS:
FY 16 DEPARTMENT OF NATURAL RESOURCES
FY 16 DEPARTMENT OF ENVIRONMENTAL CONSERVATION
9:02:04 AM
Senator Kelly asked members to limit the scope of their
questions. He encouraged the committee to ask probing
questions about budgetary issues and significant cuts.
9:03:08 AM
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."
9:03:16 AM
^OVERVIEW: FY 16 DEPARTMENT OF NATURAL RESOURCES
ED FOGELS, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES (DNR), referred to the presentation "State of
Alaska Department of Natural Resources Overview, Senate
Finance Committee, February 23, 2015" (copy on file). He
overviewed the preliminary slides in order to refresh the
committee on the organization and core missions of the
department. He stated that he would transition the
presentation to his colleague for an in-depth budget
review. He specified that the overview would include a list
of specific reductions that could be detailed to the extent
that the committee desired.
9:04:08 AM
Mr. Fogels addressed slide 2, and reviewed a departmental
organization chart. He reminded the committee of the
department's new Commissioner-designee, Mark Myers; and
related that DNR had two deputy commissioners, himself and
Marty Rutherford. He proceeded to note that the divisions
were organized under each deputy commissioner; detailing
that Deputy Commissioner Rutherford was acting as the
energy deputy, to notably include the Division of Oil and
Gas, the Division of Geologic Survey, and the Mental Health
Trust. He added that she is also designated as the state's
Alaska Liquid Natural Gas project (AKLNG) commercial lead,
and noted that the role was consuming a fair amount of her
time.
9:05:03 AM
Mr. Fogels continued his presentation on slide 3,
"Department of Natural Resources - Core Services,"
explaining that the department had four core services:
· Foster responsible commercial development and use of
state land and natural resources, consistent with the
public interest, for long-term wealth and employment.
· Mitigate threat to the public from natural hazards by
providing comprehensive fire protection services on
state, private and municipal lands, and through
identifying significant geologic hazards.
· Provide access to state lands for public and private
use, settlement, and recreation.
· Ensure sufficient data acquisition and assessment of
land and resources to foster responsible resource and
community development and public safety.
Mr. Fogels commented that the first core function
encapsulated the permitting, leasing and stewardship
functions of DNR. The second core function encompassed
wildland firefighting, which was the biggest budget segment
and also included the geologic survey and geologic hazards
evaluation program. He continued that the third function
encompassed the land sale programs, parks divisions, and
programs to ensure access to public lands and Alaska's full
state land entitlement. He concluded that the last core
function was crucial to gain greater understanding of the
state's vast current land holdings in areas of hard rock
minerals, oil and gas, forestry, and agricultural
resources. He added that the department knew very little
about the state's current land holdings.
9:06:24 AM
JEAN DAVIS, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES, related that she would
present four slides in order to portray a different way to
examine the overall DNR budget; separately detailed by
employees, division, core service, and fund source. She
specified that two slides would illustrate how DNR
developed the FY 16 Governor's Amended Budget starting with
the FY 15 Management Plan.
Ms. Davis presented slide 4, "DNR FY 2016 Governor Amended
Budget - Employees," and pointed out that in FY 16, DNR
would employ approximately 1,060 full time and seasonal
employees. She detailed that the employees were dispersed
through 29 locations with main offices in Anchorage,
Juneau, Fairbanks, and Palmer; and that DNR had regional
offices throughout the state. She drew attention to the
employee totals and commented that there had been a "fairly
steady workforce" at DNR until FY 16, when it would take a
net reduction of 47 positions. She detailed that the
department would delete 48 positions and would ask for one
new position in the AKLNG group.
Ms. Davis referred to a pie chart on slide 5, noting that
it was reflective of the FY 16 operating budget categorized
by division, and detailed the totals of each. She pointed
out the comparative numbers of the FY 16 operating budget
and the FY 15 management plan, which totaled $175,145.6
million and $178,330.4 million, respectively. She noted
that the Division of Forestry represented the largest
segment of the pie chart, of which fire suppression and
preparedness accounted for 22 percent.
Ms. Davis presented slide 6, which divided the budget by
the aforementioned core services of the department. She
pointed out that almost half the budget was under the core
service of "Foster Responsible Development"; 10 percent was
for "Sufficient Data Acquisition and Assessment, and 18
percent for providing access to state lands. She detailed
that the remaining 24 percent was allocated for mitigating
natural hazard threats included fire preparedness,
earthquakes, volcanoes, and erosion problems.
9:09:25 AM
Ms. Davis moved to slide 7, which delineated the DNR budget
by funding source type. She pointed out that approximately
50 percent of the DNR budget was Unrestricted General Fund
(UGF). [Ms. Davis clarified that the slide incorrectly
identified the source as "Undesignated General Fund."] She
itemized the remaining funding types as 12 percent Federal
funds, 23 percent "Other" funds, and 15 percent was
Designated General Funds (DGF). She expanded that the 23
percent "Other Funds" included Reimbursable Services
Agreements (RSAs), Mental Health Receipts, Industry
Reimbursements, and Permanent Fund Receipts. She furthered
that the Industry Reimbursements portion of "Other Funds"
were statutorily designated program receipts comprised
primarily by the Office of Project Management and
Permitting, funded on industry agreement reimbursements as
well as the State Pipeline Coordinators Office. She added
that there were also Permanent Fund Receipts.
Co-Chair MacKinnon asked why DNR was receiving funds from
the vehicle rental tax, and inquired how they were using
the funds. Ms. Davis noted that the vehicle rental tax was
in the DGF and was appropriated to the Division of Parks.
She was unable to recall whether it was a result of a
governor's or legislative action, but stated that it was in
the budget for several years. She elaborated that the
vehicle rental tax was collected on a percentage of
rentals, and a large portion of the money was therefore
utilized toward tourism associated functions. She added
that DNR was receiving about $2.9 million in vehicle rental
tax for the Division of Parks.
Ms. Davis continued to describe slide 7, listing the other
funds that made up the DGF: fees (from Parks, the
Recorder's Office, and Permits and leases through the
Division of Mining, Land, and Water); Land Disposal Income
Fund; Timber Receipts; as well as some funding from the
Agricultural Revolving Loan Fund (ARLF) for management of
that fund. She added that DNR had been comparing its yearly
budgets to its FY 06 Management Plan for a number of years,
and concluded that the mix of funds in the current
allocation was almost identical.
9:12:28 AM
Vice-Chair Micciche inquired about the 22 percent of
Division of Forestry funds expended on fire suppression and
wondered if it included mostly permanent positions or if
positions fluctuated according to the extent of fires in a
given year. Ms. Davis replied that DNR had a core group of
fire preparedness employees, the majority of which were in
permanent seasonal positions. She clarified that this group
of employees was engaged in all of the fire preparedness
activities: the initial fire attack prepositioning,
training, and readiness. She continued that the hiring of
emergency fire crews and additional personnel was
contingent on the type of fire season; the positions were
hired through the emergency firefighting process and were
not reflected on the budget. Vice-Chair Micciche asked if
the $38.8 million was a base allocation even though it
funded primarily seasonal employees. Ms. Davis explained
that there were two components that comprised the funding:
fire preparedness, which in FY 16 was $18.7 million and
included 31 permanent full-time positions and 167 seasonal
positions; and fire activity, which in FY 16 had $20.1
million in authorization (with $6.6 million UGF), with the
majority from federal receipts. She clarified that DNR did
not budget for employees in fire activity, but had base
funding in General Funds as well as a large amount of
federal funding that was reimbursable after expending
resources on fires on federal land.
9:15:22 AM
Ms. Davis moved to slide 8, and noted that it and the
following slide reflected how DNR had assembled the
governor's budget. She explained that the governor's budget
began with the FY 15 Management Plan as the base, and then
pointed out the adjustments that were reflected in the
slide. She related that the Legislative Finance Division
reviewed the transactions that the governor submitted to
arrive at the FY 16 Adjusted Base Scenario, through which
they could remove one-time and multi-year appropriations
which did not need to be appropriated again. Additionally,
Legislative Finance could add in funding for contractually
negotiated salary increases, at which point there was an
adjusted FY 16 budget that the legislature would typically
view as the base.
Ms. Davis detailed adjustments to the FY 15 Management Plan
as follows: negotiated salaries were added, an $8.9 million
one-time appropriation fiscal note for SB 138 [2014
legislation relating to the Alaska Gasline Development
Corporation (AGDC)] was reversed, and a couple of other
reversals of one-time items. She pointed out the almost
$4.1 billion Mental Health Trust administrative budget as
another decrement to the FY 15 Management Plan, explaining
how the Mental Health Trust had traditionally employed
zero-based budgeting. She noted that the funding would be
placed back within the FY 16 budget as full increments. She
directed attention to the funding category totals of the FY
16 Adjusted Base.
Ms. Davis highlighted to the second half of the slide, and
stated that she would be detailing increments in DNR's FY
16 budget, followed by a list of decrements on the
following slide, the sum of which would lead to the FY 16
Governor's Amended Budget. She discussed restoring one-year
funding for the AKLNG fiscal note in the amount of $8.9
million as well as a $4.2 million request for AKLNG in UGF,
to total an approximately $13.2 million budget for AKLNG.
She added that the only other increases in the budget were
added under "Other" funding source types, pointing out a
small $585,000 spending authority of statutory designated
program receipts for the State Pipeline Coordinator's
Office, based on an estimate to manage increased pipeline
agreements. She added that the funding was all reimbursable
from the companies. She pointed out two increments for
Mental Health, noting that they restored the same amount
from the previous year, as well as a $255,600 increment of
additional funding.
9:19:32 AM
Vice-Chair Micciche asked why the $4.2 million of
additional funding for AKLNG was necessary. Ms. Davis
explained that the $4.2 million request, in addition to the
restoration of $8.9 million, would cover the participation
of all state agencies in AKLNG. She elaborated that the
departments associated were DNR, the Department of Law
(DOL), and the Department of Revenue (DOR); and continued
that DOL had approximately $4.8 million of work when
associated with AKLNG, whereas DOR had approximately $1.6
million. She clarified that all the work was primarily
related to contracts and was what drove the increase for FY
16. Vice-Chair Micciche asked if the committee would see a
corresponding cut in the other departments after moving the
funding to DNR. Ms. Davis responded that it was new funding
and was not replacing anything that was currently budgeted
to the departments. She specified that the some of the
requested funding was related to a specific contract, and
offered to provide additional detailed information as
necessary.
Senator Kelly asked Senator Bishop to address the subject
in subcommittee.
Senator Bishop asked for more detail regarding the AKLNG
increment, and asked that one of the deputy commissioners
attend the Finance Subcommittee on the Department of
Natural Resources in order to provide additional
information.
Co-Chair MacKinnon mentioned a recent op-ed piece by the
governor and supposed the committee as a whole was
interested in additional information. She wondered if the
request was related to going to market in the Middle East,
and mentioned that funding for which it was included in SB
138.
Ms. Davis moved to slide 9, explaining that the top portion
listed all of the decrements that were proposed in the
governor's budget for FY 16. She noted that they added up
to almost $6 million of UGF, and included the 48 position
deletions that were mentioned earlier. She pointed out a
number of specific items listed, and inquired if the
committee would like to hear of them in greater detail.
9:23:27 AM
AT EASE
9:26:37 AM
RECONVENED
Senator Bishop commented that it was a pleasure to work
with Ms. Davis and her staff. He furthered that the DNR
subcommittee had a number of detailed questions, and asked
her to be prepared to answer them at its first meeting.
Senator Hoffman asked for more detailed information
concerning the 16 deleted positions and reorganization of
the McGrath Fire Suppression Protection Area and the
discontinuation of the Wildlife Fire Academy. He wondered
how the total reorganization would affect the work that
needed to be done in the Interior. He opined that 16
positions seemed high for the $1.1 million decrement
represented on the slide.
Co-Chair Kelly asked Mr. Fogels if he would discuss the
fire academy restructuring and the $1.1 million decrement.
Mr. Fogels explained that the funding decrease would
accomplish two things, including restructuring of the
McGrath Fire Office to reduce staffing from 22 to 6
positions. He explicated that DNR observed fire activity
shifting to other parts of the Interior, and therefore it
would focus efforts closer to the areas of Fairbanks, Delta
Junction, and Tok. He relayed that DNR would be keeping a
"warm base" in McGrath that would be staffed, and if there
was fire activity in the area, it would be able to
effectively fight the fires. He clarified that if there
were to be a bad fire season in the McGrath area, the costs
were likely to be higher in the long term if DNR proceeded
with the reorganization. He noted that the bulk of the $1.1
million decrement would be from the McGrath Fire Office,
with only $250,000 cut from the Firefighting Academy in
McGrath. He referred to the general need for budget cuts as
reasoning for the academy closure.
9:29:42 AM
Co-Chair Kelly asked Senator Bishop if the academy had been
funded through Department of Labor and Workforce
Development (DLWD) in the past. Senator Bishop related that
he and a former DLWD commissioner had worked on funding for
the McGrath Fire Academy, and characterized it as "a jobs
issue for rural Alaska." He furthered that firefighting was
a great way for rural Alaskans to make a living. He echoed
the concerns of Senator Hoffman and stated that he would be
asking questions related to the decrement in subcommittee
meetings. Co-Chair Kelly expressed similar concern and
mused that perhaps there was a way to fund the academy
through another department.
Senator Dunleavy asked about the out of state employees
brought in during heavy fire seasons and wondered if it was
at state or federal expense; and if federally funded, were
the funds contingent upon fires being on federal land. Mr.
Fogels responded that it was dependent upon the location of
the firefighting. He discussed the greater expense of
limited fire resources on state land, necessitating the
hire of fire crews from the Lower 48 at additional cost to
the state. Senator Dunleavy asked about the nature of
firefighting expense on federal land. Mr. Fogels related
that typically federal agencies would be responsible for
the cost of fires on federal land; if the State of Alaska
assists, it would be eligible for reimbursement including
the cost of out of state fire crews.
9:31:28 AM
Vice-Chair Micciche asked about the remaining funds for
fire management and related that he had spent time with
fire crews in Funny River, Alaska. He praised the fire
crews from all over the state, and characterized them as
"amazing people" who did an incredible job. He discussed
the need for re-organization and wondered if the
subcommittee could look at reorganization to result in
greater efficiency with limited resources. He referred to
the remaining $21.1 million in the budget for fire
suppression and inferred that it was a sizable amount of
money to work with. Mr. Fogels noted that it has always
been an issue to balance fire preparedness and fire
activity; more money spent on preparedness resulted in cost
savings when fighting fires. He discussed the cost savings
when funds are directed to prevention, and assured the
committee that DNR was doing everything in its power to
assure it was adequately staffed to effectively fight fires
over the summer.
Ms. Davis referred back to slide 9, and directed attention
to the change in funding from the Adjusted Base to the FY
16 Governor's Amended Budget, divided by fund types. She
remarked that it showed DNR with a 5.7 percent increase,
which included an additional $13.2 million for AKLNG. She
noted that if the budget was compared to the FY 15
Management Plan, it would reflect a reduction of 1.8
percent. She furthered that for DNR's core services there
would be a reduction of 2.3 percent overall.
9:34:35 AM
Ms. Davis moved to the final slide (slide 10), and
illustrated DNR revenue generation. She explained that DNR
had examined average annual revenue collection from FY 06
to FY 14. She pointed out that the bulk of the funding
displayed on the pie chart was UGF that they had collected
primarily from royalties from oil, gas, mining, timber
sales, and lease and permit revenues for the use of state
land and water. She added that a good portion of the
revenue DNR collected went to the Permanent Fund, and
reminded the committee that the numbers reflected an
average annual amount. She clarified that the Permanent
Fund monies were royalties on oil, gas and mining leases;
50 percent on leases issued after 1979, and 25 percent on
leases issued prior to that time. She stated that DNR also
deposited money into the CBR, based primarily on oil and
gas litigation settlements. She explained the "Other Funds"
on the pie chart as revenue deposited into the Mental
Health Trust, or excess revenues that had been collected
above and beyond what they were authorized to spend in
offices such as the Recorders Office or the State Pipeline
Coordinators Office pipeline leases. She commented that
DNR's UGF Budget was reflected on the side of the slide,
and $72,880,400 had been its average amount of UGF. She
suggested that for every dollar that DNR spent, it
deposited approximately $36 into one of the state funds
reflected on the chart. She summarized that DNR generated
an average of $2.6 billion in revenue annually.
Co-Chair Kelly asked to refer back to slide 9, and inquired
if the total reduction between the Adjusted Base and the FY
16 Governor's Amended budget was indeed 2.3 percent,
excluding the AKLNG expenditures. Ms. Davis pointed out the
reduction of 7.6 percent from the Adjusted Base reflected
in the UGF column.
9:37:37 AM
AT EASE
9:37:43 AM
RECONVENED
Co-Chair MacKinnon asked if there was any reappropriation
of capital expenditures or any switching between capital
and operating funds. Ms. Davis responded that there was no
capital money being reappropriated for expenditure in the
operating budget. She noted that DNR did propose a
reappropriation in the capital budget of funding from one
project to another.
9:38:31 AM
AT EASE
9:41:13 AM
RECONVENED
^OVERVIEW: FY 16 DEPARTMENT OF ENVIRONMENTAL CONSERVATION
Co-Chair Kelly stated that he had one or two questions for
the Department of Environmental Conservation (DEC) and
thought perhaps the other committee members had additional
questions.
LARRY HARTIG, COMMISSIONER, DEPARTMENT OF ENVIRONMENTAL
CONSERVATION, introduced himself and his team. He noted in
the gallery was Ruth Kostik, Budget Manager; Alida Bus,
Legislative Liaison; and Nathan Teal. He referred to his
presentation "Department of Environmental Conservation,
Senate Finance Committee, February 23, 2015" (copy on
file), stating that he would review DEC department
objectives before going into budget specifics. He moved to
slide 2, and stated that the mission of DEC was to protect
human health and the environment, adding that he considered
the two things to be inextricably linked. He furthered that
human health and the health of Alaskans was dependent upon
having clean air to breathe, safe food to eat, and clean
water to drink and support aquatic life. He continued that
it was part of the mission to ensure that Alaska food
products enjoyed a good reputation and could get to market
around the world. He added that DEC tried to keep a low
incidence of (oil) spills in the state, and tried to
mitigate effects in order to not leave a legacy of
contaminated sites for future generations. Additionally, he
continued, DEC supported wise resource development and
community growth. He explained that the permits and
authorizations DEC gave were often the social license for
many of the activities recently discussed by DNR, such as
oil and gas, timber, mining, etc.
9:43:30 AM
Commissioner Hartig moved to side 3, noting that while DEC
could not claim to generate funds such as DNR had, it did
add to the quality of life and support the work of other
agencies such as DNR. He reflected on conditions of budget
tightening necessary in recent years, referring to the
federal sequestration, and a 5 percent decline in federal
funds for some DEC programs such as the drinking water
program. He described cuts to the state budget, citing a
loss of $1.4 million when the 404 Permitting Program was
deleted the previous year. He pointed out a 60 percent
decline in Village Safe Water funding from the capital
budget; clarifying that it was over the last decade. He
remarked that DEC had tried to manage the cuts in part by
holding vacant positions, cutting back on non-essential
expenditures such as travel, and looking at other ways of
generating revenue through reviewing fees. He referred to
what he termed as "stress points" in the DEC budget, that
were all related to the tightening budget over the
preceding years. He discussed the departmental vacancy rate
of around 12 percent, and mentioned that the Division of
Spill Prevention and Response (SPAR) was at 15 percent
vacancy prior to the proposed cuts. He remarked that the 12
percent vacancy rate was several percentage points above
the historical average, and was reflective of the direction
the budget was heading.
Commissioner Hartig moved to slide 4, "Budget Reduction
Criteria," and explained that DEC tried to use wisdom and
deliberation in considering budget cuts. He directed
attention to the budget cut criteria DEC had developed; and
welcomed input of the finance committees, the legislators,
and the public as to what the foci should be for evaluating
potential cuts.
· Services that are mandated by statute
· Services that are necessary to implement DEC's mission
and core responsibilities
· Services that can't be performed by local government,
federal government, or others
· Services that will be difficult to restore
· Services that are a foundation for economic growth and
prosperity
· Services that enjoy strong public support
· Services that leverage other resources
9:46:00 AM
Commissioner Hartig moved to slide 5, "FY 2016 Endorsed
Budget Request," and highlighted the approximately $86
million operating budget request. He pointed out that the
UGF portion was a little over $20 million, and noted that
DEC had the second smallest UGF budget of all the state
agencies, just behind the Department of Military and
Veterans Affairs, which was primarily federally funded. He
noted that the General Fund that DEC received leveraged
other funds on the operating and capital budgets, and
discussed the necessity of having a base of operations in
order to receive federal funds. He attested that the
General Funds that DEC did have were stretched tightly
among different programs to generate fees. He pointed out
that the capital request also leveraged a fair amount of
federal receipts. In summary he estimated that the average
Alaskan paid 18 cents per day in UGF for all of the
services that DEC provided.
Commissioner Hartig moved to slide 6, which outlined the
DEC operating budget by fund source. He pointed out a pie
chart that delineated Federal funds, permit fees, the
Oil/Hazardous Release Prevention and Response Fund, UGF,
and DGF. He directed attention to the depiction of funding
sources broken down by division, commenting that the
"Other" funding category was significant within the Air
Quality Division. He explained that the funds were
primarily permitting fees, and explained that permitting
fees for the Clean Air Act were required by federal law to
support the program. He added that the funds were
designated as "Other" due to the fact that federal law
requires that the funds only be used in certain ways,
rather than appropriated for other uses. He made note of
the SPAR budget, in which a large component was Response
Fund and a small component was UGF; and relayed that the
Response Fund was in a crisis due to declining oil
production. He noted the ongoing discussions surrounding
how to make up for the loss in funding with UGF or other
sources.
9:49:18 AM
Commissioner Hartig moved to slide 7, showing the budget
changes between the 2015 Management Plan and the FY 16
Adjusted Base. He pointed out a 9.5 percent overall
reduction for DEC in UGF from the Management Plan to the
Governor's Proposed Budget. He explained that this resulted
in a total loss of 25 positions, equating to net loss of 24
positions after considering their request for an additional
request for the Air Quality program. He discussed a funding
switch between "Other" and Federal funds, and said there
was no net gain.
Co-Chair Kelly asked for clarification regarding the
funding switch between Federal and "Other".
THOMAS CHERIAN, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF ENVIRONMENTAL CONSERVATION,
explained that there was a fund source change from Federal
to "Other." Co-Chair Kelly asked where the "Other" funds
were originated. Mr. Cherian explained that they came from
the Alaska Clean Water and Drinking Water funds, which were
managed by federal capitalization grants. He referred to a
point at which programs generate sufficient fees to support
the management of the program, and suggested that scenario
was reflective of the funding switch.
Co-Chair Kelly asked how "Other" funds differed from DGF.
Mr. Cherian stated that "Other" funds were specifically for
the management of the loan funds. Co-Chair Kelly wondered
if it was appropriate to call "Other" funds DGF. Mr.
Cherian reiterated that the "Other" funds were not
designated as DGF because they had been designated for a
specific purpose. Mr. Cherian characterized the "Other"
funds as a "fees generator" issued from clean water and
drinking water laws. He recounted that when the programs
were originally set up, the intention was that the
administration would be supported by federal capitalization
grants until which time the fees would generate enough
funds to do so. He clarified that the programs were now at
the point where the fees could do so, and the funding
source reflected the switch.
9:53:21 AM
Commissioner Hartig added that they were revolving loan
programs that had been seeded with federal money;
subsequently the generation of loan fees had enabled the
programs to become self-supporting. The monies, however,
could only be used as required under the federal grant and
federal law; thereby they went into the "Other" category.
Commissioner Hartig moved to slide 8, "FY 2016 Significant
Budget Changes," and described that they would be cutting a
position in the Commissioner's Office; after the current
employee retired they would not be replaced. He further
discussed budget changes and efficiencies in Administrative
Services:
· CO-Efficiencies due to Reorganization of
Administrative Functions: -$114.1; -1 PCN(-$43.1 UGF/
-$71.0 I/A)
· AS-Efficiencies due to Reorganization of
Administrative Functions: -$25.0 UGF
· AS-Replace Federal Receipts with Existing Clean Water
Administrative Fees: $0.0($84.0 Other / -$84.0 Fed)
· AS-Rebalance Funding of Core Service Lease Costs:
$0.0($400.0 CAPF/$110.0 CPVEC/-$510.0 FED)
Commissioner Hartig pointed out that two of the items
listed were relatively minor and without budget impacts.
Commissioner Hartig moved to slide 9, "FY2016 Significant
Budget Changes - Environmental Health," which listed a
continuation of significant budget changes that he
described as having more impact both on the public and on
the department:
· FSS-Reduce Inspections of Retail Food, Public
Accommodations, and Non-Food Facilities: $869.3 UGF; -
8 PCNs
· EHL-Delete two Microbiologists Positions: $170.0 UGF;
-2 PCNs
· EHL-Maintain Fish Tissue Monitoring Program: $0.0
($250.0 OR/-$250.0 UGF)
· DW-Reduced Capacity in Drinking Water Program: $507.3
UGF; -4 PCNs
· SWM-Efficiencies due to Implementation of New
Regulations: $85.6 UGF; -1 PCN
Commissioner Hartig explained that the department was
examining looking at reducing by eight PCNs [Position
Control Numbers] in the Retail Food Inspection Division,
and explained that it would include restaurants and
individuals who provide food directly to the consumer. He
clarified that it would not include seafood processing
plant inspections, but would signify an increased risk to
the public due to a reduction in inspections of restaurants
and other retail facilities. He discussed the reduction of
two microbiologist positions in the Environmental Health
Lab; and stated that through greater efficiencies DEC hoped
to not have a reduction in services of the lab. He
discussed the Fish Tissue Monitoring Program (FTMP),
mentioning the statewide dependence on fish, and contended
that the health of fish being exposed to transboundary
contamination was a legitimate concern. He referred to data
that demonstrated increased levels of mercury in Alaskan
waters, and mentioned public concern, including
international questions regarding the health of our wild
fish. He opined that funding the FTMP would allow the state
to use data to take action in the case that our fish
reached unhealthy levels of contamination. He explained
that there would be a fund switch, utilizing some of the
ocean ranger fees that were generated to help support the
FTMP. He justified the fund switch by elaborating that the
work of the FTMP would reveal monitoring information about
the efficacy of permits [in protecting water quality]
issued to cruise ships for treated wastewater discharge
that was required to meet water quality standards set forth
by a citizen's initiative sometime in the preceding years.
He noted that the fund switch was examined by the Office of
Management and Budget as well as the Legislative Finance
Division, both of which considered it to be a legitimate
use of the ocean ranger funds.
Commissioner Hartig spoke to a reduction of 4 PCNs in the
Drinking Water Program, explaining that it concerned any
public drinking water systems that served 25 or more people
through the year. He discussed numerous federal
requirements that applied to the program, as well as new
national requirements which, he explained, DEC had spent
much time helping communities (particularly smaller
communities) around the state comply with. He articulated
that the change would entail a reduction in aid to
communities, with the expectation that they would look to
the private sector for drinking water engineers to provide
the assistance formerly provided by the state. He noted
that there would still be a core group in the program, that
could assist communities that could not otherwise get help,
but there could be a delay in receiving the services due to
a smaller team.
9:57:58 AM
Commissioner Hartig continued to describe slide 9, stating
that DEC had looked at efficiencies in its Solid Waste
Program, which dealt with landfills it oversaw around the
state, noting that it would be taking a reduction of 1 PCN.
Commissioner Hartig summarized that DEC was looking at the
deletion of 16 positions in Anchorage, 2 in Fairbanks, 2 in
Wasilla, 1 in Valez, and 4 in Juneau for a total of 25. He
referenced 1 Air Permitting Program position in Anchorage
that would be added back in.
Co-Chair MacKinnon asked how many FTE positions were being
cut, and wondered if the positions being cut had incumbent
employees, or were they a part of an ongoing vacancy factor
in the budget. Mr. Cherian responded that of the 24
positions that were being deleted, 4 were currently
staffed. He clarified that DEC had been holding positions
vacant in the expectation of position changes. He furthered
that there was funding associated with the positions. Co-
Chair MacKinnon asked if funds for the 4 positions in
question would be backfilled with the Ocean Ranger dollars
or another change in funds. Mr. Cherian responded in the
negative, and clarified that the positions would go away,
as well as the funding for the positions.
Co-Chair MacKinnon referred to the commissioner's early
comment regarding increased food safety risk due to budget
cuts and asked how many people were remaining in positions
to ensure food safety. Commissioner Hartig stated that DEC
would be reducing food inspections by 50 percent. He
remarked that even before taking the 50 percent reduction,
DEC was well below the federal level for food safety
inspections. He related that DEC was taking a "risk-based"
approach, under which they were prioritizing facilities to
inspect based upon level of risk when considering the food
product and consumers. Mr. Cherian added that there were 41
positions left in the Food Services and Sanitation Program.
Co-Chair MacKinnon asked to clarify if this was before or
after reduction in positions. Mr. Cherian elucidated that
after the proposed position reductions, there would be 33
positions left in the program. Co-Chair MacKinnon asked if
Anchorage was included in this number, and wondered if the
city had its own health inspections. Commissioner Hartig
replied that Anchorage had its own inspection program that
was operated with state oversight and delegation, and was
the only community in the state that operated that way. He
spoke to the challenges of implementing food safety
programs throughout a large state.
10:02:16 AM
Co-Chair MacKinnon noted that the marijuana bill [SB 30]
would soon be in the Senate Finance Committee, and wondered
how DEC would be involved with regard to the food safety of
edible marijuana products containing oils or leaf of the
plant. Commissioner Hartig related that DEC was concerned
with such food products and confirmed that the department
had a responsibility for processed food in the state, and
to the extent that individuals would produce food with
marijuana components they would statutorily have
repsonsibility to make sure it was safe. He relayed that
the Food Safety Program within the Division of
Environmental Health had been "heavily involved" in
discussions with other state agencies on what role they
might have. He mused that while DEC might not have a
leadership role, it may have a role with food safety. Co-
Chair MacKinnon stated that she expected to see a fiscal
note to reflect any fees associated with trying to
ascertain that the food products were healthy. She was
unsure if such a fiscal note would be a part of SB 30, but
hoped that there would be an "adequate" fiscal note along
with an associated fee to aid in the management of the
products for the general health of the public.
10:04:07 AM
Co-Chair Kelly asked about the processing of marijuana oil
extraction, which he characterized as very dangerous, and
wondered if facilities that engage in the processing would
fall under the purview of DEC. Commissioner Hartig
discussed food safety protocols, and surmised that the food
safety concerns and risks regarding marijuana products were
not known. He stressed the need for development of the food
safety standards before being able to regulate the use of
such a new food product; and relayed that DEC needed
statutes and regulations in place, which would need to
happen in steps. He added that there was no federal
guidance for the process. Co-Chair Kelly asked about any
forthcoming fiscal notes attached to SB 30. Commissioner
Hartig specified that any fiscal notes would be a product
of different state agencies working together, developed as
they received more clarity about the statutory
requirements.
10:06:10 AM
Senator Bishop asked about the two microbiologist positions
proposed to be cut, and asked how many microbiologists were
employed by DEC. Mr. Cherian did not have the information
but agreed to provide the number at a later date. He
reiterated that DEC would be deleting two microbiologist
positions. Senator Bishop referred to the governor's State
of the Budget speech, in which he discussed public-private
partnerships, and working with the University of Alaska.
Senator Bishop praised UAF's Life Science Building in
Fairbanks and urged Commissioner Hartig to consider
utilizing the building and scientists there. Commissioner
Hartig relayed that DEC always looked for such
partnerships, and furthered that DEC's Environmental Health
Lab served the needs of the state that the private labs and
the University generally could not. He stressed that they
were not trying to be in competition with anybody, but
rather to fill a gap. He used shellfish Paralytic Seafood
Poisoning (PSP) testing (federally required to take place
in a government lab) as an example to illustrate the unique
work done by the Environmental Health Lab. He explained
that the PSP testing was not economical for a private lab
to do; DEC had spent over $400 per sample in doing the PSP
tests. Further, the fees didn't even begin to cover the
costs. He noted that the shellfish testing was a service to
the state; however it and other general work done by the
DEC lab were not services that could be easily turned over
to the private sector.
Senator Bishop followed up to say that Holland [the
Netherlands] had done a lot of work in the edibles safety
area, and there was likely a large body of research to
utilize.
10:08:50 AM
Senator Hoffman discussed when Alaska took over primacy for
the National Pollutant Discharge Elimination System (NDPES)
wastewater discharge permitting and compliance program. He
relayed that the change had an associated expense of
greater than $4 million annually, and wondered if DEC had
reviewed the benefits the state had received from managing
the primacy. He further inquired as to what other states
were doing in the same field and whether NDPES had even
been considered for budget reductions. Commissioner Hartig
responded that it was critical for the state to have a good
wastewater discharge permitting program. He recounted that
the Environmental Protection Agency (EPA) had delegated the
program to the state in 2008. He noted that during the
discussions regarding the state taking primacy of the
program, there was significant public concern that the EPA
was far behind in issuing permits. He specified that the
EPA had only one permit rider in Alaska, and a few in
Seattle. He discussed differing conditions in the state and
how that affected efficacy of the permit process.
Additionally, he noted, the EPA was only issuing
approximately six permits per year; the seafood processers
were using out-of-date permits, and new processors could
not get a permit. He continued that when Alaska got
delegation of the program, we inherited a large backlog of
permit requests. He reported that currently, DEC issued
more than 19 permits per year and over 700 authorizations
or general permits per year. He contended that holding at
the current budget, DEC could keep up with the permit load
for the next two years while working with the backlog. He
characterized NDPES as a "growing program" and judged that
it was a ten-year endeavor to acheive optimization, and
concluded that it was positively serving the public and
industry around the state.
10:11:40 AM
Commissioner Hartig referred to slide 10, explaining that
the Air Quality program was the only area to which a
position would be added. He explained that the Air Permit
program was a delegated program, much like the
aforementioned NDPES. He specified that the state had had
the delegated air program from the EPA for decades. He
explained that one of the critical permits that DEC issued
under the program was called a Construction or Title 1
Permit; a permit which must be obtained prior to
construction of a facility. He described a modelling
process under which air quality standards were measured
based on hypothetical iterations of the building project to
quantify emissions and effects that were required to meet
health-based standards. He listed Point Thomson, LNG
facilities, gas facilities, gasification plants, and new
power plants as examples of facilities needing the air
program permit. He referred to them as "very expensive
projects that can't be delayed," and expressed that DEC was
experiencing a bottleneck in the modeling process that was
causing them to get behind. The addition of the position,
he explained, was an attempt to relive the bottleneck. He
discussed the Point Thomson liquid natural gas project as
an example; and relayed that DEC had been through four or
five iterations of the permit, a process necessitated by
changes in design that required repeated re-modeling and
analysis of over 200 independent emission sources. He
described the reduction in the SPAR fund, citing the
decline in oil production resulting in less money going
into the fund. He noted that DEC was looking at cutting
four positions, largely being accomplished through
reorganization that would combine several programs and gain
efficiencies.
10:14:27 AM
Commissioner Hartig moved to slide 11, illustrating
reorganizations that reflected budget changes:
· WQ-Efficiencies due to Reorganization of
Administrative Functions-$95.0 UGF; -1 PCN
· WQ-Offset Ocean Ranger Fees for Fish Tissue Monitoring
Program-$250.0 OR
· WQ-Delete Environmental Program Manager-$103.4 UGF; -1
PCN
· FC -Replace Federal Receipts with Existing Clean Water
Administrative Fees$0.0($700.0 Other/-$700.0 Fed)
· FC-Maintain Operator Certification Program$0.0($101.1
DGF/-$101.1 Fed)
Commissioner Hartig pointed out administrative
reorganization in Water Quality, the fund switch in the
FTMP program, and a fee increase in the water treatment
Operator Certification Program. He additionally mentioned
possible fee increases in Air Quality and Water programs.
Senator Olson asked about the Operator Certification
Program, and wondered how many operators were in smaller
communities to aid in providing water and sewer the
villages. Commissioner Hartig responded that the majority
of the operators were in small communities. Senator Olson
noted the importance of potable water in the rural areas,
discussed revenue sharing, and asked what the back-up plan
was to ensure that the water and sewer facilities remained
open. Commissioner Hartig relayed that DEC planned on
having a single point of contact for small communities to
reach the department for water and other issues. He
expressed that it was the intention of the department to
rethink and readjust in the eventuality of a systemic
problem being identified. Senator Olson asked if the
department had the regulatory authority to impose fines and
penalties in the case of individuals being unable to
maintain certification. Commissioner Hartig relayed that
DEC did have the authority, however it was not the
department's intention to penalize individuals; rather, its
goal was to make sure the systems were operating to provide
the health benefits to the people in the communities.
10:19:01 AM
Co-Chair Kelly asked about the SPAR program, and wondered
if DEC had a contingency plan in the event that the
legislature did not approve the supplemental appropriation
of $3.1 million from the lapsing municipal grants.
Commissioner Hartig explained that there were three sources
of funds for the Response Fund: the 4 cents a barrel
surcharge on crude oil production in the state, the
interest income on the response account, and and
statutorily required cost recovery against responsible
parties that is appropriated by the legislature into the
response fund. He remarked that all three of the fund
sources were variables, and the DOR estimated the amount of
income based upon oil production. In turn, DEC (with
assistance from the Department of Law) estimated the amount
of cost recovery for DEC. He pointed out that DEC had no
ultimate control over the variables, and basing funding on
projected revenues that do not meet expectations resulted
in a budget short fall. He recounted that budget shortfalls
had not been a problem in the past due to a surplus in the
fund that could be drawn upon if needed. He referred to an
FY 15 settlement that did not come in, as well as projected
interest income that did not materialize; which resulted in
an approximately $2.1 million shortfall in FY 15. He
relayed that DEC had immediately started implementing cost-
saving measures, and referenced the 15 percent SPAR vacancy
rate as evidence. He clarified that the entire department
had also engaged in cost saving measures. He revealed that
of the original $2.1 million from FY 15, DEC was left with
a remaining shortfall of approximately $800,000 on top of a
projected $1.9 million shortfall for FY 16. He added that
the total projected shortfall for FY 16 included an
assumption that they would receive a $5 million settlement
from the federal government that was largely negotiated but
not yet finalized. He clarified that if the $5 million
settlement was received before June 30, 2015, it would be
subject to appropriation for the FY 16 budget.
Commissioner Hartig discussed impacts to the budget, and
related that if DEC did not receive the requested
appropriation, they would be immediately impacted in FY 15,
considering the $800,000 gap. He continued that DEC was so
far in to the fiscal year, that the layoffs necessary to
balance the budget would be significant, equaling
approximately 35 full-time positions. He continued that
under the labor agreements, departments were required to
give layoff notices a minimum of 12 weeks in advance for
budgetary reasons. He reiterated the short time remaining
in the fiscal year to make up for the $800,000 budget
shortfall. He described the appropriation to be capital
funds on projects that were completed. He asserted that by
doing the reappropriation directly in to the prevention
account, it would allow DEC to be able to deal with the FY
15 problem. He clarified that if the department was forced
to wait for the funds in the supplemental budget, there
would be timing issue.
Commissioner Hartig continued to describe a shortfall that
would extend into FY 16, and noted that the expected $5
million "Aniak School Settlement" would affect the budget
differently depending on when in the budget cycle it
arrived.
10:25:31 AM
Co-Chair Kelly asked if the use of SPAR funds went far
beyond spills. Commissioner Hartig mentioned the statutory
language that created the response fund and noted that the
fund comprised of the prevention account and the response
account. He clarified that the response account was for
"eminent and substantial" spills, and spills alone. The
prevention account, he explained, ran the operating side of
SPAR, totaling $15 million of the $20 million budget, and
included a fair amount of federal and other funds. He
furthered that the prevention fund paid for prevention,
preparedness, and response. He further likened it to DNR's
description of the importance of fire preparedness and
explained that prevention was crucial in the mitigation and
treatment of toxics spills, and was a key element of the
program. He furthered that the prevention component was
funded from the 4 cents per barrel surcharge on crude oil,
and included activities such as detailed contingency plan
preparation, drills and inspections, as well as response
and clean-up. He listed contingency plan details for large
tank farms, vessels, exploratory drilling, and large
pipelines; such as prevention plans, spill response
resource planning, and localized areas to protect. He added
that there was some cost recovery from clean-up of
contaminated sites, and some of the cost was funded back
through responsible parties and reappropriated back by the
legislature. He concluded that prevention, preparedness,
and response were all partially funded by the 4 cents per
barrel surcharge.
10:28:17 AM
Co-Chair Kelly asked how many of the contaminated sites
were not pipeline or oil field related. Commissioner Hartig
relayed that there were about 2,000 reported spills per
year, the majority of which were small refined products
from fishing vessels, home fuel tanks, and trucks. He
mentioned the importance of considerations such as the
spill content, location, and volume. He estimated there to
be 10 to 20 spills of a size that required a fair amount of
state resources on the response, and 6 or so that might
make front page news for their magnitude. He relayed that
he would provide data to reflect the number, types, and
sources of spills to the committee. He qualified that the
bulk of the spills were refined products such as gasoline,
aviation fuel, diesel-type fuels, home heating fuels, etc.
He noted that the larger spills were often marine
transportation spills and spills related to oil and gas or
mining industry.
Co-Chair Kelly stated that it was his understanding that
the fund was set up for oil spills related to the pipeline,
and associated to the transport of oil. He wondered if the
money collected from oil generation was used to clean up
numerous things other than oil-related spills. Commissioner
Hartig replied in the affirmative and noted that DEC was
examining the question of fairness of requiring the crude
oil industry to fund all of the prevention and response
without some contribution from the companies and
individuals who store, transport, and use refined products.
He added that DEC was looking at ways (with the help of a
number of legislators) to get income into the response fund
prevention account and more fairly spread the costs amongst
those who benefit from those services. Co-Chair Kelly
related that his understanding of the original intent of
the fund was for response to a crude oil spill, and
wondered if companies that produce oil were required to
have spill response mechanisms. Commissioner Hartig
affirmed that companies were required to have such
mechanisms, and related that after the oil spill in Valdez
in 1989, there were changes in federal and state law
relating to drilling and transport of crude oil. Co-Chair
Kelly asked what volume was required to constitute a spill.
Commissioner Hartig stated that it varied, and that DEC
evaluated the appropriate response based on initial contact
made to DEC. In the case of impact on human health, safety,
or environment; DEC would have a heavier role. He explained
that crude oil by its nature was more problematic in the
environment and received more attention, whereas a diesel
fuel spill could volatize and dissipate without having the
same level of toxicity. He shared that crude oil companies
often had relationships with co-ops in the state that would
help them respond, and DEC worked with industry on the
response. Co-Chair Kelly stated that they could discuss the
particulars further in subcommittee.
10:34:38 AM
Vice-Chair Micciche expressed that he was interested to
have an additional meeting to include Senate Finance
Committee members; DEC and SPAR staff; DOR; and Pat Pitney,
Director, Office of Management and Budget, Office of the
Governor. He mentioned topics of immediate budget gaps,
statutory language issues, longer-term funding, and caps on
the funds. He relayed that the other body was looking at
"some complicated methods of solving the problem" and mused
that potentially they [the Senate Finance Committee] might
have a simpler solution.
Co-Chair MacKinnon asked what volume was required for
reporting of an oil spill. Commissioner Hartig replied that
under state law there were triggers based on volume and
area for spills on land; whereas any amount of spill on
water must be reported. He qualified that not all spills on
land were required to be reported to DEC.
Co-Chair MacKinnon referred to DEC's projected $1.9 million
shortfall for FY 16, and wondered if it took into account
the 35 employee layoffs that Commissioner Hartig had spoken
of when referring to the $800,000 budget shortfall in FY
15. Commissioner Hartig replied that he had calculated a
necessitated 15 full-time employee layoffs as a result of
the projected $1.9 million shortfall in FY 16. Co-Chair
MacKinnon suggested that Commissioner Hartig provide
information at a later date to clarify matters, and
wondered if the 35 positions would be temporary layoffs or
position eliminations. Commissioner Hartig discussed the FY
15 approved budget, and suggested that the problem was that
the funds were not available when needed; and the shortfall
necessitated layoff notices, although perhaps not
eliminations. He clarified that when considering the
projected $1.9 shortfall for FY 16, notwithstanding the
aforementioned 35 positions, it would equate to the layoff
of approximately 15 positions.
10:38:49 AM
Mr. Cherian explained that in light of the short remaining
time in FY 15 (exacerbated by contractually obligated
timeframes for layoffs), to make up for an $800,000
shortfall, it was necessary to cut as many as 35 positions.
Conversely, in FY 16 it was only necessary to cut 15
positions to make up for a $1.9 million shortfall over a
fiscal year.
ADJOURNMENT
10:40:58 AM
The meeting was adjourned at 10:40 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 022315 SFC DEC Overview.pdf |
SFIN 2/23/2015 9:00:00 AM |
SB 27 |
| 022315 SFC DNR Budget Overview.pdf |
SFIN 2/23/2015 9:00:00 AM |
SB 27 |