Legislature(2019 - 2020)SENATE FINANCE 532
02/20/2019 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Departmental Review: Military and Veterans' Affairs | |
| Departmental Review: Court System | |
| Departmental Review: Transportation and Public Facilities | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 20 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
February 20, 2019
9:03 a.m.
9:03:06 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:03 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Peter Micciche
Senator Donny Olson
Senator Mike Shower
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Donna Arduin, Director, Office of Management and Budget;
Lacey Sanders, Budget Director, Office of Management and
Budget; Doug Wooliver, Deputy Administrative Director,
Alaska Court System; Amanda Holland, Management Director,
Office of Management and Budget; Senator Cathy Giessel;
Senator Mia Costello; Senator Gary Stevens; Senator Shelley
Hughes.
SUMMARY
SB 20 APPROP: OPERATING BUDGET/LOANS/FUNDS
SB 20 was HEARD and HELD in committee for further
consideration.
Co-Chair Stedman informed that the committee would continue
to consider a presentation from the Office of Management
and Budget (OMB) on the governor's proposed operating
budget. He asked attendees to silence cell phones. He asked
members to avoid pontificating and confine questions to
financial aspects of the budget. He remarked that it was
well understood that the budget work was being done at the
direction of the governor through OMB, and the
commissioners were catching up on the budgetary impacts
within their departments.
Co-Chair Stedman discussed the subcommittee process and
assured that commissioners would be back before the
committee. In the meantime, the committee would hear from
an economist working for the governor. He suggested that
the committee would have a litany of questions. He had
spoken with the economist the previous day.
Co-Chair Stedman asked members to treat guests in the
committee with respect. He thought some decisions had
significant impacts to legislative districts, and that some
were complete policy change of directions since territorial
days.
SENATE BILL NO. 20
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs; capitalizing funds; amending
appropriations; 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."
^DEPARTMENTAL REVIEW: MILITARY and VETERANS' AFFAIRS
9:07:19 AM
DONNA ARDUIN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
introduced herself.
LACEY SANDERS, BUDGET DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, discussed the presentation, "State of Alaska;
Office of Management and Budget; FY 2020 Governor's Amended
Budget; Presentation to the Senate Finance Committee;
February 19, 2019; Director Donna Arduin" (copy on file).
Ms. Sanders looked at slide 10, "Department of Military of
Veterans' Affairs."
Ms. Sanders discussed slide 11, "FY2020 Budget: Department
of Military and Veterans' Affairs," which showed two bar
graphs. She detailed that the total Department of Military
and Veteran's Affairs' (DMVA) budget for the FY 19
Management Plan was $58,126,500. The governor's amended
total budget for FY 20 was $58,674,100; an increase overall
of $547,000. The Unrestricted General Funds (UGF) were
reduced by $940,100. She continued that Designated General
Funds (DGF) did not change, and equaled $28,400 for both
years. Other Funds increased by $1,136,300. Federal funds
increased from $30,942,900 to $31,294,300.
Ms. Sanders addressed the bar graphs on the right-hand side
of slide 11, "Budgeted Position Comparison." She observed
that the graphs reflected a change of permanent full-time
positions going from 277 to 278. Permanent part time and
non-permanent positions both decreased by two.
Ms. Sanders spoke to slide 12, "FY2020 Budget: Department
of Military and Veterans' Affairs Snapshot ($ Thousands)":
? Additional funding for Funeral Honor Support for
Alaska Veterans (+$50.0 GF)
? Delete funding for non-statutory/volunteer programs
? Local Emergency Planning Committee (-$300.0 GF)
? Alaska State Defense Force (-$210.9 GF)
? Delete Special Assistant to the Commissioner (-
$161.2 GF & -1 PFT)
? Statewide Support Executive Branch 50% Travel
Reduction (-$103.3 GF)
Ms. Sanders commented that the slide was a high-level
summary of the changes to the DMVA budget. She noted that
the travel reduction was applied to all agencies, and the
Homeland Security Emergency Management was excluded from
the reduction.
9:11:04 AM
Senator Wielechowski referenced the reduction to the Local
Emergency Planning Committee. He thought there were two
statutes that required the state to have such a committee.
He thought there was also a federal requirement that
stipulated that funding for disasters go through a local
emergency planning committee. He wondered how the state
would manage if the committee was eliminated.
Ms. Sanders stated that the funding was subject to
appropriation, and the Department of Homeland Security and
Emergency Management could still continue to support the
local emergency planning committees as they received
funding through other sources.
Co-Chair Stedman asked about funding for the funeral honor
support for Alaska veterans, and asked if it was for the
Fairbanks Cemetery.
Ms. Sanders stated that the item was not related to the
Fairbanks Cemetery, but rather for the coordinating travel
and attendance for veterans at funerals.
Senator Hoffman asked if there were any programs in the
DMVA budget that were non-statutory and were funded.
Ms. Sanders mentioned the Alaska Military Youth Academy
(AMYA).
Senator Hoffman asked how much the state was spending on
the program.
Ms. Sanders did not have the exact amount but offered to
provide the information at a later time.
Co-Chair Stedman asked Ms. Sanders to provide the
information along with a historical outlook on the program.
Senator Hoffman considered that the academy did provide
good things for the state, but thought it needed to be
weighed against things that were required in statute. He
mentioned the recent earthquake in Anchorage and
surrounding areas.
Ms. Sanders found that the total budget for the AMYA for
the FY 20 proposed budget was $9.4 million. She agreed to
provide additional historical information.
9:14:01 AM
Co-Chair Stedman asked if Senator Hoffman wanted a policy
discussion focused on spending prioritization in DMVA to
ensure the state was taking care of potential emergency
needs.
Senator Hoffman answered in the affirmative.
Co-Chair Stedman assumed that OMB would submit a
prioritized list from departments for the subcommittee
process.
Ms. Sanders stated that prioritized spending lists would be
provided to subcommittees by the agencies.
Co-Chair Stedman asked Senator Shower to follow up with
Senator Hoffman on the issue.
Co-Chair von Imhof observed that in UGF, the AMYA was $4.6
million for FY 19, and proposed FY 20 funding was $4.5
million, for a roughly $100,000 decrease. She asked for OMB
to include rationale for decreases in the reporting to
subcommittees.
Ms. Sanders spoke to the reduction and noted that it was a
fund source change from UGF to statutory designated program
receipts. The AMYA would be reaching out to other entities
such as non-profits and tribal corporations to see if there
were donations available to fill the funding.
Senator Hoffman asked if the administration was going to
submit the statutory requirements for the AMYA.
Ms. Sanders stated that was not one of the statutory
changes that would be submitted.
Senator Wilson asked about the Alaska State Defense Force
and the Local Emergency Planning Committee and inquired if
the department would be seeking statutory changes.
Ms. Sanders stated that there were no proposed statute
changes for the programs.
Senator Wilson explained that the United States
Constitution allowed for states to establish militias that
could be called up for disasters and other issues. He
wondered if OMB was looking to fund a defense force through
emergency funding the state had available or by other
means. He wondered about the upkeep of the Alaska State
Defense Force.
Ms. Sanders stated that DMVA would be equipped to answer
the question. She knew that the Alaska Active Defense Force
was a component of the department. When there were
disasters, the department was able to collect revenue to
pay for members to be called in for active duty to respond
to disasters or emergencies.
9:17:29 AM
^DEPARTMENTAL REVIEW: COURT SYSTEM
DOUG WOOLIVER, DEPUTY ADMINISTRATIVE DIRECTOR, ALASKA COURT
SYSTEM, displayed slide 7, "Judiciary."
Mr. Wooliver turned to slide 8, "FY2020 Budget: Judiciary,"
which showed two bar graphs. He pointed out that the graphs
on the left showed that neither federal receipt authority
nor other categories had changed. He noted that the court
system received about $380,000 in federal receipts, most of
the federal receipts went towards a court improvement
project which went towards improving child protection
cases. Another $80,000 went towards supporting a
therapeutic court in Palmer. The $2.2 million in 'Other'
funds shown on the graph was made up of interagency
receipts and program receipts are was unchanged. He noted
that every year the Alaska Mental Health Trust Authority
(AMHTA) helped to sponsor therapeutic court costs, but
every year the money came out of the budget then came back
in. The funds were unchanged from the previous year.
Mr. Wooliver continued to address slide 8. He noted that
the court system was primarily funded with GF, including
$518,000 in DGF received through the alcohol tax and used
in some treatment in therapeutic courts. He pointed out
that there were two main increments that the department had
requested, including increased lease costs and funds to
reopen on Friday afternoons. The first increment was just
below $400,000 for increased lease costs. The lease for the
court facility in Bethel had recently expired, and the re-
negotiated lease cost increased by $164,000. The other part
of the lease increase was for the Diamond Courthouse in
Juneau, which had increased by about $116,000.
Mr. Wooliver summarized that there was a total of $393,000
in increased lease costs. The second increment requested
was $3.1 million to reopen courts on Friday afternoons. He
reminded that in FY 17 the court system had opted to close
courts on Friday afternoons as a way to save about $2
million in personnel costs. There had been a 4 percent
reduction in time worked, as well as a 4 percent reduction
in pay. The closure had not proven to be a significant
bottleneck in the justice system. The closure provided
advantages such as bench time for judges to complete
administrative work, as well as free time for the other
regular participants in court.
9:23:39 AM
Mr. Wooliver continued to discuss the requested increment
for reopening courts on Friday afternoons. He identified
the disadvantages of the closure; including the loss of
hearing time, which added up to 26 days per year. There
were some administrative problems such as delayed mail and
other administrative processes. The department supported
the increase. After hearing the governor's state address,
the department had met with OMB, which said it would
support a request to include the increase totaling $3.1
million.
Mr. Wooliver showed slide 9, "FY2020 Budget: Judiciary
Snapshot ($Thousands):
• Trial Court - Re-Open Courts on Friday Afternoons
(+$3,098.0 GF & + 15 PFT)
Mr. Wooliver noted the increased employee count that went
with the request for additional funding to reopen courts on
Friday afternoons.
Senator Wilson asked if the budget reflected two Superior
Court judges proposed in SB 41 [legislation passed in 2019
pertaining to superior court judges in the third judicial
district].
Mr. Wooliver answered in the negative and explained that
the amount was in a fiscal note attached to the associated
bill.
Senator Hoffman noted that the budget was reduced by $2
million by closing the courts on Friday afternoons, yet the
request to reopen courts was for $3.1 million. He asked if
Mr. Wooliver could explain what was additionally being
requested.
Mr. Wooliver stated that there were two parts to consider.
The $2 million reflected the four percent pay reduction;
additional funds were for reinstatement of fifteen
employees.
Senator Hoffman asked about the Bethel court and asked
about potential plans if the department did not receive the
requested $165,000 increase for the facility.
Mr. Wooliver stated that in the negotiated lease with the
City of Bethel, there was an option to reduce the size of
the court facility. The department would have to absorb the
difference in funding.
9:27:36 AM
Co-Chair von Imhof understood the rationale to reopen the
courts on Friday afternoons. She suspected that during the
last year, time was utilized well despite the courts being
closed. She asked how staff would make up for lost time
with the courts reopen.
Mr. Wooliver reiterated that there were unanticipated
benefits of the closure, but the biggest impact was the
loss of hearings. He pointed out that judges worked long
hours including weekends. By reopening on Fridays, the
public would benefit. He explained that here were some
efficiencies with closing on Friday afternoons, but
reopening would move cases along more quickly.
Senator Wielechowski thought employees might like Friday
afternoons off and asked Mr. Wooliver to discuss employee
morale. He understood that the reopening would have minimal
impact on public safety hearings. He knew emergency
hearings were already being done.
Mr. Wooliver stated that the department had never polled
employees as to whether they liked Friday afternoons off.
He reminded that employees had taken a four percent pay cut
and thought getting a full paycheck was important to
employees. He affirmed there were still activities on
Fridays such as emergency hearings, criminal arraignments,
continuation of trials in certain locations, and issuance
of search and arrest warrants.
Mr. Wooliver continued to address Senator Wielechowski's
questions. He stated that the department had tried to
mitigate the effects of Friday closures. The past year had
the largest amount of felony filings in the state's
history. He acknowledged that the cases would be coming to
trial in FY 20 and the courts would need hearing time to
address them.
9:32:07 AM
Senator Shower noted that there were four crime bills in
the legislature. He anticipated that passage of the bills
would increase workload. He asked if there had been
consideration of the potential increased workload based on
how the crime bills were structured.
Co-Chair Stedman added that there had been concern in
previous hearings that the budget would be sufficient to
address tightening of the statutes and crime package. The
committee wanted assurances from the court that it was
prepared to handle the increased workload.
Mr. Wooliver stated there would likely be a fiscal impact
on the bills, and there would be fiscal notes with
additional workload information. He stated that the
proposed Friday afternoon re-opening was a part of
anticipated workload. The department anticipated increased
criminal proceedings and wanted to be open Friday
afternoons to address the matter.
Senator Micciche asked if the committee could receive
information as to how decisions were made as to what
required legislation was included in the budget. He wanted
to understand how the decisions were made at OMB.
Co-Chair Stedman thought Senator Micciche could address the
question to OMB after the testifier was done.
Mr. Wooliver added that the Court system did not build its
budget around legislation that had yet to be introduced.
Any increased cost would be shown in fiscal notes.
Co-Chair Stedman informed that the committee would be
keeping tabs on the matter to ensure a balance between
troopers, Village Public Safety Officers (VPSOs), and jail
staff. He wanted to ensure that there no gaps. He mentioned
public outrage.
9:35:25 AM
Senator Micciche observed that the crime packages were not
included in the budget and would likely cause a substantial
increase. He mentioned the oil and gas property tax. He
asked how the decisions were made and asked about an
expected addition to the budget if key bills were passed.
Ms. Arduin asked if Senator Micciche was referencing the
governor's anti-crime bills.
Co-Chair Stedman answered in the affirmative.
Ms. Arduin stated that the governor had submitted a package
of legislation dealing with the state's crime problem. The
pieces of legislation had fiscal notes, which were included
in the fiscal summary as part of the budget.
Co-Chair Stedman stated that the items would be extracted
and listed under fiscal impacts to help committee members
track the funds.
Co-Chair Stedman wondered how many more pieces of
legislation the committee should expect from the
administration.
Ms. Arduin asked for assistance from her staff.
9:37:29 AM
AT EASE
9:39:24 AM
RECONVENED
Co-Chair Stedman stated that the Legislative Finance
Division was also working on a list of the governor's
proposed bills and fiscal impacts, and he hoped to hear
information in committee soon. He thought clarity was
important. He requested that OMB help with Senator
Micciche's question.
Ms. Arduin stated that the Department of Law was still
working on a number bills. She estimated that there were
approximately 16 bills, 4 of which had been introduced. The
bills had fiscal notes and were not included in the
appropriation bill that was submitted. The fiscal notes
were included in the fiscal summary, and OMB considered
them part of the budget.
^DEPARTMENTAL REVIEW: TRANSPORTATION and PUBLIC FACILITIES
9:41:05 AM
Ms. Arduin noted that she had been joined by the management
director for OMB, who had recently been the Administrative
Services Director for the Department of Transportation and
Public Facilities (DOT).
AMANDA HOLLAND, MANAGEMENT DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET, showed slide 19, "Department of Transportation
& Public Facilities."
Ms. Holland discussed slide 20, "FY2020 Budget: Department
of Transportation & Public Facilities," which depicted two
bar graphs showing a summary of the budget. She noted that
the DOT total operating budget for FY 19 was $593,349,600.
The total proposed budget with the governor's amended
budget for FY 20 was $533,126,500 for a difference of
$60,223,000. The GF difference between the two budgets was
$96,050,300.
Ms. Holland continued to discuss slide 20. For FY 19 that
there was $179,988,800 in UGF, and the DGF amount for FY 19
was $98,821,000. The FY 20 proposed budget was $122,788,000
UGF, and $59,971,500 DGF. The difference in UGF between FY
19 and FY 20 was $57,200,800. The difference in DGF was
$38,849,500.
Ms. Holland pointed out the green portion of the column on
the graphs, which represented other funds. In FY 19, other
funding totaled $312,404,700; and in the proposed FY 20
budget other funds totaled $348,757,000 - for an increase
of $36,352,000. The majority of the increase was for
interagency receipts for the newly established Division of
Facilities Services. Federal funding totaled $2,135,100 in
FY 19, and $1,610,000 in FY 20 for a difference of
$525,100.
Ms. Holland discussed budgeted positions as shown on slide
20. She specified that there was four full time permanent
positions and three permanent part-time positions removed
from the budget. There was an increase of five non-
permanent positions. She pointed out that most of the
position movement reflected positions moving in and out of
the department, primarily DOT positions that were moving to
Department of Administration to the Office of Information
Technology as part of consolidation. There were some
positions moving into DOT from other agencies as part of
the facilities service's consolidation.
9:46:08 AM
Co-Chair Stedman expressed confusion. He mentioned
functions of the department. He asked how the position
count was the same when the department had budgetary
implications of terminating the Alaska Marine Highway
System (AMHS) and employees.
Ms. Holland stated that at the time, the budget proposed
that AMHS would continue to operate, and the summer sailing
schedule required vessels to be fully staffed. There would
be AMHS positions throughout 2020. She continued that the
plan for the entire run of FY 20 was being worked on. The
governor had issued a directive the previous week, and DOT
and the governor's office would be working together with an
economic and marine consultant to identify options for how
to reshape AMHS. The budget reflected the positions
necessary to continue the sailing schedule as currently
scheduled.
Co-Chair Stedman understood that the current schedule would
terminate October 1, 2019.
Ms. Holland stated that the schedule planned to operate
through the summer and then with reduced service for the
month of September, and potentially with no service
starting in October. However, AMHS continued to look at
options of how it might readjust the sailing schedule.
Co-Chair Stedman asked if the committee could expect an
amendment to come forward to keep the sailing of AMHS from
October till the end of June.
Ms. Holland did not have an exact answer but did not rule
out the possibility.
Co-Chair Stedman estimated that there were roughly 318
employees. He asked how to rectify the position count with
potential termination of employees October 1. He was
puzzled that the position count did not reflect the month
of December.
Ms. Holland stated that AMHS operated on a regularly
scheduled reduction in force. In October many vessels went
into layup or overhaul status, and many employees
experienced a reduction in force. She stated that OMB did
not presently have the makeup of the reduction in force for
October.
Co-Chair Stedman asked when to expect the reduction in
force to be presented to the committee for consideration in
the budgetary process.
Ms. Holland stated that the department and the governor's
office would have a report to the governor for the AMHS
plan, which was due August 1, 2019. The budget being
considered ensured budget for all AMHS positions for the
next three to six months. It was anticipated that through
the plan there would be clear direction as to whether there
would be a reduction in force or an elimination of
positions.
9:50:31 AM
Co-Chair Stedman stated he would work with Senator
Wielechowski and had many questions. He pointed out that
his district was affected by AMHS.
Co-Chair Stedman recalled that in the end of territorial
days and the early days of statehood there was work done on
transportation. One of the first statewide bond initiatives
was the implementation of the marine highway system for
coastal Alaska. The marine highway was launched with ships
that were still presently running. He discussed the lack of
roadbuilding and AMHS serving as the main transportation
corridor in coastal Alaska. He asserted that from a
statewide policy perspective, the state wanted development
of shoreside infrastructure improvements such as shipyards
and boat repair. He discussed the history of shipbuilding
in Alaska.
Co-Chair Stedman continued discussing the provenance and
history of maritime infrastructure in Alaska, including
AMHS. He emphasized that the shipyard was owned by Alaska
Industrial Development and Export Authority (AIDEA)and
therefore the people), and employed roughly 120 to 130
employees, with AMHS being the cornerstone of business. He
asked if there had been dialogue with the shipyard
regarding potential termination of AMHS.
9:54:15 AM
Ms. Holland had conversations with DOT but was not aware of
conversations between the department and AIDEA or the
shipyard. She deferred the conversation to the shipyard and
the department.
Co-Chair Stedman noted that there was near completion of
two new ships for the AMHS fleet, funded with mostly GF. He
commented that there was substantial funding that came from
federal highways each year to maintain and operate the
ships and build and maintain shoreside operations. He asked
about the budgetary impact on return request of federal
funds for ceasing operation of AMHS ships. He added that
the question also applied to any funds for the shipyard.
Ms. Holland was not aware of costs incurred through the
shipyard. If vessels were not operating, vessels were in
layup and were still staffed by crew for maintenance. She
understood that as long as vessels were in the possession
of the state, there was no federal payback required. She
stated that the intricacies of the federal highway payback
process were not in her area of expertise.
Co-Chair Stedman stated he would make a request of the
department for further information. He mentioned two marine
terminals built in Coffman Cove and one in South
Petersburg. The run had not been financially successful and
had been terminated, leaving the infrastructure in place.
The federal government had wanted funds returned and had
proposed to deduct the funds from federal highway funding.
Co-Chair Stedman continued discussing the marine terminals
and federal highway funds payback. For several years the
state consulted with federal highways to add periodic stops
to the facilities so that funds would not have to be
returned. He wanted the administration to consider and
provide information about the federal fiscal impact of
termination of AMHS. He questioned whether there was a plan
for a special session in the fall to implement an AMHS
operational budget from Oct. 1 to June 1.
Co-Chair Stedman mentioned the removal of a fuel component
from $20,600,000 down to $4 million. He thought the
reduction alone would terminate the existence of the marine
highway.
9:58:31 AM
Senator Wielechowski stated that his district was impacted
by AMHS, and he represented many military members that
moved to and from Alaska. He was curious if there would be
ferry tickets sold after October 1, 2019; or if refunds
would be issued.
Ms. Holland had not checked with the department as to how
it was advertising a schedule beyond September. She offered
to provide more information at a later time.
Senator Wielechowski was curious how OMB had enlisted a
qualified marine consultant. He wondered if there was an
appropriation in the budget, what was the scope of work,
what directive was given from the administration, and how
the work would be paid going forward.
Co-Chair Stedman asked for Ms. Holland to broaden the
answer to Senator Wielechowski's question to include why a
new study was required versus using existing information.
He thought it seemed that there were numerous studies on
AMHS and wondered why a new study was required.
Ms. Holland acknowledged that numerous studies had been
done addressing AMHS, which often had addressed specific
topics. She referenced a 2016 study by the McDowell Group
that addressed one aspect of AMHS operations. She mentioned
a white paper crafted with the help of the Southeast
Conference. She asserted that such studies did not
necessarily look at the system as a whole and did not
consider all available modes of transport in Alaska and all
options for operation of AMHS.
Ms. Holland continued to address Co-Chair Stedman's
question. She understood that department and the governor's
office would be working to identify the competencies
necessary for the qualified economic marine consultant. The
consultant would be looking at all the options available,
what was possible to reshape AMHS to a more sustainable and
affordable system. She pondered that the finding could be a
public-private partnership which could address some federal
funding issues, or a different type of marine highway
system.
10:02:31 AM
Senator Wielechowski did not see funding for a qualified
marine consultant. He asked for a copy of a Request for
Proposal (RFP) for the consultant.
Ms. Holland stated that an RFP had not yet been issued. She
stated that RFPs were public, and she would share it with
the committee when developed.
Co-Chair von Imhof referenced the studies that Ms. Holland
had described as not being comprehensive to the whole
system. She asked Ms. Holland if the administration had
used any portion of the studies to help guide the decision
to reduce funding for AMHS. She wondered what the
administration used if it had not used the studies.
Ms. Holland stated that AMHS experts in the department were
consulted when considering the possible budget changes for
the FY 20 budget. The individuals were much more familiar
with the results of the studies than she. The
administration had worked with the department to discuss
potential impacts of moving forward with the proposed
budget.
Co-Chair von Imhof thought it was unfortunate that the
individuals were not present.
Co-Chair von Imhof asked why there was a rush to cut tens
of millions from AMHS rather than making reductions over a
number of years, particularly to allow the consultant to
finish the work.
Ms. Holland shared that when the state's fiscal situation
was considered; OMB had talked with the department about
its priority programs, core services, and how funding was
split. It was found that DOT had over 90 percent of UGF
residing in AMHS or in the Highways, Aviation, and
Facilities Results Delivery Unit. In working toward a
sustainable affordable budget, AMHS was identified as a
system that was less efficient and effective in using its
UGF. She considered that in 1992, the financial recovery
rate for AMHS was a little over 60 percent. In 2018, the
recovery rate was 33.3 percent. She thought that there had
been a steady trend of recovery rate decline.
Ms. Holland pointed out that AMHS had reached its peak
ridership in the early 1990s, at just over 450,000
passengers. In 2016, ridership averaged just over 250,000
passengers. The trend line for passenger ridership had
consistently declined. She continued that vehicle ridership
had remained consistent since 1988, at roughly 100,000. She
relayed that it was necessary to examine if the state could
afford to keep AMHS in its current state with large vessels
serving 35 communities year-round.
10:08:05 AM
Co-Chair Stedman stated that AMHS roughly grossed about $50
million per year. He thought there had been a GF
appropriation at the table for considerably more than $50
million. He thought currently the appropriation was
somewhere close to $70 million. He recalled working to
increase efficiencies of the system while balancing the
cost of maintaining older ships while trying to accelerate
the construction of new ships. He mentioned two new ships
tied to the dock and almost completed and ready for
delivery.
Co-Chair Stedman continued his remarks. He opined that the
state was faced with a budgetary proposal for elimination
of AMHS. He thought the administration was proposing an
entirely different discussion than bringing the GF
appropriation amount down to the fair box return. The
historic target had always been dollar for dollar to the
fair box. He thought it was possible to run a reduced
schedule while keeping vessel maintenance and
certifications intact while going through the analytical
process of policy decisions.
Co-Chair Stedman mentioned that there had been a
transportation struggle on Prince of Wales Island. He
recounted that the state had helped subsidized a private
operator of two ships that ran a route from Ketchikan to
Hollis. The state had been subsidizing the operation about
$250,000 per year. He wanted to see the budgetary position
for dealing with the inter-island ferry. He thought the
model would be an easy example of what privatization looked
like.
Co-Chair Stedman recounted that several years ago the
committee had requested the delivery of financial documents
so that the OMB director could monitor the fiscal position
of the inter-island ferry and use the information for
budget considerations.
10:12:54 AM
Ms. Holland knew that the department had factored in the
Inland Ferry Authority in its analysis of all options
regarding reshaping AMHS.
Co-Chair Stedman believed that if the state had not stepped
in, the inter-island ferry transportation system would not
exist.
Senator Bishop asked if OMB had anticipated the amount of
ticket refunds that would be necessary because of advance
bookings. He discussed the importance of published ferry
schedules, and wondered about the notification of the
travelling public.
Ms. Holland knew the department had factored in its
published sailing schedule and existing reservations into
its plan for how it would operate under the proposed FY 20
budget.
Co-Chair Stedman added that reservations and marketing for
FY 19 was around $2.52 million, while the current budget
proposed $631,000. He asserted that the marketing cut
alone, combined with the fuel adjustment; communicated that
there would be termination of AMHS on October 1. He asked
how the reservation system would be rejuvenated if AMHS was
shut down.
Ms. Holland understood that the department had converted to
an online reservation system and had gradually increased
the amount of online reservation passengers, which did not
require as much staff. She stated that AMHS was considering
all options. She thought it was entirely possible that
sailings would continue but were more infrequent. She
thought the consultant would consider how to best use the
resources allocated.
10:17:02 AM
Co-Chair Stedman had a concept problem and thought the
budget proposal looked like a termination and liquidation.
He did not conceive of how the system would be reinstated
if the analytics showed it would be better to run a reduced
system and privatize portions of service. He pondered how
to get the system up and running if the legislature was not
in session. He thought there would be many questions for
the commissioner of DOT, and thought it was likely that the
subcommittee meetings for DOT would be live on camera. He
wondered how to change the system to have a skeleton system
without a special session for an appropriation. He thought
it would be difficult to have an item of such magnitude in
the supplemental budget.
Ms. Holland deferred the question to DOT. She asserted that
the department had a much more in-depth knowledge of AMHS
operation particulars.
Senator Bishop noted that constituents were watching the
meeting. He mentioned Senator Wielechowski's earlier
comment and emphasized that Interior Alaska relied on AMHS.
He reiterated that AMHS was important and he wanted to help
to try and find the best resolution.
Senator Wielechowski reported that he had looked up the
AMHS reservations system on the internet, and the system
showed no runs after September 30, 2019.
Senator Wielechowski recalled that the governor had been in
Ketchikan 11 days before the gubernatorial election and had
said categorically that he did not support cutting AMHS. He
wondered what had changed in the previous three months.
Co-Chair Stedman thought the question was best posed to the
governor himself. He referenced an editorial with several
quotes in the Ketchikan paper.
10:20:56 AM
Senator Shower had an email in which the department
specifically stated it planned zero ferry transport from
October to June.
Co-Chair Stedman asked for the date of the email.
Senator Shower stated that the email was from earlier in
the day.
Senator Shower relayed that the final exercise he completed
before retiring from the military had been a Federal
Emergency Management Agency (FEMA) exercise. The exercise
had demonstrated that without ports, people would die
because of lack of access to goods. He thought it was not
possible to live with airports alone. He mentioned the
Berlin airlift as a means of comparison. He had brought up
the matter because he observed that rural airport
evaluation had been cut. He thought it seemed very clear
that it was not possible to keep a community alive without
heavy transport such as a ferry. He thought shutting a
ferry down for the winter was stranding people. He asked
about the proposed study, and wondered about the rural
airport evaluation and airport support for communities. He
thought the study should consider the availability of
supply service through airports.
Co-Chair Stedman thanked Senator Shower for his comments.
He discussed the importance of food and medical supplies
being available. He suggested discussion of rural airports
when the commissioner was present.
10:24:49 AM
Senator Micciche felt that the state was on hold. He wanted
to support dramatic reductions in the budget but thought
there was a lack of planning. He used the analogy of
jumping from a plane without a parachute. He needed much
more information in order to support the proposed
reductions. He did not hear a plan being presented.
Co-Chair Stedman discussed the schedule for the following
day. He would work with Senator Micciche to help support a
slight tweak of the budget to ensure AMHS had skeletal
operations through the winter.
Co-Chair Stedman thanked OMB for coming to the meeting. He
acknowledged the difficult topic. He was concerned about
collateral damage to shipyards when dealing with AMHS. He
thought the governor was equally concerned because the
state wanted to expand its job base.
SB 20 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:27:16 AM
The meeting was adjourned at 10:27 a.m.
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