SENATE FINANCE COMMITTEE March 26, 2008 9:11 a.m. CALL TO ORDER Co-Chair Stedman called the Senate Finance Committee meeting to order at 9:11:06 AM. MEMBERS PRESENT Senator Lyman Hoffman, Co-Chair Senator Bert Stedman, Co-Chair Senator Charlie Huggins, Vice-Chair Senator Kim Elton Senator Donny Olson Senator Joe Thomas Senator Fred Dyson MEMBERS ABSENT None ALSO PRESENT Ginger Blaisdell, Staff, Senator Green; Kathie Wasserman, Executive Director, Alaska Municipal League; Bill Allen, City Manager, City of Palmer; Senator Bill Wielechowski; George Ascott, Staff, Senator Wielechowski; Anne Carpeneti, Assistant Attorney General, Legal Services Section-Juneau, Criminal Division, Department of Law; John Bitney, Staff, Representative John Harris; Bill Leighty, Director, The Leighty Foundation PRESENT VIA TELECONFERENCE Bill Griffith, Facility Programs Manger, Division of Water, Department of Environmental Conservation; Archie Giddings, Public Works Director, City of Wasilla; Kathy Monfreda, Chief of Criminal Records and Identification Bureau, Department of Public Safety; Karen Foster, Surviving Parents Coalition; Peyton Merideth, Detective, Fairbanks Police Department; Ron Tidler, Detective, Anchorage Police Department; Chris Rose, Executive Director, Renewable Energy Alaska Projects; Earnest Weiss, Mayor, City of King Cove; Gary Hennigh, City Administrator, City of King Cove; Phil Steyer, Director of Corporate Communications, Chugach Electric; Scott Saline, Refrigeration Contractor, Sitka SUMMARY SB 303 "An Act relating to certain grants awarded by the Department of Environmental Conservation." SB 303 was REPORTED out of Committee with a "do pass" and an accompanying previously published fiscal note from the Department of Environmental Conservation. SB 185 "An Act relating to sex offenders and child kidnappers; and providing for an effective date." SB 185 (STA) was REPORTED out of Committee with a "do pass" recommendation and an accompanying new zero fiscal notes from the Department of Corrections and the Department of Administration and previously published fiscal notes from the Department of Administration, Department of Law, and the Department of Public Safety. CS HB 152(FIN) "An Act establishing a renewable energy project account and a renewable energy fund and describing their uses and purposes." CSSB 152 (FIN) was HEARD and HELD in committee for further consideration. 9:11:11 AM SENATE BILL NO. 303 "An Act relating to certain grants awarded by the Department of Environmental Conservation." Co-Chair Stedman presented the opening remarks and overview for the meeting. 9:13:30 AM GINGER BLAISDELL, STAFF, SENATOR GREEN provided a technical overview of SB 303. She noted that the bill reflected a population change from 5,000 to 10,000 persons (Page 1, line 13 and Page 2, line 1-2). She referred to a "community listing" with the current population of each city in Alaska. She remarked that Legal Services indicated that changing the population under this program would not impact any other program in the state (copy on file). Ms. Blaisdell presented a final note showing a three year listing of water and sewer projects and the cities awarded these projects. She maintained that although the listing reflected FY 07-09 projects, this bill would only deal with FY 09. Co-Chair Stedman requested an explanation of the bill. Ms. Blaisdell responded that the bill changes the population criteria for the rates of community matching water and sewer grants. She noted that the bill changes the population criteria from a city of 5,000 to a city of up to 10,000. Ms. Blaisdell cited that cites of 1000 or less can participate in the program with a matching rate of eighty five percent state funding to fifteen percent municipality funding. She continued that cities between 1,001 and 5,000 have a funding rate of seventy percent state to thirty percent municipality participation and cities of 5,001 or higher was on a fifty percent to fifty percent matching rate. She indicated that the rational is that cities beginning to grow beyond the 5,000 population mark are experiencing a significant rise in costs for their expanding system of piped water and sewer. This has pushed a higher tax burden on the citizens to pay for the rising costs of steel and construction. 9:16:42 AM Senator Dyson questioned the genesis of the bill. He also asked if this involved an expansion of the sewer and water system or the intensity in the treatment of the water and wastewater. 9:17:07 AM Ms. Blaisdell responded that the requests came from multiple communities. She specified that the bill does not change the program at all or the type of sewer system used in the communities, but just helps newly growing communities. 9:17:48 AM Senator Olson remarked that it would change the funding structure for these communities and he wondered about the size of the projects being considered. Ms. Blaisdell showed that some of projects reflected a wide funding range from a few hundred thousand to several million. She remarked that a community has to follow a process by turning in an application to the Department of Environmental Conservation. This application is scored and ranked and then a decision made on how much in general funds will be provided to pay for the project. If the project costs more than the state agrees to pay, the Legislature would decide how much of the General Fund would be made available. Senator Olson remarked that he does not see reflected in the fiscal note what it will cost the state when the matching fund rate changes from a fifty/fifty to a seventy/thirty ratio. Co-Chair Stedman answered that the Fiscal Note reflected $3.72 million for one year. 9:19:32 AM Ms. Blaisdell remarked that the Fiscal Note only reflects one year because the number or type of applications that will be received from the communities next year is not known. She noted that the $3.72 million reflects the projects that it is anticipated will be approved in the budget. 9:20:08 AM Senator Elton questioned why the grants are made at the municipal rather than the borough level. Ms. Blaisdell remarked that boroughs, and municipalities within the boroughs, may have different powers. Senator Elton seemed to see a significant difference between a borough with incorporated municipalities, like the Kenai Borough, and the boroughs, such as, the Northwest Arctic Borough. He believed it might create an incentive for organized boroughs, with municipalities within them, to switch their mode of operations to access these funds. 9:22:18 AM Ms. Blaisdell reported that she had never heard this suggestion from any of the cities impacted by the bill. Senator Elton mentioned that he understood the impacts for the next fiscal year and how there is only a change in the definition of population size but he wondered if there would be a realistic way for the larger communities to grow without the money growing. Ms. Blaisdell agreed that more money would be needed. She stressed that if the fiscal note for $3.72 million was not passed, then many of the planned projects for FY 09 would have to be removed. 9:25:32 AM KATHIE WASSERMAN, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE supported SB 303 because it would help growing communities boost local water and sewer projects. She indicated that the 5,000 population number was an arbitrary number in 1994, but since that time, costs have risen for water and sewer projects so the intent of the bill is to raise that arbitrary number to 10,000. She explained the population number change would help eight communities in dealing with aging water and sewer projects: Wasilla, Ketchikan, Kenai, Sitka, Kodiak, Bethel, Palmer and Homer. Ms. Wasserman answered the earlier question about borough management by saying that boroughs usually do not have the water and sewer rights unless it is a unified borough, like Sitka, Juneau, and Yakatat. She advised that other boroughs do not provide borough-wide water and sewer projects. BILL ALLEN, CITY MANAGER, CITY OF PALMER supported SB 303. He related that the smaller city of Palmer is dealing with an aging infrastructure that contains lengths of steel wall construction pipe with a forty percent leakage in the water system. Mr. Allen pointed out that Palmer is very aggressive in economic development however the city is only five square miles which leaves the city trying to expand its boundaries through annexation. Mr. Allen related that when trying to annex outlying communities the benefits are important. Palmer wants to be able provide city-wide safe water and sanitation. Mr. Allen remarked that the local savings from fifty percent to thirty percent makes a considerable difference to the small tax base of Palmer. He remarked that Palmer is also experiencing a migration into the city from rural Alaska that is impacting the city's infrastructure. 9:33:29 AM BILL GRIFFITH, FACILITY PROGRAMS MANGER, DIVISION OF WATER, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, testified via teleconference, and advised that the department is not opposed to this statutory change but it is viewed as a policy decision by the Legislature to establish what share of project costs should be born by both the state and the local municipalities. He affirmed that for FY 09, under these proposed changes and in order to provide funding for the same number of projects, it would be necessary to increase the Department of Environmental Conservation's Capital Budget request. Or, he advised, the department could fund fewer projects with the same amount of funding that has already been requested. He indicated that in future years, the department would incorporate the new matching ratios into the department's budget request. Senator Huggins questioned how many of the existing twenty- six projects would be affected by this legislation. Mr. Griffith responded that nine projects would be affected by this change. 9:35:52 AM Senator Elton remarked that nine communities would receive a beneficial effect but there would be a potential negative affect on smaller communities or larger communities unless the amount of money grew. Mr. Griffith responded that most communities of less than 1000 people are eligible for village safe-water funding which is a separate funding request the department makes every year. Senator Elton remarked on the potential negative affect of communities between 1,000 and 5,000 and the other potential negative affect on those communities above 10,000, unless the money grows by Legislative action. Mr. Griffin agreed that either the money must grow in order to provide funding for the same number of projects or the choice could be to fund fewer projects. 9:38:15 AM Co-Chair Stedman clarified that in the fiscal note, eight projects are listed for FY 09: Homer Water Treatment Plant Upgrade Kenai New Water Transmission Main Phase Wellhouse Kodiak Aleutian Homes Water & Sewer Replacement Ph 4 Palmer Steel Water Main Replacement Phase 6 Palmer Wastewater Treatment Plant Improvement Design Palmer Southwest Utility Extension Phase II Wasilla Mission Hills Water Extension Senator Huggins observed that Mr. Griffith clarified that there are only eight, not nine, community projects. 9:39:59 AM ARCHIE GIDDINGS, PUBLIC WORKS DIRECTOR, CITY OF WASILLA, testified via teleconference in support of this legislation. He mentioned that projects are scored on a priority basis, not necessarily the size of the project. He expressed the ongoing difficulty in getting federal funding and stressed that the increase in the state contribution would help communities achieve the needed matching funds. 9:41:45 AM Ms. Blaisdell referred to the population list and indicated that most of the benefiting communities had a population of approximately 3,000 in 1994. She remarked that these communities are now in the 6,000 to 7,000 population range. She described a large population gap until reaching the higher population communities of Juneau and Fairbanks at 30,000. She explained that 10,000 was a good base number as she is confident that neither Juneau nor Fairbanks would fall below the 10,000 population mark. 9:43:25 AM Co-Chair Hoffman MOVED to REPORT SB 303 out of Committee with individual recommendation and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SB 303 was REPORTED out of Committee with a "do pass" recommendation and an accompanying previously published fiscal note from the Department of Environmental Conservation. AT EASE: 9:44:15 AM RECONVENED: 9:44:35 AM SENATE BILL NO. 185 "An Act relating to sex offenders and child kidnappers." SENATOR BILL WIELECHOWSKI, presented an overview of the bill updating the sex offender list to include the email addresses and electronic identifiers of convicted sex offenders and child kidnappers. He remarked that Alaska has one of the highest internet uses in the country and one of highest percentage of sex offenders in the nation. He argued that the bill provides a powerful tool for law enforcement to track the activities of convicted sex offenders and catch and punish them when they break the law. Alaska currently requires sex offenders to register their home addresses and places of employment but there is, at present, no way to track their internet communication. Senator Wielechowski reviewed the bill sections. He noted that: Section 1 makes not registering the sex offender's email a crime. Section 2, Page 3, line 4-6 added the definition of what must be registered. Section 3 states that the email must be registered within one day. Section 4 has two components, which were added after statements from the Senate State Affairs Committee. Section 4, paragraph 2, is a request from Senator Stevens to make this information available to the central registries of internet service providers. Section 5 is the applicability section describing the dates and times the bill goes into effect. 9:49:21 AM Co-Chair Stedman questioned the deletion of "knowingly" on Page 1, line 6. GEORGE ASCOTT, STAFF, SENATOR WIELECHOWSKI, explained that the word was deleted on the advice of drafter, Jerry Lukup, Legislative Affairs legal. 9:50:26 AM Co-Chair Stedman asked what restrictions are placed on access to computers for sex offenders. Senator Wielechowski remarked that this bill does not impact the use of computers by sex offenders; the bill simply requires them to register their email addresses. 9:50:42 AM Senator Thomas requested an explanation on Page 3, lines 22- 31, on how someone could substantiate if their child was having an internet conversation with a sex offender. 9:51:37 AM Senator Wielechowski revealed that the original plan was to generate a public list of sex offenders but the Department of Public Safety realized this could be used by sex offenders to network with one another to share pornography. He explained there would be a system in place, within a federal office, where parents could type in the email address or identifier of an individual and find out if that person is a registered sex offender. 9:52:15 AM Senator Elton questioned why the registration fee was assessed to the state and not the sex offender. 9:53:33 AM KATHY MONFREDA, CHIEF OF CRIMINAL RECORDS AND IDENTIFICATION BUREAU, DEPARTMENT OF PUBLIC SAFETY, testified via teleconference in support of the bill. She remarked that the issue of having sex offenders pay for the registration had occurred in the past but the purpose of the bill is to get the sex offender to register and many offenders are indigent and may not be able to pay. 9:54:48 AM KAREN FOSTER, SURVIVING PARENTS COALITION, testified via teleconference, and supported the bill. Ms. Foster, the mother of Bonnie Craig who was murdered in 1994, shared the statistics of child pornography and sexual predators. She believed the bill would give law enforcement an incredible tool to see if a registered sex offender is doing something illegal on the computer. Ms. Foster stressed that this bill will provide detailed information and evidence that will help prosecute the offenders and provide more time to rescue victims. 9:59:01 AM PEYTON MERIDETH, DETECTIVE, FAIRBANKS POLICE DEPARTMENT testified via teleconference, supported SB 185 on behalf of the Fairbanks Police Department and Chief of Police, Dan Hoffman. Mr. Peyton reported that he was the Agency Representative for Fairbanks Police Department on the Alaska Internet Crimes Against Children Task Force. He remarked that one of his jobs is to investigate child pornography cases in conjunction with the Anchorage Police Department and other statewide task force members. He felt that it would greatly aid law enforcement if sex offenders had to register their email or other internet identifiers so that when the police department was researching proactive cases against children, the offenders could be identified earlier. 10:01:51 AM Senator Thomas questioned the number of registered child sex offenders or child kidnappers in Alaska. Detective Meredith responded he did not know but suggested contacting the Department of Public Safety. Ms. Monfreda replied that there are 4200 registered sex offenders in Alaska. 10:03:04 AM RON TIDLER, DETECTIVE, ANCHORAGE POLICE DEPARTMENT, testified via teleconference, and supported this bill on behalf of the Anchorage Police Department and the Alaska Internet Crimes Against Children Task Force. 10:03:41 AM ANNE CARPENETI, ASSISTANT ATTORNEY GENERAL, LEGAL SERVICES SECTION-JUNEAU, CRIMINAL DIVISION, DEPARTMENT OF LAW, spoke to the drafting of this law. She explained that it is not necessary to put "knowingly" into the bill; it will be read that way by the judge. 10:04:34 AM Senator Olson questioned if this bill would apply to any one who may be downloading sexual material. Senator Wielechowski replied that the bill only applies to convicted sex offenders. Co-Chair Stedman referenced an earlier presentation on this issue and noted the ability of the law enforcement arm to monitor downloading and uploading of sexual material by offenders. He reported that law enforcement has the capability of pinpointing neighborhoods where the computer resides. He stressed that the scope and magnitude of sex offenders on the internet in Alaska is alarming. 10:06:49 AM Co-Chair Hoffman MOVED to REPORT SB 185 (STA) out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SB 185 (STA) was REPORTED out of Committee with a "do pass" recommendation and accompanying new zero fiscal notes from the Department of Corrections and the Department of Administration and previously published fiscal notes from the Department of Administration, Department of Law, and the Department of Public Safety. 10:07:56 AM CSHB 152(RES) "An Act establishing a renewable energy project account and a renewable energy fund and describing their uses and purposes." Co-Chair Stedman spoke to this first hearing of the bill. He described the intent was to hear from the Bill's Sponsor and take public testimony. 10:08:14 AM Representative Bill Thomas presented an overview of the bill that attempts to meet the energy needs throughout Alaska. He declared that the high cost of fuel has made it difficult for Alaska residents to make ends meet which has a direct impact on Alaska's economy. He reported the renewable energy options in Alaska are wind, geothermal, solar, tidal and hydro. Many communities in Alaska have been researching cleaner, more cost-effective energy sources but need funding to help harness this energy. Representative Thomas maintained that HB 152 will establish a renewable energy fund, administrated by the Alaska Energy Authority, and an advisory committee appointed by the Governor from various utility, environmental, business, state and Native interest groups. He described the fund as offering both loan and grant options for applicants to give pursue valid renewable energy source in their areas. Representative Thomas stated, for the record, that twenty three House members and fifteen members of the Senate support this bill. Co-Chair Stedman referenced a request for a $300 million endowment but questioned what other funding might be used to capitalize this process. 10:12:35 AM Representative Thomas remarked that when the bill started last year, there was no initial plan for funding. He informed the Committee that the Governor offered $250 million into a renewable energy plan and now the bill is trying to move along because of the large Alaska surplus this year. He noted that the $300 million, at seven percent, would provide a $21 million per year fund to start many of these projects and hopefully add additional monies over the years. Senator Elton questioned on Page 4, line 1, which refers "to be eligible for a grant it must be a hydro electric facility." He questioned if "facility" covers intertidal or just the hydroelectric project. Representative Johnson believed this to include the intertidal line where the communities need to be linked. Senator Elton asked if this would be the same definition under a loan component of the program. 10:15:18 AM Senator Dyson questioned that since Alaska has some of the largest coal deposits in America why was not coal included. Representative Thomas replied that coal is not considered a renewable energy. He reported that natural gas was allowed because there is a place between Fairbanks and Canadian border where there is no wind or tidal resources so the natural gas pipeline gas will be allowed at the last alternative. Senator Dyson pressed that under this bill why could not coal be used as the last alternative. Representative Thomas replied that the bill was trying to deal with renewable energy, not fossil fuel. 10:17:44 AM Representative Thomas continued that when this bill was being drafted three years ago, coal did not have a good reputation compared to natural gas. He stressed that natural gas would be allowed as it would be following the highway. 10:18:59 AM Co-Chair Hoffman asked if the advisory committee on Page 5 was so that the Legislature could adjust the projects as they saw fit. 10:19:24 AM JOHN BITNEY, STAFF, REPRESENTATIVE JOHN HARRIS, disclosed that the advisory committee was being formed to help set up the methodology to rank and score projects after they have been received by the Alaska Energy Authority. He stressed that any funds for grants available would be subject to appropriation. Co-Chair Hoffman questioned that once submitted what would be the role of the Legislature in reviewing or adjusting that list. Mr. Bitney responded that the program would operate like other programs that are ranked, scored, evaluated and presented to the Legislature. He reiterated that the advisory committee would give the Legislature guidance. 10:21:07 AM Co-Chair Stedman questioned if an endowment of $300 million was created yielding approximately $15 million to be expensed would this remove the Legislature entirely from the process. Mr. Bitney responded that there is no intention to remove the Legislature from the process since the funds are subject to appropriation. Co-Chair Stedman addressed a scenario where there would be $15 million on the table with high expectation that the Legislature would fund the projects submitted. 10:23:37 AM Mr. Bitney responded that there are a large number of projects and he sees an endowment of $15 million as not an outstanding amount of money to get many projects working since some can be expensive and large scale. He noted that, if the Legislature chooses, it may want enlarge the annual amount. Mr. Bitney thought it would be interesting which projects will be up for the first go around and he anticipated there would be a lot of them. Co-Chair Stedman questioned if one of the projects alone was budgeted at $500 million. Mr. Bitney agreed. 10:25:26 AM Senator Elton responded that there is talk that the Legislature has a lot of authority in granting these loans, but in Section 2, it simply states that the authority and consultation for the projects ride with the advisory committee. He remarked that it seems to give the advisory committee the power to make a loan or provide a grant outside the Legislature. Mr. Bitney responded that he does not see how to get around the appropriation authority of the Legislature. Senator Elton asked if anything in this bill relinquishes the authority of the Legislature. Mr. Bitney responded that there are other funds that are an appropriation given every year and the agency is giving authority for those grants. Senator Elton asked if the new director of the Alaska Energy Agency is an employee of the Governor and if this bill needs to accommodate that switch. Senator Elton advised it could be awkward in potentially giving the authority to the Governor. Co-Chair Stedman asked that the agency return with comments for Senator Elton's questions. 10:29:32 AM Co-Chair Hoffman supported the concept but mentioned two problems. He emphasized that there are viable projects that need to proceed and it is important to respond to today's oil prices by implementing these alternative energy projects now. He wondered if that could be addressed and also questioned where the agency envisioned receiving the money to jump-start this fund and how large could it get. 10:30:56 AM Mr. Bitney remarked that a memo was submitted requesting a $300 million appropriation into the fund for the first year. Co-Chair Hoffman raised this question because Senator Murkowski mentioned an energy bill that passed the U.S. Congress and wondered if there were funds attached to that legislation. He pointed out that if there were a possibility for matching funds from the federal government it could be mentioned that Alaska was stepping up to the plate with this appropriation. Co-Chair Hoffman asked if the Agency should be pursuing and funding existing projects first so Alaskans can see their energy rates reduced much earlier and at a faster pace. Mr. Bitney responded he would check with Senator Murkowski to see if this new legislation in Congress will involve matching federal funds. Mr. Bitney communicated that the agency would like to see the existing projects met in this year's capital budget process. 10:35:01 AM Co-Chair Stedman pointed out that one issue today is the high revenue stream. He emphasized that there are many questions on the type and selection of renewable energy resources. He stressed that the Legislature does not want to select less beneficial choices to the citizens of the state based on political pressure. He felt everyone would be better served in concentrating on the process and policy and not allocating several million to a particular area without more study. 10:39:02 AM CHRIS ROSE, EXECUTIVE DIRECTOR, RENEWABLE ENERGY ALASKA PROJECTS testified via teleconference and supported HB 152 with there many members throughout the state. He stressed that it is impossible to be competitive in the world economy without a stable source of energy. He believed when there are no fossil fuels involved, stable prices occur. Mr. Rose noted that this is also a local entity which can supply local jobs. He concluded that the development of an advisory energy authority would set up a process to start testing these to get most viable projects. 10:42:29 AM EARNEST WEISS, MAYOR, CITY OF KING COVE testified via teleconference in support of the bill. He cited that King Cove has, for more than ten years, one of the most prolific run-of-the-river hydro electric facilities in the state that provides more than half of the community's annual power production. He noted that at twenty four cents a kilowatt hour, King Cove had one of the lowest, single-site costs of power among all the communities in Alaska. He asserted that the community is looking forward to an even more advanced facility for a stronger saving for its citizens. 10:45:41 AM GARY HENNIGH, CITY ADMINISTRATOR, CITY OF KING COVE testified via teleconference, and supported HB 152. He reiterated that King Cove decided in the early 90s to build this renewable energy river hydro project and it has proved a smart choice. He noted that the methodology for establishing the new loans and grants from the new fund should focus on places like King Cove. 10:47:55 AM PHIL STEYER, DIRECTOR OF CORPORATE COMMUNICATIONS, CHUGACH ELECTRIC testified via teleconference in support of HB 152. He would like to raise the ratio from ninety-three percent of natural gas and seven percent hydroelectric to a higher amount of hydroelectric. AT EASE: 10:48:45 AM RECONVENED: 10:49:04 AM 10:49:07 AM SCOTT SALINE, REFRIGERATION CONTRACTOR, SITKA testified via teleconference, and referred to Section 3, line 19, "provide for renewable power production." He expounded on renewable BTU production. He stressed that the more efficient method is GO thermal exchange heating, using the heat of the ocean or Yukon River to reject heat into people's home. 10:53:20 AM BILL LEIGHTY, DIRECTOR, THE LEIGHTY FOUNDATION, supported the bill. He noted that anything achieved in Alaska will have great demonstration value within the state and to the world. RECESSED: 10:55:25 AM RECONVENED: 4:55:44 PM ADJOURNMENT The meeting was adjourned at 4:56 PM