Legislature(2009 - 2010)

2009-03-20 Senate Journal

Full Journal pdf

2009-03-20                     Senate Journal                      Page 0599
SB 161                                                                                                                        
SENATE BILL NO. 161 BY THE SENATE RULES COMMITTEE                                                                               
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
          "An Act making supplemental appropriations and                                                                        
          capital appropriations; amending appropriations; and                                                                  
          providing for an effective date."                                                                                     

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was read the first time and referred to the Finance Committee.                                                                  
A spreadsheet entitled "Economic Stimulus March 19, 2009" from the                                                              
Office of Management and Budget was transmitted with the bill.                                                                  
Governor's transmittal letter dated March 19:                                                                                   
Dear President Stevens:                                                                                                         
I am transmitting a second appropriation bill to implement the $787                                                             
billion American Recovery and Reinvestment Act of 2009 (ARRA).                                                                  
This bill contains authorization requests for capital projects designed                                                         
to create jobs and promote economic growth within the State of                                                                  
Alaska.  This appropriation bill does not include every ARRA                                                                    
program that runs to or through the State of Alaska.                                                                            
Under the direction of the Office of Management and Budget, I have                                                              
asked our departments to review the Federal spending package with                                                               
jobs for Alaskans in mind.  This is particularly important because I                                                            
must certify that all the funds I am requesting on behalf of the state                                                          
will create jobs and promote economic growth.  However, because I                                                               
cannot yet in good conscience certify that all funds in the Federal                                                             
stimulus package will be used to create jobs and stimulate our                                                                  
economy, I am requesting only job-ready funding and am encouraging                                                              
a public discussion through the legislative process.                                                                            
There are three categories of funding that are not included in this                                                             
legislation: programs with potential strings attached for receipt of the                                                        
funds; competitive funding where the federal guidance and                                                                       
requirements are uncertain or unknown; and operating funds that                                                                 
increase existing federally funded programs above what is already                                                               
included in the state budget to provide services to Alaskans.                                                                   
Programs that have been left out of this bill include those with                                                                
outstanding questions, such as the impact on Alaskans of "strings"                                                              
Congress attached to the funding, and tenuous or unclear links to job                                                           
creation or economic growth.  Descriptions of the specific issues for                                                           
each program that has not been included in this legislation are set out                                                         
in more detail later in this letter.                                                                                            

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My concerns about ARRA spending too much on operating programs                                                                  
that leave the state responsible to pay for expanded services after                                                             
federal funding ends were stated even before it was passed by                                                                   
Congress.  I was disappointed when the final bill cut billions in                                                               
spending for infrastructure and jobs in favor of operating programs.                                                            
Despite such changes to the final version of ARRA, Congress                                                                     
maintained a requirement for Governor's to certify that ARRA funds                                                              
will be used to create jobs and promote economic growth within their                                                            
respective states.                                                                                                              
I respectfully request your assistance and that of the entire Legislature                                                       
to hold hearings for review, and allow public testimony and debate on                                                           
the projects included for funding in the bill as well as programs that                                                          
have not been included.  I understand the amount of hard work this                                                              
effort will require and that this approach is definitely not the easy way                                                       
out.  The easy way would be to blindly say "yes" to all ARRA federal                                                            
funds without concern, review, or discussion for the consequences to                                                            
the state, individual Alaskans, and the nation.  Our efforts at review                                                          
and discussion would likely be made easier by issuance of clear final                                                           
guidance documents from all federal agencies and adequate answers to                                                            
specific questions we have posed about certain programs.                                                                        
The appropriation bill I am transmitting today contains capital projects                                                        
requests totaling $252.5 million, with all but $1.0 million coming from                                                         
economic stimulus funds.  Capital projects requested include $20.7                                                              
million for education and job training, $68.6 million for water and                                                             
sewer projects and storage tank replacements, $3.0 million for the                                                              
Alaska Vocational Training Center, $2.5 million for Fire Fuels and                                                              
Forest Management, $39.6 million for public housing projects through                                                            
the Alaska Housing Finance Corporation, and $116.0 million for the                                                              
University of Alaska Fairbanks Research Vessel.  We have also                                                                   
included two $1.0 million placeholders for competitive grant                                                                    
opportunities for state agencies and the University.                                                                            
After careful review of the assurances and requirements in ARRA                                                                 
under each title for receipt of federal economic stimulus funds, there                                                          
are several items that are not included in this appropriation bill.  Some                                                       
items  require  statutory  changes  in order to receive  and expend these                                                       

2009-03-20                     Senate Journal                      Page 0602
funds, or, in some instances, we have not yet obtained sufficient                                                               
information upon which to base recommendations to you.  Following                                                               
is a list of the items and policy questions for legislative consideration:                                                      
Unemployment Insurance - after review of the requirements to                                                                  
expand unemployment insurance benefits, I will not propose a revision                                                           
to Alaska's current law to permanently change the calculation of                                                                
unemployment insurance benefits that would result in a cost increase                                                            
to employers and businesses.  The statutory change would require that                                                           
Alaskan businesses pick up this increased cost once the federal funds                                                           
are no longer available.  Increasing taxes on business is simply not the                                                        
way to stimulate the economy.  $15 million would be available to the                                                            
state if the legislature makes a statutory change to comply with the                                                            
new requirement.  Once those funds are no longer available, the                                                                 
Department of Labor estimates a $2 million annual cost to the UI Trust                                                          
Fund in the future.                                                                                                             
I would like to note that Alaska has already moved forward on                                                                   
accepting the additional $25 a week for unemployment benefits                                                                   
provided in ARRA.  The additional weekly benefit is 100 percent                                                                 
federally funded and will benefit unemployed Alaskans and support                                                               
the stability of Alaska's economy.  The $25 additional benefit is                                                               
payable for weeks of unemployment beginning February 22 2009 and                                                                
continuing through the end of 2009 with a phase out for existing                                                                
claims through July 3, 2010.                                                                                                    
Energy - three assurances that present challenges for Alaska are                                                              
required in order to receive energy funds:  (1) implementation of a                                                             
general policy that ensures that electric and gas utility financial                                                             
incentives are aligned with helping customers use energy more                                                                   
efficiently; (2) implementation of a statewide building energy code;                                                            
and (3) an implementation plan for both pieces in order to achieve                                                              
90% compliance on new or renovated buildings within eight years.                                                                
Without these assurances, the state will not qualify for $28.6 million                                                          
for the State Energy Program, $18.5 million for Weatherization, and                                                             
$8.5 million for Energy Efficiency and Conservation Block Grants.                                                               
This administration is taking a proactive approach to address areas                                                             

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where federal requirements in the economic stimulus bill create                                                                 
significant hurdles for receipt of funds, such as the adoption of a                                                             
statewide building energy code.  We currently are working with the                                                              
U.S. Department of Energy to determine possible solutions that will                                                             
allow Alaska to receive these funds.                                                                                            
Air Quality Grants - Granting authority is needed by the Department                                                           
of Environmental Conservation (DEC) to receive and expend                                                                       
approximately $2 million from the Environmental Protection Agency                                                               
(EPA) for the Diesel Emission Reduction Program.  The goal of the                                                               
program is to reduce diesel emissions with new technologies and to                                                              
further advance these technologies to a larger audience.                                                                        
This is not a new program; DEC currently has a grant award from                                                                 
EPA and is already spending this funding on diesel emission reduction                                                           
projects.  Current funding is distributed to other government agencies                                                          
such as the Alaska Energy Authority to increase the fuel efficiency of                                                          
stationary source diesel power generation, the Alaska Railroad, and                                                             
the Department of Transportation & Public Facilities for diesel                                                                 
equipment retrofit.  Statutory language would be necessary for DEC to                                                           
identify grantees beyond government agencies, such as smaller private                                                           
sector businesses, that are looking to forward more efficient diesel fuel                                                       
Broadband and health information technology grants - These are                                                                
two other areas that are not included in the appropriation bill.  Gaining                                                       
sufficient guidance from the federal agencies and a clear                                                                       
understanding of the requirements for receipt of the funds require                                                              
additional time in order to develop the requests for these significant                                                          
program areas.  These programs fall under the long-range economic                                                               
development strategies in the economic stimulus legislation.  The                                                               
administration is closely monitoring the evolution of guidelines in the                                                         
relevant federal agencies in order to determine the benefits and timing                                                         
of these funds.                                                                                                                 
Other competitive grant funds for state agencies are also not included                                                          
in this appropriation bill due to lack of information regarding the                                                             
application process, amounts available, requirements, and other                                                                 
needed guidance.  The Legislative Budget & Audit (LB&A)                                                                         
Committee process is certainly an option for legislative consideration                                                          

2009-03-20                     Senate Journal                      Page 0604
of funding requests during the interim or the FY2010 supplemental                                                               
process is another option once more information on these programs                                                               
becomes available.   We have included a statewide placeholder for                                                               
capital project grants for state agencies and also for the University to                                                        
allow for LB&A consideration should agencies be successful in                                                                   
obtaining grant funds for capital projects.                                                                                     
ARRA also provides competitive grant funding to non-state entities,                                                             
communities, and organizations through the discretion of federal                                                                
agencies that will flow directly to project applicants.  We are                                                                 
communicating information to interested parties and guiding them to                                                             
<Recovery.gov>, <Grants.gov>, and federal department websites.  We                                                              
are also posting information on the state website at                                                                            
In conclusion I am required to certify that the requests I am forwarding                                                        
for legislative approval will meet the requirements of the ARRA to                                                              
create jobs and promote economic growth in Alaska.  We are open to                                                              
discussions on the operating funds that are not included in this                                                                
appropriation bill.  These program increases should be fully debated as                                                         
part of the ongoing budget process.  The Legislature has been working                                                           
diligently on the operating budget for the next fiscal year to provide                                                          
for the needs of Alaskans.  Simply expanding these programs based on                                                            
receipt of economic stimulus funds does not meet the ARRA                                                                       
certification requirement and creates an unrealistic expectation that the                                                       
state will continue these programs when the federal funds are no                                                                
longer available.                                                                                                               
The federal economic stimulus package will have profound                                                                        
implications for Alaska and the nation.  The legislative process to                                                             
consider proposed ARRA spending is crucial to developing a                                                                      
responsible approach to use of these funds.  When the final tally of                                                            
spending and borrowing is added up, current and future generations of                                                           
Alaskans and all Americans will be required to pay what amounts to                                                              
the biggest credit card bill in history.                                                                                        
I appreciate your consideration of this legislation.                                                                            
Sarah Palin                                                                                                                     

2009-03-20                     Senate Journal                      Page 0605