Legislature(2013 - 2014)HOUSE FINANCE 519
01/31/2014 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB266 || HB267 | |
| Fy 15 Governor's Budget Overview: Department of Revenue | |
| Fy 15 Governor's Budget Overview: Department of Natural Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 266 | TELECONFERENCED | |
| += | HB 267 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE BILL NO. 266
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, and making
reappropriations; making appropriations under art. IX,
sec. 17(c), Constitution of the State of Alaska, from
the constitutional budget reserve fund."
HOUSE BILL NO. 267
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program."
1:32:24 PM
^FY 15 GOVERNOR'S BUDGET OVERVIEW: DEPARTMENT OF REVENUE
1:32:24 PM
ANGELA RODELL, COMMISSIONER, DEPARTMENT OF REVENUE,
presented the PowerPoint presentation: "State of Alaska
Department of Revenue Budget Overview" (copy on file) She
began with slide 2: "Alaska Department of Revenue":
The mission of the Department of Revenue is to
collect, distribute and invest funds for public
purposes.
The Department has four major programs:
· Tax Division
Enforces the tax laws of the state; collects
and accounts for tax revenues
· Treasury Division
Manages and invests state funds
· Permanent Fund Dividend Division
Administers the PFD program and distributes
the annual dividend payment to eligible
Alaskans
· Child Support Services Division
Collects and distributes child support to
custodial parents
Commissioner Rodell presented slide 3: "Results in 2013":
Department of Revenue as a Whole
· The Department's website was updated to provide
easy links to current fund balances and fund
performance
· All Department of Revenue regulations were
reviewed and updated as necessary
Treasury Division
· Alaska received its third AAA bond rating from
Fitch in FY 13 making it one of the few states
with top rating from all three rating agencies
· The FY 13 returns for 37 out of 39 funds managed
by Treasury exceeded the benchmark returns.
· PERS and TRS funds returned 12.50 percent and
12.59 percent.
1:36:46 PM
Commissioner Rodell reviewed slide 4: "Results in 2013":
Permanent Fund Dividend Division (PFD)
· The cost of reviewing a PFD application and
paying the dividend declined each year from 2011
TO 2013.
· Of the 139,254 eligibility cases that were
created, 97 percent of them were contacted by the
time dividend amount was announced in September.
That is 7 percent better than the 90 percent
contact rate in 2012, and 12 percent above our
performance measure goal of 85 percent.
· The division had the lowest number of unreviewed
cases ever recorded by the division at the point
of the dividend announcement. Only 3,937 cases
remained under reviewed at that point in time.
Down from 16,410 in 2012. The net effect was that
of the 670,000 applicants in 2013, only one half
of one percent has not been reached regarding
their application.
· The division also overhauled our technician
training program in 2013, hiring a new trainer
and lead, who subsequently shaved an entire month
off of our previously 3-month long training
program. This means technicians are working cases
and fielding questions from the public faster
than ever.
1:38:06 PM
Commissioner Rodell directed attention to slide 5: "Results
in 2013, Child Support Services Division":
· The federally required self-assessment review
showed that CSSD exceeded all federal
requirements for the child support program.
· CSSD increased its teenage outreach program,
making 70 presentations in 48 schools throughout
the state.
1:39:10 PM
Commissioner Rodell explained slide 6: "Results in 2013":
Tax Division
· Began implementation of our Tax Revenue
Management System (TRMS), for which the
legislature appropriated $34.7 million in the
2011 session.
o Phase 1 of the project is in its final
stages, and will be rolled out for all
corporate income tax filers, and many excise
tax filers;
o Phase 2 will be starting within the next few
weeks (includes oil and gas production tax,
property tax, and economic research).
· Successfully drafted and finalized a large
regulations package within 6-7 months of the
passage of SB 21 (MAP), so they were in effect
when most of the bill's provisions went into
effect (January 1, 2014). Interest rate
calculation regulations have been filed with the
Lt. Gov. as of last week.
· 98.5 percent of known taxpayers filed tax returns
and made their payments timely
1:40:57 PM
Commissioner Rodell referenced slide 7: "Authorities and
Corporations":
· Alaska Housing Finance Corporation
To provide Alaskans access to safe, quality
and affordable housing.
· Alaska Permanent Fund Corporation
To maximize the value of the Permanent Fund
within return objectives.
· Alaska Mental Health Trust Authority
To administer the Alaska Mental Health Trust
as a perpetual trust and to ensure a
comprehensive and integrated mental health
program to improve the lives of
beneficiaries.
· Alaska Municipal Bond Bank Authority
To provide municipalities with financing
options for capital projects.
Commissioner Rodell presented slide 8: "Look Back at
Department Activities." She reported a 58 percent increase
in revenues collected by the Tax Division, and a 147
percent increase in returns collected by the Treasury
Division over the last eight years. She also acknowledged a
7 percent climb in the number of Permanent Fund Dividends
paid to Alaskans from FY 05 to FY 14. She cited an
escalation in the number of child support cases of 4
percent as well as a 15 percent rise in the dollar amount
distributed to custodial parents from FY 05 to FY 13.
1:42:43 PM
Commissioner Rodell reviewed slide 9: "Growth in State
Funds 2005 - 2014 CBRF and GeFonsi." She stated that the
chart reflected tremendous growth in reserve funds in the
state savings account over the last eight years.
1:43:19 PM
Commissioner Rodell explained slide 10: "Department of
Revenue Share of Total Agency Operations." She noted that
agency operations costs stayed within a range of .80 to 1.0
percent of the total state budget for unrestricted general
funds only. The department's budget had remained relatively
stable over the last few years.
Commissioner Rodell discussed slide 11: "Department of
Revenue Percent of Total Department's Budget by Fund
Group." She indicated that the main change in the percent
of the department's budget by fund group was due to an
increase in federal receipts designated for the Child
Support Services Division. She also noted increases in the
"other state funds" category as well as increased revenues
in the Permanent Fund and pension funds.
Commissioner Rodell referenced slide 12: "Department of
Revenue FY 2015 Governor's Budget by Fund Source." She
outlined the department's budget by fund source using the
pie chart as a visual reference.
1:44:41 PM
Commissioner Rodell presented slide 13: "Department of
Revenue FY 15 Governor's Budget by Program." She defined
the budget allocations by program as shown in the pie
chart. The Alaska Permanent Fund program was easily
identified as the major contributor to state revenues.
1:45:39 PM
JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, continued with slide 14:
"Key FY 15 Budget Changes." He commented that he worked
with the commissioner to determine potential reductions for
external services going forward, strategically evaluating
each division. The largest reduction within the Treasury
Division was non-pension, trust-related administrative
costs for the state's retirement board. He explained that
the associated services were no longer in demand relative
to previous years. Aside from small decreases within each
division, four full-time positions, one part-time position,
and one temporary position were eliminated either within
the Tax Division or the Permanent Fund Dividend Division.
Rates charged for health benefits were slightly lowered and
working reserve was somewhat diminished. He cited a total
of approximately $1 million in cutbacks. The department had
one increment of $23.8 million in management fees because
of the balance of the growing Permanent Fund and the
complexity of managing Permanent Fund assets.
1:48:29 PM
Mr. Burnett discussed slide 15: "FY 15 Capital":
· PFD Division Computer Replacement 130.0 PFD Fund
· Child Support Computer Replacement 158.5 Fed/81.6
GF
· Alaska Housing Finance Corp Multiple Projects
76,800.0 GF/850.0 Other/12,200.0 Fed
o $29 million Weatherization
o $17.5 million Home Energy Rebate
o $8 million Homeless Assistance Program
o $7 million Supplemental Housing Development
Program
o $6 million Teacher, Health, Public Safety
and VPSO Housing Loans
o $4.5 million Senior Citizen Housing
Development
Mr. Burnett elaborated that the Child Support Services and
Permanent Fund Dividend Divisions had submitted an appeal
for computer replacement funds. The department has each
division on a computer replacement cycle. Historically, the
department has submitted a capital request every year since
2004 to satisfy its replacement efforts. The balance of
capital requests for the department came from the Alaska
Housing Finance Corporation for multiple projects.
1:49:48 PM
Mr. Burnett discussed slides 16 and 17: "Department of
Revenue Ten Year Expenditure Projection":
· The mission of the Department of Revenue is to
collect, distribute and invest funds for public
purposes. The department achieves its mission through
the efforts of four core agencies, two corporate
agencies, and four boards and authorities.
· The following document provides an estimate of the
department's budget changes over the next ten years.
Projecting budgets ten years into the future for the
various programs and funding sources of the Department
of Revenue is a challenge. Changes to the department's
programs are not anticipated but are sometimes
affected by legislative action. As a result, the
assumptions and numbers that make up the plan will
continue to change as new information becomes
available.
Baseline Scenario Assumptions for DOR:
· The department's operations costs were increased by
using a 2.5 percent annual inflation factor. The
inflation calculation does not include personal
services or investment management fees.
· External custody and investment management fees were
calculated using anticipated rates applied to
estimated future market values.
Baseline Scenario Assumptions for AHFC:
· Alaska Housing Finance Corporation's (AHFC) operations
costs were increased by using 2.5 percent annual
inflation factor. The inflation calculation does not
include personal services or investment management
fees.
· The Capital budget assumes that the Corporation's
earnings will resume to pre-recession levels.
· The Weatherization program assumes the State will
contribute $100 million annually to maintain the
current program.
Baseline Scenario Assumptions for APFC:
· The Alaska Permanent Fund (APF) value was grown using
median market expectations.
· External investment manager fees were calculated using
anticipated rates applied to the projected value of
the assets under management.
· Alaska Permanent Fund Corporation's (APFC) operations
costs were grown by 2.5 percent (inflation). The
inflation calculation does not include personal
services or investment management fees.
Mr. Burnett stated that the remaining slides addressed the
Department of Revenue's ten-year expenditure plan. The
plan used a 2.5 percent annual inflation rate and
calculated external custody and management fees based on
anticipated rates applied to estimated future market
values. The ten-year plan was not based on an anticipated
number of PFD applications and did not include future
contractual salary increases in any of the departments.
Mr. Burnett also indicated that the plan incorporated
market expectations for APFC, resumed calculating the
corporation's earnings at pre-recession levels, and
continued to contribute annually to the weatherization
program.
1:51:11 PM
Mr. Burnett discussed slide 18: "Ten Year Projection
Graphs." He reported a shallow rise in future projections.
He turned to slide 19: "Ten Year Projection Graphs." He
explained that over the last ten years the annual budget
growth in general funds only reflected a 3.2 percent
incline.
Mr. Burnet looked at slide 20: "Ten Year Projection
Graphs." He specified that the referenced graph
demonstrated a 7.4 percent escalation in the annual budget
for all funds in the same ten year period.
Commissioner Rodell concluded with slide 21: "Wrap-up":
· The Tax Division is actively engaged in improving its
information system to insure efficient tax
administration, to more effectively serve taxpayer and
provide timely access to information necessary for
assisting with tax policy decisions contemplated by
the legislature.
· The Department of Revenue is the state's largest
investment manager. We pride ourselves in prudent
investment practices for a variety of programs and
needs while achieving and maintaining the highest
credit rating and thus the lowest cost of borrowing.
· Customer service sections in the PFD and Child Support
Services Divisions have continuously improved their
business practices in order to provide increased
service levels without increasing staff.
· Our corporations receive national recognition for
their exemplary program management and fiscal
solvency.
Co-Chair Austerman asked about slide 4, regarding the
Permanent Fund Dividend Division's performance measures of
85 percent and the need to adjust it.
Commissioner Rodell affirmed that the benchmark measurement
should be reevaluated and adjusted depending on findings.
1:54:42 PM
Co-Chair Austerman asked about slide 6. He wanted more
information regarding known and unknown tax payers.
Commissioner Rodell responded that the division did not
have a way to evaluate compliance unless a business had
previously filed with the state. The state only has an
opportunity to investigate for fraud when violators are
caught or reported. The division works in conjunction with
the Department of Commerce, Community and Economic
Development on compliance issues.
1:56:52 PM
Representative Thompson asked about the potential for
future savings in personnel costs.
Commissioner Rodell responded that it was too soon to make
a determination on staffing levels. She indicated that the
state would be able to evaluate whether or not it uses its
auditors to maximize tax revenues and to ensure tax payer
compliance. The majority of the state's tax division
resources were appropriated for managing oil and gas
production tax, the lion's share of the state's revenue.
1:58:38 PM
Representative Thompson asked about oil taxes and the
auditing process. He inquired what the costs would be if SB
21 was repealed and the state rolled back to Alaska's Clear
and Equitable Share (ACES).
Commissioner Rodell replied that FY 07 encompassed two
different tax structures, the Petroleum Profits Tax (PPT)
and ACES. She informed the committee that the tax year
would be finalized on March 31, 2014. She also reported the
audits for FY 08 and FY 09 were currently being conducted.
If the referendum to repeal SB 21 passed, the state would
again encounter a split tax year. She confirmed that the
tax revenue management system was programmed for the tax
structure associated with SB 21-More Alaska Production Act
(MAPA). She did not have a cost estimate reflecting the
effects of a repeal of SB 21 but offered to conduct further
research to provide the information.
Co-Chair Austerman asked if the FY 06 audit was the most
recently completed tax audit. Commissioner Rodell responded
in the affirmative.
Co-Chair Austerman asked if the delays in completing audits
were normal.
Commissioner Rodell answered that filings were made by
March of the subsequent year. Also, participating oil and
gas companies submitted monthly tax filings and made
monthly tax payments. The associated filings were then
reviewed by state auditors to confirm that the right amount
of taxes was being paid. While the audits were in progress,
the division kept the commissioner abreast of their status.
She expressed her confidence in the accuracy of revenues
being collected and that federal filings were being used as
benchmarks to measure their correctness.
Co-Chair Austerman asked whether the delays were normal or
if the state is behind in its audits because of a staffing
deficiency within the department.
Commissioner Rodell responded that a request for an updated
revenue management system and corresponding staff
requirements began with the passage of ACES. In the case of
the revenue management system, the funding did not become
available until FY 11. Since acquiring funds, the division
was working in an effort to get the system up and running
and to complete the backlog of audits.
2:05:08 PM
Co-Chair Austerman asked the commissioner to anticipate the
lead time for the completion of an audit. Commissioner
Rodell replied that the department hoped to cover two years
in one audit.
Vice-Chair Neuman asked if the 12.5 percent Public
Employees Retirement System (PERS) and Teachers' Retirement
System (TRS) fund returns on slide 3, were based on an
average. Commissioner Rodell indicated the figures were
actual percentages for FY 13.
Vice-Chair Neuman asked the commissioner for a ten-year
average on the amount of fund returns from long-term
investments.
Commissioner Rodell responded that the department did some
historical evaluations and found that the average return
was 7.78 percent over the life of the funds or 28 years;
the average excluded FY 13 numbers.
2:08:12 PM
Vice-Chair Neuman expressed concern that the retirement
systems relied on an 8 percent return.
Commissioner Rodell replied that the state actuary assumed
8 percent, a 6 percent return with a 2 percent inflation
factor built in. The department set an asset allocation
based on targeting an 8 percent return. Assumptions were
adjusted going forward and in FY 13 the state beat its
target. She reported that in FY 09 there was a 20 percent
loss. The state invested in such a way to allow assets to
make the benefit payments. She stated that she took all of
the different funds seriously. She wanted to stay within
statutory mandates and increase revenues to the state.
Vice-Chair Neuman commented on greater risk producing
greater returns.
2:11:14 PM
Representative Gara expressed his concerns about the ACES
audits. He indicated that the first audit had not occurred
yet. He stated that ConocoPhillips earned approximately $2
billion in profits in Alaska. He suggested that $40 billion
to $50 billion dollars of profits under ACES were not yet
audited. He wondered if the department had the staff to
fully audit all of the tax returns related to ACES.
2:13:37 PM
Commissioner Rodell replied that the legislature was
helpful in providing the necessary positions to get the job
done. In 2013, two positions were added: a master auditor
in oil and gas, and an oil and gas production auditor. In
reference to the final audit for FY 08 the auditors were
presently collecting data on the oil and gas companies.
Although the companies were making payments and completing
their federal tax filings, they had to submit amended
returns because of changes in regulations related to ACES.
She stated that the department was confident in the
accuracy of the amount of taxes paid and tax credits
applied. She expressed confidence that revenue staff were
diligently working to finish the audits and to get the tax
revenue management system in place. She assured the
committee that she and her staff were committed to ensuring
the state gets every dollar it is entitled to.
2:17:31 PM
Representative Gara requested reassurance that the proper
accounting activities were in place in order to acquire all
taxes owed to the state. He emphasized the importance of
audits.
Commissioner Rodell discussed how the work of 18 oil and
gas production tax auditors was distributed. The group was
divided in half with half of one group focused on
deductions and credits while the other half concentrated on
tax collection. She reported that the regulations
associated with SB 21 were completed on time for the start
of the tax year beginning on January 1, 2014.
2:19:22 PM
Representative Guttenberg asked the difference between
monthly and year-end audits and whether or not it helped to
conduct monthly audits.
Commissioner Rodell replied that there were no significant
differences between monthly and year-end audits and that by
conducting monthly audits the year-end audits were much
easier.
Representative Guttenberg asked for verification that the
master auditors were on task doing what they were hired to
do.
Commissioner Rodell confirmed that the auditors were
completing their assigned duties. They were also assisting
programmers with the implementation of the tax revenue
management system by making sure the system accurately
reflects both regulation and statute.
2:20:27 PM
Representative Guttenberg asked about slide 14. He wondered
if cuts to non-personnel external expenditures would show
up in small increments in other places in the department's
budget where the department assumed the responsibilities.
Mr. Burnett replied in the negative.
Representative Guttenberg asked about computer
replacements. Mr. Burnett responded that the two divisions
were on a four-year equipment cycle. He emphasized the
importance of having up-to-date tools to provide the public
with optimal feedback.
2:22:19 PM
^FY 15 GOVERNOR'S BUDGET OVERVIEW: DEPARTMENT OF NATURAL
RESOURCES
JOE BALASH, COMMISSIONER DESIGNEE, DEPARTMENT OF NATURAL
RESOURCES (DNR), delivered the PowerPoint presentation:
"State of Alaska Department of Natural Resources" (copy on
file).
Commissioner Balash discussed slide 4: "State of Alaska
Department of Natural Resources." He stated that there had
been some changes to the agency's organizational charts,
mostly name changes, including Mr. Balash, listed as
commissioner, and Bob Swenson, listed as deputy
commissioner. He indicated that the chart also included
the different divisions that make up the agency and the
major components of the operating budget for the
department. He reported that what was not included on the
chart were various boards that function within or alongside
some of the divisions.
Commissioner Balash turned to slide 5: "State of Alaska
Department of Natural Resources." He reviewed the DNR core
services:
1. Foster responsible commercial development and use
of state land and natural resources, consistent
with the public interest, for longterm wealth and
employment
2. Provide access to state lands for public and
private use, settlement, and recreation
3. Ensure sufficient data acquisition and assessment
of land and resources to foster responsible
resource development
4. Mitigate threat to the public from natural
hazards by providing comprehensive fire
protection services on state, private, and
municipal lands, and through identifying
significant geological hazards
2:26:26 PM
Commissioner Balash directed attention to slide 6: "State
of Alaska Department of Natural Resources." He asserted
that DNR managed the State of Alaska's lands including 100
million acres of uplands, 60 million acres of tidelands,
shore lands, and submerged lands, and 40 thousand miles of
coastline. He emphasized the astounding responsibility DNR
had.
Commissioner Balash referred to slide 7: "State of Alaska
DNR has 7 Divisions." He noted the Division of Agriculture
and the Division Forestry.
2:28:06 PM
Commissioner Balash revealed slide 8: "State of Alaska DNR
has 7 Divisions." He focused on two divisions within DNR.
First, he referenced the Division of Geological and
Geophysical Surveys acknowledging Steve Masterman, the
acting director of the division. He reported there was
currently a search for the next state geologist to replace
Mr. Swenson. The department was going to be looking for
someone with a mineral background rather than an emphasis
on energy. He then directed his attention to the Division
of Mining, Land, and Water specifying Brent Goodrum, the
division director. He noted the division was focused on
addressing backlog as well as staying current with its
review of new authorization applications.
Commissioner Balash advanced to slide 9: "State of Alaska
DNR has 7 Divisions." He highlighted the Division of Oil
and Gas and the Division of Parks and Outdoor Recreation.
He shared that the state had one of the largest state parks
in the country and one of the smallest state budgets. He
stressed the excellent performance of the director. He also
explained the role that the Office of History and
Archaeology played in the permitting system, specifically
evaluating Section 106 compliance.
2:30:57 PM
Commissioner Balash moved on to slide 10: "State of Alaska
DNR has 7 Divisions." He briefly discussed the Division of
Support Services, the seventh division within DNR. He then
drew attention to slide 11: "State of Alaska DNR Offices."
He noted the Office of the Commissioner and the State
Pipeline Coordinator's Office (SPCO). He highlighted the
functions of the SPCO including landlord, rent collector,
and regulator.
2:32:33 PM
Commissioner Balash advanced to slide 12: "State of Alaska
DNR Offices." He reported that the Office of Project
Management and Permitting operated on a Memorandum of
Understanding (MOU) basis where applicants financed some of
the services provided. He also outlined the work of the
Alaska Mental Health Trust Land Office. He informed the
committee that the Alaska Mental Health Trust Authority
funded its programs through the development of its land
assets within the state. The commissioner relayed that DNR
had an agreement with the trust to establish and run the
land office.
Commissioner Balash reviewed slide 13: "Key Performance
Measures." The slide included a graph showing the dollar
value of MOU agreements for large development projects
permitting coordination. He stated that DNR needed
additional personnel in order to stay ahead of the incoming
workload.
Commissioner Balash referred to Slide 14: "Key Performance
Measures." The slide included a graph of key performance
measures for the Division of Mining, Land and Water. He
discussed that the division was fully staffed and had been
able to decrease the permit backlog. He credited the
director for the progress that has been made within the
division to reduce the bottleneck.
2:36:31 PM
Commissioner Balash pointed to slide 15 that included a key
performance measurement chart for the percent of oil, gas,
and geothermal leases awarded within nine months of sale.
The department undertook an evaluation of the lease
process. He was happy to report that in recent months all
leases were issued within seven weeks of sale. He detailed
that the division would apply the seven-week target to the
Cook Inlet sale before making a permanent change to the
standard. Slide 16 included a chart that showed a tracking
of the square miles of published minerals-related airborne
geophysical data. The data reflected an increase in mineral
claims and exploration. Commissioner Balash commented on
the contribution that he felt mining made to small
communities.
Commissioner Balash moved on to slide 17 that contained a
graph showing park fee revenues. He discussed service fees
paid by users. The chart indicated an uptick in park-fee
revenue in FY 13. He noted that a balance existed between
increasing fees and providing Alaskans with access to
something they owned.
2:40:50 PM
JEANMARIE DAVIS, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES, moved to slide 19. She
stated that DNR employed approximately 1,100 Alaskans. She
continued with slide 20: "DNR FY 2015 Budget." She noted
that in FY 06 DNR's general funds (GF) budget growth rate
was 2.63 percent. In FY 15 DNR's GF budget growth rate was
estimated at 2 percent, a slight decrease from the overall.
The statewide annual growth rate in the last eight years
for all agencies was 7.2 percent in comparison to DNR's 2.6
percent. She pointed out a few changes in DNR's budget
including an uptick between the FY 08 and FY 09 management
plan attributed to increments given in recognition for the
workload undertaken in the Oil and Gas Division and to
increased aviation contracts for firefighting. She
acknowledged a budget incline between FY 11 through FY 14
attributed primarily to the Division of Mining, Land and
Water. Money was budgeted to fill vacant positions as well
as to create and fill new positions to help with the
permitting backlog. Additional funding was added to
support navigability work, ongoing litigation, the
Department of Law, stewardship, and the state horticulture
program.
2:43:35 PM
Ms. Davis directed attention to slide 21: "DNR FY 15
Budget." She reviewed the chart which showed the percentage
of the department's budget by fund group. The percentages
across the years remained fairly consistent. Federal
receipts made up about 13 percent of the budget and
remained the same from FY 06 to FY 15. An increase was
seen in other state funds, the statutory designated program
receipts, and in funds that support the Pipeline
Coordinator's Office and the Mental Health Trust Authority
Land Office.
Ms. Davis reviewed slide 22: "DNR FY 15 Budget." She
explained that the chart depicted a comparison of the
continued budget growth of 2.6 percent annually to the
department's ten-year fiscal plan GF only. All of the
divisions contributed to the ten-year plan by evaluating
workloads and trends.
Ms. Davis noted that slide 23 was the same comparison
represented on slide 22 based on all funds.
2:45:11 PM
Ms. Davis referenced slide 24: "DNR FY2013/FY2015 Budget."
She asserted that because natural hazard threats are
unpredictable from year-to-year budgets can differ
dramatically. She drew attention to the different
percentages of costs for mitigating natural hazard threats
in FY 13 versus those in FY 15. The state had a much
heavier fire season in FY 13 than in FY 15 throwing off the
comparison.
Ms. Davis presented slide 25: "DNR FY2013/FY2015 Budgets."
She pointed out that the fire activity component was
removed in the comparison by fund type to get a more
accurate contrast between the two years for the remaining
fund categories.
Ms. Davis summarized slide 26: "DNR FY2015 Budget." She
detailed a snapshot of the department's FY 15 budget
request broken out by division or office. The largest
portion of funds was allocated to the Division of Forestry
at 27.6 percent of which 23.7 percent was designated for
fire suppression.
2:47:22 PM
Ms. Davis turned to slide 27: "DNR FY2015 Budget." She
explained that the governor used the FY 14 management plan
as a starting place in calculating the FY 15 adjusted base.
Legislative Finance then identified one time appropriations
made in FY 14 and removed those from the FY 15 adjusted
base in order to make appropriate comparisons. The net
reduction to the FY 15 budget was approximately $3 million.
Key changes were statewide contractual salary increases,
health insurance and working reserve rate reductions,
multiple one-time item reversals, and the transfer of one
position from the Department of Transportation and Public
Facilities into DNR's budget. The bottom line was a net
zero to the state.
2:49:09 PM
Ms. Davis advanced to slide 28: "DNR FY2015 Budget." She
reported that changes from FY 14 to FY 15 were noted in the
slide and totaled approximately $1.6 million in reductions.
She referenced two key reductions, the Gas Pipeline Project
Office and the deletion of long-term vacant positions.
Additional key changes included the restoration of items
that were appropriated as one-time items in FY 14,
subsequently backed out of the budget, and then appeared as
new requests for FY 15. Other key GF increases requested
in FY 15 included funding for existing and vacant positions
for field operations, park staff, and staff for the South
Denali implementation. The second request was for funds
for the geological materials center, scheduled to be
occupied in September 2014. The third item was for another
position to support the oil and gas workload. The remainder
of the changes was related to other funding sources and
technical reductions.
2:51:05 PM
Ms. Davis directed attention to slide 29: "DNR FY 2015
Budget." She emphasized that DNR generated an average of
$2.6 billion in revenue annually (e.g. unrestricted general
fund, permanent fund, constitutional budget reserve fund,
and a mix of other revenue funds) in comparison to DNR's
average annual unrestricted general fund budget of $71.6
million. The annual average was based on averages taken
from FY 06 through FY 13.
Co-Chair Austerman asked what the turnaround time was for
processing a permit and what the processing time would be
for the 1,237 permits referred to on slide 14. He recalled
that at one point the department had estimated a five-year
delay.
2:53:18 PM
Commissioner Balash replied that there were a number of
factors which affect processing time including the number
of incoming applications. He indicated that the department
was working on the backlog while simultaneously addressing
new applications. The type of application drives the cycle
time. The data graph reflected all of the different types
of authorizations that get reviewed. He reported that the
previous year the department received over 750 applications
for permits to mine in Alaska. He stated that in order to
determine a specific processing time a particular category
of authorization would need to be identified (e.g.
easements, leases, temporary water leases, water
reservations, and water rights applications).
Co-Chair Austerman stated that in 2011, DNR quoted five
years to process a tideland permit application to install
and connect a dock to land. He asked what DNR's current
quote would be for the same type of permit.
Commissioner Balash replied that he would provide the
information to the co-chair.
2:55:55 PM
Representative Wilson asked about the amount of money spent
on fire suppression referred to on slide 25.
Ms. Davis responded that in FY 13 the cost of fire activity
was $46 million of which $22 million was from general
funds.
Representative Wilson spoke to the prevalence of poor air
quality in her region and the need for firewood for home
heating. She wondered about a forest management plan that
would reduce forest fires and at the same time provide
increased timber as a fuel source.
2:57:13 PM
Commissioner Balash replied that safety programs could be
used to thin forested areas. However, the authorizations to
cut wood were limited by road access and many of the fires
that eat up considerable resources occurred far away from
infrastructure. He suggested that fire suppression expenses
directly correlated with the proximity of fires to
populated areas.
Representative Wilson surmised that fires were not
suppressed until a community's safety was threatened. She
suggested that the state consider selling any wood that
gets cleared for fire safety as a means for generating
additional revenues.
3:00:08 PM
Commissioner Balash explained that the ownership of land
played a part in the management process. The state has a
say in what happens to its own lands but does not in the
case of federally-owned or privately-owned land. Moreover,
fire is unpredictable in nature, making managing a tree-
thinning safety program even more challenging.
Representative Wilson remarked about opening up an area to
bring dry wood into communities.
Representative Gara asked about the prior year's
presentations and whether or not they reflected the costs
associated with canceling the state's contract with the
Alaska Gas Inducement Act (AGIA). He asked if there was an
amount allocated to pay TransCanada for treble damages.
3:02:38 PM
Commissioner Balash stated that the AGIA license remained
in effect. The parties have pre-agreed to withdraw mutually
from the license depending on certain outcomes of the
session and whether or not the project is determined
economically viable. Since inception of the license in
December 2008 the licensee and its partners have spent $430
million of which the state has reimbursed approximately
$300 million. The treble damages clause was potentially
payable to the licensee if the state were to breach the
contract. Since the state has honored the agreement thus
far, there is no need for an appropriation.
Representative Gara asked Commissioner Balash to clarify
the meaning of "certain things happening this session." He
also asked if any provisions existed in the proposed
agreements or the related bill regarding potential
litigation.
3:04:51 PM
Commissioner Balash replied that the department had a MOU
to mutually agree to withdraw from the license if enabling
legislation passed. The transition out of AGIA into the
heads of agreement framework would be activated if the
legislation passed, leaving the license behind without
further obligation.
Co-Chair Austerman expressed his concerns regarding
potential litigation if the enabling legislation did not
pass.
Representative Gara asked if there was an agreement with
TransCanada to use language that allows them to walk away
from the AGIA license.
Commissioner Balash offered to explain the MOU in detail
off-line and to explain the details of the agreement. He
stated he was unclear about Representative Gara's question.
Representative Gara asked if the state would be in
violation if it did not accept certain provisions of the
MOU with TransCanada.
3:07:51 PM
Commissioner Balash mentioned one provision in the MOU that
would be helpful in addressing Representative Gara's
question but deferred to Co-Chair Austerman before reading
it.
Co-Chair Austerman allowed for a single provision to be
read from the MOU.
Commissioner Balash read article 2.1 part D. He explained
in layman's terms that the parties would agree on a set of
terms later in the current year if the enabling legislation
passed. The parties might or might not have an agreement if
the legislature changed the legislation.
Representative Gara wanted to know specifically what
provisions would have to stay intact in order to maintain
an agreement with TransCanada if enabling legislation
passed.
Co-Chair Austerman surmised that the state would not know
if it had an agreement until it knew whether or not the
correlating legislation passed. If not, the state would
have to start over with legislation.
3:09:41 PM
Representative Thompson reported that the federal
government was in the process of publishing new federal
maps of Alaska and that RS2477 trails would not be
included. He asked the commissioner if the State of Alaska
was planning on publishing new maps and, if so, would they
contain the RS2477 trails.
Commissioner Balash replied that the state was in the
process of publishing some of the revised maps with
overlays that reflect the RS2477 trails as well as 17B
easements. The easements provided for crossing through
Alaska Native Claims Settlement Act lands in order to reach
public lands.
Representative Thompson asked if there was an implied
message from the federal government that it was resisting
public use of the RS2477 trails by not including them on
its maps.
Commissioner Balash replied that he would get back to
Representative Thompson with an answer as soon as possible.
3:11:41 PM
Representative Edgmon asked if there were any plans to add
tribes, persons, or non-government organizations to the
list of applicants eligible to apply for water rights
reservations outlined in HB 77.
Commissioner Balash replied that HB 77 was presently in the
Senate Rules Committee. The Department of Natural Resources
held hearings during the interim to gather public input.
The topic of in-stream flow reservations was one of
community concern. The department was attempting to match
up its objectives with feedback it received at the
hearings.
Commissioner Balash communicated that the department's
chief concern was that while persons have been able to
apply for in-stream flow reservations for more than 30
years, it has only been in the previous two years that
individuals have applied. The first application the
department received was associated with the Chuitna coal
project on the west side of Cook Inlet. A company with
valid mining claims obtained temporary water use permits in
order to engage in exploration activities to complete the
National Environmental Policy Act (NEPA) process. Area
residents filed an application for an in-stream flow
reservation for 100 percent of the water in the related
area. Following their submission, residents attempted to
block temporary water use by petitioning DNR in court. The
department was concerned that a private entity or an
individual could stop temporary water use for a period of
five years simply by making an application for an in-stream
flow reservation. In the example the commissioner gave,
the judge ruled in DNR's favor contending that filling a
request for a water reservation did not constitute blocking
other uses of water on a temporary basis.
3:16:43 PM
Commissioner Balash indicated the Superior Court decision
was not binding. He concluded that clarity was needed when
competing filings existed which lead to conversations with
the Department of Law.
Representative Edgmon stated that he would pursue further
information outside of the committee discussion.
Co-Chair Austerman referenced the Chuitna water use
application for 100 percent use of the water and asked what
the department's response would be if the application for
100 percent water use was not warranted.
Commissioner Balash explained that DNR can grant a partial
request rather than a total request depending on its
findings.
3:19:51 PM
Co-Chair Austerman asked if the Chuitna Coal Company
applied for and used its first water right.
Commissioner Balash reported that the company had applied
for temporary water usage. Other longer-term water usage
would be necessary, but not before getting through the
permitting process. A temporary water use permit would
satisfy the company's need to gather necessary data for
further processing.
Co-Chair Austerman invited Representative Edgmon and DNR
representatives to have a more detailed discussion outside
of the committee.
3:21:45 PM
Representative Munoz asked for an update on DNR's review of
dredge and fill permitting that the legislature authorized
the previous year.
Commissioner Balash explained that through legislation DNR
and the Department of Environmental Conservation were
authorized to jointly consider whether or not applying for
and obtaining primacy on 404 permitting activities was a
benefit to the state. He knew that along with costs there
would be associated benefits. The legislation allowed for
two new positions in the Office of Project Management and
Permitting. DNR executed an MOU with the Army Corps of
Engineers and the Environmental Protection Agency to assist
the state in gathering information to evaluate the effects
of primacy.
Representative Munoz asked the commissioner when the
department's recommendations would be submitted.
Commissioner Balash answered that recommendations would be
available in 2016.
3:23:36 PM
Representative Gara asked the department to provide him
with the number of fishing streams in Alaska that are
protected through state water reservations.
Commissioner Balash replied that the department has
adjudicated a vast number of fishing streams in the state,
particularly streams targeting King Salmon. The ability to
allow for fish in every stream in Alaska would require a
great amount of state resources. He offered to provide
Representative Gara the most current numbers. In 2013 the
department adjudicated and completed reservations on more
streams than in the past 20 years.
3:25:36 PM
Representative Gara reiterated his request for the number
of Alaska streams that have been adjudicated through state-
initiated water reservations.
Commissioner Balash replied that typically public agencies
such as U.S. Fish and Wildlife Service and the Alaska
Department of Fish and Game apply for water reservations.
He emphasized that it has only been in the last five years
that individuals submitted their applications. He
specified that the department completed approximately 20
requests the prior year.
Representative Gara asked the commissioner to confirm the
total number of water reservations in state history.
Commissioner Balash responded that he would provide the
figures in writing the following week.
3:27:10 PM
Representative Munoz asked if the names of in-stream flow
reservation applicants were available to the public. She
also asked for the names of the organizations that have
applied for reservations relating to the Chuitna project.
Commissioner Balash replied in the affirmative and agreed
to provide a list of names.
Representative Edgmon put on record that his region had
concerns with the related legislation because so many very
sensitive bodies of water in the highly productive Bristol
Bay water sheds have been cataloged or measured. He opined
that percentages the commissioner offered were greater than
what the actual percentage rates would be if the state was
reviewed region by region. He pointed out that Bristol Bay
had many active salmon bearing streams that had not yet
been measured or reserved which could become a conflict
down the road with larger development projects.
Commissioner Balash appreciated the distinction between
salmon and thought he had referenced the King Salmon
fishery. He acknowledged that Bristol Bay's sustainable
sockeye salmon fishery extended beyond the region's king
salmon fishery.
Co-Chair Austerman discussed the schedule for the following
day.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DNR Overview HFIN 1-31-14.pdf |
HFIN 1/31/2014 1:30:00 PM |
DNR HFIN Overview |
| DOR Budget Overview for HFC 1-31-14.pdf |
HFIN 1/31/2014 1:30:00 PM |
DOR _ HFIN Overview |
| DNR Overview Responses HFIN .pdf |
HFIN 1/31/2014 1:30:00 PM |
DNR Overview Response |