05/02/1998 04:50 PM House FIN

HOUSE BILL NO. 463                                                             
                                                                               
"An Act establishing the Alaska public building fund;                          
and providing for an effective date."                                          
                                                                               
ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF                               
ADMINISTRATION spoke in support of HB 463.  She explained                      
that the Department has been working to create a methodology                   
that would allow them to charge agencies that occupy state                     
owned buildings rent on the program level.  The legislation                    
would create the Alaska Public Building Fund.  Collected                       
rents would be deposited in the Fund.  Operations and                          
maintenance of state facilities would be appropriated by the                   
legislature from the Fund.  Monies in the Alaska Public                        
Building Fund would not lapse at the end of the year.                          
Renewal and replacement costs would be collected through the                   
depreciation of the facility.  This would allow a rent                         
structure that can be collected over a period of years and                     
spent in a capital fashion for items such as roof                              
replacements.  She stressed that rent on a program level                       
will encourage accountability and allow other fund sources                     
to be utilized.  The federal government would need to                          
approve the rent methodology for federal agencies through                      
the Department of Health and Human Services.  The Department                   
would phase in the program.  She explained that more money                     
would be collected if federal programs were billed on the                      
program level as a direct cost of operation.                                   
                                                                               
Co-Chair Therriault questioned if funding would be diverted                    
from programs to pay the rent in cases where federal funding                   
is capped.  Ms. Elgee stated that it is a policy question                      
that has not been resolved.                                                    
                                                                               
(Tape Change, HFC 98 - 144, Side 2)                                            
                                                                               
Ms. Elgee stated that the Information Services Fund, which                     
charges back computer operations, runs on a similar manner.                    
                                                                               
Co-Chair Therriault expressed concern that the funds would                     
be raided for other uses.  Ms. Elgee stated that the problem                   
has not occurred with the Information Services Fund.  The                      
Information Services Fund is set up with a three-year life                     
expectancy.  If money is not expended within the three-year                    
period the Department is required to reduce charges in the                     
subsequent year.  The Alaska Public Building Fund would be                     
setup in a similar manner.  She estimated that the Fund                        
would be created with a five-year turnaround.  She explained                   
that a rental charge would be budgeted for at the program                      
level in the operating budget.  Operation and maintenance                      
costs would be shown under the Department of Transportation                    
and Public Facilities or Department of Administration;                         
depending on whom is managing the space.  The funding source                   
for these appropriations would be the Alaska Public Building                   
Fund as the fund source.  Capital projects would be proposed                   
in the capital budget with the Alaska Public Building Fund                     
as the fund source.  These funds would fall under the other                    
funds category.                                                                
                                                                               
In response to a question by Representative G. Davis, Ms.                      
Elgee explained that rent has three components.  Operations                    
and maintenance are annual expenditures.  Renewal and                          
replacement is collected in a rent structure by depreciating                   
the building.  There is also a component for administrative                    
costs.  The three components are combined into a rental                        
rate.  The agency would be billed based on their space                         
allocation.  Charges to the agencies would be deposited in                     
the Alaska Public Building Fund.  The legislature has to                       
authorize appropriations from the Fund.  The first                             
expenditure that would be authorized is for rent.  Then                        
expenditures would be authorized for operations and                            
maintenance in the operating budget.  Authorization for                        
capital replacement of building components would be shown in                   
the capital budget.                                                            
                                                                               
KEITH GERKEN, DIVISION OF GENERAL SERVICES, DEPARTMENT OF                      
ADMINISTRATION observed that the legislation was modeled on                    
other internal service funds in the state of Alaska.  He                       
observed that the Deferred Maintenance Task Force                              
recommended program rent as a way to stabilize the fund                        
source.  He observed that other western states utilize the                     
same concept.                                                                  
                                                                               
Co-Chair Therriault observed that Ms. McConnell indicated,                     
in her letter dated 4/30/98, that the only time the State                      
Equipment Fleet Fund was tapped by the legislature was in                      
the mid 1980's when the price of oil crashed.  There has not                   
been a problem with raiding since the establishment of the                     
Constitutional Budget Reserve Fund.                                            
                                                                               
Representative G. Davis MOVED to report HB 463 out of                          
Committee with the accompanying fiscal note.  There being NO                   
OBJECTION, it was so ordered.                                                  
                                                                               
HB 463 was REPORTED out of Committee with a "no                                
recommendation" and with Office of the Governor, 3/19/98.