Legislature(1995 - 1996)
02/21/1996 01:40 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL 500
"An Act making capital and other appropriations; and
providing for an effective date."
Co-Chair Foster introduced the Capital Budget Request (CBR)
appropriation.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR, advised that she had
provided Co-Chair Hanley with two floor amendments requested
by the Governor for consideration on the supplemental budget
funding. Those amendments address:
1. Funding to cover the disaster fund.
2. Funding to cover the Veterans Affairs retirement
account.
She continued, the FY97 Capital Budget Request demonstrates
the State's infrastructure needs. The requests include
money from Alaska Housing Finance Corporation (AHFC) and
Alaska Industrial Development Export Authority (AIDEA),
making them part of an integral financial plan.
Ms. McConnell remarked that the Governor intended to use the
AHFC appropriations to regulate housing needs. The Capital
Budget Request (CBR) contains many areas of deferred
maintenance which would be eligible for those funds. The
budget proposes to use over $2 million dollars AHFC funds
for those projects including the Pioneer Homes.
She continued, water and sewer needs will also qualify for
AHFC monies. AHFC has been provided a list of municipal and
safe water priority projects. The decision regarding which
projects to assign to general funding and which to assign to
AHFC will depend on the scope of the individual project. No
budget money from AHFC was requested for commercial area
use.
Representative Martin asked what back-up proposals were
available if AHFC money could not be used. He understood
that there was $5.7 million federal dollars available for
water and sewer projects. Ms. McConnell was not aware that
AHFC money could not be used for specific projects. She
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indicated that, $5.7 million dollars would be allocated to
the Department of Environmental Conservation (DEC).
Currently, the Administration is considering the use of
AIDEA funds for economic development projects which
previously were addressed through general fund dollars. Ms.
McConnell emphasized that the Knowles Administration has
tried to maximize use of available federal funds.
Ms. McConnell noted that the Mental Health Trust Income
Account (MHTIA) funds would be used for separate legislation
in coordination with statutory requirements. The
Administration has recommended that revenue bond funding be
used for technology requests. Ms. McConnell noted that the
revenue bond funding would be a good vehicle from which to
fund projects not otherwise fundable and would then save the
State money.
She pointed out that the $1.5 million dollar debt would be
included in legislation. Debt service will be addressed
through a five to seven year bond spanning the life of the
projects.
Ms. McConnell stressed that most of the requested projects
are absolutely needed this year, adding that additional
projects will be submitted to the Governor's Office for
funding consideration. Not all communities have submitted
information for their capital matching grant programs.
Those communities understand that if deadlines are not met,
they will need to work directly with individual legislators
for project inclusions.
Ms. McConnell stated that there are major areas which have
not yet been addressed.
1. Department of Corrections - Beds at Fort Rich and
the conversion of Harborview.
2. Schools. The proposed budget contains $7.5
million dollars for school funding; this amount
will not go far. The Board of Education is
working on a more comprehensive plan to address
school construction and major maintenance.
3. Deferred maintenance - An integral part of the
FY98 budget including the Pioneer Homes, the
University and other State facilities.
Ms. McConnell advised that the Administration is attempting
to provide a better handle on deferred and on-going
maintenance contained in the FY98 budget. Detailed
information will be provided in the Six Year Budget Plan
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Projection and will soon be released.
Ms. McConnell itemized possible amendments which the
Legislature did not adopt in the supplemental budget
funding.
1. Recapitalizing the world development loan fund
through AIDEA.
2. State Transportation Improvement Projects (STIP).
3. Alaska Families with Dependant Children (AFDC) -
The eligibility system for that program was funded
at $1.9 million dollars rather than the requested
$4 million dollars.
Ms. McConnell responded to the memo from Fred Fisher, Fiscal
Analyst, Legislative Finance. [Attachment #1]. She
clarified that the term "proposed technology revenue bond"
has been used in the market and by the government to cover
the types of arrangements recommended by the current
Administration for the CBR.
She noted that all requests from the Alaska Court System are
passed directly on to the Legislature. The Administration
does not comment on or adjust those requests.
Ms. McConnell stated that the Administration felt that the
Department of Transportation and Public Facilities (DOTPF)
$305 million dollar capital budget request was reasonable.
She added, the State could have the "opportunity" to help
municipalities with projects which "dove tail" in with DOTPF
road construction. This aspect is important at a time when
assistance from local governments is being reduced. Ms.
McConnell noted that action would create a more successful
"partnership" with local governments.
Representative Brown discussed revenue bonding for the
proposed computer projects. She asked if specific
recommendations would be required or if the State would have
authority to enter into that arrangement.
Ms. McConnell explained that action would not need a
specific bill, although, appropriation of the debt service
would have to be considered. Representative Brown cautioned
the necessary authority used, noting that the action would
commit the State to a long term purchase. She asked if
there would be an overlap between the lease and the purchase
for computer equipment. Ms. McConnell advised that they
were separate projects, some of which are system
developments, not considered hardware. If no machinery was
involved, it would not be included in the revenue bond but
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rather the general fund.
Representative Brown questioned if the State was using the
revenue bonding mechanism for purchases of equipment. Ms.
McConnell replied that the State has been leasing equipment
most specifically for telephone associated needs. She added
that the Administration concurs, it would be more economical
to use revenue bonding rather than private financing.
Representative Brown asked the differences between the
requests in the Capital Budget as compared to similar costs
recommended in the front end of the operating budget. Ms.
McConnell replied that the Administration is addressing that
concern, and is trying to develop a comprehensive plan to
create a logical funding system. Currently, internal
service funds do not address the replacement needs of the
State.
Representative Brown inquired about the time-line. Ms.
McConnell responded that one-third would be addressed by
March 6, 1996. Representative Brown questioned the number
of projects to be authorized. Ms. McConnell advised, the
intent was to allocate $1.4 million dollars for debt service
influencing the bond sale choice. Over $6 million dollars
for projects is expected.
Representative Martin voiced concern on bonding procedures.
He stated that lease purchasing would not be a "good"
option. Ms. McConnell commented that it does not make sense
to lease equipment which will eventually cost the State more
money than to buy it.
Representative Mulder questioned additional funding to the
Department of Corrections. He asked about the estimated
operational costs. Ms. McConnell offered to provide that
information. Representative Mulder asked if "facilities"
would be included in a plan for restructuring the overall
prisons. Ms. McConnell informed Committee members that
research results from that plan would be available within a
couple of weeks.
Representative Brown requested further back-up for the
capital matching grant projects. Ms. McConnell interjected
that detailed back-up is currently available with the
Department of Administration (DOA) and the Department of
Community and Regional Affairs (DCRA).
Thus concluded the Administration's testimony on the FY97
Capital Budget Request (CBR) and information regarding the
supplemental legislation previously passed by the Committee.
NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF
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MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, began her
review of the Capital Budget Request. (That information can
be found in the log notes attachment to the back-up
material).
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