Legislature(1995 - 1996)

02/21/1996 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  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)                 
  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                 
  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                 
  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                 
  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                 
  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                 
  Projection and will soon be released.                                        
  Ms.  McConnell   itemized  possible  amendments   which  the                 
  Legislature  did  not  adopt  in  the  supplemental   budget                 
       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                 
  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                 
  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.                 
  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                 

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