Legislature(1995 - 1996)
02/21/1996 01:40 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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) 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 2 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 3 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 4 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 5 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).