Legislature(2013 - 2014)HOUSE FINANCE 519

01/30/2013 01:30 PM FINANCE

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01:31:32 PM Start
01:32:26 PM HB65 || HB66
01:37:32 PM Fy 14 Governor's Budget Overview: Department of Fish and Game
02:41:39 PM Fy 14 Governor's Budget Overview: Department of Military and Veterans Affairs
03:31:50 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Governor's FY14 Budget Overview: TELECONFERENCED
- Dept. of Fish & Game
- Dept. of Military & Veterans' Affairs
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 65                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs,    capitalizing   funds,   amending                                                                    
     appropriations,   and   making  reappropriations;   and                                                                    
     providing for an effective date."                                                                                          
HOUSE BILL NO. 66                                                                                                             
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
1:32:26 PM                                                                                                                    
^FY 14  GOVERNOR'S BUDGET OVERVIEW:  DEPARTMENT OF  FISH AND                                                                  
CORA  CAMPBELL, COMMISSIONER,  DEPARTMENT OF  FISH AND  GAME                                                                    
(DFG),   introduced  department   staff.   She  provided   a                                                                    
PowerPoint  presentation titled  "Alaska Department  of Fish                                                                    
and Game  Overview" dated January  30, 2013 (copy  on file).                                                                    
She pointed  to the department's mission  statement on slide                                                                    
2;  slide   3  included   statutory  sections   the  mission                                                                    
statement  had  been  derived   from.  She  highlighted  the                                                                    
department's  six  core services  on  slide  4: (1)  harvest                                                                    
management, which  was measured by commercial  harvests, the                                                                    
purchase of  hunting and fishing licenses,  angler days, and                                                                    
user success;  (2) stock assessment,  which was  measured by                                                                    
whether or not escapement goals  were met and the completion                                                                    
of  wildlife  surveys;  (3) customer  service  was  measured                                                                    
primarily   through   angler-skills  and   hunter   heritage                                                                    
programs,  wildlife education,  and information  provided to                                                                    
the  public; (4)  public involvement  was aimed  at ensuring                                                                    
that the public participated in  the Board of Fish and Board                                                                    
of  Game  regulatory  processes  and  that  the  public  was                                                                    
involved in  decisions made by  DFG; (5)  state sovereignty,                                                                    
included  the  department's  participation in  federal  land                                                                    
management   planning   processes,   its  support   of   the                                                                    
Department of  Law (DOL) in  lawsuits (e.g.  DFG involvement                                                                    
in processes  such as the  Endangered Species  Act, listings                                                                    
decisions, and  the Federal Subsistence Board);  (6) habitat                                                                    
protection, which  was measured by ensuring  that developers                                                                    
were  in  compliance with  DFG  permits  issued through  its                                                                    
Division of Habitat.                                                                                                            
Commissioner Campbell  pointed to several graphs  on harvest                                                                    
management (slide  5) as an  example of metrics DFG  used to                                                                    
measure performance  including sport fishing  licenses sold,                                                                    
hunting  and   trapping  sales,  and  value   of  commercial                                                                    
harvest. She  turned to an  organizational chart on  slide 6                                                                    
that  showed the  department's six  divisions, one  section,                                                                    
and  two  independent agencies  that  were  attached to  the                                                                    
department for administrative purposes.   Slide 7 included a                                                                    
map  of the  department's permanent  statewide offices;  the                                                                    
map did not include the numerous seasonal locations.                                                                            
Commissioner  Campbell  discussed  that  the  Commissioner's                                                                    
Office  accounted   for  approximately  1  percent   of  the                                                                    
department's  operating  budget.   There  were  three  large                                                                    
management divisions  including Commercial  Fisheries, Sport                                                                    
Fisheries,  and  Wildlife   Conservation.  The  Division  of                                                                    
Commercial  Fisheries  was  the largest  and  accounted  for                                                                    
approximately  34 percent  of the  DFG operating  budget; it                                                                    
was responsible  for the management of  commercial fisheries                                                                    
and many  personal-use and subsistence  fisheries throughout                                                                    
the state, in addition to  the permitting of aquaculture and                                                                    
mariculture   operations.  The   Division   of  Sport   Fish                                                                    
accounted for approximately 23 percent  of the DFG operating                                                                    
budget  (slide  10); it  was  responsible  for managing  the                                                                    
state's sport  fisheries, the operation  of the  state's two                                                                    
sport hatcheries  (located in Anchorage and  Fairbanks), and                                                                    
for providing boater and angler access.                                                                                         
1:37:32 PM                                                                                                                    
Commissioner  Campbell continued  with her  overview of  the                                                                    
department's divisions (slide 11).  The Division of Wildlife                                                                    
Conservation   was   responsible   for   managing   wildlife                                                                    
populations, hunter opportunity,  and three shooting ranges;                                                                    
it also  provided a  number of  hunter education  and safety                                                                    
programs. The  Subsistence Division accounted for  4 percent                                                                    
of  the  DFG  operating   budget  and  was  responsible  for                                                                    
conducting  research  to  document Alaskans'  customary  and                                                                    
traditional  use   of  fish  and  wildlife   resources.  The                                                                    
division  provided  the   information  to  decision  makers,                                                                    
particularly to  the Board  of Fish and  Board of  Game. The                                                                    
Habitat Division  was accounted for  3 percent of  the total                                                                    
budget and was primarily  a permitting office for activities                                                                    
in  anadromous waters,  other fish  bearing  waters, and  in                                                                    
legislatively  designated  special  areas  (slide  13).  The                                                                    
Administrative Services Division accounted  for 6 percent of                                                                    
the  budget  and  was responsible  for  accounting,  budget,                                                                    
procurement,  human resources,  and  other  (slide 14).  The                                                                    
Boards Support Section  made up 1 percent of  the DFG budget                                                                    
and primarily  provided logistical  support to the  Board of                                                                    
Fish and Board of Game processes.                                                                                               
1:39:15 PM                                                                                                                    
Co-Chair  Stoltze   asked  about   the  status   of  various                                                                    
questions  he  had listed  in  a  DFG subcommittee  meeting.                                                                    
Commissioner  Campbell  replied   that  the  department  was                                                                    
working on the questions and would follow up.                                                                                   
Commissioner  Campbell  highlighted   the  department's  two                                                                    
independent  agencies  including  the  Commercial  Fisheries                                                                    
Entry  Commission and  the Exxon  Valdez  Oil Spill  Trustee                                                                    
Council (slide  16). She moved  to slide 17 that  showed the                                                                    
FY 14  budget by  division and  fund source.  She reiterated                                                                    
her  earlier  testimony  that  the  three  large  management                                                                    
divisions  accounted  for  the   bulk  of  the  department's                                                                    
budget.  Primary fund  sources  included  the general  fund,                                                                    
federal funds,  and the  Fish and Game  Fund. She  turned to                                                                    
slide 18  that showed FY  14 budgeted positions.  There were                                                                    
933 full-time  and 1,719  total positions;  DFG had  a large                                                                    
number of  seasonal and part-time employees  due to seasonal                                                                    
KEVIN BROOKS,  DEPUTY COMMISSIONER,  DEPARTMENT OF  FISH AND                                                                    
GAME, relayed  that slides 19  through 22 had  been prepared                                                                    
by  the Legislative  Finance Division.  Slide 19  included a                                                                    
bar chart that depicted General  Fund (GF) growth from FY 05                                                                    
through   FY   14;  the   DFG   budget   had  increased   by                                                                    
approximately  $50 million  during the  time period  and had                                                                    
remained at  approximately 1.7 percent of  the state's total                                                                    
agency budget.  He explained that approximately  half of the                                                                    
department's growth was  due contractual increases resulting                                                                    
from salaries  negotiated with collective  bargaining units,                                                                    
health  insurance increases,  and other.  The other  half of                                                                    
the  growth was  made  up of  initiatives  requested by  the                                                                    
governor (29 percent) and by the legislature (16 percent).                                                                      
1:42:52 PM                                                                                                                    
Mr.  Brooks moved  to slide  20, which  showed the  relative                                                                    
share of DFG budget fund  sources; the FY 14 request totaled                                                                    
approximately $215 million. He  noted that federal funds had                                                                    
increased in  dollar amount, but their  overall budget share                                                                    
had decreased  from 40 percent  down to 30  percent whereas;                                                                    
the GF share  had grown from 20 percent  to approximately 40                                                                    
percent. He discussed  that the divisions of  Sport Fish and                                                                    
Wildlife  Conservation  had  not historically  received  GF;                                                                    
however, due  to cost increases the  budget request included                                                                    
approximately $7 million in GF  for each division (the total                                                                    
budget  for Sport  Fish  was $50  million  and the  Wildlife                                                                    
Conservation budget was $45  million). He directed attention                                                                    
a line chart showing look at  budget growth from FY 05 to FY                                                                    
23. The green line showed  the continuation of (9.6 percent)                                                                    
annual growth out to FY 23.                                                                                                     
Mr. Brooks  communicated that the  dotted black  line showed                                                                    
the department's  projection with an inflation  rate of 2.75                                                                    
percent  on non-personal  services.  He  explained that  the                                                                    
department's  projection  did   not  include  any  estimated                                                                    
growth on  personal services because  future cost  of living                                                                    
allowances  (COLA) were  unknown.  He  elaborated that  COLA                                                                    
increases accounted  for a significant portion  of growth in                                                                    
personal   services.  He   noted   that   COLA  would   most                                                                    
appropriately   be   done   on  a   statewide   level.   The                                                                    
department's estimate  also included a potential  loss of $1                                                                    
million  per year  in federal  funds in  the upcoming  three                                                                    
years; DFG  would need replacement funds.  He discussed that                                                                    
there   were   numerous   federally  funded   projects   the                                                                    
department  ended  when  funds  were  no  longer  available;                                                                    
however,  some  core  functions were  supported  by  federal                                                                    
funds. He relayed that one of  the FY 14 budget requests was                                                                    
to replace  federal funds  that were ending  for one  of the                                                                    
department's core  management projects. Based  on historical                                                                    
data  from the  past  10 years  the department's  projection                                                                    
included  $1.6 million  in potential  growth to  account for                                                                    
any governor or legislative initiatives.                                                                                        
1:46:48 PM                                                                                                                    
Mr. Brooks  briefly highlighted slide  22, which  included a                                                                    
line  chart   representing  continued  budget   growth  (all                                                                    
funds). He noted  that compared to slide 21,  a much tighter                                                                    
convergence  existed  between  the  department's  projection                                                                    
(dotted black line)  and the continuation of  4.3 percent in                                                                    
annual growth (green line).                                                                                                     
Commissioner   Campbell   looked   at   FY   13   department                                                                    
accomplishments on  slide 23; the  list included  some items                                                                    
the department  had requested funding  for in the  past. She                                                                    
discussed improvements to information  available as a result                                                                    
of  salmon research.  The most  notable improvement  was the                                                                    
completion    of   the    Western   Alaska    Salmon   Stock                                                                    
Identification Program, which was  the largest genetic stock                                                                    
identification  program DFG  had  undertaken. She  expounded                                                                    
that nine reports  had resulted from the program  for use by                                                                    
the Board  of Fish  to aid in  its decision  making process.                                                                    
She noted  that the  salmon research  program had  also been                                                                    
improved  in  other  areas of  the  state.  Another  program                                                                    
supported  by  the  legislature  in the  past  was  the  DFG                                                                    
intensive management  programs. The programs  were currently                                                                    
being   implemented  in   various  game   management  units;                                                                    
subsequently, increases  had been seen in  caribou and moose                                                                    
populations that  were available  for harvest.  She believed                                                                    
the programs  were beneficial for Alaskans.  She highlighted                                                                    
that  the  programs continued  to  be  reviewed through  the                                                                    
Board of  Game process  on a regular  basis to  ensure their                                                                    
Commissioner   Campbell  communicated   that   in  2012   an                                                                    
appropriation had  been made  to assist  subsistence harvest                                                                    
surveys.  She explained  that the  Subsistence Division  had                                                                    
been  dealing with  customary and  traditional harvest  data                                                                    
that was  decades old. The  department was working  with the                                                                    
Department  of Transportation  and  Public Facilities  (DOT)                                                                    
and  the   Department  of   Natural  Resources   (DNR)  when                                                                    
development projects or  road proposals required subsistence                                                                    
data for permitting  decisions. The department's involvement                                                                    
allowed  for the  updating of  its database  for use  by the                                                                    
Board  of Fish  and  Board of  Game  in determining  amounts                                                                    
necessary for subsistence  and simultaneously expediting the                                                                    
permitting  process  for   some  development  projects.  She                                                                    
relayed that  the division had made  significant progress in                                                                    
surveying various communities that  had not been surveyed in                                                                    
many years.                                                                                                                     
Commissioner   Campbell   continued   to   discuss   FY   13                                                                    
accomplishments  on slide  23. She  pointed to  past funding                                                                    
for  the  Habitat  Division  used to  keep  up  with  permit                                                                    
requests  and to  enable the  division's involvement  in the                                                                    
pre-permitting  design  phase  to make  the  process  smooth                                                                    
going forward. She relayed that  the Fairbanks and Anchorage                                                                    
sport fish  hatcheries were producing fish,  restocking them                                                                    
into lakes and streams,  and providing angler opportunity at                                                                    
the historic levels  that existed prior to the  loss of heat                                                                    
from the  old Elmendorf  facility. She  shared that  DFG was                                                                    
happy  with improvements  in the  size and  quality of  fish                                                                    
produced in the hatcheries.                                                                                                     
1:51:10 PM                                                                                                                    
Commissioner   Campbell   addressed   current   issues   and                                                                    
challenges  (slide   24).  She   spoke  to   Chinook  salmon                                                                    
abundance  and  productivity  and   the  hardship  that  low                                                                    
returns  and  resulting   fishery  restrictions  had  caused                                                                    
throughout   the   state.   Subsequently,  DFG   had   spent                                                                    
considerable time and resources  developing a Chinook salmon                                                                    
research plan;  the plan implementation was  included in the                                                                    
DFG  FY 14  capital budget  request. She  detailed that  the                                                                    
plan targeted  12 indicator stocks throughout  the state and                                                                    
included  juvenile and  adult stock  work, increased  coated                                                                    
wire tagging, genetics work, and  biometric support in order                                                                    
to  help  DFG  determine  causes for  low  populations.  She                                                                    
communicated   that   the   plan  implementation   was   the                                                                    
department's largest capital request  and one of its largest                                                                    
priorities (to  ensure that the research  program was robust                                                                    
and comprehensive).                                                                                                             
Commissioner  Campbell  continued   to  discuss  issues  and                                                                    
challenges  on slide  24. She  highlighted  the second  item                                                                    
"increased   fishing   and  economic   opportunities."   She                                                                    
detailed  that due  to the  department's absorption  of cost                                                                    
increases or the existence of  inflationary pressures it may                                                                    
not have  the resources to  conduct a stock  assessment that                                                                    
was as  complete as it  would like; the scenario  could lead                                                                    
to more  conservative management and a  loss of opportunity.                                                                    
Subsequently, DFG had  been looking for areas  where a small                                                                    
investment could  result in a large  increase in opportunity                                                                    
for Alaskans.  Some of the  items had  been funded in  FY 13                                                                    
and others were included in  the FY 14 request, specifically                                                                    
in the  salmon fisheries. Additional funding  would help DFG                                                                    
to  increase  its  understanding  of  how  much  salmon  was                                                                    
available   to   harvest   and  the   ability   to   provide                                                                    
opportunity. She spoke to the  state's need to dedicate time                                                                    
and resources  protecting its authority  to manage  fish and                                                                    
wildlife.  She referred  to a  number of  Endangered Species                                                                    
Act  (ESA)  issues  facing  the  department  and  the  staff                                                                    
resources  needed to  engage in  the various  processes. She                                                                    
relayed  that the  department had  received  funding in  the                                                                    
past that  was targeted at  helping to increase  research on                                                                    
stocks that  were future endangered species  candidates; the                                                                    
goal was to  bring state science to the table  to inform the                                                                    
decision making. She added that  DFG worked closely with DOL                                                                    
on the  issues. She stated  that DOL had been  successful on                                                                    
some ESA  issues; however, DFG  had tremendous  concern that                                                                    
federal  agencies   were  listing  healthy,   stable  animal                                                                    
populations  with no  immediate threat  in the  near future.                                                                    
She relayed  that the agencies  were using future  data that                                                                    
speculated  on climate  impacts that  would affect  animals.                                                                    
She believed  that listing species  based on  speculation of                                                                    
what could happen in the future  was not a very high bar; in                                                                    
some cases  the federal  government asserted control  over a                                                                    
species that  had been  managed by the  state or  over lands                                                                    
that may be designated as critical habitat.                                                                                     
1:56:13 PM                                                                                                                    
Commissioner Campbell  discussed that DFG had  been spending                                                                    
an increased amount of time  on invasive species (slide 24).                                                                    
The  department had  active  programs  working to  eradicate                                                                    
various invasive  species including the tunicate  in Whiting                                                                    
Harbor near Sitka  and Pike in Southcentral;  it was working                                                                    
on  prevention  rather  than reacting  when  a  species  was                                                                    
detected.  The department  also recognized  that Alaska  was                                                                    
very  fortunate in  the number  of invasive  species it  was                                                                    
dealing with  in comparison to  other states. She  noted the                                                                    
need  for licensing  modernization, which  was reflected  in                                                                    
the   department's  capital   budget   request.  Paper   was                                                                    
primarily  used  in  the antiquated  licensing  system.  The                                                                    
department sold approximately  700,000 hunting, fishing, and                                                                    
trapping  licenses  annually;  all  of  the  reporting  from                                                                    
vendors  was paper  reporting, which  included a  tremendous                                                                    
amount  of data  entry. The  goal  was to  develop tools  to                                                                    
allow  for  online   reporting  for  personal-use  harvests,                                                                    
electronic logbooks, and other.                                                                                                 
Commissioner  Campbell   moved  to   slide  25   to  discuss                                                                    
highlights  in the  FY 14  operating  budget. She  explained                                                                    
that  DFG had  to react  to  shifts in  the availability  of                                                                    
federal funds.  She elaborated that when  federal funds were                                                                    
discontinued DFG  looked carefully at projects  to determine                                                                    
their  necessity  and  whether  they  fell  under  its  core                                                                    
mission. In  some cases core services  were federally funded                                                                    
including  the  Southeast  salmon  management  programs  (an                                                                    
operating budget  request had been made  for FY 14 due  to a                                                                    
decline  in  the  federal  funds  of  these  programs).  She                                                                    
relayed that  the Division of  Sport Fish relied  heavily on                                                                    
federal funding and income  from license sales; non-resident                                                                    
license sales had  decreased in recent years,  but the trend                                                                    
was  beginning  to  flatten  most  likely  due  to  economic                                                                    
recovery in the  Lower 48. A decline in  federal funding had                                                                    
also   impacted  the   division;  therefore,   DFG  proposed                                                                    
shifting the  Aquatic Resources Project to  GF. She detailed                                                                    
that  the project  benefited many  Alaskans  far beyond  the                                                                    
recreational  angling  sector;  the project  included  water                                                                    
reservations to protect  fish in the event  of proposals for                                                                    
water withdrawal from streams.                                                                                                  
Commissioner Campbell  continued to  provide an  overview of                                                                    
slide  25.  She  addressed  that the  Division  of  Wildlife                                                                    
Conservation relied heavily on  federal funding derived from                                                                    
excise  taxes on  sales of  guns and  ammunition; due  to an                                                                    
increase  in  sales  there was  significantly  more  funding                                                                    
available  than in  the  past. The  division  was hoping  to                                                                    
access the  funds to work on  scientific programs, biometric                                                                    
support,  and education  programs. She  noted that  the $2.5                                                                    
million listed on the slide  was comprised of $500,000 in GF                                                                    
that  would leverage  $2 million  in federal  funds. Federal                                                                    
funds  under  the Forest  Resources  Practices  Act and  the                                                                    
Alaska  Coastal Management  Program  (ACMP)  [ACMP ended  on                                                                    
July 1, 2011] had been  reduced for the Division of Habitat;                                                                    
therefore, GF  funding was needed  for work on Title  16 and                                                                    
41 pre-project reviews and permitting  (the funding had been                                                                    
included  as  a  one-time  increment the  prior  year).  She                                                                    
discussed  additional  salmon  projects where  DFG  believed                                                                    
additional  knowledge would  lead  to increased  opportunity                                                                    
and a  better understanding of  stocks; GF funding  for each                                                                    
of the state's regions had been requested.                                                                                      
Commissioner  Campbell   reviewed  FY  14   capital  project                                                                    
requests  on  slide  26.  She noted  new  projects  she  had                                                                    
previously   mentioned   including    the   Chinook   Salmon                                                                    
Initiative,  the   sport  fishing  in  Alaska   survey,  and                                                                    
licensing modernization. Another new  request was for aerial                                                                    
photo census equipment; the program  was one of the Division                                                                    
of Wildlife's  main tools for caribou  stock assessment. The                                                                    
division  could  no longer  get  film  for its  10-year  old                                                                    
camera  that  the program  relied  on.  She relayed  that  a                                                                    
digital  system  would  improve the  division's  ability  to                                                                    
analyze  photographs. She  pointed the  department's funding                                                                    
request to  conduct an economic  impact sport  fishing study                                                                    
for the 2012 fishing year.  The previous study had been done                                                                    
in 2007; the  study had been designed to  reoccur every five                                                                    
years in  order to  track trends over  time. She  touched on                                                                    
recurring    capital   projects    including   sport    fish                                                                    
recreational boating  access; deferred maintenance  (part of                                                                    
the  governor's  5-year   deferred  maintenance  plan);  and                                                                    
repair and upgrades to facilities, vessels, and aircrafts.                                                                      
2:04:34 PM                                                                                                                    
Co-Chair  Austerman requested  information  that provided  a                                                                    
basic look at the  department's core services, federal funds                                                                    
provided for  each of  the services,  and a  historical look                                                                    
showing  how   the  items  had  been   funded.  Commissioner                                                                    
Campbell agreed to provide the information.                                                                                     
Representative Costello noted that  the department's rate of                                                                    
growth was approximately  twice the rate of  growth shown by                                                                    
other  departments. She  pointed  to slide  21 and  observed                                                                    
that under  the current rate  of growth the rate  would have                                                                    
quadrupled from FY  05 to FY 23. She added  that the figures                                                                    
did not include salary increases.  She discussed the need to                                                                    
keep  the  budget growth  to  approximately  1 percent.  She                                                                    
asked   about   the   department's  plan   to   arrest   the                                                                    
department's rate of growth moving forward.                                                                                     
Commissioner  Campbell  answered  that   there  was  a  very                                                                    
different  picture prior  to 2005,  which  she believed  was                                                                    
true for  a number of  departments; there had not  been much                                                                    
budget growth  in prior years.  She explained that  prior to                                                                    
2005, oil  prices had been  low and there had  been pressure                                                                    
on  budgets;  therefore,  some   of  the  department's  core                                                                    
responsibilities   were  shifted   to  federal   funds.  She                                                                    
believed there had been an  over reliance on federal funding                                                                    
for  core state  responsibilities.  The  department made  an                                                                    
effort  to weed  out projects  for elimination  when federal                                                                    
funds  were  no  longer  available. Another  factor  in  the                                                                    
growth rate related  to GF funds requested  for the Division                                                                    
of Wildlife.  The funds were  necessary in part  because the                                                                    
administration, legislature,  and public had an  interest in                                                                    
the  department  doing  intensive wildlife  management;  the                                                                    
management  programs could  not  be  completed with  federal                                                                    
funding. She opined that some  of the growth would not occur                                                                    
in  the future  because  a  portion of  it  was  due to  the                                                                    
funding of items  that had not been funded in  the past. She                                                                    
touched on  work that  was underway  to increase  hunter and                                                                    
angler license sales in order  to help the department become                                                                    
self-supporting  with the  funds. She  relayed that  DFG was                                                                    
applying a careful, internal test before requesting a back-                                                                     
fill in federal funds.                                                                                                          
2:09:05 PM                                                                                                                    
Mr. Brooks  agreed that it  was significant to note  that FY                                                                    
05 was  the last  year of flat  budgets. He  elaborated that                                                                    
the  decade  had  been  one of  growth  and  that  different                                                                    
environments dictated different  decisions by the department                                                                    
and legislature.  He believed that going  back an additional                                                                    
ten  years prior  to  FY  05 would  change  the dynamic  and                                                                    
potentially  the discussion.  He stated  that ultimately  it                                                                    
came  down to  the  department's  responsibility to  closely                                                                    
review projects it proposed to the legislature for funding.                                                                     
Representative Costello asked  Commissioner Campbell to give                                                                    
the  department a  letter grade  for  its overall  activity,                                                                    
river  and commercial  fish  management,  and management  of                                                                    
Commissioner Campbell commented  on the potential limitation                                                                    
of a letter grading  system for understanding the subtleties                                                                    
of performance.  She believed that the  department was doing                                                                    
very  well in  its  success  on the  wildlife  side; it  had                                                                    
increased heard  sizes relied  upon by  Alaskans, additional                                                                    
opportunity was  provided, and  it was  spending significant                                                                    
resources to increase hunter  recruitment and retention. She                                                                    
believed  that  it was  more  difficult  to talk  about  the                                                                    
management of fisheries as a  success subsequent to the past                                                                    
fishing  season.  She  remarked  that it  was  important  to                                                                    
recognize  that DFG  was not  solely  responsible for  every                                                                    
aspect of  salmon abundance; many  times the  department had                                                                    
to react  to what  was put before  it related  to management                                                                    
challenges. She  did not believe  that Alaskans would  be as                                                                    
happy  if  they  were  asked  to  grade  the  department  on                                                                    
fisheries management  given increased restrictions  that had                                                                    
been  implemented  the prior  season.  She  opined that  DFG                                                                    
biologists were  doing the  best they  could to  protect the                                                                    
resource while balancing the need to provide opportunity.                                                                       
Representative  Costello   guessed  that   the  department's                                                                    
overall grade was perhaps an average  of B-.  She pointed to                                                                    
the   department's  capital   request  for   Chinook  salmon                                                                    
research;  she  struggled  with the  idea  of  funding  core                                                                    
services  with   capital  appropriations.  She   offered  to                                                                    
discuss the issue at a later time.                                                                                              
Commissioner Campbell  answered that  there were a  blend of                                                                    
projects in  the Chinook salmon  research plan. Some  of the                                                                    
projects were short-term; however, at  the end of the 5-year                                                                    
plan DFG may decide that  others have value for continuation                                                                    
in the long-term.  In the future there may be  a request for                                                                    
the  continuation of  the long-term  value  projects in  the                                                                    
operating budget.                                                                                                               
2:13:13 PM                                                                                                                    
Co-Chair  Stoltze  wondered  whether  the  department  would                                                                    
categorize its performance  as outstanding, satisfactory, or                                                                    
needs improvement.  He noted that  DFG was asking  for large                                                                    
increments and should be able to assess itself.                                                                                 
Commissioner Campbell  replied that the department  had done                                                                    
an outstanding job on wildlife  management. She believed DFG                                                                    
had done a satisfactory  job in fisheries management related                                                                    
to its reaction to the prior fishing season.                                                                                    
Co-Chair Stoltze asked whether  the department had any areas                                                                    
that   fell   under   the  "needs   improvement"   category.                                                                    
Commissioner  Campbell replied  that  there  were areas  the                                                                    
department  had  identified  that  needed  improvement.  She                                                                    
added  that DFG  had worked  to  identify the  areas in  its                                                                    
budget process and the need to address them going forward.                                                                      
Co-Chair  Stoltze asked  how the  economic impact  study for                                                                    
sport  fish  would  be  used if  funding  was  provided.  He                                                                    
wondered   whether  the   study  would   influence  improved                                                                    
economic related  decisions by the department  and the Board                                                                    
of Fish.                                                                                                                        
Commissioner  Campbell responded  that  the  study would  be                                                                    
used  in  a  variety  of  ways. Economics  was  one  of  the                                                                    
criteria  considered  by  the  Board  of  Fish  when  making                                                                    
decisions.  Additionally, DFG  used the  study for  planning                                                                    
purposes for  stocking and  enhancement programs;  the study                                                                    
showed the department where the  angler interest was located                                                                    
and where  angler activity would  contribute to  the economy                                                                    
if opportunity was boosted.                                                                                                     
Co-Chair Stoltze asked whether  economic impact and economic                                                                    
benefit should have a greater  role in allocation decisions.                                                                    
Commissioner  Campbell answered  that the  issue was  one of                                                                    
the  criteria considered  by the  boards. She  believed that                                                                    
different weight  was placed  on the  criteria based  on the                                                                    
2:16:43 PM                                                                                                                    
Representative  Kawasaki  referred  to the  prior  ACMP  and                                                                    
asked  if a  particular  GF increment  for  the Division  of                                                                    
Habitat  was related  to  assuming  responsibility for  some                                                                    
activities that had occurred under the previous program.                                                                        
Commissioner   Campbell  replied   that  DFG   had  received                                                                    
documents  from DNR  for some  of the  work that  went along                                                                    
with  permitting  projects  in Alaska's  coastal  zone.  She                                                                    
detailed that  the process was slightly  different; however,                                                                    
the  work  remained for  DFG,  which  explained the  funding                                                                    
Representative  Kawasaki   was  happy  that   the  Fairbanks                                                                    
hatchery had begun producing fish.  He discussed an original                                                                    
plan to  use heated wastewater  from the power  plant, which                                                                    
had not  worked out.  The facility  was currently  using oil                                                                    
heat  and  he  wondered  whether the  operational  cost  was                                                                    
reflected in the budget.  Commissioner Campbell replied that                                                                    
the  sport  fish budget  included  a  separate component  to                                                                    
easily   identify   the   hatchery  operating   costs.   She                                                                    
elaborated  that there  was not  an increment  in the  FY 14                                                                    
budget  to  account  for   increased  operating  costs.  She                                                                    
offered to provide the information.                                                                                             
Representative Kawasaki  affirmed his interest  in receiving                                                                    
the budget information regarding hatchery operating costs.                                                                      
Vice-Chair Neuman  pointed to the 9.6  percent budget growth                                                                    
rate on  slide 21.  He understood  that a  growth rate  of 3                                                                    
percent  to  4 percent  was  inevitable  due to  contractual                                                                    
obligations  and inflation.  He read  the department's  core                                                                    
mission statement from slide 2:                                                                                                 
     To protect,  maintain, and improve the  fish, game, and                                                                    
     aquatic plant resources of the  state, and manage their                                                                    
     uses  and  development  in the  best  interest  of  the                                                                    
     economy and the well-being of  the people of the state,                                                                    
     consistent with the sustained yield principle.                                                                             
Vice-Chair Neuman recognized that  fish was a difficult area                                                                    
to manage  and that the state  did not have control  of what                                                                    
went  on in  the ocean.  He wondered  whether the  state had                                                                    
increased  the total  allowable harvest  of game  from 2005.                                                                    
Commissioner  Campbell replied  that she  had not  looked at                                                                    
the issue on an aggregate  basis since 2005. She did believe                                                                    
there  was an  increased hunting  opportunity available  for                                                                    
Alaskans  at  present  as  a   result  of  the  department's                                                                    
activities.  She  pointed  to  the  South  Alaska  Peninsula                                                                    
caribou  heard that  had been  shut  down in  the past;  the                                                                    
department had  removed some predators  in the area  and the                                                                    
heard increased  by 50 percent.  Subsequently, the  area had                                                                    
been  reopened to  hunters. She  pointed  to other  elevated                                                                    
harvest levels  that accounted for  27 percent of  the total                                                                    
statewide  harvest.   She  expressed  confidence   that  the                                                                    
programs had resulted in increased hunting opportunities.                                                                       
Vice-Chair Neuman  asked for verification  that Commissioner                                                                    
Campbell believed  there was  currently more  game harvested                                                                    
[than  in  2005].  Commissioner Campbell  replied  that  she                                                                    
would have to  look at total harvests from  2005 compared to                                                                    
current harvests. She strongly  believed there was more game                                                                    
harvest  currently  based   on  the  department's  intensive                                                                    
Vice-Chair  Neuman   asked  about   areas  that   could  use                                                                    
improvement.  He believed  the  intensive  management was  a                                                                    
significant  factor in  the increased  harvest  of game.  He                                                                    
noted  that  the harvest  of  moose  had declined  for  many                                                                    
Alaskans. He was interested in  management decisions made by                                                                    
the department.                                                                                                                 
Commissioner Campbell  replied that  some of  the management                                                                    
programs were reviewed  and refined by the Board  of Game on                                                                    
an annual basis. She pointed  to Title 16(b), where wolf and                                                                    
bear  control provisions  were located  and noted  that even                                                                    
though   the  moose   population   was   getting  close   to                                                                    
objectives,  harvest  objectives  were not  being  met.  She                                                                    
relayed  that  a  discussion regarding  how  to  refine  and                                                                    
improve the program  would take place at  the upcoming Board                                                                    
of  Game  meeting. The  department  was  in the  process  of                                                                    
implementing   additional   work  on   habitat   improvement                                                                    
projects to increase moose availability.                                                                                        
2:24:55 PM                                                                                                                    
Vice-Chair Neuman  He wondered  whether economics  should be                                                                    
addressed when measuring  how allocations were appropriated.                                                                    
He pointed back  to the DFG mission  statement. He discussed                                                                    
whether economics  should play  a larger part  in management                                                                    
decisions made  by the board.  He addressed the  interest of                                                                    
Alaska's  economy  and  relayed   that  Mat-Su  had  seen  a                                                                    
decrease in revenue of over $100  million due to the lack of                                                                    
salmon;  it had  been devastating  to the  community, Kenai,                                                                    
and other locations.                                                                                                            
Commissioner   Campbell  replied   that  DFG   did  consider                                                                    
economics in its decision making  and in its budget process.                                                                    
She elaborated that the department  was currently looking at                                                                    
areas where economic opportunity  could be increased through                                                                    
better   decision   making.   She   detailed   that   better                                                                    
information  would  enable  the   department  to  make  more                                                                    
informed   decisions   in   order   to   increase   economic                                                                    
opportunity.  She  elaborated  that DFG  worked  within  the                                                                    
allocation and management plan adopted  by the board, but it                                                                    
still  had the  responsibility and  opportunity to  consider                                                                    
the economics of fisheries it managed.                                                                                          
Vice-Chair    Neuman   restated    Commissioner   Campbell's                                                                    
statement that  the department did have  the opportunity [to                                                                    
consider economics in DFG decision making process].                                                                             
Representative  Gara  referred  to slide  26  and  addressed                                                                    
concern  about dwindling  stocks of  King salmon  statewide.                                                                    
The numbers  were down in  the Yukon,  Kodiak, Southcentral,                                                                    
and  other. He  wondered whether  the $10  million requested                                                                    
for  the Chinook  Salmon  Initiative  would provide  answers                                                                    
about  why  the state  was  in  danger  of losing  the  wild                                                                    
fishery in all areas or in particular areas.                                                                                    
Commissioner  Campbell  responded  in the  affirmative.  The                                                                    
plan  was   designed  to  provide  answers   about  why  the                                                                    
predicament existed.  She detailed  that the  initiative and                                                                    
research  plan focused  on 12  stocks  throughout the  state                                                                    
(from  Southeast   to  the  Yukon).  She   communicated  the                                                                    
proposed  increment  would  fund smolt  out-migration  work,                                                                    
which  would provide  a sense  of  what was  going into  the                                                                    
marine environment.  The work was critical  to understanding                                                                    
whether the  productivity problem  was related  to something                                                                    
occurring   in   freshwater   (i.e.   conditions,   habitat,                                                                    
predators,  or other)  or something  related to  survival in                                                                    
the marine environment.                                                                                                         
2:29:21 PM                                                                                                                    
Representative Gara  wanted to  ensure streams would  not be                                                                    
left out. He noted that  the Mat-Su area had been devastated                                                                    
and  asked  whether it  along  with  the Susitna  and  Kenai                                                                    
Peninsula streams were covered under the research plan.                                                                         
Commissioner Campbell responded that  the plan included work                                                                    
on  the Yukon,  Kuskokwim,  Chignik, Kodiak  areas; and  the                                                                    
Susitna  drainage,   Kenai  Peninsula,  Copper   River,  and                                                                    
Representative Gara  asked what  the department could  do if                                                                    
the initiative pointed to high  seas interception of salmon.                                                                    
Commissioner Campbell responded that  it depended on whether                                                                    
the  mortality  was  in  domestic  federal  water  fisheries                                                                    
between 3  and 200 miles, beyond  200 miles, or as  a result                                                                    
of illegal fishing. In any of  the cases DFG had a mechanism                                                                    
to  address  the issues.  She  was  a  member of  the  North                                                                    
Pacific  Fishery  Management   Council,  which  managed  the                                                                    
fisheries from 3  to 200 miles; the position  allowed her to                                                                    
influence  what occurred  in  federal  fisheries. She  added                                                                    
that   the  department   was  involved   in   a  number   of                                                                    
international bodies  that negotiated on items  such as high                                                                    
seas driftnet enforcement with  other Pacific Rim countries.                                                                    
Additionally,  there was  an  international commission  that                                                                    
discussed  management of  Pollock  fisheries (Pollock  stock                                                                    
crossed  the Alaska/Russian  border). She  relayed that  the                                                                    
department had some ability to  influence enforcement on the                                                                    
high  seas  and  was  involved  in  scientific  exchange  to                                                                    
understand  activity taking  place outside  of the  200-mile                                                                    
2:31:37 PM                                                                                                                    
Representative  Gara  thought  that   the  answers  for  the                                                                    
initiative  would take  time. He  stated that  it was  known                                                                    
that  King salmon  were being  intercepted  and dumped  dead                                                                    
back  into the  water on  the high  seas level.  He wondered                                                                    
whether  DFG would  be able  to provide  the number  of King                                                                    
salmon that were intercepted and  the locations the practice                                                                    
was occurring. He asked for  confirmation that the fish were                                                                    
thrown overboard.                                                                                                               
Commissioner  Campbell  answered  that  the  department  the                                                                    
information  for  domestic fisheries  (3  to  200 mile  from                                                                    
shore range) and  would provide it. She had  been working on                                                                    
implementing caps and controls  on bycatch in fisheries that                                                                    
had none  (e.g. the Gulf  of Alaska fisheries had  no limits                                                                    
on  Chinook salmon  bycatch).  The issue  had  been a  major                                                                    
focus the North Pacific  Fishery Management Council had been                                                                    
working  on. She  would provide  information on  areas where                                                                    
limits had  been put in  place versus areas the  council was                                                                    
working to implement a limit.                                                                                                   
2:32:58 PM                                                                                                                    
Representative   Edgmon   asked   for   comment   on   ocean                                                                    
acidification.  He  appreciated the  commissioner's  concise                                                                    
presentation. Additionally, he  thanked the commissioner for                                                                    
her role  in getting the Board  of Fish out to  Bristol Bay.                                                                    
He  believed it  was important  for  the Board  of Fish  and                                                                    
Board of Game to have a presence in outlying regions.                                                                           
Commissioner  Campbell  responded that  ocean  acidification                                                                    
was of great concern to  the fishing industry in Alaska. She                                                                    
detailed that  specific concern related  to how a  change in                                                                    
the ocean's  pH levels could impact  shell-forming organisms                                                                    
and primary  prey species for salmon.  She communicated that                                                                    
the University  of Alaska had  taken the lead  in developing                                                                    
research  to  monitor  Alaska's ocean  acidity  levels  that                                                                    
would provide  baseline information  and early  detection of                                                                    
potentially  harmful  trends. She  relayed  that  DFG had  a                                                                    
cooperative  relationship with  the  Alaska Ocean  Observing                                                                    
System  that  provided  sea  conditions   and  some  of  the                                                                    
Representative Wilson pointed to  DFG testimony that hunting                                                                    
opportunities  had increased.  She  wondered  why the  guide                                                                    
concession  program was  needed and  why DFG  should not  be                                                                    
running it  because it was  about the number of  animals and                                                                    
not  necessarily  the land.  She  understood  the issue  was                                                                    
Commissioner Campbell  answered that the development  of the                                                                    
guide  concession program  had  been  primarily through  DNR                                                                    
because it  was related  to access and  use of  state lands;                                                                    
however,  the effort  had been  cooperative between  DNR and                                                                    
DFG. She  agreed that  a critical  component of  the program                                                                    
was  related to  wildlife harvest.  She elaborated  that DFG                                                                    
had been  involved in the  development of the program  as it                                                                    
related to  harvest opportunities  and impacts  on wildlife.                                                                    
She   stated  that   although   heard   sizes  and   hunting                                                                    
opportunity had  increased, every conflict that  existed had                                                                    
not been eliminated.  She noted that there  were areas where                                                                    
there was  not enough harvest opportunity  for both resident                                                                    
and non-resident  hunters. The Board of  Game had determined                                                                    
that if  there was not  a program developed to  regulate the                                                                    
guide industry and opportunity,  an alternative way to limit                                                                    
non-resident hunting  opportunity would need to  be devised.                                                                    
The reaction  from the guide  industry was  that alternative                                                                    
options could  be extremely destabilizing (e.g.  reliance on                                                                    
a  draw permit  or  other). The  department  was working  to                                                                    
support the process where it could.                                                                                             
Co-Chair Stoltze asked members  to take advantage of working                                                                    
with the co-chairs offices on  issues they would like to see                                                                    
2:38:35 PM                                                                                                                    
AT EASE                                                                                                                         
2:41:26 PM                                                                                                                    
^FY 14  GOVERNOR'S BUDGET  OVERVIEW: DEPARTMENT  OF MILITARY                                                                  
AND VETERANS AFFAIRS                                                                                                          
2:41:39 PM                                                                                                                    
MAJOR GENERAL THOMAS H.  KATKUS, COMMISSIONER, DEPARTMENT OF                                                                    
MILITARY AND VETERANS AFFAIRS (DMVA), introduced his staff.                                                                     
MCHUGH PIERRE,  DEPUTY COMMISSIONER, DEPARTMENT  OF MILITARY                                                                    
AND VETERANS  AFFAIRS, communicated that planned  to share a                                                                    
video related to department activities.                                                                                         
Commissioner  Katkus  added  that  the video  had  been  put                                                                    
together by young members of  the military. The video titled                                                                    
"2012 Year in Review" was shown.                                                                                                
2:53:44 PM                                                                                                                    
Commissioner  Katkus  provided   a  PowerPoint  presentation                                                                    
titled "Alaska  Department of Military and  Veterans Affairs                                                                    
FY 2014 Overview" dated January  30, 2013 (copy on file). He                                                                    
shared the department's mission (slide 2):                                                                                      
     To  provide  military  forces  to  accomplish  military                                                                    
     missions  in the  state or  around  the world;  provide                                                                    
     homeland  security  and  defense;  emergency  response;                                                                    
     veterans  services; and  youth military  style training                                                                    
     and education.                                                                                                             
Commissioner  Katkus   pointed  to  the   department's  Core                                                                    
Services (slide 3):                                                                                                             
   · Defend and Protect Alaska and the United States                                                                            
   · Disaster Preparedness/Response and Recovery                                                                                
   · Youth Intervention                                                                                                         
   · Outreach to Veterans and Military Families                                                                                 
Commissioner  Katkus  discussed   measures  and  results  on                                                                    
slides 4  and 5. He shared  that the department had  met all                                                                    
of  its state  and federal  emergency response  requirements                                                                    
for  training and  deployments. He  discussed a  significant                                                                    
number  of  at-risk  youths  who   had  graduated  from  the                                                                    
military  youth  academy; the  graph  on  slide 4  showed  a                                                                    
graduating class  of approximately 300 students  in 2012. He                                                                    
detailed that  benefits outweighed  the program  cost, given                                                                    
that many of  the youths could have ended up  in the state's                                                                    
correctional system.  He believed  the program had  been and                                                                    
continued to  be very successful.  He spoke to  the one-time                                                                    
benefit  payments for  the  state's  veterans. He  expounded                                                                    
that  veterans were  hard to  track in  Alaska because  many                                                                    
felt  that their  need  for  services was  not  as great  as                                                                    
others.  The department  continued its  efforts to  register                                                                    
every veteran, which drove  additional federal resources for                                                                    
veteran  support. He  touched on  the department's  outreach                                                                    
programs  to register  veterans  with the  help of  veterans                                                                    
service  officers and  community volunteers;  he pointed  to                                                                    
the significant increase in paid  benefits from 2005 to 2012                                                                    
(slide 5).                                                                                                                      
Commissioner Katkus addressed  the department's general fund                                                                    
budget on slide 6. He  shared that the DMVA budget accounted                                                                    
for 0.44 percent  of the state's overall  budget. He pointed                                                                    
to all  of the actions  shown in the video  that represented                                                                    
work funded by state dollars.                                                                                                   
2:57:46 PM                                                                                                                    
Commissioner  Katkus moved  on to  discuss the  department's                                                                    
budget by fund  and source (slide 7).  He directed attention                                                                    
to the left  chart and noted that the general  fund (GF) was                                                                    
the only fund  source that had grown in the  past two years.                                                                    
He  explained that  the GF  increase had  resulted from  the                                                                    
department's   new  oversight   of   the  Alaska   Aerospace                                                                    
Corporation  (AAC).  The  graphs   on  the  right  showed  a                                                                    
breakout  of  the AAC  budget  and  the department's  budget                                                                    
without  AAC, which  illustrated that  without AAC  the DMVA                                                                    
general fund  budget had remained  consistent over  time. He                                                                    
emphasized  that  DMVA had  not  expanded  its programs.  He                                                                    
believed the department used its general funds very well.                                                                       
Commissioner Katkus turned to  the department's 10-year plan                                                                    
(slide 8).                                                                                                                      
Mr. Pierre  added that the  projection on slide  8 pertained                                                                    
to the DMVA 10-year plan for all funds.                                                                                         
Commissioner  Katkus  continued  to   discuss  slide  8.  He                                                                    
pointed  to large  federal funding  increases projected  for                                                                    
future projects  including a  USPFO [United  States Property                                                                    
and Fiscal  Office] facility that would  capture all control                                                                    
of federal  equipment coming into  the state,  AAC projects,                                                                    
and the  Fairbanks Armory. He relayed  that the department's                                                                    
current  level   of  service   would  remain   constant.  He                                                                    
addressed  the  10-year  plan general  funds  projection  on                                                                    
slide 9.  He pointed out  that potential GF  increases would                                                                    
occur to match federal  funds if facilities were constructed                                                                    
in the future.                                                                                                                  
Commissioner Katkus pointed to priority issues on slide 10:                                                                     
   · Federal Funding and Sequestration                                                                                          
   · Base Realignment and Closure (BRAC)                                                                                        
   · Alaska Military Youth Academy Formula Funding                                                                              
   · Alaska Aerospace Corporation Contracts                                                                                     
   · Fairbanks Cemetery Land                                                                                                    
Commissioner  Katkus elaborated  that federal  sequestration                                                                    
was  the department's  highest priority;  it was  working to                                                                    
evaluate how  sequestration would  impact the state  and how                                                                    
the DMVA  would continue with  its programs. He  believed it                                                                    
would be very manageable for the state.                                                                                         
3:01:24 PM                                                                                                                    
Co-Chair Austerman looked at the  chart's gray line on slide                                                                    
8 reflecting  the current level of  service plus initiative.                                                                    
He  surmised that  the data  partially incorporated  ongoing                                                                    
AAC development.  Commissioner Katkus  agreed that  the line                                                                    
included the projected anticipated development of AAC.                                                                          
Co-Chair Austerman  remarked that  he did  not see  the same                                                                    
growth pattern reflected on slide  9. He believed there were                                                                    
anticipated  GF requests  and expenditures  for  AAC in  the                                                                    
next few years.                                                                                                                 
CRAIG  CAMPBELL,  PRESIDENT  AND  CHIEF  EXECUTIVE  OFFICER,                                                                    
ALASKA  AEROSPACE CORPORATION,  DEPARTMENT  OF MILITARY  AND                                                                    
VETERANS AFFAIRS, looked at the  top right chart on slide 7,                                                                    
which included  the $8  million AAC  request from  the prior                                                                    
year  and the  current  year. Subsequent  slides showed  the                                                                    
peak that DMVA  was required to cover, which  was created by                                                                    
the addition  of AAC  to the  department. He  explained that                                                                    
the addition of AAC skewed the DMVA chart.                                                                                      
Mr. Pierre  added that  DMVA was doing  its best  to reflect                                                                    
match requirements of GF to the  projects on slides 8 and 9.                                                                    
He elaborated  that goal  was to  show the  anticipated [GF]                                                                    
spending that  would be  required in  addition to  the total                                                                    
federal  and  outside partner  money.  He  relayed that  the                                                                    
projected  spending  may change  as  AAC  pursued the  third                                                                    
launch  pad for  the  medium lift  rocket  capability; if  a                                                                    
change  occurred DMVA  would  provide  the legislature  with                                                                    
updated information.                                                                                                            
Mr.  Campbell  noted  that  the   bottom  line  on  slide  8                                                                    
represented  an AAC  project baseline.  He  stated that  $25                                                                    
million  had been  allocated  the prior  year,  but only  $1                                                                    
million had been spent to  date; AAC was waiting on contract                                                                    
agreements with Lockheed Martin.  The gray peaks represented                                                                    
projected funds for the USPFO and Fairbanks Armory.                                                                             
3:04:43 PM                                                                                                                    
Co-Chair Austerman remarked that the  $25 million was a one-                                                                    
time expenditure.  He did not  believe the figure  should be                                                                    
continued across the  chart from FY 13 to FY  23. Mr. Pierre                                                                    
replied that  the figure  was reflected  in the  fiscal year                                                                    
the department anticipated on spending the funds.                                                                               
Co-Chair Austerman  asked if  DMVA anticipated  spending the                                                                    
$25  million  until  FY  23.   Mr.  Pierre  replied  in  the                                                                    
Commissioner  Katkus  communicated  that slide  8  showed  a                                                                    
projected  10-year plan  for all  funds (including  federal)                                                                    
whereas, slide 9 showed the data for GF only.                                                                                   
Co-Chair  Austerman asked  for  verification  that that  the                                                                    
gray  line  on  slide  9  did not  include  the  $8  million                                                                    
requested  increment for  AAC. Mr.  Pierre responded  in the                                                                    
affirmative.  The  $8  million  was  not  in  the  long-term                                                                    
spending  plan  and  was  not   included  in  the  long-term                                                                    
projection. He pointed  to slide 9 and  noted that projected                                                                    
GF decreased  slightly as a result;  however, moving farther                                                                    
out into  the future  the gray line  increased due  to large                                                                    
projects on the horizon.                                                                                                        
Representative Kawasaki asked  if data used in  the graph on                                                                    
slide 9  had come from  the Office of Management  and Budget                                                                    
(OMB). Mr. Pierre responded in the affirmative.                                                                                 
Representative  Kawasaki  referred  to   a  meeting  he  had                                                                    
attended earlier  in the day  on the AAC that  had addressed                                                                    
anticipated  future contracts  and  potential federal  funds                                                                    
supplanting GF  in the  future. He did  not believe  the OMB                                                                    
10-year projection included the data.                                                                                           
Mr.  Campbell replied  that  the AAC  data  provided to  OMB                                                                    
reflected $8 million  in GF for FY 14, $6  million in FY 15,                                                                    
$4 million in FY 16, and  $2 million in FY 17. The declining                                                                    
funding requests  were based on  a projection  for increased                                                                    
contracts   and  other   incoming   revenues.  The   request                                                                    
flattened  to  $2  million  at   the  5-year  point  due  to                                                                    
anticipated launches  and potential federal  matching funds.                                                                    
He was  comfortable with the 5-year  projection, whereas the                                                                    
following 5-year period was less clear.                                                                                         
3:08:59 PM                                                                                                                    
Representative  Kawasaki   noted  that  the  graph   he  had                                                                    
received in the budget subcommittee  was zeroed out after FY                                                                    
17.  Mr.   Pierre  replied  that   the  chart   received  in                                                                    
subcommittee may  not reflect  the most  recent information.                                                                    
He  relayed that  the  department  would provide  additional                                                                    
detail on  AAC to  the budget  subcommittee on  February 18,                                                                    
Representative Kawasaki asked about  the $75,000 request for                                                                    
maintenance  and operation  of  the  Fairbanks Cemetery.  He                                                                    
wondered about  the status  of the  cemetery and  whether it                                                                    
was open.                                                                                                                       
Mr. Pierre  responded that  money had  been included  in the                                                                    
DMVA  capital  budget  request  that  would  allow  for  the                                                                    
purchase  of  land  for the  cemetery.  The  department  had                                                                    
worked  to get  the land  donated  and had  worked with  the                                                                    
Department of  Natural Resources, the University  of Alaska,                                                                    
and private  citizens. He explained  that 32 out of  34 core                                                                    
samples  taken  from  the land  the  department  anticipated                                                                    
using  had shown  permafrost; therefore,  the  land was  not                                                                    
usable.  The  goal  was to  find  approximately  100  acres;                                                                    
Veterans Affairs  (VA) required the  land to be  larger than                                                                    
40  acres.  The  department  had  reached  the  point  where                                                                    
purchasing land was the option;  it had posted a request for                                                                    
information  (RFI)  on  properties available  for  sale  and                                                                    
pricing. The FY  14 capital budget request  was $2.5 million                                                                    
and DMVA anticipated  the total land cost to  be $3 million.                                                                    
Once   the  budget   increment   had   been  approved   DMVA                                                                    
anticipated  posting a  request for  proposal in  July; once                                                                    
the  land was  entitled the  VA would  provide the  funds to                                                                    
build and the cemetery would open  in the last quarter of FY                                                                    
14. The  $75,000 reflected operations for  the final quarter                                                                    
of FY  14. The  department believed  it would  cost $300,000                                                                    
annually to maintain and operate the cemetery.                                                                                  
Representative  Kawasaki   referred  to  the   $2.5  million                                                                    
capital budget  request for the  purchase of land.  He asked                                                                    
about who owned the land and what its current value was.                                                                        
3:11:56 PM                                                                                                                    
Mr.  Pierre replied  that the  department did  not know.  He                                                                    
elaborated  that there  had been  multiple responses  to the                                                                    
RFI that had  ranged from $800,000 to  $15 million depending                                                                    
on  the  location   and  the  size  of   the  property.  The                                                                    
department believed it was best  to work with the community,                                                                    
the  Interior  delegation,  and   with  relator  input.  The                                                                    
department hoped to  procure least 100 acres  to fulfill its                                                                    
promise to veterans in the Interior region of Alaska.                                                                           
Representative Gara  recognized the  importance AAC  had for                                                                    
the  community of  Kodiak; however,  he was  concerned about                                                                    
the  corporation.  He  asked   for  the  total  capital  and                                                                    
operating funds that had been appropriated to AAC in FY 13.                                                                     
Mr.  Campbell replied  that  the FY  13  budget included  $8                                                                    
million  in   the  operating   budget  for   operations  and                                                                    
sustainment of  the Kodiak  launch complex  and AAC  for one                                                                    
year.   Additionally,  the   legislature   had  funded   the                                                                    
governor's $25  million capital request for  the development                                                                    
of  a  new  medium-lift  launch pad.  The  funding  included                                                                    
several  criteria  specifying  that  the  corporation  could                                                                    
spend no more  than $3 million until a  firm launch schedule                                                                    
was obtained  from a customer (Lockheed  Martin was expected                                                                    
to be the customer), once  the launch dates were established                                                                    
AAC could spend $10 million  to begin the engineering design                                                                    
for the  facility and it  could move forward on  a financing                                                                    
package (the  total launch complex would  cost approximately                                                                    
$125 million),  once the additional 100  million was secured                                                                    
the corporation could use the  remaining $12 million for the                                                                    
construction of the complex.                                                                                                    
3:14:17 PM                                                                                                                    
Representative  Gara  wondered   whether  AAC  would  submit                                                                    
capital  funding  requests  in  addition  to  the  operating                                                                    
requests Mr. Campbell previously mentioned.                                                                                     
Mr.  Campbell answered  that AAC  had a  capital request  of                                                                    
approximately  $185,000  for  the rebuilding  of  a  weather                                                                    
station and slightly under $1  million for the corporation's                                                                    
deferred  maintenance backlog,  which totaled  approximately                                                                    
$4 million to $5 million.                                                                                                       
Representative Gara asked for  the current total operational                                                                    
cost for  the facility (state  GF and non-GF funds)  and the                                                                    
income that had been generated.                                                                                                 
Mr.  Campbell answered  that AAC  had no  launches scheduled                                                                    
and  no  contracts  in  the   current  or  prior  year;  the                                                                    
corporation needed  the state's support during  the two-year                                                                    
period while  it changed its  business development  plan and                                                                    
acquired  new  customers.  He  elaborated  that  the  Kodiak                                                                    
launch complex  had been built  15 years earlier;  there had                                                                    
been  16 launches  and the  state had  provided between  $30                                                                    
million and  $35 million in  support. Additionally,  AAC had                                                                    
received $145  million to $150  million in federal  funds to                                                                    
build  the  complex and  $140  million  to $150  million  in                                                                    
launch revenues.                                                                                                                
Mr.  Campbell  summarized  that AAC  had  received  slightly                                                                    
under  $300  million  against the  approximate  $30  million                                                                    
contributed by the state. He  expounded that the corporation                                                                    
had  become  complacent  and  relied  on  working  with  the                                                                    
Missile  Defense Agency  (MDA)  between 2006  and 2009;  the                                                                    
agency  had been  the corporation's  only  customer and  had                                                                    
paid all of the bills. As  a result, AAC had not marketed to                                                                    
other customers.  Subsequently, when  MDA moved  its program                                                                    
to  the  Pacific,  AAC  had   no  other  customer  base.  He                                                                    
explained that AAC  had then requested state  funds in 2010;                                                                    
it took  two years to  prepare for a launch;  therefore, the                                                                    
corporation knew it  would have no launch  contracts for two                                                                    
years.   He  acknowledged   that   the  onus   was  on   the                                                                    
corporation.  The  corporation  had  asked  for  two  annual                                                                    
appropriations   of  $8   million;   requests  would   begin                                                                    
declining  the   following  year,  given   AAC's  aggressive                                                                    
business  development. He  shared that  the corporation  was                                                                    
actively working with the space  and missile defense command                                                                    
(U.S. Army command) and was  close to signing a contract for                                                                    
a 2014  launch. Additionally, AAC was  working with Lockheed                                                                    
Martin (in the past the  company had told the legislature it                                                                    
had selected  Kodiak as a  launch site), which was  close to                                                                    
completing contract  work on  a small  launch in  late 2014.                                                                    
The  corporation was  working with  the U.S.  Air Force  and                                                                    
other  agencies and  believed it  would have  three to  four                                                                    
launches  per year  in  the future.  He  reiterated that  as                                                                    
revenues increased  due to  launches, the  corporation would                                                                    
reduce  state   funding  requests.   He  relayed   that  the                                                                    
corporation was confident  it would not need  $8 million the                                                                    
next year;  fund sources were  shifting away from  the state                                                                    
and back to the private sector.                                                                                                 
3:18:34 PM                                                                                                                    
Co-Chair Austerman asked for  detailed information about the                                                                    
$25 million  request. He wondered about  contracts that were                                                                    
in progress with Lockheed Martin or other.                                                                                      
Mr.   Campbell  replied   that  the   $25  million   capital                                                                    
appropriation the prior year had  been for the medium launch                                                                    
lift  (launch pad  3), which  had  been designed  to meet  a                                                                    
potential customer need to launch  larger rockets (twice the                                                                    
size  of  the  rockets  launched at  the  small  lift);  the                                                                    
facility was not yet available.  He elaborated that Lockheed                                                                    
Martin had been  the first customer to approach  AAC; it was                                                                    
working  on a  medium-lift  program called  Athena III.  The                                                                    
company had  hoped that AAC would  begin construction during                                                                    
the current year, but AAC was  waiting to spend money on the                                                                    
launch  pad until  the customer  contract  and launch  dates                                                                    
were  secured. The  corporation had  allocated a  portion of                                                                    
the  $25   million  to   an  environmental   assessment  and                                                                    
permitting; it  was also looking at  the initial medium-lift                                                                    
design.  He  furthered  that  AAC   had  been  working  with                                                                    
Lockheed Martin  on what its  rocket requirements  would be.                                                                    
The  plan was  to  spend less  than $1  million  of the  $25                                                                    
million until Lockheed Martin  provided its launch schedule.                                                                    
He  communicated that  another company  had visited  AAC and                                                                    
was  interested in  a medium-lift  launch.  The company  was                                                                    
currently in the  process of an East  Coast launch scheduled                                                                    
to occur in the spring  (Antares rocket); it would also need                                                                    
a West  Coast launch location  and AAC anticipated  that the                                                                    
company would  visit to discuss  using the  Kodiak facility.                                                                    
He added that  AAC wanted to optimize the  launch complex in                                                                    
order to  meet the needs  of all customers. He  relayed that                                                                    
AAC  was slowing  down on  spending in  the current  year in                                                                    
anticipation of customer agreements  and schedules; it would                                                                    
move  forward   with  the   full  design   and  construction                                                                    
beginning in the following year.                                                                                                
3:21:05 PM                                                                                                                    
Co-Chair  Austerman  asked if  the  corporation  had a  time                                                                    
commitment from  Lockheed Martin. Mr. Campbell  responded in                                                                    
the negative.                                                                                                                   
Representative   Gara  asked   for  verification   that  the                                                                    
corporation did  not have any  firm customers.  Mr. Campbell                                                                    
replied  that AAC  had a  federal  government customer  that                                                                    
would launch in August 2014.  Kodiak had been identified for                                                                    
small U.S. Air Force launch  missions by Lockheed Martin and                                                                    
Orbital  Sciences between  2013 and  2017. The  missions had                                                                    
not been  scheduled, but  the $1  billion contract  had been                                                                    
awarded  to Lockheed  Martin  and  Orbital Sciences;  Kodiak                                                                    
would  be the  launch  site. He  noted  that the  difference                                                                    
between AAC  and a federal  agency was that  the corporation                                                                    
was working  with private  companies (e.g.  Lockheed Martin,                                                                    
Orbital  Sciences, Northrop  Grumman,  Aerojet, and  other),                                                                    
which  involved a  multiagency plan  (AAC, rocket  builders,                                                                    
satellite builder,  and a  private or  government customer).                                                                    
The corporation looked at the  overall program, which in the                                                                    
current case  was $1 billion  for small and  medium launches                                                                    
in  a five-year  period; the  program had  selected Lockheed                                                                    
Martin and  Orbital Sciences, which  had selected  Kodiak as                                                                    
the launch  site. He  stressed that the  plans to  launch in                                                                    
Kodiak were  real, but  he did not  know specifics  on which                                                                    
missions would occur or at what time they would take place.                                                                     
3:23:28 PM                                                                                                                    
Representative   Gara  pointed   to  the   two  $8   million                                                                    
expenditures in  the past two  years with zero  launches. He                                                                    
asked  for the  anticipated net  revenue for  the government                                                                    
launch in  2014 and  what was expected  out of  the Lockheed                                                                    
Martin launches.  He wondered whether the  legislature would                                                                    
continue  to subsidize  the  corporation  when the  launches                                                                    
Mr.  Campbell replied  that  the $8  million  was needed  to                                                                    
operate  and   sustain  the  launch  complex   and  AAC.  He                                                                    
reiterated his  earlier testimony that  the onus was  on the                                                                    
corporation  for not  obtaining  another  customer when  MDA                                                                    
left. The  company was  building launches  and would  have a                                                                    
launch  in  2014.  He  relayed  that  when  the  corporation                                                                    
reached  four launches  per  year it  would  no longer  need                                                                    
operation sustainment  funds from the state.  He discussed a                                                                    
chart  the  corporation would  provide  at  the February  18                                                                    
budget  subcommittee meeting,  which  showed  the costs  per                                                                    
year. The  corporation charged approximately $4  million for                                                                    
a small launch and $6  million for a medium launch depending                                                                    
on the  needs of the  mission. Four launches would  bring in                                                                    
$16 million; half of the  money would go towards contractors                                                                    
and purchased  services and the  other half would go  to the                                                                    
corporation's workforce and operations.                                                                                         
Representative  Munoz  asked  how launching  out  of  Kodiak                                                                    
would be more advantageous to  a company than launching in a                                                                    
Lower  48 location.  Mr. Campbell  discussed  East and  West                                                                    
coast  launches and  relayed that  the  U.S. only  conducted                                                                    
launches  over  water.  Approximately   60  percent  of  the                                                                    
launches  were equatorial  and were  conducted  on the  East                                                                    
Coast.   Kodiak  did   not   conduct  equatorial   launches;                                                                    
therefore  it did  not  compete with  the  East Coast.  West                                                                    
Coast  launches were  polar; AAC's  only  competitor on  the                                                                    
West Coast was the Vandenberg  Air Force base in California.                                                                    
He detailed that  the base was federally  controlled and had                                                                    
a high  operational cost. The  Kodiak site was owned  by AAC                                                                    
had a lower cost of  operations. He explained that the owner                                                                    
could   determine  the   launch   priority;  the   federally                                                                    
controlled   site  prioritized   government  launches   over                                                                    
commercial launches.  He stressed  that the  Kodiak facility                                                                    
allowed  customers  to  sign a  contract  to  designate  the                                                                    
timeframe  of their  choice; the  method provided  customers                                                                    
with  great  flexibility  and assurance  that  their  launch                                                                    
would occur at the time they specified.                                                                                         
3:27:53 PM                                                                                                                    
Representative  Munoz  asked  whether  the  companies  would                                                                    
locate  any permanent  employees in  the Kodiak  region. Mr.                                                                    
Campbell  replied in  the  affirmative.  He elaborated  that                                                                    
Lockheed   Martin    wanted   to   develop    an   aerospace                                                                    
infrastructure in  Alaska. He shared that  AAC had partnered                                                                    
with  Lockheed Martin  on a  contract for  Fort Greely  four                                                                    
years  earlier;  Lockheed  Martin had  planned  to  relocate                                                                    
approximately  150 full-time  employees to  Alaska; however,                                                                    
they  had not  been  awarded the  contract. Lockheed  Martin                                                                    
wanted to  develop a  center of  excellence in  aerospace in                                                                    
Alaska,  which could  include  light manufacturing,  teaming                                                                    
with  the University  of Alaska,  and workforce  development                                                                    
training. Lockheed  Martin had  held a  suppliers conference                                                                    
in  Anchorage  the  prior  year to  determine  how  to  best                                                                    
support  its projects  in the  Alaska.  The corporation  was                                                                    
encouraging companies interested in  contracting with AAC to                                                                    
look  at ways  that would  increase aerospace  employment in                                                                    
Alaska;  Lockheed   Martin  had   been  forthright   in  its                                                                    
3:30:02 PM                                                                                                                    
Representative Kawasaki referred to  his earlier comment and                                                                    
corrected that  he did  see the  decline in  undesignated GF                                                                    
funds after the  next couple of years. He  asked about polar                                                                    
orbiting and  wondered if the  corporation would  compete on                                                                    
an international level.                                                                                                         
Mr. Campbell replied that the  U.S. had priced itself out of                                                                    
the  commercial market  in many  cases.  He elaborated  that                                                                    
most of  the truly commercial launches  originated in French                                                                    
Guyana   and   Russia.   He  noted   that   U.S.   companies                                                                    
manufacturing   satellites   purchased   services   overseas                                                                    
because  it  was cheaper.  He  explained  that Kodiak  could                                                                    
begin   lowering    launch   costs   and    increasing   its                                                                    
competitiveness  in  order  to  attract  more  of  the  U.S.                                                                    
commercial market.                                                                                                              
HB 65 was HEARD and HELD in committee for further                                                                               
HB 66 was HEARD and HELD in committee for further                                                                               
Co-Chair Austerman discussed the schedule for the following                                                                     

Document Name Date/Time Subjects
Sponsor Statement HB30.pdf HFIN 1/30/2013 1:30:00 PM
HB 30
HB 30 Sectional PDF.PDF HFIN 1/30/2013 1:30:00 PM
HB 30
HB 30 FN Attachment.pdf HFIN 1/30/2013 1:30:00 PM
HB 30
HB 30-FN-Leg Audit 1-28-13.pdf HFIN 1/30/2013 1:30:00 PM
HB 30
HB 30-FN-Leg Finance 1-28-13.pdf HFIN 1/30/2013 1:30:00 PM
HB 30
HB030 FN-GOV-OMB-01-25-13.pdf HFIN 1/30/2013 1:30:00 PM
HB 30
HB 30 Sunset in Texas.PDF HFIN 1/30/2013 1:30:00 PM
HB 30
DMVA FY2014 Department Overview_1.30.13.pdf HFIN 1/30/2013 1:30:00 PM
DMVA Overview
DFG-HFIN Committee Overview FY2014.pdf HFIN 1/30/2013 1:30:00 PM
DFG HFIN Overview