Legislature(2017 - 2018)HOUSE FINANCE 519

06/11/2017 02:00 PM FINANCE

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Audio Topic
02:08:18 PM Start
02:09:19 PM SB23
03:25:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
-- Continued from 6/10/17 --
+= SB 23 APPROP: CAPITAL BUDGET TELECONFERENCED
Moved HCS CSSB 23(FIN) Out of Committee
CS FOR SENATE BILL NO. 23(FIN) am                                                                                             
                                                                                                                                
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and  other appropriations;  amending                                                                    
     appropriations;  making  appropriations  to  capitalize                                                                    
     funds; and providing for an effective date."                                                                               
                                                                                                                                
2:09:19 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  MOVED to  ADOPT Amendment  1, 30-GS1854\T.5                                                                    
(Martin,  6/10/17)  [Due  to amendment  length,  it  is  not                                                                    
included in minutes. See copy on file for detail].                                                                              
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
PAUL LABOLLE,  STAFF, REPRESENTATIVE NEAL  FOSTER, explained                                                                    
Amendment 1 accomplished a few  goals. One was to reduce the                                                                    
appropriation to  Knik Arm from  $5 million to  $2.5 million                                                                    
and  the second  would do  the  same for  the Juneau  Access                                                                    
project,   with   half   going  to   Northern   Lynn   Canal                                                                    
transportation improvements.  The third goal was  to correct                                                                    
two  drafting errors,  including a  double appropriation  to                                                                    
the Alaska class ferry. He  detailed when the version of the                                                                    
bill  originally contained  the  appropriation  in both  the                                                                    
language and  the numbers sections. This  amendment used the                                                                    
amount  not  used  for  Knik Arm  to  eliminate  the  double                                                                    
appropriation and put it into  the Kivalina School. The draw                                                                    
from Knik  Arm to Kivalina  School was reduced  to $500,000.                                                                    
The  remainder of  the $2  million in  the Knik  Arm project                                                                    
went to federal  highway match and to  correct another draft                                                                    
error on marine  overhaul on page 7 of  the legislation. The                                                                    
intent  in  the  committee  substitute was  to  restore  the                                                                    
governor's numbers and there were  two components to that, a                                                                    
fund  source  change   and  a  $1  million   reversal  of  a                                                                    
decrement. The  draft of  the bill  contained a  fund source                                                                    
change but  did not have  the reversal of the  decrement, so                                                                    
$1 million of the Knik Arm would go towards the item.                                                                           
                                                                                                                                
Co-Chair Foster asked  for a summary of  the main difference                                                                    
between the House and Senate versions.                                                                                          
                                                                                                                                
Mr.  Labolle   explained  for  the   Knik  Arm,   the  House                                                                    
originally took $5 million, and  Senate took zero. The House                                                                    
was  now taking  $2.5  million. The  original  of the  House                                                                    
version  appropriated  the  entirety of  the  Juneau  Access                                                                    
funds to  other Southeast  projects and  the Senate  did not                                                                    
appropriate any of them. The amendment split it in half.                                                                        
                                                                                                                                
Co-Chair Foster reiterated  that there was a  50/50 split in                                                                    
the amendment.                                                                                                                  
                                                                                                                                
2:13:11 PM                                                                                                                    
                                                                                                                                
Representative Pruitt had received his answer.                                                                                  
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
Representative  Neuman OBJECTED.  He  thought  the Knik  Arm                                                                    
crossing  was an  important project  for  life, health,  and                                                                    
safety.                                                                                                                         
                                                                                                                                
Vice-Chair Gara found the Knik Arm project unaffordable.                                                                        
                                                                                                                                
Representative  Pruitt thanked  the chair  for his  efforts;                                                                    
however, he was in opposition to the amendment.                                                                                 
                                                                                                                                
2:15:14 PM                                                                                                                    
                                                                                                                                
Representative Tilton  thanked the chair for  looking at the                                                                    
issue to  restore some funds  to the Knik Arm  crossing. The                                                                    
project was extremely important to the community                                                                                
                                                                                                                                
Representative Neuman MAINTAINED his OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Guttenberg, Kawasaki, Ortiz,  Gara, Grenn, Foster,                                                                    
Seaton                                                                                                                          
OPPOSED: Pruitt, Tilton, Wilson, Neuman                                                                                         
                                                                                                                                
The MOTION  PASSED (7/4). There being  NO further OBJECTION,                                                                    
Amendment 1 was ADOPTED.                                                                                                        
                                                                                                                                
2:16:49 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster MOVED to ADOPT  conceptual Amendment 2 (copy                                                                    
on file).                                                                                                                       
                                                                                                                                
     Section 1, Page 8, line 15                                                                                                 
     DELETE: $35,100,000                                                                                                        
     INSERT: $34,100,000                                                                                                        
     Section 1, Page 8, line 18                                                                                                 
     DELETE: $22,900,000                                                                                                        
     INSERT: $23,900,000                                                                                                        
                                                                                                                                
     Explanation:                                                                                                               
     Amendment  1  provided  an  additional  $1,000,000  for                                                                    
     state match,  therefore the  Federal Aid  Highway State                                                                    
     Match   Appropriation   can    be   reduced   and   the                                                                    
     accompanying explanatory language adjusted.                                                                                
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Mr. Labolle  explained Amendment  2 cleaned up  Amendment 1,                                                                    
which left the item overfunded by $1 million.                                                                                   
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There  being NO  further OBJECTION,  There being  NO further                                                                    
OBJECTION, conceptual Amendment 2 was ADOPTED.2:17:55 PM                                                                      
                                                                                                                                
Co-Chair Foster  MOVED to ADOPT Amendment  4, 30-GS1854\T.10                                                                    
(Wallace/Martin, 6/10/17).                                                                                                      
                                                                                                                                
     Page 76, line 28:                                                                                                          
     Delete "(a)"                                                                                                               
                                                                                                                                
     Page 76, line 31, through page 77, line 1:                                                                                 
     Delete all material.                                                                                                       
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Mr. Labolle  explained Amendment  4 restores money  from the                                                                    
Public Education Fund to the Alaska Gasline Project.                                                                            
                                                                                                                                
Representative Pruitt was opposed  to the amendment. He felt                                                                    
the project had  made positive gains, and he  felt the funds                                                                    
allocated did not harm its  opportunity to go forward, so he                                                                    
preferred to keep the funds in the Public Education Fund.                                                                       
                                                                                                                                
Representative Wilson believed it  was difficult to speak to                                                                    
Amendment 4 without speaking to  three other amendments. She                                                                    
believed supporting education  was the right way  to go. She                                                                    
was opposed to the amendment.                                                                                                   
                                                                                                                                
Vice-Chair  Gara  supported  the  amendment.  The  operating                                                                    
budget  already fully  funded  the  Base Student  Allocation                                                                    
(BSA).                                                                                                                          
                                                                                                                                
Representative Neuman was opposed  to the amendment. He felt                                                                    
it was  very important  to realize that  many people  in the                                                                    
state had lost  faith in the gas pipeline. He  stated he was                                                                    
not sure  the gas  price made  that project  economical, but                                                                    
the state  did need other  funding sources. He  felt putting                                                                    
the money towards education was very important.                                                                                 
                                                                                                                                
Co-Chair  Seaton supported  the amendment.  He spoke  to the                                                                    
aim to establish further revenue sources in the state.                                                                          
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kawasaki, Ortiz,  Gara, Grenn, Guttenberg, Seaton,                                                                    
Foster                                                                                                                          
OPPOSED: Pruitt, Neuman, Tilton, Wilson                                                                                         
                                                                                                                                
The MOTION  PASSED (7/4). There being  NO further OBJECTION,                                                                    
Amendment 4 was ADOPTED.                                                                                                        
                                                                                                                                
2:23:21 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  MOVED to  ADOPT Amendment  3, 30-GS1854\T.9                                                                    
(Wallace/Martin,   6/10/17);   Amendment  5,   30-GS1854\T.8                                                                    
(Wallace/Martin,  6/10/17); and  Amendment 6,  30-GS1854\T.7                                                                    
(Wallace/Martin, 6/10/17) (copy on file):                                                                                       
                                                                                                                                
     Amendment 3                                                                                                                
                                                                                                                                
          Page 76, lines 25-27:                                                                                                 
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     Amendment 5                                                                                                                
                                                                                                                                
          Page 58, lines 12-15:                                                                                                 
          Delete all material.                                                                                                  
                                                                                                                                
          Renumber the following bill sections accordingly.                                                                     
                                                                                                                                
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          Delete "34, 35(a), (b), (d)-(k), and (m)-(o), and                                                                     
          40"                                                                                                                   
         Insert "33 34(a), (b), (d)-(k), and (m)-                                                                               
          (o), and 39"                                                                                                          
                                                                                                                                
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          Delete "35(c), and 36"                                                                                                
          Insert "34(c), and 35"                                                                                                
                                                                                                                                
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          Delete "34(b), and 43(b)"                                                                                             
          Insert "33(b), and 42(b)"                                                                                             
                                                                                                                                
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          Delete "34(b), and 43(b)"                                                                                             
          Insert "33(b), and 42(b)"                                                                                             
                                                                                                                                
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          Delete "35(a)-(k), and 38-40"                                                                                         
          Insert "34(a)-(k), and 37-39"                                                                                         
                                                                                                                                
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          Delete "35(a)-(k), and 38-40"                                                                                         
          Insert "34(a)-(k), and 37-39"                                                                                         
                                                                                                                                
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          Delete "33, 34(a), 35(1)-(o), 36, 37, 41, and                                                                         
          43(a)"                                                                                                                
          Insert "33(a), 34(l)-(o), 35, 36, 40, and 42(a)"                                                                      
                                                                                                                                
          Page 80, lines 17 - 18:                                                                                               
          Delete "33, 34(a), 35(1)-(o), 36, 37, 41, and                                                                         
          43(a)"                                                                                                                
          Insert "33(a). 34(l)-(o), 35, 36, 40, and 42(a)"                                                                      
                                                                                                                                
          Page 80, line 19:                                                                                                     
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          Page 80, line 22:                                                                                                     
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          Delete "35(a)-(k), and 38-40"                                                                                         
          Insert "34(a)-(k), and 37-39"                                                                                         
                                                                                                                                
          Page 80, line 3l:                                                                                                     
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     Amendment 6                                                                                                                
                                                                                                                                
          Page 57, lines 20-23:                                                                                                 
          Delete all material.                                                                                                  
                                                                                                                                
          Renumber the following bill sections accordingly.                                                                     
                                                                                                                                
          Page 80, line 5:                                                                                                      
          Delete "32(a), 34, 35(a), (b), (d)-(k), and (m)-                                                                      
          (o), and 40"                                                                                                          
          Insert "31(a), 33, 34(a), (b), (d)-(k), and (m)-                                                                      
          (o), and 39"                                                                                                          
                                                                                                                                
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          Delete "35(c), and 36"                                                                                                
          Insert "34(c), and 35"                                                                                                
                                                                                                                                
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          Delete "34(b), and 43(b)"                                                                                             
          Insert "33(b), and 42(b)"                                                                                             
                                                                                                                                
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          Insert "33(b), and 42(b)"                                                                                             
                                                                                                                                
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          Delete "secs. 25-30, 32, 35(a)-(k), and 38-40"                                                                        
          Insert "secs. 25-31, 34(a)-(k), and 37-39"                                                                            
                                                                                                                                
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          Delete "secs. 25-30, 32, 35(a)-(k), and 38-40"                                                                        
          Insert "sees. 25-31, 34(a)-(k), and 37-39"                                                                            
                                                                                                                                
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          Delete "31, 33, 34(a), 35(l)-(o), 36, 37, 41, and                                                                     
          43(a)"                                                                                                                
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          42(a)"                                                                                                                
                                                                                                                                
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          Delete "31, 33, 34(a), 35(l)-(o), 36, 37, 41, and                                                                     
          43(a) and (c)"                                                                                                        
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          42(a) and (c)"                                                                                                        
                                                                                                                                
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          Delete "Sections 25-30, 32, 35(a)-(k), and 38-40"                                                                     
          Insert "Sections 25-31, 34(a)-(k), and 37-39"                                                                         
                                                                                                                                
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          Delete "secs. 44 and 45"                                                                                              
          Insert "secs. 43 and 44"                                                                                              
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Mr. Labolle  explained the amendments. The  items were those                                                                    
in  Department of  Labor  and  Workforce Development  (DOL),                                                                    
Department  of  Public  Safety   (DPS),  and  Department  of                                                                    
Transportation  and   Public  Facilities  (DOT),   and  were                                                                    
removed with the funds remaining within the AKLNG project.                                                                      
                                                                                                                                
Representative Wilson  communicated that she  would withdraw                                                                    
her objection. She  did not want to  start putting operating                                                                    
budget funds  into the  capital budget.  She spoke  about 20                                                                    
positions that  had not been  filled and a  graduating class                                                                    
of  5  in  the  Alaska  State  Troopers.  She  WITHDREW  her                                                                    
OBJECTION.                                                                                                                      
                                                                                                                                
Vice-Chair  Gara OBJECTED  for discussion.  He commented  on                                                                    
the  amendments.  He spoke  to  a  shortage of  troopers  in                                                                    
Alaska.  He  had  concerns about  one-time  allocations  for                                                                    
those positions. He WITHDREW his OBJECTION.                                                                                     
                                                                                                                                
2:26:24 PM                                                                                                                    
                                                                                                                                
Representative   Neuman   OBJECTED.    He   MAINTAINED   his                                                                    
OBJECTION.  He  believed  the  state   needed  to  fund  its                                                                    
troopers.                                                                                                                       
                                                                                                                                
A  roll  call  vote  was   taken  on  the  motion  to  adopt                                                                    
Amendments 3, 5, and 6.                                                                                                         
                                                                                                                                
IN FAVOR: Ortiz, Wilson, Gara,  Grenn, Guttenberg, Kawasaki,                                                                    
Foster, Seaton                                                                                                                  
OPPOSED: Pruitt, Neuman, Tilton                                                                                                 
                                                                                                                                
The MOTION  PASSED (8/3). There being  NO further OBJECTION,                                                                    
Amendments 3, 5, and 6 were ADOPTED.                                                                                            
                                                                                                                                
2:27:51 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  MOVED to ADOPT Amendment  7, 30-GS1854\T.11                                                                    
(Wallace/Martin, 6/10/17) (copy on file):                                                                                       
                                                                                                                                
     Page 51, line 14, following "CAPITALIZATION.":                                                                             
     Insert "(a)"                                                                                                               
                                                                                                                                
     Page l, following line 15:                                                                                                 
     Insert a new subsection to read:                                                                                           
     "(b) The  sum of  $40,000,000 is appropriated  from the                                                                    
     budget reserve fund  (AS 37.05.540) to the  oil and gas                                                                    
     tax credit  fund (AS 43.55.028) to pay  outstanding tax                                                                    
     credit liabilities."                                                                                                       
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
2:28:04 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:28:23 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Mr. Labolle explained Amendment  7 would restore $40 million                                                                    
of the  $288 million of the  oil and gas credit  payments in                                                                    
the Senate version of the bill.                                                                                                 
                                                                                                                                
Representative Wilson asked if it  was the intent to restore                                                                    
the statutory amount to be paid on the credits.                                                                                 
                                                                                                                                
Mr.  Labolle   answered  that  the  House   version  of  the                                                                    
operating budget and the amendment  would bring the total to                                                                    
the statutory amount.                                                                                                           
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
Representative  Pruitt OBJECTED  for discussion.  He thought                                                                    
it  would be  better to  go  above the  statutory limit.  He                                                                    
believed maintaining  the statutory limit would  harm future                                                                    
negotiations with banks. He  recognized that foreclosure had                                                                    
the potential  to leave  banks with  leases in  their hands,                                                                    
which  would be  a  unique situation.  He  trusted that  the                                                                    
conversation was not over in  the current year. He wanted to                                                                    
hold to  the deal  that Alaska made  with oil  companies. He                                                                    
WITHDREW his OBJECTION.                                                                                                         
                                                                                                                                
2:31:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton clarified that  credits had three mechanisms                                                                    
for utilization.  The first mechanism was  as production tax                                                                    
credits  that could  be used  to  offset future  production,                                                                    
they could be sold to  other companies with tax liabilities,                                                                    
or, if available, the state  would buy the credits back. The                                                                    
utilization was  optional and not a  cash layout obligation.                                                                    
He wanted  the public to  understand that the state  was not                                                                    
obligated to pay cash for the credits.                                                                                          
                                                                                                                                
Vice-Chair  Gara remarked  that  it was  obvious there  were                                                                    
competing needs in  the state, but without a  fiscal plan it                                                                    
was  not  possible  to  fund  everything.  He  believed  the                                                                    
amendment  was   appropriate.  He  spoke  to   the  Senate's                                                                    
proposal of $288  million for payments while  making cuts to                                                                    
education.                                                                                                                      
                                                                                                                                
There being NO further OBJECTION, Amendment 7 was ADOPTED.                                                                      
                                                                                                                                
2:34:49 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster MOVED to ADOPT  conceptual Amendment 8 (copy                                                                    
on file):                                                                                                                       
                                                                                                                                
     Agency:                                                                                                                    
     Natural Resources                                                                                                          
                                                                                                                                
     Project:                                                                                                                   
     Arctic Strategic Transportation and Resources (ASTAR)                                                                      
                                                                                                                                
     Funding Source:                                                                                                            
     UGF                                                                                                                        
                                                                                                                                
     Explanation:                                                                                                               
     The  reappropriation  of  the  entire  balance  of  the                                                                    
     Reservoir  Studies  for  North  Slope  and  Cook  Inlet                                                                    
     capital project  will result  in a  FY2018 Supplemental                                                                    
     request for work that  is scheduled. Retaining $500,000                                                                    
     in   this   capital   appropriation   would   avoid   a                                                                    
     supplemental  and  allow  the  department  to  continue                                                                    
     reservoir   modeling  efforts   which   are  used   for                                                                    
     decisions related to  equity redeterminations for state                                                                    
     royalty revenue.                                                                                                           
                                                                                                                                
     Page 57, line 31                                                                                                           
     Delete "$7,803,482"                                                                                                        
     Insert "$7,303,482"                                                                                                        
                                                                                                                                
     Page 58, lines 7 & 8                                                                                                       
     Delete "estimated balance of $3,297,753"                                                                                   
     Insert "not to exceed $2,797,753"                                                                                          
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair  Foster  noted  the   amendment  had  been  brought                                                                    
forward  by the  Department of  Natural Resources  (DNR). He                                                                    
asked the department to address the amendment.                                                                                  
                                                                                                                                
ED   KING,   SPECIAL   ASSISTANT,  DEPARTMENT   OF   NATURAL                                                                    
RESOURCES,   explained  that   the  amendment   would  leave                                                                    
$500,000 in the  fund that was being  reappriopriated in the                                                                    
current  version of  the bill  to the  ASTAR project.  Those                                                                    
funds were to pay for  licenses in the department's Resource                                                                    
Evaluation section  to do  things like  redeterminations and                                                                    
other day-to-day operations. The  department had not planned                                                                    
to pay for the expenses  out of its operating budget because                                                                    
it had funds in the  reservoir account. Removing monies from                                                                    
that fund would leave the  department without the ability to                                                                    
pay for  the software for  that study. The  department would                                                                    
include the fees in the operating budget in the future.                                                                         
                                                                                                                                
2:36:54 PM                                                                                                                    
                                                                                                                                
Representative  Wilson asked  why the  state was  paying for                                                                    
the items.                                                                                                                      
                                                                                                                                
Mr. King  answered that DNR  needed the licenses to  stay on                                                                    
par  with the  industry for  anything related  to subsurface                                                                    
studies. They had no previously  needed to pay for them from                                                                    
the operating budget. There is  no longer a mechanism to pay                                                                    
for them.                                                                                                                       
                                                                                                                                
Representative Wilson  asked how  much the studies  had cost                                                                    
the preceding year.                                                                                                             
                                                                                                                                
Mr.  King answered  the  cost had  been  about $300,000  per                                                                    
year. He  detailed this included expertise  and consultants.                                                                    
The funds were needed annually.                                                                                                 
                                                                                                                                
Representative  Wilson  asked  what would  happen  when  the                                                                    
funds disappeared.                                                                                                              
                                                                                                                                
Mr. King  answered that  the department  had not  planned to                                                                    
pay  for the  licenses out  of the  operating budget  in the                                                                    
current year.  Without the reservoir studies,  it would need                                                                    
to include the  funds in the operating  budget beginning the                                                                    
next year.                                                                                                                      
                                                                                                                                
Representative  Wilson asked  whether making  a supplemental                                                                    
request was normal with DNR.                                                                                                    
                                                                                                                                
Mr. King replied that the  department had not planned to pay                                                                    
for the cost in the operating  budget in the current year as                                                                    
they thought they  would be included in  the capital budget.                                                                    
Otherwise  the  department would  be  forced  to ask  for  a                                                                    
supplemental request if the funds were not allocated.                                                                           
                                                                                                                                
2:39:32 PM                                                                                                                    
                                                                                                                                
Representative Wilson  asked what the  capital appropriation                                                                    
had been initially.                                                                                                             
                                                                                                                                
Mr. King responded it was  a reservoir study appropriated in                                                                    
2011. The  legislature at the  time wished to have  a deeper                                                                    
understanding  of reservoir  characteristics in  Cook Inlet.                                                                    
They were  now in the midst  of that study and  removing the                                                                    
funds would terminate the exercise.                                                                                             
                                                                                                                                
Representative   Wilson   commented  on   the   department's                                                                    
testimony that the  supplemental would be used  if the funds                                                                    
were not  allocated. She  wanted the  supplemental to  be as                                                                    
low as possible. She WITHDREW her OBJECTION.                                                                                    
                                                                                                                                
Representative Neuman  OBJECTED for discussion.  He remarked                                                                    
that the  operating budget  item was  being included  in the                                                                    
capital budget. He asked for the plan in the future.                                                                            
                                                                                                                                
Mr.  King  answered  if  the department  did  not  have  the                                                                    
reservoir studies  as a capital  budget item, it  would need                                                                    
to be included in the operating budget going forward.                                                                           
                                                                                                                                
Representative  Neuman asked  if  there was  a mechanism  in                                                                    
place for companies  working in the area to  cover the costs                                                                    
for the oil and gas permits without a capital expenditure.                                                                      
                                                                                                                                
2:42:34 PM                                                                                                                    
                                                                                                                                
Mr.  King  replied  that  the  particular  operations  under                                                                    
discussion were  not centered on  permitting, but  to ensure                                                                    
the  state  was  receiving   the  appropriate  royalty  from                                                                    
companies. It was not something  the industry was asking the                                                                    
state  to  do, but  was  done  to  protect the  state's  own                                                                    
interests.                                                                                                                      
                                                                                                                                
Representative Neuman  asked if the software  was a one-time                                                                    
purchase.                                                                                                                       
                                                                                                                                
Mr. King replied that the contracts were annual.                                                                                
                                                                                                                                
Mr.  Labolle relayed  that the  project had  been originally                                                                    
reappropriated in  the Senate version  of the bill  and went                                                                    
to  the  federal highway  match.  The  ASTAR project  was  a                                                                    
request from  DNR so  it was deemed  appropriate to  fund it                                                                    
together with the  DNR funds already in  the federal highway                                                                    
match.                                                                                                                          
                                                                                                                                
Representative  Guttenberg remarked  if  the project  ended,                                                                    
the state  lost information and better  understanding of the                                                                    
reservoirs in  Cook Inlet. The  value was  understanding the                                                                    
resources in the  ground. He asked if the work  needed to be                                                                    
done perpetually.                                                                                                               
                                                                                                                                
2:46:05 PM                                                                                                                    
                                                                                                                                
Mr. King  replied that  the study  would have  a termination                                                                    
date. The software needed to  be purchased annually in order                                                                    
for DNR to verify it  was getting the correct royalty share.                                                                    
He explained there  was no end to needing  the software, but                                                                    
there would an end to the study itself.                                                                                         
                                                                                                                                
Representative  Neuman WITHDREW  his OBJECTION.  There being                                                                    
NO further OBJECTION, Amendment 8 was ADOPTED.                                                                                  
                                                                                                                                
2:47:08 PM                                                                                                                    
                                                                                                                                
Representative Ortiz MOVED to  ADOPT conceptual Amendment 9,                                                                    
30-GS1854\R.A.1 (Wallace/Martin, 5/13/17):                                                                                      
                                                                                                                                
     Page 7, following line 30:                                                                                                 
     Insert new material to read:                                                                                               
     1t  is  the intent  of  the  legislature that  the  new                                                                    
     oceangoing  vessel  to  replace the  F/V  Tustumena  be                                                                    
     constructed by  a shipyard  facility that  produces the                                                                    
     best  value  and  most  advantageous  proposal  to  the                                                                    
     state.  The commissioner  of transportation  and public                                                                    
     facilities   shall   award   the   contract   using   a                                                                    
     competitive  proposal  procurement  method  unless  the                                                                    
     commissioner  concludes, in  writing, that  the use  of                                                                    
     the competitive  proposal procurement method is  not in                                                                    
     the  best interests  of the  state.  The Department  of                                                                    
     Transportation  and  Public  Facilities  shall  consult                                                                    
     with  the Federal  Highway Administration  to determine                                                                    
     whether  an open  and competitive  proposal procurement                                                                    
     method can be used."                                                                                                       
                                                                                                                                
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Representative  Ortiz  explained   the  amendment  contained                                                                    
intent language. The amendment  encouraged the department to                                                                    
look  at  existing facilities  in  the  state to  build  the                                                                    
vessel.                                                                                                                         
                                                                                                                                
Representative Wilson asked if there  was a problem with the                                                                    
state's procurement process.                                                                                                    
                                                                                                                                
Representative Ortiz replied he was  not aware of a problem.                                                                    
He elaborated  that in the past,  vessels under construction                                                                    
had been  constructed with federal  dollars and  ships being                                                                    
built  in ports  in Louisiana.  He furthered  that once  the                                                                    
construction had  taken place, there had  been problems with                                                                    
the vessels and cost  overruns. The amendment encouraged the                                                                    
department  to look  at  the  possibilities of  constructing                                                                    
vessels in the state.                                                                                                           
                                                                                                                                
Representative  Wilson  appreciated  the language,  but  her                                                                    
bigger  concern was  that if  procurement did  not allow  it                                                                    
currently,  there may  be  an issue  with  the process.  She                                                                    
asked  if   the  intent  language   would  change   the  way                                                                    
procurement was working.                                                                                                        
                                                                                                                                
2:50:47 PM                                                                                                                    
                                                                                                                                
Representative Ortiz deferred to the department.                                                                                
                                                                                                                                
MIKE  VIGUE, DIRECTOR,  PROGRAM  DEVELOPMENT, DEPARTMENT  OF                                                                    
TRANSPORTATION  AND  PUBLIC  FACILITIES, answered  that  the                                                                    
Tustumena was a  federal aid project, funded  by the Federal                                                                    
Highway  Administration.  The  typical  process  when  using                                                                    
federal funds  was to go  with a low bid.  His understanding                                                                    
was the amendment  would ask the commissioner to  look at an                                                                    
innovative  procurement  methodology  which would  mean  the                                                                    
department  would have  to  ask the  federal  agency how  to                                                                    
proceed. He underlined that this was not unprecedented.                                                                         
                                                                                                                                
Representative Wilson  was concerned that the  state did not                                                                    
currently attempt to  get the best value for  the state. She                                                                    
surmised that  the amendment would  direct DOT to go  to the                                                                    
Federal Highway  Administration to  request an  exception to                                                                    
the lowest bid process.                                                                                                         
                                                                                                                                
Mr. Vigue replied in the affirmative.                                                                                           
                                                                                                                                
Representative  Guttenberg  believed  that  many  times  the                                                                    
lowest cost  was not  the best value.  He asked  whether the                                                                    
commissioner could not make the  federal request without the                                                                    
language in the amendment.                                                                                                      
                                                                                                                                
2:54:13 PM                                                                                                                    
                                                                                                                                
Mr. Vigue  answered that  the department  could still  go to                                                                    
the federal  agency and ask  them to procure in  a different                                                                    
manner.                                                                                                                         
                                                                                                                                
Representative  Guttenberg  surmised   the  intent  language                                                                    
provided more leverage.                                                                                                         
                                                                                                                                
Mr. Vigue indicated this was the case.                                                                                          
                                                                                                                                
Representative Pruitt  asked if it  would not be  simpler to                                                                    
ask the DOT  commissioner to tell the  federal government to                                                                    
build the ships in Ketchikan.                                                                                                   
                                                                                                                                
Representative Ortiz replied there  were other ship building                                                                    
facilities outside  of Ketchikan.  He thought  the amendment                                                                    
spoke for itself.                                                                                                               
                                                                                                                                
Representative Pruitt thought the  language in the amendment                                                                    
did not  necessarily speak for  itself. He asked  what "most                                                                    
advantageous  proposal"  meant.  He believed  the  amendment                                                                    
language was vague.                                                                                                             
                                                                                                                                
Representative  Ortiz  appreciated  the comment,  but  stood                                                                    
with the amendment language as it was.                                                                                          
                                                                                                                                
2:57:09 PM                                                                                                                    
                                                                                                                                
Representative  Neuman supported  doing all  work the  state                                                                    
could  in Alaska;  however, he  thought the  amendment could                                                                    
present legal issues. He mentioned  the open bid process. He                                                                    
wondered  about  the  restriction  for "best  value  to  the                                                                    
state."                                                                                                                         
                                                                                                                                
Representative  Ortiz replied  that the  amendment left  the                                                                    
issue up to the commissioner  to determine the definition of                                                                    
"best  value  to  the state."  Additionally,  the  amendment                                                                    
specified  the department  "shall consult  with the  Federal                                                                    
Highway  Administration to  determine  whether  an open  and                                                                    
competitive  proposal procurement  method can  be used."  It                                                                    
was merely  intent language and  was not legally  binding in                                                                    
any way.                                                                                                                        
                                                                                                                                
Representative  Neuman  had  been   looking  for  a  clearer                                                                    
explanation  on   the  record  about  the   intent.  He  was                                                                    
satisfied with the answer.                                                                                                      
                                                                                                                                
Representative Wilson WITHDREW her OBJECTION.                                                                                   
                                                                                                                                
There  being NO  further OBJECTION,  conceptual Amendment  9                                                                    
was ADOPTED.                                                                                                                    
                                                                                                                                
3:00:10 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:01:21 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative Ortiz  WITHDREW conceptual Amendment  10, 30-                                                                    
GS1854\T.3 (Martin, 5/13/17) (copy on file).                                                                                    
                                                                                                                                
3:01:39 PM                                                                                                                    
                                                                                                                                
Representative   Guttenberg   MOVED  to   ADOPT   conceptual                                                                    
Amendment  11,  30-GS1854\A.9  (Martin,  5/13/17)  (copy  on                                                                    
file):                                                                                                                          
                                                                                                                                
     Sec. A.  DEPARTMENT OF MILITARY AND  VETERANS' AFFAIRS.                                                                    
     The proceeds from the sale  of state-owned land in Fox,                                                                    
     Alaska, that  was intended for a  veterans' cemetery in                                                                    
     Interior Alaska, are appropriated  to the Department of                                                                    
     Military  and  Veterans'  Affairs  for  land  purchase,                                                                    
     planning, and construction for  a veterans' cemetery in                                                                    
     Interior Alaska.                                                                                                           
     Sec.  B. LAPSE.  The appropriation  made in  sec. A  of                                                                    
     this  Act is  for a  capital project  and lapses  under                                                                    
     AS 37.25.020.                                                                                                              
     Sec.  C. Section  A of  this Act  takes effect  July 1,                                                                    
     2017.                                                                                                                      
                                                                                                                                
Representative Wilson OBJECTED.                                                                                                 
                                                                                                                                
Representative  Guttenberg explained  the amendment  related                                                                    
to   a   state-authorized   veterans'  cemetery.   He   gave                                                                    
background  on  the  attempts  to   purchase  land  for  the                                                                    
project. There  was currently another parcel  available, and                                                                    
the amendment  said that  if the  state bought  that parcel,                                                                    
and there was  still money for the project,  the money would                                                                    
go to that.  There was  an estimate of $100,000 for Davidson                                                                    
Ditch  impacts.  He  stated   the  money  would  follow  the                                                                    
project.                                                                                                                        
                                                                                                                                
Representative  Wilson wondered  where  the  money would  go                                                                    
without the intent.                                                                                                             
                                                                                                                                
Representative Guttenberg answered it  would go nowhere - it                                                                    
would sit in a fund that could not be used.                                                                                     
                                                                                                                                
Representative Wilson thanked  Representative Guttenberg for                                                                    
his  work on  trying  to  locate a  piece  of property.  She                                                                    
wanted to  ensure he would be  able to do what  he needed to                                                                    
do.                                                                                                                             
                                                                                                                                
Representative Guttenberg thanked  Representative Wilson. He                                                                    
explained it  was intent language  - the money  would follow                                                                    
the  project.   The  other  piece   of  property   would  be                                                                    
purchased,  which  was owned  by  the  Alaska Mental  Health                                                                    
Trust.                                                                                                                          
                                                                                                                                
Representative  Wilson wanted  to ensure  the project  would                                                                    
not be further delayed. She WITHDREW her OBJECTION.                                                                             
                                                                                                                                
There being  NO further  OBJECTION, conceptual  Amendment 11                                                                    
was ADOPTED.                                                                                                                    
                                                                                                                                
3:05:46 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton MOVED  to REPORT  HCS CSSB  23(FIN) out  of                                                                    
committee with individual recommendations.                                                                                      
                                                                                                                                
Representative Neuman  OBJECTED for discussion.  He objected                                                                    
to removing  funds from  the Knik Arm  project. He  spoke to                                                                    
the  Transportation  Infrastructure Finance  and  Innovation                                                                    
Act  (TIFIA) and  remarked that  the  federal Department  of                                                                    
Transportation had  gone through  the numbers  and concluded                                                                    
the total cost  would be about $782 million,  and there were                                                                    
cost overrun contingencies. He stated  it would not cost the                                                                    
state  anything according  to the  experts. He  believed the                                                                    
issue was  political. He  wondered how  the state  could let                                                                    
people die  on its roads. He  stressed that it was  a bridge                                                                    
to a community to address  serious road congestion. He spoke                                                                    
to the project  viability. He stated it was not  a bridge to                                                                    
nowhere, but  a bridge  to the fastest  growing area  in the                                                                    
state. He was  distraught that politics was  taking the lead                                                                    
over Alaskans  lives. He understood  that it  impacted other                                                                    
areas in Anchorage.                                                                                                             
                                                                                                                                
3:14:01 PM                                                                                                                    
                                                                                                                                
Representative Pruitt  believed some  great things  had been                                                                    
done  in the  capital budget.  He thanked  the co-chair  and                                                                    
Senate for their work. He  agreed with Representative Neuman                                                                    
on the Knik Arm project. He  believed it was ironic that the                                                                    
state's largest city  was out of land. He  remarked that the                                                                    
money was  restored to AKLNG  and added if the  project came                                                                    
to fruition, it  would present the opportunity  to bring gas                                                                    
to  the  Anchorage/Mat-Su  area,   leading  to  value  added                                                                    
investment. He stated  one of the largest  problems would be                                                                    
lack  of access  to the  area  by the  needed workforce.  He                                                                    
spoke  to  the  goal  of   growth  in  Alaska.  He  stressed                                                                    
substantial savings  to the state  would occur.  He believed                                                                    
in  some cases  the budget  was a  little short-sighted.  He                                                                    
underscored growth  in Alaska  would require  investment. He                                                                    
understood   what  the   statute  said   in  terms   of  the                                                                    
legislature's   liability,  but   there   was  a   secondary                                                                    
responsibility  related to  how the  international community                                                                    
would perceive  the state in  terms of how it  fulfilled its                                                                    
obligations.  He shared  that constituents  had communicated                                                                    
that their  companies would cease  to exist if the  state no                                                                    
longer paid  for the credits.  He wanted to grow  Alaska and                                                                    
send a pro-business message.                                                                                                    
                                                                                                                                
3:19:42 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Gara  believed  the bill  represented  the  most                                                                    
responsible capital  budget the  legislature could  pass. He                                                                    
spoke to the  need to fix the budget  deficit. He recognized                                                                    
the passion  by some  for the Knik  Arm Bridge;  however, he                                                                    
did not believe  the state had the  funds. Additionally, the                                                                    
state  did not  have the  money  for a  $770 million  Juneau                                                                    
Access road. He agreed the  state should fix the portions of                                                                    
highways that  were the least  safe, including on  the Glenn                                                                    
Highway.                                                                                                                        
                                                                                                                                
3:21:44 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:22:30 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative Neuman MAINTAINED his OBJECTION.                                                                                 
                                                                                                                                
A  roll call  vote was  taken on  the motion  to report  the                                                                    
legislation from committee.                                                                                                     
                                                                                                                                
IN FAVOR: Gara, Grenn, Guttenberg,  Kawasaki, Ortiz, Foster,                                                                    
Seaton                                                                                                                          
OPPOSED: Neuman, Tilton, Wilson, Pruitt                                                                                         
                                                                                                                                
The MOTION PASSED (7/4).                                                                                                        
                                                                                                                                
Co-Chair  Seaton  MOVED  to  give  the  Legislative  Finance                                                                    
Division and Legislative Legal Services  the ability to make                                                                    
technical and conforming adjustments.                                                                                           
                                                                                                                                
There  being  NO further  OBJECTION,  HCS  CSSB 23(FIN)  was                                                                    
REPORTED   out   of   committee    with   five   "do   pass"                                                                    
recommendations, five  "amend" recommendations, and  one "do                                                                    
not pass" recommendation.                                                                                                       
                                                                                                                                
Co-Chair  Foster  thanked  Legislative  Legal  Services  for                                                                    
their hard  work on the bill,  Legislative Finance Division,                                                                    
and his staff.                                                                                                                  
                                                                                                                                
Co-Chair  Foster reviewed  the  schedule  for the  following                                                                    
day.  He  recessed  the meeting  [Note:  the  meeting  never                                                                    
reconvened].                                                                                                                    
                                                                                                                                

Document Name Date/Time Subjects