Legislature(2019 - 2020)ADAMS ROOM 519

07/19/2019 01:00 PM House FINANCE

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01:02:38 PM Start
01:03:59 PM HB2002
01:36:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Presentation by the Office Management and Budget
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                  SECOND SPECIAL SESSION                                                                                        
                       July 19, 2019                                                                                            
                         1:02 p.m.                                                                                              
1:02:38 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Johnston called the House Finance Committee                                                                            
meeting to order at 1:02 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
Representative Ben Carpenter                                                                                                    
ALSO PRESENT                                                                                                                  
Representative Tammie Wilson;  Representative Louise Stutes;                                                                    
Representative  Steve   Thompson,  Paloma   Harbour,  Budget                                                                    
Director,  Office of  Management and  Budget; Donna  Arduin,                                                                    
Director, Office of Management and Budget.                                                                                      
HB2002    APPROP: CAPITAL; SUPP; OTHER APPROP                                                                                   
          HB2002 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
Co-Chair Johnston recognized Co-Chair Wilson in the room.                                                                       
She discussed housekeeping.                                                                                                     
HOUSE BILL NO. 2002                                                                                                           
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations, supplemental  appropriations, and other                                                                    
     appropriations;   repealing    appropriations;   making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
1:03:59 PM                                                                                                                    
PALOMA HARBOUR,  BUDGET DIRECTOR,  OFFICE OF  MANAGEMENT AND                                                                    
BUDGET, introduced  herself as  the new budget  director for                                                                    
the Office  of Management and  Budget (OMB). She  provided a                                                                    
PowerPoint presentation, "HB  2002 Capital Budget Overview",                                                                    
July  19,  2019   (copy  on  file).  She   shared  that  the                                                                    
presentation  would be  quick and  that  questions could  be                                                                    
considered afterward.                                                                                                           
1:05:48 PM                                                                                                                    
Ms.  Harbour  began with  slide  3,   HB2002 FY2020  Capital                                                                    
Budget ($ Thousands):                                                                                                           
     HB 2002 Project Requests Will:                                                                                           
     ? Meet Federal matching requirements                                                                                       
     ? Maximize Federal funding for project grants                                                                              
     ? Provide funding for projects where Constitutional                                                                        
     Budget Reserve funding was not approved in SB 19                                                                           
1:06:12 PM                                                                                                                    
Ms. Harbour  indicated that  Slide 4  provided a  summary of                                                                    
the Capital and Operating funding in the bill, by agency.                                                                       
Ms. Harbour turned to Slide 5:                                                                                                  
     ? Department of Commerce, Community, and Economic                                                                        
          ? Community Block Grants $60.0 UGF (matching                                                                          
          $6,000.0 Fed)                                                                                                         
          ? Alaska Travel Industry Association $7,420.0 UGF                                                                     
          ? Hope Community Resources, Inc. $85.0 UGF                                                                            
     ? Department of Corrections                                                                                              
          ?  Mental  Health:  $2,540.0 UGF  for  Renovations                                                                    
          Required to Accommodate the Women's                                                                                   
          Mental Health Unit at Hiland Mountain                                                                                 
          ?  This will  match funds  provided by  the Alaska                                                                    
         Mental Health Trust appropriated in SB 19                                                                              
          of   $1,145.0  (Mental   Health  Trust   Authority                                                                    
     ? Department of Environmental Conservation                                                                               
          ?    Village    Safe    Water    and    Wastewater                                                                    
          Infrastructure   Projects    $12,080.0   (matching                                                                    
1:07:11 PM                                                                                                                    
Ms. Harbour reviewed Slide 6:                                                                                                   
     ? Department of Fish and Game                                                                                            
          ? Cook Inlet Stock Assessment $1,000.0 UGF                                                                            
     ? Office of the Governor                                                                                                 
          ?  Capital  Costs   Related  to  Executive  Branch                                                                    
          Office Buildings, Facilities, and IT Systems                                                                          
          $2,500.0 UGF                                                                                                          
     ? Department of Natural Resources                                                                                        
          ? Critical  Minerals Mapping $600.0  UGF (matching                                                                    
          $3,000.0 Fed)                                                                                                         
          ?  Geological   Mapping  for   Energy  Development                                                                    
          $300.0 UGF (matching $300.0 Fed)                                                                                      
          ?  Arctic Strategic  Transportation and  Resources                                                                    
          (ASTAR) $2,500.0 UGF                                                                                                  
1:07:58 PM                                                                                                                    
Ms. Harbour reviewed Slide 7:                                                                                                   
     ? Department of Public Safety                                                                                            
                Reappropriation      of     $1,059.0     for                                                                    
          Maintenance/Renovation of Rural Trooper Housing                                                                       
     ? Department of Revenue       Alaska Housing Finance                                                                     
     Corporation (AHFC)                                                                                                       
          ?  AHFC  Competitive  Grants  for  Public  Housing                                                                    
          $350.0 UGF (matching $750.0 Fed)                                                                                      
          ?  AHFC  Federal   and  Other  Competitive  Grants                                                                    
          $1,500.0 UGF (matching $6,000.0 Fed)                                                                                  
          ? AHFC Housing and  Urban Development Federal HOME                                                                    
          Grant $750.0 UGF (matching                                                                                            
          $4,000.0 Fed)                                                                                                         
          ? AHFC Rental Assistance  for Victims - Empowering                                                                    
          Choice Housing Program (ECHP) $1,500.0                                                                                
          ?   AHFC  Senior   Citizens  Housing   Development                                                                    
          Program $1,750.0 UGF                                                                                                  
          ?  AHFC Supplemental  Housing Development  Program                                                                    
          $3,000.0 UGF                                                                                                          
1:08:40 PM                                                                                                                    
Ms. Harbour turned to Slide 8:                                                                                                  
     ? Department of Transportation and Public Facilities                                                                     
          ?  Decommissioning  and  Remediation  of  Class  V                                                                    
          Injection Wells $2,200.0 UGF                                                                                          
          ?  Alaska Marine  Highway System  Vessel Overhaul,                                                                    
          Annual Certification and Shoreside                                                                                    
          Facilities Rehabilitation $13,500.0 UGF                                                                               
          ?  Other   Federal  Program  Match   $1,300.0  UGF                                                                    
          (matching $10,000.0 Fed)                                                                                              
          ?  Federal-Aid Highway  State Match  $60,000.0 UGF                                                                    
          (matching $690,000.0 Fed)                                                                                             
          ? Federal-Aid  Aviation State Match  $12,000.0 UGF                                                                    
          (matching $187,200.0 Fed)                                                                                             
          ?  Highway   Safety  Grants  Program   $238.3  UGF                                                                    
          (matching $8,000.0 Fed)                                                                                               
     ? Judiciary                                                                                                              
          ? Cyber Security Courts $973.0 UGF                                                                                    
          ? Statewide Deferred Maintenance $1,500.0 UGF                                                                         
     ? Legislature                                                                                                            
          ?   Capital   Costs    Related   to   Legislature,                                                                    
          Legislative  Council,  Council  and  Subcommittees                                                                    
          Renovation    of    Legislative   Buildings    and                                                                    
          Facilities $4,195.0 UGF                                                                                               
1:09:17 PM                                                                                                                    
Ms. Harbour turned to Slide 9, HB 2002 FY2020 Capital                                                                           
Budget  Operating Budget Items ($ Thousands):                                                                                   
     Operating Fund Source Changes $14,132.8 (From Power                                                                        
     Cost Equalization to UGF)                                                                                                  
       Department of Administration                                                                                           
          ? Legal and Advocacy Services $1,995.6                                                                                
          ? Division of Motor Vehicles $20.0                                                                                    
     ? Department of Corrections                                                                                              
          ? Population Management $4,241.5 (includes $524.5                                                                     
          fiscal note for HB 14)                                                                                                
          ? Health and Rehabilitation Services $4,045.3                                                                         
          ? Administration and Support $175.0                                                                                   
          ? 24 Hour Facilities $438.4                                                                                           
     ? Department of Health and Social Services                                                                               
          ? Children's Services $73.3                                                                                           
Ms. Harbour noted that the Operating fund source change was                                                                     
the result of the PCE being unavailable due to the                                                                              
Constitutional Budget Reserve (CBR) sweep.                                                                                      
Ms. Harbour turned to Slide 10:                                                                                                 
    Operating Fund Source Changes $14,132.8 (continued)                                                                         
     ? Judiciary                                                                                                              
          ? Alaska Court System $1,198.5 (Includes $62.0                                                                        
          fiscal note for SB 41)                                                                                                
     ? Department of Law                                                                                                      
          ? Criminal Division $1,602.7                                                                                          
     ? Department of Public Safety                                                                                            
          ? Statewide Support $342.5                                                                                            
Ms. Harbour continued to Slide 11:                                                                                              
     Fiscal Notes (HB 49 - Crimes; Sentencing; Drugs;                                                                           
     Theft; Reports)                                                                                                            
     ? Department of Corrections                                                                                              
          ? Population Management, Palmer Correctional                                                                          
          Center $16,669.1 UGF                                                                                                  
          ? 24 Hour Institutional Utilities $438.4 UGF                                                                          
          ? Health and Rehabilitation Services, Physical                                                                        
          Health Care $4,584.3 UGF                                                                                              
1:10:00 PM                                                                                                                    
Ms.  Harbour reviewed  slide 12,   HB 2002  FY 2020  Capital                                                                    
Budget  Section 8  Fund Transfers:                                                                                              
An  amount equal  to  deposits in  the  budget reserve  fund                                                                    
(art. IX, sec. 17, Constitution  of the State of Alaska) for                                                                    
fiscal year 2019  from subfunds and accounts  in the general                                                                    
fund including  the power  cost equalization  endowment fund                                                                    
(AS  42.45.070)  by operation  of  article  IX, sec.  17(d),                                                                    
Constitution  of the  State  of Alaska,  not  to exceed  the                                                                    
amount necessary  after appropriations  and deposits  to the                                                                    
subfunds  and accounts  from fiscal  year 2020  revenues, to                                                                    
fund appropriations  from those  subfunds and  accounts made                                                                    
in ch. 1  -3, FSSLA 2019, and any  other appropriation bills                                                                    
effective  in fiscal  year  2020, the  general  fund to  the                                                                    
subfunds and accounts from which  those funds were deposited                                                                    
into the budget reserve fund.                                                                                                   
1:10:12 PM                                                                                                                    
Co-Chair  Foster  asked  Ms. Harbour  to  explain  what  was                                                                    
happening with the funds for  Power Cost Equalization (PCE).                                                                    
He understood  that payments  would still  go out  under the                                                                    
program and the fund would also be used for other expenses.                                                                     
1:10:43 PM                                                                                                                    
Ms.  Harbour informed  that with  the passage  of SB  19 the                                                                    
previous  session   fund  sources  had  been   changed  from                                                                    
unrestricted  general  funds  to  PCE  funds.  Additionally,                                                                    
Capital appropriations  had been made with  PCE funds; these                                                                    
changes had been made at  the last minute. She lamented that                                                                    
because the legislature failed to  pass a three-quarter vote                                                                    
to reverse the fund sweep,  the funds within the PCE account                                                                    
would be swept  into the CBR and would not  be available for                                                                    
1:11:49 PM                                                                                                                    
Co-Chair  Foster returned  to  her  statement regarding  the                                                                    
PCE. He noted that the  money generated from the earnings of                                                                    
the PCE fund  was approximately $60 million,  $32 million of                                                                    
which should  have been distributed  through the  program to                                                                    
communities in rural  areas of the state.  He suggested that                                                                    
the  remaining  $30 million  would  have  gone to  Community                                                                    
Assistance.  He  said  that Community  Assistance  had  been                                                                    
replaced  by  the  fiscal  notes  for  the  crime  bill  and                                                                    
expressed  concern that  some of  the $1  billion was  being                                                                    
used to pay for other things in the Capital budget.                                                                             
Ms. Harbour clarified that the  bill would replace where PCE                                                                    
funds were previously being used with general fund dollars.                                                                     
1:13:20 PM                                                                                                                    
Representative  Knopp  recalled  that the  original  Capital                                                                    
Budget  contained  a  $17  million   request  from  DOC  for                                                                    
population management,  contingent on  the reopening  of the                                                                    
Palmer Correctional  Facility. That item had  been vetoed by                                                                    
the governor.  He saw that the  $17 million was back  in the                                                                    
new  budget.  He  asked  what the  plan  was  regarding  the                                                                    
reopening of the Palmer Correctional Center.                                                                                    
Ms. Harbour  responded that  the funding  would be  going to                                                                    
the  Palmer  Correctional   Center;  however,  the  language                                                                    
related to contingency had been repealed.                                                                                       
1:14:48 PM                                                                                                                    
Representative Josephson  referred to  Slide 9.  He wondered                                                                    
whether PCE  had traditionally been  used to fund  the items                                                                    
proposed on the slide.                                                                                                          
Ms.  Harbour responded  no. She  added  that it  had been  a                                                                    
last-minute change.                                                                                                             
1:15:18 PM                                                                                                                    
Representative  Josephson asked  whether the  administration                                                                    
wanted to fund  the items with UGF rather than  from the PCE                                                                    
1:15:56 PM                                                                                                                    
DONNA  ARDUIN, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                    
responded  that the  administration had  originally proposed                                                                    
funding the items with UGF dollars.                                                                                             
Representative  Josephson  asked   about  the  deadline  for                                                                    
receiving the federal grant monies.                                                                                             
Ms.  Arduin  responded that  there  was  not hard  and  fast                                                                    
deadline;  however,  the  Department of  Transportation  and                                                                    
Public Works would like to get  the match soon to be able to                                                                    
continue projects on schedule.                                                                                                  
1:16:58 PM                                                                                                                    
Representative Josephson asked why  the Alaska delegation in                                                                    
Washington D.C.  was anxious  about the  issue if  there was                                                                    
not hard and fast deadline.                                                                                                     
Ms. Arduin thought that the  federal match would ensure that                                                                    
construction stayed on schedule.                                                                                                
Representative Josephson asked why it  was the policy of the                                                                    
administration  to put  all these  sweepable funds  into the                                                                    
Ms. Arduin indicated that the  issues being addressed in the                                                                    
bill  had been  created  by the  committee. The  legislature                                                                    
funded  the items  through the  PCE at  the last  minute and                                                                    
then  failed  to get  a  three-quarter  vote to  access  the                                                                    
funds.  The administration  was  following the  law and  the                                                                    
constitution to fix the accounts.                                                                                               
Representative Josephson  commented that the PCE  funds were                                                                    
not sweep able  under Hickel v. Cowper.  He wondered whether                                                                    
the administration was concerned with possible litigation.                                                                      
Ms.  Arduin   responded  that   the  administration   had  a                                                                    
presentation that it was happy to provide to the committee.                                                                     
1:19:16 PM                                                                                                                    
Co-Chair   Foster  disagreed   that   the  legislature   was                                                                    
responsible for the  lack of a reverse sweep.  He noted that                                                                    
governors, going back  nearly 40 years when  the PCE program                                                                    
was  first  created, had  not  jeopardized  the use  of  the                                                                    
1:20:18 PM                                                                                                                    
Vice-Chair  Ortiz  asked   whether  the  administration  was                                                                    
prepared to  speak on what  was not included in  the current                                                                    
bill  that   was  included  in   the  original   budget  the                                                                    
legislature had sent to the governor.                                                                                           
Ms.   Harbour  responded   that  certain   items  from   the                                                                    
Legislatures  bill  might not  be  included  in the  current                                                                    
bill. She stated  that the legislation was  intended to meet                                                                    
critical holes and appropriations.                                                                                              
Vice-Chair Ortiz  asked whether  she was prepared  to review                                                                    
the items included or not included.                                                                                             
Ms.  Harbour  replied in  the  negative.  She added  that  a                                                                    
comparison of the two bills would need to be done.                                                                              
1:21:29 PM                                                                                                                    
Vice-Chair Ortiz asked about the  $1 million addition to the                                                                    
Department  of  Fish  and  Game.  He  wondered  whether  the                                                                    
addition was considered  a direct add to  the Capital Budget                                                                    
that had  not been  reflected in  any prior  submission from                                                                    
the legislature.                                                                                                                
Ms.  Harbour  responded that  the  governor  did submit  the                                                                    
request in his original  Capital Budget. The legislature had                                                                    
not  included it  in their  version of  the bill.  She added                                                                    
that the department felt that the item was critical.                                                                            
1:22:30 PM                                                                                                                    
Representative  LeBon   mentioned  the   University  Capital                                                                    
Maintenance  piece  equal  to  $5  million,  which  was  not                                                                    
currently included in the bill.                                                                                                 
Ms.  Harbour   believed  that   the  funding   for  deferred                                                                    
maintenance was included but not at the original level.                                                                         
Representative  LeBon whether  the interior  energy project,                                                                    
proposed to be funded  through Alaska Industrial Development                                                                    
and Export  Authority (AIDEA) receipts  for $4  million, was                                                                    
Ms. Harbour indicated that the project was not included.                                                                        
Representative LeBon asked if it had been discussed.                                                                            
Ms.  Harbour  said that  she  had  not  been privy  to  that                                                                    
conversation but that the reason  for the veto was that cuts                                                                    
needed to be made.                                                                                                              
Ms. Arduin  interjected that none  of the  governors  vetoes                                                                    
had been  included in the  bill and that  the administration                                                                    
did not intend to put them back in the budget.                                                                                  
1:23:52 PM                                                                                                                    
Representative  Knopp asked  about the  Alaska Court  System                                                                    
and  the original  $1.2 million  for salary  adjustments for                                                                    
court employees.  He wondered  about the  expected increased                                                                    
costs for the recent crime bill.                                                                                                
Co-Chair Johnston  clarified that  he was talking  about the                                                                    
operating budget.                                                                                                               
Representative  Knopp maintained  his concern  and requested                                                                    
further explanation.                                                                                                            
Ms. Arduin  preferred to focus  on the topic of  the capital                                                                    
1:25:07 PM                                                                                                                    
Representative  Josephson asked  what SB  19, as  written by                                                                    
the legislature, drew from the various funding sources.                                                                         
Ms. Harbour  asked Representative  Josephson to  clarify his                                                                    
Representative  Josephson  wondered  if  the  CBR  had  been                                                                    
realize and passed  what would have been spent  from the CBR                                                                    
and, other sources, on capital expenses.                                                                                        
Ms.   Harbour   would   come  back   with   an   answer   to                                                                    
Representative Josephson's question.                                                                                            
1:26:13 PM                                                                                                                    
Representative Knopp  commented that  the title of  the bill                                                                    
included  other  appropriations  and felt that  his previous                                                                    
question was relevant.                                                                                                          
1:26:39 PM                                                                                                                    
Representative  Josephson  asked   whether  the  legislature                                                                    
could  decide about  the  capital budget  in  fall 2019  and                                                                    
still receive federal match.                                                                                                    
Ms. Arduin  responded that  it was  important that  the cash                                                                    
flow needed  to be available through  construction season in                                                                    
order to  continue projects. She  said that it  was possible                                                                    
that  if the  projects were  not completed  the state  would                                                                    
relinquish the federal match.                                                                                                   
Vice-Chair Ortiz  asked about  Alaska Marine  Highway System                                                                    
(AMHS)  and   the  approximately  $13  million   for  vessel                                                                    
maintenance  and  replacement.  He  noted  that  the  budget                                                                    
submitted  by the  legislature  had  included proceeds  from                                                                    
vessel sales to  be added to the replacement  fund. He asked                                                                    
whether  the  administration  had considered  including  the                                                                    
1:28:19 PM                                                                                                                    
Ms. Harbour reiterated that vetoed  items had not been added                                                                    
back to the legislation.                                                                                                        
1:28:44 PM                                                                                                                    
Vice-Chair  Ortiz understood  that  the monies  that he  was                                                                    
referring to had  been a part of the capital  budget sent to                                                                    
the governor by the legislature.                                                                                                
Ms. Harbour  responded that the  funds he was  referring had                                                                    
been vetoed.                                                                                                                    
1:29:19 PM                                                                                                                    
Representative LeBon asked  whether the administration would                                                                    
consider using AIDEA receipts for Capital Budget items.                                                                         
Ms. Arduin  offered that the  monies had been  suggested for                                                                    
one-time use for oil tax credits.                                                                                               
Representative  LeBon  asked if  the  amount  was over  $100                                                                    
Ms. Arduin  replied that  the legislature  chose to  use the                                                                    
fund for a prospective bonding program for the credits.                                                                         
Representative  LeBon asked  how  statutory budget  reserves                                                                    
(SBR) might be used for Capital Budget appropriations.                                                                          
Ms. Arduin responded that the money had been swept.                                                                             
Representative Knopp  asked whether there was  money to fund                                                                    
the capital budget.                                                                                                             
Ms.  Harbour  replied  that  there  was  approximately  $200                                                                    
million for the budget. She would  get a final amount to the                                                                    
1:31:13 PM                                                                                                                    
Representative   Wool  asked   about  major   transportation                                                                    
projects  and  wondered  how   many  current  projects  were                                                                    
already funded.                                                                                                                 
Ms. Harbour  thought the department  would be  better suited                                                                    
to answer the question.                                                                                                         
1:32:11 PM                                                                                                                    
Co-Chair Johnston repeated Representative Wool question.                                                                        
1:32:23 PM                                                                                                                    
Representative Wool  clarified that  he was  wondering about                                                                    
projects that had secured funding in previous years.                                                                            
1:32:40 PM                                                                                                                    
Representative LeBon  referred to  the list  on Slide  8. He                                                                    
asked  whether the  state was  leaving any  federal matching                                                                    
funds on the table.                                                                                                             
Ms. Harbour indicated  that the state was  capturing all the                                                                    
federal funding for the listed projects.                                                                                        
1:33:13 PM                                                                                                                    
Representative  Josephson asked  whether the  administration                                                                    
prioritized capturing  all the  federal revenue  for Capital                                                                    
Ms.  Arduin  replied  that the  administration  proposed  to                                                                    
capture  all the  federal  transportation dollars  allocated                                                                    
for Alaska.                                                                                                                     
Representative Josephson  had heard earlier in  the day that                                                                    
from  David Teal,  Director,  Legislative Finance  Division,                                                                    
that the current bill could not be funded.                                                                                      
Ms. Harbour confirmed that Director  Teal's numbers showed a                                                                    
1:34:38 PM                                                                                                                    
Co-Chair  Johnston wondered  about  federal matching  funds.                                                                    
She  understood that  in  the past  the  state had  received                                                                    
lapsed  federal  funds  from   other  states.  She  wondered                                                                    
whether  there was  a date  when the  current federal  match                                                                    
would no longer be available to the state.                                                                                      
Ms. Harbour did not have an answer to her question.                                                                             
Co-Chair Johnston  thought it was  an important  question to                                                                    
be  answered. She  believed that  knowing  the timeline  was                                                                    
Ms.  Harbour considered  that  regarding  labor grants,  the                                                                    
federal  government  would review  what  had  been spent  to                                                                    
date, and  if a certain  target had  not been met  the funds                                                                    
would be put out to other  agencies to be spent by September                                                                    
30th. She was unaware of DOT's timeline.                                                                                        
HB  2002  was  HEARD  and  HELD  in  committee  for  further                                                                    
Co-Chair Johnston discussed housekeeping.                                                                                       
1:36:51 PM                                                                                                                    
The meeting was adjourned at 1:36 p.m.                                                                                          

Document Name Date/Time Subjects
7.19.19 HFC HB 2002 Capital Budget.pdf HFIN 7/19/2019 1:00:00 PM
HB2001 Public Testimony Emails July 19.pdf HFIN 7/19/2019 1:00:00 PM