Legislature(1997 - 1998)
03/19/1997 09:07 AM Senate FIN
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* first hearing in first committee of referral
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SB 107 APPROPRIATIONS: CAPITAL & FUNDS
COCHAIR SHARP gave an overview of the capital budget
chronology and agenda. He took testimony on various
capital projects in SB 107 submitted by the Departments
of Administration, Commerce and Economic Development
and Community and Regional Affairs. SB 107 was HELD
for further hearings.
COCHAIR SHARP announced the overview of the capital budget
chronology and agenda. Following are an outline and
excerpts:
I. Chronology of the governor's FY 98 Capital Budget
Submission
A. On December 16, 1996, the governor released his FY
98 budget plan reflecting a $100 million general fund
cap for capital projects and a $16 million AIDEA
dividend to the General Fund. The governor did not
submit a capital budget bill at that time as required
by statute.
B. On March 6, 1997 AHFC announced a $27.6 million
one-time windfall from the state Mortgage Insurance
Fund resulting from the refunding of $434 million of
AHFC bonds. On the same day, the House and Senate
Finance Cochairs announced their intentions to use the
windfall to reduce the FY 98 fiscal gap and draw on the
CBRF.
C. On February 27, six weeks after the beginning of
the legislative session and two and one-half months
after the statutory deadline for submitting a capital
budget bill, the governor released his capital budget.
As submitted, it would:
a. spend $113.3 million from the general fund, or
$13.3 million more than the December 16 cap;
b. spend $16.8 million from AIDEA directly on
capital projects;
c. spend $53 million from AHFC on capital
projects, leaving only $50 million to help close
the fiscal gap, whereas the majority's strategy
would use $70 million from AHFC to close the gap
and spend $33 million for capital projects; and
d. as a result, increase the fiscal gap by $50.1
million.
D. On March 13, the 60th day of the legislature and
the statutory deadline for submitting operating and
capital budget amendments, the OMB send the Cochairs a
memo a) requesting an operating budget front section
amendment to delete the $16 million AIDEA dividend
appropriation to the general fund; and b) advising of
OMB's intent to submit further capital budget
amendments at a later date.
E. On March 18, 65 days into the 120-day legislative
session, OMB submitted a request for CIP budget
amendments, replacing $5.4 million in general funds
with a $5.4 million of the AHFC one-time windfall from
the state Mortgage Insurance Fund. This use of AHFC
funds is at odds with the Cochairs' intent to use the
windfall to close the gap rather than increase
spending.
II. Magnitude of the Task Before the Committee
A. Given the differences between the majority's budget
strategy and the governor's latest budget proposal, the
Senate Finance Committee will have to reduce the
governor's capital budget submission of $183.1 million
by $50.1 million (General Fund <13.3>, AIDEA <16.8>,
AHFC <20.0>).
III. Approach to Resolving the Governor's Capital Budget
Problems
A. On March 21, the committee is scheduled to hear SB
136, a bill that clarifies the governor's
responsibility to submit the proposed capital budget
bill on December 15 with the rest of the proposed
budget.
B. Request OMB to provide no later than 24 hours
before the next capital budget hearing:
1. an update to the governor's comprehensive FY
98 spending plan reflecting a) the capital budget
bill as submitted, plus requested amendments; b)
operating budget bills as submitted, plus
requested amendments; c) the net budget impact of
governor's bills as a separate line item; and d) a
projection of the total FY 98 general fund revised
programs expected to be submitted to the Budget
and Audit Committee next fiscal year.
2. a list of projects retained in the capital
budget that used a) no AIDEA corporate receipts;
b) only $33 million in AHFC corporate receipts;
and c) $100 in general funds.
COCHAIR SHARP concluded his summary and asked Ms. McConnell
to address the committee.
ANNALEE MCCONNELL, Director, Office of Management and
Budget, acknowledged the challenge ahead. One of the
reasons was that they were in the fourth consecutive year of
an extremely reduced general fund capital budget proposal.
Contributors to the pressure include federal opportunities
that need to be taken advantage of, such as increased share
in transportation projects and funds for urban and rural
water and sewer projects. There are also new federal
requirements relating to welfare reform and emergency
communications which require significant investments in
computer systems.
Concerning the AIDEA dividend, MS. MCCONNELL acknowledged
the requested amendment to the operating budget to transfer
the dividend to capital projects instead of the general
fund. They decided that it would be appropriate to suggest
the $16 million AIDEA dividend be used for economic
development. She acknowledged the legitimate question of
what effect it has on the fiscal gap. They took into
account the fact that there is a better revenue picture now
from oil development, not just for the current fiscal year,
but also in the longer term. Next, MS. MCCONNELL brought up
the long range plans and six-year capital plan offered last
year. There was a proposal to have the AIDEA dividend
remain at $50 million and the capital projects at $53
million. Last year, there was a good partnership to make
many water/sewer projects possible through AHFC.
MS. MCCONNELL mentioned two items excluded from the House
Finance CS for the FY 97 Supplemental. They were of highest
priority, needed to be moved ahead on the schedule and must
not "fall through the cracks." The items are the McLaughlin
Youth Center security needs, the emergency communications in
DH&SS, and the Police Training Academy. A large remaining
issue was school construction and major maintenance and
their budget did not go far enough to make a dent. The same
holds true for prisons and deferred maintenance. The
governor requested Speaker Phillips to include in the task
force on deferred maintenance a broad look at capital needs.
She noted an updated six-year plan was currently being
printed and suggested the task force take six-year capital
planning as part of their charge over the interim. It could
set the stage for a resolution next year recommending a six-
year plan for capital investments for the state, similar to
what communities presently do.
MS. MCCONNELL continued her presentation with a summary of
the front section of SB 107. She mentioned Section 3
previously, regarding the AIDEA dividend and added that they
had conferred with AIDEA to insure that their bond situation
would not be jeopardized by the proposal. It would be
consistent with the parameters passed in statute last year.
Section 4 was maintained at the $15 million level that was
in the budget last year. They continue to propose that
level of funding in their six-year plan. Many communities
rely on that for projects they determine themselves and it
has been successful. Two of their proposed amendments
relate to Capital Matching Grant titles. There will also be
requests from communities for changes in project titles or
shifts in amounts of money. It has been the practice to
take those up to the last minute, but they have tried to get
communities to firm it up so there are fewer amendments at
the last minute. They will continue to coordinate with both
the Cochairs' offices as well as the appropriate legislators
with copies of the amended requests. She did not expect too
many. Section 5, Federal or Other Program Receipts, relates
to other issues that have come up in the context of RPL's.
They received one recently from EVOSS and Representative
Hanley suggested it be brought up and perhaps included in
the supplemental bill. MS. MCCONNELL closed her comments
and deferred to the individual departments for the remainder
of the bill.
SHARON BARTON, Director, Administrative Services, Department
of Administration; addressed the committee next. She
referenced Section 7, which reappropriates $25.2 thousand,
and would be addressed by Dugan Petty.
DUGAN PETTY, Director, General Services; DOA; explained that
the figure was the balance that remained from a completed
CIP project. They were requesting authorization to
reappropriate it for office consolidation support for space
planning and to look at reconsolidation of offices as a way
to reduce the leasing budget.
COCHAIR SHARP asked if it would be contracted out. If it
were done with in-house personnel, he questioned why
additional funds would be needed for a study. MR. PETTY
responded that the expenditures would acquire contractual
services such as planning and consulting services necessary
to facilitate consolidation, and pay moving costs.
MS. BARTON pointed to the next section affecting general
services on page 5, line 24, regarding the Juneau subport
facility replacement planning request for $100 thousand.
MR. PETTY added that the request is to bring on a consultant
to help plan for the replacement of the subport occupants.
The property was transferred to the Mental Health Land Trust
by lease, expiring 6/30/99, which obligates relocation. The
location consists of warehouse space used by the Departments
of Fish and Game, Natural Resources, Administration, and the
Legislature. They need to look at the alternatives
available to move the occupants into minimum space
requirements. The money would enable planning funds for the
task.
The next project, an Automated Purchasing System for $225
thousand, was on line 26. MR. DUGAN explained it was to
bring on an electronic commerce package as a different way
of conducting procurement business. They want to tie it
into their access system, to have the ability to know the
funds are there and also to route it to make payment. They
also want the system to use electronic commerce with web-
based technology that would allow them to put out their bid
and quote solicitations for vendors to access either through
fax-back or web-based browser systems. Ideally, the vendor
could electronically submit their information to the state,
and the notice of award could be done electronically with a
parallel fax-back system. It would likely reduce
transaction costs for procurement across the system.
Looking at the private sector, it is the wave of the future
in the avenue of electronic commerce, one solution being the
internet, the other being an electronic data interchange
where business transactions are reduced to data transaction
sets which are shorthand for many of the written documents.
The federal government has moved to that type of transaction
for procurement under $100 thousand. The same theory
applies, by conducting business in an electronic commerce
setting, costs of operation and transactions can be reduced
for both the state and the vendor. They favored an
internet-based approach rather than a full "EDI" approach as
a cost-saving opportunity.
MS. BARTON next directed attention to page 5, line 8, with a
request of $700 thousand for Pioneer Homes Renovations,
Repairs and Maintenance.
JAMES KOHN, Director, Longevity Bonus Programs, DOA,
testified that his capital budget request was divided into
three categories. One was correction of fire, life, and
safety code violations. The Fairbanks home had electrical
code compliance of $142 thousand and the Anchorage
ventilation system compliance of $177 thousand. Of the
hundreds of these types of violations over the years, they
were the two they felt needed addressed at this time. The
next category was structural repair and maintenance to two
homes. The Anchorage home has water leakage damage, the
parking lot is buckled and dangerous to walk across. The
Juneau home is ten years old and the exterior walls need to
be maintained. The third main area was energy efficiency
modifications to the home in Palmer which uses a lot of
heating energy. They want to replace windows in the
resident and other areas which leak much of the heat. It is
difficult to keep the rooms warm in the winter. MR. KOHN
noted there may be other projects that may come up that
could take precedence over the energy efficiency
modification because there are problems with the buildings,
things fall apart unexpectedly and need immediate attention.
In response to a question by SENATOR PHILLIPS, MR. KOHN
stated the hot water section of the Anchorage home was built
in 1982 and had been patched four times.
MS. BARTON continued down the list, the next four projects
had to do with Information Services.
MARK BADGER, Director, Information Services, DOA, approached
the committee. The first item he described on page 5, line
10, was $2.1 million from the internal service fund. They
are in the fourth year of charge back with the state in
information services and part of that mechanism is the
depreciation of equipment. When it is in need of
replacement or repair, it comes from the rates that are
charged to the agencies, so the individual departments or
his division did not have to approach the legislature yearly
for broken equipment replacement. It authorizes a number of
items including a small printer, tape library, disk space,
software and hardware replacement and improvement, upgrades.
The charge-back works well in that it allows an auditable
trail for agency use and tracking rates against the national
average.
MR. BADGER, brought up the next project on page 5, line 12.
A request of $400 thousand for the Satellite Interconnect
Project rounds out a $2 million project underway for three
years. This last piece makes the digitization of the Alaska
Rural Communication Service Emergency Alert compliant by
allowing activation of emergency notification to individual
communities when an emergency is imminent. If a tsunami
warning is required on the southwest coast of Alaska, an
emergency alert could be issued to the specific communities
so that the entire state would not be illuminated with
emergency notification of a tsunami.
The third project for MR. BADGER'S division on page 5, line
14, was the Metropolitan Area Network which provides high
speed connectivity between downtown Juneau and state
agencies out the road for $200 thousand. MR. BADGER
concluded his presentation with the last project on page 5,
line 16, a $500 thousand request for FCC-mandated digital
technology for the Emergency Radio System. They must
convert all current radios from analog to digital because of
the pressures on spectrum band space, an ongoing project for
the next four to five years for several agencies. It was a
$1 million project which they hoped they could partner with
others.
MS. BARTON brought up the next project on page 5, line 18.
Human Resource Systems Computerization was the department's
first priority project and critical to successfully
implementing the re-engineering of the personnel processes.
She asked Ms. Reaume to provide details to the committee.
BEVERLY REAUME, Director, Personnel, DOA; testified that two
weeks ago they started a pilot project for a new state
hiring process. It is an internet/online-based system. The
request is what it will take to implement the project
statewide. A critical piece is the scanning of applications
for hard copies. There is a need to work on archiving,
retrieval, recording and fine tuning.
MS. BARTON noted another important project to the department
on page 5, line 20, Internet Access for Driver Licenses and
Vehicle Titling, and asked Mr. Essary to provide
information.
DAVID ESSARY, Finance System Manager, Finance, DOA;
described their goal to make the DMV more efficient, reduce
customer lines and improve service. They have four focuses
in that area. One is to replace routine tasks by the
purchase of adhesive tab printers to streamline the method
of issuing license plate tabs. Another is to provide
internet access as an "alternate highway" to the DMV in
addition to the two existing ones, those being mail or
visiting the office. They are in a pilot project with two
dealers for registration and titling functions. Another
focus is paper reduction by installing user friendly
computer terminals for direct data entry. The last area
provides public education for people waiting in line via
videos, posters and signs and employee training regarding
new programs and laws.
MS. BARTON explained the next project on page 5, line 22,
requesting $100 thousand for Public Radio and Television
Technology Improvement Grants. The appropriation will
enable the commission to meet and prioritize $3.8 million in
grant requests from the stations.
The last project for the Department of Administration was a
request of $350 thousand for the newest division, Motor
Vehicles, for FY 98 license plates.
JUANITA HENSLEY, Chief, Driver Services, Division of Motor
Vehicles, Department of Public Safety, detailed that the
fiscal request was to purchase the required license plates
that have to be issued on a yearly basis. The funding is
for inventory of the basic blue/gold design, not the new
gold rush plate passed last year. To fully fund that
program would require $142 thousand.
SENATOR DONLEY inquired if the plates were traditionally a
capital budget item. MS. HENSLEY responded that it has been
for a number of years. It used to be in the operating
budget, but when line item reductions occurred, they ran out
of plates one year, so the decision was made to move it to
the capital budget several years ago. SENATOR DONLEY felt
it should be reflected as a cost of running the division.
MS. MCCONNELL interjected that they had proposed moving it
to the operating budget last year.
End SFC-97 #61, Side 2
Begin SFC-97 #62, Side 1
COCHAIR SHARP brought up the capital budget requests for the
Department of Commerce and Economic Development.
GUY BELL, Director, Administrative Services, Department of
Commerce and Economic Development, first brought up page 6,
line 5, requesting $350 thousand for the Economic
Development Matching Grants program.
DEBBY SEDWICK, Assistant Commissioner, Division of Trade and
Development, DCED, described the next project on line 6,
which provides financial incentive of $500 thousand for
direct air service between Japan and Alaska for a minimum of
two years. There are currently about 20 thousand Japanese
tourists that come to Alaska per year, many in the winter.
It is estimated there would be an additional 20 thousand
passengers per year bringing in about $46 million of revenue
to the state, adding about $251 thousand to airport landing
fees and creating approximately 500 jobs. The money is from
AIDEA and matched by the Anchorage Convention and Visitors
Bureau ($500 thousand per year for two years) and Fairbanks
Convention and Visitors Bureau ($150 thousand per year for
two years).
COCHAIR SHARP inquired if this was different from the
governor's announced bonus to the first airline to provide
passenger service. MS. SEDWICK responded that it was the
same which evolved into a two year program to involve the
private sector.
In response to a question by COCHAIR SHARP, MR. BELL
confirmed that the Kodiak Launch Complex on page 6, line 7,
had been moved to the supplemental appropriations bill (SB
83) and withdrawn from the capital budget. MR. BELL next
addressed the final project for his department. It was a
$250 thousand request for AIDEA funds for Visitor
Statistics, something they try to do every four years to get
basic information on who's coming to the state, how they get
here, how much they spend and what their impressions are of
the state. It is fundamental research for marketing and
product decision for the industry. The program was
downsized from $800 thousand in the past. The information
would be available to the public.
COCHAIR SHARP invited testimony from representatives of the
Department of Community and Regional Affairs on their
portion of the budget.
REMOND HENDERSON, Director, Administrative Services,
Department of Community and Regional Affairs, briefly
reviewed their items contained in the capital budget. The
first was $50 thousand for Organizational Grants on page 6,
line 10. On the next line, Rural Development Grants, MR.
HENDERSON referenced an amendment to decrease the federal
portion of Mini-Grants from $480 thousand to $166 thousand.
Line 11, the Alaska Yukon Kuskokwim Salmon Marketing grant,
was a $250 thousand project designed to develop a salmon
marked for that area. SENATOR ADAMS suggested reducing the
ASMI budget by that same amount. Line 14, the Head Start
Repairs, was for upgrade and repair to various facilities
across the state. Line 15, the Delta Junction Economic
Recovery project for $675 thousand, was for a study of the
reuse of the base, $500 thousand of which would come from
federal funds.
COCHAIR PEARCE brought up a question concerning grantee
responsibility for Head Start facility repairs. MR.
HENDERSON explained there was a low profit margin and the
money provides assistance. The grant recipients prioritize
their projects, decide where funds should go and the
department makes awards based on those recommendations. MS.
MCCONNELL added that there were some situations with safety
and fire code violations in community based facilities last
year that this money would go to. COCHAIR PEARCE was
supportive of Head Start but questioned whether it made
sense to "be in the repair business to grantees" because
that is not done for child care or day care facilities.
MR. HENDERSON brought up page 6, line 15 next. The Native
Heritage Center was a project located in northeast Anchorage
along Muldoon Road and the Glenn Highway. A 26,000 square
foot welcome house includes exhibit and demonstration areas
for theatre, cafe, gift shop, gathering hall, tourist
information, and an outdoor demonstration circle. It is
anticipated to bring in about $15 million to the local
economy with construction and contracts to Native and other
Alaskan ventures, and to provide ten full-time year-round
jobs and about 150 part-time summer jobs.
SENATOR PHILLIPS noted the next item on line 17 and
questioned the label, suggesting it should read "Artic
Winter Games-Team Alaska." MR. HENDERSON agreed to check on
the wording. He explained the request was primarily for
traveling expenses of the team to travel to the Northwest
Territories '98 competition.
Line 18 listed Community Block Grants comprised of the
Community Services Block Grant and the Community Development
Block Grant. The Services grant goes primarily to RuralCAP,
the one designated CAP agency for the state, designed to
assist development in poverty-stricken families. The
Development grant provides assistance for basic
infrastructure needs such as construction, economic
development activities, roads, etc.
MR. HENDERSON brought up the next item, Federal Energy
Projects, on line 19, a request to receive authorization for
$10 million from the federal government energy division.
They are attempting to find alternative means of energy,
alternative sources of funding for fuel projects, rural
power system upgrades, and other energy-related items. They
have been successful receiving these funds in the past.
Concluding his overview, MR. HENDERSON explained that the
next item on line 20, Rural Power Systems Upgrades, was in
the Energy Division and was for generators, distribution
lines, and other power structures. The last item was the
Southeast Economic Revitalization Initiative on line 21, a
result of the mill closure in Ketchikan.
COCHAIR SHARP asked if there were questions. There being
none, he concluded the testimony and HELD SB 107 for further
consideration.
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