Legislature(2001 - 2002)
04/19/2002 09:14 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 403(FIN) am(brf sup maj fld)(efd fld)
"An Act making appropriations for the operating and loan
program expenses of state government, for certain programs,
and to capitalize funds."
SENATE BILL NO. 289
"An Act making appropriations for the operating and loan
program expenses of state government, for certain programs,
and to capitalize funds; making appropriations under art. IX,
sec. 17(c), Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for an
effective date."
CS FOR HOUSE BILL NO. 404(FIN)
"An Act making appropriations for the operating and capital
expenses of the state's integrated comprehensive mental health
program; and providing for an effective date."
SENATE BILL NO. 288
"An Act making appropriations for the operating and capital
expenses of the state's integrated comprehensive mental health
program; and providing for an effective date."
Department of Revenue
LARRY PERSILY, Deputy Commissioner, Department of Revenue,
testified via teleconference from an off-net location in Anchorage
that the impacts of the proposed $300,000 unallocated budget
reduction, in addition to no funding for certain expenses such as
contracted salary increases, would likely be decreased revenue to
the State. He explained that the efforts to collect the maximum
amount of revenue could not be maintained at the current level. He
reminded the Committee that the Department is statutorily mandated
to collect revenue and invest it for gain.
Mr. Persily noted that several divisions rely on general funds to
operate, as well as to secure funds from different sources. He
stated that each dollar of general funds reduced results in a loss
of two to three dollars in other funds.
Mr. Persily spoke to the impacts of the proposed budget to the Tax
Division, informing that the historical practice has been to audit
every oil company's corporate tax return annually. He explained
that despite the stability of tax laws under Alaska's modified
apportionment formula, the allowable deductions each corporation is
permitted in other jurisdictions, i.e. other countries, affects the
amount Alaska receives. This, he stated, is because the State tax
is calculated as a portion of the corporation's "worldwide income"
and the tax laws in other countries are constantly changing, thus
necessitating annual audits. He gave England as an example, stating
the country recently announced a ten-percent tax increase to oil
and gas income, which would impact the amount of taxes Alaska
collects, because the profits of British Petroleum, Inc and North
Sea would be lower. He noted that the audits are used in the event
of disputes over allowable deductions.
Mr. Persily remarked that the Department oversees charitable gaming
activities, the smallest revenue producer for the State at
approximately $2.3 million annually in fees and taxes collected,
countered by approximately $819,000 expended in FY 01 to administer
the program. However, he stressed charitable gaming produced $28
million in FY 01 to licensed non-profit organizations.
Mr. Persily next addressed the Child Support Enforcement Division
and qualified that although the activities of this Division are
considered primarily collecting money for others, a portion of the
revenue is paid to the State. He informed that in FY 01, a record
amount of $91 million was collected and of that amount, $7 million
was retained for the State general fund as repayment for public
assistance. He explained that in instances of custodial parents
receiving public assistance, delinquent child support payments
collected from non-custodial parents are assigned to the State to
allow the State to recover the cost of that public assistance. He
noted the FY 01 budget for this Division is approximately $3.1
million general funds, thus the Division generated approximately $4
million for the State.
Senator Hoffman asked the amount of the reduction from FY 02
proposed in this budget.
Mr. Persily listed an unallocated reduction of $334,100, in
addition to the increased costs of funding salary increases
stipulated in labor contracts.
Senator Hoffman clarified the Department's impact statement [copy
on file] asserting that reduced funding and increased expenses
would impact the Department's efforts to collect $3.6 million from
the Salmon Enhancement Tax at a cost to the State of $36,000; $3.1
million from the Seafood Marketing Assessment, at a cost of
$66,000; and $2.6 million the Salmon Marketing Tax, at a cost of
$36,000.
Mr. Persily answered that the expenses of the contracted salary
increases and the unallocated budget reduction must be "absorbed"
by the Department. He emphasized that this would require fewer or
less aggressive audits and less enforcement efforts, which would
result in less revenue.
Senator Hoffman commented as a "businessman" that the proposed
budget for this Department "makes bad business sense."
Department of Administration
ALISON ELGEE, Deputy Commissioner, Department of Administration,
testified that the reductions proposed to the Division of Finance
budget would eliminate an increment recommended by Governor Tony
Knowles to address on-going maintenance needs of the AKPAY system.
She stressed the AKPAY system is over twelve years old and that it
is "becoming extremely difficult" to maintain the system to ensure
payroll obligations. She detailed the requirements to convert the
existing database system, as the vendor no longer supports the
current system.
Ms. Elgee next addressed the Division of Motor Vehicles, noting the
proposed budget would reduce the Division's appropriation $382,300.
As a result, she stated, the Division would be forced to hold
positions vacant, not fill seasonal positions, and possibly
consolidate the Downtown Anchorage office into the Benson office.
She surmised these actions would increase the waiting time required
by customers.
Senator Hoffman asked if the $382,000 reduction is compared to the
FY 02 appropriation.
Ms. Elgee clarified the FY 03 appropriation would be reduced
$200,000 from FY 02, and the balance is the result of increased
postage costs and personnel services expenses.
DAN SPENCER, Director, Division of Administrative Services,
Department of Administration, also clarified that the seasonal
positions would not be filled and the impacts would be experienced
the following summer because the seasonal positions have already
been filled for the upcoming summer.
Ms. Elgee informed the Committee that the Alaska Public Offices
Commission (APOC) incurs additional costs during an election year.
In addition to normal election expenses, she pointed out that the
proposed budget provides no funds to implement the campaign finance
reform statutes, which the Governor had vetoed and the Legislature
overrode. She warned that training of the new requirements might
not occur and that increased complaints of noncompliance would
result.
Ms. Elgee next addressed the Public Defender Agency (PDA) reminding
of the over $2 million general funds requested by the Governor for
FY 03 as well as a $600,000 supplemental request of the current
year to compensate for short-funding for attorneys handling Smart
Start cases and Driving Under the Influence (DUI) Courts. She
listed services that have been eliminated, along with shorted
business hours, reduced training and travel. She stressed there is
no more ability to further reduce costs and that caseloads continue
to increase. She predicted at least $1 million in supplemental
funding would be needed the next year to meet the Agency's
constitutional mandate to provide legal defense for indigents.
Ms. Elgee continued that the Office of Public Advocacy (OPA) is
also underfunded in the proposed FY 03 budget by $2,270,000 and
additionally, supplemental funding for FY 02 is needed. She
detailed how the Alaska Court System appoints attorneys directly
through the OPA and the Department has little control over the
expenses.
Ms. Elgee noted the proposed reductions to the Pioneers' Homes
would result in reduced revenues. She told of new beds in the
Palmer Pioneers' Home that could not be filled because of staffing
limitations. She noted most residents require 24-hour care and that
staffing is not available to ensure safety. She stated another ten
beds must be eliminated through attrition in the Anchorage
Pioneers' Home.
Ms. Elgee concluded with the proposed funding reduction to the
Public Broadcasting System. She informed that the System has been
operating with continued budget reductions and has been able to do
"remarkable things" despite these reductions. However, she stressed
the reserves are gone and the Department would be unable to secure
$130,000 federal matching funds, which would result in loss of at
least eight full-time positions.
Senator Hoffman commented the Committee has spent considerable
effort on HB 4 relating to drunk drivers, noting he supports this
legislation. However, he stressed that adequate funding must be
provided to the PDA and OPA to implement this and other criminal
offense statutes. He suggested the budget include matching funds
for public broadcasting to allow the Department to receive the
federal funds "that our congressional delegation has fought for."
Co-Chair Donley requested concise written statements from the
departments summarizing the testimony presented at this meeting.
Senator Hoffman suggested the statements include identification of
requests for "new" funds.
Department of Community and Economic Development
JEFF BUSH, Deputy Commissioner, Department of Community and
Economic Development, testified about the Power Cost Equalization
(PCE) program. He understood the proposed FY 03 operating budget
would likely not be the final appropriation for this program;
however, he noted it contains virtually no funding for PCE. He also
pointed out the budget legislation does not contain the necessary
language to appropriate funds from the PCE Endowment fund. He
stated that, according to the current seven percent allocation
formula, $12.8 million is available in the endowment for use in the
program. In addition, he informed $2 million general funds are
necessary to partially fund the program, as well as $3 million
general funds, as requested by the Governor, to fully fund the
program.
Mr. Bush warned that if adequate funds were not forthcoming, the
program services must be pro rated. He remarked that with full
funding of PCE, the average rate paid by participating customers
would be approximately 18.67 cents per kilowatt hour; compared to
an average rate of 9.9 cents per kilowatt hour paid by residents of
Anchorage, Fairbanks and Juneau. He explained that if $15.7
million were allocated to the program, the pro-rated rate of the
average PCE customer would be approximately 21.85 cents per
kilowatt-hour.
Mr. Bush next addressed the proposed $284,000 unallocated reduction
to the Department, pointing out it is $99,300 more than the cost of
the third-year salary increase, as required in the employee
contracts. He shared that the "labor cost reductions" would be
allocated to the divisions that are funded with general funds,
which are primarily the economic development agencies. He remarked
this would require the elimination of one position responsible for
25 to 30 percent of the tourism planning efforts in the State. In
addition he listed the reductions would be made to the Rural Energy
Program and the Circuit Rider Programs. He explained the Circuit
Rider Program received an appropriation in FY 02 to perform
additional outreach, including on-site training of operators and
preventive maintenance activities.
Mr. Bush next addressed two increments proposed in the Governor's
FY 03 operating budget that are not included in the committee
substitute. The first, $275,000 for the Alaska Economic Information
System, he explained as a new web-based digital economic
information system that provides economic data related to various
regions of the State. He stated this system requires on-going
maintenance and warned that it would rapidly become outdated if the
program were not funded. He listed $90,000 for the Division of
International Trade and Market Development to provide trade
representation in China as the second request. He informed that
China is currently the fastest growing economy in the world with
eight to nine percent annual growth to the national product. He
stressed that Alaska is not fully capitalizing on this potential
market, although the State exports approximately $100 million in
goods to China.
Senator Austerman referred to the proposed unallocated budget
reduction and clarified the reductions would be made to tourism and
international trade.
Mr. Bush affirmed and added the circuit rider program would be
reduced to account for the unallocated budget reduction to the
Department.
Senator Hoffman asked if a $100,000 reduction to the circuit rider
program would result in reduced training and a subsequent increase
of power outages and costly repairs in rural areas.
Mr. Bush agreed and noted on-site training would be eliminated and
maintenance and operations would be reduced.
Department of Corrections
MARGARET PUGH, Commissioner, Department of Corrections, testified
why she found the proposed budget "unreasonable and illogical". She
told the Committee that the Department and the Legislature have
made continued efforts to accommodate the increasing prison and
probation and parole populations. She reminded of the adopted
short-range and long-range plans to meet these challenges and
emphasized that the Department has acted in good faith to manage
the Department as mandated. She noted the Governor's proposed
budget includes funding increases to continue these efforts.
Ms. Pugh stated the Alaska prison population has continued to grow
and would increase approximately four percent this year and three
percent the following year, despite lower crime rates and less than
average number of bookings. She noted the average national crime
rate has increased one-percent this year, which is the lowest
growth percentage since 1972. She attributed Alaska's larger inmate
growth to legislation that "increases, strengthens and lengthens"
incarceration and sanctions.
Ms. Pugh stressed it has been known for three years that the new
Anchorage jail would open this year, and informed that it did open
earlier in the week. She reminded that with the passage of SB 53
several years prior, the Legislature dictated the amount of
operating funds for this facility, which are reflected as a $1.8
million increase in the governor's proposed budget.
Ms. Pugh furthered that the Legislature insisted that federal funds
that the Department intended for capital projects, be used instead
for operating expenses. She informed that these funds are now
discontinued and $4 million reflected in the governor's proposed
budget are to compensate for this.
Ms. Pugh spoke to increased medical expenses, which continue to
rise across the nation as well as in Alaska's prison system. She
noted the Department has submitted a significant supplemental
budget request for FY 02 medical expenses.
Ms. Pugh remarked that the Legislature has been aware of the
increased labor costs mandated in the contracts with collective
bargaining units.
Ms. Pugh addressed legislation adopted the previous session, which
require funding to continue to implement.
Ms. Pugh noted the appropriation limitation imposed by the Senate
Majority is higher than that imposed by the House of
Representatives Majority, but that the Senate amount includes $4.8
million to fund community jails, which the House of Representatives
proposed funding through HB 20.
Ms. Pugh summarized this budget "virtually ensures the erosion of
public safety." She assured she makes this statement after thorough
review.
Ms. Pugh shared that the Department had considered a process of
transferring offenders directly from prisons to electronic
monitoring and home furlough programs and thus bypassing halfway
houses, or Community Residential Centers (CRC). She stated this is
the practice in some other jurisdictions and is less expensive, but
also riskier. She noted the budget subcommittee rejected the
proposal and recommended the Department be required to hold the CRC
component harmless when absorbing the unallocated budget
reductions.
Ms. Pugh remarked, "I'm at a loss to the logic of reducing the
budget below the 02 level, ignoring the increases in population,
which we've known about, ignoring past year's authorizations and
directions, and continuing to consider pieces of legislation that
will in fact increase the work in the Department of Corrections."
She stated the committee substitute provides approximately $3.2
million less than needed not including the increased labor costs.
Ms. Pugh listed the 109 correctional officer positions and 16
probation officer positions that must be held vacant to allow the
Department to fund the increased labor costs, asserting this is
unmanageable.
Senator Ward referenced an impact statement [copy not provided]
regarding funding to the Correctional Industries Programs, which he
stressed has not been reduced from FY 02. He qualified that the
Correctional Industries Administration component is appropriated
$1.55 million, a reduction of 3.9 percent from the previous year.
He noted the intent language to retain the McKinley Meat Packing
Plant for one more year. He asked the Department why this facility
would be closed if the budget were reduced only $47,000.
DWAYNE PEEPLES, Director, Division of Administrative Services,
Department of Corrections, responded that operations of the
facility require three product managers and two correctional
officers. He explained that approximately 20 inmates must be
transported from the Palmer Correctional Center to the meat packing
plant and overseen by Department staff. He stressed that the
proposed budget would impact the Department to such an extent that
funding would no longer be available for the additional staff
required for all correctional industries operations. He stated that
the three correctional officer positions must be relocated to the
Palmer prison because over 80 Department positions statewide would
be unfunded. He informed that the McKinley Meat Packing Plant has
been State subsidized for fifteen years. He spoke of the 1,000 cows
and pigs slaughtered each year and the intention to transition the
operation to the Department of Natural Resources Division of
Agriculture or to private ownership.
Senator Ward remarked that the matter of transitioning ownership
has been discussed for three years and should have been completed.
He charged that the Department of Corrections has been disingenuous
in failing to negotiate the transfer with the Division of
Agriculture. He stressed he is not a supporter of the meat
packaging plant and asserted it should be closed along with the
Matanuska Maid dairy and other State-operated facilities.
Senator Ward then commented on the testimony asserting that certain
laws are overburdening the Department of Corrections. He suggested
that if the Department supports the release of inmates directly
into communities under an electronic monitor program, the
Department should submit a proposal directly to the Legislature for
consideration. He stated the existing CRC system is adequate and
that he would not trust "rapists and murders with their word of
honor." He expressed, "If that means that people are gonna have to
do a little bit extra in order to make this whole thing work,
they're gonna have to do a little bit extra." He asserted, "This is
a tremendous budget… The public demands to have safety and they
will have safety under this budget."
Senator Hoffman agreed the public demands safety and he noted this
is the point the Commissioner is stressing. Senator Hoffman stated
that if the Legislature intends for the Division of Agriculture to
operate the McKinley Meat Packing Plant, funds must be appropriated
to that Division to do so." He furthered that the Legislature must
take appropriate action to make such transfers occur because "it
just does not happen instantaneously because we wish it."
Senator Hoffman asked the number of correctional officer positions
necessary to operate the new Anchorage Jail.
Ms. Pugh replied she would provide the information. She noted that
$1.8 million of the requested funding increase is to fully fund the
operations of the new facility and a significant portion of this
amount is for personnel costs.
Senator Hoffman shared that 35-40 positions are required to operate
a 200-bed facility. He calculated that the omission of funding for
108 positions could threaten the operation of three 100-bed
facilities, such as the one located in Bethel, thus further
contributing to overcrowding conditions in other facilities.
Ms. Pugh affirmed.
Senator Hoffman commented that legislators' campaign they are
"tough on crime," noting 23 bills relating to public safety are
currently under consideration. He specified HB 4 relating to drunk
driving.
SFC 02 # 70, Side B 10:01 AM
Senator Hoffman opined that legislators "need to put the dollars
behind our words."
Ms. Pugh informed that 83 new positions are associated with new
Anchorage Jail; in addition to the positions transferred from the
Fifth Avenue Jail.
Senator Ward asked the number of positions at the new jail would
not be filled because of the funding level proposed in the
committee substitute.
Ms. Pugh calculated that "the Anchorage Jail impact" would result
in a reduction of five and one-half to six correctional officer
positions.
Senator Ward clarified that rather than the requested 87 positions
the facility would operate with 82.
Ms. Pugh corrected that 83 positions are required to operate the
facility and that the impact of the proposed funding level would
reduce five to six positions.
Senator Ward asked if intention is to station five fewer positions
at the new facility.
Ms. Pugh responded this would be the impact of the proposed funding
level, emphasizing that the legislature would force the Department
into this situation if this budget were passed.
Senator Ward asked if the intention is to take the unallocated
budget reductions from correctional officer positions.
Ms. Pugh answered yes.
Senator Green proposed a solution to the transfer of the McKinley
Meat Packing Plant, to operate the program with a sunset date to
encourage a transition. She agreed with Senator Ward that the
Legislature should not be required to make the transfer decision,
but rather it should be "internal" within the Division of
Agriculture. She acquiesced that the Department of Corrections has
been drawn into the matter as an "enabler, through no fault of
theirs," to assist the operation of the facility. She stressed the
time has passed for a resolution and suggested addressing the issue
as a capital project to "have more definitive language and ratchet
it down".
Senator Hoffman opined that the Committee should be concerned about
public safety, but questioned the logic of not funding 109
positions as it could jeopardize that safety. He was concerned for
the safety of the remaining correctional officers and inmates.
Ms. Pugh pointed out the Department has a good safety record. She
indicated that unsupervised inmates would cause problems, including
assaults, and have greater opportunity to attempt suicide. She
warned that when an institution is understaffed, there is not only
increased risk to inmates, but to staff as well. She credited well-
trained personnel and adequate staffing for the fact that Alaska
has not had prison riots and other volatile situations that have
occurred in facilities located in other states.
Senator Hoffman asked if the witness anticipated this would impact
the personnel turnover rate due to concern for personal safety. He
asked what is the current turnover rate in Alaska.
Ms. Pugh affirmed the turnover rate would likely increase and she
cited studies on the factors that influence the turnover rate of
correctional officers and probation officers nationally. She
emphasized that working with offenders is well documented as a
"high stress job" in any situation. She relayed a conversation she
recently had with an Alaska State Trooper who informed her that he
"loved his job as a Trooper" and did not know how others could work
"behind the bars" in a correctional center. She listed a factor
impacting staff turnover, as well as difficulty in personal lives
such as divorce and substance abuse, is the increased amount of
work and the number of hours that correctional officers are exposed
to the conditions of prison life. She noted the national turnover
rate varies by job class and averages 20 percent annually. She
anticipated the rate in Alaska would be similar if facilities were
understaffed.
Senator Austerman cited the budget subcommittee recommendation to
allocate $1.8 million general funds to the new Anchorage Jail. He
pointed out this is the amount requested by the Governor. He asked
why the witnesses were testifying that positions at this facility
would not be funded due to budget reductions.
Mr. Peeples answered, "The increment goes in, it's acknowledged,
and then there's a series of component by component percentage
point cuts. In the Anchorage Jail, which the final budget is a
composite of the Sixth Avenue Jail being closed out-monies being
transferred over there and then an increment of $1.8 $1.9 million.
That's cut by $350,000. So it does go down; the money comes in in
the first action, and then the allocated reductions by component
reduces it down."
Senator Olson surmised from the discussion regarding the McKinley
Meat Packing Plant that it should be operated differently because
of the expense to the State. He asked about positive impacts of the
meat packing plant operation on inmates and why the program is
continued.
Ms. Pugh relayed that the previous day, she spoke with program
manager about the many inmates who have worked in the plant and
their employment after release. She learned that many are working
at grocery stores and as butchers across the State. She then asked
the manager if former inmates who had participated in the program
could be hired to work at the plant. She was told that most who had
been through program are employed elsewhere and that competitive
salaries would be necessary to entice these workers.
Senator Olson asked if there are plans to eliminate the McKinley
Meat Packing Plant program.
Mr. Peeples recalled that the Department of Corrections assumed
operation of the McKinley Meat Packing Plant from the private
sector after the company lost approximately $1 million and
defaulted on loans from the Agriculture Revolving Loan program. He
furthered that inmate labor has been used to maintain operation
with oversight of two correctional officers and two production
managers. He stated that updated regulations require three
production managers. He shared, "historically, it's not been a real
viable operation," and the main purpose has been using culled
cattle from the dairy herds and to make hamburger to feed inmates.
Senator Olson again asked if there is no intention to close
operation because of the social benefits to the State.
Mr. Peeples replied the intention is to discontinue management of
the facility because of the sizeable overhead. He spoke to efforts
of the Department, along with the Division of Agriculture, to
locate an alternate party to operate the facility. He noted that
all attempts to date have been unsuccessful.
Department of Education and Early Development
KAREN REHFELD, Director, Education Support Services, Department of
Education and Early Development, testified that the committee
substitute reduces the Department's budget approximately $5.9
million from the Governor's amended FY 03 request and over $1.8
million from the FY 02 allocation. She listed the reductions as:
$930,000 for personnel services and travel, $350,000 for the Head
Start program, $130,000 for the alternative assessment program
authorized in SB 133 the previous year, $100,000 for the statewide
library electronic doorway, $130,000 for Kotzebue Technical Center,
and $200,000 for the community schools program.
Ms. Rehfeld addressed the alternate assessment program, noting that
the fiscal note adopted for SB 133 did not reflect the on-going
cost of the program. She surmised this was an oversight and that
the Legislature intended to retain the position created in the
fiscal note as well provide the necessary resources to continue the
program.
Ms. Rehfeld spoke to the costs of the high school qualifying
examination and the related contract with McGraw Hill. She reminded
the Committee of the pending $500,000 supplemental budget request
for the current year contract and the projected need for $770,000
in FY 03. She noted FY 03 amount includes funds for benchmarking
efforts to be undertaken in the summer to determine the "refocused"
minimum competency of reading, writing and math skills. She
qualified the committee substitute provides approximately $429,000
for this effort and requested the Committee consider providing the
balance.
Ms. Rehfeld next reminded that the Legislature and the public are
asking the Department and school districts to be accountable. She
referenced the reporting requirements and the use of performance
data. She stated the Department is requesting $730,000 general
funds for staffing and contractual resources to collect, analyze,
validate and report information. She stated this would provide the
Legislature information on the State's public education system.
Ms. Rehfeld informed the proposed reduction to personnel services
and travel includes the third-year contract salary increases. She
stressed this is "a significant reduction in a very small agency."
She reminded that approximately 94 percent of the general fund
budget is distributed as grants and that the agency is operated by
a small number of staff. She anticipated this funding reduction
would result in the loss of 16 positions throughout the Department,
including the Alaska Vocational Technical Center, the School
Finance and Facilities Section, which manages the pupil
transportation system and the school debt retirement program, the
State library and museum, and the Department's internal
administrative services. She detailed the consequences of the loss
of these positions, specifically the impact on securing computers
and resources from the Gates Foundation for the State library.
Senator Hoffman commented the funding for this Department should be
at least the same amount as appropriated in FY 02.
Department of Environmental Conservation
KURT FREDRIKSSON, Deputy Commissioner, Department of Environmental
Conservation, testified that the proposed budget reductions would
impact five major programs within the Department. He began with the
food safety program, thanking the Committee for "restoring" most of
the funding requested for this program, despite the reductions
passed by the House of Representatives. However, he informed that,
although it was proposed in the budget subcommittee to utilizing
federal funding, it has since been learned this would not be
possible. He indicated that Senator Leman was attempting to
identify an alternate funding source.
Co-Chair Donley asked about the efforts of the Department to
encourage local governments to assume food safety responsibilities.
He understood that local or county governments operate the food
safety program in every state except Alaska.
Mr. Fredriksson and Co-Chair Donley debated this topic with Mr.
Fredriksson stating that efforts have been made and pointing out
that the Municipality of Anchorage oversees its food safety
inspections, and with Co-Chair Donley asserting this was occurring
before the Knowles Administration.
Mr. Fredriksson next addressed the funding source change for the
solid waste program from general fund program receipts to general
funds as stipulated in the provisions of HB 361. He explained the
"fair share" of program receipts on permitted activities. He noted
the fund source change was not reflected in the budget subcommittee
recommendations. He informed the Committee that the impact would be
a reduction of services in the larger municipal landfills to allow
a focus on "those high risk facilities" located in rural
communities. .
Mr. Fredriksson then spoke of the $715,000 reduction in federal
receipts to provide grants to local communities and local
organizations for non point source water pollution control efforts.
He listed stream cleanup and stream monitoring as activities that
would not be addressed with the grant funding.
Mr. Fredriksson informed of the Governor's budget request for
general funds to operate the water-permitting program, noting that
federal funds have not been available to rebuild this program. He
qualified that efforts are being made to secure $175,000 federal
funds from the federal Environmental Protection Agency (EPA), but
expressed he did not expect the funds would be realized. He
furthered that the budget subcommittee recommended a reduction of
$98,000 to the water-permitting program, which he informed would
cause a reduction in the certification of federal wastewater
permits.
Mr. Fredriksson concluded by describing the oil safety and
development initiative. He told of the "major increase" in oil and
gas development activities, exploration on the North Slope, in Cook
Inlet, and federal leasing across the State. He explained the
initiative, proposed by the Governor to provide funds for air and
water permitting and spill prevention and response, in addition to
the creation of a North Slope office. He remarked that the new
office would allow field workers to provide direct monitoring and
interaction with oil companies.
Senator Leman noted the intent to utilize the $715,000 of Section
"319 federal non point source" funds for Forest Practices Act
activities within the Department of Natural Resources and soil and
water conservation efforts. Therefore, he assured the funds are not
eliminated, but appropriated elsewhere.
Senator Hoffman clarified that the reductions to the solid waste
management program would result in discontinuation of services to
Anchorage, Juneau, Fairbanks, Mat-Su, Kenai, Fort Wainwright, North
Slope Borough; those communities with Class 1 solid waste
facilities. He asked if these facilities could fail to meet EPA
requirements without the services. He recalled threats by the EPA
to close some landfills located in his election district.
Mr. Fredriksson replied the facilities would likely not close
because the municipalities would interact directly with the EPA to
meet the necessary standards. He explained the Department intent to
address the higher risk "less capable" landfills due to the risk of
closure of the smaller facilities and the inability for the smaller
communities to interact with the federal agency.
Senator Hoffman surmised this is a transfer of financial
responsibility to the aforementioned local governments.
Mr. Fredriksson affirmed the municipal governments would be
assigned the responsibility.
Senator Leman noted the witness is testifying to the committee
substitute, although Mr. Fredriksson is aware the subcommittee is
continuing efforts to secure general funds for the solid waste
program. Senator Leman indicated draft legislation relating to the
appropriation of receipt supported services funds, and expressed
intent that the funds would be utilized for food safety and
sanitation programs. He furthered that the general funds currently
appropriated to these programs, could be transferred to the solid
waste program.
Senator Olson asked Senator Leman if it is his assertion that the
funds in question that are considered budget reductions by the
Department are actually a redistribution of funds.
Senator Leman affirmed and explained proposal to utilize the
federal non point source funds for other programs in the Department
of Natural Resources.
Senator Olson asked how the redistribution was prioritized.
Senator Leman replied he would provide details, commenting it was a
matter of determining higher priorities.
AT EASE 10:33 AM / 10:36 AM
Department of Fish and Game
FRANK RUE, Commissioner, Department of Fish and Game, testified the
Department budget has been reduced approximately 27 percent or $20
million general funds in the past ten years. He told of the
accommodations the Department has made to adjust to these changes,
including transferring hatchery operations to the private sector.
He furthered that funding source changes have also been made,
giving increased crewmember license fees and the use of limited
entry permit fees for Department programs, as examples. He also
listed an increased use of federal funds, noting the Department now
receives more federal funds than State general funds. As a result
of these changes, he informed that it has become more difficult to
adjust for further budget reductions. He stated that approximately
80 percent of the general funds received are allocated to the
Division of Commercial Fisheries, which is important to the State's
economy.
Mr. Rue reminded that the fishing industry pays taxes "far in
excess of the management costs." He furthered that the use of test
fishing receipts to fund Department programs causes "a certain
irritant to the fishermen."
Mr. Rue stated that the proposed funding for the Department as
reflected in the committee substitute is approximately $2 million
less than that proposed in the Governor's FY 03 budget. He remarked
that $1.7 million of the reduction is below the FY 02
appropriation.
Mr. Rue listed $741,000 general funds for the Bering Sea Crab
Fishery located in federally managed waters near the Aleutian
Islands, as one of the three funding reductions. He emphasized
these general funds leverage the receipt of "a couple of million
dollars of" federal funds in addition to fish test receipts to fund
observers. He relayed a conversation he held with a representative
of the National Marine Fisheries Service, where he learned that the
federal government is currently unable to assume the duties of
managing this fishery. Mr. Rue indicated that US Senator Ted
Stevens is experiencing increasing difficulty in securing federal
funds for fishery programs, due in part to reduced state
contributions. Mr. Rue explained the State would chose to
discontinue funding this program because the fishery is located in
federally managed waters, although the State has managed the
program since statehood.
Mr. Rue then stated that the committee substitute budget would
reduce $744,000 general funds for the genetics laboratory. He
compared this proposal to the loss of the limnology program
eliminated through funding reductions a few years prior. He
emphasized these programs provide "basic science" and necessary
information to allow the Department to identify which fish are
harvested and subsequently manage and protect stocks adequately. He
informed that the science conducted in the genetics laboratory
relates to fisheries that intercept King salmon and other salmon
species, the North Pacific Salmon Treaty issues, and Alaska
fisheries management issues. He warned that without this research,
the Department would have less information about harvested stocks,
which would "threaten our ability to maintain" healthy stocks, as
well as defend against "pressures from the Lower 48 and Canada" in
fisheries negotiations.
Mr. Rue next addressed the reduction of $223,000 general funds from
the Division of Wildlife for watchable wildlife programs. He told
of research conducted on goshawks in the Tongass National Forest,
which demonstrated that the species is not endangered and thus
prevented the goshawk from being listed under the federal
Endangered Species Act. He stated this benefited the timber
industry. He also listed other watchable wildlife programs,
including bear viewing at Pack Creek and McNeil River. He noted the
loss of these general funds would result in a loss of $671,000
federal matching funds.
Mr. Rue specified that the aforementioned programs would be
eliminated if the budget proposed in the committee substitute
passed unchanged.
Mr. Rue then told of a proposed oil safety increment within the
Division of Habitat and Restoration to address the impacts of oil
exploration, funding to monitor the affects of development near the
Kenai River and the creation of a permitting center in the Mat-Su.
Senator Austerman shared he has been concerned for several years
about the best method to manage wildlife and fisheries. He approved
of eliminating programs rather than "weakening" the entire
Department. He spoke of the declining population of stellar sea
lions and the impact the closure of the genetic laboratory would
have on determining the causes. He stressed that funding must be
provided to agencies to allow functions to continue.
Senator Hoffman commended the commissioner's approach to the budget
given the funding constraints. Senator Hoffman noted his 12 years
of experience in drafting the budget for this Department and
questioned the "business sense" of the appropriation contained in
the committee substitute. He pointed out that the industry
contributes a significantly greater amount of revenue to the
Department than the cost of operating the programs. He stated this
Department has been successful at adapting to fewer general funds
and securing funds from other sources. He noted the fishing
industry provides thousands of jobs and generates approximately
$65.8 million and the Department should therefore be supported. He
asserted that the "reward" given to the Department for adjusting to
previous budget reductions has been further reductions. He
reiterated that the reductions threaten the Department's ability to
generate other revenue.
Co-Chair Donley remarked that the fishing industry utilizes a
public resource and that the State's goal should not be to balance
the cost of operating that industry with the revenue it generates.
He explained "it's the people's resource that's being used" and the
State is entitled to a fair return in the form of taxation that
could then be used to benefit the entire State.
Senator Hoffman commented the State should receive "maximum return"
rather than simply a fair share. He remarked that to realize a
maximum return, consideration must be given to the cost of
administering the programs. He surmised that the commissioner would
agree the Department is currently unable to achieve a maximum
return.
Senator Leman opined that this Department manages a budget for the
"largest sector of Alaskans" and that competition and conflict
between user groups are prevalent. He shared the concerns of
Senator Austerman and Senator Hoffman about "hemorrhaging" within
the Department. He spoke to the "substantial loss to the federal
government" in the past several years.
Senator Austerman stressed that fisheries utilizes renewable
resources, which must be managed in manner of economic value to the
State.
SFC 02 # 71, Side A 10:53 AM
Senator Austerman continued that all industries must be treated
fairly, and that the fishing industry has contributed a significant
portion to the State's general fund while other industries are
continually subsidized using general funds. He warned that once the
non-renewable resources, such as oil, are depleted, dependence on
the State's renewable resources would increase.
Senator Hoffman expressed that the Bering Sea Crab Fishery must be
managed due to the number of jobs the fishery provides.
Mr. Rue summarized that in a number of fisheries in Alaska, the
Department has attempted to leverage federal funds and other funds.
He assured that Senator Ted Stevens has assisted in this effort.
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