Legislature(2015 - 2016)SENATE FINANCE 532
04/09/2015 01:30 PM Senate FINANCE
Audio | Topic |
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Start | |
SB56 | |
SCR1 | |
SJR2 | |
SB22 | |
SB26 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | TELECONFERENCED | ||
+ | SB 56 | TELECONFERENCED | |
+= | SCR 1 | TELECONFERENCED | |
+= | SJR 2 | TELECONFERENCED | |
+ | SB 22 | TELECONFERENCED | |
SB 50 | |||
= | SB 26 | ||
SENATE BILL NO. 26 "An Act making appropriations, including capital appropriations and other appropriations; making appropriations to capitalize funds; and providing for an effective date." 8:51:19 PM Vice-Chair Micciche MOVED to ADOPT the committee substitute for SB 26, Work Draft 29-GS1781\I (Martin, 4/9/15). Co- Chair MacKinnon OBJECTED for discussion. LAURA PIERRE, STAFF, SENATOR ANNA MACKINNON, explained the difference between the proposed committee substitute (CS) and the previous version of the bill, detailing that the committee cut the governor's proposed capital budget by $40 million for a total capital budget of $1,500,829,300. She specified that the budget was broken into an Unrestricted General Fund (UGF) total of $108,318,036, a Designated General Fund (DGF) total of $56,325,100, an "Other" fund total of $61,233,800, and $1,274,952,400 in Federal Receipts. Ms. Pierre discussed the changes reflected in the CS. The new bill consolidated the allocations for the Municipal Harbor Facility Grant Fund, which would give the Department of Transportation and Public Facilities (DOT) more flexibility in how it could disperse the funds to municipalities and complete projects. She continued that the new bill funded the Alaska Donor Services Program for operational costs in the amount of $75,000; and in order for the program to access the funds an allocation in the capital budget was required. The bill added a reappropriation of legislative appropriations in the amount of $211,000 for the Senate Special Committee on the Arctic, for work to be conducted during the 29th Alaska State Legislature. Additionally, reappropriations were added to the Alaska Housing Capital Corporation (AHCC) account, brought forward by members who were lapsing. Ms. Pierre continued that a $45 million fund transfer was removed from the Alaska Capital Income Fund to the AHCC account. As a result, $43,237,400 was added to the School Construction Grant Fund to build a new school for Kivalina per the consent decree and settlement agreement from the Kasayulie lawsuit [a 2011 settlement for the 1997 case of Kasayulie vs. State of Alaska pertaining to equity in education]. 8:54:38 PM Ms. Pierre specifically thanked Hilary Martin from the Legislative Legal Department and staff from the Legislative Finance Division. Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO further OBJECTION, it was so ordered. Co-Chair MacKinnon MOVED to ADOPT Amendment 1, 29- GS1781/I.1, Martin, 4/9/15 (copy on file): Page 33, following line 18: Insert a new subsection to read: "(e) The amount necessary for Dalton Highway disaster emergency repairs, not to exceed $5,000,000, is appropriated from the general fund to the Department of Transportation and Public Facilities for that purpose." Vice-Chair Micciche OBJECTED for discussion. Co-Chair MacKinnon explained that the amendment had been brought to the committee by the administration. She mentioned that there was an emergency happening on the Dalton Highway. 8:56:01 PM PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, explained Amendment 1. She stated that on March 13, 2015; there was an ice jam on the Sag River (mile 390 to 410 of the Dalton Highway near Deadhorse) which created an ice floe/flood over the road and stopped traffic. The road had been closed for some time and when open was limited to one lane of traffic. She recounted that she had shared photos of the ice jam and highway blockage with Co-Chair MacKinnon's office earlier in the day. She related the DOT Commissioner Marc Luiken was on site, and highlighted the importance of getting the road open. She continued that industry members had been working closely with state personnel to provide contractors to help clear the road. The previous day there was a disaster declaration for the flooding on the road, which put the state into a faster procurement role. She furthered that the amendment would provide up to $5 million to continue to mitigate flooding and keep traffic passing through the area. Vice-Chair Micciche wondered if there was any potential for federal aid to offset the costs of cleanup and repairs. Ms. Pitney replied that she was optimistic that the federal government would offer financial aid based on the state's disaster declaration. She related that the Federal Highway Administration (FHWA) would be coming to assess the flooding to determine whether it fit within the rules for federal response. She specified that if criteria were met, some of the federal response would be funded at 100 percent, and other work would be funded at the 90 - 10 federal rate. There were items that would not qualify for federal response, however the administration was "cautiously optimistic" that there would be some federal aid. She reiterated the importance of getting the road open, and estimated that at a minimum the state would be responsible for $700,000 in up-front costs. She explained that until the threshold was passed, there would be no sharing of costs. 8:59:19 PM AT EASE 8:59:44 PM RECONVENED Vice-Chair Micciche wondered if the funds in the amendment were only a contingency, and the state would not end up using the $5 million being requested. Ms. Pitney replied that there would be a minimum of $700,000 used. She agreed to share Commissioner Luiken's eyewitness account of with Vice-Chair Micciche after the meeting; and related that the commissioner was optimistic there would be federal funding. She related that the commissioner had been amazed by the size and amount of ice. Co-Chair MacKinnon wondered if there was any comment from DOT/PF with regard to use of the funds, and perhaps assurance as to how they would be used. MARY SIROKY, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, shared that DOT had officially notified FHWA of the intent to seek emergency response funding. The department had various conversations with regional federal representatives, and she thought there had also been conversations at a higher level. She shared that the department was optimistic that FHWA would participate in the disaster relief efforts. She discussed the concern over what the FHWA would consider "fundable" and what the state considered necessary to get the road open. She remarked that there may be more severe infrastructure damage to the road, once the flooding was under control and ice was removed. Ms. Siroky continued that the department had a plan in place, had contractors on site, and hoped to have at least one lane open by the following day. 9:02:39 PM Senator Olson wondered if any occurrences of the same magnitude had happened in the area in the past. Ms. Siroky replied that there had never been anything of the same magnitude before. She described photos of the site as amazing, and stated that it was impossible to discern where the overflow ice started and ended. She reiterated that Commissioner Luiken had been astounded at the sight. Senator Olson asked if there were plans in place to prevent a recurrence. Ms. Siroky replied that there were already two projects for raising the roadbed on the Dalton Highway that were already in the funding queue. She added that the projects were anticipated to start the following summer. 9:04:00 PM Co-Chair MacKinnon WITHDREW her OBJECTION to Amendment 1. There being NO further OBJECTION, Amendment 1 was ADOPTED. Senator Olson MOVED to ADOPT Amendment 2 (copy on file). Co-Chair MacKinnon OBJECTED for discussion. Senator Olson explained the amendment, which would fund the Kivalina road at $2.5 million. He remarked that there was funding in the budget for the Kivalina school for approximately $43 million, but a road was needed before the school could be built. He remarked that there were several estimates on the cost for the road. The $2.5 million in the amendment would provide seed money in order to try and secure federal funding from the Bureau of Indian Affairs (BIA), Indian Reservation Roads Program (IRR). He commented that the governor was in support of the amendment. He and pointed out that the amendment in no way obligated the state to fund the remainder of the road, and referred to a relevant memo from the Division of Legal and Research Services dated April 9, 2015 (copy on file). Senator Dunleavy also objected to the amendment. He remarked that there were various issues with moving the amendment forward. He did not think the state should get involved in building a road that may lead to later obligations of moving the town of Kivalina [as erosion would necessitate]. He did not feel that the state should take on the construction of the road. Co-Chair MacKinnon handed the gavel to Vice-Chair Micciche. 9:06:53 PM AT EASE 9:07:19 PM RECONVENED Co-Chair MacKinnon shared that the committee was currently reviewing several pieces of correspondence from Department of Education and Early Development (DEED) Commissioner Michael Hanley regarding the litigation associated with the Kivalina school, and did not believe that the road was part of the resultant Kasayulie settlement. Senator Dunleavy MAINTAINED his OBJECTION. Senator Olson shared that the amendment had been an element of concern due to costs associated with the road. He discussed the Kasayulie settlement, and recognized the need for the road. He referred back to the letter from the legal department that indicated that the state was not necessarily liable for its construction. He asked for support of the amendment. A roll call vote was taken on the motion to adopt Amendment 2. IN FAVOR: Olson OPPOSED: Kelly, Bishop, Dunleavy, Hoffman, Micciche, MacKinnon The MOTION FAILED (6/1). Senator Dunleavy MOVED to ADOPT Conceptual Amendment 3. He described the amendment as legislative intent regarding the Kivalina School: a. The legislature declines to fund the Kivalina K-12 School renovation/addition under the 2011 consent decree and settlement agreement in Kasayulie vs. State (3AN-97-3782CIV September 1st, 1999) because of concerns about erosion and viability of the school site. b. The legislature declines to fund a Kivalina replacement school at the new school site because of concerns about erosion and viability of the new school site. c. The settlement terms of the January 7, 2015 letter from the Citizens for the Educational Advancement of Alaska's Children are unacceptable to the legislature. Senator Dunleavy explained that the amendment would remove the funding for the Kivalina School project. He argued that the decree specifically provided for the legislature to decline funding which would not trigger a reopening of the case. The amendment also put the findings on permanent record as to avoid future misunderstanding. 9:11:00 PM AT EASE 9:11:42 PM RECONVENED Co-Chair MacKinnon brought up the aforementioned legal memo pertaining to the Kivalina School construction, and shared that she would speak in opposition to Conceptual Amendment 3 based on advice from the Attorney General's office, as well as the memo. It was her belief that the state was responsible for some amount of money to Kivalina, although the matter was still in dispute and not final as to whether the project should be a renovation (for much less funds) or a new school entirely. Senator Olson referred to the consent decree and stated there was strong evidence that it was not up to the legislature to fund or not fund; rather, the funding had been mandated and therefore he wondered about the validity of the conceptual amendment to withstand legal challenge. 9:13:32 PM AT EASE 9:17:28 PM RECONVENED Vice-Chair Micciche queried what conditions were on the previously appropriated funds for the Kivalina School. Co- Chair MacKinnon replied that there was a direct appropriation for the Kivalina School in compliance with the settlement. Ms. Pierre announced that the appropriation was to the School Construction Fund, and would lapse after five years if unspent (like any other capital project). 9:19:00 PM Senator Dunleavy directed the committee's attention to page 1, second paragraph of the memo. He read the passage: Note, as a preliminary matter, that the consent decree specifically provides that the parties cannot bind the legislature. Senator Dunleavy pointed out the words "legislature" and "state", and reminded the committee that the legislature was the fiduciary or funding arm of state government. Senator Dunleavy directed the committee's attention to page 2, first paragraph of the memo. He read the passage: (Consent decree, p. 6.) The consent decree is slightly ambiguous in this regard… Senator Dunleavy remarked that he was attempting to clear up any ambiguity, so that the legislature (as opposed to the state) was not liable for future obligations toward the "whole Kivalina concept." 9:20:49 PM Senator Dunleavy directed the committee's attention to page 2, second paragraph of the memo. He read the passage: The consent decree requires that the state include the "Kivalina K-12 school renovation/addition" in the governor's proposed capital appropriations budget bill. (Id.) The consent decree also provides that "if the Legislature declines to fund, or places contingencies on the Kivalina school project because of concerns about erosion or viability of the school site, the lack of funding or contingencies will have no effect on the settlement, and cannot be used by plaintiffs to reopen the litigation." Senator Dunleavy stated there was an issue with the terminology used in the memo, and considered the use of "legislature" and "state" to be incorrectly differentiated. He argued that the legislature was part of the state. He suggested that the administration had put the legislature in an obligation, to some degree, regarding the school. He recognized that there was a legitimate issue in the Northwest Arctic in the town of Kivalina. He pointed out that the project had originally been a settlement on a school to do a renovation on-site, starting with a cost $14 million. He expressed concern that the state inadvertently would be responsible for a much larger obligation. Senator Dunleavy referred back to the legal memo, and pointed out that the document referred to "state" and "legislature" and rarely mentioned "administration." Senator Dunleavy directed the committee's attention to page 2, third paragraph of the memo. He read the passage: Further, under the consent decree, the legislature can decline to fund the Kivalina K-12 school project if it has concerns about erosion or viability of the existing school site. Senator Dunleavy further explained Conceptual Amendment 3. He reiterated that the purpose would be to remove the school funding, and stated that he would not have objected to funding the school and having the funds be put into escrow or contingency funds that isolated the monies specifically for the Kivalina School. He hoped the end result was that the funding would remain school-focused rather than being used for road or town site projects, which he thought should be separate discussions. He thought there were ambiguities (as the letter mentioned) and that the legislature was singled out as not being obligated to fund the school. He continued that there was discussion in the memo implying that the state was obligated. He reiterated that the purpose of the amendment was to isolate the school funding to keep it designated only for the particular school. 9:25:32 PM AT EASE 9:26:00 PM RECONVENED Senator Dunleavy asked for the support of the committee for Conceptual Amendment 3. Co-Chair MacKinnon directed the committee's attention to page 3, paragraph 4 of the legal memo. She read the passage: Failure to appropriate any funding does not, however, resolve the state's constitutional obligations. Co-Chair MacKinnon MAINTAINED her OJECTION. A roll call vote was taken on the motion to adopt Conceptual Amendment 3. IN FAVOR: Dunleavy OPPOSED: Olson, MacKinnon, Bishop, Hoffman, Micciche, Kelly The MOTION FAILED (6/1). 9:27:09 PM Senator Dunleavy offered Conceptual Amendment 4: Any funds appropriated for this project shall be placed in a joint escrow account to be spent only for direct construction/design for a school structure serving Kivalina. These funds shall automatically, without further action by either party, be swept back into the state general fund if construction is not yet commenced prior to April, 2022. Senator Dunleavy characterized the amendment as an attempt to safeguard the public funds for the issue of the Kivalina School. He reiterated that the idea was to focus solely on funding the school rather than a road, relocation, or a new site. Co-Chair MacKinnon OBJECTED for discussion. Co-Chair MacKinnon found the amendment to be "intriguing" and thought that it had merit. She remarked that the previous amendment also had merit for the purposes of discussion and reducing the state's liability in a piece of legislation and litigation that was before the legislature. She expressed a commitment to working towards making sure the children of Kivalina saw direct benefit from the appropriation and allocation being considered for the Kivalina School. She opposed the amendment and believed the committee should work with the legislative legal department to ensure there was compliance with the decree. She wanted to review the relevant language and work with Senator Olson. Senator Olson inquired how Senator Dunleavy came up with a construction commencement deadline of 2022. 9:29:40 PM AT EASE 9:29:50 PM RECONVENED Senator Dunleavy explained that the date specified in the amendment was an estimate based on seven consecutive construction seasons. Senator Dunleavy WITHDREW Conceptual Amendment 4. There being NO OBJECTION, it was so ordered. Senator Dunleavy MOVED Conceptual Amendment 5. He explained that the amendment would remove all references to the figure of $43,237,400 for the Kivalina School and replace it with $14,724,714 [the original capital improvement project (CIP) amount for major maintenance] adjusted for present day value from July 1, 2012. He explained that the amounts in question pertained to language in the decree on the CIP list when the funds were earmarked for that date for renovation of the school. Co-Chair MacKinnon OBJECTED for discussion. 9:31:12 PM Vice-Chair Micciche stated that he supported $43,237,400 in school funding for Kivalina in order to prevent the state from being at risk for litigation being reopened and subsequently being responsible for the purchase of an entire school at a much higher cost (nearing $100 million). Vice-Chair Micciche referred to page 5 of the legal memo, which discussed a limit to the state's liability. He specified that the cost of the replacement school for Kivalina was based off of the 2013 CIP process. He referred to the second paragraph on page 5, and read the following passage: Because the consent decree specifically provides that the amount of the appropriation would be determined through the 2013 CIP process, the consent decree places the risk of a project that exceeds the budget on Kivalina. If the project exceeds the costs estimated in the 2013 CIP, the state may not be required to provide additional funding. If the legislature takes this approach, the state will have met its obligations and CEAAC would not have a strong argument for reopening the litigation. Vice-Chair Micciche reiterated his concern that the state could be responsible for greatly increased costs if it did not meet its responsibility to fund the school as planned. Senator Olson agreed with Vice-Chair Micciche that there was a possibility of litigation over the Kivalina School being reopened. He respectfully asked Senator Dunleavy to withdraw his amendment. Senator Dunleavy expressed appreciation for Senator Olson's words, but wanted the committee to vote on Conceptual Amendment 5. 9:33:41 PM Co-Chair MacKinnon expressed appreciation for an opportunity to discuss the issue and the children of Kivalina, who had waited for 15 years while the issue of the school was debated. It was her view that the state should meet its obligation to take care of the children and students of Kivalina. A roll call vote was taken on the motion to adopt Conceptual Amendment 5. IN FAVOR: Dunleavy OPPOSED: Micciche, Olson, Kelly, Bishop, Hoffman, MacKinnon The MOTION FAILED (6/1). 9:34:24 PM Senator Dunleavy expressed appreciation for the discussion. He agreed with Co-Chair MacKinnon that the children of Kivalina deserved a school and a great education. He reminded the committee that he had spent 13 years near Kivalina, much of it as an educator and administrator. He relayed that he had visited Kivalina on numerous occasions, and looked forward to the fact that the children would be getting a new school. He emphasized that he would like continued discussion pertaining to constraining the funding in some way so it did not morph into funding something other than a school. He referred back to the legal memo, and claimed it "betrays a weak link in our situation." He opined that the state was responsible for things the administration had agreed to, and for that reason he wanted to pursue further discussion. Co-Chair MacKinnon brought up the aforementioned letters from DEED and concurred that the department had exceeded its authority in some of the language that was used for the Kivalina School appropriation. Vice-Chair Micciche shared the concerns of Co-Chair MacKinnon and Senator Dunleavy. He highlighted protecting the state from additional expenses and possible reopening of litigation over the Kivalina School. 9:37:28 PM Co-Chair MacKinnon made a statement: In 1999 Kasayulie vs. State a superior court found that the legislature had not met its constitutional obligations to maintain, by general law, a system of public school open to all children of the state. In response to the superior court order, and to meet the state's obligation under the consent decree, we entered in to resolve the litigation. The legislature had previously provided appropriations for school construction projects in Emmonak, Koliganek, Nightmute, Kwethluk. Through the capital improvement project grant program and passed legislation to equalize funding for rural and municipal school construction needs, in this budget the legislature is appropriating $43,237,399 for school construction in Kivalina. Kivalina is the last of the five-school construction project the state agreed to request funding for in the Kasayulie consent decree. By this appropriation the state is providing rural schools with the assurance of adequate facilities, funding under the capital improvement project grant program and meeting its constitutional obligations to establish and maintain a system of public schools open to all children in the state. With this appropriation, the legislature intends to resolve the Kasayulie litigation and further the goal of providing for equal education opportunities and adequate facilities across the state. Vice-Chair Micciche MOVED to REPORT CSSB 26(FIN) out of committee with individual recommendations. There being NO OBJECTION, it was so ordered. CSSB 26(FIN) was REPORTED out of committee with a "do pass" recommendation. 9:39:53 PM AT EASE 9:41:03 PM RECONVENED Senator Dunleavy thanked the committee for the discussion and working hard on the budget. He referred back to the Kivalina School, and foresaw the need for future discussion about education and other items that were constitutionally mandated by the state. He thought it was important to ponder the different ways of doing education, and thought it was possible to do it differently while providing a quality education for all kids. Senator Hoffman thanked Co-Chair MacKinnon and her staff for providing leadership to continue to reduce the capital budget. He stressed that many people in Alaska did not fully comprehend the magnitude of the financial problems the state was faced with. He recognized the needs of the constituency, and the difficulty of trimming a budget further than what the governor had proposed. 9:43:09 PM Vice-Chair Micciche commended Co-Chair MacKinnon and the co-chair of the operating budget for persevering in a difficult and unpleasant process. He recognized the pressure the co-chairs were under, and opined that Co-Chair MacKinnon was consistent and fair. Senator Bishop said "good job." Co-Chair MacKinnon thanked the committee for their efforts.