Legislature(2003 - 2004)

02/24/2004 09:03 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     SENATE BILL NO. 313                                                                                                        
     "An  Act making  supplemental  and  other appropriations;                                                                  
     amending   appropriations;  making  an  appropriation   to                                                                 
     capitalize  a fund; and providing for an  effective date."                                                                 
     SENATE BILL NO. 314                                                                                                        
     "An  Act making  supplemental  and  other appropriations;                                                                  
     amending    and    repealing    appropriations;     making                                                                 
     appropriations  to capitalize funds; and  providing for an                                                                 
     effective date."                                                                                                           
This  was  the second  hearing  for  this  bill in  the  Senate                                                                 
Finance Committee.                                                                                                              
The Committee continued hearing  presentations from departments                                                                 
on the budget requests of both  bills. The Committee referenced                                                                 
a spreadsheet prepared  by the Office of Management  and Budget                                                                 
dated  February  23,  2004, outlining  each  request  [copy  on                                                                 
Department of Law                                                                                                             
     SB 313                                                                                                                     
     Section: 2                                                                                                                 
     Budget Request Unit (BRU): Environmental Law                                                                               
     Supplemental  Need: Exxon Valdez Oil Spill  on-going costs                                                                 
     for  experts and  outside  counsel to  analyze  continuing                                                                 
     injury  and develop  restoration  options;  June 30,  2005                                                                 
     lapse date.                                                                                                                
     $100,000 EVOS Restoration fund                                                                                             
KATHRYN  DAUGHHETEE,   Director,  Division  of  Administrative                                                                  
Services, Department of Law,  testified that Assistant Attorney                                                                 
General  Craig  Tilery  would  be best  able  to  outline  this                                                                 
CRAIG  TILERY,  Chief  Assistant  Attorney  General,  Statewide                                                                 
Section  Supervisor,  Environmental  Section,  Civil  Division,                                                                 
Department of Law, testified  via teleconference from Anchorage                                                                 
as follows.                                                                                                                     
     Section  2 of the  fast track  supplemental appropriation                                                                  
     contains   an  item  for   the  sum  of  $100,000   to  be                                                                 
     appropriated  from  earnings  on  the moneys  received  as                                                                 
     restitution  from Exxon in connection with  their criminal                                                                 
     plea  agreement in the Exxon  Valdez oil spill.  The money                                                                 
     is  to be used  to fund  analysis of  a continuing  injury                                                                 
     from the oil spill  and to develop options for restoration                                                                 
     of such  injury. Many of the natural resources  injured by                                                                 
     the  Exxon Valdez  oil spill  have recovered  or are  well                                                                 
     along in  the process of recovery. One area  of particular                                                                 
     concern  stems from their discovery in 2001  that there is                                                                 
     significantly  more oil remaining in a toxic  state in the                                                                 
     environment   than  was  expected.   Preliminary   studies                                                                 
     indicate  that  this  lingering  oil is  bio-available  to                                                                 
     species  that  feed  in the  inter-tidal  and  near  shore                                                                 
     environments.   Preliminary  studies  also  indicate  that                                                                 
     certain  species with  access to this  oil, in  particular                                                                 
     harlequin  ducks and  sea otters,  continue to ingest  the                                                                 
     oil  and may  be adversely  affected  by  it. In  addition                                                                 
     there  are  other species  such  as herring  where  injury                                                                 
     persists,  but the  connection  to the  oil spill  remains                                                                 
     clouded.  This  appropriation  is  intended  to allow  the                                                                 
     State  to retain  independent  outside  experts to  review                                                                 
     these studies and,  if warranted, to develop a strategy to                                                                 
     deal with any problems.                                                                                                    
Co-Chair  Green  asked   if  this  request  must  be  a  FY  04                                                                 
supplemental appropriation.                                                                                                     
Mr. Tillery  affirmed and explained  the funds must  be secured                                                                 
this year to enable field studies  to begin at the start of the                                                                 
summer season.                                                                                                                  
     SB 314                                                                                                                     
     Section: 9                                                                                                                 
     BRU: Civil Division, Deputy Attorney General                                                                               
     Supplemental Need: Judgments and Claims                                                                                    
     as of February 5, 2004 $2,825,490.66                                                                                       
     $ 2,825,500                                                                                                                
Ms. Daughhetee  stated that this reflects an annual  request by                                                                 
the Department  of Law to compensate for judgments  and claims,                                                                 
which are amounts  arising from legal issues that  the State is                                                                 
obligated to pay.                                                                                                               
Co-Chair  Green asked for  an overview  of those judgments  and                                                                 
claims in excess of $200,000.                                                                                                   
           Item #2                                                                                                              
           Dillion & Fincley                                                                                                    
           Markey v. State                                                                                                    
           Settlement-house destroyed following collapse of                                                                     
           Date: 10/20/2003                                                                                                     
           Amount: $1,138,844.73                                                                                                
           Interest: $29,719.17                                                                                                 
           Total: $1,168,563.90                                                                                                 
Ms. Daughhetee  explained that  the largest judgment  and claim                                                                 
is  the Markey  v.  State  case  involving  the collapse  of  a                                                               
roadway embankment,  which resulted in the "total  destruction"                                                                 
of the  Markey home.  This case  went to trial  as an  "inverse                                                                 
condemnation".   The   jury   determined   that   the   State's                                                                 
rehabilitation  projects  along Juneau's  Fritz  Cove Road  had                                                                 
lead to an  over-compaction of  the embankment. The  negotiated                                                                 
settlement is $175,400 below  the overall amount awarded by the                                                                 
court. This  judgment and  claim is listed  on the spreadsheet                                                                  
provided  by the Department  of Law titled,  "2004 Judgments  &                                                                 
Claims - General Funds" [copy on file].                                                                                         
           Item #10                                                                                                             
           James P. Jacobsen itf Bennett White                                                                                  
           Bennett    White    v.    State,    Department    of                                                               
           Transportation and Public Facilities                                                                               
           Maritime personal injury case                                                                                        
           Date: 6/19/2003                                                                                                      
           Amount: $324,000                                                                                                     
           Interest: $12,549.45                                                                                                 
           Total: $336,549.45                                                                                                   
Ms. Daughhetee  informed  that  Mr. White  was an "able-bodied                                                                  
seaman"  employed by the  Alaska Marine  Highway System.  While                                                                 
directing traffic on the M/V  Aurora ferry he seriously injured                                                                 
his left knee.  After a series of operations, a  medical doctor                                                                 
determined that  Mr. Bennett could not continue  to work aboard                                                                 
ships.  Mr.  Bennett  subsequently  sued the  State  under  the                                                                 
federal  Jones Act  claiming that  the State  was negligent  in                                                                 
failing to  paint the traffic lanes,  and did not provide  safe                                                                 
working  conditions.  An economic  expert determined  that  Mr.                                                                 
Bennett's future  earnings based on his age at  the time of the                                                                 
injury  would  total  approximately  $600,000.  The  negotiated                                                                 
settlement  is  $360,000.  A  portion  of  the  settlement  has                                                                 
already been paid; the remaining portion is $324,000.                                                                           
Ms. Daughhetee  noted that  the legislature  passed a  worker's                                                                 
compensation  law effective July  1, 2003, which should  hinder                                                                 
cases like Mr. Bennett's from occurring in the future.                                                                          
           Item #11                                                                                                             
           Jermain, Dunnagan & Owens                                                                                            
           ASEA v. State                                                                                                      
           Damages awarded in health insurance cost shifting                                                                    
           Date: 11/28/2003                                                                                                     
           Amount: $1,005,720                                                                                                   
           Interest: $22,215.39                                                                                                 
           Total: $1,027,935.39                                                                                                 
Ms.  Daughhetee explained  that  the Association  attempted  to                                                                 
implement a cost shifting mechanism  within its health benefits                                                                 
trust  that would  allow  employees  with  double-coverage  the                                                                 
option of  moving the cost of premiums  for their independents                                                                  
to  Select Benefits  health  coverage.  The State  argued  that                                                                 
statutes  prohibited   the  union  from  this  cost   shifting;                                                                 
however, the court  determined that the State could  not hinder                                                                 
the  union from  implementing  the  mechanism.  The court  also                                                                 
found  that the  State was  liable for  20% of  costs the  ASEA                                                                 
could  have saved  if allowed  to implement  the cost  shifting                                                                 
mechanism. The  State is required to award the  ASEA $1,005,720                                                                 
The State  eventually authored  regulations that reduced  State                                                                 
employee  coverage  to 30%  for anyone  participating  in  cost                                                                 
shifting. These regulations have  prevented much cost shifting.                                                                 
Senator Hoffman asked the amount  of the judgment that pertains                                                                 
to attorney fees.                                                                                                               
Ms. Daughhetee answered that  this award is the amount the ASEA                                                                 
would  have saved  if allowed  to implement  the cost  shifting                                                                 
mechanism. She added that she  was unsure if attorney fees were                                                                 
included in the award amount.                                                                                                   
Ms. Daughhtee mentioned  a judgment and claim resulting  from a                                                                 
personal injury  case involving  a pedestrian on a State-owned                                                                  
bicycle  path who  stepped on  some unsecured  metal, fell  and                                                                 
broke  his leg. The  settlement  for the  negligence claim  was                                                                 
Ms. Daughhetee  added that the Department of Law  is requesting                                                                 
an  extended  lapse  date  for  certain   FY  03  legal  cases,                                                                 
including  the Planned Parenthood  case, because the  timing of                                                                 
the legal events  related to those cases would  continue beyond                                                                 
FY 04.                                                                                                                          
Senator  Dyson asked for  a summary of  the Planned  Parenthood                                                                 
Ms.  Daughhetee  responded  that the  Planned  Parenthood  case                                                                 
arose out of legislation  that requires a minor  female to have                                                                 
the  consent  of  a  parent  of  guardian   before  seeking  an                                                                 
     SB 314                                                                                                                     
     Section: 10                                                                                                                
     BRU: Civil Division and Criminal Division                                                                                  
     Supplemental  Need: Technical  change to sec. 60,  ch. 82,                                                                 
     SLA 03 which  appropriated $175,000 to Department  of Law,                                                                 
     Civil   Division    for  outside    counsel   costs.   The                                                                 
     appropriation  should have  been to the Criminal  Division                                                                 
Ms. Daughhetee  stated  this item  is a  technical correction,                                                                  
which would  ratify an appropriation  to the Civil Division  of                                                                 
the Department  of Law. The Department has since  realized that                                                                 
the appropriation should be directed  to the Criminal Division.                                                                 
This ratification would enable a transfer of the funds.                                                                         
Co-Chair Green asked if Section  10 and the extended lapse date                                                                 
requests relate to the same court cases.                                                                                        
Ms. Daughhetee replied that the  technical change in Section 10                                                                 
relates  to one  of two  cases that  would be  affected by  the                                                                 
extended lapse date.                                                                                                            
Department of Revenue                                                                                                         
     SB 313                                                                                                                     
     Section: 8(a)                                                                                                              
     BRU: Alaska Permanent Fund Corp.                                                                                           
     Supplemental Need: Increased costs to advocate for POMV                                                                    
     $300,000 Perm Fund Receipts                                                                                                
BOB  BARTHOLOMEW,  Chief Operating  Officer,  Alaska  Permanent                                                                 
Fund Corporation,  Department of  Revenue, testified  that when                                                                 
drafting the FY  04 operating budget the Alaska  Permanent Fund                                                                 
Corporation  had  not  realized  that educational  advertising                                                                  
would be needed  in FY 04. This  advertising would educate  the                                                                 
public about the  Alaska Permanent Fund Corporation's  Board of                                                                 
Trustee's  Percentage of Market  Value (POMV) proposal.  During                                                                 
the last  Board of Trustee's  meeting  the Trustees  determined                                                                 
that  the  educational  advertising   must  occur  as  soon  as                                                                 
possible due to lack of public understanding.                                                                                   
     SB 313                                                                                                                     
     Section: 8(b)                                                                                                              
     BRU: Alaska Permanent Fund Corp.                                                                                           
     Supplemental Need: Authorization that APFC may advocate                                                                    
     for POMV                                                                                                                   
Mr.  Bartholomew  recommended  a technical  correction  in  the                                                                 
language  of the bill  to clarify  that the  Board of  Trustees                                                                 
does not interact  directly with  the legislature, rather  that                                                                 
the operating  officer  interacts with  the legislature  on the                                                                 
Board's behalf.                                                                                                                 
Mr. Bartholomew  expressed that this request is  more important                                                                 
than  the  preceding  request  for  funding  to  use  for  POMV                                                                 
education  purposes. This language  would demonstrate  that the                                                                 
legislature  supports  a POMV  method  of managing  the  Alaska                                                                 
Permanent Fund,  and also would authorize the Alaska  Permanent                                                                 
Fund Corporation  to  campaign in  support of  adopting a  POMV                                                                 
method  for  the  Fund.  Current  statutes  would  subject  the                                                                 
Corporation  to Alaska Public Offices  Commission (APOC)  rules                                                                 
if  a  resolution   were  passed  to  place  a  Constitutional                                                                  
amendment  initiative  on  the  ballot. He  asserted  that  the                                                                 
Corporation  would be "severely  restrained" in the  efforts it                                                                 
could undertake in lobbying for  passage of the ballot measure,                                                                 
as the  Corporation is  not currently  authorized to  influence                                                                 
Mr.  Bartholomew   qualified  that   APOC  rules  would   allow                                                                 
representatives  of the Corporation to speak on  the subject of                                                                 
POMV if invited,  but would not allow representatives  to speak                                                                 
at meetings  if  not previously  requested  to participate.  He                                                                 
commented  on the "gray  area between  education and  advocacy"                                                                 
and he asserted both would be necessary.                                                                                        
Senator  Hoffman commented  that this  request raises  concerns                                                                 
and that  a decision  on  the matter  would be  premature  as a                                                                 
resolution to amend the Constitution  has not yet been adopted.                                                                 
He  questioned the  need  for FY  04 supplemental  funding  and                                                                 
instead recommended  the funding be addressed in  a fiscal note                                                                 
accompanying the resolution itself.                                                                                             
Mr. Bartholomew  responded  that the Board  deliberated  on the                                                                 
issue during  meetings held in  December 2003 and January  2004                                                                 
and established  intent to begin education efforts  in February                                                                 
2004. He told  of a proposal to  contract with a media  firm to                                                                 
assist  the Alaska Permanent  Fund Corporation  with  educating                                                                 
the  public.  The  education  efforts  would   demonstrate  how                                                                 
management  of the  Fund currently  operates  and how it  would                                                                 
operate  under  a POMV  method, therefore  education  would  be                                                                 
useful even if  the POMV resolution were not passed.  The Board                                                                 
has  considered  the  potential  reactions  of  the  public  in                                                                 
response to  the use of public  funds to support the  education                                                                 
Senator  Dyson  shared concerns  about  using public  money  to                                                                 
advocate for  something that "government  wants". He  asked for                                                                 
examples  of  other instances   when the  government  has  used                                                                 
government  funds to  "sell a  position that  government  wants                                                                 
voters to approve."                                                                                                             
Mr. Bartholomew did not have  examples of other instances. Some                                                                 
government  agencies  utilize State  funds  to promote  Alaskan                                                                 
products,  such as  the Alaska  Seafood  Marketing Institute's                                                                  
promotion  of  Alaskan  seafood,   but  selling  a  product  is                                                                 
different  from selling  a public policy  position. Both  State                                                                 
and local governments  have used limited amounts  of government                                                                 
funds  to educate  the public  about  bond proposals,  but  the                                                                 
education  methods were not as  extensive as those proposed  in                                                                 
this request.                                                                                                                   
Co-Chair Wilken  also shared concerns about the  timing of this                                                                 
request. He  had understood that  $1.4 million or $1.8  million                                                                 
would be expended  on the campaign  to amend the Constitution.                                                                  
He asked if  this $300,000 request  represents a supplement  to                                                                 
the larger sum, or a change in plans.                                                                                           
Mr. Bartholomew  replied  that this FY  04 supplemental  budget                                                                 
request and the request for funds  to be appropriated in the FY                                                                 
05  budget totals  $1.4  million.  The  total projected  FY  04                                                                 
expenditures  would be  $500,000: $300,000  from this  request,                                                                 
and $200,000  from funds  appropriated in  the FY 04  operating                                                                 
budget.  The  total  projected  FY  05  expenditures  would  be                                                                 
$900,000.  These amounts  reflect the  maximum amount  proposed                                                                 
for the education efforts.                                                                                                      
Mr. Bartholomew  pointed out that if a resolution  to amend the                                                                 
Constitution  were not adopted  by the legislature,  only those                                                                 
funds  appropriated   in  the   FY  04  operating  budget   and                                                                 
supplemental budget would be expended.                                                                                          
Senator  Bunde disagreed  with Senator  Hoffman's comments  and                                                                 
asserted that  the funds would  be well spent. Many  people are                                                                 
not familiar with  the operation of the Permanent  Fund and the                                                                 
public should have  an opportunity to learn about  it. However,                                                                 
he agreed  that  the timing  of this  request  is wrong.  These                                                                 
efforts should have been undertaken  months ago, rather than at                                                                 
a time when a proposed change is placed on the ballot.                                                                          
Mr.  Bartholomew   stated  that   regardless  of  whether   the                                                                 
legislature  appropriates this  funding, authority to  speak on                                                                 
the merits of POMV  is still necessary. He predicted  that POMV                                                                 
education    efforts    could   be    undertaken   "relatively                                                                  
inexpensively",  as has occurred in the past; however,  without                                                                 
the necessary authority  the Permanent Fund cannot  sponsor any                                                                 
public discussion on the POMV plan.                                                                                             
Co-Chair   Green   clarified  that   without   this   authority                                                                 
representatives of the Corporation  could not include POMV as a                                                                 
topic of conversation.                                                                                                          
Mr. Bartholomew  affirmed  that in consultation  with APOC  and                                                                 
the Office of the Attorney General,  it was determined that the                                                                 
Corporation  would be limited in  its activities and  could not                                                                 
give advice on the ballot measure.                                                                                              
AT EASE 9:33 AM / 9:34 AM                                                                                                       
     SB 314                                                                                                                     
     Section: 14(a)                                                                                                             
     BRU: Municipal Bond Bank                                                                                                   
     Supplemental Need: Increased management fees due to                                                                        
     increased activity                                                                                                         
     $150,000 Muni Bond Bank Receipts                                                                                           
SUSAN TAYLOR,  Director, Division  of Administrative  Services,                                                                 
Department  of Revenue, testified  that existing authorization                                                                  
allows  four to  five debt  issuances annually.  However,  last                                                                 
year funds  were requested  to allow for  seven issuances.  The                                                                 
base authorization  for these issuances  has not been  adjusted                                                                 
because  they  are difficult  to  predict.  The  Department  is                                                                 
estimating eight to nine issuances  in FY 04. The primary costs                                                                 
of the bond  bank are a percentage  of the dollars issued.  The                                                                 
Department  is requesting  a similar  amendment  for the  FY 05                                                                 
operating  budget  to eliminate  the  need for  a supplemental                                                                  
budget amendment in FY 05.                                                                                                      
Co-Chair Green  asked if the increase in issuances  reflects an                                                                 
overall increase in activity.                                                                                                   
Ms.  Taylor responded  that  interest  rates are  factors  that                                                                 
affect the number of issuances,  and in addition the Department                                                                 
should have increased its FY 04 base budget.                                                                                    
     SB 314                                                                                                                     
     Section: 14(b)                                                                                                             
     BRU: Alaska Permanent Fund Corporation                                                                                     
     Supplemental Need: Language clarifying that the                                                                            
     appropriation made in sec. 67(2), ch. 82, SLA 2003 was                                                                     
     for inflation proofing                                                                                                     
Mr. Bartholomew  stated this request  is for clarification  and                                                                 
affirmation  of  legislative  intent. When  the  FY 04  capital                                                                 
budget  was  passed,  it  included  a  provision,  which  swept                                                                 
approximately $354  million from the Permanent  Fund's earnings                                                                 
reserve  account  into the  principal  of the  Permanent  Fund.                                                                 
Senator Therriault  later specified  that the fund transfer  be                                                                 
intended to  be a prepayment of  the inflation proofing  of the                                                                 
Fund  for FY 04.  The Permanent  Fund  distinguishes  inflation                                                                 
proofing  appropriations   and  special  appropriations.   This                                                                 
request would specify the intent of the appropriation.                                                                          
     SB 314                                                                                                                     
     Section: 14(c)                                                                                                             
     BRU: Alaska Permanent Fund Corp.                                                                                           
     Supplemental Need: Balance needed to inflation proof the                                                                   
     fund in FY 04                                                                                                              
     $177,000,000 Permanent Fund Earnings Reserve                                                                               
Mr. Bartholomew  informed that  the appropriation necessary  to                                                                 
inflation proof the Fund for  FY 04 was repealed at the time of                                                                 
the  transfer.  This  request  would  reinstate  the  inflation                                                                 
proofing appropriation  when the  inflation proofing  amount is                                                                 
determined after  June 30, 2004. At that time the  $354 million                                                                 
appropriation by  the legislature would be subtracted  from the                                                                 
inflation  proofing  amount   to determine   if  an  additional                                                                 
appropriation  is  necessary.   The  current  estimate  for  an                                                                 
additional appropriation is $170 million.                                                                                       
Senator  Hoffman  asked   if  this  amount  is  more  than  the                                                                 
anticipated  FY 04  inflation-proofing  amount  estimated  last                                                                 
Mr. Bartholomew  answered  this amount is  close to the  amount                                                                 
predicted  in 2003. He  added that the  legislature retained  a                                                                 
$100  million balance  in  the earnings  reserve  account,  and                                                                 
swept  all other  remaining  funds into  the  principal of  the                                                                 
Permanent Fund for inflation proofing.                                                                                          
Senator  Hoffman   understood,   but  asked  why  the   initial                                                                 
appropriation  was  inadequate  to  inflation  proof  and  this                                                                 
additional appropriation is needed.                                                                                             
Mr. Bartholomew  responded that  the estimate has not  changed,                                                                 
but that the amount of funds  available in the earnings reserve                                                                 
account was inadequate  to fully inflation proof  the fund when                                                                 
the  initial  appropriation  was  made.  When  the legislature                                                                  
decided  to pre-inflation  proof  the  Permanent  Fund, it  was                                                                 
informed  that  the balance  in the  earnings  reserve  account                                                                 
would  only allow  for a partial  pre-inflation  proofing,  and                                                                 
that  additional   funds  would   be  required.  Historically,                                                                  
inflation  proofing  does not  occur until  June  30th of  each                                                                 
Senator Hoffman  asked if this appropriation is  at the request                                                                 
of the Permanent Fund's Board of Trustees.                                                                                      
Mr.  Bartholomew  affirmed,  and reported  that  the Board  has                                                                 
historically   requested  that  the  legislature   "follow  the                                                                 
existing statutes" and inflation proof the Permanent Fund.                                                                      
Senator  B.  Stevens  recalled  that the  amount  necessary  to                                                                 
inflation proof  the Permanent Fund has always  been calculated                                                                 
on June 30th. Therefore,  the amount necessary  for FY 04 would                                                                 
not be determined until the upcoming summer.                                                                                    
Mr. Bartholomew  confirmed and  pointed out that the  Permanent                                                                 
Fund Corporation  supplies inflation proofing amount  estimates                                                                 
to  the  legislature.   These  estimates  change   because  the                                                                 
Corporation  receives deposits  from oil development  royalties                                                                 
Senator B.  Stevens noted the proposed  FY 05 operating  budget                                                                 
contains an  appropriation to inflation  proof the Fund  for FY                                                                 
Mr.  Bartholomew   again  affirmed   and  explained   that  the                                                                 
legislature  would authorize  the appropriation,  although  the                                                                 
funds would  not be allocated  until FY  06 when the  necessary                                                                 
inflation proofing amount is finalized.                                                                                         
Senator  B. Stevens  suggested  the practice  could be  changed                                                                 
with  the  amount   necessary  for  the  current   fiscal  year                                                                 
appropriated  in  the  budget  legislation  for  the  following                                                                 
fiscal year.                                                                                                                    
Mr. Bartholomew agreed this was  a possibility if two effective                                                                 
dates were established.                                                                                                         
Department of Health and Social Services                                                                                      
     SB 313                                                                                                                     
     Section: 5(a)                                                                                                              
     BRU: Capital                                                                                                               
     Supplemental  Need: Add the capital project  for the State                                                                 
     veterans'  home  conversion  in  Palmer  to speed  up  the                                                                 
     design work and take  advantage of the summer construction                                                                 
     season. A corresponding  FY 05 capital amendment will also                                                                 
     be submitted  to delete the project from  the FY 05 budget                                                                 
     $2,275,000 federal funds                                                                                                   
     $  459,200 general funds                                                                                                   
     $    765,800   Alaska  Student  Loan  Corporation   (ASLC)                                                                 
     $3,500,000 Total Funds                                                                                                     
JANET CLARKE,  Director, Division  of Administrative  Services,                                                                 
Department   of  Health   and   Social  Services   noted   this                                                                 
supplemental   request   would   transfer  a   capital   budget                                                                 
appropriation   into   the  fast   track   supplemental.   This                                                                 
appropriation  would appropriate  $3.5 million  total funds  to                                                                 
bring  the  Palmer Pioneers'  Home  into  compliance  with  the                                                                 
federal  Veterans'   Administration.   Governor  Murkowski   is                                                                 
requesting  this appropriation  change because  it would  allow                                                                 
the State  to have  an operational  State  Veterans' Home  five                                                                 
months  earlier  than  a  capital  budget appropriation   would                                                                 
allow.   A  65-percent   match  from   the  federal   Veterans'                                                                 
Administration  is  included  in  this appropriation   request.                                                                 
Specifically, this  appropriation would be used  to upgrade the                                                                 
heating  system, electrical  systems, make  seismic safety  and                                                                 
energy   conservation   improvements,   meet   Americans   with                                                                 
Disabilities  Act (ADA)  accessibility  requirements, and  fire                                                                 
codes, mechanical  codes,  and other appropriate  codes  of the                                                                 
Palmer Pioneers' Home.                                                                                                          
Co-Chair  Green clarified  that the facility  would be  divided                                                                 
between veterans' home residents  and pioneers' home residents.                                                                 
She mentioned the  benefits this facility-sharing  system would                                                                 
provide  the Palmer  Pioneers'  Home, and  suggested that  this                                                                 
system would be appropriate for  other pioneers' homes as well.                                                                 
Co-Chair Wilken  noted the ASLC dividend fund source  and asked                                                                 
if the dividends  would be derived  from bond proceeds  or from                                                                 
traditional dividends earned from ASLC activities.                                                                              
Ms.  Clarke   replied  that  the   Department  had   originally                                                                 
requested general  funds for the required match  but the Office                                                                 
of Management  and  Budget made  the determination  to  utilize                                                                 
ASLC dividend funds.                                                                                                            
     SB 313                                                                                                                     
     Section: 5(b)                                                                                                              
     BRU: Alaska Senior Assistance Program                                                                                      
     Supplemental  Need:  Reduce excess  federal fiscal  relief                                                                 
     ($3,334,000) Federal Unrestricted Receipts                                                                                 
     SB 313                                                                                                                     
     Section: 5(c)                                                                                                              
     BRU: Senior Care                                                                                                           
     Supplemental Need: Use excess federal fiscal relief funds                                                                  
     for FY 04 costs for Senior Care program                                                                                    
     $3,334,000 Federal Unrestricted Receipts                                                                                   
Ms.  Clarke   explained   this  allocation   would  allow   the                                                                 
Department to utilize federal  funds appropriated to the Alaska                                                                 
Senior Assistance Program for  the Senior Care program. Section                                                                 
5(b) reduces the  federal funds, and section 5(c)  appropriates                                                                 
those funds to the Senior Care program.                                                                                         
     SB 313                                                                                                                     
     Section: 5(d)                                                                                                              
     BRU: Senior Care                                                                                                           
     Supplemental Need: FY 04 costs for Senior Care program                                                                     
     $154,000 general funds                                                                                                     
     SB 313                                                                                                                     
     Section: 5(e)(1)                                                                                                           
     BRU: Alaska Longevity Programs Mgmt                                                                                        
     Supplemental Need: FY 04 costs for Senior Care program                                                                     
     $46,000 general funds                                                                                                      
     SB 313                                                                                                                     
     Section: 5(e)(2)                                                                                                           
     BRU: Health Purchasing Group                                                                                               
     Supplemental Need: FY 04 costs for Senior Care program                                                                     
     $85,000 general funds                                                                                                      
     SB 313                                                                                                                     
     Section: 5(e)(3)                                                                                                           
     BRU: Public Assistance Administration                                                                                      
     Supplemental Need: FY 04 costs for Senior Care program                                                                     
     $25,000 general funds                                                                                                      
     SB 313                                                                                                                     
     Section: 5(e)(4)                                                                                                           
     BRU: Public Assistance Data Processing                                                                                     
     Supplemental Need: FY 04 costs for Senior Care program                                                                     
     $6,800 general funds                                                                                                       
Ms.  Clarke explained  that  these sections  would appropriate                                                                  
general  funds to allow  the Senior  Care program  to begin  on                                                                 
April 1, 2004.  The Senior Care program is more  expensive than                                                                 
the Alaska  Senior Assistance Program  because of the  benefits                                                                 
it offers. The Department needs  the funds requested in Section                                                                 
5(d) for the additional program  costs. Sections (e)1, 2, 3 and                                                                 
4  would also  appropriate  funds  to cover  program  operating                                                                 
costs.  These appropriations  would  enable  the Department  to                                                                 
begin the Senior Care program on April 1, 2004.                                                                                 
     SB 314                                                                                                                     
     Section: 8(a)                                                                                                              
     BRU: Pioneer Homes                                                                                                         
     Supplemental   Need:   Transfer  within   H&SS  to   cover                                                                 
     projected  funding shortfalls as part of  net-zero general                                                                 
     fund supplemental.                                                                                                         
     $711,900 general funds                                                                                                     
     SB 314                                                                                                                     
     Section: 8(a)                                                                                                              
     BRU: Pioneer Homes                                                                                                         
     Supplemental  Need:  Excess  authority  from discontinued                                                                  
     Longevity Bonus payments relating to failed SB 117.                                                                        
     ($775,000) Receipt Supported Services                                                                                      
     SB 314                                                                                                                     
     Section: 8(b)                                                                                                              
     BRU: Alcohol Safety Action Program                                                                                         
     Supplemental  Need: Operating  expense belt tightening  to                                                                 
     achieve net-zero general fund supplemental                                                                                 
     ($42,100) general funds                                                                                                    
Ms. Clarke commented on the Departments' approach to the FY 04                                                                  
supplemental. She continued to testify as follows.                                                                              
     Section  8 basically  provides to  the legislature  a net-                                                                 
     zero delete  add supplemental related to  increasing costs                                                                 
     for Medicaid, for  the catastrophic assistance and illness                                                                 
     assistance  program,   and for  a  shortfall  we  have  in                                                                 
     revenue  for the pioneers'  homes. Overall, Madame  Chair,                                                                 
     our shortfall is  almost $29 million of general funds, and                                                                 
     we  are  coming   to  the  legislature  with   a  net-zero                                                                 
     [request],   which  finances   that  entire  $29   million                                                                 
     The  other important  parts  of our program  and our  plan                                                                 
     here  is that this $29 million  also includes what  we are                                                                 
     calling  "the gap" in our  fair share receipts.  We have a                                                                 
     ratification that  we will talk about later, in FY 02. Our                                                                 
     budgeted  amount for fair  share is about $55 million.  We                                                                 
     receive  revenue,  its  varied anywhere  from  $33 to  $37                                                                 
     million  so there is a gap in our revenue,  in our receipt                                                                 
     that we are earning  from fair share. This also takes care                                                                 
     of that  problem for FY 04, which is why  the number is so                                                                 
     The other  important part of our proposal  is that we went                                                                 
     to the Legislative  Budget and Audit Committee this summer                                                                 
     with  an one-time increase  in pro-share receipts  that we                                                                 
     believed we could  earn because of the federal fiscal year                                                                 
     and the  State fiscal year,  and in that quarter  where we                                                                 
     have  the  first State  [federal]  quarter  and the  final                                                                 
     State fiscal  year quarter, we were able  to do a one-time                                                                 
     increase  in  pro-share  receipts,   and  the Legislative                                                                  
     Budget and  Audit Committee asked us to  come back to them                                                                 
     with  a full accounting of  that pro-share. We  are using,                                                                 
     in this  plan, the $14 million  that we had identified  of                                                                 
     those pro-share receipts  in our net-zero supplemental. So                                                                 
     I want  to make sure that  the Committee understands  that                                                                 
     as well.                                                                                                                   
     In general, Madame  Chairman, in addition to the pro-share                                                                 
     payments,  we  were  also  able  to continue  to  look  to                                                                 
     enhancements in federal  revenue, and we are continuing to                                                                 
     look  at other efficiencies  in our operations  to come up                                                                 
     with  the balance of the $15  million of general  funds to                                                                 
     make this a net-zero supplemental.                                                                                         
     In  your back up,  you have a memo  that the Commissioner                                                                  
     sent to all divisions  outlining a belt tightening process                                                                 
     to allow us to generate  the general fund savings that you                                                                 
     see  in the net-zero  supplemental.  We are taking  a hard                                                                 
     look at filling vacancies  except if they are essential or                                                                 
     have to do with a life-health safety of clients.                                                                           
SFC 04 # 19, Side B 09:52 AM                                                                                                    
Ms. Clarke continued to testify as follows.                                                                                     
     We are  also taking a tough  look at any contracts  we are                                                                 
     going to renew. We  also did an extensive review of all of                                                                 
     our grants,  and there were several grantees  that had not                                                                 
     spent funds  in the first half of the fiscal  year, and we                                                                 
     were able to reduce those as well.                                                                                         
Ms. Clarke stated that the regular supplemental requests                                                                        
reflect general cutbacks.                                                                                                       
Co-Chair Wilken asked for the source of the funds in Section                                                                    
     SB 314                                                                                                                     
     Section: 8(i)                                                                                                              
     BRU: Senior/Disabilities Medicaid Services                                                                                 
     Supplemental Need: Increased federal receipts for                                                                          
     $ 24,098,600 federal funds                                                                                                 
Ms. Clarke  replied that the funds  reflect a federal  increase                                                                 
in Medicaid  funding.  All of  the federal  funds reflected  in                                                                 
Section 8 represent increased Medicaid funding.                                                                                 
Co-Chair  Wilken asked  if the  Department was  aware of  these                                                                 
federal increases last year.                                                                                                    
Ms. Clarke  replied that  the Department  anticipated  Medicaid                                                                 
cost containment  measures but were unable to implement  all of                                                                 
them because many  require regulation changes.  She reported an                                                                 
"incredible"  growth  in  claims for  Personal  Care  Attendant                                                                 
program  services for senior  and disabled  clients, which  was                                                                 
not expected.  The cost  of these services  increased from  $13                                                                 
million  to an anticipated  $56 million  for FY  06 if no  cost                                                                 
containment measures are implemented.  This program has "gotten                                                                 
out of control".  She offered to  further detail the  situation                                                                 
to the budget subcommittee.                                                                                                     
Co-Chair Green  clarified the annual increase from  $13 million                                                                 
to $56 million.                                                                                                                 
Co-Chair   Wilken  referred  to   a  packet  provided   by  the                                                                 
Department  of Health and Social  Services titled "DHSS  FY2004                                                                 
Delete/Add   Supplemental   Request"   [copy   on  file],   and                                                                 
specifically  a chart on page 15.  He used this chart  to point                                                                 
out that in 1998  the State spent $5.3 million  on the Personal                                                                 
Care  Attendant  program  within  the Division  of  Senior  and                                                                 
Disability  Services,  and in 2004  the State  is expecting  to                                                                 
spend $53.1 million on this program.                                                                                            
Ms. Clarke informed that this  program changed in FY 02 through                                                                 
regulations    adopted    by   the    previous   gubernatorial                                                                  
administration. The Department  needs to restrict staff working                                                                 
hours, and make  other changes to this program  to slow program                                                                 
cost increases.                                                                                                                 
Co-Chair  Green  asked  whether  these  changes  would  require                                                                 
legislation to enact.                                                                                                           
Ms.  Clarke replied  the  changes  could  be made  through  the                                                                 
regulation process.                                                                                                             
     SB 314                                                                                                                     
     Section: 8(j)                                                                                                              
     BRU: Nursing                                                                                                               
     Supplemental Need: Operating expense belt tightening to                                                                    
     achieve net-zero general fund supplemental                                                                                 
Senator  Hoffman  asked  whether   the State   health  services                                                                 
savings being  implemented in FY  04, specifically the  cuts in                                                                 
nursing  positions, are one  time savings,  or if they  will be                                                                 
ongoing belt tightening measures.                                                                                               
Ms. Clarke  responded that the  belt tightening measures  are a                                                                 
one  time savings;  however,  she did  not expect  that  public                                                                 
health nurses  would agree that  their positions will  be "back                                                                 
to normal" in FY  05. The Department has offered  a proposal to                                                                 
restructure public health nursing in the FY 05 budget.                                                                          
Senator Hoffman voiced concern  about the nursing cut backs and                                                                 
expressed   interest   in   hearing    other   measures   under                                                                 
consideration for restructuring public health nursing.                                                                          
Senator Bunde cited  demographic predictions by  the Department                                                                 
of  Labor  and  Workforce   Development  indicating   that  the                                                                 
majority of Alaska's population  would be over the age of 65 or                                                                 
under  the age  of five  in the  "relatively  near future".  He                                                                 
asked how the growth of these  programs equates to the changing                                                                 
demographics, and how problematic is the issue.                                                                                 
Ms.  Clarke  attributed   some  of  the  program's   growth  to                                                                 
demographics,   as  the   fastest  growing   segments   of  the                                                                 
population are  seniors and disabled people. She  remarked that                                                                 
these services have become a "niche" in the market.                                                                             
Senator  Dyson   informed  that   several  states  are   saving                                                                 
significant  Senior Care  funds by allowing  seniors to  direct                                                                 
how their care  is supplied, partially by allowing  families to                                                                 
subsidize  care. He asked if the  Department has been  allowing                                                                 
similar senior  involvement, and whether legislation  is needed                                                                 
to allow that level of involvement.                                                                                             
Ms. Clarke responded  that the Department would  need to review                                                                 
the issue  to determine  if legislation  is  needed. She  added                                                                 
that the Personal  Care Attendant  program is consumer  driven.                                                                 
The Department supports the program,  but parameters need to be                                                                 
established to hinder abuse of the program.                                                                                     
Senator Dyson commented on the  consumer driven programs he has                                                                 
heard  about  and  observed,  and  expressed   satisfaction  in                                                                 
learning that certain programs  within the Department implement                                                                 
consumer management.                                                                                                            
Senator  B. Stevens  asked for  clarification  on the chart  on                                                                 
page 15 of the DHSS packet. He  asked for a document that would                                                                 
show the fund  sources and their  specific contribution  to the                                                                 
Division of Senior and Disability Services.                                                                                     
Ms. Clarke responded that a document could be produced.                                                                         
Senator Dyson  asked for an explanation  of the waivers  listed                                                                 
on the chart on page 15 of the DHSS packet.                                                                                     
Ms. Clarke  answered that  the "AD Waiver"  is the Adults  with                                                                 
Physical Disability  Waiver, the "CCMC Waiver"  is the Children                                                                 
with Complex  Medical Conditions  Waiver, the "MRDD  Waiver" is                                                                 
the Mental  Retardation or Developmental  Disabilities  Waiver,                                                                 
and the "OA Waiver" is the Older Alaskans' Waiver.                                                                              
Co-Chair  Green  asked  for  a  more  detailed  explanation  of                                                                 
Section 8(a).                                                                                                                   
Ms. Clark  explained that the Department  has implemented  this                                                                 
net-zero  budget plan by  making internal  fund transfers.  The                                                                 
revenue  generated  from pioneers'  homes'  resident fees  have                                                                 
dropped severely.  The Department  has been able to  internally                                                                 
reallocate  $173,100, but  the overall  shortfall is  $885,000.                                                                 
The request  for $711,900  from the general  fund represents  a                                                                 
transfer   of  funds  appropriated   to  other  areas   of  the                                                                 
Department,  to  the pioneers'  homes  to completely  fund  the                                                                 
shortfall.  She commented  that it would  be useful to  further                                                                 
discuss  the declining  enrollments  of some  of the  pioneers'                                                                 
homes  in  the  Senate  Health  and  Social  Services   Finance                                                                 
Subcommittee. The  pioneers' homes do not typically  experience                                                                 
the decline  in revenue  that is  evident this  year, and  this                                                                 
concerns the Department.                                                                                                        
Co-Chair  Green  mentioned   that  senior  citizens  have  more                                                                 
assisted  living facility  options  than they  have had in  the                                                                 
past.  These  increased  options  may  affect  the  demand  for                                                                 
pioneers'  homes.  She supported  further  discussion  on  this                                                                 
Co-Chair Green asked if the pioneers'  homes revenue shortfalls                                                                 
were a result of increased operating costs.                                                                                     
Ms. Clarke  replied that  the shortfalls  were a result  of low                                                                 
Co-Chair Green  emphasized that  this shortfall is significant                                                                  
and unanticipated.                                                                                                              
     SB 314                                                                                                                     
     Section: 8(d)                                                                                                              
     BRU: Front Line Social Workers                                                                                             
     Supplemental  Need: Operating  expense belt tightening  of                                                                 
     96.3  to achieve  net-zero general  fund supplemental  and                                                                 
     anticipated  additional Social Services  Block Grant funds                                                                 
     of 150.0                                                                                                                   
     ($246,300) general funds                                                                                                   
Co-Chair Green  asked if the Department has sufficient  federal                                                                 
receipt  authority  to allow  for  the additional  $150,000  in                                                                 
Social Services Block Grants.                                                                                                   
Ms. Clarke replied that the Department  has sufficient revenue.                                                                 
Co-Chair   Green   referenced   Section  8(d)   affecting   the                                                                 
Subsidized Adoptions  and Guardianship program  and stated that                                                                 
this  component request  is historically  a  "huge issue".  She                                                                 
asked what  contributed to the  amount of this request  such as                                                                 
better planning,  less program  growth,  or more funding  in FY                                                                 
Ms. Clarke responded that all  of those reasons contributed. In                                                                 
the past,  the Subsidized  Adoptions  and Guardianship  program                                                                 
has had large  cost increases.  The cost increase in  FY 03 was                                                                 
approximately nine-percent, but  the forecasted growth had been                                                                 
12-percent. The program is leveling off.                                                                                        
Co-Chair  Green requested  a spreadsheet  that detailed  all of                                                                 
the Department's internal fund transfers.                                                                                       
Ms. Clarke stated that she would provide the spreadsheet.                                                                       
     SB 314                                                                                                                     
     Section: 8(g)                                                                                                              
     BRU: Kenai Peninsula Youth Facility                                                                                        
     Supplemental  Need:  200.0 savings  from delay in  opening                                                                 
     the  facility   plus  112.4  in  operating   expense  belt                                                                 
     tightening  to achieve net-zero general  fund supplemental                                                                 
     ($312,500) general funds                                                                                                   
Senator  Hoffman  asked if  the $200,000  savings  reflected  a                                                                 
contract  that was  not  issued to  the Kenai  Peninsula  Youth                                                                 
Ms. Clarke  replied that the legislature  provided the  funding                                                                 
to  enable  the  Kenai   Peninsula  Youth  Facility   to  begin                                                                 
operations on July  1, 2004. However, there were  delays in the                                                                 
facility's  opening,  which  made some  of the  contract  funds                                                                 
available for reappropriation.                                                                                                  
Senator  Hoffman asked  specifically  what  the contracts  were                                                                 
Ms.  Clarke replied  that  she would  get Senator  Hoffman  the                                                                 
requested information.                                                                                                          
     SB 314                                                                                                                     
     Department: Miscellaneous Claims                                                                                           
     Section: NEW                                                                                                               
     BRU: Health and Social Services                                                                                            
     Supplemental Need: Feb.23 Amd: miscellaneous claim of                                                                      
     $2,000 general funds                                                                                                       
Ms. Clarke  explained that this  appropriation addresses  three                                                                 
vendor  claims  relating to  the State  medical  examiner.  The                                                                 
Committee  should be receiving  back  up information  regarding                                                                 
this request.                                                                                                                   
Co-Chair Green asked about the Department's ratifications.                                                                      
Ms. Clarke  stated  that Section  18(a)(3)  was a ratification                                                                  
from FY 02 relating  to the Medicaid program and  the statutory                                                                 
designated program  receipts from the Fair Share  program. This                                                                 
request  reflects   the  shortfall   between  the  amount   the                                                                 
Department   budgeted  for   Medicaid,   and  the  amount   the                                                                 
Department   was  able  to  earn.   The  Department   typically                                                                 
approaches  the legislature two  years after a fiscal  year has                                                                 
closed  so that  Legislative  Budget  and Audit  Committee  can                                                                 
review the federal  adjustments, and verify their  accuracy. In                                                                 
FY 02, the legislature implemented  the fair share program. The                                                                 
Department  had anticipated receiving  $55 million in  receipts                                                                 
from the tribal  hospitals in payment  back to the State.  Only                                                                 
$33 million  was received.  The Department  is certain  that no                                                                 
additional receipts  will be received. She added  that the Fair                                                                 
Share  program's shortfalls  have  been included  in the  FY 04                                                                 
supplemental   request,   so  the  Department   would   not  be                                                                 
requesting a ratification of this magnitude for FY 04.                                                                          
Co-Chair  Green  confirmed  that  the  legislature  should  not                                                                 
anticipate a future ratification of this amount.                                                                                
Ms. Clarke responded  that approximately eight  million dollars                                                                 
has been  proposed in the  Department's  FY 05 budget to  close                                                                 
the Fair Share programs shortfalls.  She commented that this is                                                                 
another issue  that deserves further  discussion in  the Senate                                                                 
Health and Social Services Finance Subcommittee.                                                                                
Senator  Hoffman referred  to testimony  given  last year  that                                                                 
suggested  that the State would  be obligated to fund  this $54                                                                 
million of anticipated  tribal hospital receipts.  He asked how                                                                 
this ratification amount would be reconciled.                                                                                   
Ms.  Clarke   responded  that   the  Department  had   budgeted                                                                 
approximately  $55  million  for the  Fair Share  program.  The                                                                 
earnings  were  $33  million.  This  ratification  is  the  gap                                                                 
between the estimated earnings and the actual earnings.                                                                         
Ms. Clarke  continued that  the Department  has a claim  to the                                                                 
funds that  were not granted  through  the Fair Share  program.                                                                 
The Department  has established  a legal case in an  attempt to                                                                 
garner the funds; the case is currently being appealed.                                                                         
Senator  Hoffman  asked what  efforts  were being  expended  to                                                                 
ensure the payment of the shortfall,  and the timeline of those                                                                 
efforts.  He  also  asked  the  likelihood  of  collecting  the                                                                 
Ms. Clarke  responded  that the  Department  has made  numerous                                                                 
efforts  to come to a  resolution; however  the federal  Appeal                                                                 
Board has no restrictions  on how long it considers  an appeal.                                                                 
Senator Hoffman restated his  earlier question and asked if the                                                                 
Department's efforts are reflected in the budget.                                                                               
Ms.  Clarke  responded  that  the  Department   has  made  many                                                                 
internal efforts to produce a  favorable resolution. Department                                                                 
staff  has  provided  information   to the  necessary   federal                                                                 
agencies.  She  added that  the Department  could  provide  the                                                                 
Committee   information  pertaining   to  these  efforts.   The                                                                 
Department is confident in a favorable resolution.                                                                              
Senator  Hoffman asserted  that this Department  of Health  and                                                                 
Social  Services  supplemental   budget  request  is  the  most                                                                 
significant   request,   and  the   information   provided   is                                                                 
Co-Chair  Green commented  that this  supplemental request  has                                                                 
"some  very,  very interesting   history".  She had  asked  the                                                                 
previous   gubernatorial   administration   to   address   this                                                                 
ratification  by cutting the budget,  but action was  not taken                                                                 
until Governor Murkowski came into office.                                                                                      
Department of Transportation and Public Facilities                                                                            
     SB 313                                                                                                                     
     Section: 9(a)                                                                                                              
     BRU: Anchorage Airport Administration                                                                                      
     Supplemental Need: Tenant improvement inspection                                                                           
     oversight. DOT will contract out management of the                                                                         
     extensive  tenant  building activity  for  the few  months                                                                 
     prior  to  opening the  terminal.  Internal  staff  cannot                                                                 
     handle  this level  of one-time  activity.  Cost will  not                                                                 
     affect FY 05 budget.                                                                                                       
     $200,000 International Airports Revenue Fund                                                                               
JOHN  MACKINNON, Deputy  Commissioner  of Highways  and  Public                                                                 
Facilities,   Department    of   Transportation    and   Public                                                                 
Facilities, overviewed this request.                                                                                            
Co-Chair Green  clarified that  existing staff would  be unable                                                                 
to handle the significant increased activities.                                                                                 
     SB 313                                                                                                                     
     Section: 9(b)                                                                                                              
     BRU: Anchorage Airport Facilities                                                                                          
     Supplemental   Need:  Concourse  C  operations   costs  of                                                                 
     planning  and implementation  of  the consultant  contract                                                                 
     (to  be hired  in March)  and the  first  month (June)  of                                                                 
     operations and maintenance.                                                                                                
     $1,500,000 International Airport Revenue Fund                                                                              
Mr.  MacKinnon  anticipated  that  all  of  the  operation  and                                                                 
maintenance  required   for  Concourse  C  would  be  conducted                                                                 
through contract services. This  request would allow the hiring                                                                 
of  a contract  consultant  who  would  develop a  request  for                                                                 
proposals  (RFP).  The current  annual  cost estimate  for  the                                                                 
contracted services is approximately  six million dollars. This                                                                 
request would  allow the Department  of Transportation  to hire                                                                 
the contract consultant, and  would fund one month of Concourse                                                                 
C operations.  Concourse C is scheduled  to open in  June 2004.                                                                 
Co-Chair  Green asked if  this expense  was unanticipated  when                                                                 
the FY 04 budget was prepared.                                                                                                  
NANCY SLAGLE,  Director, Division  of Administrative  Services,                                                                 
Department of Transportation  and Public Facilities,  testified                                                                 
that the Department did know  now the opening date of Concourse                                                                 
C and had therefore  been "hesitant" to request  funding in the                                                                 
original FY 04 budget.                                                                                                          
     SB 313                                                                                                                     
     Section: 9(c)                                                                                                              
     BRU: Capital                                                                                                               
     Supplemental    Need:   Federal   contract    to   perform                                                                 
     maintenance   and  operation  for  5  years  at  Adak  air                                                                 
     facility. Interest  earnings must be spent on the Adak air                                                                 
     $10,000,000 Adak Airport Operations                                                                                        
Mr. MacKinnon informed  that commercial air activity  has begun                                                                 
at this airport. The additional  costs of this project would be                                                                 
$13.5 million,  which would be  funded by various federal  fund                                                                 
sources over the next three years.                                                                                              
Co-Chair Green asked if future responsibility of the facility                                                                   
would transfer to the State.                                                                                                    
Mr. MacKinnon answered that it could, and noted the current                                                                     
agreement is for five years.                                                                                                    
     SB 313                                                                                                                     
     Section: 10(a)                                                                                                             
     BRU: Capital                                                                                                               
     Supplemental Need: Earmarked projects passed in January's                                                                  
     federal omnibus bill which must all be obligated before                                                                    
     September 30, 2004:                                                                                                        
           (1) Alaska  Statewide  Airports Runway  and  Related                                                                 
           Improvements (ED99)                                                                                                  
           $3,000,000 federal funds                                                                                             
           $  157,900 Alaska Industrial Development & Export                                                                    
                  Authority (AIDEA) Dividend                                                                                    
           (2) Fairbanks Terminal Redevelopment (ED99)                                                                          
           $1,000,000 federal funds                                                                                             
           $   52,700 International Airport Revenue Fund                                                                        
           (3) Kodiak Terminal Improvements (ED36)                                                                              
           $1,000,000 federal funds                                                                                             
           $   26,400 AIDEA Dividend                                                                                            
           (4) University  of  Alaska Transportation   Research                                                                 
           Center (ED99)                                                                                                        
           $2,000,000 federal funds                                                                                             
           (5) Circumpolar  Infrastructure  Task Force,  Arctic                                                                 
           Council and Northern Forum (ED99)                                                                                    
           $1,000,000 federal funds                                                                                             
           (6)  Kotzebue   Dust  and   Persistent  Particulate                                                                  
           Abatement Research (ED40)                                                                                            
           $1,000,000 federal funds                                                                                             
           $  250,000 AIDEA Dividend                                                                                            
           (7) Coffman  Cove/Wrangell/Petersburg   Ferries  and                                                                 
           Ferry Facilities (ED1-5)                                                                                             
           $2,000,000 federal funds                                                                                             
           $  500,000 AIDEA Dividend                                                                                            
           (8) Arctic Winter Games Transportation  Improvements                                                                 
           $1,000,000 federal funds                                                                                             
           (9) Ft.  Wainwright  Alternative  Access  and  Chena                                                                 
           River Crossing (ED60)                                                                                                
           $5,700,000 federal funds                                                                                             
           $  565,800 AIDEA Dividend                                                                                            
           (10) Big Lake to Wasilla Pedestrian Trails (ED70)                                                                    
           $500,000 federal funds                                                                                               
           (11) Kincaid Park Trail Connection (ED 50)                                                                           
           $900,000 federal funds                                                                                               
           (12) Funny River Bridge Crossing (ED 90)                                                                             
           $5,000,000 federal funds                                                                                             
           (13) Glacier Creek/Nome Bypass (ED39)                                                                                
           $3,000,000 federal funds                                                                                             
           (14) McCarthy Creek Tram (ED 6)                                                                                      
           $200,000 federal funds                                                                                               
           (15)   Bartlett    Access    Intersection     Safety                                                                 
           Improvement (ED50)                                                                                                   
           $500,000 federal funds                                                                                               
           (16) Nome Bypass Road (ED39)                                                                                         
           $2,000,000 federal funds                                                                                             
           (17) C Street Railroad Bypass (ED50)                                                                                 
           $2,000,000 federal funds                                                                                             
           (18) Chenega Road System (ED5)                                                                                       
           $850,000 federal funds                                                                                               
           (19) Craig Road Improvements (ED 5)                                                                                  
           $1,000,000 federal funds                                                                                             
           (20) Donlin Creek Road (ED6)                                                                                         
           $10,000,000 federal funds                                                                                            
           (21) False Pass Causeway and Road to the Terminus                                                                    
           of the South Arm Breakwater (ED37)                                                                                   
           $3,000,000 federal funds                                                                                             
           (22) Fairbanks Transit Bus Replacement (ED60)                                                                        
           $3,000,000 federal funds                                                                                             
           (23) Girdwood Project (ED32)                                                                                         
           $1,000,000 federal funds                                                                                             
           (24) Hydaburg Road Improvement (ED5)                                                                                 
           $2,000,000 federal funds                                                                                             
           (25) Keystone Drive and Related Improvements (ED90)                                                                  
           $1,500,000 federal funds                                                                                             
           (26) Lucille Street and Mack Drive Improvements-                                                                     
           Wasilla (ED14)                                                                                                       
           $1,000,000 federal funds                                                                                             
           (27) Mat-Su Roads Improvement (ED70)                                                                                 
           $3,000,000 federal funds                                                                                             
           (28) North Pole Roads Lighting (ED11)                                                                                
           $950,000 federal funds                                                                                               
           (29) North Slope Borough Road Improvements (ED40)                                                                    
           $3,000,000 federal funds                                                                                             
           (30) Port of Ketchikan Ferry Facility (ED1)                                                                          
           $1,000,000 federal funds                                                                                             
           (31) Seldovia-Homer-Jakolof Bay Halibut Cove Ferry                                                                   
           Planning and Design (ED35)                                                                                           
           $2,000,000 federal funds                                                                                             
           (32) Seward Road Improvements (ED35)                                                                                 
           $2,000,000 federal funds                                                                                             
           (33) Ship Creek Improvements (ED50)                                                                                  
           $1,000,000 federal funds                                                                                             
           (34) Sitka Road Improvements (ED2)                                                                                   
           $1,500,000 federal funds                                                                                             
           (35) University of Alaska Transportation Research                                                                    
           Center (ED99)                                                                                                        
           $2,000,000 federal funds                                                                                             
           (36) Williamsport/Pile Bay Road Kenai (ED90)                                                                         
           $3,000,000 federal funds                                                                                             
           (37) Winner Creek Trail Improvements (ED50)                                                                          
           $1,000,000 federal funds                                                                                             
           (38) Yakataga River Bridge (ED5)                                                                                     
           $3,000,000 federal funds                                                                                             
           (39) Alaska Mobility Coalition Bus Replacement                                                                       
           $500,000 federal funds                                                                                               
           (40) Coffman Cove Inner Island/Bus Terminal (ED1-5)                                                                  
           $1,500,000 federal funds                                                                                             
           $  375,000 AIDEA Dividend; ASLC Dividend                                                                             
           (41) Mobility Coalition                                                                                              
           $500,000 federal funds                                                                                               
     SB 313                                                                                                                     
     Section: 10(b)                                                                                                             
     BRU: Capital                                                                                                               
     Supplemental Need: Fund source section for projects                                                                        
     listed in Section 10(a)                                                                                                    
Mr. MacKinnon explained  that funding for a number  of projects                                                                 
was approved  by federal omnibus  legislation. This  request is                                                                 
necessary because  certain confusions exist within  the omnibus                                                                 
bill.  The  language  specifies  that  project  funds  must  be                                                                 
obligated by September  30, 2004, or the funds  might lapse. By                                                                 
including  these  projects   in the  fast  track  supplemental                                                                  
budget, the Department could  begin to process and obligate the                                                                 
projects by September 30, 2004.                                                                                                 
Co-Chair Wilken  asked why this  request could not be  included                                                                 
in the FY 05 capital budget.  He also questioned the definition                                                                 
of "obligate" in this context.                                                                                                  
Mr. MacKinnon replied that "obligate"  refers to the Department                                                                 
satisfying   certain  criteria   established  by  the   federal                                                                 
government  in order to receive  funds. The federal  government                                                                 
funds project costs  as the State can exhibit need;  therefore,                                                                 
total project costs may not be obligated all at once.                                                                           
Co-Chair  Wilken clarified  that  the Department  simply  needs                                                                 
authorization  to  begin the  obligation  process  as early  as                                                                 
Mr. MacKinnon affirmed.                                                                                                         
Senator Hoffman  asked if the projects  listed in this  request                                                                 
represent  all   of  the  projects  approved  by   the  omnibus                                                                 
Mr.  MacKinnon responded  that  the projects  listed  represent                                                                 
only a portion of the projects approved.                                                                                        
Co-Chair Green  surmised this situation is different  than from                                                                 
the previous year.                                                                                                              
Mr. MacKinnon affirmed.                                                                                                         
Senator Hoffman  asked about the projects not included  in this                                                                 
request,  and what criterion  was used  to select the  included                                                                 
Mr. MacKinnon  replied  that the federal  legislation  includes                                                                 
funds  from various  sources.  Some  of the  proposed  projects                                                                 
would  be  funded  with  appropriations  that  could  lapse  in                                                                 
September  2004. Therefore,  these  projects  must be  underway                                                                 
before that date.                                                                                                               
Senator  Hoffman  clarified  that the  projects,  of which  the                                                                 
funding  would not lapse,  are included  in the proposed  FY 05                                                                 
capital budget.                                                                                                                 
Ms. Slagle  also noted  that several airport  projects  are not                                                                 
included  in  this  supplemental   request  and  would  not  be                                                                 
included in the FY 05 capital  budget either. She explained the                                                                 
funding   for  these   projects  do   not  require   additional                                                                 
legislative approval.                                                                                                           
Senator  Hoffman  requested  additional   information  on  this                                                                 
Ms.  Slagle  qualified  that  many  of  the  projects  are  not                                                                 
proposed  at the  request  of the  Department,  but rather  are                                                                 
requests of local governments and other agencies.                                                                               
Co-Chair Green  asked if these  projects are in lieu  of, or in                                                                 
addition to, "normal" projects.                                                                                                 
Mr. MacKinnon replied that the  language of the omnibus bill is                                                                 
different  than  previous  legislation.   He  stated  that  the                                                                 
Department   interprets  this   language  to  imply   that  the                                                                 
appropriation  would be made from  existing funds allocated  to                                                                 
the  State. Normally  the language  stipulates  that  specified                                                                 
projects  would be funded  in addition  to the regular  project                                                                 
funding supplied to the State.  The Department has been assured                                                                 
that this discrepancy would be  corrected to provide that these                                                                 
projects would not take funds from existing projects.                                                                           
Co-Chair Green clarified that  this federal appropriation would                                                                 
change   the  usual  method   of  determining   Department   of                                                                 
Transportation and Public Facilities' capital projects.                                                                         
Co-Chair Green  asked if the legislature  could select  certain                                                                 
proposed projects or whether  all the projects must be accepted                                                                 
as a package.                                                                                                                   
Mr. MacKinnon was  unsure that the State would  have the option                                                                 
of  not  accepting  particular  projects.  Many  projects  were                                                                 
submitted  by "other  entities",  and  the Department  has  not                                                                 
fully identified  each of the projects.  He reiterated  that he                                                                 
was unsure of the intent of the  appropriation language, noting                                                                 
that some of the  projects appear to be duplicates  of existing                                                                 
proposed projects,  although utilizing different  fund sources.                                                                 
Ms.  Slagle  added  that  the  Department  inquired  about  not                                                                 
accepting   certain  projects.   However,  given  the   current                                                                 
language  of the federal  appropriation,  the State would  lose                                                                 
funds from its regular appropriation  if it chose not to accept                                                                 
a project.                                                                                                                      
Co-Chair  Green assumed  the Department  is  attempting to  get                                                                 
clarification  on this  language.  She asked  if this would  be                                                                 
determined before  May 2004, when the FY 05 State  budget would                                                                 
be adopted.                                                                                                                     
Mr.  MacKinnon  agreed  the Department  is  making  efforts  to                                                                 
clarify the issue and has been  assured that the language would                                                                 
be amended  to specify this federal  appropriation is  separate                                                                 
than that for existing  projects. However, he had  no guarantee                                                                 
of when this legislation would be amended.                                                                                      
Senator  B.  Stevens  understood  the  proposed  projects  were                                                                 
included  in  the  federal  omnibus  transportation   bill.  He                                                                 
clarified  that  the  transportation  portion  of  the  omnibus                                                                 
legislation should have been passed by October 1, 2003.                                                                         
Senator B.  Stevens expressed confusion  about the possibility                                                                  
that  funding for  these  projects  could be  transferred  from                                                                 
appropriations  for other surface  transportation projects.  He                                                                 
asked if  Congress had  not approved the  funding increase  for                                                                 
Alaska projects over the next six years.                                                                                        
Mr.  MacKinnon informed  of  the two  versions  of the  omnibus                                                                 
bill,  one adopted  by  the  Senate and  one  by the  House  of                                                                 
Representatives.  A conflict exists between those  versions and                                                                 
the version  supported  by the President  Bush administration.                                                                  
None of the versions have been passed out of Congress.                                                                          
Senator  B. Stevens  noted the  appropriation  included in  the                                                                 
Senate version  is less than the appropriation  included in the                                                                 
House of Representatives version,  and the appropriation in the                                                                 
Bush administration version is even less.                                                                                       
Senator  B.  Stevens  expressed  concern   in  authorizing  the                                                                 
Department  to  consider  and plan  for  certain  projects  and                                                                 
project appropriations  when the  federal omnibus bill  has not                                                                 
yet passed, and may be adjusted.                                                                                                
Co-Chair Wilken  referenced the  projects included in  Sections                                                                 
10(a)(39)  and 10(a)(41)  that  would provide  funding for  the                                                                 
purchase  of  vehicles  for  disabled  persons   and  nonprofit                                                                 
organizations.  He asked what organizations would  receive this                                                                 
funding and also  asked the criteria to qualify  for the funds.                                                                 
Mr. MacKinnon replied  the Alaska Mobility Coalition  requested                                                                 
the funding.  The Department  would administer  the funding  on                                                                 
behalf of the Coalition.                                                                                                        
Co-Chair  Wilken pointed  out the  inaccuracy  of the  election                                                                 
districts listed for the proposed projects.                                                                                     
Co-Chair Green  assumed more information on this  request would                                                                 
Mr.  MacKinnon  affirmed  and stated  that  the  Department  is                                                                 
attempting   to  learn  more  specifics   about  the   proposed                                                                 
Senator  Hoffman clarified  Mr.  MacKinnon is  the contact  for                                                                 
further questions.                                                                                                              
     SB 313                                                                                                                     
     State Debt                                                                                                                 
     Section: NEW                                                                                                               
     BRU: Debt Service                                                                                                          
     Supplemental  Need:  Feb  23 Amd:  Fund source  switch  of                                                                 
     $500,000  to the International Airports  Revenue Fund from                                                                 
     Passenger Facility  Charges ($500,000) for debt service on                                                                 
     international  airports  revenue  bonds.  The $500,000  of                                                                 
     PFCs  will be used  for capital  projects appropriated  in                                                                 
     prior years from this fund source.                                                                                         
     $0.0 Passenger Facility Charges; International Airports                                                                    
     Revenue Fund                                                                                                               
Ms.  Slagle reviewed  this  amendment  and explained  that  the                                                                 
Commissioner  of the Department  of Transportation  and  Public                                                                 
Facilities  had   reached  an  agreement  with  the   signatory                                                                 
airlines, which specified that  debt service contributions made                                                                 
by Passenger  Facility  Charges  would not  exceed two  million                                                                 
dollars  on an annual  basis. This amendment  would enable  the                                                                 
Co-Chair Green questioned the  component title of the amendment                                                                 
on the spreadsheet dated February  23, 2004, which is listed as                                                                 
"State Debt".                                                                                                                   
Ms. Slagle  clarified  that this amendment  would specifically                                                                  
affect the  debt reimbursement  of the Anchorage International                                                                  
     SB 314                                                                                                                     
     Section: 17(a)                                                                                                             
     BRU: Capital                                                                                                               
     Supplemental  Need: Proceeds from the 2003  sale of the MV                                                                 
     Bartlett  will be spent  on the new  Prince William  Sound                                                                 
     marine highway  maintenance facility in  Cordova. This and                                                                 
     the $900,000 authorization  requested in the FY 05 capital                                                                 
     budget will complete the project                                                                                           
     $389,500 Marine Highway System Fund                                                                                        
Ms.  Slagle  informed  that  federal  regulations,   Title  23,                                                                 
stipulate  that any the proceeds  from the sale of a  vessel in                                                                 
which federal highway funds were  used for its initial purchase                                                                 
or renovation, must be utilized  for an eligible project of the                                                                 
same purpose or be returned to the federal government.                                                                          
Co-Chair Green  asked if the proposed  maintenance facility  is                                                                 
eligible for these funds.                                                                                                       
Ms. Slagle answered it is.                                                                                                      
     SB 314                                                                                                                     
     Section: 17(b)                                                                                                             
     BRU: NR Leasing and Property Management                                                                                    
     Supplemental Need: Funds needed due to legal challenges                                                                    
     to recent changes in airport leasing rates in AS 17.                                                                       
     $ 50,000 Receipt Supported Services                                                                                        
Ms. Slagle  told of the legal issues  resulting from  leases at                                                                 
the  Deadhorse  airport.   She  stated  that  leases  at  rural                                                                 
airports in Alaska are about  one-half of the fair market value                                                                 
and that this dispute is a result  of the Department's attempts                                                                 
to implement the regulations.                                                                                                   
SFC 04 # 20, Side A 10:40 AM                                                                                                    
Senator  Bunde asked  if  the leasers  were suing  to  maintain                                                                 
their subsidy.                                                                                                                  
Ms.  Slagle clarified  the  parties are  not  suing the  State,                                                                 
rather just  appealing the implementation  of the regulations.                                                                  
Senator Bunde commented  that the leasers had been  receiving a                                                                 
substantial  subsidy and  are appealing  the reduction  of that                                                                 
Co-Chair  Green  informed  that  she has  been  following  this                                                                 
matter and that the issue is not straightforward.                                                                               
     SB 314                                                                                                                     
     Section: 17(c)                                                                                                             
     BRU: CR Hwys and Aviation                                                                                                  
     Supplemental   Need:  Snow  hauling  in  Anchorage.  Funds                                                                 
     budgeted  in FY 04  have been exhausted  due to the  heavy                                                                 
     snowfall so far this  winter. Additional costs of removing                                                                 
     snow  from  Anchorage   sidewalks  are  included  in  this                                                                 
     $200,000 general funds                                                                                                     
Ms. Slagle reported  that Anchorage had received  a total of 76                                                                 
inches  of snow as  of a couple  of weeks  ago, which is  three                                                                 
feet more  than normal. In FY 04  the Department had  allocated                                                                 
$500,000 for snow haul purposes  and $696,500 had been expended                                                                 
to date for snow removal activities.                                                                                            
Co-Chair  Green asked  if snow-hauling  activities encompassed                                                                  
airport maintenance as well as roadway maintenance.                                                                             
Ms. Slagle  corrected this funding  would be expended  only for                                                                 
the  streets   in  downtown   Anchorage   that  the  State   is                                                                 
responsible to maintain.                                                                                                        
Senator  B.  Stevens  clarified  this  funding  is  for  State-                                                                 
maintained roads  located in Anchorage and not  for those roads                                                                 
included  in the  Anchorage  Metropolitan  Area Transportation                                                                  
Solutions (AMATS) program.                                                                                                      
Ms. Slagle affirmed.                                                                                                            
Co-Chair Green  asked if additional expenses were  not incurred                                                                 
in areas surrounding downtown Anchorage.                                                                                        
Mr. MacKinnon explained  that snow storage in urban  areas does                                                                 
not exist and that after a certain  amount of accumulation, the                                                                 
snow must  be removed  from the  area. By  contrast, he  stated                                                                 
that  other   areas   along  State-maintained   highways   have                                                                 
sufficient snow storage.                                                                                                        
Co-Chair  Wilken cautioned  that  granting  this request  would                                                                 
establish an undesirable precedence.                                                                                            
     SB 314                                                                                                                     
     Section: 17(d)                                                                                                             
     BRU: SE Hwys and Aviation                                                                                                  
     Supplemental  Need: Funds  needed due to legal  challenges                                                                 
     to recent changes in airport leasing rates in AS 17.                                                                       
     $50,000 Receipt Supported Services                                                                                         
Ms. Slagle  stated this section  relates to leases held  by the                                                                 
Yakutat  airport and  a dispute  in the best  interest  finding                                                                 
award of an airport lease.                                                                                                      
Co-Chair  Green  asked  if  the  Department  usually   requests                                                                 
funding for legal challenges.                                                                                                   
Ms. Slagle  replied these  expenses are  unusual, and that  the                                                                 
leasing budgets  are limited and unable to absorb  the costs of                                                                 
large  legal  disputes.  She furthered  that  legal  issues  on                                                                 
leases are uncommon.                                                                                                            
Co-Chair  Green  did  not  recall  such  funding   requests  in                                                                 
previous years.                                                                                                                 
     SB 314                                                                                                                     
     Section: 17(e)                                                                                                             
     BRU: Marine Vessel Operations                                                                                              
     Supplemental  Need:  Masters, Mates  and Pilots union  has                                                                 
     ratified its contract  as of January 1, 2004. In the FY 04                                                                 
     budget,  the Legislature appropriated  $60,500  to cover a                                                                 
     full  year's monetary  term  cost, but six  months of  the                                                                 
     appropriation is not needed.                                                                                               
     ($30,200) Marine Highway System Fund                                                                                       
Ms. Slagle outlined this return of funds.                                                                                       
Department of Community and Economic Development                                                                              
     SB 314                                                                                                                     
     Section: 2(a)                                                                                                              
     BRU:   Regulatory    Commission   of   Alaska   Audits   &                                                                 
     Supplemental  Need:  Additional funds  for expert  witness                                                                 
     costs   are  required   for   a)  completion   of   Alaska                                                                 
     Communications  Systems  cases ($20,000),  b) Enstar  case                                                                 
     participation  ($15,000),  c)  assistance  on the  telecom                                                                 
     regulations  preceding responsive to HB  111 ($20,000), d)                                                                 
     participation in other cases ($60,000).                                                                                    
     $115,000 RCA Receipts                                                                                                      
     SB 314                                                                                                                     
     Section: 2(b)                                                                                                              
     BRU: Regulatory Commission of Alaska                                                                                       
     Supplemental  Need:  Due  to major  developments  in  Cook                                                                 
     Inlet   and  the   Trans  Alaska   Pipeline  System,   the                                                                 
     Regulatory  Commission  of Alaska's  effort in  regulating                                                                 
     pipelines  has  significantly  increased.  To provide  the                                                                 
     necessary   expertise  two  new  positions,   a  range  21                                                                 
     Research  Analyst  IV and  a  range 19  Utility  Financial                                                                 
     Analyst are requested.  Funds for additional office space,                                                                 
     furniture and equipment are also requested.                                                                                
     $114,600 RCA Receipts                                                                                                      
TOM  LAWSON, Director,  Division  of Administrative   Services,                                                                 
Department  of Community  and Economic  Development,  testified                                                                 
that  Sections   2(a)  and  2(b)   relate  to  the   Regulatory                                                                 
Commission of Alaska (RCA), and  are funded by RCA receipts. He                                                                 
briefly explained the two requests.                                                                                             
MARK JOHNSON, Commissioner and  Chair, Regulatory Commission of                                                                 
Alaska,  Department  of  Community  and Economic  Development,                                                                  
testified via teleconference  from Anchorage, that  the request                                                                 
in  Section  2(a) relates  to  the  Audits  and Investigations                                                                  
section  of the  RCA, which  is under  the supervision  of  the                                                                 
State Attorney General per Executive  Order #111. The Office of                                                                 
the Attorney General has requested  certain expert witness fees                                                                 
regarding   four   particular   issues.   He   emphasized   the                                                                 
reasonableness of the request.                                                                                                  
Mr. Johnson noted  that Section 2(b) relates to  an increase in                                                                 
the regulatory filings involved  in the intrastate transport of                                                                 
natural  gas. A separate  commission  formerly supervised  this                                                                 
function,  but it was merged into  the Alaska Public  Utilities                                                                 
Commission,  the predecessor  of the  Regulatory Commission  of                                                                 
Alaska. Regulatory  filings have increased particularly  in the                                                                 
Cook Inlet region and the North  Slope region. Additional staff                                                                 
is  needed   to  handle   the  increased   regulatory   filings                                                                 
expeditiously in  order to "enable economic development  in the                                                                 
oil fields."                                                                                                                    
     SB 314                                                                                                                     
     Section: 2(c)                                                                                                              
     BRU: Capital                                                                                                               
     Supplemental  Need: Repeal  of funds to Saxman  for Public                                                                 
     Safety  Bldg sec. 87,  ch. 1, SSSLA  2002, pg. 138,  In 9.                                                                 
     Actual grant amount is $1,074,341                                                                                          
     ($1,074,300) general funds                                                                                                 
Mr. Lawson  informed that this  would repeal the appropriation                                                                  
that was granted  to the City of  Saxman for construction  of a                                                                 
public safety facility. This  facility would be built elsewhere                                                                 
in the Ketchikan Borough.                                                                                                       
     SB 314                                                                                                                     
     Section: 2(d)                                                                                                              
     BRU: Power Cost Equalization                                                                                               
     Supplemental  Need:  PCE Endowment  fund appropriation  to                                                                 
     PCE fund to replace  the general funds requested in the FY                                                                 
     05 budget.  This is the balance of the statutory  7% limit                                                                 
     of  the PCE  Endowment monthly  average  market value  for                                                                 
     appropriation  in FY  04. An FY 05  budget amendment  will                                                                 
     also be submitted.                                                                                                         
     $4,581,000 PCE Endowment Fund                                                                                              
Mr. Lawson stated this appropriation  would fund the Power Cost                                                                 
Equalization  (PCE)  program. He  explained  that this  request                                                                 
would compensate  for an FY 05 budget shortfall.  It would also                                                                 
replace $3.7  million of general  funds requested in  the FY 05                                                                 
operating  budget.  The FY  04 operating  budget  authorized  a                                                                 
withdrawal of up to $12.6 million  from the PCE Endowment fund.                                                                 
In FY 04 $7.9  million was transferred  from the PCE  Endowment                                                                 
fund into the PCE fund. The PCE  fund reached its $15.7 million                                                                 
funding  level after  a one-time  National  Petroleum  Reserve-                                                                 
Alaska  (NPR-A) appropriation.  Approximately  $4.6 million  of                                                                 
the PCE Endowment  fund remains  available for withdrawal,  and                                                                 
this request would authorize  a transfer from the PCE Endowment                                                                 
fund to the  PCE fund. This appropriation  would be  used in FY                                                                 
05 to fully fund the PCE fund.                                                                                                  
Department of Corrections                                                                                                     
     SB 314                                                                                                                     
     Section: 3(a)                                                                                                              
     BRU: Inmate Health Care                                                                                                    
     Supplemental   Need:  The  cost  of  drug  and  scientific                                                                 
     supplies  continue to rise annually and  contractual costs                                                                 
     have  increased  due  to eight  catastrophic  cases,  each                                                                 
     costing in excess of $100,000.                                                                                             
     $1,100,000 general funds                                                                                                   
JERRY BURNETT,  Director, Division of Administrative  Services,                                                                 
Department  of  Corrections,   testified  this  request   would                                                                 
provide  for the increased  costs of  contractual services  and                                                                 
medical supplies.                                                                                                               
     SB 314                                                                                                                     
     Section: 3(b)                                                                                                              
     BRU: Out of State Contracts                                                                                                
     Supplemental  Need:  Due to  increases  in population  and                                                                 
     subsequent  management of placement of prisoners,  the out                                                                 
     of   state  contracts   and  related   travel  costs   are                                                                 
     increasing  from the budgeted  650 prisoners to  in excess                                                                 
     of 775 by the end of FY 04.                                                                                                
     $920,000 general funds                                                                                                     
Mr. Burnett  told of the  increased number  of Alaskan  inmates                                                                 
housed  in a correctional  facility  in Arizona.  He  qualified                                                                 
that the actual  need could be less than the need  reflected in                                                                 
this request  and that  a subsequent adjustment  would  be made                                                                 
once the actual number of inmates is determined.                                                                                
Senator  Bunde asked if  Section 3(a)  included pharmaceutical                                                                  
Mr. Burnett  responded that pharmaceuticals  are one  component                                                                 
of the  request in Section  3(a) because  pharmaceutical  costs                                                                 
have gone  up by  more than 20%,  and an  increasing number  of                                                                 
inmates have pharmaceutical needs.                                                                                              
Senator  Dyson  reminded of  the previous  appearance  of  this                                                                 
witness before  the Committee when  Senator Dyson complemented                                                                  
the Department on its care of  inmates. He recalled his earlier                                                                 
questioning  of how the legislation  could verify the  truth in                                                                 
the Department's  reporting. He clarified he did  not intend to                                                                 
infer disbelief in the reporting.                                                                                               
Mr. Burnett detailed that an  "open [reporting] process" exists                                                                 
within the State's correctional institutions.                                                                                   
Senator  Dyson furthered  that inmates  are not prevented  from                                                                 
reporting complaints to the legislature or others.                                                                              
Mr.  Burnett  affirmed, and  added  that  daily communications                                                                  
occur between  the correctional  facilities  and people  in the                                                                 
Senator Dyson apologized for  his earlier comments, and thanked                                                                 
the Department for their good record.                                                                                           
Department of Education and Early Development                                                                                 
     SB 313                                                                                                                     
     Section: NEW                                                                                                               
     BRU: Alyeska Central School                                                                                                
     Supplemental Need: Feb 23 Amd: Additional operating                                                                        
     costs of $653,736                                                                                                          
     $653,700 general funds                                                                                                     
KAREN REHFELD,  Deputy  Commissioner,  Department of  Education                                                                 
and  Early   Development,  testified   that  in  the   previous                                                                 
legislative  session,  the  legislature  provided  the  Alyeska                                                                 
Central School  (ACS) funding for  a one-year transition  to be                                                                 
incorporated by a local school  district. A school district has                                                                 
expressed  interest in assuming  the program and is  undergoing                                                                 
the process  for establishing a  charter school to operate  the                                                                 
correspondence  program.   The  projected  budget  assumed  the                                                                 
enrollment of 800 students, and  actual enrollment has declined                                                                 
by nearly one-half,  possibly due to uncertainty  of the future                                                                 
of  the  program.  The  lack  of  enrollment   will  create  an                                                                 
approximately $1.3  million loss in revenue. In  addition, many                                                                 
staff   members    have   resigned.   The   Department    needs                                                                 
approximately   $654,000  to  complete  the  program   for  the                                                                 
students  enrolled, and  to complete the  incorporation  of the                                                                 
ACS into a local school district.                                                                                               
Co-Chair  Green asked  the consequences  of  not providing  the                                                                 
requested additional funding.                                                                                                   
Ms.  Rehfeld  replied the  program  would  be unable  to  "make                                                                 
payroll".  The staff  would be  laid off,  and the educational                                                                  
program would be discontinued.                                                                                                  
     SB 314                                                                                                                     
     Section: 4(a)                                                                                                              
     BRU: Foundation                                                                                                            
     Supplemental Need: FY 04 foundation program entitlement                                                                    
     adjustment based on actual student count.                                                                                  
     ($3,654,000) general funds                                                                                                 
Ms.  Rehfeld stated  the  surplus  of funds  is  the result  of                                                                 
decreased enrollment.                                                                                                           
Senator Bunde  asked the number  of fewer students and  whether                                                                 
the impact of the  decreased enrollment was more  noticeable in                                                                 
certain parts of the State.                                                                                                     
Ms. Rehfeld  replied that the overall  reduction in  enrollment                                                                 
is approximately  1,500 students. She deferred  to Eddie Jeans.                                                                 
EDDIE JEANS,  Manager, School Finance  and Facilities  Section,                                                                 
Education Support  Services, Department of Education  and Early                                                                 
Development,  testified he  would provide  a comparison  of the                                                                 
student count  of the previous  year to the current  year and a                                                                 
school district comparison. He  informed that the enrollment in                                                                 
public  and community  schools reduced  by approximately  1,800                                                                 
students  while  the  enrollment  of  correspondence   programs                                                                 
increased by 382 students.                                                                                                      
Senator  Bunde clarified  that he  is interested  in whether  a                                                                 
large percentage  of the decreased  enrollment occurred  in one                                                                 
part of the State.                                                                                                              
Mr. Jeans told  of decreased enrollment in the  Kenai Peninsula                                                                 
School District,  although no major  population decreases  have                                                                 
occurred in the  area. However, he commented that  the decrease                                                                 
in enrollment  has  not been concentrated  in  one part of  the                                                                 
Senator  Bunde  asked  if  a method  exists  to  track  student                                                                 
movements as they change schools.                                                                                               
Mr. Jeans told of the student  identification system that could                                                                 
track students  as they move around the State,  but this system                                                                 
has only been in place for three  years. Therefore, the data is                                                                 
not yet meaningful.                                                                                                             
Co-Chair Green  asked if enrollment in public schools  is a net                                                                 
Mr. Jeans answered yes.                                                                                                         
     SB 314                                                                                                                     
     Section: 4(b)                                                                                                              
     BRU: Pupil Transportation                                                                                                  
     Supplemental    Need:   Pupil    transportation    program                                                                 
     adjustment based on actual student count                                                                                   
     ($788,400) general funds                                                                                                   
Ms. Rehfeld outlined this item.                                                                                                 
     SB 314                                                                                                                     
     Section: 16(a)                                                                                                             
     BRU: School Debt Reimbursement                                                                                             
     Supplemental Need: FY 04 entitlement adjustment based on                                                                   
     actuals, down from $37,424,100 to $32,052,000                                                                              
     ($3,399,900) Debt Funds                                                                                                    
     Supplemental Need: FY 04 Cigarette Tax revenue increase                                                                    
     adjustment from $28,600,000 to $30,572,200                                                                                 
     $1,972,200 School Fund                                                                                                     
     SB 314                                                                                                                     
     Section: 16(a)                                                                                                             
     BRU: School Debt Reimbursement                                                                                             
     Supplemental Need: FY 04 Debt Retirement Fund decrease                                                                     
     from $37,424,100 to $32,052,000 that corresponds with the                                                                  
     increase in cigarette tax revenue                                                                                          
     ($1,972,200) Debt Fund                                                                                                     
Ms. Rehfeld overviewed these items.                                                                                             
Department of Military and Veterans Affairs                                                                                   
JOHN CRAMER,  Director,  Division of  Administrative  Services,                                                                 
Department  of Military and Veterans'  Affairs, testified  that                                                                 
an earlier  spreadsheet  detailing the  proposed amendments  to                                                                 
the  regular  supplemental  budget  stated  the  Department  of                                                                 
Military and  Veterans' Affairs  request would be appropriated                                                                  
from the general  fund, when it would actually  be appropriated                                                                 
using federal funds.                                                                                                            
     SB 314                                                                                                                     
     Section: 11(a)                                                                                                             
     BRU: Homeland Security and Emergency Services                                                                              
     Supplemental Need: Transfer of federal authorization from                                                                  
     Army Guard to Homeland Security for increased FEMA grants                                                                  
     $767,000 general funds                                                                                                     
     SB 314                                                                                                                     
     Section: 11(b)                                                                                                             
     BRU: Army Guard Facilities Maintenance                                                                                     
     Supplemental Need: Transfer of federal authorization from                                                                  
     Army Guard to Homeland Security for increased FEMA grants                                                                  
     ($767,000) general funds                                                                                                   
Mr. Cramer detailed these requests.                                                                                             
Co-Chair Green  asked if these  would be technical amendments.                                                                  
Mr.  Cramer  affirmed,  and  stated  that this  is  a  net-zero                                                                 
Senator Dyson asked if the Department  had too much funding for                                                                 
Mr. Cramer replied  affirmed and added that the  Department has                                                                 
"excess authorization".                                                                                                         
Co-Chair  Green  noted that  a committee  substitute  would  be                                                                 
prepared   that   would   include   the  Governor's    proposed                                                                 
amendments, at  which time the Committee would  determine which                                                                 
projects to approve. She requested member input.                                                                                
Co-Chair  Wilken referenced  a chart on  page 15 of the  packet                                                                 
provided  by  the Department  of  Health  and  Social  Services                                                                 
titled   "DHSS   FY2004   Delete/Add   Supplemental    Request"                                                                 
indicating  increases  in  disability  services.  He  expressed                                                                 
interest in the details of this issue.                                                                                          
Co-Chair Green  agreed that the  growth of disability  services                                                                 
is an important issue.                                                                                                          
Co-Chair  Wilken commented  on the dramatic  growth of  certain                                                                 
Department of Health and Social  Services' programs illustrated                                                                 
in the chart.                                                                                                                   
Senator  Dyson  mentioned that  the  states that  are  allowing                                                                 
consumer-directed  health  services  have set  base rates  that                                                                 
cannot be exceeded.  These restrictions prevent  the State from                                                                 
overspending   while  allowing   consumers  to  determine   the                                                                 
specifics  of  their  care. He  added  that  consumer  directed                                                                 
services are "a fascinating concept".                                                                                           
Co-Chair Green  commented on the  unpredictable impacts  of the                                                                 
negotiated rate process in Alaska.                                                                                              
Co-Chair Green ordered the bill HELD in Committee.                                                                              

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