Legislature(1999 - 2000)

01/21/2000 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
GENERAL SUBJECT(S):  Review of Departments Accomplishments                                                                      
Department of Natural Resources                                                                                                 
Department of Transportation and Public Facilities                                                                              
    Alaska Housing Finance Corporation (AHFC)                                                                                   
                                                                                                                                
The following overview was taken in log note format.  Tapes and                                                                 
handouts will be on file with the House Finance Committee through the                                                           
21st Legislative Session, contact 465-2156. After the 21st Legislative                                                          
Session they will be available through the Legislative Library at 465-                                                          
3808.                                                                                                                           
                                                                                                                                
Time Meeting Convened: 1:40 p.m.                                                                                                
                                                                                                                                
Tape(s):   HFC 00 - 14, Side 1                                                                                                  
  HFC 00 - 14, Side 2                                                                                                           
  HFC 00 - 15, Side 1                                                                                                           
                                                                                                                                
                                                                                                                                
PRESENT:                                                                                                                        
X                                                                                                                               
Representative G. Davis                                                                                                         
Absent                                                                                                                          
Co-Chair Therriault                                                                                                             
X                                                                                                                               
Representative Foster                                                                                                           
X                                                                                                                               
Co-Chair Mulder                                                                                                                 
Absent                                                                                                                          
Representative Grussendorf                                                                                                      
X                                                                                                                               
Vice Chair Bunde                                                                                                                
X                                                                                                                               
Representative Moses                                                                                                            
X                                                                                                                               
Representative Austerman                                                                                                        
X                                                                                                                               
Representative Phillips                                                                                                         
Absent                                                                                                                          
Representative J. Davies                                                                                                        
Absent                                                                                                                          
Representative Williams                                                                                                         
                                                                                                                                
ALSO PRESENT: John T. Shively, Commissioner, Department of Natural                                                              
Resources; Dan Fauske, Executive Director, Alaska Housing Finance                                                               
Corporation, Department of Revenue; Joseph Perkins, Commissioner,                                                               
Department of Transportation and Public Facilities; Nico Bus,                                                                   
Administrative Services Manager, Division of Support Services,                                                                  
Department of Natural Resources;                                                                                                
                                                                                                                                
                                                                                                                                
LOG                                                                                                                             
SPEAKER                                                                                                                         
DISCUSSION                                                                                                                      
                                                                                                                                
TAPE HFC 00 - 14                                                                                                                
SIDE 1                                                                                                                          
                                                                                                                                
                                                                                                                                
000                                                                                                                             
Co-Chair Mulder                                                                                                                 
Convened the House Finance Committee                                                                                            
meeting at 1:40 p.m.                                                                                                            
21                                                                                                                              
DAN FAUSKE,                                                                                                                     
EXECUTIVE DIRECTOR,                                                                                                             
ALASKA HOUSING                                                                                                                  
FINANCE CORPORATION,                                                                                                            
DEPARTMENT OF                                                                                                                   
REVENUE                                                                                                                         
Noted that the Alaska Housing Finance                                                                                           
Corporation's (AHFC) mission is to                                                                                              
provide Alaskans access to safe, quality,                                                                                       
and affordable housing.                                                                                                         
38                                                                                                                              
Mr. Fauske                                                                                                                      
Noted that AHFC's goals and strategies                                                                                          
are to provide programs and services that                                                                                       
are responsive to the diverse housing                                                                                           
needs statewide, increase home ownership,                                                                                       
increase special needs housing, expand                                                                                          
partnerships to strengthen program and                                                                                          
service delivery, strengthen commitments                                                                                        
to AHFC housing programs, functions and                                                                                         
benefits, promote operational excellence                                                                                        
and manage assets to generate sufficient                                                                                        
profit to meet AHFC's financial                                                                                                 
commitments.                                                                                                                    
69                                                                                                                              
Mr. Fauske                                                                                                                      
Core business activity is to earn profits                                                                                       
through the purchase of mortgage loans.                                                                                         
Observed that senior housing remains a                                                                                          
large concern to the corporation as that                                                                                        
population continues to grow.                                                                                                   
86                                                                                                                              
Mr. Fauske                                                                                                                      
Discussed the prior year's                                                                                                      
accomplishments. Pointed out that AHFC                                                                                          
received a perfect score of 100 percent                                                                                         
from HUD's 1999 Public Housing Management                                                                                       
Assessment Program.                                                                                                             
107                                                                                                                             
Mr. Fauske                                                                                                                      
Observed that AHFC received an annual                                                                                           
award for Significant Achievement from                                                                                          
the National Council of State Housing                                                                                           
Agencies.                                                                                                                       
139                                                                                                                             
Mr. Fauske                                                                                                                      
Noted that AHRC received a design award                                                                                         
from the Pacific Northwest Regional                                                                                             
Council and an Award of Merit from the                                                                                          
National Association of Housing &                                                                                               
Redevelopment Officials for work on                                                                                             
Etolin Heights in Wrangell.                                                                                                     
159                                                                                                                             
Mr. Fauske                                                                                                                      
They also received a National Recognition                                                                                       
Award for outstanding contributions to                                                                                          
the Weatherization Assistance Program.                                                                                          
183                                                                                                                             
Mr. Fauske                                                                                                                      
Observed that AHFC's web site received                                                                                          
the highest possible rating.                                                                                                    
202                                                                                                                             
Mr. Fauske                                                                                                                      
Noted that AHFC reduced requirements for                                                                                        
documentation required and streamlined                                                                                          
procedures for loan commitments and                                                                                             
purchases. They are also working to                                                                                             
implement electronic submission of loan                                                                                         
files.                                                                                                                          
231                                                                                                                             
Mr. Fauske                                                                                                                      
The Corporation provided workshops for                                                                                          
4,583 individuals.                                                                                                              
238                                                                                                                             
Mr. Fauske                                                                                                                      
The Corporation purchased 1,228                                                                                                 
streamlined refinancing loans.                                                                                                  
261                                                                                                                             
Mr. Fauske                                                                                                                      
Noted that AHFC provided $612 million                                                                                           
dollars for 5,120 Alaskans to purchase                                                                                          
homes, which is an increase of 18                                                                                               
percent.                                                                                                                        
283                                                                                                                             
Mr. Fauske                                                                                                                      
Observed that AHFC contributed more than                                                                                        
$8.7 million dollars in servicing fees to                                                                                       
Alaskan lenders.                                                                                                                
301                                                                                                                             
Mr. Fauske                                                                                                                      
The Corporation also maintained a                                                                                               
delinquency rate of less than 4 percent.                                                                                        
346                                                                                                                             
Mr. Fauske                                                                                                                      
Noted that AHFC purchased 2,181 new loans                                                                                       
and increased mortgage loan activity by                                                                                         
31 percent in the urban loan program.                                                                                           
379                                                                                                                             
Mr. Fauske                                                                                                                      
Discussed performance measures. Noted                                                                                           
that net income went from $95,916 million                                                                                       
dollars in FY98 to $79,85 million dollars                                                                                       
in FY99. Net income dropped by $10                                                                                              
million dollars due to a requirement to                                                                                         
start booking investments at market value                                                                                       
rather than book value on assets. Since                                                                                         
investments are held until maturity,                                                                                            
there is no loss in funds.                                                                                                      
475                                                                                                                             
Mr. Fauske                                                                                                                      
There was an allowance for loan losses                                                                                          
because of the increase in loan activity.                                                                                       
Nearly $4.4 million dollars were put into                                                                                       
debt service returns. These loans will                                                                                          
generate more income in the long-term.                                                                                          
514                                                                                                                             
Co-Chair Mulder                                                                                                                 
Concluded that AHFC would not have                                                                                              
trouble meeting its financial commitment                                                                                        
to the state.                                                                                                                   
544                                                                                                                             
Mr. Fauske                                                                                                                      
Agreed and pointed out that their loan                                                                                          
portfolio has increased by 11.7 percent.                                                                                        
574                                                                                                                             
Mr. Fauske                                                                                                                      
Observed that the number of loan                                                                                                
applicants increased in urban areas by                                                                                          
27.3. Rural applicants are down by 17                                                                                           
percent.                                                                                                                        
615                                                                                                                             
Co-Chair Mulder                                                                                                                 
Asked how AHFC's growth in their loan                                                                                           
portfolio compared to other lenders.                                                                                            
625                                                                                                                             
Mr. Fauske                                                                                                                      
Based on the return of assets, AHFC is                                                                                          
doing well. Stressed that he would like                                                                                         
to see a higher rate, but emphasized that                                                                                       
a 2.35 percent growth rate is healthy.                                                                                          
653                                                                                                                             
Mr. Fauske                                                                                                                      
In response to a question by Co-Chair                                                                                           
Mulder, Mr. Fauske compared AHFC's return                                                                                       
on assets to other banks. AHFC had a                                                                                            
return on assets of 2.1772. This was                                                                                            
higher than many major national banks.                                                                                          
750                                                                                                                             
Mr. Fauske                                                                                                                      
Observed that AHFC is below the national                                                                                        
delinquency average. The rural                                                                                                  
delinquency rate is lower than the urban                                                                                        
rate. Pointed out that AHFC has tripled                                                                                         
their rural activity. The Corporation is                                                                                        
attempting to increase its rural presence                                                                                       
and is working in conjunction with FANNY                                                                                        
MAE.                                                                                                                            
814                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Questioned the use of the delinquency                                                                                           
rate as a performance measure.                                                                                                  
828                                                                                                                             
Mr. Fauske                                                                                                                      
The delinquency rate is used as a                                                                                               
benchmark in that it can be monitored and                                                                                       
tracked. Acknowledged that the economy                                                                                          
can affect the delinquency rate.                                                                                                
878                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Maintained that if the delinquency rate                                                                                         
went out of sight it would be a                                                                                                 
performance measure.                                                                                                            
899                                                                                                                             
Co-Chair Mulder                                                                                                                 
Referred to rural vs. urban loan rates.                                                                                         
906                                                                                                                             
Mr. Fauske                                                                                                                      
Noted that rural loans were down. Pointed                                                                                       
out that AHFC has initiated a one-stop                                                                                          
shopping program in rural areas. They are                                                                                       
trying to make the inspection system                                                                                            
easier.                                                                                                                         
975                                                                                                                             
Mr. Fauske                                                                                                                      
Observed that mortgage loan purchases are                                                                                       
up 48 percent.                                                                                                                  
1017                                                                                                                            
Mr. Fauske                                                                                                                      
Provided members with the Standard &                                                                                            
Poor's Evaluation of AHFC (copy on file).                                                                                       
1048                                                                                                                            
Mr. Fauske                                                                                                                      
Discussed performance completion dates.                                                                                         
Noted that AHFC is on track for FY00                                                                                            
projects.                                                                                                                       
1109                                                                                                                            
Mr. Fauske                                                                                                                      
Discussed the Standard and Poor's                                                                                               
evaluation. AHFC was given the highest                                                                                          
ranking, of Strong.                                                                                                             
1163                                                                                                                            
Mr. Fauske                                                                                                                      
Discussed bond sales. They sold $813.4                                                                                          
million dollars in bonds.                                                                                                       
1241                                                                                                                            
Co-Chair Mulder                                                                                                                 
Asked what the last bond sale went for.                                                                                         
1250                                                                                                                            
Mr. Fauske                                                                                                                      
Did not have the information available.                                                                                         
1300                                                                                                                            
Mr. Fauske                                                                                                                      
AHFC rates of issue are similar to other                                                                                        
issuers of the same size. Pointed out                                                                                           
that Alaska has had to combat the                                                                                               
argument that oil revenues will cease and                                                                                       
that Alaska's economy is based on "one-                                                                                         
horse". Maintained that AHFC has done a                                                                                         
good job of convincing buyers that Alaska                                                                                       
is diversifying.                                                                                                                
1404                                                                                                                            
Mr. Fauske                                                                                                                      
In response to a question by Vice Chair                                                                                         
Bunde, discussed the booking change that                                                                                        
accounted for a paper loss in AHFC's net                                                                                        
value.                                                                                                                          
1478                                                                                                                            
Vice Chair Bunde                                                                                                                
Asked for information on commingling of                                                                                         
state and federal funds.                                                                                                        
1500                                                                                                                            
Mr. Fauske                                                                                                                      
Stressed that AHFC seeks to capture as                                                                                          
much federal money as possible. Discussed                                                                                       
anticipated federal funding. Maintained                                                                                         
that AHFC has captured grant funding at a                                                                                       
good clip. Anticipated that there would                                                                                         
be more federal block grants.                                                                                                   
1602                                                                                                                            
Vice Chair Bunde                                                                                                                
Asked how AHFC determines qualification.                                                                                        
1613                                                                                                                            
Mr. Fauske                                                                                                                      
There are a variety of criteria depending                                                                                       
on the program, including income and                                                                                            
location. Federal guidelines are                                                                                                
established under HUD.                                                                                                          
1660                                                                                                                            
Representative                                                                                                                  
Austerman                                                                                                                       
Asked if there is competition with the                                                                                          
Department of Labor and Workforce                                                                                               
Development.                                                                                                                    
1690                                                                                                                            
Mr. Fauske                                                                                                                      
Responded that there may be some                                                                                                
competition within The Public Housing                                                                                           
Division's Section 3 Program.                                                                                                   
1719                                                                                                                            
WES, WEIR, DIRECTOR,                                                                                                            
DIVISION PUBLIC                                                                                                                 
HOUSING, ALASKA                                                                                                                 
HOUSING FINANCE                                                                                                                 
CORPORATION,                                                                                                                    
DEPARTMENT OF                                                                                                                   
REVENUE                                                                                                                         
Explained that the AHFC program works                                                                                           
with the Department of Labor and                                                                                                
Workforce Development to recruit. He was                                                                                        
not aware of any overlap. Training leads                                                                                        
to programs administered by the                                                                                                 
Department of Labor and Workforce                                                                                               
Development. Discussed training provided                                                                                        
by AHFC. Carpenters use the training.                                                                                           
1829                                                                                                                            
Co-Chair Mulder                                                                                                                 
Asked if it is more expensive to operate                                                                                        
the program under AHFC.                                                                                                         
1836                                                                                                                            
                                                                                                                                
Maintained that the Section 3 Program is                                                                                        
more expensive on the short term but not                                                                                        
on the long term as it moves people out                                                                                         
of public housing.                                                                                                              
1850                                                                                                                            
Co-Chair Mulder                                                                                                                 
Asked if the Department of Labor and                                                                                            
Workforce Development would take over the                                                                                       
training if it were discontinued by AHFC.                                                                                       
1869                                                                                                                            
Mr. Weir                                                                                                                        
Did not think that the Department of                                                                                            
Labor and Workforce Development would                                                                                           
take over training if it were                                                                                                   
discontinued under AHFC.                                                                                                        
1881                                                                                                                            
Representative                                                                                                                  
Foster                                                                                                                          
Asked about the Veterans Mortgage                                                                                               
Program.                                                                                                                        
1892                                                                                                                            
Mr. Fauske                                                                                                                      
The program is federally funded. AHFC Is                                                                                        
fighting to keep the program.                                                                                                   
1923                                                                                                                            
Representative                                                                                                                  
Foster                                                                                                                          
Asked if AHFC is self-insured.                                                                                                  
1932                                                                                                                            
Mr. Fauske                                                                                                                      
Responded that AHFC is self-insured.                                                                                            
1936                                                                                                                            
Representative                                                                                                                  
Foster                                                                                                                          
Referred to page 5 of the Standard and                                                                                          
Poor's evaluation.                                                                                                              
1963                                                                                                                            
Mr. Fauske                                                                                                                      
Acknowledged that there is a rise in                                                                                            
lower paying jobs.                                                                                                              
1990                                                                                                                            
Representative                                                                                                                  
Austerman                                                                                                                       
Asked for statistics of success on the                                                                                          
Corporation's training program.                                                                                                 
Questioned how the drop in population and                                                                                       
increase of senior population affects                                                                                           
housing needs.                                                                                                                  
2026                                                                                                                            
Mr. Fauske                                                                                                                      
Emphasized that AHFC needs to stay                                                                                              
abreast of assisted living and senior                                                                                           
housing. Anticipated that additional                                                                                            
money will be needed to keep up with the                                                                                        
rising age of population.                                                                                                       
2088                                                                                                                            
Mr. Fauske                                                                                                                      
Noted that there is a demand for medium                                                                                         
income housing for seniors such as the                                                                                          
Chester Park facility in Anchorage. This                                                                                        
is not assisted living housing.                                                                                                 
2119                                                                                                                            
Representative                                                                                                                  
Austerman                                                                                                                       
Observed that there is a decrease in                                                                                            
middle class jobs and a loss in the                                                                                             
corresponding residents.                                                                                                        
2166                                                                                                                            
Mr. Fauske                                                                                                                      
Stated that AHFC is tracking trends in                                                                                          
population.                                                                                                                     
2182                                                                                                                            
Co-Chair Mulder                                                                                                                 
Asked that the AHFC's mission statement                                                                                         
consider a state dividend.                                                                                                      
                                                                                                                                
                                                                                                                                
DEPARTMENT OF TRANSPORTATION AND PUBLIC                                                                                         
FACILITIES                                                                                                                      
2269                                                                                                                            
JOSEPH PERKINS,                                                                                                                 
COMMISSIONER,                                                                                                                   
DEPARTMENT OF                                                                                                                   
TRANSPORTATION AND                                                                                                              
PUBLIC FACILITIES                                                                                                               
Read from prepared statements: The                                                                                              
department's mission is to improve the                                                                                          
quality of life for Alaskans by cost                                                                                            
effectively providing, operating and                                                                                            
maintaining safe, environmentally sound                                                                                         
and reliable transportation systems and                                                                                         
public facilities.                                                                                                              
2304                                                                                                                            
Commissioner Perkins                                                                                                            
Noted quality of employees and emphasized                                                                                       
the need to support them. Maintained that                                                                                       
he represents about 3,000 of the hardest                                                                                        
working, conscientious employees from                                                                                           
every corner of the state.                                                                                                      
2348                                                                                                                            
Commissioner Perkins                                                                                                            
Discussed performance goals. The                                                                                                
percentage of on-time departures of                                                                                             
vessels - Current - 80% for the fleet as                                                                                        
a whole but varies between vessels and                                                                                          
route from 60% to 95%.  The goal for FY01                                                                                       
is 85%.                                                                                                                         
                                                                                                                                
Tape Change, HFC 00                                                                                                             
14,- Side 2                                                                                                                     
                                                                                                                                
31                                                                                                                              
Commissioner Perkins                                                                                                            
Looking for a 5 percent improvement in on                                                                                       
time vessels.                                                                                                                   
147                                                                                                                             
Commissioner Perkins                                                                                                            
Noted that the department will attempt to                                                                                       
increase on-time departures through                                                                                             
better scheduling, but emphasized that                                                                                          
they will not compromise safety.                                                                                                
238                                                                                                                             
Commissioner Perkins                                                                                                            
Discussed the revenue received and                                                                                              
expenditures made for each rider mile -                                                                                         
Current - revenues range between $.58  -                                                                                        
$.59 per rider mile over the past 3                                                                                             
years.  Expenditures ranged between $1.05                                                                                       
and $1.12 per rider mile over the past 3                                                                                        
years. The performance measure was                                                                                              
modified to track the ratio of revenues                                                                                         
to expenditures for each rider mile.                                                                                            
364                                                                                                                             
Commissioner Perkins                                                                                                            
Washington state is at .6 or 60 percent                                                                                         
revenue and 40 percent subsidy. Alaska is                                                                                       
at .61 or 61 percent revenue and 39                                                                                             
subsidy.                                                                                                                        
434                                                                                                                             
Commissioner Perkins                                                                                                            
Discussed the total ridership, including                                                                                        
passengers, vehicles, and cabin                                                                                                 
occupancy, compared to the five-year                                                                                            
ridership average. - Current - passengers                                                                                       
are down 2.4%, vehicles up by 3.5% and                                                                                          
cabins down by 2.3%. Most of the money is                                                                                       
made with vehicles.                                                                                                             
551                                                                                                                             
Commissioner Perkins                                                                                                            
The onboard sales for each passenger. -                                                                                         
Current - on board sales has increased                                                                                          
from $9.82 in FY97 to $10.75 in FY99.                                                                                           
The goal is to increase on board sales to                                                                                       
$11.25 dollars.                                                                                                                 
644                                                                                                                             
Vice Chair Bunde                                                                                                                
Asked if private vendors could be used to                                                                                       
operate on board services.                                                                                                      
662                                                                                                                             
Commissioner Perkins                                                                                                            
There has not been any interest from the                                                                                        
private sector. Labor contracts require                                                                                         
the use of Department of Transportation                                                                                         
and Public Facilities personnel.                                                                                                
692                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Questioned if the issue of on board sales                                                                                       
is the same as food service.                                                                                                    
723                                                                                                                             
Commissioner Perkins                                                                                                            
Explained that ship personnel that run                                                                                          
the gift shops also have other jobs. The                                                                                        
department is looking at the possibility                                                                                        
of increasing the hours the gift shops                                                                                          
remain open.                                                                                                                    
815                                                                                                                             
Co-Chair Mulder                                                                                                                 
Questioned if there can be a better ratio                                                                                       
of return.                                                                                                                      
846                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Asked if gift shops can be privatized.                                                                                          
864                                                                                                                             
Commissioner Perkins                                                                                                            
Did not know the answer, but emphasized                                                                                         
that it is a small operation that only                                                                                          
requires one part-time employee. A                                                                                              
private operation would have to pay for                                                                                         
the person's room and board.                                                                                                    
917                                                                                                                             
Commissioner Perkins                                                                                                            
Reviewed the department's operation to                                                                                          
establish performance goals and                                                                                                 
baselines. The department is proceeding                                                                                         
carefully to support worthwhile goals.                                                                                          
Observed that the system of performance                                                                                         
measures can be costly. The department is                                                                                       
looking at the most critical functions                                                                                          
that can help management to increase                                                                                            
efficiencies.                                                                                                                   
1025                                                                                                                            
Co-Chair Mulder                                                                                                                 
Emphasized that the department would be                                                                                         
working with the subcommittee. The                                                                                              
subcommittee will help set policy.                                                                                              
1061                                                                                                                            
Commissioner Perkins                                                                                                            
Stressed that performance measures must                                                                                         
be in a form that does not cost a lot of                                                                                        
money to set up.                                                                                                                
1097                                                                                                                            
Co-Chair Mulder                                                                                                                 
Agreed that performance measures should                                                                                         
not create additional bureaucracy.                                                                                              
1131                                                                                                                            
Commissioner Perkins                                                                                                            
The department completed an inventory of                                                                                        
everything statewide and in the field,                                                                                          
including their required work, status of                                                                                        
work and identification of assets.                                                                                              
1167                                                                                                                            
Commissioner Perkins                                                                                                            
The inventory identified a deferred                                                                                             
maintenance need for highways, aviation                                                                                         
and facilities of $303 million dollars.                                                                                         
The state is accumulating deferred                                                                                              
maintenance at a rate of approximately                                                                                          
$24 million dollars per year.  This takes                                                                                       
into account approximately $25 million                                                                                          
federal dollars per year for highway                                                                                            
surface maintenance. Concluded that                                                                                             
deferred maintenance is building a time                                                                                         
bomb.                                                                                                                           
1225                                                                                                                            
Co-Chair Mulder                                                                                                                 
Noted that the department's estimated                                                                                           
rate of growth for deferred maintenance                                                                                         
is 8 percent. Asked for a list of                                                                                               
deferred maintenance.                                                                                                           
1291                                                                                                                            
Commissioner Perkins                                                                                                            
Acknowledged that the growth rate could                                                                                         
be overstated.                                                                                                                  
1300                                                                                                                            
Co-Chair Mulder                                                                                                                 
Felt an 8 percent growth rate was high.                                                                                         
Asked why the deferred maintenance rate                                                                                         
was higher than for other state agencies.                                                                                       
1310                                                                                                                            
Commissioner Perkins                                                                                                            
Observed that highways break up quickly                                                                                         
in Alaska's climate. Discussed other                                                                                            
conditions that could contribute to the                                                                                         
high deterioration rate, such as rapid                                                                                          
brush growth.                                                                                                                   
1401                                                                                                                            
Co-Chair Mulder                                                                                                                 
Encouraged the use of spray to combat                                                                                           
brush.                                                                                                                          
1415                                                                                                                            
Vice Chair Bunde                                                                                                                
Noted complaints by constituents that the                                                                                       
department has equipment that is only                                                                                           
used part of the year. Asked to look at                                                                                         
contracting for equipment that is not                                                                                           
needed all year.                                                                                                                
1459                                                                                                                            
Commissioner Perkins                                                                                                            
Agreed and added that the department has                                                                                        
looked at the issue. Did not think that                                                                                         
the department has much equipment that is                                                                                       
sitting around. Pointed out that federal                                                                                        
equipment is used on big jobs.                                                                                                  
Maintenance equipment is limited. The                                                                                           
federal government pays for drilling                                                                                            
equipment.                                                                                                                      
1492                                                                                                                            
Vice Chair Bunde                                                                                                                
Referred to page 29 of SB169 section 137:                                                                                       
The mission of the department with                                                                                              
respect to aviation is to plan,                                                                                                 
establish, construct, enlarge, improve,                                                                                         
maintain, equip, lease, contract,                                                                                               
operate, regulate, protect, and police                                                                                          
airports and air navigation facilities in                                                                                       
the state system of airports.                                                                                                   
1554                                                                                                                            
Commissioner Perkins                                                                                                            
Observed that technical equipment still                                                                                         
belongs to FAA. Lights are state owned.                                                                                         
1572                                                                                                                            
Commissioner Perkins                                                                                                            
Discussed other goals: a goal for project                                                                                       
design at 10% of the approved budget. The                                                                                       
department is currently at 10.75%.                                                                                              
1585                                                                                                                            
Commissioner Perkins                                                                                                            
Discussed the construction goal of                                                                                              
delivering the completed project within                                                                                         
5% of the contract bid price. The                                                                                               
department is currently at 7%.                                                                                                  
1599                                                                                                                            
Commissioner Perkins                                                                                                            
Observed that there is a goal to increase                                                                                       
commercial driver and safety inspections                                                                                        
to 3600 per year. The current level is                                                                                          
3514.                                                                                                                           
1614                                                                                                                            
Commissioner Perkins                                                                                                            
Added that there are additional goals                                                                                           
such as maintaining a pavement condition                                                                                        
index of 70 for runways and 60 for                                                                                              
taxiways and aprons at the International                                                                                        
Airports.                                                                                                                       
1634                                                                                                                            
Commissioner Perkins                                                                                                            
The department plans to continue the                                                                                            
Highway Pavement Condition reporting                                                                                            
project to insure that it feeds the                                                                                             
state's Federal Statewide Improvement                                                                                           
Construction Program.                                                                                                           
1643                                                                                                                            
Commissioner Perkins                                                                                                            
Noted major changes in the right of way                                                                                         
leasing process.                                                                                                                
1682                                                                                                                            
Commissioner Perkins                                                                                                            
Discussed accomplishments: Developed and                                                                                        
issued new procedures for construction                                                                                          
related bid advertising. By displaying                                                                                          
the public notice on the department's web                                                                                       
site and then publishing a much smaller                                                                                         
newspaper advertisement pointing                                                                                                
interested bidders to the web address,                                                                                          
the department will save over $100,000                                                                                          
per year in newspaper advertising costs.                                                                                        
The quality of service available on the                                                                                         
web is an improvement over the                                                                                                  
information previously available through                                                                                        
the papers.                                                                                                                     
1716                                                                                                                            
Commissioner Perkins                                                                                                            
Noted that the department catalogued Y2K                                                                                        
non-compliant systems in mission critical                                                                                       
business functions and completed                                                                                                
remediation and testing for most                                                                                                
functions prior to end of FY99. Only                                                                                            
minor problems were encountered. A sander                                                                                       
on Thompson Pass wouldn't work. The date                                                                                        
was set to 01 and it worked.  Credit card                                                                                       
swiper boxes on the Marine Highway                                                                                              
vessels had to be replaced.                                                                                                     
1759                                                                                                                            
Commissioner Perkins                                                                                                            
Observed that the department received a                                                                                         
commendable report from the Federal                                                                                             
Highway Administration on completion and                                                                                        
review of the department's Affirmative                                                                                          
Action Plan.  This was a major effort due                                                                                       
to federal changes. The department had                                                                                          
until September 1, 1999 to meet the                                                                                             
requirements or lose a portion of its                                                                                           
federal funding.                                                                                                                
1788                                                                                                                            
Commissioner Perkins                                                                                                            
Noted that the department completed the                                                                                         
$7.5 million dollar reconstruction of the                                                                                       
Alaska Highway between mileposts 1396 and                                                                                       
1398, bringing to grade, width and                                                                                              
alignment the last substandard section of                                                                                       
the Highway between Fairbanks and Canada.                                                                                       
1801                                                                                                                            
Commissioner Perkins                                                                                                            
Added that the department placed                                                                                                
extensive effort with Federal surfacing                                                                                         
program to smooth the roads statewide.                                                                                          
1825                                                                                                                            
Commissioner Perkins                                                                                                            
Observed that the department completed                                                                                          
the $3.2 million dollar reconstruction of                                                                                       
the roadway intersection at University                                                                                          
Avenue and College Road, providing a more                                                                                       
accessible link between the University of                                                                                       
Alaska, Fairbanks and the Fairbanks                                                                                             
community.                                                                                                                      
1835                                                                                                                            
Commissioner Perkins                                                                                                            
Emphasized that the department turned                                                                                           
over harbors to local communities.                                                                                              
1878                                                                                                                            
Commissioner Perkins                                                                                                            
The department completed major                                                                                                  
construction of the Whittier Access                                                                                             
Tunnel to facilitate opening to traffic                                                                                         
in June of 2000.                                                                                                                
1887                                                                                                                            
Commissioner Perkins                                                                                                            
The department began construction of the                                                                                        
first phase of the $90 million program to                                                                                       
widen and improve the Parks Highway from                                                                                        
the Glenn Highway through the City of                                                                                           
Wasilla.                                                                                                                        
1935                                                                                                                            
Representative                                                                                                                  
Phillips                                                                                                                        
Asked how far the four-lane highway will                                                                                        
go.                                                                                                                             
1960                                                                                                                            
Commissioner Perkins                                                                                                            
The road will be four lanes from                                                                                                
Anchorage to the other side of Wasilla,                                                                                         
where it will switch to a three-lane                                                                                            
road.                                                                                                                           
1966                                                                                                                            
Commissioner Perkins                                                                                                            
Noted that the department began                                                                                                 
construction of the Sutton to King River                                                                                        
project on the Glenn Highway.                                                                                                   
2018                                                                                                                            
Commissioner Perkins                                                                                                            
Spoke to contracting out and the amount                                                                                         
of money received for that service.  The                                                                                        
department received a "safety at sea                                                                                            
certification", which was required by the                                                                                       
federal government.  The Department has                                                                                         
started the design and construction of                                                                                          
the first fast ferry.                                                                                                           
2079                                                                                                                            
Commissioner Perkins                                                                                                            
Observed that the department started the                                                                                        
Anchorage Gateway Alaska program.                                                                                               
2100                                                                                                                            
Commissioner Perkins                                                                                                            
Emphasized the need to continue to do                                                                                           
needs based selection of capital                                                                                                
projects, to put maximum effort to                                                                                              
obligate the federal program. He noted                                                                                          
state dependence on federal construction                                                                                        
funding. The department will also attempt                                                                                       
to take full advantage of new and                                                                                               
improved technology to be more efficient                                                                                        
and save money.                                                                                                                 
2159                                                                                                                            
Representative                                                                                                                  
Phillips                                                                                                                        
Questioned if information would be                                                                                              
coordinated with the State Troopers.                                                                                            
2170                                                                                                                            
Commissioner Perkins                                                                                                            
Affirmed that information would be                                                                                              
shared. Noted that deferred maintenance                                                                                         
needs to be addressed. In 1995, there                                                                                           
were about 825 miles of the National                                                                                            
Highway System, which was substandard.                                                                                          
The department improved 210 miles and                                                                                           
will do 125 miles in the next 3 years.                                                                                          
He maintained that this important program                                                                                       
must continue to receive a priority.                                                                                            
2198                                                                                                                            
Commissioner Perkins                                                                                                            
Stressed the need to reverse the graying                                                                                        
of the construction work force.                                                                                                 
Emphasized the need to attract young                                                                                            
people into the industry. Need to                                                                                               
consider how to grow new engineers, 11%                                                                                         
of DOT employees are eligible for                                                                                               
retirement next year.  There is going to                                                                                        
be a problem getting professionals into                                                                                         
the field.  He urged members to consider                                                                                        
programs that will encourage this.                                                                                              
2261                                                                                                                            
Commissioner Perkins                                                                                                            
Applauded the hard work of his staff.                                                                                           
2270                                                                                                                            
Co-Chair Mulder                                                                                                                 
Asked about ADA compliance and the                                                                                              
requirements of the federal government.                                                                                         
2283                                                                                                                            
Commissioner Perkins                                                                                                            
Responded that he would provide that                                                                                            
information.                                                                                                                    
2288                                                                                                                            
Representative                                                                                                                  
Austerman                                                                                                                       
Expressed concern regarding the closure                                                                                         
of a highway maintenance station in                                                                                             
Kodiak and the affect of the closure on                                                                                         
the Kodiak Launch Center.  He spoke to                                                                                          
rural highways being closed due to snow                                                                                         
in the winter. He noted that rural                                                                                              
Alaskans have different concerns than                                                                                           
that of urban Alaskans.  He voiced                                                                                              
concern with the closure of the weigh-                                                                                          
station during the winter.                                                                                                      
                                                                                                                                
TAPE HFC 00-15                                                                                                                  
SIDE 1                                                                                                                          
                                                                                                                                
000                                                                                                                             
Commissioner Perkins                                                                                                            
Replied that there are many                                                                                                     
considerations for the revenues of the                                                                                          
department. He stated that the department                                                                                       
would consider if the assets were                                                                                               
correctly assigned.                                                                                                             
098                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Asked reconsideration of the priorities                                                                                         
of the department and the impact on the                                                                                         
communities.                                                                                                                    
171                                                                                                                             
Co-Chair Mulder                                                                                                                 
Questioned if the maintenance function is                                                                                       
being contracted out.                                                                                                           
187                                                                                                                             
Commissioner Perkins                                                                                                            
The department has extended the global                                                                                          
station of each district.                                                                                                       
221                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Pointed out that the weigh station was                                                                                          
still being maintained with minimum                                                                                             
access to the road responsibility.                                                                                              
271                                                                                                                             
Representative G.                                                                                                               
Davis                                                                                                                           
Stated that the department was not                                                                                              
supposed to consider the cost of the                                                                                            
mission and measures. Asked if there is                                                                                         
not enough money to man the need.                                                                                               
Stressed that the purpose of the measure                                                                                        
is to guarantee that the function                                                                                               
continues to be provided. He noted that                                                                                         
Craig Holt stressed that intent.                                                                                                
396                                                                                                                             
Co-Chair Mulder                                                                                                                 
Pointed out that cost is the factor, but                                                                                        
the policy and management of the policy                                                                                         
is left up to the department.  He                                                                                               
questioned the management choices that                                                                                          
led the department to specific decisions.                                                                                       
He stated that the Commissioner is held                                                                                         
accountable for the management.                                                                                                 
502                                                                                                                             
Commissioner Perkins                                                                                                            
Stated that the Department is not afraid                                                                                        
of performance statements. Emphasized                                                                                           
that there are different standards that                                                                                         
are acceptable to the people. Stressed                                                                                          
that the standard needs to be                                                                                                   
established.                                                                                                                    
559                                                                                                                             
Co-Chair Mulder                                                                                                                 
Acknowledged that the standards were an                                                                                         
improvement.                                                                                                                    
581                                                                                                                             
Representative Moses                                                                                                            
Recommended that the answer to the                                                                                              
problem would be a municipal dividend                                                                                           
addressed by the municipalities.                                                                                                
613                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Spoke to prioritization.                                                                                                        
657                                                                                                                             
Co-Chair Mulder                                                                                                                 
Encouraged Representative Austerman to                                                                                          
work with the Commissioner at the                                                                                               
subcommittee level.                                                                                                             
681                                                                                                                             
Representative                                                                                                                  
Austerman                                                                                                                       
Remarked that the weigh station was                                                                                             
closed because of budget cuts.                                                                                                  
702                                                                                                                             
Co-Chair Mulder                                                                                                                 
Stated that Representative Austerman was                                                                                        
owed an explanation why that action                                                                                             
happened.                                                                                                                       
726                                                                                                                             
Commissioner Perkins                                                                                                            
Stated that he would provide further                                                                                            
explanation. He noted that the Department                                                                                       
went through extensive analysis to                                                                                              
determine the action taken.                                                                                                     
                                                                                                                                
                                                                                                                                
DEPARTMENT OF NATURAL RESOURCES                                                                                                 
775                                                                                                                             
JOHN T. SHIVELY,                                                                                                                
COMMISSIONER,                                                                                                                   
DEPARTMENT OF                                                                                                                   
NATURAL RESOURCES                                                                                                               
Spoke to the missions and measures of the                                                                                       
Department. The department's mission is                                                                                         
to develop, conserve, and enhance natural                                                                                       
resources for present and future                                                                                                
Alaskans. He noted that the department's                                                                                        
budget is driven by personnel costs. The                                                                                        
department has a large number of seasonal                                                                                       
employees. Budget reductions have                                                                                               
resulted in a loss of staff. The                                                                                                
department had 80 fewer positions in FY99                                                                                       
than in 1994. However, the number of                                                                                            
fields has expanded.  Mining activity and                                                                                       
claims are up.  The Department is getting                                                                                       
more efficient.                                                                                                                 
937                                                                                                                             
Commissioner Shively                                                                                                            
The department did not meet its goal in                                                                                         
regards to land leasing. This was in part                                                                                       
due to the BP/ARCO merger.                                                                                                      
984                                                                                                                             
Commissioner Shively                                                                                                            
The department's goal to survey a 1,000                                                                                         
square miles was exceeded.                                                                                                      
1038                                                                                                                            
Representative                                                                                                                  
Phillips                                                                                                                        
Observed that an Australian University                                                                                          
has a course on mining in Alaska.                                                                                               
1077                                                                                                                            
Commissioner Shively                                                                                                            
Noted that the number of mining claims                                                                                          
has grown.                                                                                                                      
1134                                                                                                                            
Commissioner Shively                                                                                                            
Observed that 120 state parks were                                                                                              
maintained in FY99. One park was turned                                                                                         
over to the Mental Health Trust                                                                                                 
1158                                                                                                                            
Commissioner Shively                                                                                                            
The department met its goal to keep good                                                                                        
public records. There were 14,000                                                                                               
transactions.                                                                                                                   
1185                                                                                                                            
Commissioner Shively                                                                                                            
Noted that timber sales were down. The                                                                                          
department only took in $300 thousands                                                                                          
dollars from timber sales, but there were                                                                                       
25 value-added timber sales, which tend                                                                                         
to be smaller.                                                                                                                  
1229                                                                                                                            
Commissioner Shively                                                                                                            
Pointed out that the department did not                                                                                         
anticipate the BP merger and how much of                                                                                        
the department's time it would take.                                                                                            
1259                                                                                                                            
Commissioner Shively                                                                                                            
Observed that Anchorage personnel have                                                                                          
moved into the Frontier Building.                                                                                               
1268                                                                                                                            
Commissioner Shively                                                                                                            
Discussed leases and land disposals.                                                                                            
Shallow gas regulations have been issued.                                                                                       
The department has also issued right-of-                                                                                        
way leases to Alpine, Northstar, and                                                                                            
Nuiqsut. Noted that the department sold                                                                                         
or disposed of 4,500 acres of land.                                                                                             
1300                                                                                                                            
Representative                                                                                                                  
Foster                                                                                                                          
Asked the status of the BP/Arco merger.                                                                                         
1313                                                                                                                            
Commissioner Shively                                                                                                            
Noted that BP is attempting to negotiate                                                                                        
with the Federal Trade Commission (FTC).                                                                                        
The issue is broader than the state of                                                                                          
Alaska. BP has put in a 20-day notice.                                                                                          
The FTC has to act by the end of 20 days.                                                                                       
The Governor is looking to resolve the                                                                                          
issue.                                                                                                                          
1375                                                                                                                            
Representative                                                                                                                  
Phillips                                                                                                                        
Asked about the proposed university land                                                                                        
bills.                                                                                                                          
1383                                                                                                                            
Commissioner Shively                                                                                                            
The Administration has opposed additional                                                                                       
land grants to the university. He did not                                                                                       
think the University should receive oil                                                                                         
and gas leases.                                                                                                                 
1463                                                                                                                            
Commissioner Shively                                                                                                            
Noted that the department is taking a                                                                                           
strong stand against congressional                                                                                              
roadless designations in Alaskan national                                                                                       
forests.                                                                                                                        
1504                                                                                                                            
Commissioner Shively                                                                                                            
Discussed the impact of DNR surveys to                                                                                          
landowners.                                                                                                                     
1527                                                                                                                            
Representative                                                                                                                  
Foster                                                                                                                          
Questioned if any parks would be closed                                                                                         
in the next year.                                                                                                               
1538                                                                                                                            
Commissioner Shively                                                                                                            
Noted that there is a backlog of deferred                                                                                       
maintenance at the existing parks.                                                                                              
Expressed concern that the quality of the                                                                                       
park experience is starting to decline                                                                                          
due to funding shortfalls. There are lost                                                                                       
opportunities to use federal funding for                                                                                        
new facilities because there are not                                                                                            
enough personnel to maintain them.                                                                                              
1587                                                                                                                            
Representative G.                                                                                                               
Davis                                                                                                                           
Referred to the Kenai land grant.                                                                                               
1593                                                                                                                            
Commissioner Shively                                                                                                            
Discussed the Kenai land grant. There are                                                                                       
a lot of competing uses for the land.                                                                                           
1646                                                                                                                            
Co-Chair Mulder                                                                                                                 
Observed that there were a number of                                                                                            
missions and measures within SB 169 that                                                                                        
were not addressed by the commissioner.                                                                                         
Stressed that the legislation is serious                                                                                        
in maintaining missions and measures.                                                                                           
Stated that he wished to see the                                                                                                
department's performance measures further                                                                                       
refined.                                                                                                                        
1677                                                                                                                            
Commissioner Shively                                                                                                            
Stated that he supports missions and                                                                                            
measures. Emphasized that they are a work                                                                                       
in progress.                                                                                                                    
1714                                                                                                                            
Co-Chair Mulder                                                                                                                 
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 3:45 p.m.                                                                                              
                                                                                                                                
HOUSE FINANCE COMMITTEE                                                                                                         
LOG NOTES                                                                                                                       
January 21, 2000                                                                                                                
                                                                                                                                
House Finance Committee    14    1/21/00                                                                                        
                                                                                                                                
                                                                                                                                

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