Legislature(2011 - 2012)HOUSE FINANCE 519

01/26/2011 01:30 PM House FINANCE


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01:32:38 PM Start
01:33:35 PM Budget Overview: Department of Commerce, Community and Economic Development
03:00:10 PM Budget Overview: Department of Law
03:43:32 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Budget Overviews: TELECONFERENCED
Dept. of Commerce, Community & Economic
Development
Dept. of Law
                  HOUSE FINANCE COMMITTEE                                                                                       
                     January 26, 2011                                                                                           
                         1:32 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:32:38 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 1:32 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative David Guttenberg                                                                                                 
Representative Reggie Joule                                                                                                     
Representative Mark Neuman                                                                                                      
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Les Gara                                                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Susan Bell, Commissioner,  Department of Commerce, Community                                                                    
and  Economic Development;  Jo Ellen  Hanrahan, Director  of                                                                    
Administrative Services,  Department of  Commerce, Community                                                                    
and Economic  Development; Representative Dan  Saddler; John                                                                    
J.  Burns,   Attorney  General,  Department  of   Law;  Dave                                                                    
Blaisdell,   Director,  Administrative   Services  Division,                                                                    
Department  of   Law;  Richard  Svobodny,   Deputy  Attorney                                                                    
General, Criminal Division, Department of Law.                                                                                  
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
BUDGET OVERVIEWS:                                                                                                               
     Department of Commerce, Community and Economic                                                                             
     Development                                                                                                                
     Department of Law                                                                                                          
                                                                                                                                
                                                                                                                                
^BUDGET  OVERVIEW:  DEPARTMENT  OF COMMERCE,  COMMUNITY  AND                                                                  
ECONOMIC DEVELOPMENT                                                                                                          
                                                                                                                                
1:33:35 PM                                                                                                                    
                                                                                                                                
SUSAN BELL, COMMISSIONER,  DEPARTMENT OF COMMERCE, COMMUNITY                                                                    
AND ECONOMIC  DEVELOPMENT, (DCCED) introduced  a PowerPoint,                                                                    
"Alaska  Department  of  Commerce,  Community  and  Economic                                                                    
Development:   Promoting  a   Healthy  Economy   and  Strong                                                                    
Communities" (copy on file).                                                                                                    
                                                                                                                                
Commissioner Bell  described DCCED  as very broad,  with six                                                                    
corporate  agencies and  six core  agencies. She  shared the                                                                    
collective mission  statement of DCCED agencies:  "Promote a                                                                    
healthy  economy, strong  communities and  protect consumers                                                                    
in  Alaska." She  noted the  organizational chart  (Slide 2)                                                                    
depicting  the department's  relationships with  the various                                                                    
associated corporations   (connected to the  department with                                                                    
dotted lines),  including the Alaska  Aerospace Corporation,                                                                    
the   Alaska  Energy   Authority,   the  Alaska   Industrial                                                                    
Development Export  Authority, the Alaska  Seafood Marketing                                                                    
Institute, the  Regulatory Commission  of Alaska,  and Serve                                                                    
Alaska.  She explained  that DCCED  has  varying degrees  of                                                                    
involvement  with  the   corporate  agencies,  ranging  from                                                                    
providing  administrative services,  serving on  boards, and                                                                    
working corroboratively with them.                                                                                              
                                                                                                                                
Commissioner Bell listed the core state agencies of DCCED:                                                                      
                                                                                                                                
   · Division of Banking and Securities                                                                                         
   · Division of Corporations, Business and Professional                                                                        
     Licensing                                                                                                                  
   · Division of Community and Regional Affairs                                                                                 
   · Division of Insurance                                                                                                      
   · Office of Economic Development                                                                                             
                                                                                                                                
Commissioner Bell  noted a number  of ways that  the various                                                                    
agencies  worked collectively  to  achieve the  department's                                                                    
mission, from  providing access to capital,  providing state                                                                    
grants and  loans, providing programs targeting  a number of                                                                    
industries, marketing  Alaska as  an entity overall  as well                                                                    
as Alaska products  and services, regulation of  a number of                                                                    
aspects  of  the   business  community  (including  banking,                                                                    
securities,  corporations,  insurance,  occupations,  public                                                                    
utilities), and  providing assistance to  local governments.                                                                    
She   hoped  to   provide  the   committee  with   a  better                                                                    
understanding of  DCCED's activities  and challenges  at the                                                                    
division level.                                                                                                                 
                                                                                                                                
Commissioner  Bell indicated  a  map of  Alaska  on Slide  3                                                                    
showing the  locations of the department's  538 employees in                                                                    
Anchorage,  Bethel, Dillingham,  Fairbanks, Juneau,  Kodiak,                                                                    
Kotzebue,  Nome,  Tok,  and Seattle  (the  location  of  the                                                                    
Alaska Seafood Marketing Institute office).                                                                                     
                                                                                                                                
Commissioner  Bell directed  attention  to the  department's                                                                    
four  priority program  areas,  with  the entities  involved                                                                    
listed underneath each (Slide 4):                                                                                               
                                                                                                                                
   · Economic Development                                                                                                       
        o Economic Development; Alaska Aerospace; AIDEA,                                                                        
          ASMI                                                                                                                  
   · Sustainable Energy                                                                                                         
        o Alaska Energy Authority                                                                                               
   · Strong Communities                                                                                                         
        o Community and Regional Affairs; Serve Alaska                                                                          
   · Consumer Protection                                                                                                        
        o Banking and Securities; Insurance; Corporations,                                                                      
          Business and Professional Licensing; Regulatory                                                                       
          Commission of Alaska                                                                                                  
                                                                                                                                
Commissioner Bell  noted that  the individual  budgets would                                                                    
be discussed in  more detail at the  subcommittee level. She                                                                    
noted overall  that the  priority area  economic development                                                                    
had a  FY 12 reduction  over the  FY 11 budget  of $459,000.                                                                    
The energy programs achieved by  the Alaska Energy Authority                                                                    
(AEA)  had  a  reduction  over  the FY  11  budget  of  $1.5                                                                    
million,  predominantly  from  a  reduction  in  power  cost                                                                    
equalization.                                                                                                                   
                                                                                                                                
Co-Chair Stoltze  opined that the Division  of Corporations,                                                                    
Business and  Professional Licensing should be  listed under                                                                    
the   priority  heading   "economic  development"   and  not                                                                    
"consumer protection."  He pointed  out that  the division's                                                                    
focus was  commerce and that  most Alaskans  interfaced with                                                                    
it. He commended the current  leadership in the division. He                                                                    
noted  that  small  business people  in  his  district  were                                                                    
paralyzed when slowed down by  a license renewal. He thought                                                                    
more  improvements   could  be  made  to   support  economic                                                                    
development in the state. He  did not want to see government                                                                    
slowing  things down,  whether the  operation  was large  or                                                                    
small.                                                                                                                          
                                                                                                                                
1:40:37 PM                                                                                                                    
                                                                                                                                
Commissioner Bell noted  some of the staff  changes that had                                                                    
been made  in the  department. She recognized  employees for                                                                    
work done. She detailed  that the department interacted with                                                                    
over 115 businesses. She stressed  that the presentation was                                                                    
organized in priority areas.                                                                                                    
                                                                                                                                
Commissioner  Bell  directed attention  to  a  pie chart  on                                                                    
Slide  5,  "Budget  by   Priority  Program"  indicating  the                                                                    
comparable portions of  the total proposed budget  for FY 12                                                                    
of $204,178,400, which was a  4 percent decrease from the FY                                                                    
11  budget.  The  colored  slices  detailed  the  budget  by                                                                    
priority areas:                                                                                                                 
                                                                                                                                
   · Economic Growth (red): $79,806,000; 39 percent of the                                                                      
     total budget                                                                                                               
   · Sustainable Energy (green): $53,315,800; 26 percent of                                                                     
     the total budget                                                                                                           
   · Strong Communities (yellow): $38,927,500; 19 percent                                                                       
     of the total budget                                                                                                        
   · Consumer Protection (blue): $32,129,100; 16 percent of                                                                     
     the total budget                                                                                                           
                                                                                                                                
Commissioner  Bell  turned  to   the  first  priority  area,                                                                    
"Economic Development Programs" (Slide 6):                                                                                      
                                                                                                                                
   · Division of Economic Development                                                                                           
        o Strengthening/realigning:    finance,   marketing,                                                                    
          research,      business/technical      assistance,                                                                    
          outreach/coordination                                                                                                 
   · Financing                                                                                                                  
        o 268 loans, totaling $20.3 million                                                                                     
        o Legislation proposing several targeted loan                                                                           
          programs                                                                                                              
   · Made in Alaska                                                                                                             
        o 2010 Showcase: 48 vendors and 19 Alaska/national                                                                      
          buyers                                                                                                                
   · Alaska Film Office                                                                                                         
        o 29 film productions prequalified for tax credits                                                                      
        o Marketing and logistical support for productions                                                                      
                                                                                                                                
Commissioner  Bell detailed  that the  Division of  Economic                                                                    
Development  had   been  created  the  previous   fall.  She                                                                    
stressed  the  importance  of strengthening  and  realigning                                                                    
Alaska's economic  development programs in the  areas listed                                                                    
on  the   slide,  including   within  state,   federal,  and                                                                    
community governments,  as well as with  the private sector.                                                                    
She  reported that  DCCED had  been engaging  with many  key                                                                    
organizations.                                                                                                                  
                                                                                                                                
1:44:15 PM                                                                                                                    
                                                                                                                                
Representative Costello queried the  merging of the Division                                                                    
of  Investments with  the new  division.  She asked  whether                                                                    
there  had been  fund-tracking  problems. Commissioner  Bell                                                                    
responded that  there had previously  been concerns  about a                                                                    
fragmented approach  in state activities and  that the focus                                                                    
was  on  a  narrowly   defined  number  of  industries.  The                                                                    
department  felt that  bringing together  the two  divisions                                                                    
(the  Office of  Economic  Development and  the Division  of                                                                    
Investments) would provide a  framework for more effectively                                                                    
servicing  businesses  statewide,  particularly  related  to                                                                    
financing. She pointed  to programs that had  not been fully                                                                    
utilized,  including the  Alaska Small  Business Development                                                                    
Center, the  Rural Development  Investment Fund  (RDIF), and                                                                    
Capstone  Aviation. There  was currently  more outreach  and                                                                    
the department  was better able to  incorporate industry and                                                                    
community feedback.                                                                                                             
                                                                                                                                
Co-Chair  Stoltze queried  the amount  of the  pre-qualified                                                                    
tax credits under the Alaska Film Office.                                                                                       
                                                                                                                                
JO  ELLEN  HANRAHAN,  DIRECTOR OF  ADMINISTRATIVE  SERVICES,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
replied that there had been  $244,000 in tax credits through                                                                    
FY 10.                                                                                                                          
                                                                                                                                
Commissioner Bell  added that DCCED reviewed  the production                                                                    
for the  29 pre-qualified  films. In  order to  be approved,                                                                    
the production had  to be audited by an  Alaskan firm. There                                                                    
were  presently four  productions that  have been  approved,                                                                    
with $244,000 in tax credits.                                                                                                   
                                                                                                                                
1:48:07 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas asked which shows  had qualified for the tax                                                                    
credits. Commissioner Bell replied  that the list was posted                                                                    
on  the  department  website.  She   pointed  out  that  the                                                                    
production firm names were often  different than the name of                                                                    
the show.                                                                                                                       
                                                                                                                                
Co-Chair Stoltze  asked for the  information to  be provided                                                                    
to the co-chairs.                                                                                                               
                                                                                                                                
Co-Chair Thomas thought the public  would like to know which                                                                    
shows  were using  the tax  credits. He  thought shows  that                                                                    
were  given  the  credits should  be  marketing  Alaska.  He                                                                    
referred  to an  Alaskan business  was expecting  more trade                                                                    
because of a show; even  before the season started, bookings                                                                    
were up 25 percent for the year.                                                                                                
                                                                                                                                
Representative   Neuman  believed   the  available   credits                                                                    
amounted to between  30 and 40 percent  of production costs;                                                                    
he requested  the actual numbers. He  thought the projection                                                                    
of Alaska in the shows was positive.                                                                                            
                                                                                                                                
Commissioner  Bell  detailed  that  the  base  for  the  tax                                                                    
credits was  30 percent of  production cost; there  were two                                                                    
additional  step increases  up to  44 percent,  depending on                                                                    
seasonality, rural location, and Alaska hire.                                                                                   
                                                                                                                                
Vice-chair   Fairclough  noted   that  she   had  voted   in                                                                    
opposition  to the  film credits  provision and  thought the                                                                    
reasons would become clear in  a few years. She had concerns                                                                    
about  film  credits  being used  for  projects  that  could                                                                    
result in  closing down resource development  in Alaska. She                                                                    
believed   Alaskan  businesses   had  been   trying  extract                                                                    
resources  in a  responsible  manner and  she was  concerned                                                                    
that the film credits had  drawn people to Alaska that would                                                                    
highlight the  state in a  way that would not  be beneficial                                                                    
to Alaskans.                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  noted that he  also had voted  against the                                                                    
film  tax credits.  He  opined that  tax  credits were  like                                                                    
general funds; when used, the  legislature lost the power to                                                                    
make decisions about the money.                                                                                                 
                                                                                                                                
1:52:57 PM                                                                                                                    
                                                                                                                                
Representative  Wilson queried  the process  of getting  the                                                                    
tax  credits related  to  how a  project  would benefit  the                                                                    
state  or not.  Commissioner  Bell responded  that the  pre-                                                                    
approval  process  included  a  review  of  the  script.  In                                                                    
addition, an Alaskan firm would  audit the financials of the                                                                    
project.  She offered  to get  more  information about  what                                                                    
would happen  if the  production changed  significantly from                                                                    
its initial review.                                                                                                             
                                                                                                                                
Commissioner Bell  continued with  the first  priority area,                                                                    
"Economic Development Programs" (Slide 6).                                                                                      
                                                                                                                                
   · Division of Economic Development                                                                                           
        o Strengthening/realigning:    finance,   marketing,                                                                    
          research,      business/technical      assistance,                                                                    
          outreach/coordination                                                                                                 
   · Financing                                                                                                                  
        o 268 loans, totaling $20.3 million                                                                                     
        o Legislation proposing several targeted loan                                                                           
          programs                                                                                                              
   · Made in Alaska                                                                                                             
        o 2010 Showcase: 48 vendors and 19 Alaska/national                                                                      
          buyers                                                                                                                
   · Alaska Film Office                                                                                                         
        o 29 film productions prequalified for tax credits                                                                      
        o Marketing and logistical support for productions                                                                      
                                                                                                                                
Commissioner  Bell  detailed  that   the  "Made  in  Alaska"                                                                    
program  certified the  use of  the "Made  in Alaska"  logo;                                                                    
there had been a showcase  in Anchorage that had resulted in                                                                    
new business  relationships as well  as sales for  nearly 15                                                                    
vendors. She commended the program  staff for bring together                                                                    
buyers and sellers.                                                                                                             
                                                                                                                                
Commissioner  Bell reported  that she  had asked  the Alaska                                                                    
Film Office staff to ensure  that the state was presented in                                                                    
the most  effective way possible  when selecting  shows. She                                                                    
wanted to be broad and strategic regarding the industry.                                                                        
                                                                                                                                
Commissioner Bell  mentioned challenges.  She referred  to a                                                                    
third-party   certification    ranking   Alaska's   business                                                                    
environment  for  competitiveness at  number  50  out of  50                                                                    
states  in the  country.  She stated  that the  department's                                                                    
economic development programs had  been reviewing how Alaska                                                                    
was marketed.  The department  wanted to  figure out  how to                                                                    
best  serve the  business  community and  get businesses  to                                                                    
come to the state.                                                                                                              
                                                                                                                                
Commissioner Bell  added that another challenge  was working                                                                    
within state  government and  with other  organizations such                                                                    
as  the Resource  Development Council.  She  noted that  the                                                                    
department  had  been  complimented  for  its  outreach  and                                                                    
collaboration.                                                                                                                  
                                                                                                                                
1:56:23 PM                                                                                                                    
                                                                                                                                
Vice-chair Fairclough stated  that the 50 out  of 50 ranking                                                                    
was  based  on  one  poll  that was  based  heavily  on  the                                                                    
criteria of transportation costs, which  had put Alaska at a                                                                    
disadvantage. She  agreed that Alaska  was not as  "open for                                                                    
business" as she wanted it  to be. However, she believed the                                                                    
state was not at the bottom  but was in the lower 10 percent                                                                    
of states.                                                                                                                      
                                                                                                                                
Commissioner  Bell   continued  with   economic  development                                                                    
(Slide 7):                                                                                                                      
                                                                                                                                
   · Tourism Development                                                                                                        
        o Increased market demand for Alaska travel                                                                             
        o Created product development and training                                                                              
        o Engaged industry and conducted economic impact                                                                        
          analysis                                                                                                              
                                                                                                                                
Commissioner Bell  referred to a presentation  by the Alaska                                                                    
Travel   Industry   Association    (ATIA)   [House   Finance                                                                    
Committee, January 26, 2011,  noon meeting]. She highlighted                                                                    
that the  state was in  year three of a  three-year decline;                                                                    
in  2009,  Alaska  lost  approximately  125,000  independent                                                                    
visitors, and  a significant reduction in  cruise passengers                                                                    
was expected  for the summer  of 2011. She pointed  out that                                                                    
it was very difficult to  sustain a two- or three-year loss.                                                                    
The department provided  support in the form of  data to the                                                                    
visitor  industry to  show where  visitors  went, what  they                                                                    
spent, and  their satisfaction  ratings. An  economic impact                                                                    
analysis was  done and a  contractor projected  an estimated                                                                    
loss  of   5,000  jobs  resulting  from   the  decline.  The                                                                    
department  also  had  a   number  of  programs  researching                                                                    
product development  and customer-service training,  and had                                                                    
worked  with  a  federally-funded program  developing  rural                                                                    
tourism in Alaska.                                                                                                              
                                                                                                                                
Co-Chair Stoltze referred  to changes that had  been made in                                                                    
statute related to  cruise ships. He stated  concerns that a                                                                    
decline  could become  a permanent  economic adjustment.  He                                                                    
wondered where the  state was at in the  decline and whether                                                                    
the decline  had been stopped  or slowed.  Commissioner Bell                                                                    
replied  that  the  annual  direct  or  indirect  employment                                                                    
associated  with  the visitor  industry  was  a little  over                                                                    
36,000,  with  peak  employment   of  40,000.  In  terms  of                                                                    
restoring the demand, small cruise  ships would be returning                                                                    
to   Alaska  in   2011;  approximately   50,000  cruise-ship                                                                    
passengers were  expected to return on  the Princess Cruises                                                                    
in the  summer of  2012. She  acknowledged that  the numbers                                                                    
did not make up for  the full approximately 150,000 visitors                                                                    
lost.  She  noted  an  increase  in  independent  travelers,                                                                    
predominantly  visitors  traveling   by  air.  She  reported                                                                    
information given by ATIA regarding  a $6 million television                                                                    
marketing   program  (from   one-time  funding);   based  on                                                                    
inquiries and  surveys, ATIA anticipated  the result  of the                                                                    
marketing  would  be  about  70,000  new  visitors  and  $72                                                                    
million  in new  spending. The  increase would  not get  the                                                                    
state back to the 2008 peak.                                                                                                    
                                                                                                                                
2:02:31 PM                                                                                                                    
                                                                                                                                
Representative  Doogan  referenced  the 5,000  lost  Alaskan                                                                    
jobs and asked whether the jobs  were in Alaska or were jobs                                                                    
Alaskans  would  have  held  if  they  had  not  gone  away.                                                                    
Commissioner  Bell responded  that  the  number referred  to                                                                    
direct and indirect employment  associated from the spending                                                                    
generated  by visitors  coming to  the  state. The  analysis                                                                    
began by looking at how many  people came to Alaska and what                                                                    
they  spent  on goods  and  services  within the  state.  An                                                                    
input/output  model was  then used  to determine  direct and                                                                    
indirect  spending   and  the  associated   employment.  She                                                                    
stressed that  a key piece  was that the jobs  were "onshore                                                                    
Alaskan  employment,"   as  distinct   from  tourism-related                                                                    
employment on  cruise ships. Therefore,  the jobs  lost were                                                                    
in Alaska.                                                                                                                      
                                                                                                                                
Representative Doogan clarified that  there were many people                                                                    
who come to the state to  work during the tourist season and                                                                    
then leave the state. He  asked whether they were discussing                                                                    
those  kinds of  jobs or  jobs that  belong to  [year-round]                                                                    
Alaskans.    Commissioner    Bell    answered    that    the                                                                    
quantification   did   not    differentiate   residency   or                                                                    
seasonality.                                                                                                                    
                                                                                                                                
Representative  Wilson asked  how the  numbers distinguished                                                                    
between the effects  of the overall economy  and the effects                                                                    
of advertising. She  opined that people could  not afford to                                                                    
travel as far  as Alaska. Commissioner Bell  replied that in                                                                    
2009,  the  significant  drop in  independent  visitors  was                                                                    
attributable to  the economy.  She stated  that there  was a                                                                    
high  degree of  confidence  in the  methodology behind  the                                                                    
quantification  of visitors  and their  actual spending.  To                                                                    
measure what was driving the  numbers, other things could be                                                                    
considered:  the   number  of   inquiries,  the   number  of                                                                    
visitors, and surveys about  travel attitudes, barriers, and                                                                    
images. She  explained that there was  a considerable amount                                                                    
of  market research  aimed  at understanding  how  to be  as                                                                    
effective as possible.                                                                                                          
                                                                                                                                
2:06:40 PM                                                                                                                    
                                                                                                                                
Commissioner Bell reviewed the remaining items on Slide 7:                                                                      
                                                                                                                                
   · Increased outreach and effectiveness                                                                                       
        o Leverage external/internal partners                                                                                   
             ƒMinerals, forestry, seafood, agriculture,                                                                        
               transportation                                                                                                   
        o Multi-year international trade strategy                                                                               
        o Business retention and expansion strategy                                                                             
        o Expanded presence at key trade shows and forums                                                                       
        o Council of Economic Advisors                                                                                          
        o Connect Alaska broadband strategy                                                                                     
                                                                                                                                
Commissioner  Bell   detailed  that  DCCED  was   trying  to                                                                    
interact with the private sector,  other state agencies, and                                                                    
to conduct market research and  analysis in order to advance                                                                    
employment and  economic opportunity. She reported  that the                                                                    
department had  formed an economic advisory  council and had                                                                    
asked the  group (including geographically  diverse industry                                                                    
representatives,  ANCSA  [Alaska  Native  Claims  Settlement                                                                    
Act]   Corporations,  bankers,   the  Resource   Development                                                                    
Council for  Alaska, AOGA [Alaska Oil  and Gas Association],                                                                    
and  others) to  meet  with the  department  on a  quarterly                                                                    
basis in order to increase contact with the private sector.                                                                     
                                                                                                                                
Representative Costello  referred to  the position  that was                                                                    
being  created  in  the   commissioner's  office  and  asked                                                                    
whether  the  position  would  take   on  the  functions  of                                                                    
outreach  and  effectiveness.  Commissioner  Bell  responded                                                                    
that the engagement  was at all levels and  not just limited                                                                    
to the economic staff. She  stated that she as commissioner,                                                                    
the  deputy commissioner,  the directors,  and the  economic                                                                    
development  staff were  involved. Some  of the  changes had                                                                    
already been evolving before her  arrival in the department.                                                                    
There was  also a communications director;  the position had                                                                    
previously been  solely funded and  housed in the  Office of                                                                    
Economic   Development,  but   had  been   moved  into   the                                                                    
commissioner's  office with  the  goal of  serving the  full                                                                    
department.                                                                                                                     
                                                                                                                                
Commissioner  Bell   continued  with   economic  development                                                                    
(Slide 8):                                                                                                                      
                                                                                                                                
   · Alaska Aerospace Corporation                                                                                               
        o Supported Air Force SPT-26 launch in November                                                                         
        o Planning next launch in May 2011                                                                                      
                                                                                                                                
Commissioner  Bell  described  a successful  launch  by  the                                                                    
Alaska   Aerospace   Corporation   in  November   2010   and                                                                    
referenced another  launch planned  for the spring  of 2011.                                                                    
She   highlighted  the   corporation's  on-going   need  for                                                                    
sustainability   funding.  She   spoke  of   the  governor's                                                                    
announcement to  move the aerospace operation  from DCCED to                                                                    
the  Department  of  Veterans and  Military  Affairs,  which                                                                    
DCCED  supported.  She   referred  to  studies  commissioned                                                                    
through  the  Anchorage  Economic  Development  Corporation,                                                                    
Northern Economics,  and the McDowell Group  recognizing the                                                                    
employment   and   economic   impacts   of   the   aerospace                                                                    
corporation.  She stated  that  DCCED wanted  the entity  to                                                                    
grow and  thrive, wherever  it was  housed. She  thought the                                                                    
corporation had important business  impacts on the state and                                                                    
that it  could grow. For  example, the agency  had partnered                                                                    
with Lockheed  Martin Corporation on a  military contract at                                                                    
Fort  Greely.  The  department   had  assisted  in  bringing                                                                    
together  some of  the departments  involved, including  the                                                                    
Department of  Labor and  Workforce Development,  DCCED, the                                                                    
Alaska  Housing  Finance  Authority  in  the  Department  of                                                                    
Revenue, and  others to help the  aerospace corporation with                                                                    
bidding and successful implementation.                                                                                          
                                                                                                                                
2:11:39 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas queried an increment  for $4 million for the                                                                    
Alaska Aerospace Corporation. He  believed $10 million would                                                                    
actually  be needed  and asked  whether  she anticipated  an                                                                    
future   increment  to   $10   million.  Commissioner   Bell                                                                    
responded that  the $4  million request  was in  the capital                                                                    
budget.  She stated  that  part  of the  goal  was a  closer                                                                    
alignment  with  a  military  entity,  which  would  provide                                                                    
better  access and  better opportunity  to pursue  contracts                                                                    
like Air Force launches and  the Fort Greely missile defense                                                                    
project. She  acknowledged an on-going need  for sustainment                                                                    
funding from the federal government  and from commercial and                                                                    
government launches.                                                                                                            
                                                                                                                                
Co-Chair  Thomas  pointed out  that  he  had been  told  the                                                                    
agency would need  $10 million in the  operating budget over                                                                    
the next four years.                                                                                                            
                                                                                                                                
Co-Chair Stoltze added that he had heard larger numbers.                                                                        
                                                                                                                                
Commissioner Bell  responded that there had  been discussion                                                                    
about looking at  $10 million for each of the  years from FY                                                                    
13 through FY  15, which she believed was  referenced in the                                                                    
budget language. She also noted  discussion about the "third                                                                    
launch  complex,"  which  would  be  a  significant  capital                                                                    
investment. Currently,  the corporation  was working  on the                                                                    
rocket  motor  storage,  which was  being  utilized  by  the                                                                    
spring launch.  She suggested the  price tag  could approach                                                                    
$100 million.                                                                                                                   
                                                                                                                                
Commissioner  Bell  continued with  the  last  two items  on                                                                    
Slide 8:                                                                                                                        
                                                                                                                                
   · AIDEA                                                                                                                      
        o Revolving loan fund assets increase by $37.1                                                                          
          million                                                                                                               
        o FY12 dividend $29.4 million                                                                                           
        o Expanding development projects and economic                                                                           
          development tools                                                                                                     
   · Alaska Seafood Marketing Institute                                                                                         
        o Increasing exposure for Alaska seafood in U.S.                                                                        
          and international markets                                                                                             
                                                                                                                                
Commissioner Bell detailed that  AIDEA had been implementing                                                                    
its  strategic   plan  to  be   more  focused   on  economic                                                                    
development and  more aggressive. She added  that the agency                                                                    
had been criticized in the  past for being more conservative                                                                    
than private  lending institutions. Creative  new approaches                                                                    
in  tools  included  a  bill   recently  introduced  in  the                                                                    
legislature related  to new  market tax  credits and  a bill                                                                    
from the previous session that  provided the flexibility for                                                                    
AIDEA  to partially  own projects.  She  noted the  December                                                                    
2010  announcement   of  AIDEA's  $29.4   million  dividend,                                                                    
bringing the  total dividends to the  state to approximately                                                                    
$300 million.  She also underlined increased  involvement by                                                                    
the private sector,  both on the board and  at the committee                                                                    
level.                                                                                                                          
                                                                                                                                
Commissioner  Bell turned  to the  Alaska Seafood  Marketing                                                                    
Institute (ASMI),  which had  become aggressive  with retail                                                                    
and   food   service    programs   both   domestically   and                                                                    
internationally.   She   maintained   that   the   audiences                                                                    
communicated to  by ASMI were  broad, and  included grocers,                                                                    
food  distributors,  restaurants,  culinary  schools,  food-                                                                    
service  operators,   media,  and   direct-to-consumer.  The                                                                    
institute had  been trying  to increase  awareness, support,                                                                    
consumption,   and  purchasing   of   Alaska  seafood.   The                                                                    
international   programs  were   largely  federally   funded                                                                    
through the  U.S. Department  of Agriculture  (USDA). Target                                                                    
markets included  Japan, China, and the  European Union. She                                                                    
noted that  ASMI had been  impacted by the  world recession.                                                                    
In  addition, there  was  competition  from farmed  seafood.                                                                    
Research  had  been  conducted  regarding  the  market;  the                                                                    
entire range of the seafood  market had been affected by the                                                                    
economy, the  credit crunch, and  fuel prices.  She asserted                                                                    
that overall ASMI was still strong throughout the world.                                                                        
                                                                                                                                
2:17:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAN SADDLER queried  the structural change in                                                                    
the budget  related to the  ASMI funding.  Commissioner Bell                                                                    
likened the shift to changing from  a credit card to a debit                                                                    
card. The institute got most  of its receipts from fishermen                                                                    
late in  the year  and was  previously able  to draw  on the                                                                    
general fund and then replenish  it as the industry receipts                                                                    
came  in.  However,  a  new  accounting  standard  had  been                                                                    
required; ASMI  was set up  with its  own fund and  would be                                                                    
operating on a cash basis.                                                                                                      
                                                                                                                                
Co-Chair  Thomas  stated  that the  organization's  receipts                                                                    
came  from a  self-assessed tax  by Alaska  fishermen, which                                                                    
made  its income  different from  the income  other entities                                                                    
received. The income was based  on fish prices; the year had                                                                    
been a  record one  for high salmon  prices. He  pointed out                                                                    
that half  of one percent  of the fishermen's gross  went to                                                                    
ASMI for marketing. He mentioned  another industry that paid                                                                    
little  for its  marketing. He  queried what  the department                                                                    
would do  to help  the halibut  fishermen, who  had recently                                                                    
lost  75  or  80  percent  of  their  guarantee  income.  He                                                                    
stressed the seriousness of the  impact in many communities.                                                                    
The raw-fish  tax would  be lower and  affect the  income of                                                                    
both the state and the fishing communities.                                                                                     
                                                                                                                                
Co-Chair Stoltze  pointed out  that charter  operators would                                                                    
be  similarly  affected  by the  lower  halibut  quotas.  He                                                                    
thought the  situation presented  an opportunity  for groups                                                                    
that normally  compete over the same  resources to cooperate                                                                    
with one another.                                                                                                               
                                                                                                                                
Co-Chair Thomas commented that ASMI  could have to come back                                                                    
to the  legislature for  funds because  the loss  of halibut                                                                    
quotas would impact ASMI income.                                                                                                
                                                                                                                                
2:23:01 PM                                                                                                                    
                                                                                                                                
Commissioner Bell  agreed that  there could  be far-reaching                                                                    
implications resulting from the  lower fish tax receipts and                                                                    
that  communities  could   be  significantly  impacted.  She                                                                    
thought  the  situation  warranted  looking  for  additional                                                                    
marketing and  financing tools, as existing  tools might not                                                                    
be  sufficient.  The current  year  was  a banner  year  for                                                                    
salmon, but prices  for Pacific cod and other  fish were not                                                                    
so strong.                                                                                                                      
                                                                                                                                
Commissioner Bell turned to "Sustainable Energy" (Slide 9):                                                                     
                                                                                                                                
   · Completed Alaska Energy Pathway, July 2010                                                                                 
   · Program Overview                                                                                                           
        o Renewable energy development                                                                                          
        o Technical assistance                                                                                                  
       o Bulk fuel facility upgrade and loan program                                                                            
        o Rural power system upgrades                                                                                           
   · Renewable Energy Fund grants                                                                                               
        o $150 million, 133 projects                                                                                            
   · Pursuing new projects to meet statewide energy                                                                             
   · efficiency goals                                                                                                           
                                                                                                                                
Commissioner Bell recognized AEA  for completing the "Alaska                                                                    
Energy Pathway" report in 2010.  She stressed the importance                                                                    
of considering  both large  and small  things that  could be                                                                    
done throughout  the state, given  that the  legislature had                                                                    
designated aggressive statewide goals  that needed to be met                                                                    
by 2020. She reviewed the  progress of AEA programs over the                                                                    
past year:                                                                                                                      
                                                                                                                                
   · Bulk fuel upgrades: 68 of 97 projects completed                                                                            
   · Power-system upgrades: 3 projects completed                                                                                
   · Bulk fuel revolving loans: 52 communities had loans                                                                        
   · Power project fund: recapitalized to provide loans to                                                                      
     both government and privately-owned utilities                                                                              
   · Renewable energy fund grants: $150 million and 133                                                                         
     projects, about one-third in the hands of communities                                                                      
  · Power Cost Equalization: over $31 million distributed                                                                       
   · Training and technical assistance: 54 rural residents                                                                      
     trained to manage or operate rural infrastructure                                                                          
   · Emerging energy technical fund: applications due March                                                                     
     2 for $2.4 million state funding and $2.4 million in                                                                       
     Denali Commission funding                                                                                                  
                                                                                                                                
Commissioner Bell  stated that there  were a number  of ways                                                                    
AEA   was  engaged   with  communities   and  private-sector                                                                    
entities throughout  the state. She believed  AEA would grow                                                                    
in  visibility  and  importance  as  the  department  worked                                                                    
towards  achieving  goals  and  recognized  the  urgency  in                                                                    
addressing the state's energy needs.                                                                                            
                                                                                                                                
Vice-chair Fairclough referenced  the renewable energy grant                                                                    
funds  and  the  emerging  technology  grant.  She  wondered                                                                    
whether  there were  criteria to  avoid  the duplication  of                                                                    
grants for projects that have failed in other regions.                                                                          
                                                                                                                                
2:27:10 PM                                                                                                                    
                                                                                                                                
Commissioner Bell  thought AEA  would have  more information                                                                    
and offered to get the information.                                                                                             
                                                                                                                                
Representative   Joule   referred   to  the   potential   of                                                                    
developing gas  and geothermal  resources in  some locations                                                                    
in  the  state. He  noted  the  challenge of  getting  large                                                                    
equipment to  distant locations to do  the exploratory work.                                                                    
He  questioned   using  small-bore  drilling   to  determine                                                                    
whether further  exploration and development  was warranted.                                                                    
He hoped to  diversify energy sources in  the outlying parts                                                                    
of  the  state.  He  pointed   out  that  Kotzebue  had  the                                                                    
potential to  develop geothermal energy, but  the expense of                                                                    
getting the  necessary equipment there was  prohibitive. The                                                                    
cost of  looking for  gas was  also high.  Commissioner Bell                                                                    
offered to  follow up,  find out  whom to  talk to,  and get                                                                    
more information.                                                                                                               
                                                                                                                                
Commissioner  Bell  informed  the  committee  that  the  AEA                                                                    
executive  director search  process was  continuing; resumes                                                                    
had been requested and interviews  would be conducted in the                                                                    
near future.                                                                                                                    
                                                                                                                                
Co-Chair   Stoltze   queried    energy   costs   that   were                                                                    
automatically billed as state  costs, such as transportation                                                                    
costs and heating for schools and state buildings.                                                                              
                                                                                                                                
Representative Edgmon thought there  were many challenges to                                                                    
discuss  related to  energy. He  questioned the  position of                                                                    
AEA in  the hierarchy  of the department.  Commissioner Bell                                                                    
responded that there could be  much more opportunity for AEA                                                                    
to collaborate  with other staff throughout  the department.                                                                    
She  referred   to  opportunities  for   cross-training  and                                                                    
collaboration.   She  noted   that   formally,  within   the                                                                    
structure,  she sat  on the  AEA board  and that  that there                                                                    
were monthly  board meetings.  She thought  the organization                                                                    
needed to connect more throughout the department.                                                                               
                                                                                                                                
Representative Edgmon surmised that  the situation was still                                                                    
evolving.  He thought  the Susitna  project would  require a                                                                    
tremendous amount of time and resource.                                                                                         
                                                                                                                                
2:33:08 PM                                                                                                                    
                                                                                                                                
Commissioner  Bell   explained  that  AEA  was   a  separate                                                                    
corporate  entity that  was housed  in  the department.  She                                                                    
served  on  the  board  and  DCCED  provided  administrative                                                                    
support,  but she  believed that  there more  opportunity to                                                                    
collaborate could be created.                                                                                                   
                                                                                                                                
Representative   Doogan  recalled   that  $50   million  for                                                                    
renewable  energy  grants  had   been  passed  the  previous                                                                    
session,  and  $25  million  of   that  was  vetoed  by  the                                                                    
governor.                                                                                                                       
                                                                                                                                
Co-Chair  Stoltze  detailed  that   the  actual  amount  was                                                                    
$25,250,000.                                                                                                                    
                                                                                                                                
Representative Doogan  asked what the governor's  plans were                                                                    
for the  fund. Commissioner  Bell answered that  $25 million                                                                    
had been placed  in the proposed [capital] budget  for FY 12                                                                    
for the  specific project. She surmised  from the governor's                                                                    
speeches that he  recognized that his budget  proposal was a                                                                    
starting place for the legislature.                                                                                             
                                                                                                                                
Representative   Doogan   noted   that   unfortunately   the                                                                    
governor's  budget  was  also  the  ending  point  for  such                                                                    
things. He asked for more  information on the appropriation.                                                                    
Commissioner  Bell stated  that she  was only  aware of  the                                                                    
current request.                                                                                                                
                                                                                                                                
Co-Chair  Stoltze commented  that the  legislature made  the                                                                    
appropriations; he  guessed $25 million had  been the number                                                                    
historically.                                                                                                                   
                                                                                                                                
2:36:47 PM                                                                                                                    
                                                                                                                                
Commissioner  Bell moved  on to  discuss strong  communities                                                                    
(Slide 10):                                                                                                                     
                                                                                                                                
   · Community and Regional Affairs Overview                                                                                    
        o Local government assistance                                                                                           
        o Rural Utility Business Advisory program (167                                                                          
          communities)                                                                                                          
       o Administered $1.2 Billion in grants in FY11                                                                            
        o $34 million to communities (PILT, National Forest                                                                     
          Receipts, Fisheries Business Tax, Fisheries                                                                           
          Landing Tax) plus Community Revenue Sharing ($60                                                                      
          million)                                                                                                              
        o Land management and planning                                                                                          
        o State assessor, community publications, Local                                                                         
          Boundary                                                                                                              
        o Commission                                                                                                            
        o Bulk Fuel Bridge Loan (21 communities in 2010)                                                                        
                                                                                                                                
Commissioner Bell  detailed that  the staff of  the Division                                                                    
of  Community   and  Regional   Affairs  was   engaged  with                                                                    
communities  throughout the  state through  the listed  core                                                                    
programs. She noted  that the state assessor  had done full-                                                                    
value  determinations  for  40 municipalities  in  the  past                                                                    
year. Communications such as "Lien  Watch" had been produced                                                                    
and  used  by state,  federal,  and  local governments.  The                                                                    
department  supported  the  Local Boundary  Commission,  the                                                                    
National  Flood Insurance  Program,  and provided  technical                                                                    
assistance to  a number of communities.  She underlined that                                                                    
the emphasis was on serving  communities with populations of                                                                    
2,500 or  less, although services were  available statewide.                                                                    
She  added  that  the Division  of  Community  and  Regional                                                                    
Affairs operated  the Bulk Fuel Bridge  Loan for communities                                                                    
that were  not eligible for  the more traditional  Bulk Fuel                                                                    
Loan Program;  the goal was  to get  communities sustainable                                                                    
enough to qualify for the more traditional loan.                                                                                
                                                                                                                                
Representative  Joule  thanked  Commissioner  Bell  for  the                                                                    
weekly updates  provided by the department.  He thought they                                                                    
were concise and broad enough  to provide a snapshot of what                                                                    
the department  was doing in  communities across  the state.                                                                    
He thought  the updates could  be a model  for communication                                                                    
in other agencies.                                                                                                              
                                                                                                                                
Commissioner  Bell continued  that  the  division ran  other                                                                    
programs,  such  as  Fuel  Watch. She  listed  some  of  the                                                                    
challenges faced by the division (Slide 11):                                                                                    
                                                                                                                                
   · Community viability and capacity building are a                                                                            
     continuing challenge                                                                                                       
        o Increased operating costs, staff turnover, and                                                                        
          potential for reduced federal funding                                                                                 
        o Lack of infrastructure and the high cost of doing                                                                     
          business in rural Alaska                                                                                              
        o Water, electric, fuel utilities vulnerable - may                                                                      
          need more regional strategies                                                                                         
        o Disparity in the ability to attract and evaluate                                                                      
          diverse economic development projects                                                                                 
        o High energy costs negatively impact community                                                                         
          viability and economic development efforts                                                                            
                                                                                                                                
Commissioner  Bell  emphasized   the  vulnerability  of  the                                                                    
utility system, as utilities were  funded by state, federal,                                                                    
and   local  community   and  municipal   funds.  Regulatory                                                                    
agencies such  as the Regulatory Commission  of Alaska (RCA)                                                                    
were  engaged in  the  issues, but  DCCED  staff dealt  with                                                                    
issues on a daily basis.                                                                                                        
                                                                                                                                
Representative Guttenberg  directed attention to  the bullet                                                                    
point  "Disparity in  the ability  to  attract and  evaluate                                                                    
diverse economic development  projects." He queried examples                                                                    
of what the department was  doing to level the playing field                                                                    
and make the  process easier. He wondered what  could be put                                                                    
in  place that  could be  self-sustaining and  have on-going                                                                    
effect.  Commissioner  Bell  responded that  the  department                                                                    
tried to partner  with other entities for  training, such as                                                                    
training  for  planning   commissioners  and  other  elected                                                                    
officials. Some  of the issues  that needed to  be addressed                                                                    
fell within the purview of  DCCED, but others fell under the                                                                    
purview  of other  departments (such  as  the Department  of                                                                    
Labor   and   Workforce   Development).  She   opined   that                                                                    
transportation, energy, and  labor were economic foundations                                                                    
that Alaska needed  to continually work at.  She thought the                                                                    
need  was broad;  the division  tried to  be accessible  and                                                                    
point  people in  the right  direction to  help build  local                                                                    
capacity and enable communities to function on-going.                                                                           
                                                                                                                                
In response  to a  question from  Representative Guttenberg,                                                                    
Commissioner  Bell   offered  two   aspects.  Some   of  the                                                                    
department's  training  was  offered in  collaboration  with                                                                    
other entities.  She stressed that  the department  was also                                                                    
working  towards   more  extensive  use  of   broadband  and                                                                    
offering    services    and    online    training    through                                                                    
telecommunting.                                                                                                                 
                                                                                                                                
2:44:01 PM                                                                                                                    
                                                                                                                                
Representative  Wilson   wondered  whether   the  department                                                                    
reviewed  regulations that  could be  slowing small  Alaskan                                                                    
businesses down, such  as their ability to  sell cheese from                                                                    
home or  participate in farmer's markets.  Commissioner Bell                                                                    
answered in  the affirmative and  added that  the department                                                                    
could  do  more.  She  stated that  she  was  interested  in                                                                    
hearing  more  stories  from  around   the  state  like  the                                                                    
specific examples provided.                                                                                                     
                                                                                                                                
Representative Edgmon  asked the about the  rural subcabinet                                                                    
[Alaska  Rural Action  Subcabinet]  and  how its  objectives                                                                    
could relate  to the overall mission  of DCCED. Commissioner                                                                    
Bell responded that  she was chair the  rural subcabinet and                                                                    
had  been  working  on  an  action  plan.  She  referred  to                                                                    
commissioners  who had  traveled to  rural communities  that                                                                    
had never seen state  commissioners. The officials conducted                                                                    
hearings and  meetings to listen  to people.  The subcabinet                                                                    
action  plan  was  focused  on  making  recommendations  and                                                                    
understanding the budgetary impact of prospective actions.                                                                      
                                                                                                                                
2:47:27 PM                                                                                                                    
                                                                                                                                
Commissioner Bell  moved on  to discuss  consumer protection                                                                    
(Slide 13):                                                                                                                     
                                                                                                                                
   · Banking and Securities                                                                                                     
        o License, charter and examine banks                                                                                    
        o Consumer education and protection                                                                                     
        o ANCSA proxies                                                                                                         
   · Insurance                                                                                                                  
        o Ensure financial solvency                                                                                             
        o License, ensure compliance                                                                                            
        o Criminal investigations                                                                                               
        o Consumer education and protection                                                                                     
        o Challenges    include    increased   number    and                                                                    
          complexity of insurance products and associated                                                                       
          increase in investigations                                                                                            
   · Corporations, Business and Professional Licensing                                                                          
        o Administer 40 professional licensing programs                                                                         
        o Business licenses                                                                                                     
        o Register corporations and trademarks                                                                                  
        o Consumer outreach and complaint investigation                                                                         
   · Regulatory Commission of Alaska                                                                                            
        o Regulate public utilities and pipeline carriers                                                                       
        o Tariff filings, dispute resolution, regulations                                                                       
        o Establish PCE rates                                                                                                   
        o Significant challenges include emerging energy                                                                        
          issues, changing regulatory environment, and                                                                          
          viability of rural utilities                                                                                          
   · FY12 concurrent hearings with FERC on TAPS                                                                                 
                                                                                                                                
Commissioner  Bell noted  that  there  were four  department                                                                    
entities  related to  consumer protection:  the Division  of                                                                    
Banking  and  Securities,  the Division  of  Insurance,  the                                                                    
Division   of   Corporations,  Business   and   Professional                                                                    
Licensing,  and the  Regulatory  Commission  of Alaska.  She                                                                    
noted that all the entities  were supported by fees and that                                                                    
each interfaced with businesses and consumers.                                                                                  
                                                                                                                                
Commissioner Bell detailed that  the Division of Banking and                                                                    
Securities  was engaged  with  mortgage  lenders and  payday                                                                    
lenders; in  the past year,  it had issued 205  new mortgage                                                                    
licenses,  35 money-transmitter  licenses, and  conducted 38                                                                    
examinations of depository  and non-depository institutions.                                                                    
In  addition,  ANCSA  corporations filed  proxies  with  the                                                                    
division.                                                                                                                       
                                                                                                                                
Commissioner Bell  informed the committee that  the Division                                                                    
of  Insurance focused  on licensing  insurance providers  in                                                                    
the  state  and  ensuring   compliance.  The  division  also                                                                    
oversaw  consumer  education  and protection  programs,  and                                                                    
conducted criminal investigations.  She noted that insurance                                                                    
products  were increasingly  complex and  took progressively                                                                    
more  time to  investigate.  There had  been seven  criminal                                                                    
convictions in the last year,  two of which resulted in jail                                                                    
sentences; 306 consumer  complaints were investigated, which                                                                    
resulted in  a total of  $230,000 being returned  to Alaskan                                                                    
consumers. Twenty purchasing groups  were registered, 28 new                                                                    
insurance  companies  were  admitted,   along  with  14  new                                                                    
surplus-line  insurers and  five risk-retention  groups. She                                                                    
noted that Director Linda Hall  had been involved with other                                                                    
agencies  in understanding  the federal  healthcare law  and                                                                    
its implications for Alaska.                                                                                                    
                                                                                                                                
Vice-chair  Fairclough  stated   concerns  about  reversible                                                                    
mortgages   for  senior   citizens.  She   wondered  whether                                                                    
consumer  complaints were  being received  on the  issue and                                                                    
whether  the   state  was   regulating  the   practice.  She                                                                    
specified concerns  about people  being forced out  of their                                                                    
homes and the interest rates collected by banks.                                                                                
                                                                                                                                
Vice-chair Fairclough  also voiced concerns  about bankcards                                                                    
and debit  card distribution  systems used for  payroll. She                                                                    
was  worried about  costs  being  inappropriately passed  to                                                                    
consumers, such  as service charges  or the  transference of                                                                    
payroll  costs   to  employees  that  employers   should  be                                                                    
responsible for.                                                                                                                
                                                                                                                                
Commissioner Bell responded that she  would follow up on the                                                                    
issues.                                                                                                                         
                                                                                                                                
2:52:17 PM                                                                                                                    
                                                                                                                                
Representative  Neuman  thought  ASMI  did  a  good  job  of                                                                    
selling Alaska's seafood. He queried  direction given by the                                                                    
department for  selling minerals  and other  Alaskan natural                                                                    
resources  to  the  world.  Commissioner  Bell  referred  to                                                                    
smaller-scale efforts  for marketing minerals and  film. She                                                                    
thought one  of the  core economic development  functions of                                                                    
the  department related  to marketing,  financing, research,                                                                    
and technical  assistance. She  noted that  department staff                                                                    
would  be joining  staff from  DNR,  the governor's  office,                                                                    
AIDEA,  and others  at the  Mineral Exploration  Roundup, an                                                                    
international  mining   conference  in   Vancouver,  British                                                                    
Columbia [January  24 to  27, 2011].  She referred  to other                                                                    
trade shows and marketing  events. She acknowledged that the                                                                    
efforts were on a much  smaller scale than marketing efforts                                                                    
by ASMI.                                                                                                                        
                                                                                                                                
Commissioner  Bell concluded  the  presentation and  assured                                                                    
the  committee   that  the   department  took   its  mission                                                                    
seriously.                                                                                                                      
                                                                                                                                
Co-Chair Thomas  commended AEA's professionalism  related to                                                                    
applications.  He wanted  the programs  to be  fair and  not                                                                    
motivated by politics.                                                                                                          
                                                                                                                                
Co-Chair Stoltze requested a summary  of the previous year's                                                                    
increments  for  DCCED.  He  remembered  the  past  work  of                                                                    
Representative Richard Foster.                                                                                                  
                                                                                                                                
2:57:17 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:59:53 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^BUDGET OVERVIEW: DEPARTMENT OF LAW                                                                                           
                                                                                                                                
3:00:10 PM                                                                                                                    
                                                                                                                                
JOHN  J.   BURNS,  ATTORNEY  GENERAL,  DEPARTMENT   OF  LAW,                                                                    
introduced himself  and reviewed  his background.  He stated                                                                    
his  commitment to  Alaska and  his  desire to  meaningfully                                                                    
contribute  to  the  state's  betterment.  He  reported  his                                                                    
experience growing  up in Nome and  Fairbanks and practicing                                                                    
law  in the  state. He  reviewed recent  travels around  the                                                                    
state  to  meet  and  talk   to  citizens,  including  rural                                                                    
leaders,  judges,  and  law  enforcement  officers.  He  had                                                                    
visited  women's  shelters  and youth  facilities  with  the                                                                    
intention  of  better  understanding   the  needs  of  rural                                                                    
communities and to identify how  the Department of Law (DOL)                                                                    
could best  meet those needs.  He stated that  his objective                                                                    
as  Attorney General  was upholding  the state  constitution                                                                    
and  enforcing  the  laws  of  Alaska, and  to  do  so  with                                                                    
dignity,   integrity,  and   consistent  with   his  ethical                                                                    
obligations as an attorney.                                                                                                     
                                                                                                                                
Attorney General Burns introduced his staff.                                                                                    
                                                                                                                                
Attorney  General  Burns  provided   the  committee  with  a                                                                    
PowerPoint  presentation, "Department  of Law  FY 12  Budget                                                                    
Overview for the House Finance  Committee of the 27th Alaska                                                                    
Legislature." He read the mission statement of DOL:                                                                             
                                                                                                                                
     The  mission of  the  Alaska Department  of  Law is  to                                                                    
     prosecute  crime and  provide legal  services to  state                                                                    
     government for  the protection and benefit  of Alaska's                                                                    
     citizens.                                                                                                                  
                                                                                                                                
Attorney  General Burns  summarized "Key  Statistics" (Slide                                                                    
3):                                                                                                                             
                                                                                                                                
     Attorneys      FY12      FY11      Change                                                                                  
     Civil          163       162       1*                                                                                      
     Criminal       122       121       1**                                                                                     
     Admin Svcs     1         1         0                                                                                       
     Total          286       284       2                                                                                       
                                                                                                                                
     Department   offices:   *Anchorage,   Barrow,   Bethel,                                                                    
     Dillingham, Fairbanks, Juneau, Kenai, Ketchikan,                                                                           
     Kodiak, **Kotzebue, Nome, Palmer, and Sitka                                                                                
                                                                                                                                
Attorney General  Burns detailed  that DOL  accomplished the                                                                    
objectives through  three departments: civil,  criminal, and                                                                    
administrative  services.   He  noted  that   the  budgetary                                                                    
request  for  FY  12  included   increasing  the  number  of                                                                    
attorneys  by  two: one  civil  attorney  to handle  growing                                                                    
public records  requests, and  another criminal  attorney to                                                                    
be the  district attorney  for Kotzebue.  Additional support                                                                    
staff was also being requested  to handle collections and to                                                                    
provide paralegal support.                                                                                                      
                                                                                                                                
3:04:23 PM                                                                                                                    
                                                                                                                                
Representative Guttenberg  queried the  relationship between                                                                    
attorneys and support staff. He  asked whether the ratios in                                                                    
Alaska  were  consistent  with  those  around  the  country.                                                                    
Attorney  General Burns  replied that  he did  not know  and                                                                    
would get the information.                                                                                                      
                                                                                                                                
Attorney  General  Burns  pointed  out  that  the  operating                                                                    
budget proposal  showed a decrease  of $2.6 million  from FY                                                                    
11  (Slide  4).   He  admitted  that  the   decrease  was  a                                                                    
"misnomer"  and   that  the  next  slide   would  show  that                                                                    
approximately   $7   million  associated   with   litigation                                                                    
expenses, experts,  outside counsel, and other  expenses was                                                                    
included in  the capital budget.  He stated that  the reason                                                                    
was to provide  flexibility to avoid a lapse  in funding due                                                                    
to delays  in litigation. He  referred to a proposal  by the                                                                    
Legislative Finance Division  to move the oil  and gas funds                                                                    
back into  the operating  budget with extended  lapse dates.                                                                    
He  thought that  would  provide  the flexibility  necessary                                                                    
related to litigation.                                                                                                          
                                                                                                                                
Mr.  Budget  turned to  the  capital  budget (Slide  5)  and                                                                    
reminded the committee that $7  million in FY 12 represented                                                                    
a transfer  from FY  11 for the  reasons already  stated. He                                                                    
noted that the  administrative services category represented                                                                    
the most substantive  change in the capital  budget, and was                                                                    
associated   with  software   purchases,  development,   and                                                                    
implementation, including  an upgrade to the  server room, a                                                                    
pro-law  development program,  an e-discovery  solution, and                                                                    
search engines.                                                                                                                 
                                                                                                                                
Attorney General  Burns explained that DOL  accomplishes its                                                                    
mission through four "Core Services" (Slide 6):                                                                                 
                                                                                                                                
   · Protecting the Safety and Financial Well Being of                                                                          
     Alaskans                                                                                                                   
   · Fostering Conditions for Responsible Development of                                                                        
     Our Natural Resources                                                                                                      
   · Protecting the Fiscal Integrity of the State                                                                               
   · Promoting Good Governance                                                                                                  
                                                                                                                                
Attorney General  Burns detailed that protecting  the safety                                                                    
and financial well-being of  Alaskans was done predominantly                                                                    
through the criminal and child  protection divisions and the                                                                    
consumer and fair business division.                                                                                            
                                                                                                                                
3:07:09 PM                                                                                                                    
                                                                                                                                
Attorney  General  Burns turned  to  a  chart detailing  the                                                                    
"FY12 Budget  by Core Service"  (Slide 7) and noted  that 62                                                                    
percent of  the budget  was focused  on achieving  the first                                                                    
primary objective of safety and protecting Alaskans.                                                                            
                                                                                                                                
Attorney General  Burns directed  attention to Slide  8, "FY                                                                    
10 Return on  Investments." The chart shows  that the budget                                                                    
for FY 10  was $85.4 million; the  department recovered $576                                                                    
million in  rewards and collections,  resulting in  a return                                                                    
of  $6.75  for every  dollar  spent.  Looking at  the  civil                                                                    
division alone  (the section through which  most collections                                                                    
were achieved), the budget for  FY 10 was $48.9 million; the                                                                    
department   recovered   $576   million   in   rewards   and                                                                    
collections,  resulting  in a  return  of  $11.77 for  every                                                                    
dollar spent.                                                                                                                   
                                                                                                                                
Attorney  General  Burns  stressed  that  Slide  8  did  not                                                                    
reflect  cost savings.  For example,  the tort  division had                                                                    
defended  over  200  lawsuits  in the  past  year,  with  no                                                                    
significant cost to the state.                                                                                                  
                                                                                                                                
Co-Chair Stoltze directed attention  the Constitution of the                                                                    
State of Alaska (Article II,  Section 17). He noted that the                                                                    
funds received  by DOL went  into the  Constitutional Budget                                                                    
Reserve (CBR), not to unrestricted general funds.                                                                               
                                                                                                                                
DAVE BLAISDELL, DIRECTOR,  ADMINISTRATIVE SERVICES DIVISION,                                                                    
DEPARTMENT  OF LAW,  answered that  a large  portion of  the                                                                    
funds would go  into the retirement and  benefits account to                                                                    
pay for the Mercer settlement.  He added that other returned                                                                    
funds  would not  necessarily go  directly into  the general                                                                    
fund.                                                                                                                           
                                                                                                                                
Co-Chair Stoltze pointed out that  the additional funds were                                                                    
not necessarily  available to be  spent. He wanted  to lower                                                                    
expectations about  how much  money was  available. Attorney                                                                    
General  Burns  agreed  that there  were  no  guarantees  on                                                                    
future returns.                                                                                                                 
                                                                                                                                
Attorney General  Burns addressed  results in  achieving the                                                                    
department's  first  core  objective  of  protecting  public                                                                    
safety (Slides 10 through 12):                                                                                                  
                                                                                                                                
   · Aggressive but fair prosecutions                                                                                           
        o Screened 7,727 felony cases                                                                                           
        o Prosecuted 5,072 felony cases                                                                                         
        o Screened 23,229 misdemeanor cases                                                                                     
        o 19,622 misdemeanor cases                                                                                              
   · Assisted in drafting new laws                                                                                              
        o reformed the bail statute                                                                                             
        o enhanced penalties for sex assault and domestic                                                                       
          violence                                                                                                              
        o procedures for evidence retention                                                                                     
       o procedures for post-conviction DNA testing                                                                             
   · Played a key role in developing the 10-year Sexual                                                                         
     Assault/Domestic Violence Initiative                                                                                       
   · Collaborated with agencies and non profits to support                                                                      
     the SA/DV Initiative                                                                                                       
   · Coordinated PSA's for the "Choose Respect" campaign                                                                        
                                                                                                                                
3:11:52 PM                                                                                                                    
                                                                                                                                
Attorney   General  Burns   reviewed   results  related   to                                                                    
protecting  citizen's   financial  well-being   through  the                                                                    
consumer protection  and environmental  enforcement branches                                                                    
of the department (Slides 13 through 14):                                                                                       
                                                                                                                                
   · Collected $5.5 million in civil penalties, attorneys                                                                       
     fees and costs, and restitution in consumer protection                                                                     
     actions                                                                                                                    
   · Collected $3.9 million in environmental penalties                                                                          
   · Negotiated an Identity Theft settlement protecting                                                                         
     Alaskan retirees and public employees from potential                                                                       
     financial harm after PricewaterhouseCoopers, a state                                                                       
     contractor, lost employees' personal information                                                                           
                                                                                                                                
Attorney General  Burns detailed that notable  cases related                                                                    
to  consumer protection  included  the Publisher's  Clearing                                                                    
House for  deceptive marketing and Direct  TV for misleading                                                                    
advertising.                                                                                                                    
                                                                                                                                
Representative Guttenberg  asked how  successful DOL  was in                                                                    
dealing  with  internet  crimes.  He  queried  international                                                                    
agreements.  Attorney  General   Burns  responded  that  the                                                                    
office was  regularly flooded with consumer  complaints; DOL                                                                    
tried to deal with the  complaints as they could. He offered                                                                    
to get more information.                                                                                                        
                                                                                                                                
Attorney  General Burns  provided  details  on the  identity                                                                    
theft  settlement  after   the  PricewaterhouseCoopers  data                                                                    
breach.  The financial  and personal  information of  77,000                                                                    
current and  former state employees  was lost;  a settlement                                                                    
was  negotiated that  included  free  credit monitoring  and                                                                    
guarantees of  reimbursement in the event  of financial loss                                                                    
resulting from the misappropriation of the information.                                                                         
                                                                                                                                
Attorney General  Burns turned  to the issue  of "Protecting                                                                    
Alaska Children" (Slide 15):                                                                                                    
                                                                                                                                
   · Prevailed in all ten Alaska Supreme Court appeals                                                                          
    where children had to be removed from unsafe homes                                                                          
   · Participated in 2,376 child welfare cases where                                                                            
     children were at risk                                                                                                      
   · Department of Law's child protection attorney case                                                                         
     load is 113 per attorney-exceeding the recommended                                                                         
     national average of 100 cases                                                                                              
                                                                                                                                
Attorney  General Burns  detailed  that  the attorney  child                                                                    
protection  case  load  was  13  percent  greater  than  the                                                                    
national average.                                                                                                               
                                                                                                                                
Co-Chair  Stoltze  referred  to   the  passage  of  statutes                                                                    
related to  internet crime and  sexual predators  during the                                                                    
previous legislative session.  He  queried the status of the                                                                    
American Civil Liberties Union  (ACLU) litigation related to                                                                    
the issue.                                                                                                                      
                                                                                                                                
RICHARD   SVOBODNY,   DEPUTY  ATTORNEY   GENERAL,   CRIMINAL                                                                    
DIVISION, DEPARTMENT OF LAW, replied  that the ACLU had sued                                                                    
the state and asked for  injunctive relief in federal court,                                                                    
which had been granted on  one provision of the bill passed.                                                                    
He did  not think  the ACLU  was right;  the case  was still                                                                    
being litigated.  He referred to  a governor's  bill dealing                                                                    
with the  sexual exploitation of  children that had  an easy                                                                    
solution to the situation.                                                                                                      
                                                                                                                                
3:17:00 PM                                                                                                                    
                                                                                                                                
Attorney   General   Burns   directed   attention   to   the                                                                    
department's  second  core   function,  "Fostering  Economic                                                                    
Development" (Slide 16):                                                                                                        
                                                                                                                                
   · Defended offshore oil and gas (OCS) exploration in                                                                         
     court challenges                                                                                                           
   · Court agreed a pending OCS lawsuit on Lease Sale 193                                                                       
     does not prevent seismic exploration                                                                                       
   · Defended Shell's Beaufort and Chukchi Sea OCS                                                                              
     exploration plans in lawsuits in federal courts                                                                            
  · Filed an amicus brief challenging the OCS 5-year plan                                                                       
                                                                                                                                
Attorney  General  Burns  continued   with  the  subject  of                                                                    
fostering economic development (Slide 17):                                                                                      
                                                                                                                                
   · Developed with ADF & G and the Administration a                                                                            
     comprehensive Endangered Species Act strategy                                                                              
        o Fought unwarranted listings                                                                                           
             ƒCook Inlet Beluga whales as "endangered"                                                                         
             ƒRibbon seal                                                                                                      
        o Fought unwarranted critical habitat designations                                                                      
             ƒPolar bear critical habitat                                                                                      
                                                                                                                                
Attorney General  Burns opined  that the  federal Endangered                                                                    
Species Act  (ESA) was being  "flagrantly misused"  and that                                                                    
the  number of  species listed  as threatened  or endangered                                                                    
was  continuing to  increase. He  referred  to recent  press                                                                    
about walruses  and noted that  the ringed seal  and bearded                                                                    
seal were being added to the  list. He thought the issue was                                                                    
an example of federal regulatory overreach.                                                                                     
                                                                                                                                
Representative Neuman queried  strategies developed with the                                                                    
Department  of Fish  and Game  (DFG) regarding  the ESA.  He                                                                    
wondered  whether  DOL   was  considering  [marine]  spatial                                                                    
planning  and ocean  zoning issues.  Attorney General  Burns                                                                    
agreed that the issue was  a significant one. He thought the                                                                    
department   needed   to   be  proactive   and   develop   a                                                                    
comprehensive  interdepartmental  strategy  on the  ESA  and                                                                    
many   other  issues,   including  those   related  to   the                                                                    
Environmental  Protection Agency  (EPA), the  U.S. Fish  and                                                                    
Wildlife Service,  the Bureau of Land  Management (BLM), and                                                                    
others that have significant  impact on multiple departments                                                                    
and areas.                                                                                                                      
                                                                                                                                
Attorney  General  Burns   emphasized  his  philosophy  that                                                                    
litigation  should  be  used  only  as  a  last  resort.  He                                                                    
preferred to  be as proactive  as possible, to  get involved                                                                    
as  early as  possible in  the process  in order  to promote                                                                    
dialogue and  to educate people  and agencies.  However, the                                                                    
proactive  strategy  was  not always  successful;  in  those                                                                    
times,  he  thought  it  was critical  that  the  state  was                                                                    
willing to aggressively defend its  rights. The focus of DOL                                                                    
has been  increasingly to be  proactive in the  early stages                                                                    
of the process,  and trying to interface  with the agencies,                                                                    
even in the development of the discussions.                                                                                     
                                                                                                                                
Representative  Neuman asked  whether  DOL  was planning  to                                                                    
address the marine spatial  planning issue. Attorney General                                                                    
Burns replied in the affirmative.                                                                                               
                                                                                                                                
Representative Joule believed that  there should be a longer                                                                    
discussion  about ESA  issues and  about the  Alaska Coastal                                                                    
Management Plan  (ACMP) and  whether or not  the use  of the                                                                    
plan would help  the state. He referred  to debate connected                                                                    
to the issue and queried the view of the department.                                                                            
                                                                                                                                
3:22:43 PM                                                                                                                    
                                                                                                                                
Attorney General  Burns answered that a  thorough discussion                                                                    
of the issue  would take some time. He agreed  the issue was                                                                    
important. He  referred to a  meeting he had had  with Mayor                                                                    
Edward S. Itta from the  North Slope Borough. He stated that                                                                    
the  importance  of dialogue  during  the  development of  a                                                                    
comprehensive strategy  had become  clear to him  during his                                                                    
visits  to   Nome,  Bethel,  and  particularly   Barrow.  He                                                                    
acknowledged that he had been  remiss in sending a letter in                                                                    
response to  the critical habitat designation  for the polar                                                                    
bear  without   first  checking  with  the   people  in  the                                                                    
communities affected.                                                                                                           
                                                                                                                                
Representative Joule believed that  there could be a unified                                                                    
response;  there were  many  in rural  Alaska  who could  be                                                                    
collaborated  with on  addressing  resource development,  if                                                                    
certain issues were cleared up.  Rural Alaskans were acutely                                                                    
aware of the importance of  resolving the issues in order to                                                                    
sustain  economic development  into the  future. He  thought                                                                    
the tough issues  had to be dealt with, that  closure had to                                                                    
be brought  to the issues, and  then a unified voice  had to                                                                    
be   presented   to   the   U.S.   Congress   and   to   the                                                                    
administration. Attorney  General Burns  agreed. He  did not                                                                    
think dialogue necessarily meant  agreement, but opined that                                                                    
there must  be an  agreement to disagree,  in order  to find                                                                    
common ground.  He reported that  he had been  encouraged by                                                                    
discussions with Mayor  Itta and his staff, as  well as with                                                                    
the  Arctic  Slope  Regional   Corporation  and  others.  He                                                                    
assured  Representative Joule  that from  DOL's perspective,                                                                    
the  ability   to  succeed  in   the  discussed   arena  was                                                                    
critically  and   vitally  dependent  on   establishing  the                                                                    
relationships. He stated that  he would make every concerted                                                                    
effort that he could on behalf of DOL to engage.                                                                                
                                                                                                                                
Attorney General Burns continued with  steps taken by DOL to                                                                    
address  issues related  to  fostering economic  development                                                                    
(Slide 18 through 19):                                                                                                          
                                                                                                                                
   · Sued  the   Environmental  Protection  Agency   on  its                                                                    
     finding that greenhouse gas emissions endanger human                                                                       
     health and welfare                                                                                                         
   · Opposed last-ditch  efforts by  extremist environmental                                                                    
     groups to block a federally authorized Southeast                                                                           
     (Logjam) timber sale                                                                                                       
   · Prevailed in the United  States Supreme Court, allowing                                                                    
     Kensington Mine to open                                                                                                    
   · Assisted  DEC in  promulgating new  pollution discharge                                                                    
     regulations for Red Dog Mine                                                                                               
   · Worked  with Legislature  and  Governor  to settle  the                                                                    
     cruise ship industry challenge to the head tax                                                                             
  · These actions created and preserved hundreds of jobs                                                                        
                                                                                                                                
Attorney  General Burns  detailed that  300 Kensington  Mine                                                                    
workers had their  jobs as a result of DOL  actions and that                                                                    
85 percent of  the workers were Alaskan  employees. He added                                                                    
that  the  Red Dog  Mine  operation  supported 560  indirect                                                                    
jobs, and 2,800 direct and indirect jobs.                                                                                       
                                                                                                                                
Attorney General Burns  moved to the third  core function of                                                                    
DOL, "Protecting Fiscal Integrity" (Slide 20):                                                                                  
                                                                                                                                
   · Recovered  $500 million  from Mercer,  actuary for  the                                                                    
     state pension plan                                                                                                         
   · Recovered  $54.7  million  in   oil  and  gas  tax  and                                                                    
     royalties                                                                                                                  
   · Defended the State Assessment  Review Board's 2006 TAPS                                                                    
     property tax valuation                                                                                                     
   · Defended  over   200  tort   claims  with   no  adverse                                                                    
     judgments against the state                                                                                                
   · Collected   over  $7.3   million  in   PFD  and   other                                                                    
     garnishments                                                                                                               
                                                                                                                                
Attorney General Burns detailed  that the successful defense                                                                    
of tort claims  with no adverse judgments  against the state                                                                    
underscored DOL's  abilities and  was an  acknowledgement of                                                                    
the fact  that other  state agencies  were also  doing their                                                                    
jobs very well.                                                                                                                 
                                                                                                                                
Attorney General Burns moved to  the fourth core function of                                                                    
the department,  "Promoting Good Governance" (Slides  21 and                                                                    
22):                                                                                                                            
                                                                                                                                
   · Sued the federal  government over the constitutionality                                                                    
     of the federal Affordable Care Act                                                                                         
   · Joined  other  states  in litigating  Second  Amendment                                                                    
     issues                                                                                                                     
   · Issued Executive Branch Ethics Act regulations                                                                             
   · Led the  Rural Action  Subcabinet on outreach  trips to                                                                    
     rural Alaska                                                                                                               
                                                                                                                                
3:29:08 PM                                                                                                                    
                                                                                                                                
Attorney General Burns finished  reflections on "Where We've                                                                    
Been" related to FY 10 and  turned to the "Where We Are Now"                                                                    
portion  of the  presentation, related  to FY  11. He  noted                                                                    
that  Slide  24 ("FY  2011  Increment")  reflected the  main                                                                    
increments  received by  the department  and  what was  done                                                                    
with them:                                                                                                                      
                                                                                                                                
   · Added  two new  assistant district  attorneys in  Kenai                                                                    
     ($300.0)                                                                                                                   
   · Added a child protection  assistant attorney general in                                                                    
     Kenai ($200.0)                                                                                                             
   · Funded a  natural resources assistant  attorney general                                                                    
     ($200.0) and $800.0 for outside counsel in ESA cases                                                                       
   · $200.0 for fast ferry lawsuit                                                                                              
   · $2.5 million for issues related to gasline activity                                                                        
                                                                                                                                
Attorney General Burns discussed  the on-going goals for the                                                                    
achievement  of core  objectives  in FY  11, beginning  with                                                                    
protecting public safety (Slides 25 and 26):                                                                                    
                                                                                                                                
   · Continue   to   aggressively   but   fairly   prosecute                                                                    
     criminals                                                                                                                  
   · On  January 26,  2011,  statewide DA's  offices are  in                                                                    
     trial on 12 felony cases, including five felony sexual                                                                     
     or DV assaults and two homicides, including                                                                                
        o State v. Waterman (Ketchikan woman accused of                                                                         
          murdering her mother)                                                                                                 
        o State v. Rollins (APD officer accused of sexual                                                                       
          assault of young women he met on duty)                                                                                
   · Continue to support major aspects of the SA/DV                                                                             
     initiative                                                                                                                 
        o Hosting pro bono legal summits to increase legal                                                                      
          representation of SA/DV victims                                                                                       
        o Partnering with the Domestic Violence Sexual                                                                          
          Assault Coordinator to assist victims                                                                                 
        o Advising agencies of available federal funds,                                                                         
          e.g., to train rural law enforcement officers                                                                         
                                                                                                                                
Attorney  General  Burns  turned to  activities  related  to                                                                    
fostering economic development for  FY 11 (Slides 27 through                                                                    
29):                                                                                                                            
                                                                                                                                
   · Continue to pursue resolution of the Point Thomson                                                                         
     litigation with ExxonMobil                                                                                                 
   · Oppose roadblocks to petroleum exploration in the                                                                          
     National Petroleum Reserve-Alaska(NPR-A)                                                                                   
   · Implementing a comprehensive ESA strategy                                                                                  
        o Petitioning the federal government to de-list the                                                                     
          Eastern population of Stellar sea lions                                                                               
        o Successful defense on de-list of ribbon seal                                                                          
        o Litigating numerous cases involving polar bears                                                                       
        o Collaborating   with    Alaska   Legislature   and                                                                    
          congressional delegation                                                                                              
   · Fighting lawsuits by extremist groups to shut down OCS                                                                     
     oil and gas exploration                                                                                                    
   · Defending DNR's land and water use permits                                                                                 
                                                                                                                                
Attorney  General Burns  detailed  that  the second  bullet-                                                                    
point   related  to   the  NPR-A   involved  a   request  by                                                                    
ConocoPhillips for an oil and  gas permit in the area, which                                                                    
was remanded  recently by the  U.S. Army Corps  of Engineers                                                                    
based  on a  determination by  the court  that the  proposed                                                                    
drilling  techniques were  not appropriate.  The corps  felt                                                                    
that  horizontal drilling  was  needed.  The department  was                                                                    
optimistic that the case would be decided quickly.                                                                              
                                                                                                                                
Attorney General Burns spoke  to department strategy related                                                                    
to  the  ESA,  which  involved efforts  to  de-list  certain                                                                    
species  that had  been listed.  He acknowledged  that there                                                                    
were  circumstances in  which the  relationship between  the                                                                    
state  and federal  government  was  working. He  maintained                                                                    
that the state cooperated when  it could and that litigation                                                                    
was the "path of last resort."                                                                                                  
                                                                                                                                
Attorney  General  Burns  continued with  FY  11  activities                                                                    
related to  protecting fiscal  integrity (Slides  30 through                                                                    
32):                                                                                                                            
                                                                                                                                
   · Pursuing  civil  penalties,  costs and  restitution  in                                                                    
     consumer protection actions                                                                                                
   · Pursuing  penalties  related  to  violations  of  state                                                                    
     environmental laws                                                                                                         
   · Challenging TAPS  Owners' attempt to  include imprudent                                                                    
     Strategic Reconfiguration expenses in the TAPS tariff                                                                      
     rate base                                                                                                                  
   · Defending  SARB's  2007-2009 property  tax  assessments                                                                    
     for TAPS                                                                                                                   
   · Recovering  fines   and  cleanup  costs   and  economic                                                                    
     damages from BP for negligent maintenance of the                                                                           
     pipeline                                                                                                                   
   · Sued  the  boat builder  and  the  manufacturer of  the                                                                    
     state's two fast ferries for engine defects                                                                                
        o Fairweather still out of service                                                                                      
        o Chenegain inspection                                                                                                  
   · These engine  defects have cost  the state  hundreds of                                                                    
     thousands of dollars in repairs                                                                                            
                                                                                                                                
Attorney  General  Burns  detailed  that  the  Trans  Alaska                                                                    
Pipeline  System (TAPS)  issue involved  on-going litigation                                                                    
related to  prudent practices and  how much  was appropriate                                                                    
to allocate in the tariff rate base.                                                                                            
                                                                                                                                
Representative     Guttenberg     referenced    the     TAPS                                                                    
reconfiguration  and asked  whether the  argument was  about                                                                    
the  methodology of  the agreement.  Attorney General  Burns                                                                    
responded  that  at  the time  the  project  was  originally                                                                    
sanctioned, it  was for electrification; the  estimated cost                                                                    
was  about  $250,000. Seven  years  later,  the project  was                                                                    
still not complete  and the cost was $750  million. He noted                                                                    
that TAPS  was seeking  to roll the  entire amount  into the                                                                    
tariff  base.  He  thought  the  question  was  whether  the                                                                    
efforts  reflected prudent  operating  practices, which  was                                                                    
the  justification  for applying  the  costs  to the  tariff                                                                    
base.                                                                                                                           
                                                                                                                                
3:35:19 PM                                                                                                                    
                                                                                                                                
Attorney General  Burns continued to discuss  the protection                                                                    
of  fiscal   integrity  (Slide   32).  He   emphasized  that                                                                    
litigation involving  the state's fast ferries  was the last                                                                    
resort; the statute of limitations  had to be preserved, and                                                                    
dialogue had been unsuccessful.                                                                                                 
                                                                                                                                
Attorney  General Burns  reviewed the  department's work  to                                                                    
promote good governance in FY 11 (Slide 33):                                                                                    
                                                                                                                                
   · Defended the Division of Elections in challenges to                                                                        
     Alaska's election laws in last year's general election                                                                     
   · Challenging the federal health care "individual                                                                            
     mandate" requiring that all Alaskans purchase health                                                                       
     insurance                                                                                                                  
   · Challenging National Park Service regulations that                                                                         
     infringe state sovereignty on navigable waters                                                                             
                                                                                                                                
Attorney General Burns moved on  to highlight challenges and                                                                    
opportunities for  DOL in  FY 12 and  beyond. He  began with                                                                    
challenges  and  opportunities   in  the  criminal  division                                                                    
related to child protection (Slide 35):                                                                                         
                                                                                                                                
   · Criminal Division and Child Protection                                                                                     
       o Expedite felony cases from intake to trial                                                                             
        o Steady focus on the SA/DV Initiative                                                                                  
             ƒMore crime may be reported                                                                                       
             ƒGreater demand for prosecution and child                                                                         
               protection interventions                                                                                         
                                                                                                                                
Attorney General  Burns detailed that statistics  related to                                                                    
child protection cases were  "staggering." In Anchorage, the                                                                    
lapsed time  to disposition  has nearly quadrupled  from 173                                                                    
days  in  1987  to  669  days  in  2007.  The  delay  has  a                                                                    
compounding effect.  He maintained  that the  department was                                                                    
working  with the  criminal justice  working  group to  take                                                                    
steps to address the problem.                                                                                                   
                                                                                                                                
Co-Chair Stoltze commented that 669  days was a big fraction                                                                    
of a child's life.                                                                                                              
                                                                                                                                
Attorney    General    Burns   reviewed    challenges    and                                                                    
opportunities for the civil division (Slides 36 to 37):                                                                         
                                                                                                                                
   · Civil Division                                                                                                             
        o Continue to aggressively defend state sovereignty                                                                     
          against federal regulatory overreach                                                                                  
             ƒFederal health care legislation                                                                                  
             ƒEPA attempts to regulate greenhouse gas                                                                          
               emissions                                                                                                        
            ƒNational Park Service incursions                                                                                  
             ƒBLM "Wild Lands" designation                                                                                     
        o Support--as   legally   appropriate--the   state's                                                                    
          long-term commitment to responsible resource                                                                          
          development                                                                                                           
       o Develop a comprehensive long term strategy                                                                             
            ƒEndangered Species Act challenges                                                                                 
                  · Unwarranted listings                                                                                        
                  · Unwarranted designations of critical                                                                        
                    habitat                                                                                                     
                  · Mitigation when justified                                                                                   
             ƒOuter    Continental     Shelf    exploration                                                                    
               challenges                                                                                                       
                                                                                                                                
Attorney  General  Burns  stressed  that  the  emphasis  was                                                                    
always on  responsible resource development. He  stated that                                                                    
the  department was  not  anti-environmentalist. He  thought                                                                    
all Alaskans  understood the value  of the outdoors,  but he                                                                    
felt  there  was a  clear  nexus  between jobs  and  healthy                                                                    
families,  both  of  which   were  critically  dependent  on                                                                    
responsible  resource development.  He  maintained that  the                                                                    
development of  the comprehensive long-term strategy  was in                                                                    
the furtherance of those values.                                                                                                
                                                                                                                                
Attorney General  Burns referred  to the  department's five-                                                                    
year plan (Slide 38):                                                                                                           
                                                                                                                                
   · Develop a 5-year interdepartmental plan                                                                                    
        o Coordinate and cooperate                                                                                              
             ƒLegislative and executive branches of state                                                                      
               government                                                                                                       
             ƒAll executive agencies                                                                                           
               ƒDepartment of Natural Resources                                                                                
               ƒDepartment of Environmental Conservation                                                                       
               ƒDepartment of Commerce Community and                                                                           
                  Economic Development                                                                                          
               ƒDepartment of Law                                                                                              
               ƒDepartment of Fish and Game                                                                                    
                                                                                                                                
Attorney General  Burns hoped that the  five-year plan would                                                                    
be presented  to the legislature  and that it  would receive                                                                    
engagement  with the  legislature and  the various  agencies                                                                    
listed. He thought agencies that  were isolated did not work                                                                    
well.  He argued  that the  players must  come together  and                                                                    
develop a comprehensive strategy.                                                                                               
                                                                                                                                
3:39:59 PM                                                                                                                    
                                                                                                                                
Attorney   General   Burns   listed   the   challenges   and                                                                    
opportunities    involved     in    collaboration    between                                                                    
stakeholders (Slide 39):                                                                                                        
                                                                                                                                
   · Cooperate and coordinate with stakeholders outside and                                                                     
     inside state government                                                                                                    
        o Municipalities                                                                                                        
        o Boroughs                                                                                                              
        o Native corporations and tribes                                                                                        
        o Other states                                                                                                          
             ƒWashington and Oregon joined to de-list the                                                                      
               Stellar sea lions                                                                                                
        o Allies like National Association of Attorneys                                                                         
          General and Association of Fish and Wildlife                                                                          
          Agencies                                                                                                              
                                                                                                                                
Attorney General Burns concluded the presentation.                                                                              
                                                                                                                                
Co-Chair  Stoltze informed  the committee  that the  ESA and                                                                    
development issues  would be addressed  at a  future meeting                                                                    
with representatives  from several departments and  from the                                                                    
North Slope Borough.                                                                                                            
                                                                                                                                
Representative Neuman requested an  update on what the state                                                                    
was  doing   to  defend  commercial   fisheries,  especially                                                                    
halibut  in   Southeast,  sport   and  guide   fishermen  in                                                                    
Southcentral, and Alaskan citizens.                                                                                             
                                                                                                                                
Co-Chair Thomas pointed to the  sea otter issue in Southeast                                                                    
and wondered how to control the  otters and how to work with                                                                    
the federal  government so that  the state would be  able to                                                                    
take care of  the issue. He noted that  since the Department                                                                    
of Fish  and Game had put  the 400 otter in  the region, the                                                                    
population had expanded to 10,000.                                                                                              
                                                                                                                                
3:43:32 PM                                                                                                                    
                                                                                                                                
Representative Doogan reported  that he was one  of the guys                                                                    
who put  the sea  otters in the  waters off  Amchitka Island                                                                    
that came down  to Southeast. He apologized  for the ensuing                                                                    
troubles.                                                                                                                       
                                                                                                                                
Representative Doogan referred to a  quote on Slide 29 about                                                                    
"fighting lawsuits by extremist groups  to shut down OCS oil                                                                    
and  gas exploration."  He did  not think  the state  should                                                                    
characterize  groups as  "extremists," whether  or not  they                                                                    
were. He was  concerned that a government  group as official                                                                    
as DOL would  characterize people in that  manner. He opined                                                                    
that the  use of the  word was  a kind of  extremism itself,                                                                    
unless the  accusation could  be defended.  Attorney General                                                                    
Burns acknowledged his input.                                                                                                   
                                                                                                                                
Representative Joule  concurred with  Representative Doogan.                                                                    
He  thought   the  label  might  be   true  of  out-of-state                                                                    
organizations,  but  he  had  concerns  about  referring  to                                                                    
Alaskans as  extremists, especially when people  were trying                                                                    
to work  with the  groups and find  areas of  compromise. He                                                                    
thought the language could become counterproductive.                                                                            
                                                                                                                                
Representative  Joule  pointed  to Attorney  General  Burns'                                                                    
reference to  working with  Native corporations  and tribes.                                                                    
He  stated  that   all  the  groups-whether  municipalities,                                                                    
boroughs,  corporations, or  tribes-could be  challenging to                                                                    
work with, given timing, issue,  and place. However, in that                                                                    
challenge, he  believed all groups presented  an opportunity                                                                    
at the same time. He was  glad to see tribes being looked at                                                                    
in that  light. He stated that  he himself sat at  the table                                                                    
as a  citizen of Alaska  and as a state  Representative, but                                                                    
he was also  a shareholder in more than  one corporation and                                                                    
a tribal  member as well. He  told the committee he  was "by                                                                    
no means a boogeyman, in any capacity."                                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:48 PM.                                                                                           

Document Name Date/Time Subjects
DCCED Overview 2011 HFin.pdf HFIN 1/26/2011 1:30:00 PM
DLAW Letter Overview 012611.pdf HFIN 1/26/2011 1:30:00 PM
fy12 law budget overview.pdf HFIN 1/26/2011 1:30:00 PM