Legislature(2025 - 2026)ADAMS 519
03/17/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: State Deferred Maintenance Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 17, 2025
1:33 p.m.
1:33:51 PM
CALL TO ORDER
Co-Chair Schrage called the House Finance Committee meeting
to order at 1:33 p.m.
MEMBERS PRESENT
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Neal Foster, Co-Chair
ALSO PRESENT
Lacey Sanders, Director, Office of Management and Budget;
Christopher Hodgin, Project Delivery Team Lead, Division of
Facilities Services, Department of Transportation and
Public Facilities; Danny Gibson, Director, Division of
Facilities Services, Department of Transportation and
Public Facilities.
SUMMARY
PRESENTATION: STATE DEFERRED MAINTENANCE UPDATE
Co-Chair Schrage reviewed the meeting agenda.
^PRESENTATION: STATE DEFERRED MAINTENANCE UPDATE
1:35:23 PM
LACEY SANDERS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
introduced the PowerPoint presentation "Deferred
Maintenance Overview," dated March 17, 2025 (copy on file).
She continued on slide 2 and detailed the scope of deferred
maintenance in Alaska. She stated that deferred maintenance
referred to repair projects for buildings that had been
postponed due to insufficient funding within an agency's
normal operating budget. She reported that the state
maintained nearly 2,000 facilities, including 402
university buildings. The types of facilities varied by
agency and created specific challenges in managing deferred
maintenance needs.
Ms. Sanders relayed that the University of Alaska (UA)
maintained classrooms, laboratories, research space, and
residential halls, while the Department of Corrections
(DOC) and the Department of Health (DOH) operated 24-hour
facilities. She added that the Department of Military and
Veteran Affairs (DMVA) managed armories across the state,
and the Departments of Natural Resources (DNR) and the
Department of Fish and Game (DFG) oversaw cabins, shelters,
and fire suppression and preparedness facilities. She added
that the state's facility portfolio extended beyond typical
office space.
Ms. Sanders continued to slide 3. She stated that one of
the most common areas of concern was the backlog of
deferred maintenance. She explained that the Office of
Management and Budget (OMB) collected information from
state agencies each fall and winter to compile a
comprehensive list of deferred maintenance projects. The
data shown on slide 3 represented state agencies only and
excluded the university, which would be addressed on the
following slide. The total backlog for state agencies was
approximately $724 million. She directed attention to two
specific categories on the right side of the slide related
to the Department of Transportation and Public Facilities
(DOT). She stated that one category reflected state-owned
facilities within the Public Building Fund (PBF), while the
other covered separate facilities owned and maintained by
the department, but outside the fund. She clarified that
DOT also maintained deferred maintenance lists for
highways, aviation, harbors, and the Alaska Marine Highway
System (AMHS), but the current presentation would focus
solely on facilities and excluded infrastructure projects.
1:39:19 PM
Representative Stapp asked if the state had calculated the
value of its assets. He understood that the assessed value
differed from the replacement cost, but he was still
interested in knowing the total value of state-owned
facilities.
Ms. Sanders responded that she had calculated the value of
assets but did not have the information readily available.
She suggested that her colleague might have the
information.
CHRISTOPHER HODGIN, PROJECT DELIVERY TEAM LEAD, DIVISION OF
FACILITIES SERVICES, DEPARTMENT OF TRANSPORTATION AND
PUBLIC FACILITIES, responded that the assessed value of the
state's facilities was estimated between $9 billion and $10
billion.
Representative Hannan asked if any of the data included
facilities owned by the Regional Educational Attendance
Area (REAA) school districts or if those facilities had
been excluded.
Ms. Sanders replied that the presentation excluded all
school district facilities. She stated that deferred
maintenance for those facilities fell under the authority
of the Department of Education and Early Development
(DEED), which would appear before the committee later in
the week.
Representative Hannan asked whether DEED's total on the
slide included only state-operated assets, such as the Mt.
Edgecumbe High School (MEHS) campus and DEED buildings in
Juneau and Anchorage. She asked if other school district
facilities were excluded from the chart.
Ms. Sanders responded that the total represented only the
Andrew P. Kashevaroff (APK) building in Juneau [the Alaska
State Museum] and MEHS in Sitka. She clarified that MEHS
was not included under the statutes governing deferred
maintenance within the state's school construction and
major maintenance programs.
1:41:53 PM
Ms. Sanders continued to slide 4 which included the 402
facilities managed by UA. She stated that the total
deferred maintenance backlog had increased from $724
million to $2.2 billion after the UA facilities were
included. She reported that UA had approximately $1.26
billion in deferred maintenance and $224 million in renewal
and replacement needs. The renewal and replacement category
aligned with the UA Board of Regents' policy, which
combined both deferred maintenance and renewal in its
planning documents. She indicated that she was not an
expert on the university's deferred maintenance, but she
reiterated that the university would appear before the
committee soon to explain how it developed its plan and
what was included within its reported backlog.
Representative Johnson directed attention to the two
largest bars on the chart on slide 3, both related to DOT.
She asked for more information about the difference between
PBF and the department's other public facilities.
Ms. Sanders replied that the PBF bars referred to state-
owned facilities that participated in a lease payment
structure to fund ongoing maintenance needs. For example,
the State Office Building (SOB) in Juneau was funded by
PBF. She explained that the separate category for DOT
included other facilities which were owned and maintained
by the department but not part of PBF, such as equipment
storage buildings or hangars.
Representative Johnson remarked that the explanation was
helpful, but she wanted further clarification. She observed
that the slide included a footnote stating that highways,
aviation, and harbors were excluded. She asked if aviation-
related buildings were included, such as hangars.
Ms. Sanders responded that the footnote applied
specifically to the second column for DOT. She confirmed
that actual road surfaces, aviation runways, and harbor
structures such as docks or breakwaters were excluded.
However, aviation-related facilities such as hangars were
considered buildings and therefore included in the total.
Representative Johnson asked for confirmation that the
first bar represented public facilities with a dedicated
maintenance fund, while the second bar represented other
DOT assets, such as shops and hangars.
Ms. Sanders confirmed that Representative Johnson's
understanding was correct.
1:45:40 PM
Representative Tomaszewski thought it appeared that UA
represented approximately 40 percent of the state's square
footage but approximately 68 percent of the total deferred
maintenance backlog. He asked why the university's backlog
was disproportionately large.
Ms. Sanders responded that the university would be
appearing before the committee the following day and could
better explain its specific situation. She added that
limited resources had led to a scaled-back approach to
addressing deferred maintenance across the state, including
for the university.
Representative Tomaszewski understood that UA was
responsible for addressing its own deferred maintenance. He
suggested that he could ask the university the same
question when it presented to the committee.
Ms. Sanders agreed that Representative Tomaszewski could
ask the university his question.
Co-Chair Schrage added that it was his understanding that
the university had developed a more comprehensive and
detailed inventory of deferred maintenance needs, which
might have contributed to the larger reported backlog.
Representative Hannan stated that she was reviewing the two
large facilities attributed to DEED: MEHS and the Alaska
State Library Archives Museum. She noted that the museum
was likely one of the newest fully state-owned facilities
and had been constructed within the past decade. She asked
how much of the deferred maintenance figure was
attributable to the museum as compared to the other
facilities. She asked if annual maintenance was considered
when constructing a new building. She asked how two
buildings could account for $25 million in deferred
maintenance. She acknowledged that MEHS was a World War II-
era facility, but additions had been made to the building.
She assumed that buildings constructed in the twenty-first
century would have been better maintained but noted that
the available data did not reflect improved maintenance.
Ms. Sanders responded that the deferred maintenance amount
for DEED was primarily attributable to MEHS. She
acknowledged that the museum building was over ten years
old. There was annual funding in the operating budget for
routine maintenance, but additional needs sometimes arose,
and additional funding was required. She added that the
department also owned property for libraries and museums in
Sitka and two of the facilities were particularly old.
1:49:16 PM
Representative Johnson relayed that she had additional
questions about the first two bars on the chart on slide 3.
She recalled that during the tenure of Commissioner Kelly
Tshibaka at the Department of Administration (DOA), there
had been a proposal to consolidate lease costs and facility
maintenance under DOT. She understood that each department
had managed its own facilities and maintenance in the past
but that many of the responsibilities had been transferred
to DOT and charged back to the departments. She asked for
clarification on whether the transfer had been completed
and if it explained the current composition of the data.
Ms. Sanders responded that she believed Representative
Johnson was referencing the shift in oversight of
maintenance project management. She stated that the data
shown reflected ownership of facilities by individual
departments, such as DEED. She explained that what had been
transferred was the project management of maintenance for
those facilities, and that responsibility had shifted to
DOT. She stated that the department was available to help
explain the responsibilities.
Representative Johnson asked if the first bar on the chart
reflected buildings covered by PBF. She asked if the
backlog reflected the remaining amount of unfunded
maintenance after the available funds had been spent. She
clarified that she understood the number did not represent
all maintenance needs for a given year, but the portion of
needs that were not currently funded.
Ms. Sanders responded that the bar represented the cost of
deferred maintenance projects for buildings such as the
Robert B. Atwood Building in Anchorage and the SOB. She
explained that each year, the capital budget included an
appropriation from PBF to address deferred maintenance
needs. She noted that the fund did not contain enough
resources to cover the entire $210 million backlog and that
the process of addressing the needs occurred incrementally.
She did not know the exact appropriation amount, but the
capital budget included funding to address a portion of the
projects in the public building fund backlog.
Representative Johnson stated that she was trying to
understand whether each department was transferring
sufficient funds into PBF to cover maintenance obligations.
She understood that multiple departments occupied the SOB
and asked how maintenance costs were divided among the
departments and if the departments were contributing enough
to cover maintenance needs. She wondered if each department
had a designated line item in its budget for maintenance
contributions or if the expenses were embedded within
operating costs. She asked for clarification on whether
departments were underfunding maintenance transfers and if
additional appropriations were necessary to reduce the
backlog.
Ms. Sanders responded that departments occupying facilities
covered by PBF contributed to the fund through annual lease
payments. For example, DOA paid for its own space in the
SOB. She stated that lease payments flowed into PBF to
cover maintenance expenses. She relayed that increasing the
lease rates could generate more revenue for maintenance
projects, but additional funding would need to be allocated
to the affected departments to cover the higher costs.
Representative Johnson acknowledged that there were
different ways to structure maintenance funding. She found
the large deferred maintenance backlogs stressful. She was
concerned because the legislature often acknowledged the
problem but failed to make meaningful progress in
addressing the backlog. She thought it would be helpful to
understand whether additional funding should be provided to
departments or if there needed to be structural
adjustments. She stated that she wanted to gain a clearer
picture of the underlying causes and potential solutions
and whether more funding was needed.
1:55:18 PM
Co-Chair Schrage stated that he shared Representative
Johnson's concerns. He observed that the legislature
continued to receive reports of deferred maintenance needs
without making significant progress in addressing the
needs. The state was able to raise lease rates to fund more
maintenance, but it was choosing not to, resulting in
continued accumulation of deferred maintenance.
Representative Galvin stated that she was trying to
determine which projects were most urgent based on safety
and health needs. She asked if there was also a list
identifying facilities that needed to be fully replaced.
For example, she understood that the Fairbanks Pioneer Home
(FPH) needed a full replacement. She asked if such
facilities were tracked separately from deferred
maintenance.
Ms. Sanders responded that there was a short list of
facilities in need of full replacement and confirmed that
FPH and the Fairbanks Juvenile Justice Center were on the
list. She stated that the facilities were not included in
the deferred maintenance backlog but were considered
replacement needs with significantly higher associated
costs. She suggested that Mr. Hodgin provide additional
information.
Mr. Hodgin added that DOT maintained a short list of
highway maintenance stations that had reached the end of
their useful life and required replacement. He stated that
some of the projects were already in the design phase.
Representative Galvin thought that deferred maintenance
eventually reached a tipping point where continued
investment was no longer efficient. She asked how many
items on the deferred maintenance list actually required
full replacement or should be removed from service.
Ms. Sanders responded there were multiple short lists
maintained by various agencies, but not a single
comprehensive list identifying all facilities that required
replacement. She explained that an additional factor in
evaluating facilities was whether the building continued to
serve a necessary purpose. She noted that the state owned
many correctional facilities and pioneer homes that
continued to be evaluated based on both condition and use.
1:58:59 PM
Ms. Sanders continued to slide 5, which summarized the
statewide deferred maintenance appropriations and provided
an overview of the funding mechanism currently in place.
She stated that the state's capital income fund (CIF) was
the primary funding source for deferred maintenance
projects. She reported that Chapter 88, SLA 2018 [SB 107
passed in 2018] had designated the fund for preventative
and deferred maintenance of state facilities. She explained
that the earnings from the state's settlement with Amerada
Hess [State v. Amerada Hess et al.] were deposited into the
fund each year. She stated that funding from CIF was then
requested in the capital budget and appropriated to OMB,
which allocated it to state agencies for specific projects.
Ms. Sander relayed that the slide presented a summary of
allocations dating back to FY 20. She stated that once
agencies submitted their prioritized lists, a review and
ranking process was conducted by DOT Director Danny Gibson
and Mr. Hodgin. She relayed that OMB then used the
recommendations to allocate funding. She noted that a
portion of the total appropriation was retained as
unobligated funds to respond to emergencies that occurred
during the year, such as failed boilers or roof damage. In
FY 25, $6 million of the $28 million appropriation had been
set aside for emergencies and subsequently transferred to
the Disaster Relief Fund (DRF) due to its zero balance. She
reported that approximately $6.5 million in deferred
maintenance projects were currently on hold as a result.
The money would be returned to the deferred maintenance
fund and reallocated if DRF was later backfilled through an
appropriation.
2:02:04 PM
Representative Hannan noted that there was a sharp decline
in appropriations shown for FY 21, which she assumed was
due to the COVID-19 pandemic. The legislature had adjourned
early in 2020 and had only made three authorizations. She
assumed that the higher amount for FY 22 likely reflected
two years' worth of accumulated funds for public
facilities. She asked if her understanding was accurate.
Ms. Sanders responded that Representative Hannan was on the
right track. She explained that the $5.9 million shown for
FY 21 was made up of supplemental appropriations that were
enacted during the FY 22 legislative session. She stated
that the funds were applied retroactively to address urgent
needs.
DANNY GIBSON, DIRECTOR, DIVISION OF FACILITIES SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES,
continued the presentation on slide 6 and relayed that
Alaska faced a substantial deferred maintenance backlog
with limited available financial resources. He explained
that it was essential to prioritize projects and ensure
that the most critical needs were funded. He reported that
since 2019, the State Facilities Council (SFC) had served
as the primary entity for evaluating and prioritizing
deferred maintenance projects for executive branch
agencies. He explained that SFC was composed of one
representative from each executive branch agency and was
facilitated by the Division of Facilities Services (DFS).
Each year, OMB and DFS collected deferred maintenance
backlogs from agencies for review. He noted that the
council typically met between March and June of each year
with the goal of delivering a prioritized list of statewide
deferred maintenance projects to OMB by July for allocation
of funding.
Mr. Gibson stated that the prioritized list was developed
using a consistent formula that considered the importance
of the facility, the type of system in need of repair or
replacement, and the urgency of the issue. He explained
that each project was assigned a Project Index Value (PIV)
and projects were prioritized based on the assigned value.
He noted that Mr. Hodgin was one of the original founders
of SFC and the developer of the PIV methodology. He stated
that Mr. Hodgin would explain the methodology in more
detail later in the presentation.
Representative Johnson noted that that the table on slide 5
showed that the Alaska Court System (ACS) had no
expenditures for four of the six included years. She asked
for clarification on how the court system's maintenance
projects were prioritized. She noted that there had been
discussion in the past about whether capital needs for the
court system were fully captured in the general
prioritization process. She expressed concern that the
court system had received no funding for deferred
maintenance over the past three years, despite its large
number of buildings.
Ms. Sanders responded that the court system submitted
deferred maintenance project requests through the capital
budget process for the December 15, 2024 deadline, and also
submitted requests for emergent needs. She explained that
not all agencies appeared on the allocation table every
year, and not all funding for the court system came through
the deferred maintenance prioritization process. She noted
that the court system sometimes received direct capital
appropriations for specific projects, which would not be
reflected in the deferred maintenance data on the slide.
Representative Johnson stated that she understood that the
court system could receive direct appropriations for events
such as roof collapses or flooding. She emphasized that the
court system had a large portfolio of buildings, and she
would have expected more stability for ongoing maintenance.
She stated that she would follow up offline.
2:07:38 PM
Representative Galvin remarked that the explanation of the
deferred maintenance process had been helpful. She observed
that there were no projects listed for the UA system in FY
25 and asked for clarification regarding its absence.
Ms. Sanders responded that the legislature had appropriated
approximately $20 million directly to UA in the prior year
for deferred maintenance needs. She explained that because
the university received a separate appropriation of $18.9
million, it did not receive an allocation through CIF in FY
25. The information shown on slide 5 only reflected funding
distributed through CIF and did not include all other
capital appropriations for deferred maintenance.
Representative Galvin understood that there was a formula
to identify and prioritize projects based on need. She
would be pleased if the $20 million appropriation covered
all of the needs, but she thought that was unlikely. She
was surprised that neither the court system nor the
university had any critical needs, such as a failed boiler
system. She asked if the implication was that the needs
from other departments ranked higher based on the formula.
Ms. Sanders responded that the university's projects were
not evaluated through the deferred maintenance
prioritization process discussed in the presentation. The
university had received a separate allocation and its
projects were not taken into account. The university's
projects would have been considered for additional funding
if it had not received a separate appropriation.
Representative Galvin asked why the schools were not
evaluated using same formula.
Ms. Sanders responded that DEED was responsible for
evaluating the school system's needs and it was separate
from the process discussed in the presentation.
Representative Galvin asked why it was separate. She noted
that each department conducted its own evaluation but still
submitted requests to the same appropriating body. She
questioned whether it would make sense to include DEED's
school maintenance needs in the same formula used by other
departments and treat all state funding for public
facilities uniformly. She asked if there was a reason for
the separation.
Ms. Sanders responded that school facilities were not
state-owned and were considered separate from state agency
facilities. She explained that the state was not liable for
the maintenance of school district-owned buildings. She
added that DEED conducted its own extensive project
evaluation and ranking process for school facilities. There
were some REAA facilities that were exceptions and were
addressed through a separate fund and appropriation
mechanism.
2:12:01 PM
Mr. Hodgin continued to slide 7 which detailed the
methodology behind PIV and the process for prioritizing
deferred maintenance projects. He explained that PIV was
used to inform OMB's funding allocations. He reported that
the calculation considered three primary factors: the
Mission Alignment Index (MAI), the system factor, and the
need.
Mr. Hodgin continued to slide 8 and explained that MAI
aligned a facility to the core mission of a department. He
relayed that it measured how closely a specific facility
supported the primary purpose of the agency that owned it.
For example, if an agency owned multiple types of
buildings, such as warehouses, office buildings, or
hangars, some of the facilities would align more directly
with the agency's mission than others.
Mr. Hodgin relayed that departments were asked to consider
several questions, including how well a facility delivered
services, how heavily the facility was utilized, how many
individuals it served, and whether there were alternative
facilities in the same area that could serve the same
function. He stated that the most critical facilities were
those directly aligned with an agency's fundamental
purpose. He emphasized that departments were required to
assess the relative criticality of their facilities to
guide investment decisions and divestiture considerations.
He clarified that the MAI score was determined by the
department and reflected its own business decisions.
Mr. Hodgin moved to slide 9 which included examples of how
MAI was applied. He explained that the scale ranged from 0
to 0.9, with critical facilities ranked at the top and non-
mission critical facilities at the bottom. For example, a
correctional center was critical for DOC's fundamental
purpose and a highway maintenance station was critical for
DOT's purpose. He stated that other facilities might
receive lower mission alignment scores, such as warehouses
or general office buildings.
Mr. Hodgin proceeded to slide 9 and explained the system
and needs assessment components. He stated that building
systems were evaluated based on function and urgency of
repair. The criteria ranged from life, health, safety, and
structural systems to more aesthetic or nonessential
systems such as interior finishes or groundskeeping. He
explained that scores ranged from 0.25 to 1.0 depending on
the system's importance.
Mr. Hodgin continued to slide 10 and stated that any system
could rise in priority if its failure impacted life,
health, safety, or building operations. For example, a
heating system with significant deficiencies could escalate
to a high priority due to its effect on the safety of
building occupants. He indicated that the need factor was
assessed on a scale from five to three, where five
indicated imminent system failure and three represented a
necessary repair within an appropriate timeframe.
Representative Johnson asked if Mr. Hodgin had created the
formula and process for prioritization.
Mr. Hodgin responded that he had created the formula.
Representative Johnson acknowledged the complexity of
prioritization and that opinions about what should be
prioritized could differ. She would follow up online to
learn more details.
Representative Hannan asked when MAI had been created and
how long it had been used in deferred maintenance planning.
Mr. Hodgin responded that the system was introduced to SFC
in late 2019 and implementation began in 2020. He reported
that the system had been in use since 2020.
Representative Hannan acknowledged that some of the
committee's frustration could have stemmed from the
political challenges in determining deferred maintenance
priorities. She asked whether the development of MAI had
enabled DOT to produce a more accurate deferred maintenance
list, or whether the process still relied on agencies
advocating for themselves. She asked if the new process
allowed urgent needs to be prioritized appropriately, such
as a correctional facility facing a critical security risk.
She asked if the system had successfully improved the
accuracy and clarity of maintenance spending decisions.
2:18:40 PM
Mr. Hodgin responded that prior to the implementation of
the current system, individual departments submitted
requests directly to OMB, which created a difficult and
subjective allocation process. He stated that the need for
a more collaborative and objective process led to the
development of MAI and the formation of SFC. He explained
that each agency's council representative was expected to
have professional experience in facilities management and
to be able to present and defend the agency's project needs
based on objective criteria. The process had led to more
robust discussions between departments.
Mr. Hodgin explained that council members could question
whether a system or facility was appropriately ranked and
challenge or encourage a reevaluation if the urgency or
risk of failure appeared greater than initially expected.
He stated that the methodology encouraged objectivity and
collaboration and allowed departments to better advocate
for their needs. The methodology had created a functional
process and there was no process in place before. He noted
that his perspective on process was colored by working with
engineers.
Representative Hannan asked if OMB thought the engineering-
based evaluation provided a clearer framework for capital
budget planning than previous methods. She asked if the
process offered more solid ground and clarity for OMB.
Ms. Sanders responded that she had worked with Mr. Hodgin
for many years and emphasized that she was not an engineer.
She explained it had previously been difficult for OMB to
assess and compare the priorities of 18 agencies advocating
for unique and critical needs. She stated that the process
developed by SFC had provided a clearer outline for
allocating funds. She added that OMB appreciated having
authority to retain a portion of funds to address urgent
needs that were not yet identified in the prioritized list,
which gave the agency important flexibility. She stated
that the new process had helped OMB respond more
methodically to urgent state needs.
Co-Chair Schrage understood that the system allowed for
more accurate prioritization of maintenance projects but
did not improve the accuracy of the overall dollar estimate
for the state's deferred maintenance and infrastructure
needs.
Mr. Hodgin responded in the affirmative.
Co-Chair Schrage asked how often the state's assessment of
infrastructure and deferred maintenance costs was updated.
He requested an explanation of the update process and how
current the state's deferred maintenance list was.
Mr. Hodgin responded that in 2024, DOT hired consultants to
assist in assessing deferred maintenance needs. The
assessment focused specifically on PBF facilities and
buildings shared by multiple tenants. There was an added
cost associated with hiring outside consultants, but the
department tried to account for the cost. He noted that in
2025, DOT planned to conduct a similar assessment for its
own facilities, such as maintenance stations and airport
buildings. When resources permitted, the department tried
to capitalize on the opportunity to conduct objective,
updated evaluations.
Mr. Gibson added that the department maintained operating
maintenance agreements with many agencies that owned
facilities outside of DOT that were not funded by PBF. He
stated that DOT liaised with other agencies as often as
possible to support and communicate needs observed in the
field. He clarified that agencies were ultimately
responsible for submitting their deferred maintenance
backlogs each year.
2:24:41 PM
Representative Bynum thought that the presentation
illustrated that there was a concerning volume of backlog
maintenance. He suggested that nearly all prioritized
projects were urgent given the scale of the backlog. He
asked how low-cost items were identified and addressed
within the current process. He noted that some low-cost
projects might not seem critical yet but could become
serious problems if the projects were neglected.
Mr. Gibson responded that OMB maintained an unobligated
portion of deferred maintenance funds. He explained that
the funds could be accessed to address critical events that
occurred during the year. He noted that if a system failure
arose that was not high-cost, unobligated funds provided a
mechanism for agencies to request funding outside of the
prioritized list.
Representative Stapp asked whether there was a source that
clearly accounted for interagency receipts for operational
maintenance. He stated that he had seen an interagency
operational maintenance line item for $45,000 for the
"executive's house" which he thought seemed high. He had
observed various operational maintenance costs without
accompanying justification. He suggested that the state
would not have a significant backlog if such amounts were
actually being spent on maintenance.
Ms. Sanders responded that the $45,000 item was in the
operating budget. At the request of the legislature the
previous year, OMB had allocated operational maintenance
costs into a separate allocation within each agency's
budget. She noted that the process was new and she
requested some grace for the agencies to ensure the
accuracy of their figures, with the understanding that
there would be an opportunity to revise and improve the
figures the following year. She added that operational
maintenance costs often included personal services costs
for maintenance staff and were not limited to materials or
minor repair expenses. She clarified that personnel hired
to maintain facilities would also be captured in the
operational maintenance line.
Representative Stapp noted that he would not press further
since it was a new process. He asked whether including
personal services costs could inflate the operational
budget. He added that labor costs were already budgeted
elsewhere in departmental appropriations.
Ms. Sanders replied that Representative Stapp was correct
that such costs would be "double-counted," which was why
capital improvement project receipts were used because the
fund codes were considered duplicated. She emphasized that
when analyzing the state's budget, it was important to
separate non-duplicated costs from duplicated costs. She
indicated that capturing all operations and maintenance
costs in a single allocation would be challenging and what
should or should not be included would differ by agency.
For example, the deferred maintenance costs for DOC could
look significantly different from the costs for DFG. She
explained that DOC might have on-site maintenance personnel
whose costs were included, while DFG might incur
maintenance expenses for remote facilities such as cabins
used during fish-counting operations. She reiterated that
maintenance needs and expenditures were not directly
comparable across agencies.
2:30:29 PM
Representative Johnson stated that buildings that were
substandard from the beginning often had elevated deferred
maintenance costs from day one. She suggested that the
number of people served by a facility should be part of the
evaluation. For example, the Division of Motor Vehicles'
(DMV) office was visited by the public daily and should be
treated differently than a warehouse facility. She asked
whether the number of people who used a facility was
incorporated into the prioritization process.
Mr. Hodgin responded that such considerations were part of
MAI. He explained that the index accounted for a facility's
capabilities and level of utilization and was one of the
decision-making factors used by agencies in the
prioritization process.
Mr. Hodgin continued on slide 11, which presented an
example from the most recent prioritization cycle conducted
by SFC. He reported that over 100 projects had been
reviewed, scored, and ranked. He explained that each
council member had scored both the system factor and the
level of need for the project. The average of the scores
was then used to calculate the PIV, which was used to
prioritize the projects. He stated that SFC approved the
prioritized list of projects, which was then submitted to
OMB to help inform its allocation decisions.
Representative Galvin asked how many of the 1,999
facilities had one or more projects included on the master
prioritization list.
Mr. Hodgin responded that there were approximately 100 to
120 projects on the list. However, the included projects
represented a small selection of the larger deferred
maintenance backlog.
Representative Galvin clarified that her question concerned
how many of the 1,999 facilities had any deferred
maintenance projects at all, regardless of whether the
projects were currently prioritized.
Ms. Sanders responded that she did not have the number
available but would follow up with the information. She
added that one building might have multiple projects on the
list. The duration of a project would depend on the
complexity and scope of the project, and projects would
likely go through planning, design, and construction
phases. The projects provided opportunities for both local
and statewide design professionals and contractors through
the state's procurement process.
2:34:15 PM
Mr. Hodgin stated that typical project costs could be
influenced by market conditions, commodity prices, or
unforeseen increases in project scope due to unknown
conditions or hazardous materials. He acknowledged that
while some projects had come in under budget, others had
significantly exceeded estimates. He noted that challenges
were communicated back to SFC in order to better inform
future cost projections and prioritization strategies.
Representative Johnson asked for more information about
SFC. She asked how many members were on the council and
where it was located. She wondered if Mr. Hodgin could
follow up with a report.
Mr. Hodgin responded that SFC was comprised of
approximately 10 or 11 members, each representing an
executive branch department that owned facilities. He
stated that members were expected to have knowledge and
expertise in facility management. The council operated
under a formal charter, which outlined member
qualifications and duties. One of the primary duties of the
council was the ranking and prioritization of deferred
maintenance projects. The council typically met quarterly.
He offered to follow up with more information after the
meeting.
Representative Johnson noted that she would request further
details after the meeting.
2:36:52 PM
Mr. Gibson continued the presentation on slide 13 to
address funding recommendations and targets. He stated that
although there was no definitive rule for how much should
be spent on deferred maintenance, the industry standard
typically ranged from 1 percent to 4 percent of the
replacement value of a facility. The replacement value of
the state's facility portfolio was approximately $8 billion
which meant that the state would need to invest between $84
million and $337 million annually to meet its deferred
maintenance needs.
Mr. Gibson continued that one point he wanted to address
that had been raised during the presentation was the
relationship between operational maintenance efforts and
deferred maintenance. He stated that while he recognized
and credited many of the maintenance teams for their work
in preventing emergency events, the structure of a
commercial facility generally outlasted the lifespan of its
system components. He explained that even when a facility
was newly constructed, the expectation was that major
components such as roofs, boilers, and plumbing systems
would need replacement long before the facility itself
reached the end of its life. Although ongoing maintenance
supported the longevity of systems, systems at the end of
their intended lifespans would likely not be in optimal
condition even if the systems were still functioning. He
added that the system replacements might not score as
urgent needs in the prioritization process and would likely
be classified as deferred maintenance. He emphasized that
due to limited funding, not all systems could be replaced
as needed or as expected.
Co-Chair Schrage asked how much funding had been allocated
to deferred maintenance in the governor's budget.
Ms. Sanders responded that approximately $26 million had
been appropriated to the CIF. She clarified that she did
not have the precise figure available at the moment. She
noted that there were other capital requests included in
the budget such as a project to address an Americans with
Disabilities Act (ADA) compliance issue at MEHS. She noted
that the administration utilized CIF as much as possible,
but unexpected issues were often brought directly to the
legislature for separate appropriations.
Co-Chair Schrage asked whether any entity recommended
appropriating only 0.25 percent of a facility's replacement
value annually for maintenance.
Ms. Sanders responded that no such recommendation existed.
She acknowledged that the amount being appropriated was
insufficient and that the backlog of deferred maintenance
continued to grow.
2:40:19 PM
Representative Bynum understood that based on the current
backlog and the fact that there was approximately $26
million in available funding, it would take around 30 years
to resolve the existing backlog, assuming the backlog did
not grow. He noted that in 30 years, many other facilities
would likely be due for replacement. He was not sure the
long-term plan was reasonable. He stated that the current
level of investment appeared designed only to stop the
backlog from growing rather than reducing the backlog. He
asked what the current rate of backlog growth was and if
the trend was improving or getting worse. He understood
that the situation was trending in the wrong direction and
that the state was not catching up. He asked whether the
state kept track of how the backlog changed from year to
year.
Ms. Sanders responded that she had not personally reviewed
the backlog trends. She added that SFC might not have
reviewed the trends either, but she agreed it would be a
useful exercise. She acknowledged that the current fiscal
environment had not allowed for significant investment in
deferred maintenance and that available funds were being
used only to meet the most critical needs.
Representative Bynum asked if the state had the capacity to
execute on the existing backlog. He suggested that if $700
million were suddenly appropriated to address the full
backlog, the state likely lacked the capacity to manage and
complete the associated work. He asked whether the state
had ever evaluated its ability to execute such a backlog,
regardless of whether there was enough funding.
Ms. Sanders responded that the conversation about capacity
occurred during the project allocation process. She stated
that it was important to ensure that DOT had sufficient
staff capacity to award contracts and that enough
contractors were available in the specific project
locations. There had recently been an issue in Sitka
because DEED had been unable to find an available
contractor for a project. She explained that capacity
concerns were focused on the department's ability to
administer funds but also on communities' abilities to
secure contractors. She emphasized that capacity was a key
consideration when allocating funding.
Representative Bynum understood that there was a
recommendation to set aside 2 percent to 4 percent of the
replacement cost value to address deferred maintenance
needs. He asked whether there was an existing plan that the
department would communicate to the legislature on
strategies to resolve the problem. If there was no plan, he
asked what the department needed from the legislature in
order to create a plan.
Ms. Sanders responded that there was no statewide deferred
maintenance plan currently in place. She stated that
discussions had occurred in prior years under former Alaska
Governor Sean Parnell regarding the development of a
statewide plan, but the efforts had been set aside due to
the state's fiscal situation. She noted that UA had also
conducted an internal exercise to determine what a
sustainable plan would look like for its own deferred
maintenance backlog. She stated that there had been
proposed legislation related to the university's effort,
though she was not aware of its current status. She
reiterated that the absence of a statewide plan was tied to
the lack of available resources. She offered reassurance
that a conversation about establishing a plan could
certainly take place, but without funding to support the
work, a plan would be of limited use.
2:45:25 PM
Co-Chair Schrage thanked the presenters. He reviewed the
meeting agenda for the following day.
ADJOURNMENT
2:46:02 PM
The meeting was adjourned at 2:45 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| OMB HFIN Deferred Maint Update FY26 Overview 031725.pdf |
HFIN 3/17/2025 1:30:00 PM |
HB 54 |
| FY2011-FY2025 Deferred Maintenance Backlog Trend.pdf |
HFIN 3/17/2025 1:30:00 PM |
HB 54 |
| FY2025 State Facilities Prioritization and Initial Allocation Statewide DM Appropriation.pdf |
HFIN 3/17/2025 1:30:00 PM |
HB 54 |
| 03.24.25 HFIN OMB Deferred Maintenance Follow-up to 03.17.25 Hearing Final.pdf |
HFIN 3/17/2025 1:30:00 PM |
HB 54 |