Legislature(2001 - 2002)
07/17/2001 05:15 PM Senate BUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT COMMITTEE
LEGISLATIVE BUDGET AND AUDIT
July 17, 2001
5:15 P.M.
MEMBERS PRESENT
Senator Gene Therriault, Chair
Senator Lyman Hoffman
Senator Randy Phillips
Senator Jerry Ward
Representative Hugh Fate, Vice Chair
Representative Reggie Joule (teleconferenced)
Representative Ken Lancaster
Representative Eldon Mulder
Representative Bill Williams, (alternate)(teleconferenced)
MEMBERS ABSENT
Senator Dave Donley
Senator Wilken (alternate)
Representative John Harris
Representative John Davies (alternate)
COMMITTEE CALENDAR
APPROVAL OF PREVIOUS MINUTES
May 7, 2001
June 7, 2001
EXECUTIVE SESSION
Preliminary Audit Reports
AUDIT REPORTS
Release of Preliminary Audits to Agencies
DNR/OMB/VARIOUS AGENCIES-PRESENTATION OF PROPOSED CONTRACTS
With the LBA Committee - Natural Gas Pipeline Projects
OTHER COMMITTEE BUSINESS
WITNESS REGISTER
HEATHER BRAKES, Legislative Assistant to
Senator Gene Therriault
Alaska State Legislature
Capitol Building, Room 121
Juneau, Alaska 99801
Telephone: (907) 465-6590
DAVID TEAL, Director
Legislative Finance Division
Alaska State Legislature
P.O. Box 113200
Juneau, Alaska 99811
Telephone: (907) 465-3795
POSITION STATEMENT: Spoke on behalf of the Legislative
Finance Division
PAT DAVIDSON, Director
Legislative Audit Division
Alaska State Legislature
P.O. Box 113300
Juneau, Alaska 99811-3300
Telephone: (907) 465-3830
POSITION STATEMENT: Introduced the audit reports
PAT POURCHOT, Commissioner
Department of Natural Resources
State of Alaska
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400 Willoughby Avenue-5 Floor
Juneau, AK 99801-1724
Telephone: (907) 465-2400
POSITION STATEMENT: Natural Gas Pipeline Project
BILL BRITT, Coordinator of the Gas Pipeline
Department of Natural Resources
State of Alaska
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411 West 4
Anchorage, AK 99501
Telephone: (907) 271-4304
POSITION STATEMENT: Natural Gas Pipeline Project
SENATOR JOHN TORGERSON
35477 Kenai Spur Hwy, 101A
Soldotna, AK 99669
Telephone: (907) 260-3041
POSITION STATEMENT: Natural Gas Pipeline Project
ANNALEE MCCONNELL, Director
(Testified via Teleconference)
Office of Management and Budget
Office of the Governor
P.O. Box 110020
Juneau, AK 99811-0020
Telephone: (907) 465-4660
POSITION STATEMENT: Natural Gas Pipeline Project
LARRY PERSILY, Deputy Commissioner
Department of Revenue
State of Alaska
P.O. Box 110405
Juneau, AK 99811-0405
Telephone: (907) 465-5469
POSITION STATEMENT: Natural Gas Pipeline Project
KRAG JOHNSEN,
Denali Commission
510 L Street #410
Anchorage, AK 99501
Telephone: (907) 271-1413
POSITION STATEMENT: Denali Commission Report
ACTION NARRATIVE
TAPE LBA 01-7, SIDE A
CHAIR GENE THERRIAULT called the Joint Committee on
Legislative Budget and Audit meeting to order at 5:15 P.M.
on July 17, 2001. Members present at the call to order were
Senators Therriault, Hoffman, Phillips, Ward and with
Representatives Fate, Joule, Lancaster and Williams.
APPROVAL OF THE MINUTES
CHAIR THERRIAULT announced that the first order of business
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would be approval of the minutes from the May 7, 2001 and
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June 7, 2001, Legislative Budget and Audit Committee
meetings.
REPRESENTATIVE FATE MOVED approval of the minutes and asked
for unanimous consent. There being NO OBJECTION, the
minutes were approved and adopted.
EXECUTIVE SESSION
REPRESENTATIVE FATE made a motion, in accordance with Title
24 and 44, to MOVE into Executive Session for the purpose of
discussing audit reports, which are held confidential by
law. There being NO OBJECTION, the Committee went into
Executive Session at 5:20 P.M.
CHAIR THERRIAULT requested that Pat Davidson (Legislative
Auditor), David Teal (Director of Legislative Finance),
Amanda Ryder (Legislative Finance Staff) and Committee Staff
Heather Brakes attend the Executive Session.
The Committee resumed Open Session at 5:35 P.M.
AUDIT REPORTS
REPRESENTATIVE FATE MOVED to release the preliminary audits
to the agencies.
· AIDEA - Rural Energy Program
· State of Alaska Single Audit FY00
There being NO OBJECTION, the preliminary audits were
released for agency response.
DEPARTMENT OF NATURAL RESOURCES/VARIOUS AGENCIES
PRESENTATION OF PROPOSED CONTRACT WITH LEGISLATIVE BUDGET &
AUDIT COMMITTEE
NATURAL GAS PIPELINE PROJECTS
CHAIR THERRIAULT noted that during the Legislative Session,
there had been a request to the Legislature for authorized
funding for the Office of Management & Budget (OMB) and the
Department of Natural Resources (DNR) to undertake necessary
work in order to move forward with the natural gas pipeline
permit to prepare the State to evaluate permits and
applications. He stated that an agreement had not been
reached during the Legislative Session, however, in the last
appropriation bill, $1.5 million dollars was given to the
Legislative Budget & Audit Committee for the purpose of
contracting with State agencies for the necessary efforts.
Chair Therriault acknowledged that it was unusual to be
contracting with State agencies to have work done rather
than contracting with independent businesses. He added that
there were members of the Committee that were skeptical with
some parts of the plan. He asked the Committee to consider
providing the authorization to release money for work to be
undertaken by DNR and OMB in order that they would not have
to keep coming back to LBA in order to receive the required
funding.
REPRESENTATIVE FATE MOVED to approve authorization for the
Legislative Budget & Audit Chairman to sign the RSA for the
Department of Natural Resources. That amount would not
exceed $923,800 dollars.
CHAIR THERRIAULT advised that there were representatives
from the departments to testify on the issues. He
referenced the spreadsheet, which accompanied the handouts
in member's packets. [Copy on File]. The spreadsheet
indicates a detailed timeframe and funding source. It is
broken down by agency and by general fund and statutory
designated program receipts (SDPR). During the period of
stst
July 1 - December 31, 2001, there is an estimated total
cost of $923.8 thousand general fund dollars. That amount
proposes to match a "possible" $2,573.0 million statutory
designated program receipts expected to be received from the
producers. That would amount to a total of approximately
$3.5 million dollars.
Chair Therriault indicated that it has been difficult to
determine the exact level of required expenditure. He
pointed out that there would be seventy-six positions
created through the funding. He referenced the motion made
by Representative Fate. He suggested that in addition to
the items listed on the spreadsheet, other expenses would be
primarily personnel and equipment costs. New personnel will
be processing the requests and permits. He noted the Non-AO
187 activities for which the funding would provide.
Chair Therriault mentioned that there had been questions
regarding the timeliness of some of the requests. There has
been an alternative method worked out for the Alaska Oil and
Gas Conservation Commission's (AOGCC) work so that they can
move forward under the statutory designated program receipt
section.
PAT POURCHOT, Commissioner, Department of Natural Resources,
asked if more information was needed on the Administrative
Order #187 (AO) spreadsheet. He commented that the work
indicates "most likely an over statement" of what would need
to be done in the first six months. He interjected that the
numbers were based on whole quarter estimates. The timing
was such that not a full quarters work would be done. He
informed members that representatives from all affected
agencies were present to testify.
REPRESENTATIVE MULDER asked what had changed from the
initial request.
COMMISSIONER POURCHOT replied that the initial request in
January 2001 did not include a clear understanding of what
would be received from reimbursements by the applicants.
That information is currently available through the pre-
application work, which has been turned in and amounts to
approximately $3 million dollars. The memorandum of
understanding (MOU) outlines the costs for equipment,
travel, commodities and recruitment not directly related for
permitting and which the State would be liable for.
REPRESENTATIVE MULDER pointed out that in January, there had
not been a lot of support for the proposal. He asked what
functions had changed since January.
COMMISSIONER POURCHOT clarified that the Administration had
refined the information during the process since the initial
proposal in January. He added that the project was less
expansive than originally anticipated. Initially, the
project would have been started much earlier. He added that
the studies component has been more refined.
REPRESENTATIVE MULDER pointed out that the same number of
positions had been requested in the January proposal. He
reiterated that there had been little support in the House
for the proposal during the Legislative Session. He stated
that he was currently reluctant to support the motion.
CHAIR THERRIAULT noted that the producers and Foothills Pipe
Lines Alaska have agreed to "step-in" and add personnel. He
commented that he had less of a concern than voiced by
Representative Mulder. The largest part of the general fund
expenditure would be equipping and setting up the office.
Because some of the producers will be providing funding
dollars, they will be exerting some control. The motion
would provide authorization to work with the Administration,
thus providing some control by the Committee. Most often,
the LBA Committee only makes appropriations, however,
through this motion, the LBA Committee would be entering
into a contract through the Committee Chair.
Chair Therriault noted the bottom portion of the
spreadsheet, which indicates items the motion would not
cover.
COMMISSIONER POURCHOT advised that there would be a total of
seventy-six positions, which would not relate to the other
general fund component. The Administration is making the
assumption that there would be an active application in the
second half of the fiscal year.
CHAIR THERRIAULT asked if the State Fire Marshal report
would be proposed in the first six months.
BILL BRITT, Department of Natural Resources, commented that
if the Fire Marshal were doing work that is reimbursable for
reapplication, it would be in the State's best interest to
have it funded as represented in the spreadsheet.
CHAIR THERRIAULT observed that the amount freed up by that
would be small. He noted that he intended to track that
amount. He stated it was his intent that the Committee
should be cautious with the amount of money expended. When
the full Legislature is back in session, then the Finance
Committees could take control of the responsibility.
REPRESENTATIVE FATE restated the MOTION before the
Committee. The motion would approve the authorization for
the Chairman of the LBA Committee to sign the RSA with the
Department of Natural Resources and that it would not exceed
$923.8 thousand dollars.
REPRESENTATIVE FATE and SENATOR PHILLIPS noted a conflict of
interest in voting on the matter.
REPRESENTATIVE JOULE commented that Senator Torgerson was
frustrated with the lack of available information. He asked
if Senator Torgerson would be comfortable enough to help
move the other contracts forward.
CHAIR THERRIAULT indicated that Senator Torgerson was more
concerned with the second portion of the Department of
Natural Resources proposal.
SENATOR JOHN TORGERSON stated that the producers have "come
to the table" and have requested that some studies be done.
He agreed that the Committee should authorize the studies.
He acknowledged that the producers would be paying for that.
He pointed out that there was no provision for the
Administration to deal with or share knowledge with the
Legislature. The studies are a point of concern, as that
information might not be available and that the
Administration might not share those findings with the
Legislature.
CHAIR THERRIAULT replied that was a different concern than
the motion currently before the Committee.
There being NO OBJECTION to the original motion, it was
approved.
CHAIR THERRIAULT invited Commissioner Pourchot to address
the study portion of the spreadsheet.
COMMISSIONER POURCHOT explained that the Administration
intended to work cooperatively with the Legislature in
developing the specifics of how the preapproval process
would work. He hoped that the hiring process would work
quickly.
CHAIR THERRIAULT expected that the process could be worked
out by the end of the week. It was his intent to require
periodic reports, distributed to Committee members. He
recognized that the Committee was already a couple weeks
behind the projected timeline as submitted by the
Administration. He noted that the Administration would need
to justify the next level of staffing to the Chair.
COMMISSIONER POURCHOT addressed the studies. The
Administration is proposing to utilize the fast track money
for these studies. In response to Senator Torgerson's
concern, the studies will be made available to the
Legislature. He noted that there are a few items that have
not received funding. AOGCC study is very important to help
determine the extraction of the oil. He added that the
Department of Natural Resources would have an economic
component on that study. The Administration would like to
be reimbursed for the study. The language did not
specifically cover that concern. He stated that the
Administration would provide a report on that issue in
November 2001. The labor study is more complicated.
Commissioner Pourchot recognized that there is a difference
of agreement with the timeliness and the subject matter of
that report. He stated for the record that work is valuable
and that it is important to do it before the construction
phase.
Commissioner Pourchot noted an additional component in the
amount of $180 thousand dollars which would continue the
contracts with the Cambridge Energy Research Associates.
That contract has been used to provide expert advise on gas
and related issues. He noted that the Administration would
like to keep that contract for another six months or so. He
did not know another alternative.
SENATOR WARD requested further information on the Department
of Law line.
COMMISSIONER POURCHOT responded that the Department of Law
was on the list, however, it is anticipated that the
additional funding would not be needed until January 2002,
which would correspond to the increased work effort with the
incoming applications. It was listed on the sheet so that
the entire year's appropriation needs would be clear.
CHAIR THERRIAULT referenced the memo from Legislative
Finance Division regarding the different sources of funding.
[Copy on File]. He indicated that there was a difference in
opinion on how that language should be interpreted between
the Legislature and the Administration.
COMMISSIONER POURCHOT suggested the Office of Management and
Budget (OMB) would make that determination. He noted that
there could be policy considerations with such a decision
and not only legal implications.
ANNALEE MCCONNELL, Director, Office of Management and
Budget, (Testified via Teleconference), stated that OMB
would not normally allow a department to undertake a study
such as proposed, but rather, they would attempt to write a
work project or report. The Administration does not believe
that they should expand outside the interpretation, which
they subject their own agencies to.
CHAIR THERRIAULT indicated that there is some disagreement
with the amount of flexibility available on that portion of
the money. He noted that there would be further discussions
regarding that concern.
Chair Therriault stated that the Administration is moving
forward with the producers and Foothill regarding the AOGCC
studies. He asked if that could be worked out so that the
project could start.
COMMISSION POURCHOT replied that he hoped so.
ANNALEE MCCONNELL interjected that if the Administration
needs to come back to the LBA Committee, they will.
TAPE CHANGE, LBA 01-7, SIDE 2
CHAIR THERRIAULT pointed out that there has been discussion
regarding how the project will affect the State of Alaska.
There have been recommendations of getting a report from the
Department of Labor indicating how the project would affect
communities and employment in those areas from the northern
route versus the highway route. There is support for a
different kind of study and it could provide information
that the Legislature would want to have access to for the
beginning of the next legislative session.
ANNALEE MCCONNELL stated that there are certain activities
that relate to the permitting process, which will require
assistance from the Department of Law. In addition to that,
there are issues that the State has relating to its own
responsibility and fiscal matters. She stated that there
are activities that fall outside of what would be
appropriate for the producers to pay for in the
reimbursement agreement.
CHAIR THERRIAULT responded that during the time of LBA
control, it is important to provide more specifics regarding
such items.
COMMISSIONER POURCHOT referenced the Department of Revenue's
request in the amount of $180 thousand dollars for the
consultant contract with Cambridge Energy Research
Associates. The Department was previously under contract
and was provided with a monthly retainer to provide that
advice. The hope is that retainer could be continued for
the next six months during the application period.
SENATOR TORGERSON pointed out that the request had
previously been funded out of the Governor's Office. He
asked why it had been "dumped" on the Department of Revenue.
He voiced his frustration in working with the Administration
while determining the appropriate course regarding the
request.
CHAIR THERRIAULT consulted David Teal if that should be a
point in question.
DAVID TEAL, Director, Division of Legislative Finance,
responded that the retainer on that item would amount to
about $21 thousand dollars per month. Legislative Finance
Division pays several thousand dollars per year for email
type retainers and studies. The Legislative Finance
Division does not pay a monthly retainer for additional
questions. He understood that is what the monthly cost
would be to the Department of Revenue.
CHAIR THERRIAULT asked where the additional costs resulted
from.
COMMISSIONER POURCHOT explained that amount included travel
money for the Department of Revenue outside of the contract
and for consulting amounts.
LARRY PERSILY, Department of Revenue, advised that the
retainer amount was $20,833 thousand dollars per month plus
their expenses. The $30 thousand dollars for the
Commissioner's Office is for travel and expenses that office
would incur for the project.
CHAIR THERRIAULT questioned if those costs had not been
anticipated in the regular budget.
LARRY PERSILY responded that the Commissioner's travel
budget was quite small. Generally, the Commissioner does
not travel much outside of the State. The $30 thousand
dollars would be used for the entire year. It is not a six-
month request. He added that Cambridge was under contract
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until June 30, 2002. He pointed out that the
Administration is only requesting funds for six months.
CHAIR THERRIAULT asked the will of the Committee.
VICE-CHAIR FATE MOVED to adopt the request of $180 thousand
dollars to be RSA'd to Department of Revenue to cover the
expenses as discussed. He asked if that was an adequate
amount or just enough to "get the job done".
LARRY PERSILY believed that the Department would spend more
than $30 thousand dollars on travel, conference fees and
purchasing reports in FY02 on the gas line.
ANNALEE MCCONNELL recommended adding the amount to the
existing RSA's for simplification.
VICE CHAIR FATE MOVED to AMEND the original motion to
include the remarks made by Ms. McConnell. The motion would
include the $180 thousand dollars plus the $923.8 thousand
dollars.
There being NO OBJECTION, the motion was adopted.
OTHER COMMITTEE BUSINESS
THE DENALI COMMISSION
KRAG JOHNSEN, Denali Commission, referenced the memorandum
in member's packets, which provides an update on the
activities of the Denali Commission. [Copy on File]. He
listed the primary funding areas for the Denali Commission
FY01 appropriations.
· Health Clinic
Mr. Johnsen pointed out that dollars were committed to both
large and small clinic projects throughout the State through
a fast track RFP process developed by the Committee in
March.
· Energy
Mr. Johnsen commented that energy continues to be the
primary goal of the Commission and that they are focusing on
the bulk fuel upgrades, the rural power systems upgrades and
the energy cost reduction RFP's.
CHAIR THERRIAULT asked if Representative Lancaster was
involved with the energy portion of the Commission.
REPRESENTATIVE LANCASTER responded that he had co-sponsored
a bill to establish an energy plan task force.
KRAG JOHNSEN continued.
· Economic Development
He noted that the Denali Commission has committed to a mini-
grant program, community priorities program, Alaska growth
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capital, 1 Alaskans Foundation and the community toolbox
program.
Mr. Johnsen noted that the Senate is looking at a $40
million dollar budget next year. The regional funding
summits have been a three-way effort between USDA-Rural
Development, the State of Alaska Department of Community &
Economic Development and the Denali Commission.
VICE CHAIR FATE asked if there was a dollar amount
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available, which had been distributed to the 1 Alaskan
Foundation. He pointed out that group was well endowed. He
asked why they were using Denali Commission money.
KRAG JOHNSEN replied that they have their own money. The
Denali Commission has given them money to be used directly
for rural communities to address the development of local
decision-making, management and governance skills necessary
to plan and implement sustainable community development
efforts.
VICE CHAIR FATE reiterated that group was well endowed. He
suspected that they owned between $26-$28 million dollars.
He asked how much was being given to that group and why the
proceeds of their income was not being used.
KRAG JOHNSEN clarified that originally, the amount allocated
to that group was $1 million dollars. That money went to a
number of community development causes.
SCHOOL COST STUDY
CHAIR THERRIAULT pointed out the school cost study request
package.
VICE CHAIR FATE commented that the issue had been discussed
at their last meeting, however, action had not been taken on
that request.
CHAIR THERRIAULT advised that the RPF had been developed and
that it had been submitted to Legal Services for review.
The Committee is currently ready to release for proposals.
When those proposals are returned, an evaluation committee
will be formed. Senator Therriault requested that the
Committee consider providing authorization to evaluate the
proposals in order to get the contracts started.
VICE CHAIR FATE MOVED that the Committee authorize Chair
Therriault to enter into a contract for a school operating
cost study in an amount not to exceed $350 thousand dollars.
SENATOR HOFFMAN requested copies of the proposals be made
available to Committee members. He noted the importance of
the issue.
CHAIR THERRIAULT stated he would make that information
available. He added that the evaluation team would consist
of the following members:
· Chair Therriault
· Pat Davidson, Legislative Auditor
· David Teal, Director, Legislative Finance
· Eddy Jeans, Department of Education & Early
Development
There being NO OBJECTION, the motion was adopted.
FOSTER CARE AUDIT REQUEST
VICE CHAIR FATE asked if Commissioner Karen Perdue,
Department of Health and Social Services, had made a request
for an item of discussion.
PAT DAVIDSON, Legislative Auditor, stated that the Committee
approved an audit request generated from Representative Fate
to look at the foster care system in the State of Alaska.
That request had a number of components which included
looking at attracting/retaining foster parents and checking
to see how the Division of Family and Youth Services was
doing in addressing contact with those children in foster
care.
Ms. Davidson noted that there has been discussion with the
Commissioner, which indicated that the Federal Health and
Human Services would be starting a review process for their
child protection, foster care and adoption service monies.
They provided three manuals on how the review would take
place. There was a request by the Department that the State
audit not be done at the same time as the Department is
gearing up for the federal review.
Ms. Davidson added that her office has had staff go through
the manuals to determine if the audit would be sufficient in
scope to address the requests and the time frame for issuing
the report. She added that she wanted to see the report in
order to determine whether the quality was there to report
back to the Legislature.
Ms. Davidson reported that the review does seem to be
sufficient in scope and that it will address the items of
concern. She added that the idea of a joint audit was
attractive. At this time, there have been between eight to
twelve states that have had the federal audit performed.
There are only three reports that are currently available.
She surmised that if the Audit Division began an audit at
this time, the results would be available sometime late
February or March 2002. The federal report should be
available sometime in July 2002.
VICE CHAIR FATE asked if the time line was critical.
PAT DAVIDSON replied that the previous experience of the
Division of Family and Youth Service (DFYS) audits are that
the services are "long-term" in nature. The problems will
take a while to become resolved. Part of the federal review
would be a self-assessment. As soon as the self-assessment
discovers trouble areas, the Department will start to write
corrective action plans.
REPRESENTATIVE LANCASTER asked what prompted the federal
audit and if infractions were to be discovered, would State
funding be jeopardized.
PAT DAVIDSON replied that DFYS does receive Title E-4 money,
which is federal money. The federal review is in year-two
of a four-year process. She understood that a review is
done every four years by the federal government because they
are concerned about how the federal money is being spent.
If there were any violations, the federal government would
request a corrective action plan.
SENATOR HOFFMAN inquired if it would have any interaction
with the Indian Child Welfare Act.
PAT DAVIDSON understood that would be covered, however, she
did not know to what extent.
CHAIR THERRIAULT summarized the work done to date by the
Legislative Audit Division. He asked what the next step
should be.
VICE CHAIR FATE interjected that it is critical to look into
the health of the children going into the program and the
medical care available to them. He pointed out that there
have been some deaths.
PAT DAVIDSON commented that she was satisfied with the
current situation and that she wanted to have some of her
staff contact the federal review group in order that
questions can be answered and concerns covered.
VICE CHAIR FATE was comfortable with the comments made by
Ms. Davidson.
CHAIR THERRIAULT asked if the task previously approved by
the Committee should be changed.
PAT DAVIDSON recommended that at the next Committee meeting,
Legislative Audit Division would possibly provide a formal
motion for the Committee to suspend or withdraw the audit
request.
REPRESENTATIVE LANCASTER inquired if the federal and/or
State audit would include the counseling services for
representing the children.
PAT DAVIDSON stated that an audit would determine if
children are receiving the services that are in their plan.
REPRESENTATIVE MULDER suggested that Representative Fate be
added to the Committee evaluation team.
CHAIR THERRIAULT noted that he intended to have
Representative Fate as a member of that team.
CHAIR THERRIAULT concluded that the next Legislative Budget
and Audit meeting would be scheduled sometime in September
2001.
ADJOURNMENT
CHAIR THERRIAULT adjourned the Legislative Budget and Audit
Committee at 6:55 P.M.
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