Legislature(2003 - 2004)

02/21/2003 09:07 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 21, 2003                                                                                    
                              9:07 AM                                                                                         
SFC-03 # 6, Side A                                                                                                              
SFC 03 # 6, Side B                                                                                                              
CALL TO ORDER                                                                                                               
Co-Chair Lyda  Green convened the meeting at approximately  9:07 AM.                                                            
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde                                                                                                               
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Also  Attending:  SENATOR ROBIN  TAYLOR;  CHERYL  FRASCA,  Director,                                                          
Office of Management  and Budget, Office of the Governor;  NICO BUS,                                                            
Acting  Administrative   Services   Manager,  Division  of   Support                                                            
Services, Department of Natural Resources                                                                                       
Attending  via  Teleconference:     There  were  no  teleconference                                                           
SUMMARY INFORMATION                                                                                                         
SB  75-SUPPLEMENTAL APPROPRIATIONS: FAST TRACK                                                                                  
SB  76-SUPPLEMENTAL APPROPRIATIONS                                                                                              
The Committee heard an  overview of the supplemental budget requests                                                            
from the  Office of  Management  and Budget,  and detailed  requests                                                            
from  the   Department  of  Natural   Resources  relating   to  fire                                                            
suppression activities. The bill was held in Committee.                                                                         
     SENATE BILL NO. 75                                                                                                         
     "An Act making supplemental and other appropriations; amending                                                             
     appropriations; and providing for an effective date."                                                                      
     SENATE BILL NO. 76                                                                                                         
     "An Act making supplemental and other appropriations; amending                                                             
     appropriations; making appropriations to capitalize funds; and                                                             
     providing for an effective date."                                                                                          
CHERYL FRASCA, Director,  Office of Management and Budget, Office of                                                            
the Governor,  testified that the  total FY 03 supplemental  request                                                            
is $63.3  million, with $9.3  million of that  included in  the fast                                                            
track  request. She  stressed  that  the recently  formed  Murkowski                                                            
Administration "focused  on the spending side of the fiscal gap", in                                                            
preparing the supplemental  budget request. She explained the review                                                            
process in  determining why the departmental  requested funding  was                                                            
needed.  She shared  that in  some instances,  it  was learned  that                                                            
supplemental  requests submitted by  departments were proposed  only                                                            
because  the Legislature  did not appropriate  funding the  previous                                                            
legislative  session.  She furthered  that  some requests  were  not                                                            
actually supplements  to the original appropriations,  but rather to                                                            
fund  unanticipated  events and  that other  "options  to cover  the                                                            
costs"   were   identified.   Therefore,   she  assured   that   the                                                            
supplemental   budget  request  presented  to  the  Legislature   is                                                            
"scrubbed down".                                                                                                                
Ms. Frasca  divided  the supplemental  budget  requests into  "three                                                            
major  groupings".  The first  she  identified  as $15  million  for                                                            
caseload growth  in formula programs.  She informed that  the actual                                                            
caseload growth  expense is approximately $12 million  and that this                                                            
amount was  offset by other savings:  fewer students than  projected                                                            
in  the   K-12  foundation   funding  formula,   and  current   year                                                            
requirements for school debt reimbursement.                                                                                     
Ms. Frasca  next listed $31  million general  funds and $31  million                                                            
federal  funds  for disasters  and  fire  suppression  as the  group                                                            
comprising the largest amount of requested supplemental funds.                                                                  
Ms. Frasca listed  the third grouping of programs  "habitually short                                                            
funded"  in  the  regular   operating  budget  and  thus   requiring                                                            
approximately  $7  million in  supplemental  funds.  She listed  the                                                            
Office of Public Advocacy  (OPA); the Public Defenders Agency (PDA);                                                            
foster care programs and subsidized adoptions.                                                                                  
Ms. Frasca  added that  approximately $11  million is requested  for                                                            
other purposes.                                                                                                                 
Senator  Bunde  asked  the  Administration's   desired  timeline  in                                                            
receiving funds  requested in the fast track supplemental  and those                                                            
requested in the regular supplemental legislation.                                                                              
Ms. Frasca  requested receipt  of funds included  in the fast  track                                                            
legislation in  March 2003, advising that funding  for some programs                                                            
could be depleted  by that date. She stated that the  items included                                                            
in the regular  supplemental request  could be funded at  the end of                                                            
the legislative session, as in past years.                                                                                      
Senator Hoffman directed  attention to the $3.3 million supplemental                                                            
request  for  the  OPA  and  commented  that   during  the  previous                                                            
legislative  session,   the  Senate  Minority  was  criticized   for                                                            
proposing an increase of  $2.3 million to the initial appropriation.                                                            
He  therefore  asserted  that   amendments  offered  to  the  FY  04                                                            
operating budget should receive serious consideration.                                                                          
Senator  Hoffman  next  addressed  funding  to  offset  the  federal                                                            
government denial of the  State's use of the Fair Share provision to                                                            
partially  fund  the Medicaid  program,  which  is not  included  in                                                            
either supplemental budget  request. He understood that legal issues                                                            
were involved,  but stressed that the State is obligated  to provide                                                            
services.  He asked when these expenses would be paid.                                                                          
Ms. Frasca detailed  the identification of the relationship  between                                                            
tribal hospitals  and the  State, and the  intention to utilize  $50                                                            
million federal  funds for  Medicaid expenses  under the Fair  Share                                                            
provision.  She reported  that the  federal agency  disallowed  this                                                            
usage  and  the State  has  appealed  this  decision,  although  she                                                            
cautioned  that the  federal agency  has history  of not  overruling                                                            
decisions  made  within that  agency.  If the  appeal  is lost,  she                                                            
continued,  the matter would  be taken to  court. She remarked  that                                                            
the  Murkowski   Administration  is   meanwhile  operating   on  the                                                            
assumption that  the State is "within the regulation"  and therefore                                                            
funding is not  requested in this supplemental budget.  She informed                                                            
that  if the  final ruling  were  against the  State,  the issue  of                                                            
appropriating  State  funds would  be addressed  at  that time.  She                                                            
predicted  funds might be  procured from  the Constitutional  Budget                                                            
Reserve (CBR) fund.                                                                                                             
     SB 76                                                                                                                      
     Section 7                                                                                                                  
     Department of Natural Resources                                                                                            
     Fire Suppression                                                                                                           
      Fixed costs and fire suppression costs incurred to date                                                                   
     $19,033,800 general funds                                                                                                  
NICO  BUS,  Acting  Administrative  Services  Manager,  Division  of                                                            
Support  Services,  Department  of  Natural  Resources,  provided  a                                                            
booklet  titled, "Wildland  Fire Management,  The  Basics" [copy  on                                                            
Mr. Bus reminded the Committee  that the initial FY 03 appropriation                                                            
was $3 million for fire  suppression. He recounted that historically                                                            
the  annual  general  fund  expenses  have  been  approximately  $14                                                            
Mr. Bus  reported  that at the  start of  FY 03,  fire activity  and                                                            
subsequent   expenses  were  higher   than  average  due   to  "very                                                            
extraordinary" weather  conditions, including minimal snow the prior                                                            
winter.  He  described  the  dry conditions  in  the  spring,  which                                                            
continued  late into the  summer. He stated  that the larger  fires,                                                            
those  exceeding   $1  million  to  suppress  and   defined  by  the                                                            
Department as "project fires", occurred in July and August.                                                                     
Mr. Bus told of  the classification of areas of the  State into four                                                            
broad protection  levels at the start  of the fire season:  critical                                                            
protection,  full   protection,  modified  protection   and  limited                                                            
protection. He said this  dictates how the fire season is managed by                                                            
the  Department  of Natural  Resources  and  federal agencies.    He                                                            
applied  critical protection  status  to those  areas important  for                                                            
life and property, full  protection to areas of historical sites and                                                            
other property "important  to protect", modified protection to areas                                                            
where a designation  would be determined  in the event of  an actual                                                            
fire, and limited  protection to areas of low value,  in which fires                                                            
would be allowed to burn.                                                                                                       
Mr. Bus  related that over  the past several  years, there  has been                                                            
pressure on  the Department to categorize  as much land as  possible                                                            
for limited protection  without jeopardizing the protection  of life                                                            
and  property.  He spoke  to  the Department  goal  and legislative                                                             
directive relating  to the size of  fires and their classification,                                                             
noting  that in  FY 02,  the  goal was  exceeded.  He remarked  that                                                            
confining fires to areas  of less than ten acres reduces the cost of                                                            
fire suppression.                                                                                                               
Mr. Bus described  the conditions during the past  summer, including                                                            
one day in which  7,000 lightning strikes occurred.  He coupled this                                                            
with fuel conditions  in explaining the difficulty  of fire fighters                                                            
to contain  fires. He reported that  once the initial $3  million FY                                                            
03 appropriation  was exhausted the  Department issued an  emergency                                                            
disaster  declaration  on July  19,  2002. The  additional  expenses                                                            
incurred after that date  he estimated at $7.5 million. He continued                                                            
that weather conditions  in late July and early August created other                                                            
"flare ups of  fire activity", although this is normally  the end of                                                            
the fire season.  As a result, he  said, another emergency  disaster                                                            
declaration was  issued on August 19, with $11 million  expended. He                                                            
disclosed these  expenditures comprise the $19 million  supplemental                                                            
budget request.                                                                                                                 
Mr.  Bus  was  uncertain   whether  this  amount  would   fund  fire                                                            
suppression  activities through the  end of the fiscal year  on June                                                            
30, 2003.  He explained  that if  fire occurrences  are minimal  the                                                            
expenses could  be absorbed; however, any large project  fires would                                                            
require  another  emergency  disaster  declaration   and  additional                                                            
Co-Chair  Green requested  the average  costs  for fire suppression                                                             
during the months of May and June in the past five to ten years.                                                                
Mr. Bus stated  he would provide this information  to the Committee.                                                            
He predicted the  cost for the upcoming spring would  be higher than                                                            
average, given the low snow pack.                                                                                               
Senator Hoffman  asked the relationship between the  State of Alaska                                                            
and the federal  government in fighting  fires located on  federally                                                            
owned lands.  He also  wanted to  know if fire  activity on  federal                                                            
land was over-budgeted for FY 03.                                                                                               
Mr. Bus replied  that the State is divided into two  fire protection                                                            
zones, with the federal  Bureau of Land Management (BLM) responsible                                                            
for  fire  suppression  activities  in  all lands  in  the  northern                                                            
portion of the state plus  most of Southeastern Alaska and a portion                                                            
of Southcentral  Alaska.  Fire suppression  in  central and  western                                                            
portions,  and  a  small  portion  of  Southeastern  Alaska  is  the                                                            
responsibility  of the  state Division  of Forestry,  Department  of                                                            
Natural Resources. [Map  indicating these areas is located on page 8                                                            
of the aforementioned  handout.] He  commented that the majority  of                                                            
the population resides in the areas under State control.                                                                        
Mr. Bus then explained  that regardless of the landowner,  the State                                                            
and  federal governments  are  responsible  for fighting  the  fires                                                            
located within  their fire protection boundaries.  He furthered that                                                            
once  a fire  is  extinguished  and  the cost  is  calculated,  land                                                            
ownership is determined  and that party is liable  for the expenses.                                                            
He exampled a  fire located on federally owned land  within the fire                                                            
protection boundary  of the Division of Forestry.  He stated that at                                                            
the conclusion  of the fire  season, the  State charges the  federal                                                            
government  for reimbursement, and  conversely the State  reimburses                                                            
the  federal government  for  expenses  incurred fighting  fires  on                                                            
state-owned  land  located  in  the BLM  fire  protection  zone.  He                                                            
detailed the  timeframe in reconciling  the charges, with  the final                                                            
settlement completed in March of the following year.                                                                            
Co-Chair Green commented that this is an on-going process.                                                                      
Senator  Bunde asked  if the State  charges  private landowners  for                                                            
fire suppression efforts on their property.                                                                                     
Mr. Bus  responded that if  the State conducts  fire suppression  on                                                            
Native-owned  land, the BLM reimburses  the State for the  expenses.                                                            
He continued  that if the  fire began on  privately owned land,  the                                                            
Department  considers the  cause of  the fire and  if negligence  is                                                            
found, the  State attempts to recoup  the costs from the  landowner.                                                            
He admitted  that actual collection  of these expenses is  "not very                                                            
Senator Bunde  commented that the population in the  State continues                                                            
to grow  and is redistributed.  He  asked if a  procedure exists  to                                                            
reclassify the  priority of fire suppression in areas  as population                                                            
concentrations  changes. He also asked whether the  lands classified                                                            
for  limited   protection  should   be  increased  to  reduce   fire                                                            
suppression costs.                                                                                                              
Mr. Bus  relayed that  the Murkowski  Administration  is "eager"  to                                                            
review the  classifications and amend  contractual relationships  to                                                            
attain  the most  economical system.  He qualified  that  agreements                                                            
must be reached  between the landowners. He exampled  that a portion                                                            
of State-owned  land could be classified for limited  protection yet                                                            
is adjacent  to land  under different  ownership  that has a  higher                                                            
It was established that  representatives of the Division of Forestry                                                            
would provide further details at a later time.                                                                                  
Co-Chair Green  asked if the classifications are internal  decisions                                                            
made  within  the   Division  of  Forestry,  or  whether   statutory                                                            
guidelines apply.                                                                                                               
Mr. Bus told  of annual landowner  meetings whereby discussions  are                                                            
held to determine  classifications. Conversely, he  stated that if a                                                            
fire  occurred   in  an  area  under  State  jurisdiction   and  the                                                            
Department  did not  respond  adequately,  the State  could be  held                                                            
liable for damages.                                                                                                             
Senator Bunde asked if  a cabin were constructed in a non-protection                                                            
area and  the land  was not reclassified,  could  the State  be held                                                            
liable in the event of fire damage.                                                                                             
Mr.  Bus  replied  that property  owners  could  attempt  to  obtain                                                            
restitution  and the State would be  required to defend against  the                                                            
Senator Bunde  recommended that the  Legislature should be  involved                                                            
in making the classification determinations.                                                                                    
Mr. Bus  referenced the  aforementioned handout  in commenting  that                                                            
the  inter-agency  agreement  on classification  of  land  partially                                                            
determines  how  the  Department  responds  to  fire  situation.  He                                                            
stressed  that although the  total cost of  fire suppression  is the                                                            
responsibility  of landowner, if no  action is taken on State-owned                                                             
land  and the fire  spreads  to land  under other  ownership with  a                                                            
higher protection  value,  the State becomes  liable for the  damage                                                            
done  on that land.  He relayed  such  an instance  of the  previous                                                            
summer in which the State was required to pay $1.2 million.                                                                     
Co-Chair  Wilken spoke of  a situation along  the Chena Hot  Springs                                                            
Road the prior year and  he thanked the Division for its efforts. He                                                            
opined  that this  situation  "had  all the  components  of being  a                                                            
disaster," but noted the disaster was averted.                                                                                  
Co-Chair  Wilken  next told  of  an instance  in  the  fall of  2002                                                            
whereby a fire  burned to the property line of a private  landowner.                                                            
Co-Chair Wilken stated  this landowner requested assistance from the                                                            
Department,  but that  request  was denied.  He asked  the  witness'                                                            
assessment of the situation.                                                                                                    
Mr. Bus was unaware of the details of the situation.                                                                            
Co-Chair Wilken  asked how the State  is compensated for  the State-                                                            
employed  firefighters  sent  to  other  states to  assist  in  fire                                                            
Mr. Bus replied  that these expenses are reimbursed  100 percent. He                                                            
pointed out that the fire  season in Alaska is generally May through                                                            
July and after  it has been determined  that the Alaska fire  season                                                            
is  concluded,  equipment  could  be "released"   for use  in  other                                                            
states. He informed that  these expenses are reimbursed as well, and                                                            
therefore, some  of the Department's fixed costs are  reimbursed. He                                                            
listed  an  average  of  $8  million  federal  reimbursement   funds                                                            
garnered,  approximately  $5 million  of which  is for out-of-state                                                             
fire  suppression  activities.  He  noted  that  village  crews  are                                                            
employed in this  manner and this contributes to village  economies.                                                            
Co-Chair Wilken and Mr.  Bus further discussed the accounting of the                                                            
reimbursements  into the  State general  fund and  the logistics  of                                                            
loaning equipment.                                                                                                              
Senator  Olson questioned  the  loan of  certain  aircraft to  other                                                            
states, noting that other aircraft is less expensive to operate.                                                                
Mr. Bus replied  that the federal  government prefers this  aircraft                                                            
and  utilizes   them  almost   immediately   upon  release   by  the                                                            
Department. He  noted that as a result, the federal  government pays                                                            
the majority of the fixed costs of these aircraft.                                                                              
Mr. Bus  told  of other  federally owned  aircraft  utilized by  the                                                            
State that  has since been  returned at the  request of the  federal                                                            
Co-Chair  Wilken  asked what  is  done with  the  State-leased  fire                                                            
suppression aircraft during the winter.                                                                                         
Mr.  Bus replied  that the  aircrafts  undergo maintenance  and  are                                                            
Senator Taylor  asked about  efforts to salvage  timber in  areas of                                                            
fire activity. He surmised  that between two and three million acres                                                            
of land is burned annually.                                                                                                     
Mr. Bus answered that no  commercial market exists for burned timber                                                            
from Interior  Alaska. He understood  that local residents  obtain a                                                            
conditional use  permit to utilize some of this timber  for personal                                                            
Senator Olson  pointed out the request  of $48,000 for fire  weather                                                            
forecasting. He asked the reason for this item.                                                                                 
Mr.  Bus replied  that  weather  is  a significant  factor  in  fire                                                            
activity  and  forecasts are  utilized  in  determining suppression                                                             
activity. He exampled  the decision to "attack less  aggressively" a                                                            
fire when rain is forecasted.                                                                                                   
Senator  Olson  wanted  to  know  why  the  federal  weather  bureau                                                            
forecasts are not utilized, as this service is free of charge.                                                                  
Mr. Bus indicated he would research the matter.                                                                                 
Senator Olson  next referenced the  airport use fees of $111,000  in                                                            
FY 02 compared to $33,000 in FY 03.                                                                                             
Mr. Bus  told of erosion  at the McGrath  airport and the  emergency                                                            
temporary repairs that  were required during FY 02. He informed that                                                            
the federal government  issued an emergency declaration  and rebuilt                                                            
the airfield.  However, he  said the State  was responsible  for the                                                            
cost of the emergency repairs.                                                                                                  
Senator  Olson   understood  the   process  of  reimbursement   from                                                            
different  agencies,  and asked  the  reimbursement  process in  the                                                            
event an  aircraft crash  starts a  fire. He wanted  to know  if the                                                            
State collects from the pilot's insurance carrier.                                                                              
Mr. Bus  replied that  the possibility  of collecting  from  private                                                            
insurance  companies  is  under consideration.   He was  unsure  the                                                            
number of fires caused by downed aircraft.                                                                                      
Co-Chair  Green  commented  that  a number  of  pilots  fly  without                                                            
insurance coverage.                                                                                                             
Senator  Olson  relayed  an  incident of  a  helicopter  crash  near                                                            
Galena,  which  started  a  tundra  fire.  He  understood  that  the                                                            
insurance company  was billed for  the cost of fire suppression  and                                                            
as a result, the company ceased issuing new policies in Alaska.                                                                 
Mr. Bus stated  he would provide further information  on the matter.                                                            
Senator Bunde  suggested an initially  appropriating $6 million  for                                                            
fire suppression  to cover the fixed  costs, rather than  $3 million                                                            
with an expectation for a supplemental appropriation.                                                                           
Mr. Bus agreed  to this approach.  He noted the average annual  fire                                                            
suppression  expense is $14 million  and that projecting  the actual                                                            
budget requirement  would be difficult.  He stated this has  been an                                                            
issue  for the  previous ten  years. However,  he  asserted that  an                                                            
appropriation sufficient  to cover fixed costs would be appreciated.                                                            
Senator Bunde  spoke of "unfortunate accidents" the  previous summer                                                            
involving air tankers.  He surmised this would impact the number and                                                            
types of air tankers  available for the upcoming year.  He asked the                                                            
Department's plan given this situation.                                                                                         
Mr. Bus affirmed  that aircrafts are scarce. He told  of the process                                                            
undertaken  to obtain  additional  aircraft  for the  upcoming  fire                                                            
Senator Taylor asked to  what extent Native corporations participate                                                            
in the expense of fire  suppression activities on Native-owned land.                                                            
Mr. Bus responded that  the federal BIA reimburses the entire amount                                                            
of fire suppression expenses to the State.                                                                                      
Co-Chair  Green  noted  the discussion  on  fire  suppression  would                                                            
continue.  She indicated  intent to  change the  process of  funding                                                            
this  item  and  others  to  minimize  the  amount  of supplemental                                                             
appropriations necessary.                                                                                                       
SFC 03 # 6, Side B 09:54 AM                                                                                                     
Co-Chair  Green  continued  that  this  would be  applied  to  other                                                            
departments as well.                                                                                                            
Senator Taylor compared  the State's philosophy of fighting fires to                                                            
those  practiced  in  British  Columbia   and  Alberta,  Canada.  He                                                            
informed that  in these provinces, fires are suppressed  immediately                                                            
and not  allowed to spread  from one area  to another. He  suggested                                                            
the system  practiced in Alaska is  "set to fail". He surmised  that                                                            
if the  fire located near  McGrath had  been contained immediately,                                                             
the expense would have been between $2 and $3 million lower.                                                                    
Co-Chair  Green  stated  the  Department   would  respond  to  these                                                            
comments as the first order of business in the next meeting.                                                                    
Co-Chair Lyda Green adjourned the meeting at 09:56 AM                                                                           

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