Legislature(2003 - 2004)

03/24/2003 10:07 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          March 24, 2003                                                                                      
                             10:07 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 28, Side A                                                                                                             
SFC 03 # 28, Side B                                                                                                             
SFC 03 # 27, Side A*                                                                                                            
                                                                                                                                
*Audio recording  of this  meeting begins with  tape SFC-03  #28 and                                                            
continues with tape SFC-03 #27                                                                                                  
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair  Gary Wilken convened  the meeting  at approximately  10:07                                                            
AM.                                                                                                                             
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Lyda Green, Co-Chair                                                                                                    
Senator Con Bunde, Vice Chair                                                                                                   
Senator Ben Stevens                                                                                                             
Senator Donny Olson                                                                                                             
                                                                                                                                
Also Attending:  SUSAN  TAYLOR, Director, Division of Administrative                                                          
Services, Department of  Revenue; DAN SPENCER, Director, Division of                                                            
Administrative Services,  Department of Administration; KIM GARNERO,                                                            
Director,  Division of Finance,  Department  of Administration;  TOM                                                            
LAWSON, Director,  Division of Administrative  Services,  Department                                                            
of Community and Economic Development;                                                                                          
                                                                                                                                
Attending via  Teleconference:  From Anchorage: JOHN  MALLONEE, Data                                                          
Processing Manager,  Child Support Enforcement Division,  Department                                                            
of  Revenue;  MIKE MORA,  Common  Carrier  Specialist,  and  Project                                                            
Manager,  Regulatory  Commission  of Alaska;  GENE  KANE,  Director,                                                            
Department  of Community  and  Economic  Development;  From off  net                                                            
locations:  JULIE   STINSON,  Department  of  Administration;   MIKE                                                            
HARPER, Deputy  Director, Rural Energy, Alaska Industry  Development                                                            
and Export  Authority;  From Fairbanks:  JO GROVE,  Grants  Manager,                                                            
Division  of  Community  and  Business  Development,  Department  of                                                            
Community and Economic Development                                                                                              
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 100-APPROP: CAPITAL PROJECTS                                                                                                 
                                                                                                                                
The Committee heard from the Department of Revenue, the Department                                                              
of Administration, and the Department of Community and Economic                                                                 
Development. The bill was held in Committee.                                                                                    
                                                                                                                                
[Note: Audio recording of this meeting begins with tape SFC-03 #28                                                              
and continues with tape SFC-03 #27.]                                                                                            
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 100                                                                                                        
     "An  Act making capital  appropriations  and reappropriations;                                                             
     capitalizing a fund;  making appropriations under art. IX, sec.                                                            
     17(c),   Constitution  of  the   State  of  Alaska,   from  the                                                            
     constitutional   budget reserve  fund;  and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
The Committee heard overviews of the departmental budget requests.                                                              
                                                                                                                                
Department of Revenue                                                                                                         
                                                                                                                                
     Child Support Enforcement Case File Imaging Project                                                                        
     $363,800 federal receipts                                                                                                  
     $187,410 receipt supported services                                                                                        
     Reference No.: 37886                                                                                                       
     Category: Health/Human Services                                                                                            
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     State Match Required                                                                                                       
     Phased Project                                                                                                             
     This is  a project to provide  paperless case files  to be used                                                            
     for  child  support  cases.  All  information  regarding  cases                                                            
     including support  orders from the court, correspondence, forms                                                            
     applications,  etc., are currently in over 48,000  paper files.                                                            
     A  file center staff  of 3  full time employees  is devoted  to                                                            
     delivering  them  to  caseworkers  as  requested,  retrieving,                                                             
     updating  and re-filing.  As the number  of documents  that are                                                            
     handled  by CSED grows  over the coming  years, the ability  to                                                            
     create  imaged  files  instead  of  paper  files  will  greatly                                                            
     increase  the efficiency  of  the caseworkers,  accounting  and                                                            
     audit  staff and will  also allow file  center personnel  to be                                                            
     reallocated to provide even more client service.                                                                           
                                                                                                                                
SUSAN TAYLOR, Director, Division of Administrative Services,                                                                    
Department of  Revenue, testified this request would  fund the first                                                            
of two phases of the project.                                                                                                   
                                                                                                                                
Co-Chair Wilken asked the  source of the receipt-supported services.                                                            
                                                                                                                                
JOHN MALLONEE,  Data Processing Manager,  Child Support Enforcement                                                             
Division, Department  of Revenue, testified via teleconference  from                                                            
Anchorage that  the funds are "the  money that we collect  back that                                                            
are  reimbursements   for  public  assistance  that   was  paid  out                                                            
previously."                                                                                                                    
                                                                                                                                
Senator  Olson asked  if other  departments had  undertaken  imaging                                                            
projects that  could be reviewed to  determine the benefits  of such                                                            
an undertaking.                                                                                                                 
                                                                                                                                
Ms. Taylor stated  she would survey other departments  and report to                                                            
the Committee.                                                                                                                  
                                                                                                                                
     Child Support Enforcement Computer Replacement Project -                                                                   
     Phase 4                                                                                                                    
     $269,300 federal receipts                                                                                                  
     $35,700 receipt supported services                                                                                         
     Reference No.: 37810                                                                                                       
     Category: Health/Human Services                                                                                            
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     State Match Required                                                                                                       
     Phased Project                                                                                                             
     This is a continuation  of the computer and printer replacement                                                            
     project initiated  in FY 00. The agency objective is to replace                                                            
     personal  computers,  printer and  servers  that have  exceeded                                                            
     their useful  life. With 250 computers in use  in the Division,                                                            
     we have  at least 60  computers in that  situation, as  well as                                                            
      several network and mainframe printers and two servers.                                                                   
     The funding  for this project includes one-time  excess federal                                                            
     funding of  $200,000 derived from FY 02 and FY  03 Alaska Court                                                            
     System expense reimbursement.                                                                                              
                                                                                                                                
Ms. Taylor  informed that it is no  longer economical to  repair the                                                            
existing equipment.                                                                                                             
                                                                                                                                
Senator Olson asked when the computers were replaced last.                                                                      
                                                                                                                                
Ms. Taylor informed that  some of the computers are over eight years                                                            
old. She was unsure the  best practices for replacing the units, but                                                            
estimated four to five years was preferable.                                                                                    
                                                                                                                                
Department of Administration                                                                                                  
                                                                                                                                
     Payroll and Accounting Systems Replacement Analysis                                                                        
     $400,000 general funds                                                                                                     
     Reference No.: 37950                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2004                                                                           
     Phased Project                                                                                                             
     Funding  will  be used  to continue  replacement  analysis  and                                                            
     planning  for  the statewide  accounting  and  payroll  systems                                                            
     (AKSAS  and  AKPAY)  currently   managed  by  the  Division  of                                                            
     Finance.                                                                                                                   
                                                                                                                                
DAN SPENCER, Director, Division of Administrative Services,                                                                     
Department of Administration, introduced Ms. Garnero.                                                                           
                                                                                                                                
KIM GARNERO, Director, Division of Finance, Department of                                                                       
Administration read a statement relating to this request into the                                                               
record as follows.                                                                                                              
                                                                                                                                
     The  Division  of Finance  is currently  leading  a project  to                                                            
     assess our statewide  administrative systems and plan for their                                                            
     eventual  replacement.  This analysis is  well underway  with a                                                            
     multi-department  steering  committee  overseeing the  project.                                                            
     We're  developing a business  case, which will analyze  various                                                            
     possible  solutions and their  total costs of ownership.  These                                                            
     options  will be presented to  policy makers for a decision  on                                                            
     how to proceed.                                                                                                            
                                                                                                                                
     At the same time,  we're compiling business requirements, which                                                            
     any  selected  solution  will  have  to  meet.  Both  of  these                                                            
     products  are scheduled  for  completion July  1. The  $400,000                                                            
     request  before you  today will  be used to  administer  an rfp                                                            
     [request   for  proposals]  and  conduct  subsequent   contract                                                            
     negotiations  with the resulting vendors. The  rfp and contract                                                            
     negotiations  are  critical  paths,  which will  determine  the                                                            
     overall  replacement   cost  and  ongoing  maintenance  of  the                                                            
     selected solution.                                                                                                         
                                                                                                                                
     Shortcomings of these  tasks could cost the State millions over                                                            
     the  long  terms.   For  perspective,  our  current   statewide                                                            
     accounting  system is  18 years  old and costs  $15 million  to                                                            
     implement in the early 1980s.                                                                                              
                                                                                                                                
     Our  intent  is to  bring  to you  a  funding request  for  the                                                            
     selected  solution during the  next legislative session.  We're                                                            
     currently planning status meetings on this project for our                                                                 
     users in mid April and I'd like to invite any interested                                                                   
     legislators or their staff to attend one of these meetings.                                                                
                                                                                                                                
Co-Chair Wilken  asked how the $600,000 appropriated  in the current                                                            
fiscal year has been expended.                                                                                                  
                                                                                                                                
Ms. Garnero  told of a nationwide  firm, Maximus, that "specializes                                                             
in  serving  government"  contracted  to assist  in  developing  the                                                            
"business  case  and our  business  requirements",  which  would  be                                                            
completed July 1, 2003.  She added that some of the funds would also                                                            
be  utilized  for   travel  to  Anchorage  and  Fairbanks   for  the                                                            
aforementioned April meetings.                                                                                                  
                                                                                                                                
Co-Chair Wilken asked how  the $400,000 requested in this item would                                                            
be used to continue the process.                                                                                                
                                                                                                                                
Ms. Garnero replied this  would allow the Department to continue its                                                            
relationship  with  Maximus  to administer  the  rfp and  assist  in                                                            
contract  negotiations.  She  stressed  the  rfp  is  a complicated                                                             
procurement and  that the State would be "ill-advised"  to undertake                                                            
without professional consulting.                                                                                                
                                                                                                                                
Co-Chair  Wilken asked if  a total of $1  million appropriated  over                                                            
two fiscal years would result in a "structure" to go out to bid.                                                                
                                                                                                                                
Ms.  Garnero explained  that  a solution  would  be  selected and  a                                                            
contract negotiated.                                                                                                            
                                                                                                                                
Co-Chair  Wilken  asked  whether  the State  would  purchase  a  new                                                            
accounting system.                                                                                                              
                                                                                                                                
Mr. Spencer clarified that  these efforts would determine whether it                                                            
is preferable to purchase  a prepared system or create one in-house.                                                            
                                                                                                                                
Co-Chair  Wilken asked the  estimated cost  of a payroll  accounting                                                            
system for the State.                                                                                                           
                                                                                                                                
Ms. Garnero  replied that  other states have  purchased systems  for                                                            
between $20  million and  $250 million, the  amount appropriated  by                                                            
the State of Pennsylvania.  She assured the intent is to expend less                                                            
than the maximum amount.                                                                                                        
                                                                                                                                
Co-Chair Wilken  asked the savings  realized by the State  by such a                                                            
purchase and  whether staff reductions  or other efficiencies  would                                                            
occur.                                                                                                                          
                                                                                                                                
Ms. Garnero responded that  such savings is not known at this point.                                                            
She stated  that analysis  of the requirements  to "do business"  is                                                            
underway and she  anticipated that the question of  savings would be                                                            
considered in determining the solution.                                                                                         
                                                                                                                                
Co-Chair  Wilken asked  if  the solution  posed to  the legislature                                                             
would include information on the potential savings.                                                                             
                                                                                                                                
Ms.  Garnero remarked  that  "hard savings"  would  be difficult  to                                                            
measure. She  reiterated the existing  system was purchased  in 1985                                                            
and she spoke to the maintenance  expenses of this system. She noted                                                            
that licensing  and maintenance  of a new  system would surpass  the                                                            
current expenditures.                                                                                                           
                                                                                                                                
Co-Chair  Wilken   qualified  that   a  definitive  amount   is  not                                                            
necessary,  but rather requested a  range of the estimated  expense.                                                            
                                                                                                                                
Co-Chair  Green   suggested  the   question  could  rather   be  the                                                            
consequences of not making this purchase.                                                                                       
                                                                                                                                
Ms. Garnero  spoke of  the limited  use of the  existing system  and                                                            
that the payroll  system is the "driving  force" to streamline  data                                                            
processing for the State.                                                                                                       
                                                                                                                                
Co-Chair  Wilken  reminded  of  conversations  on  this  matter  the                                                            
previous year and stressed  that the Committee must be "comfortable"                                                            
with  the proposed  solution before  the  significant appropriation                                                             
could be made.  He therefore encouraged  the Department to  "burden"                                                            
the Committee with analysis and information.                                                                                    
                                                                                                                                
     Labor Contract Negotiations Support                                                                                        
     $250,000 general funds                                                                                                     
     Reference No.: 38476                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2005                                                                           
     One-time Project                                                                                                           
     Funding will be used for labor contract negotiations.                                                                      
                                                                                                                                
Mr.  Spencer  informed   that  tentative  agreements   for  one-year                                                            
contract extensions  have been reached  with all but two  bargaining                                                            
units, but that longer-term agreements must still be reached.                                                                   
                                                                                                                                
Co-Chair  Wilken noted  the $330,000  appropriation  of the  current                                                            
fiscal year has resulted in the one-year contract extensions.                                                                   
                                                                                                                                
Mr. Spencer  affirmed  and expressed  he would  research whether  an                                                            
unexpended balance of that appropriation remains.                                                                               
                                                                                                                                
Co-Chair  Green  asked  if funding  for  this  purpose is  always  a                                                            
capital expenditure.                                                                                                            
                                                                                                                                
Co-Chair Wilken understood this request is for "support".                                                                       
                                                                                                                                
Mr. Spencer  affirmed  and furthered  that  this is  not an  ongoing                                                            
expense,  but rather  a specific project  that would  have a  finite                                                            
end, and therefore  should not be "buried" in the  operating budget.                                                            
He noted that this funding  had been included in an operating budget                                                            
several years  ago, but that concerns arose about  the appropriation                                                            
lapsing at the end of the negotiations.                                                                                         
                                                                                                                                
Co-Chair Green  asked whether a period of time would  elapse between                                                            
these negotiations  and the beginning of the negotiations  for long-                                                            
term contracts.                                                                                                                 
                                                                                                                                
Mr. Spencer  responded  that the  next negotiations  would begin  in                                                            
July 2003.  He spoke  of the  lengthy process  involved in  reaching                                                            
agreements.                                                                                                                     
                                                                                                                                
Co-Chair Wilken  asked if the negotiations must begin  again shortly                                                            
because the current agreements are one-year contracts.                                                                          
                                                                                                                                
Senator  B. Stevens  asked if the  contracts for  all 12  bargaining                                                            
units are one year.                                                                                                             
                                                                                                                                
Mr. Spencer answered yes.                                                                                                       
                                                                                                                                
Senator B.  Stevens asked if the negotiations  must therefore  begin                                                            
anew.                                                                                                                           
                                                                                                                                
Mr.  Spencer  affirmed  and  explained  the  timeframe  of  the  new                                                            
gubernatorial  administration,  and the statutory  requirement  that                                                            
the governor must submit  negotiated contracts to the legislature by                                                            
the 60th  day of the legislative  session.   Because of the  limited                                                            
time,  he  stated  the decision  was  made  to  negotiate  one  year                                                            
contracts  to  allow further  review  of  the matter  before  longer                                                            
agreements were negotiated.                                                                                                     
                                                                                                                                
Senator B.  Stevens surmised the strategy  would begin negotiations                                                             
on July 1, 2003, rather than December 1, 2002.                                                                                  
                                                                                                                                
Mr.  Spencer  informed   that  Governor  Murkowski  began   contract                                                            
negotiations  immediately  upon taking  office.  However, given  the                                                            
complexities,  he said it  was determined  that additional  time was                                                            
necessary to negotiate longer-term agreements.                                                                                  
                                                                                                                                
Senator  B.   Stevens  asked  the   number  of  labor  negotiations                                                             
administered by the Department of Administration.                                                                               
                                                                                                                                
Mr. Spencer answered 13 or 14.                                                                                                  
                                                                                                                                
Senator B.  Stevens asked if 90 percent  of the labor contracts  are                                                            
on the same cycle.                                                                                                              
                                                                                                                                
Mr. Spencer  replied  that the  previous  administration  negotiated                                                            
bargaining  unit contracts  so all would  be on  the same cycle.  He                                                            
noted the benefits of undertaking all negotiations at one time.                                                                 
                                                                                                                                
     License Plates, Tabs and Manuals                                                                                           
     $400,000 receipt supported services                                                                                        
     Reference No.: 37942                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2004                                                                           
     On-going Project                                                                                                           
     Funding will provide for the purchase of license plates and                                                                
      tabs to maintain necessary statewide inventory levels.                                                                    
                                                                                                                                
Mr. Spencer noted  this item has historically been  included in both                                                            
the  operating capital  budgets.  He stated  the  Division of  Motor                                                            
Vehicles  is required  to  have license  plates,  training  manuals,                                                            
decals,  etc.  He  listed  the  Division  annually  expends  between                                                            
$200,000 and $300,000 for these items.                                                                                          
                                                                                                                                
Co-Chair Wilken asked whether  unexpended funds appropriated for the                                                            
current fiscal  year could be lapsed  and utilized for the  upcoming                                                            
fiscal year expenses.                                                                                                           
                                                                                                                                
Mr. Spencer  answered that because  it was a capital appropriation,                                                             
any  unexpended  funds  could   not  be lapsed.   He  explained  the                                                            
expenditures  occur on a calendar  year basis, rather than  a fiscal                                                            
year basis,  with a surge  of business occurring  during the  summer                                                            
months.  He said the  Division  attempts to  control inventory,  yet                                                            
retain an adequate supply.                                                                                                      
                                                                                                                                
Co-Chair  Wilken asked why  this item is  not currently included  in                                                            
the operating budget.                                                                                                           
                                                                                                                                
Mr. Spencer responded that  the previous time this item was included                                                            
in the operating  budget, it appeared  to be a funding increase  and                                                            
therefore  the  legislature  transferred  the  item to  the  capital                                                            
budget.                                                                                                                         
                                                                                                                                
     Payroll and Accounting Systems Replacement Analysis                                                                        
     Reference No.: 37950 (continued)                                                                                           
                                                                                                                                
Senator  B. Stevens  noted  the existing  consulting  contract  with                                                            
Maximus and asked whether  this company is a potential bidder on the                                                            
new system.                                                                                                                     
                                                                                                                                
Mr. Spencer answered  it is not and that this company  only provides                                                            
consulting services. He  informed that the State also entered into a                                                            
separate  contract agreement  with another  division of the  Maximus                                                            
company to  advise on federal cost  allocation plans. He  emphasized                                                            
this  company  does not  write  operating  systems. He  assured  the                                                            
Department  is careful  to  not procure  advice from  entities  that                                                            
could subsequently bid on the projects they provide advise for.                                                                 
                                                                                                                                
Senator B. Stevens  asked the percentage of the system's  operations                                                            
that  are  for  payroll   operations.  He  questioned   whether  the                                                            
Department is attempting  to replace the entire system when only the                                                            
payroll  portion is obsolete.  He requested  the Department  provide                                                            
further information on this matter.                                                                                             
                                                                                                                                
Mr. Spencer indicated Ms. Garnero would research the matter.                                                                    
                                                                                                                                
     Alaska Land Mobile Radio                                                                                                   
     $680,000 general funds                                                                                                     
     Reference No.: 37949                                                                                                       
     Category: Development                                                                                                      
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2006                                                                           
     Phased-underway Project                                                                                                    
     Funding  will be  used to  continue the  process of  converting                                                            
     Federal,  State, and local emergency communications  systems to                                                            
     technology that will  provide for interoperability (the ability                                                            
     of different agencies  with different communications systems to                                                            
      communicate across jurisdictions and with each other.)                                                                    
                                                                                                                                
Mr. Spencer  explained that  the Department  does not have  adequate                                                            
funding from receipt  authority funds for this project.  He reminded                                                            
that  this project  has  been  before the  legislature  for  several                                                            
years. He told  of efforts of Alaska's  congressional delegation  to                                                            
secure federal  appropriations. He stated the requested  funds would                                                            
be utilized to complete the first phase of the project.                                                                         
                                                                                                                                
Mr. Spencer spoke  of a concept demonstration recently  conducted in                                                            
Valdez, which was successful.                                                                                                   
                                                                                                                                
Senator Bunde  relayed criticisms  that this project would  create a                                                            
significant  unfounded mandate for  local governments, by  requiring                                                            
the purchase  of new  equipment,  when less  expensive options  were                                                            
available.                                                                                                                      
                                                                                                                                
JULIE   STINSON,  Department   of   Administration   testified   via                                                            
teleconference  from an off-net  location that  the system  would be                                                            
constructed utilizing State  and U.S. Department of Defense funding.                                                            
She assured  this project would not  create a mandate but  is rather                                                            
intended  to support existing  systems,  although local governments                                                             
could purchase  new equipment that would fully utilize  the services                                                            
available.                                                                                                                      
                                                                                                                                
Ms. Stinson  furthered  that this  Alaska Land  Mobile Radio  (ALMR)                                                            
project would utilize standard-based  technology and would encourage                                                            
other  manufacturers   to  produce  equipment  compatible   to  this                                                            
standard.                                                                                                                       
                                                                                                                                
Senator Bunde noted the  system would exist, although municipalities                                                            
would  be required  to  purchase new  radios  to fully  utilize  the                                                            
system.                                                                                                                         
                                                                                                                                
Ms. Stinson corrected  that other radio systems could  be interfaced                                                            
with the new  system. She qualified  that all features would  not be                                                            
available and that dispatch would be necessary.                                                                                 
                                                                                                                                
Senator Bunde  and Ms. Stinson continued to debate  the requirements                                                            
of local governments to participate in the new system.                                                                          
                                                                                                                                
Ms. Stinson noted new radios  would cost between $2000 and $4000 per                                                            
unit depending upon the features desired.                                                                                       
                                                                                                                                
Senator Olson asked about  the cost of interfacing with the systems.                                                            
                                                                                                                                
Ms. Stinson surmised  a memo of understanding would  be signed based                                                            
on interface needs. She  furthered that equipment could be purchased                                                            
by local  governments through  State procurement  contracts  at bulk                                                            
rate prices.                                                                                                                    
                                                                                                                                
Senator  Olson restated his  question about  operating expenses  for                                                            
municipalities.                                                                                                                 
                                                                                                                                
Ms. Stinson  noted some discussion  of user fees have been  held for                                                            
operation and  maintenance of the  system, and although she  did not                                                            
know the exact amount, she predicted it would be minimal.                                                                       
                                                                                                                                
Senator  Bunde  reiterated  this would  be  considered  an  unfunded                                                            
mandate  by municipalities  and expected  that additional  operating                                                            
expenses would be incurred.                                                                                                     
                                                                                                                                
Senator Olson  asked the cost to the State if the  ALMR project were                                                            
not funded.                                                                                                                     
                                                                                                                                
Ms. Stinson  did not know and would  research the matter  through an                                                            
engineering firm working on the project.                                                                                        
                                                                                                                                
Co-Chair  Wilken understood  the current system  would be  utilized,                                                            
although communication  between the  various emergency groups  would                                                            
not be available.                                                                                                               
                                                                                                                                
Ms.  Stinson  corrected  that  the  aging  system  would  eventually                                                            
require replacement.  She noted that replacement equipment  could no                                                            
longer  be  purchased  for the  system  currently  utilized  by  the                                                            
Department of Transportation and Public Facilities.                                                                             
                                                                                                                                
Co-Chair   Wilken  asked   the   definition  of   "standards   based                                                            
communications".                                                                                                                
                                                                                                                                
Ms. Stinson  told of the multiple  types of communication  equipment                                                            
that  had  been  purchased  separately  and  subsequently  were  not                                                            
compatible  with   each  other.  She  stated  the   intent  is  that                                                            
manufactures  would design  and construct  equipment according  to a                                                            
standard to ensure compatibility.                                                                                               
                                                                                                                                
Co-Chair  Wilken   next  referenced  federal  funding   received  in                                                            
previous  years,  but noted  the  proposed  FY  04 budget  does  not                                                            
contain a request to receive and expend such funds.                                                                             
                                                                                                                                
Mr.  Spencer  explained  that  the previous  federal  appropriation                                                             
authority  was to  receive  and expend  approximately  $16  million,                                                            
however  only  approximately   $2  million  has  been  received  and                                                            
therefore no expenditure  authority is now requested.  Therefore, he                                                            
stated that  the Department  has received  authority to receive  and                                                            
expend  more  money  than  received  and  additional   authority  is                                                            
unnecessary at  this time. He told of efforts with  U.S. Senator Ted                                                            
Stevens to secure the remaining funds.                                                                                          
                                                                                                                                
Co-Chair  Wilken asked  if the  10 percent match  requirement  would                                                            
remain the same.                                                                                                                
                                                                                                                                
Ms.  Stinson responded  that  the match  requirement  percentage  is                                                            
unknown because  the State has yet  to decide which grants  it would                                                            
apply for.  She noted the $2 million  of grant funds received  in FY                                                            
03 did  not require  matching funds  from the  State, although  that                                                            
funding  source  could  not  be  utilized  for  program   management                                                            
services, including professional  services and Federal Communication                                                            
Commission (FCC) licensing.                                                                                                     
                                                                                                                                
Co-Chair Wilken  surmised that no  commitment has been made  to fund                                                            
the  program  at a  90  to 10  matching  fund  ratio, and  that  the                                                            
requirement  for matching  funds and  the amount  of the  percentage                                                            
could change.                                                                                                                   
                                                                                                                                
Ms. Stinson affirmed.                                                                                                           
                                                                                                                                
Co-Chair Wilken asked what  agency would be expected to maintain the                                                            
system once in operation.                                                                                                       
                                                                                                                                
Ms.  Stinson understood  the  State  and Federal  governments  would                                                            
maintain the system with  assistance from local governments. She did                                                            
not expect operation fees  would be higher than the current expense.                                                            
She spoke of the current system of collecting user fees.                                                                        
                                                                                                                                
Co-Chair Wilken asked if  other State agencies were requesting funds                                                            
for this project.                                                                                                               
                                                                                                                                
Ms.  Stinson informed  that  the Department  of  Transportation  and                                                            
Public Facilities  is requesting matching  funds to receive  federal                                                            
grant monies,  and noted  the Department  has received $3.3  million                                                            
federal funds for subscriber  units and could request matching funds                                                            
from the legislature.  She indicated she is researching  whether the                                                            
matching funds  utilized by the Department  of Administration  could                                                            
also  be   applied  as   matching  funds   for  the  Department   of                                                            
Transportation and Public  Facilities project as well. She furthered                                                            
that the Department  of Public Safety has requested  federal receipt                                                            
authority.   She  expected  these   were  the  total  requests   the                                                            
legislature would receive for the ALMR project.                                                                                 
                                                                                                                                
Co-Chair   Wilken   clarified    that   only   the   Department   of                                                            
Administration,   the  Department   of  Transportation  and   Public                                                            
Facilities and the Department  of Public Safety would submit funding                                                            
requests.                                                                                                                       
                                                                                                                                
Ms. Stinson  affirmed, qualifying  that other two-way communication                                                             
requests could  be received, but would be "stand alone"  systems not                                                            
related to the ALMR system.                                                                                                     
                                                                                                                                
Senator  Bunde requested  the  cost estimates  of  the four  largest                                                            
Alaskan communities  to take full  advantage of the ALMR  system. He                                                            
spoke  of the  benefits of  full communication.  He  warned that  in                                                            
event  of disaster,  the State  would be  blamed  for not  providing                                                            
adequate funds.                                                                                                                 
                                                                                                                                
Co-Chair Wilken  clarified the request  is for a range of  costs for                                                            
Anchorage,  Fairbanks,  Juneau and  the Mat-Su  Valley, rather  than                                                            
specific amounts.                                                                                                               
                                                                                                                                
Ms. Stinson stated  she would research the estimated  costs to these                                                            
communities. She noted  that through the system design process, some                                                            
data is already available.                                                                                                      
                                                                                                                                
Mr.  Spencer noted  that one  or two  municipalities  and  nonprofit                                                            
organizations   have  received  "substantial"   federal   funds  for                                                            
subscriber units.                                                                                                               
                                                                                                                                
Ms. Stinson furthered that  the Department has received $1.7 million                                                            
Informational  Services   Fund  (ISF)  for  Fairbanks,  through  the                                                            
federal Office  of Domestic Preparedness.  She stated that  once the                                                            
system  is  operational  in  Valdez,  efforts  would  focus  on  the                                                            
Fairbanks area  with intent the "system would go live  this summer".                                                            
She stated  that a review  process would  commence to determine  how                                                            
the grant funds would be distributed.                                                                                           
                                                                                                                                
Senator B.  Stevens noted the estimated  cost for completion  of the                                                            
north  zone phase  of  the ALMR  project.  He understood  that  $6.8                                                            
million federal funds would  be available for 90 percent of the cost                                                            
to purchase the subscriber  units. Therefore he surmised the federal                                                            
government would pay the subscriber unit costs.                                                                                 
                                                                                                                                
Co-Chair Wilken restated the question.                                                                                          
                                                                                                                                
                                                                                                                                
SFC 03 # 28, Side B 10:54 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Co-Chair Wilken continued.                                                                                                      
                                                                                                                                
Senator B.  Stevens attempted to understand  who would purchase  the                                                            
subscriber  units  given the  significant  amount of  federal  funds                                                            
available.                                                                                                                      
                                                                                                                                
Ms. Stinson  understood the  estimated cost  of subscriber  units in                                                            
the Fairbanks area would  be significantly higher than $6.8 million.                                                            
She informed  that  $6.8 million  federal funds  are designated  for                                                            
State agencies'  subscriber units  and infrastructure and  that $1.7                                                            
million of federal funds  is designated for locally owned subscriber                                                            
units. She  stated that  the Department is  evaluating the  "federal                                                            
funding  issues" to request  additional subscriber  units for  State                                                            
agencies.                                                                                                                       
                                                                                                                                
Co-Chair  Wilken asked for  information on  what the requested  $8.5                                                            
million would purchase.                                                                                                         
                                                                                                                                
Co-Chair Green questioned the ISF funds.                                                                                        
                                                                                                                                
Mr. Spencer  explained these  funds are utilized  for operations  of                                                            
the Informational  Technology Group.  He stated this funding  source                                                            
was initially  used for the matching requirements  when this project                                                            
began.                                                                                                                          
                                                                                                                                
Co-Chair  Wilken  furthered these  funds  are collected  from  State                                                            
agencies "across  the board" to pay telecommunications  and computer                                                            
services expenses.                                                                                                              
                                                                                                                                
Co-Chair  Wilken   stressed  the   ALMR  project  entails   a  major                                                            
expenditure and he wanted  to ensure that appropriate considerations                                                            
are given.                                                                                                                      
                                                                                                                                
     Priority Maintenance for Facilities not in the Public Building                                                             
     Fund                                                                                                                       
     $300,000 general funds                                                                                                     
     Reference No.: 37947                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2005                                                                           
     On-going Project                                                                                                           
     Funding for maintenance projects in Department of                                                                          
     Administration managed facilities that are not part of the                                                                 
     Public Building Fund.                                                                                                      
                                                                                                                                
Mr. Spencer explained  that the request for FY 04  only includes the                                                            
Dimond Courthouse  Roof Repair project. He noted that  although many                                                            
projects are  necessary, this project  is included because  water is                                                            
leaking into the walls of the building.                                                                                         
                                                                                                                                
Co-Chair  Wilken  noted an  earlier  request  for carpeting  in  the                                                            
courthouse and asked why the two projects are not combined.                                                                     
                                                                                                                                
Mr.  Spencer  informed  that the  Department  of  Administration  is                                                            
responsible  for maintenance and the  Alaska Court System  addresses                                                            
other matters such as re-carpeting.                                                                                             
                                                                                                                                
     Public Building Fund Projects                                                                                              
     $2,500,000 public building fund                                                                                            
     Reference No.: 37943                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2005                                                                           
     Funding is requested for renewal projects in PBF facilities.                                                               
                                                                                                                                
Mr.   Spencer  reminded   that   this  project   addresses   ongoing                                                            
maintenance  needs utilizing funding  generated from rent  collected                                                            
from occupant agencies.                                                                                                         
                                                                                                                                
Co-Chair Wilken noted the  public building fund is in its third year                                                            
of operation and asked the balance of the fund.                                                                                 
                                                                                                                                
Mr. Spencer  did not know.  He noted the  requested funding  of this                                                            
item  would  utilize  future  revenues   because  the  projects  are                                                            
deferred maintenance.                                                                                                           
                                                                                                                                
Co-Chair Wilken  detailed the proposed  projects. He clarified  that                                                            
the entire $2.5 million would not be expended in FY 04.                                                                         
                                                                                                                                
Mr.   Spencer  affirmed   and   detailed.  He   exampled   waterline                                                            
replacements,  warning that  if the system  failed the repair  costs                                                            
could be triple the amount of the initial replacement cost.                                                                     
                                                                                                                                
Co-Chair Wilken questioned  if these projects should be accounted as                                                            
encumbrances rather than expenditures.                                                                                          
                                                                                                                                
Mr. Spencer answered  it could, but pointed out the  projects listed                                                            
in the  backup material  are the  planned expenditures;  however  if                                                            
breakage  occurs elsewhere,  the funds would  be diverted for  those                                                            
repairs.                                                                                                                        
                                                                                                                                
Co-Chair Wilken requested the total fund balance.                                                                               
                                                                                                                                
Senator  B. Stevens  asked  if the  building  fund consists  of  the                                                            
contributions of all tenants.                                                                                                   
                                                                                                                                
Mr.  Spencer listed  the eight  facilities  included  in the  public                                                            
building fund. He noted  this is a pilot project and that the intent                                                            
of  the  fund  is  to  "capture"  non-general   funds  for  deferred                                                            
maintenance expenses.                                                                                                           
                                                                                                                                
Mr.  Spencer  furthered  that  in  prior  years  the  Department  of                                                            
Administration  undertook minimal  maintenance projects because  the                                                            
facilities   were   the  responsibility    of  the   Department   of                                                            
Transportation and Public Facilities.                                                                                           
                                                                                                                                
Senator  B. Stevens  commented that  76 percent  of this  allocation                                                            
would be  for one facility  and asked if 76  percent of the  revenue                                                            
generated is  from that facility.  He questioned whether  the public                                                            
building fund is equitable.                                                                                                     
                                                                                                                                
Mr. Spencer responded  that in the short term the  fund would not be                                                            
equitable, although it  would be in the long term. He explained that                                                            
the  income  generated   in  a  given  year  might   not  match  the                                                            
expenditures  of one facility; however  the expenditures  in another                                                            
year  would be  higher at  a different  facility.  He qualifies  the                                                            
expenditures would vary for different projects.                                                                                 
                                                                                                                                
Senator Bunde  asked if the public building fund has  adequate funds                                                            
to  undertake  the  substantial  repairs  necessary  to  the  Atwood                                                            
building caused by damage of the recent windstorm.                                                                              
                                                                                                                                
Mr. Spencer  gave examples  of other  projects could  be delayed  to                                                            
enable funding to be expended on repairs to the Atwood building.                                                                
                                                                                                                                
Co-Chair Wilken  listed the balance  of the public building  fund at                                                            
the end of FY 02 at $45 million, of which $4.3 was cash.                                                                        
                                                                                                                                
Mr. Spencer affirmed but qualified the cash balance fluctuates.                                                                 
                                                                                                                                
     Information Technology Group Equipment Replacement                                                                         
     $2,465,000 Information Services funds                                                                                      
     Reference No.: 37948                                                                                                       
     Category: General Government                                                                                               
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2006                                                                           
     On-going Project                                                                                                           
     Funding  will  be  used  to  purchase/lease  the  top  priority                                                            
     equipment  and services  that  will meet  current and  expected                                                            
     customer demand, within  the amount collected through rates for                                                            
     depreciation.                                                                                                              
                                                                                                                                
Mr. Spencer  explained that the ISF  funds are collected  as earlier                                                            
described  by Co-Chair  Wilken,  and  utilized to  replace  outdated                                                            
equipment.                                                                                                                      
                                                                                                                                
Senator  Bunde commented  to on-going  maintenance  versus the  ALMR                                                            
project.  He  compared  the expense  of  maintaining  and  repairing                                                            
existing equipment  to purchasing  new equipment, pointing  out that                                                            
either option has expense.                                                                                                      
                                                                                                                                
AT EASE 11:13 AM / 11:14 AM                                                                                                     
                                                                                                                                
Department of Community and Economic Development                                                                              
                                                                                                                                
     Rural Internet Access                                                                                                      
     $7,500,000 federal receipts                                                                                                
     Reference No.: 37909                                                                                                       
     Category: Development                                                                                                      
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     One-time Project                                                                                                           
     Grants to local governments and non-profit organizations to                                                                
     expand internet service throughout rural Alaska.                                                                           
                                                                                                                                
TOM  LAWSON,   Director,   Division  of   Administrative   Services,                                                            
Department  of Community and Economic  Development gave the  funding                                                            
history of  this item beginning  with $7.5  million appropriated  in                                                            
the FY 03 supplemental budget appropriation legislation.                                                                        
                                                                                                                                
Co-Chair  Wilken asked  the locations  where this  program would  be                                                            
implemented.                                                                                                                    
                                                                                                                                
Mr. Lawson  explained the  competitive grant  process and noted  the                                                            
recipients have not yet been determined.                                                                                        
                                                                                                                                
Co-Chair  Wilken asked  if the grants  would be  utilized to  access                                                            
satellite signals or cable optic signals.                                                                                       
                                                                                                                                
MIKE  MORA,   Common  Carrier  Specialist,   and  Project   Manager,                                                            
Regulatory  Commission of Alaska testified  via teleconference  from                                                            
Anchorage  that  the grant  program  was  initially intended  to  be                                                            
"technologically   neutral".  However,  he  pointed   out  that  the                                                            
majority of the rural areas  eligible for this funding would receive                                                            
service via satellite transmission.                                                                                             
                                                                                                                                
Senator Bunde noted the  intent that through Internet providers, the                                                            
program would  become self-sufficient.  He asked if the subscribers                                                             
or providers would eventually pay the service expenses.                                                                         
                                                                                                                                
Mr. Mora explained  that once the  grant program expires,  residents                                                            
of the participating communities  would be responsible for the fees.                                                            
He  surmised  the  fees should  be  comparable  to  that  of  larger                                                            
communities.                                                                                                                    
                                                                                                                                
Senator Bunde estimated the amount at $20 to $50 per month.                                                                     
                                                                                                                                
Mr. Mora affirmed.                                                                                                              
                                                                                                                                
Senator Bunde surmised  this is a substantial fiscal expectation for                                                            
rural economies  that could not support  local government.  He asked                                                            
the consequences  to  the State if  communities  do not continue  to                                                            
subscribe to the service.                                                                                                       
                                                                                                                                
Mr.  Mora  assured  that  the  grant  would  be  issued  to  telecom                                                            
carriers,  which  must  submit  a  business   model  to demonstrate                                                             
evidence that  the program would be  sustainable through  consistent                                                            
demand for services.                                                                                                            
                                                                                                                                
Co-Chair Wilken  assumed that the rfp applications  for grants would                                                            
be scored  according  to the potential  for the  grantee to  provide                                                            
ongoing funding without State support.                                                                                          
                                                                                                                                
Mr. Mora answered  this is correct. He pointed out  that although no                                                            
matching  funds  are required  to  receive  the federal  funds,  the                                                            
Department would require partial funding from the carrier.                                                                      
                                                                                                                                
Co-Chair Wilken  asked if the Department  would require evidence  of                                                            
ongoing support.                                                                                                                
                                                                                                                                
Mr. Mora replied  that a component of the grant qualification  is to                                                            
demonstrate ongoing sustainability.                                                                                             
                                                                                                                                
Co-Chair  Wilken  asked   if  this  would  be  a  requirement  or  a                                                            
suggestion.                                                                                                                     
                                                                                                                                
Mr.  Mora answered  it  would be  a requirement  and  also would  be                                                            
included in the scoring process.                                                                                                
                                                                                                                                
     Community Development Grants                                                                                               
     $3,470,000 federal receipts                                                                                                
     $150,000 general funds                                                                                                     
     Reference No.: 33925                                                                                                       
     Category: Housing/Social Services                                                                                          
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     State Match Required                                                                                                       
     On-going Project                                                                                                           
     Multiple  federally-funded  programs,  enabling  Department  of                                                            
     Community  and  Economic   Development  to  provide  grants  to                                                            
     communities   and  non-profit   organizations   for   community                                                            
     development.                                                                                                               
                                                                                                                                
Mr. Lawson listed  the main funding source as the  Federal Emergency                                                            
Management  Agency (FEMA)  and the U.S.  Department of Agriculture,                                                             
among others.                                                                                                                   
                                                                                                                                
     Community Block Grants                                                                                                     
     $6,000,000 federal receipts                                                                                                
     Reference No.: 33488                                                                                                       
     Category: Housing/Social Services                                                                                          
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     On-going Project                                                                                                           
     Multiple  federally-funded  programs,  enabling  Department  of                                                            
     Community  and  Economic   Development  to  provide  grants  to                                                            
     communities  and  non-profits   that  provide  services  and/or                                                            
     benefit the low- to moderate-income individuals.                                                                           
                                                                                                                                
Mr. Lawson noted no state match is required.                                                                                    
                                                                                                                                
     Language  Section:  National  Petroleum Reserve  Alaska  Impact                                                            
     Grant Program; PCE Pgm                                                                                                     
     $35,300,000 federal receipts                                                                                               
     Reference No.: 35360                                                                                                       
     Category: Development                                                                                                      
     Location: Barrow                                                                                                           
     Election District: Arctic                                                                                                  
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     Grants  to  communities  for public  facilities  and  services.                                                            
     Priority  is given to  those communities  directly or  severely                                                            
     impacted  by the leases and development  of oil and  gas within                                                            
     the National Petroleum Reserve.                                                                                            
                                                                                                                                
Mr. Lawson explained  this item relates to authorization  to receive                                                            
funds from  the National  Petroleum Reserve  - Alaska (NPR-A)  lease                                                            
sales and annual least  payments for the purpose of providing grants                                                            
to communities  impacted by  the development  of oil and gas  within                                                            
the NPR-A.                                                                                                                      
                                                                                                                                
Mr. Lawson  gave an updated  amount available  as $33.6 million.  He                                                            
noted the funds  would be allocated for 20 projects  at a total cost                                                            
of $25  million with  the balance  of the funds  deposited into  the                                                            
permanent  fund, the  public school  trust fund  and the Power  Cost                                                            
Equalization (PCE) fund as outlined in statue.                                                                                  
                                                                                                                                
Co-Chair  Wilken  noted the  funding  source  is listed  as  federal                                                            
receipts  but he  pointed out  the funds  actually  are the  State's                                                            
share of projected rent,  lease payments and royalties on production                                                            
for FY 04.                                                                                                                      
                                                                                                                                
Mr. Lawson affirmed  and detailed the lease sales  of 1999 and 2002,                                                            
from which the revenue is generated.                                                                                            
                                                                                                                                
Co-Chair Wilken calculated  the total revenue from NPR-A development                                                            
would be approximately $70.6 million.                                                                                           
                                                                                                                                
Mr. Lawson answered yes.                                                                                                        
                                                                                                                                
Co-Chair Wilken  detailed that the total revenue is  equally divided                                                            
between  the  State  and federal  government,  and  of  the  State's                                                            
portion,  approximately  $25  million  would  be  allocated  to  the                                                            
community  impact  grants, and  25 percent,  or  approximately  $2.5                                                            
million, of the remaining  $10.2 million would be deposited into the                                                            
permanent fund,  one-half percent  would be allocated to  the public                                                            
schools trust  fund, leaving approximately $7.3 million  for PCE. He                                                            
furthered  that any  remaining funds  not utilized  by PCE would  be                                                            
deposited to the general fund.                                                                                                  
                                                                                                                                
Mr. Lawson  affirmed, but  qualified differing  legal opinions  have                                                            
been  issued  about the  distribution  of  funds  in excess  of  the                                                            
community impact grants.                                                                                                        
                                                                                                                                
Co-Chair  Wilken  cited  Article   IX,  Section  15  of  the  Alaska                                                            
Constitution,  "At least  25 percent  of all  mineral lease  rental,                                                            
royalties,  royalty sale proceeds  … received by the State  shall be                                                            
placed  in  a permanent  fund…"  He  therefore  opined  the  current                                                            
practice  of allocation of  NPR-A funds is  in direct conflict  with                                                            
the constitution.                                                                                                               
                                                                                                                                
Co-Chair  Wilken continued  that if the  applications for  community                                                            
impact grants were greater  than the available funds, no funds would                                                            
be deposited from this source into the permanent fund.                                                                          
                                                                                                                                
Mr. Lawson affirmed.                                                                                                            
                                                                                                                                
Co-Chair Wilken  furthered that funds from this source  could not be                                                            
contributed to the State general fund or the school trust fund.                                                                 
                                                                                                                                
Mr. Lawson again affirmed.                                                                                                      
                                                                                                                                
Co-Chair  Wilken   surmised  that  the  benefits  of   the  National                                                            
Petroleum Reserve  - Alaska (NPR-A) would only benefit  those living                                                            
north of the Brooks Range.                                                                                                      
                                                                                                                                
Co-Chair Wilken  was unsure that Alaskans understand  that the NPR-A                                                            
does  not actually  benefit the  school  trust fund  or other  State                                                            
services. He  stressed that current  law allows four communities  to                                                            
claim all the  benefits at the expense  of distributing these  funds                                                            
to benefit the remaining residents of Alaska.                                                                                   
                                                                                                                                
Co-Chair Wilken  calculated that the grant requests  for FY 04 total                                                            
$53.2 million of which $35 million has been approved.                                                                           
                                                                                                                                
Mr. Lawson did  not have the exact amount, although  knew the amount                                                            
exceeded $35 million.                                                                                                           
                                                                                                                                
Co-Chair  Wilken   compared  the   situation  of  the  grant   funds                                                            
appropriated  to  four  communities  to a  hypothetical  per  capita                                                            
appropriation of $420 million  capital grants to the Fairbanks North                                                            
Star Borough or $1.2 billion for Anchorage.                                                                                     
                                                                                                                                
Co-Chair  Wilken   asked  for  a   description  of  how   the  grant                                                            
applications  are scored.  He understood the  criteria based  on the                                                            
impact  of oil development  and  asked whether  additional State  or                                                            
federal criterion  is involved. He  asked whether the extent  of oil                                                            
development impact  is measured, whether directly  or indirectly and                                                            
how  a sewage  treatment  facility  relates  to oil  fields  located                                                            
hundreds of miles away.                                                                                                         
                                                                                                                                
Co-Chair Wilken  noted other funding requests included  in the FY 04                                                            
capital budget to construct  oil field connector roads and asked why                                                            
they were not proposed  to be undertaken with NPR-A funds, given the                                                            
direct impact on local communities.                                                                                             
                                                                                                                                
Co-Chair Wilken summarized his arguments stated above.                                                                          
                                                                                                                                
Senator Olson  pointed out that the  oil fields are not hundreds  of                                                            
miles  away  from  Barrow and  asserted  that  sewage  treatment  is                                                            
necessary  because of the  influx of people  brought as a result  of                                                            
the oil production activities.                                                                                                  
                                                                                                                                
Senator  Olson  noted that  only  projects  within the  North  Slope                                                            
Borough  are  included  and  questioned  whether  needs  from  other                                                            
communities could be addressed with these funds.                                                                                
                                                                                                                                
GENE  KANE,   Director,   Department  of   Community  and   Economic                                                            
Development,  testified  via  teleconference  from  Anchorage,  that                                                            
other  requests   were  denied  for   various  reasons.   He  listed                                                            
incomplete applications,  lack of detail, unclear impact of the NPR-                                                            
A, and duplication for projects already funded.                                                                                 
                                                                                                                                
JO  GROVE,  Grants  Manager,  Division  of  Community  and  Business                                                            
Development,  Department  of  Community  and  Economic Development,                                                             
testified via  teleconference from Fairbanks added  that most of the                                                            
applications were  from communities within the North  Slope Borough,                                                            
and  would   benefit  Anaktuvuk  Pass,   Barrow,  Nuiqsut   and  all                                                            
communities  within the  Borough.  She exampled  the village  school                                                            
counselor program and the waterfowl continuation study.                                                                         
                                                                                                                                
Senator  Olson asserted  that denial  of applications  because  they                                                            
were  incomplete  or lacked  detail  appeared  to  be more  lack  of                                                            
sophistication rather than  actual need. He predicted that the North                                                            
Slope Borough has excellent grant writers.                                                                                      
                                                                                                                                
Co-Chair Wilken  detailed a list of the proposed projects  [copy not                                                            
provided],  their  scores  and  the  delineation   of  the  approved                                                            
projects based on the amount of funding available.                                                                              
                                                                                                                                
Senator  Olson commented  that  many of  the proposed  projects  had                                                            
greater  merit, citing  a proposed  senior center.  He referenced  a                                                            
proposal to eliminate  or reduce the Alaska Longevity  Bonus benefit                                                            
payments  to  senior residents.  He  requested  that  the  reviewing                                                            
committee impose  a "broader perspective" as to what  programs would                                                            
offer the greatest benefit and fulfill greatest needs.                                                                          
                                                                                                                                
Senator  B. Stevens  asked about  a proposed  project titled  "Grant                                                            
Oversight and  Supervision" and asked how this application  received                                                            
a 100 percent score.                                                                                                            
                                                                                                                                
Ms. Grove stated she would provide the information.                                                                             
                                                                                                                                
Senator B.  Stevens also requested  the "approved indirect  rate" as                                                            
approved  by  the  U.S.  Department   of  Labor.  He  asserted  that                                                            
management  of grants should be included  in the grants themselves.                                                             
                                                                                                                                
Co-Chair Wilken  clarified the request for the scoring  criterion of                                                            
applications,  whether  the criterion  is  established  by State  or                                                            
federal guidelines,  and the relationship of the approved  grants to                                                            
the NPR-A laws.                                                                                                                 
                                                                                                                                
                                                                                                                                
SFC 03 # 27, Side A 11:44 AM                                                                                                    
                                                                                                                                
[Note: Audio recording  of this meeting begins with  tape SFC-03 #28                                                            
and continues with tape SFC-03 #27]                                                                                             
                                                                                                                                
Senator B. Stevens  asked if the Department serves  as the oversight                                                            
agency for all these grants.                                                                                                    
                                                                                                                                
Mr. Lawson affirmed.                                                                                                            
                                                                                                                                
     Rural Utility Preventative Maintenance                                                                                     
     $300,000 general funds                                                                                                     
     Reference No.: 32588                                                                                                       
     Category: Health/Human Services                                                                                            
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     On-going Project                                                                                                           
     Preventative  maintenance  to electric  power systems in  rural                                                            
     Alaska  intended to  prevent the  need for  more costly  future                                                            
     emergency  responses  to rural  Alaskan electric  power  system                                                            
     failures.                                                                                                                  
                                                                                                                                
Mr. Lawson outlined this request.                                                                                               
                                                                                                                                
Co-Chair Wilken  asked if this would be the first  year this project                                                            
was funded.                                                                                                                     
                                                                                                                                
Mr. Lawson  answered that  this request has  been submitted  in past                                                            
years and was funded some years and not funded in other years.                                                                  
                                                                                                                                
Co-Chair Wilken  asked if this program operates in  conjunction with                                                            
the Denali Commission sustainability initiative.                                                                                
                                                                                                                                
Mr. Lawson  responded that the programs  are interrelated  utilizing                                                            
various funding sources.                                                                                                        
                                                                                                                                
Senator  Bunde  questioned  if PCE  was fully  funded  whether  that                                                            
program would pay the maintenance and circuit rider expenses.                                                                   
                                                                                                                                
Mr. Lawson was unsure.                                                                                                          
                                                                                                                                
MIKE  HARPER,  Deputy  Director  -  Rural  Energy,  Alaska  Industry                                                            
Development   and   Export   Authority   (AIDEA),    testified   via                                                            
teleconference  from an off-net location  that properly maintaining                                                             
equipment would  allow greater production for each  gallon of diesel                                                            
used. He  furthered this  would benefit the  PCE program. He  warned                                                            
that  not  cleaning  up  and  repairing   systems  would  result  in                                                            
inefficient  operations   and generator   failures.  He  noted  that                                                            
failures would require  emergency repairs, thus increasing operating                                                            
expenses for the PCE program.                                                                                                   
                                                                                                                                
Senator Bunde asked whether  completion of this project would result                                                            
in reduced electrical rates.                                                                                                    
                                                                                                                                
Mr. Harper  replied the  rates would decrease  eventually.  He noted                                                            
that the rates  in smaller communities  are three to four  times the                                                            
rates  experienced in  Anchorage and  Fairbanks.  He furthered  that                                                            
this project would improve power generators and other equipment.                                                                
                                                                                                                                
     Language Section: Electrical Emergencies                                                                                   
     $ 330,000 Rural Electric funds                                                                                             
     Reference No.: 32590                                                                                                       
     Category: Health/Human Services                                                                                            
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     On-going Project                                                                                                           
     To provide technical support when an electric utility has lost                                                             
     the ability to generate or transmit power to its customers and                                                             
     the condition  is a threat to life, health, and/or  property in                                                            
     the rural community.                                                                                                       
                                                                                                                                
Mr. Lawson  spoke of the rural electrification  revolving  loan fund                                                            
and the implementation  of those funds in situations  where a system                                                            
has "basically  failed." He characterized  this program as  "another                                                            
tool to help rural communities."                                                                                                
                                                                                                                                
Senator Bunde  clarified that the  previous request was for  funding                                                            
to prevent failures and  this separate request is for funding in the                                                            
event of a failure.                                                                                                             
                                                                                                                                
Mr. Lawson affirmed.                                                                                                            
                                                                                                                                
Senator Bunde  asked if the reason  for the two programs  is to keep                                                            
costs minimal.                                                                                                                  
                                                                                                                                
Mr. Lawson replied this has been the practice for several years.                                                                
                                                                                                                                
Co-Chair Wilken requested a listing of past expenditures.                                                                       
                                                                                                                                
Mr. Lawson indicated he would provide the information.                                                                          
                                                                                                                                
Co-Chair  Wilken asked if  the funds appropriated  for this  program                                                            
would lapse at end of the fiscal year.                                                                                          
                                                                                                                                
Mr. Lawson affirmed.                                                                                                            
                                                                                                                                
     Diesel Efficiency and Alternative Energy Program                                                                           
     $250,000 general funds                                                                                                     
     Reference No.: 32591                                                                                                       
     Category: Health/Human Services                                                                                            
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2002 - 06/30/2007                                                                           
     On-going Project                                                                                                           
     This  program's objective  is to  lower the  cost of power  and                                                            
     heat  to  predominately  rural  communities  while maintaining                                                             
     system  safety  and  reliability.   This  is  done  by  funding                                                            
     projects  such as fuel efficiency  improvements, wind  resource                                                            
     development,   biomass  development,   and  geothermal   energy                                                            
     resource  development. A portion of this appropriation  will be                                                            
     used  to provide  the required  state match  to federal  grants                                                            
     also used to fund this program.                                                                                            
                                                                                                                                
Mr. Lawson explained  this request is for matching  funds to receive                                                            
federal funding through  the US Department of Agriculture (USDA) and                                                            
the US Department  of Energy (USDOE). He noted the  following budget                                                            
item reflects  the requested  federal funding  grants, pointing  out                                                            
that sometimes the State does not receive the grants.                                                                           
                                                                                                                                
Co-Chair Green  asked whether this  request could be interpreted  as                                                            
providing   matching  funds  for   any  Denali  Commission   project                                                            
requests.                                                                                                                       
                                                                                                                                
Mr.  Lawson  understood  some  could be  utilized  in  this  manner,                                                            
although he was uncertain.                                                                                                      
                                                                                                                                
Mr. Harper  furthered that  a small portion  of the requested  funds                                                            
are intended as  matching funds for the Denali Commission,  but that                                                            
the majority are intended  as matching funds for the federal grants.                                                            
                                                                                                                                
Co-Chair  Wilken  noted  the  State has  authorized  more  than  $66                                                            
million over  the past three  years and asked  how that funding  was                                                            
expended.                                                                                                                       
                                                                                                                                
Mr. Lawson  clarified the  amount Co-Chair  Wilken cited  represents                                                            
programs in addition to  the alternate energy projects, and has been                                                            
utilized to  fund a rural power system  upgrade, bulk fuel  storage,                                                            
and  other  projects.  He  offered  to  provide  a  listing  of  all                                                            
projects.                                                                                                                       
                                                                                                                                
Co-Chair  Wilken  requested  detail  of  how  the  funds  have  been                                                            
utilized.                                                                                                                       
                                                                                                                                
     Federal Energy Projects                                                                                                    
     $35,000,000 Federal Receipts                                                                                               
     Reference No.: 36338                                                                                                       
     Category: Health/Human Services                                                                                            
     Location: Statewide                                                                                                        
     Election District: Statewide                                                                                               
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     On-going Project                                                                                                           
     AEA [Alaska  Energy Authority]  anticipates receiving  over $35                                                            
     million in federal  funding from various federal agencies in FY                                                            
     2004. These  awards cover several programs including  bulk fuel                                                            
     upgrades,  rural power system  upgrades and alternative  energy                                                            
     projects.                                                                                                                  
                                                                                                                                
Mr. Lawson  reiterated  this item  is authorization  to receive  and                                                            
expend  grant funds  from  federal agencies,  including  the  Denali                                                            
Commission, the USDA and the USDOE.                                                                                             
                                                                                                                                
     Kodiak Launch Site Infrastructure                                                                                          
     $64,000,000 federal receipts                                                                                               
     Reference No.: 37910                                                                                                       
     Category: Development                                                                                                      
     Location: Kodiak                                                                                                           
     Election District: Kodiak                                                                                                  
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     One-Time Project                                                                                                           
     Kodiak launch site infrastructure to support the U.S.                                                                      
     Department of Defense's Missile Defense Program.                                                                           
                                                                                                                                
Mr. Lawson outlined this item.                                                                                                  
                                                                                                                                
Co-Chair Wilken  asked whether these activities have  been funded in                                                            
prior years.                                                                                                                    
                                                                                                                                
Mr. Lawson  answered that various  improvements have been  funded in                                                            
the past.  He explained  the backup documentation  does not  reflect                                                            
previous  funding  because  the  proposed   improvements  relate  to                                                            
missile  defense, while  other  projects related  to infrastructure                                                             
specific to other activities.                                                                                                   
                                                                                                                                
     Southeast Conference - Southeast Intertie Planning and                                                                     
     Organization                                                                                                               
     $160,000 general funds                                                                                                     
     Reference No.: 37215                                                                                                       
     Category: General Government                                                                                               
     Location: Juneau Areawide                                                                                                  
     Election District: Juneau Areawide                                                                                         
     Estimated Project Dates: 07/01/2003 - 06/30/2008                                                                           
     One-Time Project                                                                                                           
     Grant to provide funding for the Southeast Conference                                                                      
     Organization                                                                                                               
                                                                                                                                
Mr. Lawson  explained this  request would  provide grant funding  to                                                            
the nonprofit  Southeast  Conference for the  design and  permitting                                                            
costs of an intertie.                                                                                                           
                                                                                                                                
Senator Bunde asked whether  this project has local support or if it                                                            
would be "derailed" due to environmental concerns.                                                                              
                                                                                                                                
Mr.  Lawson  understood  the  Southeast  Conference  is  "very  much                                                            
interested"  in securing  these funds.  He stated  he would  request                                                            
further information regarding public support.                                                                                   
                                                                                                                                
Senator Bunde  pointed out  that the Southeast  Conference  does not                                                            
"speak" for all residents of Southeastern Alaska.                                                                               
                                                                                                                                
Co-Chair Wilken  asked why funding for this appropriation  would not                                                            
be generated from utility  rates assessed to the beneficiaries of an                                                            
intertie.                                                                                                                       
                                                                                                                                
Mr. Lawson was unsure and stated he would research the matter.                                                                  
                                                                                                                                
Senator Bunde  furthered that the universal service  charge assessed                                                            
to  all utility  customers  is intended  for  projects  such as  the                                                            
proposed intertie.                                                                                                              
                                                                                                                                
Co-Chair  Wilken noted alternative  funding  for this item  would be                                                            
researched.                                                                                                                     
                                                                                                                                
Senator  Olson  referenced   the  backup  material  indicates   that                                                            
previous funding for this  item was utilized to hire consultants. He                                                            
asked the  percentage of  the requested $160,000  would be  utilized                                                            
for consultant fees.                                                                                                            
                                                                                                                                
Mr. Lawson replied he would research the matter.                                                                                
                                                                                                                                
Co-Chair  Wilken  surmised  a good  portion  would be  utilized  for                                                            
consultant expenses.                                                                                                            
                                                                                                                                
     Inter-Island Ferry Authority                                                                                               
     $250,000 general funds                                                                                                     
     Reference No.: 37192                                                                                                       
     Category: Transportation                                                                                                   
     Location: Prince of Wales Island                                                                                           
     Election District: Cordova/Southeast Island                                                                                
     Estimated Project Dates: 07/01/2000 - 06/30/2008                                                                           
     One-Time Project                                                                                                           
     Grant for operation of the Inter-Island Ferry Authority (IFA)                                                              
                                                                                                                                
Mr.  Lawson  stated  this  funding  would  assist  the  IFA  in  its                                                            
operations.  He relayed  that another  vessel would  be on line  the                                                            
upcoming  summer, which would  improve cash  flow and eliminate  the                                                            
need for future State general funding.                                                                                          
                                                                                                                                
Co-Chair  Wilken  asked if  the  requested  funds would  be  working                                                            
capital.                                                                                                                        
                                                                                                                                
Mr. Lawson affirmed.                                                                                                            
                                                                                                                                
Senator Bunde asked if the ferries would be self-sufficient.                                                                    
                                                                                                                                
Mr. Lawson replied, "That's  my understanding, but certainly I'm not                                                            
an expert on this project."                                                                                                     
                                                                                                                                
Senator Olson asked if  the IFA has been operating "in the black" to                                                            
date. He requested the  "track record" of the Authority's cash flow.                                                            
                                                                                                                                
Mr. Lawson did not have a record, but stated he would research and                                                              
provide further information. He stated that the IFA was formed in                                                               
1997 with vessels funded from federal grants.                                                                                   
                                                                                                                                
Senator Olson asked if the Authority owns the vessels or contracts                                                              
for their use.                                                                                                                  
                                                                                                                                
Mr. Lawson understood the Authority owns the vessels.                                                                           
                                                                                                                                
Co-Chair Green asked the distinction between this request and the                                                               
Department of Transportation and Public Facilities' planning                                                                    
procedure for a ferry system.                                                                                                   
                                                                                                                                
Co-Chair Wilken asked why this request is included in the proposed                                                              
capital budget.                                                                                                                 
                                                                                                                                
Mr. Lawson did not know.                                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 12:02 PM                                                                          

Document Name Date/Time Subjects