Legislature(2003 - 2004)
02/10/2004 09:04 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
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MINUTES
SENATE FINANCE COMMITTEE
February 10, 2004
9:04 AM
TAPES
SFC-04 # 7, Side A
SFC 04 # 7, Side B
CALL TO ORDER
Co-Chair Lyda Green convened the meeting at approximately 9:04 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Donny Olson
Also Attending: NICO BUS, Acting Director, Division of Support
Services, Department of Natural Resources; KAREN REHFELD, Director,
Education Support Services, Department of Education and Early
Development; ED FISHER, Deputy Commissioner, Department of Labor
and Workforce Development; MIKE BARTON, Commissioner, Department of
Transportation and Public Facilities; KEVIN BROOKS, Director,
Division of Administrative Services, Department of Fish and Game
Attending via Teleconference: There were no teleconference
participants.
SUMMARY INFORMATION
DEPARTMENT FY04 STATUS REPORTS
The Committee heard updated information on activities in FY 04 from
the Department of Natural Resources, Department of Education and
Early Development, Department of Labor and Workforce Development,
Department of Transportation and Public Facilities and Department
of Fish and Game.
Co-Chair Green shared that over the interim, she has heard about
"really good things that have happened" in each department; some as
a result of legislation passed the previous year.
Co-Chair Green stressed that the FY 05 budget would not be
discussed at this hearing.
Co-Chair Green reminded that the missions and measures apply and
asked the testifiers provide any relevant updates on these.
Department of Natural Resources
NICO BUS, Acting Director, Division of Support Services, Department
of Natural Resources, testified to the emphasis on revenue
generation and job enhancements. He noted the department is in the
midst of identifying which activities accomplish this goal that oil
and gas development has subsequently become the primary focus, with
other activities organized to synergize these efforts.
Mr. Bus informed of activities at Flint Hills, a lease negotiation
in Bristol Bay, and of negotiations with companies to construct a
natural gas line, as announced by Governor Murkowski the day
before. He pointed out that addressing these initiatives normally
require ten to 15 Department staff for each proposed project;
however the Department is employing technology to reduce the number
of additional staff necessary. He thanked the Legislature for
providing adequate funding for staff needs. He also noted the
permitting process is being streamlined, and that the incorporation
of Habitat Restoration functions into the Department has assisted
this endeavor.
Mr. Bus listed the six large mining operations in the State that
require significant coordination on the part of the Department. He
emphasized that the focus is on results.
Mr. Bus also told of less "obvious" efforts to accomplish the goals
of job enhancement and revenue generation, including addressing
increased workload for the Recorder's Office with temporary staff
increases funded through supplemental appropriations. He explained
that due to low interest rates nationwide, refinancing of home and
property loans has risen. He noted the workload has increased 50
percent since calendar year 2000, although revenue has increased
100 percent. He assured that as the workload decreases, the
nonpermanent staff is dismissed. He stated that the increased
revenue is primarily possible through better technology.
Mr. Bus said that the Department's Pipeline Coordinator Office is
working with "State and Federal organizations" and the Kenai
Kachemak gasline has recently commenced with transportation of gas.
He also noted the processing of the "Happy Valley extension
amendments", with construction planned to begin in May 2004 with
completion expected in October 2004. He added that the Trans-
Alaskan Pipeline System (TAPS) strategic reconfiguration is
underway to maintain the same level of service at a significantly
lower cost and subsequently generate more revenue to the State.
Mr. Bus remarked that the Department is developing prospectuses
with Native corporations and other landowners with regard to timber
issues in Interior Alaska. He stated that the Department is
promoting more timber sales with the intent to allow for the
opening of the Ketchikan Veneer Mill and create more jobs in
Southeast Alaska.
Mr. Bus listed the Department's total budget at approximately $100
million, with only $30 million general funds, or 30 percent of the
total budget. Of the total general funds, he pointed out that $15
million, or 50 percent, is expended for fire suppression
activities. He furthered that the largest single expenditure of the
Department is for fire suppression.
Mr. Bus informed that the Department is changing the decision model
in determining when fires would be fought. He announced this would
be the first year that the Department is not requesting
supplemental funding for fire suppression. He stated this is not
asking for supplemental for fire suppression. Even though fire in
critical area told managers not to fight every fire to full extent
of resources… proved to be effective strategy.
Mr. Bus continued that the Department has eliminated some warehouse
space used to store fire suppression supplies. He said that
currently warehouses in Fairbanks and Palmer store all equipment
with the expectation that if another area, such as the Kenai
Peninsula were identified as a high-risk area at some point in the
fire season, supplies and equipment would be stockpiled in that
area for the duration of the risk. He stated this practice lessen
the need to store supplies for an entire fire season in every area.
Mr. Bus remarked on efforts to identify those who start fires and
hold them financially accountable. He informed that $500,000 has
been recovered, and that although these funds are deposited to the
general fund, this is a significant accomplishment. He anticipated
these actions would result in others exercising caution in
preventing fires to avoid similar charges.
Mr. Bus told of a warehouse located in Eagle River utilized to
store all core samples. He stated that although the Division of
Geological and Geophysical Surveys is only the custodian of this
material, the State was bearing the storage costs. He informed that
regulatory fees assessed by the Alaska Oil and Gas Conservation
Commission (AOGCC) on industry would be utilized to pay these
expenses.
Mr. Bus relayed that the Department is also working with the
private sector to reduce expenses. He exampled that certain
information is now provided via the Internet rather than through
printed material.
Mr. Bus also informed that the Division of Oil and Gas and the
Division of Geological and Geophysical Surveys are combining
efforts on energy-related projects.
Mr. Bus spoke of the 121 park units within the State and the
decision to outsource operation of these units. He reminded that
the Department was faced with the closure of 11 units in 2002
because of inadequate funding, although nine were opened through
the use of private contracting and additional funding was
identified to operate the two remaining units. He stated that the
Department received feedback from the contractors on continuing the
process of outsourcing and he relayed intent to identify additional
units in FY 05 to outsource.
Mr. Bus noted the Division of Agriculture utilizes no general
funds; however, he informed the Committee of the Department's goal
to maximize returns to the Agriculture Revolving Loan Fund. He also
reminded that the Division assumed operation of the meat processing
plant, and he relayed that immediate management actions were taken
to reduce the number of inmates working at the facility and thus
reducing the number of guards needed. He stated the intent is to
transfer the facility to private ownership or a cooperative
organization by 2006.
Mr. Bus summarized the "underpinning" of all efficiency measures.
He stated that investments in automation of resource management
activities would save money. He also noted the Department is
partnering with the federal Bureau of Land Management, as both
agencies utilize the same system to manage land. In addition to
eliminating duplication of efforts, he said this partnering allows
the Department to receive federal grants to fund 40 percent of
operations compared to the previous need for 100 percent general
funds. He added that the Department is also able to utilize "soft
funds" from Native corporations and private landowners.
Mr. Bus also noted that no additional administrative staff was
added, despite the assumption of the Habitat and Restoration duties
from the Department of Fish and Game.
Co-Chair Green suggested that the budget subcommittees address
questions and further information on these presentations.
Department of Education and Early Development
KAREN REHFELD, Director, Education Support Services, Department of
Education and Early Development, testified that the Department has
a budget of $952 million, not including funding for school debt
reimbursement. She stated that 95 percent of the budget is
appropriated to school districts in the form of grants. She listed
319 full time positions within the Department, and of those, 104
employed by Alaska Commission on Postsecondary Education, i.e. the
student loan program.
Ms. Rehfeld cited the Department's main mission is to improve
student achievement. She noted that to achieve this goal, the
Alaska Vocational Technical Center (AVTEC) was transferred from the
Department to the Department of Labor and Workforce Development,
and childcare programs were transferred to the Department of Health
and Social Services. She stated these changes have allowed the
Department of Education and Early Development to focus on its
mission and administer programs without affecting school districts.
Ms. Rehfeld informed that the Department has consolidated
activities with other agencies to improve services for a lower
cost. She furthered that some systems have been converted to web-
based systems to become easier available to the public and to
school districts.
Ms. Rehfeld relayed that the new commissioner started in June 2003
and impressed upon Department employees a "vision" that
communication is the "key element". She told of positive feedback
from school districts regarding the quality of service provided by
the Department. She noted that many Department staff were focused
on internal processes to ensure a high level of service.
Ms. Rehfeld said the State Board of Education has focused on four
areas: closing the achievement gap; refining state assessment and
accountability system; professional development, standards-based
instruction; and effective use of instructional time.
Ms. Rehfeld overviewed major program areas, including the
integration of the Learning Opportunity Grants funding into the
"student base", implementing the provisions of SB 202 Public
Schools Funding Program, passed by the Legislature the previous
session, implementing the pupil transportation grant program, as
well as the federal No Child Left Behind program. . She noted the
base student allocation is currently $4,169 per student. She told
of efforts with us Department of Education and Early Development
federal regulators and areas still needing addressing, such as
possible changes to the accountability workbook waivers and the
testing requirements for the heritage language programs, in
addition to the requirements for "highly qualified" teachers. She
stated the Department is addressing smaller schools in which
teachers are instructing multiple subjects.
Ms. Rehfeld reminded that the high school graduation "exit exam"
would be in effect this spring. She stated that the Department has
implemented regulations for a waiver and appeal process.
Ms. Rehfeld told of a contractor employed to evaluate and upgrade
the assessment examinations. She stated the Department is also
attempting to ensure more instructional time with students.
Ms. Rehfeld described the transition of the State-operated Alyeska
Central School to the Yukon-Kuskokwim School District. She stated
that the Y-K District would submit a charter school application to
the Board of Education outlining how the correspondence program
would be operated.
Ms. Rehfeld summarized that the Department has made significant
progress in meeting its goals.
Senator Bunde read that the National Education Association-Alaska
has passed a resolution suggesting the State "ignore" the No Child
Left Behind program. He noted this would result in a loss of
federal funding, and asked if the Department had information on the
financial impact of such an action.
Ms. Rehfeld told of discussions as to amount of federal funds that
would be relinquished if the State did not participate in the
federal program. She relayed that the exact amount of federal
funding that would be jeopardized is unknown.
Department of Labor and Workforce Development
ED FISHER, Deputy Commissioner, Department of Labor and Workforce
Development, testified that the Department is a "mixture of
products and services and divisions that primarily are focused on
helping people and employers find each other", including the
Division of Business Partnership, the Division of Employment
Security, and the Division of Vocational Rehabilitation. He also
noted the Division of Workers' Compensation provides benefits for
injured workers, thus ensuring replacement compensation for
salaries when these workers are unable to work.
Mr. Fisher stated that the Division of Labor Standards and Safety
acts as a law enforcement entity occupational safety and health
laws, wage and hour laws, and building and public safety laws. He
noted this Division performs mechanical inspections and issues
Certificates of Fitness to electricians, plumbers, boiler
operators, and also enforces the federal Occupational Safety and
Health Act as directed by the Legislature.
Mr. Fisher relayed that the Division of Administrative Services
oversees the data processing and information technology functions,
as well as standard administrative functions.
Mr. Fisher informed that the Commissioner's Office operates the
Alaska Labor Relations Agency. He explained the primary function of
this agency is labor certification and to settle disputes between
employers and bargaining units, both within State government and
private employers. He noted the Agency follows the same guidelines
as the federal Labor Relations Board.
Mr. Fisher emphasized the Department is attempting to make the
delivery of services more efficient, particularly in the area of
workforce development. He stated that the Division of Business
Partnerships was separated from the former Division of Employment
Security with the intent of providing an "employer friendly"
environment for grant funds through the Workforce Investment Act,
the Denali Training Fund and other programs. He explained this new
Division allows for a single process for all grant programs
relating to training Alaskans for jobs, regardless of the funding
source. He stated that a "process of due diligence" has also been
implemented with the intent to ensure the grantees financial
ability and wherewithal to carry out the stipulations of the grants
which it receives. He noted this has been attempted previously.
Mr. Fisher told of the reduction of "several layers of management,"
including the combination of workforce investment boards, into a
single statewide planning area as directed by the Workforce
Investment Act. He stated this merger has resulted in $450,000 to
$500,000 administrative cost savings, which is now available for
training programs and grants.
Mr. Fisher furthered that the Department has eliminated a number of
positions and reduced the number and cost of State vehicles, and
reduced travel to "only that travel which is necessary to carry out
the functions of the Department-the programs of the Department." He
stated that more meetings are conducted by teleconference and
videoconference technology and that most travel is directed to
areas without the technology for teleconferencing.
Mr. Fisher reminded of Governor Murkowski's State of the State
address of 2003, in which the Governor listed his priorities to
create jobs by developing the economy, and ensuring healthy
families and safe communities. Mr. Fisher translated this into the
Department's mission to strive for full employment of the Alaska
workforce to meet the Governor's goals. He also noted the
importance of eliminating accidents fatalities in the workplace.
Co-Chair Green noted the reductions outlined by the Deputy
Commissioner and asked if the level of services has remained
unchanged.
Mr. Fisher assured that customers would not experience any material
change in services from actions taken as a result of the FY 04
budget. However, he pointed out that the FY 05 budget would result
in service reductions.
Senator Olson noted the decreasing number of employees in the
Department and asked the number of eliminated positions as well as
the number of vehicles utilized by the Department.
Mr. Fisher qualified that the "numbers are misleading" due to the
Department's acquisition of the Alaska Vocational and Technical
Center and the 35 employees of the Center. He anticipated the
elimination of 27 positions in FY 05.
Senator Olson requested further clarification.
Co-Chair Green directed further discussion on this matter be held
in the budget subcommittee.
Senator Bunde inquired about the "challenges" to the workers'
compensation program and the "unemployment issue".
Mr. Fisher relayed that the Division of Insurance in the Department
of Revenue, has declared a crisis for the Workers' Compensation
program as a result of the insolvency of an insurance carrier,
Freemont Indemnity. This insolvency, he said has affected the
guarantee association, "the safety net for workers comp insurance",
which is subsequently experiencing a "serious cash flow situation".
He noted legislation has been introduced to provide funding for the
program, as well as restructure the program.
Mr. Fisher continued that unemployment insurance premiums would
increase because of a calculation made to determine the solvency of
the trust fund, after two or three years of high unemployment in
which the trust fund was "slightly depleted". However, he noted
that the trust allows for recuperation of these funds with the
current increase in employment.
Senator Bunde commented that these two matters would have the
greatest impact on Alaskans, given that most Alaskans are employed.
Department of Transportation and Public Facilities
MIKE BARTON, Commissioner, Department of Transportation and Public
Facilities, testified that Governor Murkowski reorganized the
Department into three major "deputy areas": aviation, highways and
public facilities and marine operations. Mr. Barton furthered that
the Governor also created two advisory boards: the Aviation
Advisory Board and the Marine Advisory Board. Mr. Barton noted that
these boards are working diligently and are proving beneficial to
the Department's efforts.
Mr. Barton told of the consolidation of aviation leasing activities
and the realized savings for personnel and other costs, and more
importantly, the consistency that has resulted between and within
airports.
Mr. Barton stated that the design functions of the Department were
decentralized. He admitted that this change, affecting 500
employees, is still being implemented, noting valid reasons for
centralization and decentralization. However, he expressed this
change "sets the stage" for a new project management scheme from
inception to completion. He assured this would result in shortened
timelines.
Mr. Barton informed that the Department is implementing "term
contracts", which he explained as a system of developing a
comprehensive listing of engineering services and pre-qualified
firms available to perform these services. He detailed that firms
would be chosen from this list to provide services for various
projects, thus eliminating the need to issue bidding requests and
subsequently saving several months time.
Mr. Barton relayed that studies of the Alaska Marine Highway System
(MHS) are underway that may result in a number of changes or
outsourcing. He listed areas under review: ticketing and
reservations, coordination with the Alaska Railroad, terminal
operations, marketing, shore side management, and vessel
construction management. He stated that changes to current
practices could result in significant savings. He furthered that
the Department is reviewing the fare structure to determine price
sensitivity in the marketplace.
Mr. Barton listed road projects under development as a result of
the Resource Roads Program, created under the direction of the
Governor: Colville River Road, Pleasure Creek Road, Pogo River Road
off of Spine Road. Crooked Creek Road to access Doyon, and Pebble
Copper Road near Lake Illiamna.
Mr. Barton said the Department is also working to streamline the
environmental permit process, acquiescing most of which beyond the
State's control due to federal regulations. He stated this has
provided incentive to undertake projects without federal funding.
He noted however that the federal Corps of Engineers has been
assisting in expediting the process, as well as the US Coast Guard,
which has been assisting in securing navigation permits.
Mr. Barton relayed that sea trials for the newly constructed M/V
Fairweather are underway.
SFC 04 # 7, Side B 09:52 AM
Mr. Barton continued that this vessel is able to travel at speeds
up to 42 knots. He reported that the State should receive ownership
in March 2004 and the vessel would be put into service in May.
Mr. Barton also reported that the Lieutenant Governor Leman
christened the M/V Lituya, which would ferry passengers between
Saxman and Metlakatla and is able to withstand heavy seas.
Mr. Barton informed that the State recently attained ownership of
the Adak Airport through an agreement with the Native corporation.
Although some have characterized this acquisition as another
"Seward's Folly", he deemed it an investment in Alaska's future.
Co-Chair Wilken asked if State law prohibits expansion of design
and build efforts.
Mr. Barton responded that he was reviewing the matter and would
report his findings.
Co-Chair Wilken surmised that such efforts are appropriate but
recalled earlier attempts to undertake design and build projects
presented difficulty.
Mr. Barton agreed that these efforts were not always "greeted"
favorably by contractors and design consultants. He admitted that
the Department has undertakes seven or eight design build projects
over the past several years.
Co-Chair Green shared that she has been serving with the
Commissioner on the Knik Arm Bridge and Toll Authority and she
appreciated the professional services and advice provided by the
Department.
Mr. Barton next announced that he was uncertain whether the federal
highway reauthorization would be completed before the next
presidential election in November 2004, suggesting that instead the
current resolution could be continued or reauthorized for 18 months
rather than the usual six-year reauthorization.
Mr. Barton stated that the Omnibus Appropriation Act passed by
Congress also has "some challenges" for the State.
Co-Chair Green spoke to the difficulty for the public in hearing
for many years about certain projects that are never constructed.
She appreciated the "reality check" the Department provides in
relaying timelines of projects, as well as specific federal
requirements and subsequent penalties if not complied with.
Department of Fish and Game
KEVIN BROOKS, Director, Division of Administrative Services,
Department of Fish and Game, testified that of the total $132.5
million budget, only 20 percent is general funds. Of the general
funds, he stated that 90 percent, or $24 million of $27 million,
are appropriated to the Division of Commercial Fisheries. He
reminded that the Division's budget was reduced $1 million general
funds in the current fiscal year. He informed that this reduction
was minimized with additional federal funding and funding from
other sources.
Mr. Brooks reported on coordination of efforts of the Division of
Commercial Fisheries and the Division of Sport Fish for the
management of fisheries. He qualified that the divisions have
different missions. He spoke of federal funds received to research
Chinook salmon. He stated that the divisions would consolidate
technical reporting processes and review biometrics functions. He
also noted that the printing of all regulation booklets has been
consolidated, utilizing the Internet wherever possible.
Mr. Brooks furthered that the Division of Commercial Fisheries is
reviewing all assets used for fisheries management, specifically
research vessels and aircraft. He informed that older vessels are
being replaced, and the fleet is being streamlined. He stated that
the Department owns many smaller boats in various locations across
the State. He informed that the Department and the Department of
Public Safety are collaborating on the use of these vessels. He
noted that in many instances, personnel from both departments are
in the field at the same time for various fisheries openings.
Mr. Brooks reminded of the changes relating to the habit permitting
process in which the Division of Habitat Restoration was eliminated
and its functions transferred to the Division of Sport Fish and the
Department of Natural Resources. He listed the four primary
function areas retained by the Department of Fish and Game: special
areas permitting; access defense across federal lands; habitat
research and restoration, i.e. Kenai riverbank restoration
projects, and the research facility located at Kachemak Bay
restoration; and mariculture leases.
Mr. Brooks stated that wildlife predator control has begun in
Nelchina and McGrath, with the intent of benefiting game
populations in these areas.
Mr. Brooks remarked that the Department has been actively involved
in statewide administrative initiatives including the human
resources consolidation, consolidations of mailroom services in
Juneau, and statewide information technology planning. He added
that the Department is more closely scrutinizing travel requests
and reducing them where possible. In addition, he stated that
numerous memberships and subscriptions have been cancelled.
Co-Chair Wilken commented that he had not realized that 90 percent
of the general funds appropriated to the Department were allocated
to the Division of Commercial Fisheries.
Senator Dyson asked the amount of revenue anticipated from test
fishing.
Mr. Brooks responded that $1.8 million was generated in FY 03 from
these activities.
Senator Dyson asked the amount generated from salmon fisheries
compared to other species.
Mr. Brooks stated he would provide this information.
Senator Dyson understood the Department anticipated generating a
similar amount of revenues from test fisheries in the next year.
Mr. Brooks informed that the Department was granted receipt
authority for $2.8 million of test fisheries revenue, an amount
higher than the anticipated actual revenues. He stated that the
revenue varies by project and that although small increases have
occurred there have been no dramatic increases in revenue.
Senator Dyson asked if all receipts generated from test fisheries
are invested in research activities.
Mr. Brooks replied that the revenues are utilized for the
management of the test fishery in which the funds were generated
and not transferred to other fisheries or other areas of the State.
ADJOURNMENT
Co-Chair Lyda Green adjourned the meeting at 10:09 AM
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