Legislature(2005 - 2006)SENATE FINANCE 532
02/24/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| SB97 | |
| Start |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 97 | TELECONFERENCED | |
| += | SB 98 | TELECONFERENCED | |
MINUTES
SENATE FINANCE COMMITTEE
February 24, 2005
9:04 a.m.
CALL TO ORDER
Co-Chair Wilken convened the meeting at approximately 9:04:41 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Bert Stedman
Also Attending: JOELLEN HANRAHAN, Director, Division of
Administrative Services, Department of Commerce, Community and
Economic Development; MARC ANTRIM, Commissioner, Department of
Corrections; CHARLINE GRIFFIN, Acting Director, Division of
Administrative Services, Department of Corrections; EDDY JEANS,
Director, School Finance, Department of Education and Early
Development; TOM LAWSON, Director, Division of Administrative
Services, Department of Fish and Game; DAN SPENCER, Director,
Division of Administrative Services, Department of Public Safety;
DAVID MARCUS, Acting Deputy Attorney General, Civil Division,
Department of Law; GUY BELL, Director, Division of Administrative
Services, Department of Labor and Workforce Development; JOHN
CRAMER, Director, Administrative Services Division, Department of
Military and Veterans Affairs; NICO BUS, Acting Director, Division
of Support Services, Department of Natural Resources; SUSAN TAYLOR,
Director, Administrative Services Division, Department of Revenue;
BOB BARTHOLOMEW, Chief Operating Officer, Alaska Permanent Fund
Corporation, Department of Revenue; NANCY SLAGLE, Director,
Division of Administrative Services, Department of Transportation
and Public Facilities
Attending via Teleconference: From Offnet Sites: CRAIG TILLERY,
Chief Assistant Attorney, General-Statewide Section Supervisor,
Environmental Section, Department of Law; WILLIAM HERMAN, Program
Officer, Alaska Mental Health Trust Authority, Department of
Revenue; From Anchorage: DEAN BROWN, Deputy Director, Division of
Forestry, Department of Natural Resources
SUMMARY INFORMATION
SB 97-SUPPLEMENTAL APPROPRIATIONS/CBR
The Committee heard supplemental request overviews from the
Department of Commerce, Community and Economic Development; the
Department of Education and Early Development; the Department of
Labor and Workforce Development; the Department of Fish and Game,
the Department of Law; the Department of Military and Veterans
Affairs; the Department of Revenue, the Department of Natural
Resources, Department of Public Safety; and the Department of
Transportation and Public Facilities. The bill was held in
Committee.
SB 98-SUPPLEMENTAL APPROPRIATIONS: FAST TRACK
This bill was scheduled but not heard.
SENATE BILL NO. 97
"An Act making supplemental, capital, and other
appropriations, and reappropriations; amending appropriations;
making appropriations to capitalize funds; making an
appropriation under art. IX, sec. 17(c), Constitution of the
State of Alaska, from the constitutional budget reserve fund;
and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken announced that the purpose of today's hearing is to
continue Department overviews on the regular supplemental bill.
Department of Commerce, Community and Economic Development
Item: 74
Section: 2
RDU: Qualified Trade Association Contract
Supplemental Need: The difference between the estimated amount
and the actual amount paid to the Alaska Travel Industry
Association that was due.
$158,200 General Funds
JOELLEN HANRAHAN, Director, Division of Administrative Services,
Department of Commerce, Community and Economic Development, read
the Supplemental Need of Item 74 and expressed that "this
correction is to FY 05 legislation which adjusted FY 04
appropriation amounts". At that time, the State had a contractual
arrangement with the Alaska Travel Industry Association (ATIA) in
which the State provided a 60/40 funding match. In FY 04, ATIA had
anticipated being unable to meet their match obligation, and their
appropriation was reduced. Subsequent action allowed ATIA to exceed
their anticipated match by $158,000. Therefore, this item "would
correct that reduced appropriation".
Co-Chair Green asked how this request, "would differ from a
ratification".
Ms. Hanrahan replied that this has been a topic of discussion
between the Department and the Legislative Finance Division. The
reason the request is included in the supplemental bill is because
it is an adjustment to FY 05 legislation that adjusted FY 04
appropriation funding. In summary, the request could be classified
as a ratification and not be included in the supplemental.
Department of Corrections
Item: 75
Section: 3(a)
RDU: Institutional Facilities
Supplemental Need: The department took a 7% savings in
commodity purchases in anticipation of savings from deploying
technology. Deployment has been delayed and the savings has
not been realized.
$350,000 General Fund
MARC ANTRIM, Commissioner, Department of Corrections, read the
Supplemental Need and stated that the implementation of the
Department's procurement system has been slow and therefore, the
anticipated seven-percent savings, or $507,600, has not transpired.
$490,000 of that amount was anticipated in the Division of
Institutions. The Department would absorb $157,600 of the expense.
Co-Chair Wilken understood therefore that this request would
"backfill the decrement in the supply line for the FY 05 budget"
and some of the decrement would be absorbed within the Department.
Commissioner Antrim stated that the FY 05 budget was short-funded
by approximately $500,000, as it was developed with the
understanding that the new procurement system would be online.
However, due to the delay in the program's implementation, the
savings have not materialized.
Co-Chair Wilken asked whether this request pertains to the e-
commerce system.
Commissioner Antrim affirmed.
Co-Chair Wilken asked whether the funding appropriated to the e-
commerce system has been expended.
Commissioner Antrim responded no. The funding request pertaining to
the purchase of the e-commerce system is included in the SB 98-FAST
TRACK SUPPLEMENTAL APPROPS/CBRF bill. This request would serve to
fund the Department's commodities.
Item: 76
Section: 3(b)
RDU: Institutional Facilities
Supplemental Need: Fuel cost increases
$75,000 General Funds
Commissioner Antrim stated that this request would fund fuel cost
increases for facilities throughout the State.
Co-Chair Green asked whether this request would provide for the
entire fuel cost increase or whether the Department would be
absorbing some of the FY 05 expenses.
Commissioner Antrim responded that this request would not provide
the full amount. The Department would absorb approximately $25,000
to $30,000 in expenses above the requested amount.
Senator Stedman asked whether the Department's FY 06 budget would
be adjusted to reflect future fuel price projections.
Commissioner Antrim affirmed.
Item: 153
Section: 19(c)
RDU: Corrections Ratifications
Supplemental Need: AR50566-02 Parole Board
$62,129.00 General Funds
CHARLINE GRIFFIN, Acting Director, Division of Administrative
Services, Department of Corrections, stated that this request "is a
ratification for the Parole Board for FY 2002". This amount was
adjusted "from the Parole Board to the out-of-state contracts
component. The Parole Board was never funded to hold hearings in
Arizona when that contract began and was unable in that year to
absorb those costs". A legislative audit recommended that this
request be presented.
Department of Education and Early Development
Item: 77
Section: 4(a)
RDU: ACPE
Supplemental Need: Unanticipated increase in mainframe charges
from Department of Administration's Enterprise Technology
Services
$265,000 ACPE Rcpts
EDDY JEANS, Director, School Finance, Department of Education and
Early Development, stated that this request would allow
postsecondary receipts to address mainframe computer chargebacks.
Co-Chair Wilken, noting that 30-percent of this increase was due to
loan volume, asked regarding the cause of the remaining 70-percent.
Mr. Jeans voiced the understanding that in addition to the activity
from the increased loan volume, an increase in overall mainframe
usage attributed to the chargeback.
Co-Chair Green asked for confirmation that payment would be to the
Department of Administration.
Mr. Jeans affirmed.
Item: 78
Section: 4(b)
RDU: Foundation Program
Supplemental Need: Reduce the FY 05 entitlement for public
school funding due to a decrease in projected enrollment; an
increase in the amount of federal impact aid that reduces the
amount of state aid; and the actual cost of the supplemental
funding floor.
($14,145,500) General Funds
Mr. Jeans stated that this request is the result of a reduction in
the student foundation funding formula program. Fewer students than
anticipated, an increase in federal impact aid receipts, and an
adjustment to the supplemental funding floor attributed to this
decrement.
Co-Chair Wilken asked increasing local contributions was a factor.
Mr. Jeans responded in the negative; local contribution increases
would have been a factor in developing the FY 05 budget.
Item: 79
Section: 4(c)
RDU: Library Operations
Supplemental Need: Costs associated with implementation of
librarian job class study resulting in a one-range increase
effective January 15, 2005.
$30,000 General Funds
Mr. Jeans read the supplemental need and stated that this would
provide salary increases for fourteen librarian positions.
Item: 82
Section: 7(a)
RDU: Fund Capitalization Debt Retirement Fund
Supplemental Need: Increased capitalization of the Debt
Retirement Fund to supplant a shortfall in cigarette tax
revenue into the School Fund - the estimate for cigarette tax
revenue is reduced by $800.0 from $30.2 million to $29.4
million. This fully funds the School Construction Debt
Reimbursement program in FY 05.
$551,100 General Funds
$ 3,500 Federal Funds
$245,400 DEED CIP Equity
Total Funds: $800,000
Mr. Jeans stated that this request would infuse "additional money
into the debt fund to offset a reduction in actual tobacco tax
collected". While $30,200,000 in tobacco tax was anticipated in the
FY 05 budget, the actual amount collected would be $29,400,000.
This item reflects the fund sources identified by the Office of
Management and Budget.
Item: 114
Section: 16(a)
RDU: School Debt Reimbursement
Supplemental Need: Fund Source change due to a shortfall in
cigarette tax revenue deposits into the School Fund. The
School Fund is reduced from $30.2 million to $29.4 million and
the Debt Retirement Fund is increased from $51,670,084 to
$52,470,000.
Total Funds: $0.0 Debt Ret Fund and School Fund
Mr. Jeans noted that this item reflects fund changes in the fund
source and the reduction in the tobacco tax from $30.2 million to
$29.4 million and an increase in the Debt Fund to $52,470,000.
Co-Chair Wilken expressed that Item 82 reflected the fact that the
State collected $800,000 less money as a result of a decline in
smoking. The resulting $800,000 shortfall in debt reimbursement
would be replaced with general funds, federal funds and other funds
to include CIP equity.
Mr. Jeans shared that in FY 04, the Department had a CIP equity
account that was funded by overhead charges relating to capital
projects. The Department had incorrectly understood that that fund
was liquidated; however, a $245,000 balance remained.
Co-Chair Wilken asked whether any balance currently exists.
Mr. Jeans replied in the negative.
Co-Chair Green asked for confirmation that this amount was required
to backfill the account due to a shortfall.
Mr. Jeans concurred that this amount is needed "for the debt
reimbursement program for the current year".
In response to a comment from Co-Chair Wilken, Mr. Jeans clarified
that the total amount is $82 million: $30 million from the tobacco
tax and the $52 million.
Co-Chair Wilken acknowledged.
Co-Chair Green asked for confirmation that these figures are firm
and no additional amount would be anticipated.
Mr. Jeans replied that this is the amount needed for "the debt
reimbursement program to fully reimburse all school districts in
the current year". The amount of revenue that would be received
from the tobacco tax was overestimated and that shortfall must be
backfilled.
Department of Fish and Game
Item 80
Section: 5
RDU: Commercial Fisheries
Supplemental Need: Language in sec. 1, ch. 158, SLA 2004, page
14 for the Southeast Region Fisheries Management component
should have been for the entire Commercial fisheries
appropriation.
Total Funds: zero
TOM LAWSON, Director, Division of Administrative Services,
Department of Fish and Game, explained that this item would correct
an error in the FY 05 operating budget by allowing FY 04 year-end
balances of test fish receipts for all Commercial Fisheries to roll
forward rather than limiting the rollover only to the Southeast
Region. The amount in question is $421,000. The roll forward
language has been in effect since FY 03. Absent this correction,
Commercial Fisheries would be required "to harvest additional
resources" to achieve the revenue required to cover the costs of
the programs funded by test fish receipts.
Co-Chair Wilken asked regarding the item's reference to zero funds.
Mr. Lawson replied that the $421,000 has lapsed into the general
fund.
Co-Chair Wilken, noting that this could be viewed as "a
ratification for FY 04 expenditures", asked for further information
regarding the effect of this request.
Mr. Lawson explained that, in the FY 05 operating budget, the
rollover language was mistakenly placed under the Southeast
Commercial Fisheries component. As a result, only the test fish
revenue from that component was specified to rollover. This item
would allow the rollover language to apply to all pertinent
Commercial components.
Co-Chair Wilken understood therefore that this is a lapse issue.
Mr. Lawson concurred.
Department of Public Safety
Item 81
Section: 6
RDU: Fund Capitalization Fish and Game Fund
Supplemental Need: Fish and Game Fund interest can't be spend
by the Department of Public Safety or the Department of Law
per Legislative Audit, December 2004. A language change is
necessary to specifically appropriate the interest earnings.
$108,400 General Funds
[NOTE: The following testifier's audio is garbled and difficult to
understand.]
DAN SPENCER, Director, Division of Administrative Services,
Department of Public Safety, expressed that this item would allow
the interest earned in the Fish and Game Fund since 1998 to be
utilized by the Department of Public Safety for enforcement
purposes and by the Department of Law for prosecution purposes.
While the funds have historically been utilized in this manner, a
recent Legislative Budget & Audit report [copy not provided]
recommended that the language be clarified to explicitly allow for
the interest to be appropriated.
Co-Chair Wilken asked for confirmation that use of the interest in
this manner is supported for all interested parties.
Mr. Spencer concurred and noted that language should be adjusted in
the FY 06 appropriation budget to reflect this clarification.
Co-Chair Wilken asked whether that language has been provided.
Mr. Spencer expressed that it would be forthcoming.
Co-Chair Green asked for confirmation that the historical use of
these funds would not be altered as a result of this language
change.
Mr. Spencer replied that the funds would be utilized in "the exact
same way" they have been used since 1998.
Senator Bunde understood that the funds would be used to enhance
enforcement efforts relating to Fish and Game issues.
In response to a question from Senator Bunde, Mr. Spencer expressed
that the funds would be used to support Fish and Wildlife
enforcement issues.
Item: 109
Section: 14(a)
RDU: Capital
Supplemental Need: Additional National Marine Fisheries
Service funding for the existing FY 05 capital project: Marine
Fisheries Patrol Improvements. This increases the amount from
$1,080.3 to $1,250.0.
$169,700 Federal Funds
Mr. Spencer stated that this request would allow for an increase in
the amount of federal funds received in FY 05 for "joint open
water" enforcement patrols with the National Marine Fisheries
Service. Overall federal funding support of this ongoing program in
FY 05 would exceed $2.25 million. Additional funds might be
forthcoming.
Co-Chair Green asked whether this funding could be included in the
FY 06 budget.
Mr. Spencer replied that while the joint operation would continue
in FY 06, the timing of the receipt of this funding would be "the
only issue" as the authority to expend it must align with the
fiscal year in which it was received.
Co-Chair Green asked, therefore, whether "an expiration date" is
attached to the funding.
Mr. Spencer communicated that the funding relates to a specific set
of services the State has agreed to provide.
Item 110
Section: 14(b)
RDU: Capital
Supplemental Need: New Crime Scene Examination Enhancement
project
$225,000 Federal Funds
Mr. Spencer stated that this Congressional appropriation would be
used to improve the handling of crime scenes.
Co-Chair Wilken understood this would be a one-time project.
Co-Chair Green asked for confirmation that this was a new project.
Mr. Spencer responded yes; this would be one of a variety of
improvements relating to how crime scenes are processed.
Co-Chair Wilken understood that the project would continue until
its funding was exhausted.
Co-Chair Green asked whether the inclusion of a new project in the
supplemental bill was "appropriate".
Co-Chair Wilken asked whether this funding could be included in the
FY 06 budget rather than in the supplemental bill.
Mr. Spencer responded that were this federal funding received in FY
05, expenditures relating to such things as training programs
should be made.
Item: 83
Section: 7(b)
RDU: Fund Capitalization Debt Retirement Fund
Supplemental Need: This section appropriates any lapsing
balances as of June 30, 2005 of federal unrestricted receipts
to the Debt Retirement Fund. (The amount is unknown at this
time.)
Total Funds: Zero
Co-Chair Wilken commented that this request would allow lapsing
federal funds to be deposited into the Debt Retirement Fund.
Department of Law
Item 94
Section: 9
RDU: Civil Division, Deputy Attorney General's Office
Supplemental Need: Judgments and Claims as of 2/27/05.
$1,108,900 General Funds
DAVID MARCUS, Acting Deputy Attorney General, Civil Division,
Department of Law, stated that this request would address 13
judgments and claims: four to address attorney fees; three to
address challenges pertaining to the November 2004 general
election; and the balance to address personal injury settlements.
Senator Dyson asked whether this request would address an
[unspecified] improper termination lawsuit against the State.
Mr. Marcus responded that were that issue's judgment to have
occurred after February 7, 2005, it would not be included in this
request. He would investigate this further.
Item 97
Section: 11(a)
RDU: Opinions, Appeals and Ethics
Supplemental Need: Outside counsel costs to complete the
appeal through the oral argument in the Planned Parenthood
case: FY 06 lapse date.
$19,100 General Funds
Mr. Marcus read the Supplemental Need and stated that the State
would continue its efforts to defend the Constitutionally of the
Parental Consent Act, which prohibits doctors from performing
elective, non-medically necessary abortions "on girls age 16 and
younger who are both un-married and un-emancipated unless the girl
has first obtained the consent from her parents or a Superior Court
Judge". 40 other states have similar laws. This is a very important
issue to the Governor Frank Murkowski Administration as well as to
many Legislators. The Act is currently undergoing its second appeal
before the Supreme Court with an upcoming oral argument Court date
scheduled for April 13. Extensive briefings and Court records have
been incurred. To date, the Department of Law has expended $667,000
and all appropriations for this purpose have been spent, in
addition to monies spent by the Legislation Judicial Council. A
private lawyer, Mr. Clarkson, has been retained to forward the
Legislature's interest and assist Department of Law attorneys'
efforts. Mr. Clarkson estimated that an additional $19,100 would be
necessary to complete work on the appeal through the oral argument
phase.
Item: 98
Section: 11(b)
RDU: Statehood Defense
Supplemental Need: Extend lapse date to June 30, 2006 for
Navigable Waters, RS 2477 Rights-of-Way, Statehood Defense -
Sec. 62(b), ch. 82, SLA 2003.
Total Funds: zero
Mr. Marcus stated that this request would allow the use of funds
appropriated in 2003 to be extended through June 30, 2006 in order
to address safety defense issues.
Item: 99
Section: 11(c)
RDU: Environmental Law
Supplemental Need: Extend lapse date to June 30, 2006 for
continued analysis of the continuing injury from the Exxon
Valdez oil spill and development of restoration option - Sec.
16, ch 159, SLA 2004.
Total Funds: zero
Item 100
Section: 11(d)
RDU: Environmental Law
Supplemental Need: Expend lapse date to June 30, 2006 for
Exxon Valdez Oil Spill Trustee Council - Senator Elton. 22(c),
ch. 159, SLA 2004.
Total Funds: zero
CRAIG TILLERY, Chief Assistant Attorney, General-Statewide Section
Supervisor, Environmental Section, Department of Law, testified via
teleconference from an offnet site in Anchorage stated that these
two requests would allow the appropriations to be extended through
June 30, 2006. Section 11(d) was a $1.5 million appropriation from
the Exxon Valdez Oil Spill Trustee Council to support studies that
have either not yet been completed or would require review of
restoration activities. The studies and reviews should be completed
by the fall of 2005. In addition, a $100,000 appropriation from the
Exxon Valdez Criminal restitution money, a restricted account, is
also being requested to have an extension date.
Co-Chair Wilken recalled that a similar request had come before the
Committee the prior year. At that time, a concern was raised
regarding whether the continuance of Prince William Sound studies
was a necessary monetary expenditure.
Mr. Tillery confirmed that this issue had been raised the prior
year. The response is that studies would fully evaluate whether the
Sound's cleanup was complete or which components must be further
addressed. This would be the final review and should be completed
by this fall.
Co-Chair Wilken understood last year's $1.5 million appropriation
was to support some new and some existing efforts. To the point, he
asked whether any new projects would be undertaken with this money
were it not to lapse.
Mr. Tillery responded that, "the only new projects that could be
started with this money" are those that would be considered as
providing a follow-up or an extension of an existing project. One
example might be an activity that might address "lingering oil in
the Sound … or a general look around to see if there are any
activities that can be undertaken to resolve or deal with lingering
oil remaining on some beaches".
Co-Chair Wilken asked a list to be provided that would include
"projects that are currently underway, a list of projects new or in
addition to the current projects that will get underway" to include
start/finish dates. "That list should total $1.5 million".
Mr. Tillery responded that the amount would be less than $1.5
million as some of the money would fund federal agency endeavors
and, as such, would not funnel through the Department of Law.
Co-Chair Wilken stressed that once this list is developed, it would
provide a way to gauge, one year from now, the status of all the
projects funded by this appropriation.
Mr. Tillery concurred.
Department of Labor and Workforce Development
Item: 95
Section: 10(a)
RDU: Management Services
Supplemental Need: Language for carryforward of revenues due
to audit findings.
Total Funds: zero
Item: 96
Section: 10(b)
RDU: Vocational Rehabilitation Administration
Supplemental Need: Language for carryforward of revenues due
to audit findings.
Total Funds: zero
GUY BELL, Director, Division of Administrative Services, Department
of Labor and Workforce Development informed the Committee that
these requests would address a Division of Legislative Audit
finding regarding the Department's indirect cost allocation plan,
in that the Department must receive Legislative approval to
rollover excess revenue it collects from one year to the next.
These monies are used to offset future administrative cost rates.
These requests seek that authorization.
Co-Chair Wilken asked the amount of the "unexpended, unobligated"
revenue.
Mr. Bell responded that the net for both divisions from FY 04 to FY
05 is approximately $150,000.
Department of Military and Veterans Affairs
Item 101
Section: 12(a)
RDU: Capital
Supplemental Need: Transfer RPL 09-5-0001, authorized on July
8, 2004, for the Alaska Aviation Safety project from operating
to capital ($2,803.0 federal funds).
Total Funds: zero
JOHN CRAMER, Director, Administrative Services Division, Department
of Military and Veterans Affairs, stated that this request would
allow this funding to move from the Department's operating budget
to its capital budget, as the funding would be utilized over
multiple years.
Item: 102
Section: 12(b)
RDU: Capital
Supplemental Need: Reappropriation of the estimated balance of
$48.5 from the Tudor Road Combined Support Maintenance Site
Clean-up project (Sec. 1, ch. 135, SLA 2000) for statewide
emergency communications.
Total Funds: zero
Mr. Cramer stated that the Department has concluded its clean up of
the Tudor Road maintenance shop area. This request would allow the
remaining balance of that project's appropriation to be dedicated
to the Alaska Statewide Emergency Communications Program.
Item: 103
Section: 12(c)
RDU: National Guard Military Headquarters
Supplemental Need: Anchorage Armory basic telecommunications
service; increased basic telephone service costs provided by
the National Guard Bureau for Department of Military and
Veterans Affairs offices located in the Anchorage Armory.
$57,200 General Funds
Mr. Cramer stated that this request relates to an increase in the
cost of providing basic telephone service expenses at Fort
Richardson.
Item: 104
Section: 12(d)
RDU: Air Guard Facilities Maintenance
Supplemental Need: Network Services Costs for Kulis and
Eielson; network service provided by the Air National Guard
$30,900 General Funds
Mr. Cramer expressed that this request would provide for expenses
associated with the Statewide network services for the Air National
Guard facilities at Kulis and Eielson.
Co-Chair Wilken inquired to the reason that network expenses have
increased so dramatically.
Mr. Cramer informed that contrary to previous years, the federal
government is no longer allowing the Department to chargeback such
expenses. The Department of Administration charges Departments for
such services; however, these facilities do not receive "the
benefit of those services".
Co-Chair Wilken understood therefore that due to the chargeback
component being disallowed by the federal government, general fund
dollars are being requested to fund this request.
Department of Natural Resources
Item 106
Section: 13(a)
RDU: Fire Suppression Activity
Supplemental Need: Costs to fight worst fire season in
history.
$36,902,700 General Funds
NICO BUS, Acting Director, Division of Support Services, Department
of Natural Resources, expressed that this request would address the
State's "highest" fire suppression efforts to date, even though the
season started out slower than usual. To place the amount in
perspective, the entire Department budget is similar to the cost of
the FY 05 fire suppression efforts.
Co-Chair Wilken asked the State's participation in the North Slope
Borough's task force efforts to analyze last summer's fire season
in an attempt to prevent similar events from re-occurring.
Mr. Bus deferred to the Division of Forestry.
DEAN BROWN, Deputy Director, Division of Forestry, Department of
Natural Resources, testified via teleconference from Anchorage, and
stated that a Departmental Regional Forester and other staff, as
needed, have been attending the North Star Borough's task force
weekly meetings. The Department has been "completely involved" and
has provided information in order for the task force to have the
most complete information available.
Co-Chair Wilken asked whether progress is being made.
Ms. Brown affirmed that progress is being made. The task force's
findings, combined with the Division of Forestry and the Bureau of
Land Management reports, and public meeting comments should provide
"a fairly good picture of the concerns and issues" that would allow
fire suppression policies to be re-evaluated for coordination
purposes across all levels: State, local, federal, and public.
Co-Chair Wilken hoped that the results of this effort would be
beneficial.
Senator Bunde asked for an estimation of last summer's property
loss, as well as a projection for the upcoming summer fire season.
Co-Chair Wilken commented that while there was fire damage to
property, no lives were lost.
Ms. Brown asked for a definition of property; specifically whether
it would include such things as residences, personal property,
State forest loss values, Native Corporation losses, and more.
Senator Bunde expressed that he was seeking the total loss of all
entities.
Ms. Brown expressed that the economic value of the forest resources
lost in the fire is difficult to calculate, as the value of those
forests is questionable as they are not accessible by road. The
number of actual structural losses and fire suppression expenses
could be provided; however, due to "the magnitude of the fire
season", total losses are still being determined by the affected
entities.
Senator Bunde agreed that there was little high-timber value in the
fire areas. Continuing, he voiced hope that the State's fire
suppression plans for remote areas would not be affected by
pressures exerted from property owners, as it would be interesting
to compare the actual property loss expense to the $37 million
expense of the fire suppression.
Ms. Brown agreed that this past fire season was "a real test" of
fire suppression policies in remote areas; however, the interagency
community considers that it successfully demonstrated "that limited
resources can be focused towards protection of life and property in
the areas where it needs to be" while recognizing the historic role
of fire in the regeneration of growth in areas where it does not
threaten life and property.
Co-Chair Wilken commented that due to the close proximity of the
fire, many communities could have been in harm's way had the wind
shifted. He appreciated the jobs conducted by the fire suppression
crews.
Item: 152
Section: 19(b)
RDU: Ratifications Natural Resources
Supplemental Need: AR37313-04 Fire Suppression Activity
$2,010,200.00 General Funds
Mr. Bus stated that this request is a ratification of the expenses
associated with June 2004 fire suppression activities. Total FY 04
fire suppression expenses amounted to approximately ten million
dollars. As the average fire season costs approximately $15
million, FY 04 was considered a good year.
Item 107
Section: 13(b)
RDU: Capital
Supplemental Need: Reappropriation of the Grants to Named
Recipient: Ketchikan Area State Parks Advisory Board - $25,000
for Areawide Health, Safety and Maintenance Upgrades project
to DNR for same purpose. As originally appropriated, the Board
has no staff or the capability to receive and expend the
funds.
Total Funds: zero
Mr. Bus stated that due to the fact that the Ketchikan Area State
Parks Advisory Board has no mechanism through which to receive or
expend money, this request would allow this grant to be processed
through the State Division of Parks.
Co-Chair Green asked whether the Grants to Named Recipients program
was a specific program in the Department of Natural Resources.
Mr. Bus replied that it is not a Department of Natural Resources
program. He explained that this grant was a legislative designation
to the Ketchikan Area State Parks Advisory Board.
Item: 108
Section: 13(c)
RDU: Water Development
Supplemental Need: Replace non-realizable receipts.
$100,000 General Funds
($100,000) Receipt Supported Services
Total Funds: zero
Mr. Bus explained that this request would allow for the re-
appropriation of $100,000 in receipt-supported services to the
general fund in order to support the Department's Water Development
program. This is necessary due to FY 05 Legislative action that
switched $300,000 from general fund support for this program to
receipt supported services funding. Unfortunately, the Department
"is prohibited from increasing fees beyond what is reasonably
necessary to cover the expenses"; and as a result, the Department
has been unable to fill water adjudication positions, and has
fallen behind in processing water right applications. Only half of
the applications could be processed. This has negatively affected
economic development in all areas. While the Department has re-
allocated other funding to address this issue, there remains an
approximate $100,000 shortfall.
Co-Chair Wilken deducted therefore that, since there is a $300,000
request for this program in the FY 06 budget, the annual expense
relating to this program is $300,000.
Mr. Bus concurred. The Department attempted to control FY 05
expenses by leaving positions vacant and transferring money from
other divisions to it.
Senator Stedman asked for further information regarding the source
of the added workload, specifically whether it pertains to large
river or stream water right applications.
Mr. Bus exampled the types of water right applications from
Southeast Alaska: one from the City of Sitka, two seafood
processing applications, and one from the Kennicott Greens Creek
Mine. Those from the Northern region include various city,
industry, and mining applications. Application delays result in
significant negative economic impact. Applicants are unable to
apply for bank loans without an approved application.
Senator Bunde asked whether the application fee is based on the
size of the project and whether the current fee structure
sufficiently covers program expenses.
Mr. Bus communicated that the fees cover the costs of operating the
program. Processing private citizen water right applications is
currently secondary to the processing of economic development-
related applications.
Senator Bunde understood therefore that this is a receipt-supported
program.
Mr. Bus responded that the charges to the program have reached the
funding limit. Fees could not be increased, as the charges could
not exceed the cost of operating the program.
Senator Bunde therefore questioned the need for more funding.
Mr. Bus explained that the Statute recognizes $75 as being the
reasonable amount to charge for the processing service; however,
the program cost might be $150. The difference is due to
administrative expenses.
Senator Bunde inquired as to whether the Statute could not be
changed to reflect actual costs.
Mr. Bus responded that "various functions" within the program could
not be included in the overall cost assessment.
Senator Bunde ascertained therefore that program expenses exceed
the allowable fee level.
Mr. Bus voiced that while this observation is valid, costs not
directly related to the application are not considered.
Senator Bunde expressed that the water rights program is a
component of a larger program.
Co-Chair Green noted that the request's detailed explanation states
that, "the law provides that fees may not exceed the estimated
average reasonable direct costs of providing the program". Mr. Bus
might be including direct and indirect costs in his comments.
Mr. Bus acknowledged that he is referring to total costs. The fees
could be altered were the law changed to specify total costs.
Co-Chair Green commented that changing the regulation could be
considered.
Co-Chair Wilken surmised that including the word total in the
language could address this issue. This issue should be further
discussed.
Senator Bunde voiced support of such action, specifically as it
would assist in furthering economic development in the State.
Senator Stedman asked for further information regarding the
program's workload. While he understood that processing large
projects is primary due to their economic importance, he asked
regarding the number of smaller applicants being processed.
Mr. Bus recalled that a few year prior, the program received a
funding boost in order to address the backlog of small
applications. However, the current funding situation has mandated
that priorities be established. The Department would address
individual permit applications were, for example, the potential for
a conflict to arise between two parties. Were a request filed for a
change to an existing residential water use, the water could
continue to be utilized while the permit is pending.
Department of Revenue
Item: 111
Section: 15(a)
RDU: Alaska State Pension Investment Board
Supplemental Need: Increased managers fees
$1,100,000 various Retirement Funds
SUSAN TAYLOR, Director, Administrative Services Division,
Department of Revenue, explained that, "investment management fees
are a percentage of the market value invested" and the Alaska State
Pension Investment Board (ASPIB) is requesting $1,100,000 relating
to various retirement funds. During the past several years, ASPIB
decreased this authorization as a result of declining markets.
Markets have since rebounded. The calculation is based on the
estimated rate of returns as determined by the State's consultant,
Callan & Associates. The rate of return is a median rate with a
five percent increase that acts, as a "cushion" were the markets to
perform better than expected. This would serve to avoid the need
for additional authorization requests. These funds could not be
used for general operating expenses.
Co-Chair Wilken noted that the detailed language specifies these
expenses to pertain to FY 04 fees payable in FY 05.
Ms. Taylor corrected that this request pertains to FY 05 fees.
There must be a typographical error in the explanation. The
increased fees associated with the market rebound in FY 04 were
absorbed in the FY 04 authorization. This would not be the case in
FY 05.
Co-Chair Wilken asked whether the $1.1 million increase is solely
due to the increasing value of the State's assets.
Ms. Taylor replied that a portion of the amount is the result of
other investment vehicles. For example, 70-percent of the increase
is the result of "agricultural managers being added".
Senator Stedman asked whether the State experienced "a substantial
reduction in management fees" when the value of its portfolio
declined, and whether the State is now experiencing growth in these
fees once again due to market rebounds.
Ms. Taylor understood this to be correct, but noted that this would
be confirmed.
BOB BARTHOLOMEW, Chief Operating Officer, Alaska Permanent Fund
Corporation, Department of Revenue, expressed that the Permanent
Fund Corporation (PFC) experienced the same cycle as the retirement
systems. The PFC authorization for management fees in FY 01 was
$45.5 million; the current management fee authorization is $39
million. Decrements have been experienced, "and now we are in the
process of going back up". He noted that the PFC would be
requesting a $1.5 million increase for management fees for FY 05.
Even with this increase, the PFC authorization would still be below
the amount required three years prior.
Senator Stedman asked that a chart be developed to reflect the
various management fee authorizations from year to year.
Ms. Taylor affirmed that a chart would be developed.
Senator Bunde understood that the Fund's management fees would be
included in the "Other Funds" component.
Ms. Taylor affirmed.
Co-Chair Green asked regarding the types of entities to which
management fees are paid.
Ms. Taylor deferred to Mr. Bartholomew.
Mr. Bartholomew shared, for example, that the PFC employs
approximately 16 different management firms for its equity
investments.
Senator Bunde asked whether those who provide actuarial advice to
the retirement systems "also manage the funds".
Mr. Bartholomew responded no; the retirement system employs a
separate consultant to perform actuarial duties.
Item: 146
Section: 20
RDU: Treasury Division
Supplemental Need: Increased managers fees.
$25,000 Constitutional Budget Reserve
Ms. Taylor stated that a sub-fund of the Constitutional Budget
Reserve (CBR) Fund was invested in domestic and international
equity in an endeavor to garner higher rates of return. However,
financial markets declined after it was established and managers
fee levels decreased accordingly. Recent market upswings have
resulted in increased managers fees and thus, the need for this
request. Additional funds would also be required in FY 06.
Co-Chair Wilken recalled that the sub-fund was allocated $400
million in FY 99.
Ms. Taylor affirmed.
Co-Chair Wilken understood that the fund had been abolished.
Ms. Taylor clarified that while legislation to this effect had been
proposed, it had not advanced.
Senator Stedman understood that the retirement system establishes a
target rate with a specified margin; that percentage would be the
basis for budgeting manager fees. To that point, a five percent
margin on a target rate of 8.25 percent would establish the base
for calculating managers fees at approximately 13.5 percent. Were
"extraordinary returns" to be experienced, the Department would be
required to seek supplemental funding.
Ms. Taylor concurred.
Senator Stedman summarized therefore that a target rate of eight-
percent, with a five-percent margin, would establish a calculation
rate of 13-percent to provide for manager fees. He understood that
the rate could be adjusted throughout the year depending on market
performance.
Ms. Taylor responded that the calculation is not adjusted
throughout the year. The process is to budget for more than the
target rate. Were fees lower than the authorization, the balance
would not be expended.
Mr. Bartholomew informed that the Permanent Fund's manager fee
calculations solely utilize the median rate of return and do not
include a "buffer".
Mr. Bartholomew clarified that the retirement system calculates its
managers fees based on a projected market return, and then
increases that amount by five-percent. For example, managers fees
based on an eight-percent return, might amount to $30 million; an
additional five-percent, or $1.5 million, would be added to the $30
million. It would be "a five-percent buffer of their total budget
request".
Ms. Taylor affirmed that the amount would be based on the gross
budget.
Senator Stedman acknowledged the clarification.
Item: 113
Section: 15(c)
RDU: APFC Custody and Management Fees
Supplemental Need: Increased Managers Fees
$1,500,000 Permanent Fund Receipts
Mr. Bartholomew stated that a strong equity market has occurred
since the FY 05 budget was calculated 18 months prior. This has had
a direct effect on the fees. In addition, the funds "are moving
into asset classes that have higher costs than the standard bond
and stock investments that we've been doing". "A certain amount of
the fee increase is related" to that change. The funds should
produce a higher level of returns to compensate for the higher
manager fees.
Senator Stedman noted that the words "with a lower level of risk"
should be added to Mr. Bartholomew's last statement.
Mr. Bartholomew replied the goal of changing to these different
asset classes, is to either obtain a higher return or to diversify
in order to lower risks. "There are increased costs, regardless".
Item: 112
Section: 15(b)
RDU: Capital
Supplemental Need: Alaska Mental Health Trust Authority:
Mobility Coalition grant funds from the U.S Department of
Transportation
$500,000 Federal Funds
Ms. Taylor informed that this request is included in the
supplemental bill due to the fact that historically this funding
had been appropriated to the Department of Transportation and
Public Facilities (DOT), but this year it was appropriated to the
Alaska Mental Health Trust Authority. This request would allow DOT
to manage the funds as they have in the past.
In response to a question from Co-Chair Wilken, Ms. Taylor
clarified that this request pertains to federal funds. The State
has already appropriated its $500,000 match.
Co-Chair Wilken asked whether this request could be included in the
FY 06 budget.
WILLIAM HERMAN, Program Officer, Alaska Mental Health Trust
Authority, Department of Revenue, testified via teleconference from
an offnet site and stated that the Trust's intent is to utilize
this money in FY 05. It is anticipated that federal funds would
also be appropriated in FY 06.
Co-Chair Wilken understood therefore that a $500,000 Mental Health
request would be included in the State's FY 06 Mental Health budget
with the anticipation that $500,000 in federal matching funds would
again be provided.
Mr. Herman concurred, but clarified that the FY 06 federal
appropriation has not been finalized.
Department of Transportation and Public Facilities
Item 116
Section: 17(a)
RDU: Capital
Supplemental Need: Bids came in higher for Chandalar
maintenance station construction.
$930,000 General Funds
NANCY SLAGLE, Director, Division of Administrative Services,
Department of Transportation and Public Facilities stated that this
request would assist the Department in replacing the Chandalar
maintenance station on the Dalton Highway. The station was
demolished due to structural inadequacy and operations are being
conducted in a tent. The original structure replacement estimate
was $5.2 million; $2.6 million was allocated in FY 04. However, the
estimate must be revised due to recent steel price increases. This
funding request would allow the contract to be awarded for the
shell of the building. A completion-funding request would be
included as an amendment to the FY 06 capital budget.
Co-Chair Wilken commented that this project must get done.
Ms. Slagle agreed that this project has been an issue for many
years.
Co-Chair Wilken communicated that the Committee strongly supports
completing this station.
Item 117
Section: 17(b)
RDU: Capital
Supplemental Need: Adak contract - new federal authority for
capital improvements.
$3,400,000 Federal Funds
Ms. Slagle shared that the Department of Defense is providing
funding to bring the Adak airport facility and runway up to
required operation standards; including construction of an airport
rescue and fire fighting building, runway replacement, and water
and lighting system upgrades. No State match is required.
Senator Bunde understood this to be a private airport facility.
Ms. Slagle replied that the State is operating the facility under
an agreement with the United States Navy.
Senator Bunde asked whether the airport facility had been included
in the federal military base transfer to a Native corporation.
Ms. Slagle replied in the negative, and stated that forthcoming
Item 121 would provide further information. The State received $10
million in federal funds in FY 04 in addition to this funding. The
agreement authorizing the State to operate the airport is effective
for another five years.
Item: 118
Section: 17(c)
RDU: Capital
Supplemental Need: Emergency and Non-routine Maintenance:
Failed railroad crossings, $305.0; Winter ice storm and
avalanche damage, $50.0; Johnson River bridge damage, $218.4
$573,400 General Funds
Ms. Slagle stated that the Department did not receive any
appropriation for this item in the FY 05 budget with the
understanding that, were any situation to arise, it would be
addressed through a supplemental request. This request includes:
the repair of three failed railroad crossings; overtime and
equipment usages associated with responses to winter weather
conditions, and repair work to the Johnson River Bridge. "An over-
height vehicle hit the cross members of the bridge and caused
extensive damage".
Co-Chair Wilken asked whether the person responsible for the
Johnson Creek Bridge damage has been identified.
Ms. Slagle replied in the negative.
Senator Stedman inquired whether a person responsible for damaging
State property, such as this bridge, would be held responsible for
the repairs.
Ms. Slagle responded that compensation for damages to State
infrastructures would be pursued either through the individual or
through their insurance carrier. Any recovered funds would be used
toward the repairs. Due to increased efforts in this regard, the
Department has been increasingly successful.
Senator Bunde asked regarding the efforts that have been exerted in
locating the person responsible for the bridge damage.
Ms. Slagle voiced being unfamiliar with the specific efforts
exerted in this regard, but noted that this information could be
provided.
Senator Bunde asked whether the Alaska State Troopers are involved
in the investigation.
Ms. Slagle responded that, "they typically are".
Co-Chair Wilken informed that the State Troopers are continuing
their search for the backhoe that was involved in the incident.
Co-Chair Wilken voiced concern regarding the long-standing
agreement with the Alaska Railroad that the State be responsible
for railroad crossing repairs. Continuing, he noted that were the
Railroad to provide a franchise fee to the State, that funding
could be used toward this expense. A fee of one dollar per
passenger would provide sufficient funding for this endeavor.
Item: 119
Section: 17(d)
RDU: Anchorage Airport Facilities
Supplemental Need: Utility cost increases.
$1,001,400 Internat'l Airport Rev Fund
Ms. Slagle expressed that this request would address increased
utility fees associated with the Anchorage international Airport.
In addition to increased electricity and natural gas expenses, the
airport's expansion is also a factor.
Item: 120
Section: 17(e)
RDU: Anchorage Airport Field and Equipment Maintenance
Supplemental Need: Utility cost increases.
$274,800 Internat'l Airport Rev Fund
Ms. Slagle informed that this request would address the airport's
equipment maintenance needs.
Item: 121
Section: 17(f)
RDU: Capital
Supplemental Need: Reappropriate the June 30, 2005 balance of
the $10 million appropriation made in sec. 29(c), ch. 159, SLA
2004 for the Adak air field, estimated to be $9 million, to
DOT for capital improvements.
Total Funds: zero
Ms. Slagle stated that request would allow for the reappropriation
of the FY 04 $10 million federal fund appropriation for the
aforementioned Adak Airport. The original appropriation was
intended as an operating item, however, "to correct an accounting
issue" within the Department, this is a request to place the funds
in the capital budget.
Senator Stedman inquired as to whether this airport would
eventually become self-supporting rather than being funded by the
State.
Ms. Slagle understood that the State originally agreed to manage
the airport with the provision that its operation be federally
funded. There was no intent to impact the general fund.
Senator Dyson commented that the infrastructure at the Adak
military base "was grossly overbuilt". He described the base as
once being "the center" for United States naval intelligence for
the North Pacific. After the demise of the Cold War, that mission
dissipated; however, things such as increasing terrorist activities
might require its reactivation in the future. In the meantime, the
airport is available as an emergency landing facility for aircraft
in the North Pacific. "Lots of things" support the need to continue
this airport's "viability".
Item: 122
Section: 17(g)
RDU: Central Region Facilities
Supplemental Need: Heating fuel and risk management cost
increases.
$249,900 General Funds
Item: 123
Section: 17(h)
RDU: Northern Region Facilities
Supplemental Need: Heating fuel and utility cost increases.
$465,500 General Funds
Ms. Slagle stated that these requests represent the increased
utility costs associated with maintaining Department facilities.
Senator Bunde remarked that there is public concern about the
Department's purchasing of large road construction equipment, such
as asphalt recycling machines. Justification for such purchases
should be reviewed, as the State should not compete with private
enterprise.
Co-Chair Wilken commented that the concern might apply to both
purchase or lease scenarios.
Senator Bunde agreed.
Senator Stedman also reported hearing similar concerns in this
regard. He echoed that the justification for either leasing or
purchasing of large equipment should be provided.
Co-Chair Wilken noted that the Finance Committee's DOT subcommittee
would address this issue.
Co-Chair Wilken noted that the Department's supplemental request
overviews would continue at the next hearing on this bill.
The bill was HELD in Committee.
ADJOURNMENT
Co-Chair Wilken adjourned the meeting at 10:41 AM.
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