SENATE BILL NO. 241 "An Act making appropriations for the operating expenses of state government and certain programs; making capital appropriations and supplemental appropriations; capitalizing funds; and providing for an effective date." 10:08:32 AM MILES BAKER, INFRASTRUCTURE INVESTMENT COORDINATOR, OFFICE OF THE GOVERNOR, introduced himself. NEIL STEININGER, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, introduced himself. Mr. Baker discussed the presentation, "State of Alaska, Office of the Governor, Infrastructure Appropriation Bill SB241, Senate Finance Committee, April 6, 2022" (copy on file). He started with slide 7 titled "SB 241 Infrastructure Overview by Category" [see Senate Finance Committee meeting dated April 6, 1:00 p.m. for slides 1 through 6]. The slide showed a table depicting spending categories ranging from the least discretionary to most discretionary. The bulk of the bill spending was $950 million in federal funds and undesignated general fund (UGF) match (70 percent) for reauthorized and new federal programs. The second spending category was UGF funding for additional state support of federal programs. He cited critical minerals mapping as an example. The third category was Congressional earmarks. He elaborated there had been a number for Alaska and only two required additional authority. The governor wanted to match the public safety housing program operated by Alaska Housing Finance Corporation (AHFC) dollar for dollar. Mr. Baker addressed the fourth category on slide 7: infrastructure coordination and implementation. He relayed it was an ongoing effort coordinating with local governments and tribes. The category included money for the governor's office, a grant for the Alaska Federation of Natives (AFN) navigator program, and a grant to the Alaska Municipal League (AML). He characterized the last spending category as the most policy subjective. The administration had identified four large areas in the Department of Energy where Alaska should be competitive that were worth putting some UGF into exploring and pursuing. 10:12:01 AM Co-Chair Bishop reminded committee members there were numerous agencies available online for questions. Mr. Baker displayed slide 8 titled "Federal Programs and Match": Commerce, Community and Economic Development • Alaska Broadband Office $6,513.0 ($6,000.0 Fed, $513.0 CIP); 3 PFT • Rural Utility Business Advisor (RUBA) $666.7 ($500 Fed, $166.7 GF Match); 2 PFT Alaska Oil and Gas Conservation Commission (AOGCC) • Orphaned Well Plugging, Remediation and Restoration $32,341.0 Fed Mr. Baker elaborated that broadband was one of the biggest game changing new investments in the infrastructure bill and all states would be required to have a broadband office to coordinate the planning effort. He reported that every state would receive a minimum of $100 million and 5 percent of the funding received could be used on administration. The state expected to receive another $1 million in federal planning money for a second program [under the Department of Commerce, Community and Economic Development (DCCED)]. The broadband increment also included capital improvement project (CIP) funding for three proposed positions to staff the broadband office. There was also a tremendous amount of money coming in through the Environmental Protection Agency (EPA) water programs. He noted the Rural Utility Business Advisor (RUBA) program provided outreach to support the water programs. Mr. Baker highlighted a large new initiative for the plugging of oil and gas wells through the Department of Interior. There were three different programs for state and private land, federal land, and tribal land. The bulk of the federal funding was for the state and private land program. He detailed that AOGCC was the required lead; all of the national equivalents of AOGCC had been working on the topic for quite some time. The administration had put in the request for information (RFI) and had received the notice. He relayed there were 12 known oil and gas wells on state land and the funding was the first tranche of funding the administration expected to receive. He expounded that AOGCC would contract the work out and would work with the Department of Environmental Conservation (DEC, Department of Natural Resources (DNR), RSA, and private contractors. 10:15:10 AM Co-Chair Bishop asked Mr. Baker to specify the operating and capital funding in the requests as he continued the presentation. He looked at the federal funding of $32,341,000 for AOGCC. He asked if it was funding for one year, five years, or other. He asked for the information going forward. Senator Wielechowski asked if companies responsible for drilling wells were required to plug, remediate, and restore wells they had abandoned. Mr. Baker answered there were requirements for companies and requirements had changed to become more rigid over the years. He stated that wells were from various time periods; therefore, some had been plugged, but not to the current standard. Some of the wells were plugged long enough ago that some of the adjacent lands were not properly remediated. He stated it was all over the map. Senator Wielechowski requested a list of wells that were proposed to be plugged, remediated, and restored. He wondered why the state was assuming the responsibility with the federal dollars instead of the group that drilled the wells. Co-Chair Bishop asked if the funds would "clear the deck" on the abandoned wells. He asked if it would bring closure to all of the abandoned wells. Mr. Baker replied that when the notice came out for the funding, AOGCC put in a response including the estimated cost to plug the wells on state land. The cost was $32 million. He clarified the funding reflected the first tranche; if the costs increased the state could potentially receive additional money to fill the work. The allocation was based on the administration's best cost estimate. He noted the funding was an FY 22 supplemental because the well sites needed to be looked at in the spring before alders came up in order to get the best cost estimate. 10:19:05 AM Senator Wielechowski asked if the work would be bid out via a competitive bid process. Mr. Baker replied in the affirmative. He elaborated that AOGCC was the official receipt entity for the state. The national organization working on the issue was comprised of all of the AOGCC equivalents. He explained that AOGCC would be contracting out and working with DNR and DEC on their portions of the work. Senator Wielechowski referenced the $6.5 million and three permanent full-time employees for the broadband office. He assumed the positions accounted for several hundred thousand dollars. He asked where the remaining money would go. Mr. Baker replied that the administration was asking for federal receipt authority of what it expected to get in the first tranche of available planning funding. The $513,000 was the CIP to pay for the positions. He explained that a tremendous amount of work would be required. In order to receive the initial planning funding, the state had to file a notice of intent to participate in the program. He furthered that the document was fairly technical and would include the type of plan and work required. Once the state received the initial planning funding, which should be fairly quick after filing the NOI, the administration would develop a five-year plan that would include setting up regional advisory groups, getting public input and working with national agencies. The money would be used for funding positions, possibly bringing in technical expertise, holding planning events, and putting together the needed information. Senator Wielechowski relayed it would be helpful if Mr. Baker could reference the page number of the appropriation request. Mr. Baker offered to provide the project numbers and would do his best to provide the requested information. Co-Chair Bishop stated that no one from DCCED was available online to answer any questions. He wanted to know the current number of RUBA employees. He referenced the request for two additional positions. He wanted to ensure RUBA was connecting with the United States Department of Agriculture (USDA). He highlighted another $2 billion pot of funding for rural utility electrification, water, and broadband. He wanted to ensure the state accessed every federal dollar possible to get running water in rural Alaska. 10:24:04 AM Mr. Baker continued with slide 8, reading as follows: Alaska Energy Authority (AEA) • Alternative Energy and Energy Efficiency Programs $3,655.6 Fed o Energy Efficiency Conservation Block Grants o State Energy Program (SEP) o Energy Efficiency Revolving Loan Fund Capitalization Program (New) o Energy Auditor Training Program (New) Alaska Housing Finance Corporation (AHFC) • Weatherization Assistance Program $35,000.0 Fed • Energy Efficiency Research and Training $2,000.0 Fed Senator Hoffman commented that $3.6 million was not a large sum of money. He recalled that the weatherization program was initiated the last time there was a spike in oil prices. He had learned from AHFC that there were thousands of homes in the state that still needed weatherization. He was aware that there was a $1,300 energy rebate proposed by the other body and the governor had said he was supportive of the rebate; however, there was no way to ensure that individuals would actually spend the rebate money on energy costs, particularly in rural areas. A significant benefit of the weatherization program was that it saved individuals from $200 to $500 per month on energy costs, which equated to millions of dollars saved on energy over the lifetime of a home. Senator Hoffman wondered if the administration had looked into offering financial assistance to Alaskans for home weatherization. He thought that of all the programs in the state, the weatherization program made the most significant strides for Alaskans in reducing energy costs. He noted that there had been out-migration in the state for the last eight years, and he believed that the high cost of living was one of the most significant contributing factors. He thought that the notion that the proposed sum of $3.6 million was large was laughable. He asked what the administration thought about the weatherization program and the benefits it could offer. 10:29:05 AM Mr. Baker agreed that the term "large" was an inappropriate descriptor for the sum and apologized if he gave the wrong impression. He believed that the weatherization program to which Senator Hoffman was referring was managed by AHFC and supported by general funds (GF). The federal bill [Infrastructure Investment and Jobs Act (IIJA)] had around a $3.5 billion supplemental for weatherization and it was previously estimated that Alaska's portion would be $35 million, but the estimate was reduced to $18 million in the prior week. He relayed that the governor wanted to keep the spending of GF down and limit the amount of discretionary GF spending. The only exception was a $2 million federal earmark for AHFC's rural housing program for teachers' health and public safety. The governor wanted to match the amount with $2 million of UGF for public safety housing. Senator Hoffman stated that he had a comment on the topic. Mr. Baker wondered if representatives from AHFC were available to comment. Senator Hoffman asked if the legislature should use the additional revenue to try to make Alaska a more affordable place to live. He understood the reasoning behind wanting to keep GF spending to a minimum but wondered how it would impact Alaskans. He asked if it would be wiser to help Alaskans reduce their energy costs directly or to give Alaskans a check for $1,300 and hope that individuals use the money for energy costs. He thought the question should be debated by policymakers. He indicated that Alaskans were struggling due to the high cost of fuel, and he did not think a one-time check would be enough to make a change. After the check was spent, the needs would still be pressing because the root cause was not addressed. Co-Chair Bishop asked Mr. Curtis Thayer to comment. He referred to the last bullet under the AEA section on slide 8 regarding the Energy Auditor Training Program. He asked how many more auditors Mr. Thayer was hoping to hire. 10:34:49 AM CURTIS THAYER, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY, ANCHORAGE, (via teleconference) replied that the initial request was $63,000 for a partial auditor and he anticipated that additional funding for commercial auditors would come in later years. Co-Chair Bishop asked if Mr. Thayer was referring to commercial property. Mr. Thayer agreed. Co-Chair Bishop wondered whether AEA had interfaced with the Cold Climate Housing Research Center (CCHRC) in Fairbanks. Mr. Thayer replied in the affirmative. He furthered that AEA had a working relationship with AHFC and some of the auditor training would be shared between the two agencies. Co-Chair Bishop thought it would be helpful if AEA could leverage its assets. Mr. Baker replied to Senator Hoffman's earlier comments. He explained that the new estimate was $18.4 million for the weatherization program, which had been reduced from $35 million. He added that there were some other opportunities in the bill that AHFC wanted to pursue in the area of energy efficiency research, which was a $2 million federal receipt authority. 10:36:43 AM STACY BARNES, ALASKA HOUSING FINANCE CORPORATION, ANCHORAGE, (via teleconference) introduced herself. Co-Chair Bishop noted that the estimate had been reduced from $35 million to $18.4 million over the course of a week. He asked if the $18.4 million estimate was for the current fiscal year and whether AHFC expected similar funding to continue in the future. JAMES WIEDLE, ALASKA HOUSING FINANCE CORPORATION, ANCHORAGE, (via teleconference) responded that the money was expected to be available for the next five years. Co-Chair Bishop asked if Mr. Wiedle meant $18 million per year or $35 million per year. Mr. Wiedle replied $18 million in total. Co-Chair Bishop asked for more information on the way the money would be used for the energy efficiency research and training program. Mr. Wiedle responded that he did not yet have specific details about what the program would look like; however, he would follow up with the information when it came out. Co-Chair Bishop asked if Mr. Wiedle meant he did not yet have guidance from the federal government. Mr. Wiedle answered in the affirmative. 10:38:14 AM Mr. Baker looked at slide 9, "Federal Programs and Match": Fish and Game • Wildlife Restoration (Pittman-Robertson) $24,000.0 ($18,000.0 Fed, $6,000.0 F and G Fund) Mr. Baker indicated that the Pittman-Robertson funds had increased substantially, and the $18 million federal funds required a match that would come out of the Department of Fish and Game fund. Senator Hoffman remarked that restoration of Chinook salmon in the Yukon-Kuskokwim Delta (YKD) was of great importance to him. He added that devastation of Chinook salmon was happening throughout the state, and it was important for the legislature to try to reverse the trends as Alaskans living in the YKD area were already experiencing significant lifestyle changes due to the devastation. He asked if it was possible to look into restoring Chinook salmon in YKD and throughout the state. He did not mean to suggest that salmon populations should be restored to commercial levels, but simply that salmon should be available for personal use and food security purposes. He asked if the administration could help Alaskans achieve food security in other ways if the funds could not be used to help restore Chinook populations. Mr. Baker replied that he believed the money was intended to be used for game and was therefore non-fish related. He referred to pages 24 through 26 of the capital backup, reference number 60594, which showed a list of the types of projects that qualified. He thought there were other programs that might have more flexibility and would follow up with more information on whether salmon restoration would qualify. Senator Hoffman remarked that he was not only interested in learning if salmon restoration would qualify, but if the legislature was interested in recognizing the problem and taking steps to reverse the trends to ensure that the lifestyle of Alaskans on the YKD would not vanish. 10:43:37 AM Mr. Steininger responded to Senator Bishop's earlier question regarding the difference between operating and capital in the presentation. He explained that on slide 8, the RUBA program and the broadband programs were both operating items and the rest of the items were part of the capital budget. On slide 9, the Low Income Home Energy Assistance Program (LIHEAP) was within the Department of Health and Social Services (DHSS) operating budget and all other items were part of the capital budget. Mr. Baker continued with slide 9: Health and Social Services • Low Income Home Energy Assistance Program (LIHEAP) $314.0 Fed Mr. Baker commented that the money was a small supplemental compared to current funding for LIHEAP, which was around $10 million. There were also some significant tribal awards for the same purpose that did not come through the state. Senator Hoffman asked if Mr. Baker had done any analysis on what energy costs would be in rural Alaska through LIHEAP. He wondered if the funding would be enough to help Alaskans facing increased energy costs. Mr. Baker replied that he would follow up with the information. Senator Hoffman was looking forward to it. 10:45:50 AM Mr. Baker continued with slide 9: Military and Veterans' Affairs • State and Local Cybersecurity Grants $2,404.4 ($2,164.0 Fed, 240.4 UGF) Natural Resources • National Geological and Geophysical Data Preservation Program (NGGDPP) $3,290.0 ($2,290.0 Fed, $1,000.0 UGF) • Critical Minerals Mapping - Earth Mapping Resources Initiative (MRI) $7,500.0 Fed • Abandoned Mine Lands Reclamation Program $1,333.0 Fed • Community Wildfire Defense Grants (NEW) $3,000.0 Fed Mr. Baker added that the cybersecurity grant was a four- year program, and that 80 percent of the funds would be sub-granted out to local and tribal governments. He highlighted that the program was one of the few four-year programs in the bill and that most of the programs were five-year programs. The match requirement changed from year to year, beginning with a 10 percent match and increasing by 10 percent each year. Co-Chair Stedman recalled that slide 8 indicated there would be $24 million of Pittman-Robertson funds coming into the state. There were three major shooting ranges around the state that were subsidized in the budget every year, and the increase in Pittman-Robertson funding was due to the volume of ammunition being sold around the country. He thought the legislature should consider dedicating more funds to shooting ranges outside of the three major ranges in the state. He thought it was beneficial for youth to learn how to handle firearms. He did not think the funding was sufficient and suggested implementing a match. 10:49:09 AM AT EASE 10:53:22 AM RECONVENED Senator Wielechowski wondered whether there were any federal funds that were available that the state did not accept. Mr. Baker replied in the negative. Senator Wilson wondered why there was not more federal funds for railroad related infrastructure projects. He asked how many full-time equivalents (FTE) would be needed and whether the positions would be permanent. He guessed the number would be around 25. Mr. Steininger replied that there were 27 full-time positions and five non-permanent positions represented in the bill. He stated that the full-time positions would exist within DEC to help manage the significant increase in DEC programs. He noted that many of the programs would experience a five-year increase, however some of the programs could continue for a decade which was why the decision was made to add permanent positions. Additionally, the bill represented the federal dollars that the state was certain would be incoming. There may be other opportunities in the future to address other areas such as the railroad. Mr. Baker furthered that generally, there was no federal money for the purpose of building new rail, particularly not freight rail. There was money for Amtrak and inner-city passenger rails, but there was no new money for capacity building of rails. The Federal Transit Administration's (FTA) transit formula programs could elicit an increase in money for railroads in the state based on passenger traffic. There were some existing grant programs for which the Alaska railroad was eligible and regularly applied for, but there were no new funding sources for the railroad. Senator Wilson asked if the administration had considered a passenger rail from the Mat-Su area to Anchorage. Mr. Baker responded that the administration had not considered a passenger rail. 10:57:54 AM Senator Wielechowski asked if there were federal commuter dollars that the state could utilize. Mr. Baker responded that there were competitive grant programs. The largest driver of whether a rail received an award was based on whether the rail would assist in moving passenger traffic off roads and onto centralized transit. He thought a new capacity rail such as a passenger rail from Mat-Su to Anchorage would be challenged in the opportunities in the bill. However, it might be worth looking into if the municipalities and the rail were interested. Mr. Steininger furthered that if there was money that was coming into the state for the railroad that did not pass through the Department of Transportation and Public Facilities, it would not be included in the bill because the railroad was not subject to the Alaska Budget Act. He explained that if the Alaska railroad received a direct grant, it would not be included in an appropriation bill coming from OMB because the railroad was exempt from the process. Co-Chair Bishop noted that the committee would discuss the bill again in the future. He wanted to ensure that the appropriate agencies would be present at future meetings to answer questions. SB 241 was HEARD and HELD in committee for further consideration.