HOUSE BILL NO. 463 "An Act establishing the Alaska public building fund; and providing for an effective date." ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION spoke in support of HB 463. She explained that the Department has been working to create a methodology that would allow them to charge agencies that occupy state owned buildings rent on the program level. The legislation would create the Alaska Public Building Fund. Collected rents would be deposited in the Fund. Operations and maintenance of state facilities would be appropriated by the legislature from the Fund. Monies in the Alaska Public Building Fund would not lapse at the end of the year. Renewal and replacement costs would be collected through the depreciation of the facility. This would allow a rent structure that can be collected over a period of years and spent in a capital fashion for items such as roof replacements. She stressed that rent on a program level will encourage accountability and allow other fund sources to be utilized. The federal government would need to approve the rent methodology for federal agencies through the Department of Health and Human Services. The Department would phase in the program. She explained that more money would be collected if federal programs were billed on the program level as a direct cost of operation. Co-Chair Therriault questioned if funding would be diverted from programs to pay the rent in cases where federal funding is capped. Ms. Elgee stated that it is a policy question that has not been resolved. (Tape Change, HFC 98 - 144, Side 2) Ms. Elgee stated that the Information Services Fund, which charges back computer operations, runs on a similar manner. Co-Chair Therriault expressed concern that the funds would be raided for other uses. Ms. Elgee stated that the problem has not occurred with the Information Services Fund. The Information Services Fund is set up with a three-year life expectancy. If money is not expended within the three-year period the Department is required to reduce charges in the subsequent year. The Alaska Public Building Fund would be setup in a similar manner. She estimated that the Fund would be created with a five-year turnaround. She explained that a rental charge would be budgeted for at the program level in the operating budget. Operation and maintenance costs would be shown under the Department of Transportation and Public Facilities or Department of Administration; depending on whom is managing the space. The funding source for these appropriations would be the Alaska Public Building Fund as the fund source. Capital projects would be proposed in the capital budget with the Alaska Public Building Fund as the fund source. These funds would fall under the other funds category. In response to a question by Representative G. Davis, Ms. Elgee explained that rent has three components. Operations and maintenance are annual expenditures. Renewal and replacement is collected in a rent structure by depreciating the building. There is also a component for administrative costs. The three components are combined into a rental rate. The agency would be billed based on their space allocation. Charges to the agencies would be deposited in the Alaska Public Building Fund. The legislature has to authorize appropriations from the Fund. The first expenditure that would be authorized is for rent. Then expenditures would be authorized for operations and maintenance in the operating budget. Authorization for capital replacement of building components would be shown in the capital budget. KEITH GERKEN, DIVISION OF GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION observed that the legislation was modeled on other internal service funds in the state of Alaska. He observed that the Deferred Maintenance Task Force recommended program rent as a way to stabilize the fund source. He observed that other western states utilize the same concept. Co-Chair Therriault observed that Ms. McConnell indicated, in her letter dated 4/30/98, that the only time the State Equipment Fleet Fund was tapped by the legislature was in the mid 1980's when the price of oil crashed. There has not been a problem with raiding since the establishment of the Constitutional Budget Reserve Fund. Representative G. Davis MOVED to report HB 463 out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 463 was REPORTED out of Committee with a "no recommendation" and with Office of the Governor, 3/19/98.