HOUSE BILL NO. 64 "An Act making appropriations, including capital appropriations and other appropriations; making appropriations to capitalize funds; and providing for an effective date." 2:05:05 PM KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, addressed the legislation. She referred to a spreadsheet that included FY 14 capital budget amendments (copy on file). The capital budget request including the amendments and the mental health budget totaled $1.86 billion. Of that, $799.2 million was unrestricted general funds for approximately 43 percent of the total budget. She pointed out that $74.6 million was classified as designated general funds while $56.6 million was "other funds" and $938.4 million was federal funds. Ms. Rehfeld highlighted that designated general funds included the Regional Educational Attendance Area Fund and $46.2 million was requested for two school construction projects. The Renewable Energy Grant Fund request was $25 million for round 6 of the renewable energy grants. She noted that "other funds" addressed items like the Highway Working Capital Fund, International Airport Funds and Statutory Designated Program Receipts. Ms. Rehfeld noted that HB 64 contained 14 sections. Section 1 was considered the number section of the bill and contained individual department projects. The projects were organized by department in order of priority. She stated that the exception was the Department of Transportation and Public Facilities (DOT/PF), which was organized by program area in alphabetical order. The deferred maintenance requests appeared at the end of each department's budget. Sections 2 and 3 of the bill were the funding summaries for the numbers included section 1. The language section began on page 48. 2:08:36 PM Ms. Rehfeld moved to the language section. She pointed to Section 4, which included the Legislative Budget and Audit Committee provisions. Section 5 on page 48, lines 17-21 included requests for fund capitalization. She pointed out that (a) addressed the Alaska Gasline Inducement Act (AGIA) reimbursement for a request of $25 million. She explained that $305 had been appropriated for the project and the additional increment would bring the total to $330 million of the $500 million. She noted that $223 million had been paid out in reimbursements in December 2012. Ms. Rehfeld continued with section 5 (b) and the request for $2 million for the Emerging Energy Technology Fund created in 2010 for demonstration projects. She repeated that section 6, page 48 addressed fund transfers. She continued with section 7, page 48, which authorized settlements from insurance claims to go to the catastrophic reserve or appropriate state agency. Section 8, page 48 and 49 addressed the National Petroleum Reserve Alaska (NPRA) Grants. She noted that the Office of Management and Budget (OMB) brought forward an estimate of the amount of revenue available for the next fiscal year. The amended budget contained a revised amount and a list of grants. The Department of Commerce, Community and Economic Development (DCCED) managed the annual grant program for communities in the impacted area of the NPRA. Ms. Rehfeld continued with section 9, page 49 and a request for reappropriation of $1,750,000 in funds from the Alaska Energy Authority for a project for Akiak Rural Power System Upgrade. The project was complete and the request was to repurpose the balance for the completion of a project in Atmautluak. Section 10, page 49 included a request to reappropriate remaining balances from projects under the Department of Environmental Conservation (DEC) for the municipal matching grant program for project administration of continuing water, sewer and solid waste facility grants. The amount was estimated at $359,541. 2:12:04 PM Ms. Rehfeld pointed to Section 11 on page 50. She mentioned the Kodiak Near Island Research Facility through the Department of Fish and Game to repurpose the funds for their hunting and fishing licensing system. She continued with Section 12 and the lapse provisions including (a), the NPRA grant and (b) addressed fund capitalizations for AGIA and the emerging technology. Section 13 provided reappropriations and their effective date of June 30, 2013. She added that section 14 was the effective date of the bill July 1, 2013. Ms. Rehfeld continued to highlight specific funding sources proposed in the budget. Under the Alaska Housing Capital Corporation funding source, $95.2 million was proposed for the Susitna Watana project. She mentioned that the Alaska Industrial Development and Export Authority annually declared a dividend available and the FY 14 dividend amount was $20,745,000, which was proposed for utilization in 4 projects. The projects included the Ambler Road to Resources for $8.5 million, the Dalton Highway improvements for $7.5 million and the general Roads to Resources program for smaller timber harvest and other roads for $2 million and the Strategic Mineral Assessment for $2,745,000. Ms. Rehfeld noted that the Alaska Housing Finance Corporation (AHFC) did not have dividends available for projects, so their $10.6 million was allocated for debt service under AHFC. She noted that the energy components of the governor's capital request included the Susitna project, the Alaska Industrial Development and Export Authority (AIDEA) appropriation of $50 million to leverage other funds and financing for natural gas treatment and distribution for interior Alaska, weatherization at $31.5 million, home energy rebates at $20 million, and the renewable energy grants at $25 million. Ms. Rehfeld mentioned approximately $1 billion requested for statewide infrastructure projects. The projects were typically introduced for aviation and highway facilities, the village safe water components municipal water and sewer projects. She included the request for funding for 12 major maintenance projects from the Department of Education and Early Development (DEED) list with an amendment to fund project 13. She noted that year 4 of the governor's deferred maintenance initiative to address state facilities for $100 million. 2:16:12 PM Ms. Rehfeld pointed to a request for $15 million for the Geologic Materials Center to purchase and renovate an existing facility in Anchorage. She added the Chinook Salmon Research Initiative for $10 million over a five year period to take a strategic look at sustainability of the initiative. Ms. Rehfeld discussed the amendment package. She reviewed the spreadsheet, line 2 and DEED's major maintenance project, number 13 on the department's list. She noted that OMB had the opportunity to reappropriate funds from two prior projects; one from Susitna Valley Replacement School and one from Petersburg Elementary School Roof Replacement. She explained the legislative request to repurpose the funds to finish Tununak K-12 Major Maintenance. Ms. Rehfeld continued with lines three and four of the spreadsheet, which were corrections to the submitted back- up. The dollar amounts were unchanged. She pointed to line 4 and the Nome Airport Runway and Airport Pavement Rehab should include the north apron area. She continued with a request for $26.5 million in federal receipt authority found on line 5. The request addressed 4 projects found on lines 6, 7, 8 and 9. She mentioned the State Transportation Improvement Program (STIP) amendment process. Most of the projects occurred after the December budget was released. She requested consideration for $10 million for the Ketchikan Water Street Trestle replacement and $1.5 million for Parks Highway Passing Lanes. She continued with a request for $10 million for St. Mary's in Mountain Village Road Rehabilitation. She added line 9 and the Wrangle Evergreen Road Improvements. Ms. Rehfeld continued with Line 10 and the adjustment to the National Petroleum Reserve Alaska Impact Grant Program containing a list of grants for the individual projects in the back-up. She continued with line 11 and the earlier mentioned reappropriation for the ability to fund the Tununak School. Line 12 was a reappropriation through DOT/PF to continue efforts to build sand storage buildings in central region as part of an Environmental Protection Agency (EPA) requirement. 2:21:06 PM Ms. Rehfeld looked at line 1 of an additional spreadsheet submitted March 19 (copy on file). The first item addressed the Medallion Foundation. She explained that $750 thousand would be added to the $250 thousand requested in the governor's budget. She mentioned the second item for the Northwest Arctic Borough for the Kivalina Evacuation Road. The community of Kivalina had decided on an official relocation site, and the evacuation road would provide safe access to that location. Ultimately, the Kivalina School would require replacement and the evacuation site would house the new school. Co-Chair Austerman pointed to the four DOT/PF projects and the STIP. He asked if a state match would be requested the following year. Ms. Rehfeld replied that a state match was included annually in the request. She understood that providing the authority would not require additional state funds. 2:23:47 PM Co-Chair Austerman pointed to reappropriations on page 1. He asked about the Tununak school maintenance with a request of $727.9 thousand. Ms. Rehfeld responded that there were two components to funding the Tununak project. She noted that the reappropriation with the $727.9 thousand would total the $16,381,000 required for the project. She pointed out line 2, which stated the $727.9 thousand and line 11. The reappropriation estimated at $15,653,451 would total the amount necessary to fund the Tununak project. Representative Guttenberg asked about line 8 of the amendments and the Saint Mary's road rehabilitation. He wondered follow-up maintenance was planned for the road. Ms. Rehfeld replied that DOT/PF would be responsible for the road maintenance. Representative Guttenberg asked if the department had submitted a maintenance request for the item. He stated that the maintenance was not a priority in the current time and he reported to the committee that driving the 16 mile stretch took approximately one hour. Representative Wilson asked about safe-water projects (pages 8 through 10 in the legislation). She noted that there was an air-quality problem in Fairbanks. She wondered why the Fairbanks problem was not a priority when safe- water was. Ms. Rehfeld replied that the Village Safe Water Program for $8.7 million was a general fund match for federal funds. The projects were not meant to be mutually exclusive to clean air. 2:28:02 PM Representative Wilson believed that the state should be responsible for helping to address the air quality issue in Fairbanks. Representative Gara discussed the legislature's intent to appropriate $50 million to the Renewable Energy Fund. The intention was to allow for the completion of as many projects as possible. He wondered why $25 million as opposed to the $50 million statutory request. Ms. Rehfeld answered that it was necessary to evaluate budget items every year. She opined that the energy component for the capital budget was robust. She pointed out that the legislature had opportunity to amend the request. She mentioned competing interests. She stated that the administration believed there had been significant investment in renewable energy with many good projects leading to reductions in costs. The package included renewables, the Home Energy Rebate, weatherization, the interior energy project and Susitna. Representative Gara noted that the decision was not based on an evaluation about whether more than $25 million of good applications would save communities money. Ms. Rehfeld responded that the Alaska Energy Authority (AEA) had an annual evaluation process, with a project list submitted to the legislature at the end of January. She noted that AEA had not completed its review process prior to the release of the governor's budget. Representative Gara asked about the request of $2 million for the Emerging Energy Grant Fund. He requested further explanation of the fund and its use. Ms. Rehfeld deferred the question to AEA. 2:31:48 PM Representative Guttenberg remarked that there had been a long conversation regarding the Kivalina project. Co-Chair Stoltze noted the bill would come before the committee again. HB 64 was HEARD and HELD in committee for further consideration. 2:32:53 PM AT EASE 2:37:39 PM RECONVENED