HOUSE BILL NO. 299 "An Act making supplemental appropriations, capital appropriations, and other appropriations; amending appropriations; repealing appropriations; making appropriations to capitalize funds; and providing for an effective date." 1:35:28 PM ^FY 14 SUPPLEMENTAL BUDGET OVERVIEW: OFFICE OF MANAGEMENT AND BUDGET 1:35:37 PM KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, presented an overview of the supplemental bill. She spoke to 2 supporting documents: the FY15 supplemental spreadsheet and the FY15 supplemental summary (copy on file). She shared that the supplemental bill totaled $53,370,100; less than $1 million was specific to agency operations $8 million was specifically related to fire suppression activities and disaster relief funding, $2 million was for settlements and judgments, and $2.4 million was for emergency repairs that had not been eligible for disaster funding. 1:37:28 PM Ms. Rehfeld spoke to Page 1, line 2 of the spreadsheet: Department of Administration  Office of Public Advocacy  Caseload Capacity and Appellant Backlog  Funding to accommodate case load increases and address the appellant backlog. The impact of this supplemental is being considered for a FY2015 budget amendment. General Fund  $193.0  Ms. Rhefeld continued to Line 3: Department of Administration  Public Defender Agency  Caseload Capacity and Appellant Backlog  Funding to address case load increases and the appellant backlog. The impact of this supplemental is being considered for a FY2015 budget amendment. General Fund  $650.0  1:38:48 PM Ms. Rehfeld spoke to Line 4: Department of Military and Veterans Affairs  Alaska Military Youth Academy  Replace Unavailable Receipt Authority for  Alaska State Employees Association One- Time Payment  The Alaska Military Youth Academy (AMYA) does not receive nor is able to request federal or interagency receipts from the U.S. Department of Defense ChalleNGe grant or through the Alaska Department of Education and Early Development formula funding. The one-time $755 lump sum payment was made to General Government Unit employees in the second pay period of August 2013. This is a one-time request. General Fund  48.0  Interagency  Receipts  (24.9)  Federal Receipts  (23.1)  1:39:21 PM Ms. Rehfeld continued to Slide 5: Department of Natural Resources  Fire Suppression Activity  FY2014 Fire Activity  This request provides general funds for expenditures incurred under the Declaration of Disaster Emergency process for the fall 2013 fire season. Additional authorization for this purpose is requested each year due to the unpredictable cost of each fire season. General Fund  $22,769.4  1:40:14 PM Ms. Rehfeld spoke to lines6, 7, and 8: Department of Revenue  Treasury Division  Investment Management of Public School Trust Fund Investment management fees are charged as a percent of the market value of invested assets under management. Market fluctuations affect the value of the assets and therefore the amount of the management fees. This amount covers the costs for the remainder of FY2014. This is a one-time request. Public School Trust Fund  $19.0  Department of Revenue  Treasury Division  Investment Management of Retiree Health  Insurance Fund/Long Term Care Management  Investment management fees are charged as a percent of the market value of invested assets under management. Market fluctuations affect the value of the assets and therefore the amount of the management fees. This amount covers the costs for the remainder of FY2014. This is a one-time request. Retiree Health Insurance Fund/Long Term Care  $7.0  Department of Revenue  Treasury Division  Investment Management of Power Cost Equalization  Endowment Fund  Investment management fees are charged as a percent of the market value of invested assets under management. Market fluctuations affect the value of the assets and therefore the amount of the management fees. This amount covers the costs for the remainder of FY2014. This is a one-time request. Endowment Fund  $16.0  Ms. Rehfeld spoke to capital supplemental items. She began with Page 2, line 11: Department of Commerce, Community, and Economic  Development  Capital  Inter-Island Ferry Authority  This funding is designed to assist the Inter-Island Ferry Authority in providing daily service between Ketchikan and the Prince of Whales Island given current revenue and expenditures. These funds are not intended to be provided annually but considered as needed to continue this vital service. General Fund  $500.0  1:41:51 PM Ms. Rehfeld continued to Line 12: Department of Transportation and Public Facilities  Capital  Northern Region Emergency Flooding Disaster May 2013  Repair damaged areas, due to flooding and ice jams, which resulted in substantial damage to public infrastructure. These projects are not eligible for reimbursement from the Federal Highway Administration or the Federal Emergency Management Agency. General Fund  $2,408.1  Ms. Rehfeld discussed the language section beginning on Line 16: Department of Environmental Conservation  Capital  Reappropriate balances from several smaller municipalities' water and sewer projects that have been completed under budget, stalled, or canceled. The unexpended and unobligated balances, estimated to be a total of $3,358,421, of the following appropriations, are reappropriated to the Department of Environmental Conservation for Village Safe Water and Wastewater Infrastructure Projects and Technical Assistance, First Time Service Projects. Federal Receipts  2,517.7  General Fund Match  200.0  Alaska Housing Finance Corporation Receipts  640.7  Ms. Rehfeld spoke to Line 17: Department of Environmental Conservation  Capital  Scope Change: Sec1 Ch17 SLA2012 P114 L5 Haines - Barnett and Tower Road Water Tank Replacement and Infrastructure Improvements This will allow roof replacement at the Tower Road tank using excess funds appropriated for the Barnett tank replacement which is anticipated to be completed under budget. General Fund  Ms. Rehfeld continued to Line 18: Department of Health and Social Services  Capital  Reappn: Sec13 Ch29 SLA2008 P149 L14 Reappropriation for Eligibility Information System Replacement This will further the development of the replacement of the eligibility system for the State's welfare programs. The unexpended and unobligated balance, estimated to be $81,232, of the appropriation made in sec. 13, ch. 29, SLA 2008, page 149, lines 14 - 17 (Department of Health and Social Services, Evaluate Eligibility Information System Alternatives, Phase 2 - $864,300), is reappropriated to the Department of Health and Social Services for eligibility information system replacement. Federal Receipts  66.4  General Fund  14.8  1:44:06 PM Ms. Rehfeld continued to Lines 19 and 20: Department of Law  Deputy Attorney General's Office  Judgments and Settlements  Actual judgment and settlement costs received as of February 3, 2014. General Fund  $1,570.2  Department of Law  Deputy Attorney General's Office  Judgments and Settlements  Actual judgment and settlement costs incurred in the fiscal year ending June 30, 2014 but not yet included in the previous subsection. General Fund    1:44:55 PM Ms. Rehfeld directed committee attention to Page 4, lines 21 through 24: Department of Military and Veterans Affairs  Capital  Reappn: Sec1 Ch16 SLA2013 P70 L9 Reappropriation for Alcantra Facilities Projects This Army Guard Facilities Projects allocation will provide needed capital improvement projects at the Alcantra Armory. The original project will be completed using U.S. Army active duty resources that do not flow through the state budget. The unexpended and unobligated balance of the appropriation made in sec. 1, ch. 16, SLA 2013, page 69, lines 23 - 24 (Army Guard Facilities Projects - $5,589,000), and allocated on page 70, lines 9 - 10 (Fort Greely - Covered Shelter Buildings - $350,000), estimated to be $350,000, is reappropriated to the Department of Military and Veterans' Affairs, Army Guard Facilities Projects, and allocated for Alcantra Facilities Projects. General Fund    Department of Military and Veterans Affairs  Capital  Reappn: Sec7 Ch17 SLA2012 P166 L28 Reappropriation for Eielson Covered Storage A reappropriation of the original appropriation will provide needed protection of assets for the 168th Wing at Eielson Air Force Base. The original purpose of the appropriation is no longer necessary because The STARBASE program has been discontinued. The unexpended and unobligated balance of the appropriation made in sec. 7, ch. 17, SLA 2012, page 166, lines 28 - 30 (Move and Renovate STARBASE Building - $195,000), estimated to be $195,000, is reappropriated to the Department of Military and Veterans' Affairs for covered storage for the 168th Wing at Eielson Air Force Base. General Fund    Department of Military and Veterans Affairs  Office of the Commissioner  Arbitration Settlement - ASEA v. SOA, DMVA, AMYA The sum of $111,328 is appropriated from the general fund to the Department of Military of Veterans' Affairs, Office of the Commissioner, for the purpose of paying judgments and settlements for the fiscal year ending June 30, 2014. General Fund  $111.3  Ms. Rehfeld spoke to Page 5, line 24: Department of Natural Resources  Fire Suppression Activity  FY2014 Projected Spring Costs for Wildland Fire  Protection  Additional authorization for this purpose is requested each year due to the unpredictable cost of each fire season. It is difficult to predict the amount necessary for spring 2014 fire suppression activity. The estimate of $5.0 million will be adjusted based on costs incurred through June 30, 2014. General Fund  $5,000.0  1:46:26 PM Ms. Rehfeld continued to Line 25: Department of Transportation and Public Facilities  Central Design and Engineering Services  Settlement and Legal Fees Related to Old Quinhagak  Airport Litigation In November 2013 (FY2014), a legal settlement of $100.0 was negotiated. Associated legal fees amount to $64.6 for a total cost of $164.6 related to the Old Quinhagak Airport litigation. The sum of $164,617 is appropriated from the general fund to the Department of Transportation and Public Facilities, office of the commissioner, for the purpose of paying costs associated with Old Quinhagak Airport litigation for the fiscal year ending June 30, 2014. General Fund  $164.6  Ms. Rehfeld related the request on Line 26: Office of the Governor  Fuel Branch-wide Unallocated  Amend: Sec22(e)(2) Ch14 SLA2013 P75 L29 Amend Fuel Allocation Percentage This will increase the University of Alaska's fuel trigger cap of 10% of the total appropriated plus or minus three percent to 15% of the total plus or minus three percent to cover an anticipated $1.6 million shortfall for fuel and utility costs. The governor shall allocate amounts appropriated in (a) and (b) of this section as follows: (2) to the University of Alaska, 15 [10] percent of the total plus or minus three percent. 1:48:24 PM Ms. Rehfeld stated that Lines 27 and 28 related to debt service: Debt Service  General Obligation  Amend Sec25(h) Ch14 SLA2013 P81 L31 through P82 L22 Fund Source Change for Series 2010AB Federal reimbursement for eligible state bonds has been reduced by 8.7% in FY2014. General obligation bonds series 2010A and 2010B federal reimbursements were reduced by a total of $414,540. General Fund 414.6  Federal ARRA  Debt Service  General Obligation  Amend Sec25(h) Ch14 SLA2013 P81 L31through P82 L22 Series 2013 Federal Reimbursement Eligibility General obligation bond series 2013A is eligible for federal reimbursement, but this funding source was not included in the FY2014 operating budget. General Fund  (430.1)  Federal ARRA  430.1  1:49:07 PM Ms. Rehfeld spoke to Lines 29 and 30: Debt Service  International Airport Revenue Bonds  Repeal and reenact Sec25(i) Ch14 SLA2013 P83 L4 Debt Service Fund Source Changes This changes fund sources relating to FY2014 International Airport debt service in order to increase the amount of Passenger Facility Charges (PFC) currently approved, and to change the federal subsidy funding code from federal receipts (1002) to federal stimulus: ARRA 2009 (1212). As with previous supplemental requests in years' past, this request utilizes amounts deemed by AIAS as surplus and available in order to help minimize the amount of revenue needed to be collected from airport customers while meeting debt service coverage ratios required under the bond resolution rate covenant. International Airports Revenue Fund  (1,962.6)  Passenger Facility Charges  2,000.0  Federal Receipts  (429.8)  Federaln ARRA  392.4  Debt Service  International Airport Revenue Bonds  Amend Sec25(m) Ch14 SLA 2013 P83 L3 Early Redemption Fund Source Change In review of 2014 activity for its Optional Bond Redemption plan which was initiated in 2010, the Alaska International Airports System (AIAS) determined the use of International Airports Revenue Fund as the funding source for the full amount of FY2014 redemptions provided more optimal benefit in context of updated capital improvement program needs and debt management than does the partial funding from the AIAS Construction Fund. International Airports Revenue Fund  23,000.0  International Airports Construction Fund  (23,000.0)  1:49:35 PM Ms. Rehfeld continued to Line 31: Fund Capitalization  Disaster Relief Fund  Recovery Efforts from the 2013 Spring Flood Disaster  The sum of $19,961,480 is appropriated from the general fund to the disaster relief fund (AS 26.23.300(a)). General Fund  $19,961.5  1:50:07 PM Ms. Rehfeld turned to Page 7, line 32: Fund Capitalization  Disaster Relief Fund  Potential Disaster Relief Efforts This language provides authorization for actual disaster relief costs incurred in the fiscal year ending June 30, 2014 but not included in sec14(a) of the Governor's supplemental bill. The amount necessary, after application of the amount appropriated in (a) of this section, to pay for disaster activities is appropriated from the general fund to the disaster relief fund (AS 26.23.300(a)), subject to AS 26.23.020 and 26.23.025, for the fiscal year ending June 30, 2014. General Fund  Ms. Rehfeld stated that Line 33 began the list of ratifications, which were listed at the end of the summary Lines 41 through 52. She said that the ratifications were for terminated appropriations, for prior year over expenditures, where federal funds were unrealizable or a cost was disallowed; the allowance of the ratification would allow for the zero balancing of the appropriations. She shared that the description of the ratification would indicate the fiscal year the appropriation came from. 1:51:59 PM Ms. Rehfeld backtracked to Lines 34 through 36: Lapse of Appropriations  The appropriations made by secs. 6, 7, 9(a) and 9(b) of this Act are for capital projects and lapse under AS 37.25.020. Lapse of Appropriations  The appropriations made by sec. 14 of this Act are for the capitalization of a fund and do not lapse. Effective Date  This Act takes effect April 20, 2014. 1:52:45 PM Representative Wilson asked about a major fire in Fairbanks in 2014 that was caused by another entity. She wondered whether the state was recouping the costs of the fire from the responsible party. Ms. Rehfeld replied in the affirmative. She added that the majority of the fire had been on federal land and the costs were being recouped from the federal government. 1:53:19 PM Representative Wilson asked about the private land. Ms. Rehfeld reiterated that funds were being recouped from the federal government. 1:53:32 PM Co-Chair Stoltze spoke to fire concerns in his area. He asked whether discussions had occurred with the Department of Natural Resources (DNR) concerning possible fire issues. Ms. Rhefeld said yes. She furthered that DNR could speak to their concerns and their game plan to mitigate risk and train local crews. 1:55:12 PM Co-Chair Austerman understood that the item on Line 11 had been in the FY14 and FY15 budget requests. Ms. Rehfeld responded in the affirmative; it had not been the intent to make the request an annual operating expanse to the state, but it had been recognized that the ferry provided a vital service to Prince of Whales Island. She said that if the authority could not provide the service, the Alaska Marine Highway System (AMHS) would bear the burden, which would be costly and complicated. She shared that the authority had made significant modifications to its operations to be able to operate without state assistance. 1:56:48 PM Co-Chair Austerman noted that the request had been turned down the prior year. He recalled from conversations the previous year that the authority had been providing 7-day per week service to Prince of Whales Island from Ketchikan. He thought that costs could be lowered by reducing service. He expressed disappointment with seeing the request in the budget again, particularly since Kodiak received service twice per week and was happy with the service. He wanted to see something from the authority that showed they were controlling costs. Ms. Rehfeld explained that part of the challenge was stability issues with the AMHS providing statewide service with an aging fleet. She asserted that the authority was trying to generate enough revenue with the one run to keep sailing. She explained that the administrations concern was the degree that the state, through AMHS, would need to reinstate any service that the authority was unable to provide. 2:00:23 PM Representative Gara spoke to a controversial runway at the Anchorage airport. He wondered if the state were to ask the city to pause the project would the state be paid a dividend or would the airport money stay inside the airport. Ms. Rehfeld deferred the question to the Department of Transportation and Public Facilities (DOT&PF). She understood that the master plan for the runway had been a required document that updated their annual plan, whether or not they intended to move forward with the plan was uncertain. 2:02:30 PM Representative Gara guessed that the airport was spending millions of dollars on community meetings and design discussions. He hoped the governor would look at whether this was a wise use of money. He queried whether the fund could be put back into the general fund. Ms. Rehfeld stated that the funds were a component of the general fund but were separate. She deferred the question to the department. 2:03:35 PM Vice-Chair Neuman spoke to Line 12. He question why the request was being made again. He referred to a previous conversation with Commissioner Kemp, which had led him to understand that DOT&PF had the funds for projects already within its budget. Ms. Rehfeld deferred the question to the commissioner of DOT&PF. 2:05:47 PM MARY SIROKY, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, indicated that Commissioner Kemp had been speaking to his operating budget needs, while this request was a capital budget request for the funding for the actual repairs. She asserted that the commissioner worked to clear avalanches and patch pot holes without asking for additional operating budget supplementals. 2:06:47 PM Representative Gara reiterated his question about the redistribution of funds for the airport expansion. Ms. Siroky replied that the Federal Aviation Administration required that revenue generated from the airport had to be spent at the airport. Representative Gara inquired if the state supported the airport with any general funds. Ms. Siroky replied no. Representative Gara inquired whether there was ever a review by the department to see assess whether funds were being spent appropriately. Ms. Siroky responded that one of the highest priorities of the commissioner was to assure that projects were examined and were shelf ready so that funding was spent where there was the greatest need. 2:09:56 PM Co-Chair Austerman understood that the legislature had given DOT&PF the authority to transfer unused fund from one project to another without coming before the legislature for approval. 2:10:17 PM Representative Gara said that he had heard concerns that projects were being completed, even though they did not need to be completed, just to assure that the department spend the available general fund money. He expressed concern that the department was spending money "just because it was there", rather than because it needed to be spent. Ms. Siroky contended that the department spent its money as wisely as possible. 2:11:14 PM Representative Holmes commented that the department had done a good job reaching out to the community concerning the potential airport expansion project. 2:12:35 PM Representative Costello asked about how other states addressed the need for fire suppression. She wondered if there was an alternative way the state could accommodate the fire suppression portion of the budget. Me. Rehfeld responded that all western states were wresting with the issue. She said that there were other approaches that could be considered. 2:14:08 PM Representative Wilson spoke to the ratifications for the Department of Labor. She wondered whether only a part of the request should be honored, leaving the department to take responsibility for the rest of the mistake. 2:15:00 PM Ms. Rehfeld stated that the ratification items had already occurred in the fiscal year reflected in the back up for each item. She said that there were no additional general funds being approved for the items. 2:16:02 PM Representative Wilson asked if the money had been paid, was it paid by the department or the general fund. Ms. Rehfeld stated that they were over-expenditures that were unknown at the time; they were accounting transactions that had already occurred and needed to be zeroed out in order to balance the old accounts. 2:17:09 PM Co-Chair Stoltze related a story that illustrated the point of ratifications. Representative Wilson asserted that she was looking for accountability. HB 299 was HEARD and HELD in committee for further consideration. 2:18:35 PM AT EASE 2:26:09 PM RECONVENED