SENATE BILL NO. 107 "An Act relating to the Alaska capital income fund." 3:46:12 PM Co-Chair Foster relayed that it was the first hearing for the legislation. 3:46:33 PM SENATOR ANNA MCKINNON, SPONSOR, read the Sponsor Statement (copy on file): The State of Alaska maintains over 2,200 facilities, which span over 14 entities, including the University of Alaska and the Court system. These facilities total 19 million square feet of space and have a combined replacement value of $8.6 billion. The State's current outstanding deferred maintenance backlog totals over $1.84 billion, which peaked in FY2012 at $2.3 billion. With current funding levels and no consistent funding source, the deferred maintenance backlog is expected to trend up, causing our facilities to fall into disrepair. The Alaska capital income fund was created in 2006 and receives an annual deposit of the earnings from the Amerada Hess Settlement invested by the Permanent Fund. Senate Bill 107 envisions using these funds, which cannot be used for dividends, to provide reliable annual funding for preventative and deferred maintenance. It is important we set up this mechanism to continue to preserve our investment in these facilities as the infrastructure ages and cost for repairs and replacement increases. 3:48:09 PM Representative Kawasaki wondered whether the language restricted the use of the funds. Co-Chair MacKinnon stated that she could not put restraints on the use of the fund. The main intent of the bill was to encourage future legislatures to spend the funding on deferred maintenance. Representative Kawasaki surmised that the bill could not constrain other legislatures, but wanted to establish the intent of the fund. Co-Chair MacKinnon responded agreed. Representative Kawasaki asked how much was in the fund at present. Co-Chair MacKinnon responded that it had a 6 percent interest rate at approximately $26 million. 3:50:48 PM Representative Thompson had been concerned with deferred maintenance. He stressed that there were many deferred maintenance projects. Co-Chair Foster noted the other testifiers available for questions. Representative Wilson asked about the prioritization list. Co-Chair MacKinnon responded that the capital budget chairman would take the budget from the government to evaluate the use of appropriations or general fund dollars on an annual basis. The fund could be redirected to prioritize deferred maintenance. Representative Wilson wondered if there had been an assessment of all of the smaller buildings, and whether those buildings were still utilized. She queried who decided whether a building be closed permanently . Co-Chair MacKinnon responded that the state did most of the prioritization, and thought some of the bill needed to go through a more formal process. 3:54:45 PM Representative Neuman asked why the bill was needed. The bill was an advisory bill. He understood the importance of maintaining buildings, but felt that the bill gave away the appropriation authority of the legislature. Co-Chair MacKinnon posed the question as to why the state would not put its best foot forward to address deferred maintenance. It was a step in the right direction. She appreciated the question. Representative Neuman asked about the naming of the fund, and whether it bound future legislatures. Co-Chair MacKinnon suggested that any future legislature could do what it wanted. Co-Chair Foster recognized Representative Reinbold in the audience. 3:59:21 PM Co-Chair Seaton asked if the item would be a part of the capital budget or the operating budget. Vice-Chair Gara did not want to vote for empty legislation. Co-Chair MacKinnon stressed that the state had a budget deficit, and the bill helped to assign funds for needed deferred maintenance. 4:04:03 PM Vice-Chair Gara commented that she was in the company of Governor Walker and the previous governor. Co-Chair Foster thanked the presenter and indicated he would be setting the bill aside. He reviewed the agenda for the following meeting. SB 107 was HEARD and HELD in committee for further consideration.