SB 1005 - APPROP: MISCELLANEOUS A draft CSSB 1005 (Fin) (9-GS2073\O, Utermohle, 6/4/96) was adopted without Sec. 1. Amendments 1 through 9 were distributed for review. Amendments 1 and 2 were adopted as amended. Amendments 3 and 4 were not offered. Amendment 5 failed on a vote of 2 to 5. Amendments 6, 7, and 8 were adopted. Amendment 9 was held per a request by the sponsor (Senator Zharoff). Testimony was presented by Senator Pearce, Annalee McConnell, and Nancy Slagle. CSSB 1005 (Fin) was REPORTED OUT of committee with a "do pass" recommendation. Co-chairman Frank directed attention to CSSB 1005 (Fin) (9- GS2073\O, Utermohle, 6/4/96) and conducted the following sectional analysis: Sec. 1. Contains legislative findings and intent for Long Range Planning Commission work. Sec. 2. Contains constitutional budget reserve language dealing with both the sweep and the budget balancing mechanism. It suggests that appropriations be made under sec. 17(c), which requires a three-quarter vote. Secs. 3 and 4. Contain supplemental appropriations for employee contracts. Secs. 5 and 6. Contain appropriations for FY 97 for monetary terms of collective bargaining contracts, including non-covered employees. Dollar amounts have been reduced in Sec. 5(c) by $1.5 million for the retirement incentive plan savings and $975.0 for other employer cost savings resulting from CSSB 1003 (Fin). Sec. 6. Makes funding contingent upon passage of CSSB 1003 (Fin). Sec. 7. Reduces the amount of the appropriation from the general fund to the debt retirement fund for debt retirement (both G.O. and school debt), due to a reduction in the estimate required to fully fund debt retirement this year. That is a savings of $1.6 million from the earlier budget. Sec. 8. Contains an appropriation to the disaster relief fund for the fire in MatSu. Sec. 9. Relates to the MatSu fire. Sec. 9 makes an additional appropriation to the fire suppression fund. An additional amendment will later be offered to increase this appropriation and make an appropriation to the MatSu Borough for costs associated with that fire. Secs. 10 and 11. Incorporate effective dates that failed in SB 412 and SB 136 (the operating and capital budget bills). Sec. 12. States that Secs. 3 through 5 constitute explicit approval of the monetary terms of collective bargaining agreements. Secs. 13 and 14. Contain effective date clauses. Co-chairman Frank acknowledged additional amendments for the bill and noted that the current draft does not contain additional capital and operating items. The Governor and other legislative members have requested inclusion of additional budget items. The intent, at this time, is to "get this bill moved from committee and into second reading so that we would not lose any days in our legislative process." Amendments to include additional operating or capital items would be offered as floor amendments, over and above those of today. Senator Donley voiced concern regarding the fact that minority members were previously advised to hold amendments for floor action and were subsequently criticized for not having offered them in committee. Co-chairman Frank said he would have no problem with amendments being offered during the committee process. He advised that he was not intending to explain why the committee was not adding all of the Governor's requests at this juncture. The committee does not want to lose a day. If a member wants to make an amendment, that opportunity is available. Co-chairman Halford MOVED for adoption of CSSB 1005 (Fin) (9-GS2073\O, Utermohle, 6/4/96) as a mark-up vehicle. Senator Rieger OBJECTED. He then voiced concern regarding Sec. 1. He suggested that Sec. 2 through the end of the bill be adopted and Sec. 1 be considered piece by piece, or another means of dividing the question be found. The Senator objected to language which indicates intent to adopt the long-range financial plan at a future date. He further objected to specific provisions within intent language, saying that they do not match his view of what the long range plan should encompass. Co-chairman Halford withdrew his motion for adoption of CSSB 1005 (Fin) and instead MOVED for adoption exclusive of Sec. 1 and any title provisions that might apply to Sec. 1. Senator Zharoff questioned objection to Sec. 1 language. Co-chairman Frank cited lack of time for argument over the 23 subsections within Sec. 1 since findings and intent do not substantively impact the legislation. Senator Rieger reiterated that language does not reflect his intent and suggested that it is inappropriate to incorporate intent saying that the legislature "is going to do, next year, what we could have done this year." Senator Zharoff indicated that language speaks to a fiscal plan and suggested that it attempts to move the state toward a budget reduction process over a period of time. At present, there appears to be no plan other than to cut the budget. Proposed intent language offers recommendations. Co-chairman Frank called for further debate on the motion. None was forthcoming. He then called for objections to the motion. Senator Zharoff OBJECTED. Co-chairman Frank called for a show of hands. The motion carried on a vote of 6 to 1, and CSSB 1005 (Fin) was ADOPTED with the exception of Sec. 1. Co-chairman Frank next referenced proposed amendments. Co- chairman Halford spoke to need for a technical amendment to AMENDMENT NO. 1. He asked that "and 1997" be added to appropriation language for fire suppression funding so that the third line of the amendment reads: ending June 30, 1996 and 1997, from the following fund sources: Co-chairman Halford MOVED for adoption of AMENDMENT NO. 1 AS AMENDED. No objection having been raised, AMENDMENT NO. 1 was ADOPTED AS AMENDED. Co-chairman Frank referenced AMENDMENT NO. 2 and explained that it would allow the public utilities commission to utilize FY 96 moneys in FY 97, with the stipulation that assessments for FY 97 be reflective of costs attributable to the particular industry, whether that be telephone, electric, etc. The funding is needed to deal with the Federal Telecommunications Act of 1996. Co-chairman Halford MOVED for adoption and requested unanimous consent. Senator Rieger OBJECTED for the purpose of a question. He said that a reading of the first four lines indicates a balance is being carried forward. The following language reads as if the balance is assessed against utilities in FY 97. Senator Sharp voiced his understanding that it is necessary to apply the assessment to the FY 97 regulatory charge for telephone utilities because left over moneys are normally used to reduce regulatory charges against all utilities, on a prorata share, in the following year. The amendment says that the $200.0 to be used exclusively for telephones should be assessed against telephone utilities in addition to their regular assessment next year. Senator Rieger asked if the "balance on June 30," referenced in amendment language, refers to a balance that will be assessed against the utilities. Co-chairman Frank explained that it refers to the unexpended balance in the existing budget. That amount will be carried forward. Normally, any amount carried forward from one fiscal year to the next, in APUC, is used to offset future assessments. The unspent $200.0 would normally have reduced everyone's assessment (gas, electric, and telephone utilities). However, in this case, the APUC is asking that the $200.0 be spent on telephone utilities alone. That has the effect of disproportionately increasing 1997 assessments for other utilities. Language within the amendment says that the $200.0 should be assessed against telephones so as not to have an impact on the 1997 assessment for other utilities. Senator Rieger suggested it would have been clearer to say, at line 5, that "an equal amount shall be assessed against the telephones." Senator Sharp voiced his understanding that the $200.0 needed to "get up to speed" on federal regulations was not included in the total amount approved for FY 97. "This would be an add-to for telephones only." Senator Rieger next asked for an explanation of what the intent would do. He specifically asked if "universal service" means the same access now available. Co-chairman Frank asked if representatives from the Office of Management and Budget were prepared to speak to the issue. ANNALEE McCONNELL, Director, Office of Management and Budget, responded, "Not specifically on the intent language presented here, but, obviously, we did believe that it was important for the state to have control of our own responsibilities under the Federal Telecommunications Act." The Governor thus included a request for funding. The administration does not wish to end up with federal preemption. Senator Donley referenced lengthy deliberations in past years regarding universal service and voiced need for an explanation. Ms. McConnell advised that she could not speak specifically to that issue. She reiterated the administration's belief that it is important that APUC "take this up" per the recommended lapsing funds. Senator Rieger voiced concern that language within the amendment "seems to be almost a code for something that's going on." SENATE PRESIDENT DRUE PEARCE came before committee. She explained that earlier in the session, after passage of the federal telecommunications act, a number of phone utilities in Alaska (both local and long distance) expressed interest in legislation to follow federal law. A briefing for legislators was conducted by John Katz of Alaska's Washington, D.C., office and one of Senator Stevens' staff members to advise of federal action. Senator Stevens was on the federal conference committee. Concern was raised by APUC-regulated, local phone companies in smaller communities. It was the recommendation of the Lt. Governor and Mr. Katz (following review of the federal act and in agreement with APUC) that it was not necessary, during the present session, to attempt to make state statutes comparable to the new federal act. It is still unknown what new rules might impact the industry in Alaska. Another federal joint board process will be put forward via the federal communications commission. There is no Alaskan on the joint board, yet it will be dealing with how Alaska will be treated under the new act. END: SFC-96, FSS #4, Side 2 BEGIN: SFC-96, FSS #5, Side 1 Senator Pearce voiced need for state ability to react should new rules be forthcoming in the near future. It is expected that the first new rule will issue "sometime this Fall." The specific interest of locals, that led to proposed language asking that the APUC review the new rules "before they take action," stems from the fact that local telephone companies are regulated by APUC. That means that if they want to change their telephone rates, they have to go through an APUC rate case. It requires filings, public hearings, etc., and the APUC has a set amount of time in which it is required to respond. Rate-making cases can take from six months to much longer. Concern by small phone companies is that, with the new telecommunications act and with announced intention by some long distance carriers and ATU to get into local phone service throughout the state, larger unregulated telephone companies will make offers to consumers to which local utilities will be unable to respond because of need to proceed through APUC. Telephone companies in smaller communities would have to file an APUC rate case to "ever be able to get to any sort of competitive prices." By the time they progressed through the process and got to a competitive price (if they were able to match the price), the time for action would be long gone. That was the concern brought forward by local phone companies. It is that concern that led to intent language within Amendment No. 2. Senator Pearce next referenced interest on behalf of some long distance companies for the legislature to declare that competitive local phone service was in the state's best interest. Those bills have not passed. However, there is still concern that the APUC might move forward, and local phone companies would not be able to respond. Senator Rieger advised that the foregoing testimony explains the last four lines of the amendment. It does not, however, speak to universal service, how it is defined, and what "same access" means. He voiced concern that universal service would raise questions of cross-subsidization and expressed need to know what is being talked about before he could support the language. In the past, Alaskan consumers have enjoyed "some preferential treatment" compared to benefits available in the "Lower Forty-eight," particularly in terms of full cost allocations. He questioned whether the subject language might involve "removing some support for telephone service up here." Senator Pearce said she could not speak to the universal service question. She acknowledged a subsidy and further acknowledged questions about how those subsidies would be distributed if there is local competition. The APUC will eventually have to make that decision. She said she did not know whether the legislature would choose to be a part of that. The subsidy question, and definition of universal service in terms of the subsidy, will start with rule-makings under new federal law. Only after those decisions are made will the matter come to APUC for further action at the state level. Both Senator Rieger and Senator Pearce acknowledged that they did not know the impact of the language. Senator Donley voiced support for the portion of the amendment relating to authorization of program receipts. He then asked why it was linked to subsequent intent regarding universal service and APUC action on the federal communications act. Senator Pearce reiterated concern by telephone companies in small communities about what might happen should APUC move forward before the joint board has an opportunity to do its work. Senator Donley concurred in Senator Rieger's concern regarding universal service and access language. Senator Donley next asked if utilization of the remaining $200.0 means that telephone utilities would repay the $200.0 in FY 97, and it would be rebated back to other utilities. Co-chairman Frank responded negatively. He advised, "I think that they would get a little extra assessment for their share of . . . the $200.0." He then recited his understanding of the operation of the approximate $4 million budget. In developing next year's budget, the legislature assumed a $200.0 carryforward. Assessments would thus be for $3.8 million, divided per the normal proration. Under the proposed language, assessments would be $4 million with the extra $200.0 being fully assessed against the telephone industry. Assessments for other utilities would not change. Ms. McConnell advised that when the administration was considering inclusion of the amendment, discussions were had with APUC regarding the mechanics "for how they had to do this." The language the administration developed does not specifically tie it to telephone utilities. It was the administration's understanding that was "the way that they needed to deal with it." She offered to check on the question and bring it to committee attention for subsequent correction, if there is a problem. Ms. McConnell referenced earlier discussion indicating that, given the regulatory process, "they would need to do it in a more generic fashion." Co-chairman Frank directed that Ms. McConnell ask if "they can live with our language." Senator Donley asked if the administration had a position on universal service and access language. Ms. McConnell advised she was not an expert on the issue and could not speak to it. Co-chairman Halford suggested that since universal service language is not understood, it be removed from the amendment. He then cited the following text for removal: in addressing the issue of what constitutes 'universal service' under the Act, the Alaska Public Utilities Commission should define 'universal service' so that and suggested that remaining language maintains the intent. Co-chairman Frank concurred that removal represents an improvement in the wording. Co-chairman Halford then formally MOVED to delete the above-noted language so that the remaining portion of the sentence reads: It is the intent of the Legislature that Alaskans will have the same access to the benefits of modern telecommunications . . . . No objection having been raised, the amendment to AMENDMENT NO. 2 was ADOPTED. Senator Zharoff reiterated earlier concern regarding "same access," suggesting that perhaps it should read "same or improved." Co-chairman Frank asked if access language was necessary to the amendment. Senator Pearce said that instructing APUC not to move forward until rule-making takes place would comfort numerous small, rural utilities statewide. Co-chairman Frank suggested that the amendment be further limited by removal of access language so that the last sentence reads: It is the intent of the legislature that the APUC should carefully review steps taken by the Federal Communications Commission to implement the 1996 Federal Telecommunications Act prior to taking any significant action which would affect the current telecommunications marketplace in Alaska. Co-chairman Halford MOVED to delete the following access- related wording: Alaskans will have the same access to the benefits of modern telecommunications services as the residents of the lower 48 states and that No objection having been raised, the amendment was ADOPTED and the latter language was deleted. Senator Rieger voiced need to insert the word "any" in remaining language between the words "review" and "steps." He explained that without the insertion, language could be construed to direct APUC "to not take any telecommunications actions on anything until the federal commission has completed its work." He suggested that the legislature would not want to freeze activities entirely. Co-chairman Frank called for objections to the addition. None were forthcoming, and the third amendment to the amendment was ADOPTED. Co-chairman Frank called for objections to adoption of AMENDMENT NO. 2 AS AMENDED. No objection having been raised, AMENDMENT NO. 2 was ADOPTED AS AMENDED. Co-chairman Frank next noted AMENDMENT NO. 3 by Senator Donley. Senator Donley said he would not offer the amendment. Senator Donley also said he would not offer AMENDMENT NO. 4. He voiced his understanding that the proposed bill now deals only with collective bargaining agreements, the constitutional budget reserve fund, "this telephone issue," and the MatSu fire. Co-chairman Frank concurred. Senator Donley referenced AMENDMENT NO. 5 and noted that an appropriation to the Dept. of Public Safety for victims for justice was discussed toward the end of the budget process, in regular session, and attempts were made to identify alternative sources of funding through reappropriations. None of those efforts were successful. As background information, he advised that seven or eight years ago, the state eliminated funding for advocates for victims. Since that time, a non-profit organization, "victims for justice" has stepped in to fill the gap. The organization is active in assisting the judicial council and "putting on seminars for judges," relating to sensitivity to victims. He urged support for the $25.0 appropriation since attempts to find reappropriated funding failed. Co-chairman Frank directed that the meeting be briefly recessed. RECESS - 5:45 P.M. RECONVENE - 5:55 P.M. Upon reconvening the meeting, Co-chairman Frank acknowledged general support for the appropriation within AMENDMENT NO. 5 but recommended that it not be approved at this time. He advised it could be kept in mind for a floor amendment along with other potential amendments that may be offered as part of the final operating and capital item package. Senator Donley acknowledged ongoing negotiations but voiced concern that the request for victims for justice did not appear in the Governor's budget. For that reason, he stressed need to address the request in special session. He attested to support for the appropriation in both the House and Senate and suggested that it "just kind of fell through the cracks." Co-chairman Frank called for a show of hands on adoption of AMENDMENT NO. 5. The amendment failed to be adopted on a vote of 2 to 5. Senator Sharp MOVED for adoption of AMENDMENT NO. 6. He explained that it would retain balances in the power project fund and the rural electrification revolving fund that would otherwise lapse into the general fund on June 30. Totals are $650.0 for the former and approximately $350.0 for the latter. He attested to a list of backlogged projects submitted to the Dept. of Community and Regional Affairs and noted need for the foregoing funds to be used as originally budgeted. Co-chairman Frank called for objections to AMENDMENT NO. 6. Senator Rieger asked if "regional intertie projects" could include the Glennallen intertie. Senator Sharp responded negatively, saying that it relates to "small, village- intertie-type" projects. Senator Donley raised a question concerning what appeared to be a deletion of language relating to the Bethel Seawall Construction. Senator Sharp explained that an appropriation to the seawall was contained in the original SB 1005 but not in the second version. He reiterated that amendment language would merely roll the funding forward within cited funds rather than allowing it to lapse. Reference within the amendment to seawall construction should be lined out because the current draft does not contain that language. In response to a request from Senator Donley that the administration speak to the amendment, ANNALEE McCONNELL, Director, Office of Management and Budget, came before committee. She said that the balance of the power project fund was supposed to have gone into the general fund when the statutory change was made. The administration proposed, in both its original submission and a pared down version, that both sources of funding be used for the Bethel Seawall. They would otherwise lapse into the general fund. While there are pending projects, the cited funds have not been designated for any particular projects. The administration thus felt it was appropriate for "them to go ahead and be reappropriated to the Bethel Seawall." That was one of the sources recommended for capturing the $5 million in federal funds. The administration does not support the proposed amendment. It believes the funding should be used for another purpose. Senator Rieger asked if the funds lapsed in 1994. Ms. McConnell explained that one piece of the funding was supposed to have lapsed at that time. However, it was missed in effecting the transition under the new statute. It was only recently noticed (long after budget preparation last fall) as something that should have lapsed when the statutory change was made. It is thus available for the Bethel Seawall. Senator Sharp referenced three projects identified as high priority by utilities throughout the state. The first is $1 million for the Old Harbor hydroelectric project to be matched by $600.0 from AVEC to reduce the draw on PCE. The Senator further noted projects between Klawock and Thorne Bay and Kasaan. He said that matching power project and rural electrical funds to a Bethel Seawall does not bode well when projects within the original intent are in need of financing. Co-chairman Frank called for further discussion or objection to AMENDMENT NO. 6. Senator Donley OBJECTED. The Co- chairman called for a show of hands. AMENDMENT NO. 6 was ADOPTED on a vote of 6 to 1. Co-chairman Halford explained that AMENDMENT NO. 7 relates to disaster relief associated with the MatSu fire. The $1 million appropriation to the Dept. of Military & Veterans Affairs would increase the total to $4 million, at the request of the administration. In response to a question from Senator Sharp, both Co-chairmen advised that the appropriation would not lapse. The effective date would be immediate. Senator Rieger acknowledged need as a result of the fire, but noted that the proposed appropriation appears to be contrary to recent committee policy of not placing large amounts of funding in disaster relief in advance. Concerns have been raised regarding administration of disasters by the department. He said he was uneasy with the proposal and would be more comfortable with a different approach, once it is known what the funding will be used for. Senator Sharp voiced similar reservations in light of procedures used in a recent disaster where cost controls and responsibilities were not effected. Ms. McConnell explained that in response to legislative concerns and issues raised in a subsequent audit, the administration instituted new procedures with very specific expenditure authority. As the dollar value increases, the level of required scrutiny also increases. A disaster response cabinet includes all commissioners in impacted departments. Past situations giving rise to concern should not be repeated. She stressed that news regarding the current fire is changing by the minute, and the magnitude is quickly growing because of winds. The administration has assured citizens in the area that necessary suppression (DNR) and disaster (DMVA) resources will be in place. Ms. McConnell attested to increased evacuations and expanded temporary housing facilities. She advised of a 5:00 p.m. briefing to update legislators and others on the status of the situation. Amounts requested in the proposed bill reflect best estimates as of earlier this afternoon. News in the last three or four hours may mean that the amounts are insufficient. Co-chairman Halford acknowledged problems with past disasters but stressed that the ongoing fire is near a population center. Response, review, and reconstruction will be done in the public eye. It does not present the same potential for abuse highlighted in the recent audit. He attested to the fact that the state would likely end up spending "a great deal more than this number" and noted need to amend the number upward as more information is available. Ms. McConnell reiterated that members would be updated daily. The appropriation to the Dept. of Military & Veterans Affairs will include temporary housing, public assistance with utilities, and individual and family grants. Senator Rieger inquired concerning the likelihood of FEMA moneys from the federal government. Ms. McConnell explained that the state disaster declaration would be transmitted to FEMA. Application for federal assistance on wildland fires will also be made. NANCY SLAGLE, Director, Division of Budget Review, Office of Management and Budget, came before committee with an update. She advised of preliminary approval for wildland fire assistance from the federal government. The state should thus be receiving assistance from FEMA. Senator Sharp voiced his understanding that during the Koyukuk flood, temporary housing was 100 percent paid by FEMA as well as a $1,000 allotment for personal effects. Ms. Slagle attested to a 70/30 split on FEMA wildland fires. She said she did not know that the funding was specifically tied to temporary housing and those types of things. It relates more to fire fighting. Co-chairman Halford cited involvement of two issues: the first relates to the fact that federal fire fighting funds will actually be available; the second issue is disaster relief after the fire is extinguished and residents remain homeless, etc. There has been no federal disaster declaration. Senator Zharoff commented upon the fire at Holy Cross and stressed need to devote attention to that area as well as MatSu. The interior should not be ignored simply because fewer residents are involved. Ms. Slagle advised that the Dept. of Natural Resources responded to questions from Senator Lincoln and assured her that there are adequate numbers of teams to deal with fires as they develop and need attention. Co-chairman Frank called for further discussion or objections to AMENDMENT NO. 7. No objection having been raised, AMENDMENT NO. 7 was ADOPTED. Senator Zharoff explained that AMENDMENT NO. 8 is technical in nature. It relates to a project at Pt. Baker, a community on the northern end of Prince of Wales Island. The community seeks to use part of the capital matching grant moneys for the water system for the state-maintained small boat access ramp. Co-chairman Halford advised that the legislature dealt positively with all other community changes when the capital budget was under discussion. He then said he had no objection to the request if the administration would provide assurance that funding belongs to the community, and the amendment merely includes a change in terminology. Nancy Slagle responded affirmatively. Senator Zharoff MOVED for adoption of AMENDMENT NO. 8. No objection having been raised, AMENDMENT NO. 8 was ADOPTED. Senator Zharoff asked that AMENDMENT NO. 9 be held. Co-chairman Frank inquired concerning further amendments. None were offered. Co-chairman Halford MOVED for passage of CSSB 1005 (Fin), AS AMENDED, with individual recommendations. No objection having been raised, CSSB 1005 (FIN) was REPORTED OUT of committee. Co-chairmen Frank and Halford and Senators Phillips and Sharp signed the committee report with a "do pass" recommendation. Senators Donley, Rieger, and Zharoff signed "no recommendation." ADJOURNMENT The meeting was adjourned at approximately 6:20 P.M.