SENATE BILL NO. 32 "An Act making and amending capital appropriations and reappropriations and capitalizing funds; and providing for an effective date." Senator Dave Donley gave the subcommittee report. The committee was made up of Senator Gary Wilken, Senator John Torgerson, Senator Al Adams and himself as chair. The capital budget subcommittee employed a different process this year, included many public hearings and considered projects item by item. The mission the subcommittee was given was to meet a certain funding level and attempt to close the fiscal gap. The main concern was the use of general funds. The Governor's budget request was considerably larger than last year's capital budget and would have utilized much more general funds. It also anticipated passage of a large gasoline tax to help fund some of the projects. The subcommittee's intent was to capture as much federal matching funds as possible. A larger state match would be necessary to do so. Yet, the direction was to have a total capital expenditure that did not exceed the previous year. Senator Dave Donley felt the committee was successful in capturing the maximum amount of federal funds while reducing general fund expenditure as much as possible. Senator Dave Donley noted there were some projects listed in the proposal that were not allocated the full state match necessary to take advantage of all available federal funding. However, the federal funds were available for 18 months and could be realized in the next Legislative budget. For example, $5 million in state match funds were needed to obtain federal discretionary ferry funds for use in Southeast. The current budget contained $4 million of the $5 million required and the balance could be paid with a subsequent appropriation in the next budget. Therefore, projects that were short-funded in this budget would be accessible in the next fiscal year and would not be lost. The subcommittee written report did not mention that the members concurred with the Governor's mental health capital appropriations. He asked that those projects be considered as proposed in the original bill. Additionally, the subcommittee focused on the departmental requests as areas for reductions to the Governor's proposal. The subcommittee looked at the various agency projects and adopted criteria. The criteria included relationships to safety, school education, eligibility for special unique federal funding sources such as the SEAMAK money, deferred maintenance needs, essential completion of a phased project, critical administrative needs, high volume of use to maximize benefits for the maximum number of Alaskans. There were projects not included in the subcommittee's recommendation that did meet the criteria because there simply wasn't enough funding to do all of them. The subcommittee acknowledged it would like some projects reconsidered by the full committee. However, that would involve a reprioritization within the overall plan. That was a decision the whole committee needed to make. Within the US Corps of Engineers projects, the Governor proposed a total of about $6.3 million for eleven projects. The subcommittee proposed to add approximately $1,150,000 for the Cook Inlet Navigation project to that list. It also proposed to reduce the funding for the Nome Port project so that the state match would be 25-percent rather than 50- percent. That would not lose any federal funds, it just placed more burden on the City of Nome to come up with the remaining matching funds. The whole committee could discuss this matter further. There were three specific reductions to the Department of Environmental Conservation's request that came primarily from the operating budget subcommittee chaired by Senator Loren Leman. This included administration expense reduction and was reflected in the capital budget. There was also an incremental general fund request of $125,000, which was changed in the proposal. They should be reflected in the updated total before the committee members. Those were operating aspects that were included in the capital budget. The subcommittee was still meeting on the specifics for the Department of Transportation and Public Facilities items. The subcommittee had made the commitment to capture the maximum amount of federal funding available. The committee substitute would only show separate categories that totaled the amount to be allocated to the department. The subcommittee would continue to prioritize and place projects into the categories and would issue a final report in the next day or two. The intent was to capture all of the TEA-21 funds. The subcommittee recommended no changes to the National Highway System Program or the Marine Transportation Program from the Governor's request. This was to capture the discretionary federal funding. He qualified that the details were somewhat vague since the projects were in the application process. The subcommittee recommended funding $4 million of the potential $5 million needed to capture those dollars. The acknowledgement was to fund the remaining one million dollars in the next fiscal year if all the projects received federal approval. The Department of Transportation and Public Facilities would also be applying to the federal government for funding of three large bridge projects. The projects had been called many things including Pure Discretionary Projects and Demonstration Projects but basically the department would compete against all other states for federal funds. They hoped to obtain approval for at least one project, and possible two. The subcommittee provided adequate funding for one project and intended that if an additional project was approved the Legislature would somehow come up with matching funding for the second project. Senator Loren Leman asked where the bridge projects were located. He wondered if one was to link Gravina Island and Ketchikan. Senator Dave Donley informed him that was a different demonstration project and received separate funding the year before. There were no funds provided this year, but there could be another request the next year. One of the currently proposed projects was in the Kenai/Soldotna area. He was unsure where the others were located and Senator Loren Leman determined he could easily find out for himself. Senator Dave Donley continued saying this variable was a difficult projection to make and the subcommittee took the advice from the department that they thought they would obtain approval for one of the three projects. It could be a problem if approval was granted for two or three of the projects. The Legislature would need to find additional funding to meet the match requirement. The subcommittee would continue to work on CPP, TRAAK and AMATS specifics and would have a full report on actions soon. Senator Dave Donley moved for adoption of CS SB 32 (FIN) Version "D" as a Workdraft. Senator Al Adams noted he had some concerns with the CS but would not object to its adoption and would save his discussions for the full committee. Without objection, the CS was adopted. Senator Dave Donley requested the departments review the CS and provide feedback. Many proposals would impact the agencies and some fine-tuning would probably be necessary. Co-Chair John Torgerson announced the schedule for capital budget hearings. Wednesday, the committee would begin with the Mental Health budget SB 31 and would then hear from agencies on the impacts. Public testimony would be taken starting at 6:00PM. Amendments were due by 3:00PM Thursday and would be considered by the committee on Friday. He expected the bill would be reported out of committee on Friday evening. Senator Dave Donley noted that this budget proposal would capture over $1 billion in federal funds, at an expense of approximately $132 million. Co-Chair John Torgerson commended the subcommittee's efforts. While the CS was subject to amendments, it was also subject to the fiscal constraints.