SENATE BILL NO. 192 "An Act making and amending capital appropriations and reappropriations and capitalizing funds; and providing for an effective date." Co-Chair Torgerson announced the Committee would be hearing a report from the Capital Budget Subcommittee and if the report were adopted, a committee substitute would be drafted and distributed. He continued saying the deadline for amendments to the capital budget legislation would be the following Monday at 3:00 PM. Senator Donley, chair of the Capital Budget Subcommittee, talked about the relatively new process of addressing capital budget requests in a subcommittee setting. He listed the membership of the subcommittee as Senator Torgerson, Senator Wilken, Senator Adams and himself. He stated that Senator Leman also participated in some of the subcommittee meetings in the place of Senator Adams. Senator Donley shared that the proposal from the subcommittee was to utilize $138,474,201. Those funds are a combination of approximately $80 million general funds, $18.5 million Alaska Industrial Development and Export Authority (AIDEA) dividend funds and $39 million Alaska Housing Finance Corporation (AHFC) funds, he said. He noted that the total amount is $15,679,932 less than the previous year's enacted capital spending and over $33 million less than the governor's requested funding level. Senator Donley told that the subcommittee was assigned the task of assisting in making reductions to the operating budget to reach the targeted goal of $30 million. He stressed that the subcommittee was faced with reducing the governor's requested budget increase as well as reducing the amount of funds spent in the previous fiscal year. Senator Donley conveyed the priorities and criteria established by the subcommittee for project evaluation of the proposed capital items. These, he said, included whether the project was life, safety or health related, school education related, was eligible for unique and special federal funding sources and met deferred maintenance needs. He continued listing criteria as whether the funding request was for essential completion of a phased project, met critical administrative needs, and whether the project would have a high level of use to maximize benefit to the greatest number of users. He stated that none of the criteria was considered by itself and that the criteria had changed some from the previous year. Senator Donley added that the subcommittee attempted to not include projects that were not requested by the State Of Alaska and also to avoid projects where the state was asked to provide funding for projects requested by other governmental entities. Senator Donley qualified that the subcommittee did try to approve funding for projects that could reduce future operating budget expenses. He gave examples of capital projects that provided more efficient record keeping and case-management tracking. Senator Donley continued that to stay within the funding allocation goals, the subcommittee could not approve all the requested projects that met those criteria. He stressed that the subcommittee did attempt to rate the projects to include those that would have the most benefit. Senator Donley relayed that the subcommittee did not attempt to remedy the on-going problems with the Department of Transportation and Public Facilities Statewide Transportation Improvement Program (STIP) process. He said this was because it was felt that decisions related to these projects should be made by the full Senate Finance Committee. Senator Donley also reported that the subcommittee did not consider Grant Anticipation Revenue Vehicles (GARVEE) bonds as a funding source for capital projects. SENATOR LYMAN HOFFMAN was invited to join the Committee to speak for the Senate Minority on behalf of Senator Adams who was not present. Senator Hoffman spoke to an issue raised at the subcommittee level concerning the stated intent to try to obtain the maximum amount of federal matching funds as possible. He regarded most of the projects meeting this criteria were economic development projects. He believed this year was the first in five or six years that this criterion was not applied to consideration of funding projects. Senator Hoffman then expressed concerns about the confusion over which document the subcommittee was working from. He came to the conclusion that the original version of SB 192 was what the subcommittee was using. He reached this conclusion after asking the subcommittee chair the direct question and was told on the record that the original SB 192 was before the subcommittee. He stated that he would have objected to the adoption of the governor's amended version of SB 192 due to the omission of several rural projects. Senator Hoffman talked about the impacts on rural projects contained in each version. He wanted to make sure all of the important projects receive funding. Senator Hoffman spoke to the governor's amended request saying he did not think that the added STIP projects followed a fair public process in being included in the updated version. Co-Chair Torgerson stated that he had a side-by-side spreadsheet prepared by the Division of Legislative Finance that compared GARVEE bonds related to the STIP. He said he was trying to obtain information from the Administration as to what projects properly belong in the STIP. Co-Chair Torgerson spoke to frustrations the Committee has had with the Department of Transportation and Public Facilities in having the directions given by the legislature followed. He shared that he intended to remedy the situation. He went into detail about the federal funding allocated by the legislature to certain projects that the department refuses to undertake saying they do not rank high enough. Senator Leman clarified that Senator Hoffman suggested that if certain projects were not funded this year they would "drop off the list" of eligibility for federal funding. He understood that they would not be dropped, but only be delayed a year or so. Senator Hoffman conceded these projects could get funding in the future but that it was not fair that they be dropped after six years and supplanted by other projects that have not been on the STIP. Co-Chair Torgerson told Senator Hoffman that he hoped the Minority member would share those concerns with the Department of Transportation and Public Facilities, who made those decisions. Senator Donley emphasized the serious concerns with the entire STIP process as implemented by the Department of Transportation and Public Facilities. He questioned the constitutionality of the process. He stressed that the matter was more complicated than it seemed and expressed his desire that the Committee work to change the process. Co-Chair Torgerson announced that a committee substitute would be drafted to incorporate the recommendations of the subcommittee. He stated his intent to use AIDEA funds to pay for a portion of the capital projects. Co-Chair Torgerson ordered the bill HELD in Committee.