JOINT COMMITTEE LEGISLATIVE BUDGET AND AUDIT September 23, 1999 8:40 A.M. MEMBERS PRESENT Representative Gail Phillips, Chair Representative Con Bunde Representative Eric Croft Representative Gary Davis Representative Gene Therriault Representative Eldon Mulder (alternate) Senator Randy Phillips, Vice Chair Senator Al Adams Senator Rick Halford Senator Sean Parnell Senator Gary Wilken Senator Drue Pearce (alternate) COMMITTEE CALENDAR APPROVAL OF PREVIOUS MINUTES August 10, 1999 REVISED PROGRAMS (RPL's) EXECUTIVE SESSION Preliminary Audit Reports Final Audit Reports AUDIT REPORTS Release of Final Audits Consideration of Audit Reports OTHER COMMITTEE BUSINESS WITNESS REGISTER TOM MAHER, Legislative Assistant to Representative Gail Phillips Alaska State Legislature Capitol Building, Room 411 Juneau, Alaska 99801 Telephone: (907) 465-6873 DAVID TEAL, Director Division of Legislative Finance State Office Building, Sixth Floor Juneau, Alaska 99811 Telephone: (907) 465-3795 POSITION STATEMENT: Introduced the RPL's PAT DAVIDSON, Director Division of Legislative Audit State Office Building, Sixth Floor Juneau, Alaska 99801 Telephone: (907) 465-3830 POSITION STATEMENT: Spoke to the Audit Reports MERLE JENSEN, Deputy Legislative Auditor Division of Legislative Audit State Office Building, Sixth Floor Juneau, Alaska 99801 Telephone: (907) 465-3820 NICO BUS, Administrative Services Manager Division of Support Services Department of Natural Resources 400 Willoughby Avenue, 5th Floor Juneau, Alaska 99801-1724 Telephone: (907) 465-2406 POSITION STATEMENT: Spoke to the Department RPL's NANCY SLAGLE, Director Division of Administrative Services Department of Transportation and Public Facilities 3132 Channel Drive Juneau, Alaska 99801-7898 Telephone: (907) 465-3911 POSITION STATEMENT: Spoke to RPL #25-0-6200 CAROL TAYLOR, Planner Division of Statewide Planning Department of Transportation and Public Facilities 3132 Channel Drive Juneau, Alaska 99801-7898 Telephone: (907) 465-4070 POSITION STATEMENT: Spoke to RPL #25-0-6200 BARBARA RITCHIE, Deputy Attorney General Office of the Attorney General Department of Law PO Box 110300 4th Floor, Dimond Courthouse Juneau, Alaska 99811-0300 Telephone: (907) 465-2133 THOMAS DAHL, Assistant Attorney General Human Services Section Department of Law PO Box 110300 5th Floor, Dimond Courthouse Juneau, Alaska 99811-0300 (907) 465-3600 ACTION NARRATIVE TAPE 99-6, SIDE A CHAIR GAIL PHILLIPS called the Joint Committee on Legislative Budget and Audit meeting to order at 8:40 A.M. on September 23, 1999. Members present at the call to order were Representatives Phillips, Croft, G. Davis, Therriault, Mulder and Senators Phillips, Adams, Wilken, and Pearce. Representative Bunde and Senators Halford and Parnell arrived later during the meeting. (time not noted). APPROVAL OF MINUTES CHAIR PHILLIPS announced that the first order of business would be the approval of minutes from the August 10th Legislative Budget and Audit Committee meeting. SENATOR PHILLIPS MOVED approval of the minutes and asked for unanimous consent. There being NO OBJECTION, the minutes were approved and adopted. REVISED PROGRAMS (RPL's) DAVID TEAL explained the RPL's before the Committee for review and action. RPL Number: 02-0-0026 Department of Administration Senior Services BRU Home and Community Based Care Component $28,900 MHTAAR - Operating DAVID TEAL explained that the funding would be used for temporary relocation of the Bridge Adult Day Program from the Mountain View/Juneau Senior Center to the Twisted Fish Company Restaurant. The program, with 4-5 full time staff and an average of 20 clients, provides a structured therapeutic day program for frail and disabled people of any age who have Alzheimer's Disease and related disorders. Mr. Teal continued that the relocation is necessary due to an Alaska Housing Finance Corporation (AHFC) initiated remodel of the Mountain View/Juneau Senior Center. The remodel is necessary to bring the building up to code and that the Twisted Fish restaurant is ADA compliant. The Mental Health Trust Authority awarded these funds on July 15th, 1999. AHFC will be paying for all the remodeling costs and some of the relocation costs of that project. Catholic Community Services will be providing $11,900 dollars. The requested RPL would cover the balance of costs. SENATOR ADAMS MOVED to adopt the requested funding. There being NO OBJECTION, RPL #02-0-0026 was adopted. RPL Number: 10-0-4013 Department of Natural Resources Information/Data Management BRU Information Resource Management Component $310,000 Federal - Operating DAVID TEAL commented that the requested funds would be used for the development of a modern digital mining claim and land information system that includes both State and federal mining claims, and bridges isolated land record systems. The multiple agency systems having no electronic cross- reference currently make it difficult to obtain information. Statewide access to past and future mining claims and land record databases will be improved with the new system. The Department would be the lead agency on the project. Mr. Teal continued, on August 14th, 1998, LBA approved RPL 10-9-4002 for $125,000 federal dollars to initiate the project. The requested amount would supplement the original funding. The request was not included in the FY00 budget because at the time, the specifics were not known. There should be requests included in the FY01 and FY02 budgets and that there would be no impact on general funds. Mr. Teal noted that $150 thousand dollars of the request would be spent on personal services (current positions). The funding will bring the vacancy factor back down to 5.5%. REPRESENTATIVE MULDER asked if the positions saved by the proposed funding request would have different responsibilities than those positions lost in the FY00 operating budget cut. NICO BUS explained that those personnel would have been laid off, regardless. The proposed project tries to consolidate State and federal records. The employees would be handling different functions by incorporating the mining claim records, using the newly purchased equipment to make information more readily available to the public. He stressed that the mining community is very supportive of the project. SENATOR PHILLIPS questioned how the Department could justify the request given the status of the advisory vote. NICO BUS responded that the decision would be left to the LBA Committee. He added that economic development takes State financial effort to automate. REPRESENTATIVE G. DAVIS asked if the requested positions would be middle management hires. SENATOR PHILLIPS interjected that a partial part of the "no" vote was to reduce the size of government. He pointed out that the proposed RPL was the bureaucury requesting more positions with federal funds. He suggested that the "no" vote should be recognized. Senator Phillips commented that he was determined to take a more "hard line@ view of such proposals. REPRESENTATIVE BUNDE advised that each time the State receives money from the federal government, the State "suffers" by passing it. He echoed Senator Phillips concerns. SENATOR ADAMS commented that his interpretation of the "no" vote was different from his colleagues. He suggested that if Anchorage wants to have cuts, they should be given those cuts. The rest of the State is not saying that. He believed that the rest of the State would like to see a different plan than that proposed in September. Senator Adams suggested that the merits of the debate should incorporate mining and development economic status for Alaska. SENATOR PHILLIPS inquired where the positions would be located. NICO BUS responded that they were located in Anchorage. REPRESENTATIVE THERRIAULT asked if the funding request would cover only the current fiscal year. NICO BUS explained that in last year=s project, the federal government funded $450 thousand dollars. The RPL is for $310 thousand dollars which would be carried forward into FY01 for $140 thousand dollars. REPRESENTATIVE THERRIAULT asked if the federal government had been approached after the State's operating budget was completed. NICO BUS replied that the Department had been working with the mining community and the federal government for a long time to streamline the system. The proposed RPL is the resulting product. The federal government was not sure if they would continue funding this project, however, correspondence in June provided one more allocation in the amount of $450 thousand dollars to implement the next phase. REPRESENTATIVE MULDER questioned the length of federal appropriation anticipated by the Department. NICO BUS replied that the remaining $140 thousand dollars would be carried into FY01. REPRESENTATIVE MULDER asked if the Department anticipated the new hired positions to be "gone" after a two-year period. NICO BUS responded that those positions would be gone after completion of this specific project. REPRESENTATIVE CROFT commented on his frustration that an alternative had not been presented to the public for the advisory vote. He noted that there has been a lot of "talk" regarding resource development as a "way out" of the State's bleak financial situation. The proposed RPL would provide a way, without spending State general funds, to move toward resource extraction, economic development and additional jobs. Representative Croft acknowledged that the task of determining the "no" vote indication would be difficult for Alaska. SENATOR PHILLIPS countered that part of the $100 million dollar revenues and the proposal were part of the conditions. REPRESENTATIVE G. DAVIS questioned if the RPL would expand economic development opportunities or would it add current mining claims easier access to that information. NICO BUS replied that it would address both the old and the new claims. REPRESENTATIVE BUNDE understood that the mining industry and resource development, return approximately 20% of the actual cost to the State, to provide this service. NICO BUS did not believe that amount was correct. He suggested that the impact was greater to the economy. He offered to provide those statistics to the Committee. REPRESENTATIVE BUNDE interjected that it was fair to assume that there was not a net gain. He projected that the only resource, which does not cost the State more, is oil. NICO BUS replied that could only be determined by the definition of "net gain". If the understanding were employment for the Alaskan citizens, this request provides that. REPRESENTATIVE THERRIAULT commented that the Fairbanks North Star Borough did an economic impact analysis and determined that the mining industry was one of the largest property tax payers in that borough. He emphasized the tremendous benefit of that service to our State. REPRESENTATIVE MULDER asked if the RPL would allow the State to look at federal lands for potential claims. NICO BUS replied that the State can currently do that, however, that information is found in two different places. The proposal would provide consolidation. SENATOR ADAMS MOVED to adopt the requested RPL #10-0-4013. SENATOR PHILLIPS OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Representatives Phillips, Croft, G. Davis, Therriault and Mulder (alternative) Senators Adams, Wilken, Pearce (alternative) OPPOSED: Representative Bunde Senator Phillips Senators Halford and Parnell were not present for the vote. The MOTION PASSED (7-2). RPL Number: 10-0-4014 Department of Natural Resources Mining, Geological, Water Development BRU Geological Development Component $400,000 Federal - Capital DAVID TEAL explained that the request was an amendment to an existing capital project. The federal funds are available from the U.S. Bureau of Land Management (BLM) to conduct an airborne geophysical survey of parts of the Sleetmute and Iditarod Quadrangles in southwestern Alaska. He added that the Department would procure and manage a survey contract according to specifics in a cooperative agreement with BLM. The products of the survey are expected to catalyze mineral exploration and development of the survey area. Mr. Teal pointed out that the existing capital project for an Airborne Geophysical and Geophysical Mineral Inventory was initiated with $400 thousand general fund dollars during last legislative session. BLM signed the cooperative agreement on September 13th, 1999. The funds will expire on October 1, 1999 if not encumbered by the State for the project. The Department did not include the new funding in the FY00 budget because availability was not known until July 1, 1999. Mr. Teal continued, the projected completion date of the project is September 30, 2000 and there will be no impact on the general fund. He noted that no new positions would be requested for this project. SENATOR PEARCE questioned if a contract already existed. NICO BUS responded that the entire project would be contract work for the helicopter time to fly into those areas. The areas contracted for last session will be worked on in the spring. He added that the work would basically be done on federal land with federal money. The federal government has requested that the Department administer their contract over their land. SENATOR PEARCE questioned if the size will expanded, would it run as a separate contract. She asked if that would create additional efficiency. NICO BUS advised that efficiency exists as the Department has run the program for the last seven years and understands the routine. All that will be required is changing of the actual geographic location and analysis of the data. SENATOR PEARCE inquired who would own the data. NICO BUS stated that the federal government owns the data, and that it is available to the public. SENATOR ADAMS pointed out that the area affected was that represented by Senator Hoffman and that area has the lowest employment in the State. Senator Adams asked why the Sleetmute and Iditarod survey was chosen for this RPL. NICO BUS advised that the federal government made the choice, as it was a combination of federal and Native lands nominated. Senator Stevens identified these areas and the federal government put the money up front to the State of Alaska. The State will benefit, as there are some areas that are closely federal/State/Native lands. REPRESENTATIVE THERRIAULT asked if the federal government had a specific project in mind. He noted that the money would lapse in a couple of weeks. NICO BUS replied that he did not know the source of federal money, but thought that there had been some year-end lapse money made available for the project. SENATOR PHILLIPS asked what would happen if the RPL was not approved. NICO BUS stated that the project would not be funded and the federal government would receive $400 thousand dollars back. He added that there was a $10 thousand dollar administrative fee associated with the RPL. SENATOR WILKEN MOVED to adopt RPL #10-0-4014. REPRESENTATIVE BUNDE OBJECTED. He asked if these funds would be technically counted as State spending. Mr. Bus acknowledged they would. REPRESENTATIVE G. DAVIS clarified that it would be a standard land survey. NICO BUS explained the process of picturing the land platted areas to determine good prospects for mining development. REPRESENTATIVE CROFT noted that the employees would not be federal or State workers; they would all be private contract hires. Mr. Bus agreed. A roll call vote was taken on the motion. IN FAVOR: Representatives Phillips, Croft, G. Davis, Therriault, Mulder (alternate) Senators Halford, Wilken, Adams Pearce (alternate) OPPOSED: Representative Bunde Senator Phillips Senator Parnell was not present for the vote. The MOTION PASSED (8-2). RPL Number: 25-0-6200 Department of Transportation and Public Facilities AMATS Community Transportation Cooperative Program (CTCP) $250,000 Federal Receipts - Capital CHAIR GAIL PHILLIPS noted that the Department had received authorization last session to receive these funds. She pointed out that the request came to the LBA Committee from the urging of Senator Donley. She stressed that the RPL does not need approval. Chair Phillips recommended that the Committee take NO ACTION on the request. She stated that she did not want to begin the practice of bringing RPL's forward that does not need the Committee's approval. It will create excess work for the agencies and unnecessary delays. If this RPL was approved, it would raise the question of what the Department would use the authority for. She requested that Mr. Teal explain the issue. DAVID TEAL explained that the Municipality of Anchorage applied for and has been awarded, a discretionary grant from the Federal Highway Administration (FHWA) under the Transportation and Community System Preservation Pilot Program. This is a planning grant with a two-tiered approach. Tier I would re-design the Municipality's public involvement process for the AMATS Transportation Improvement Program. Tier II would apply the new process specifically to a significant transportation-planning project, the Ship Creek Multimodal Transportation Plan. The anticipated product is a stand-alone program that the AMATS and Municipality's Planning Department could apply to future planning efforts for both land use and transportation issues. Mr. Teal continued, the funding was not anticipated during the regular budget process. The Municipality's grant proposal competed nationally with other states' proposals, and was awarded from FY99 special discretionary funds. This is a one-time request and the funds are available now. Notification of the award was received June 18, 1999, via signed federal aid agreement and no expenditures have yet been made. The funds, however, must be obligated by September 30, 1999, before the close of the federal fiscal year. If the RPL is not approved now, the Municipality of Anchorage will lose the grant. He added that the grant is 100% federally funded and that there are no implications for positions, indirect cost recoveries or efficiency measures. Mr. Teal noted the two letters distributed to Committee members addressing the RPL. [Copies on File]. He noted that what exists is an RPL, which the Department intended to proceed on without a request because of broad authority in the budget. He commented that he could not speak for the Department, however, when money is used, not in the budget, it removes funds from projects supposedly allocated for. He acknowledged that one could argue that this RPL could take from a later RPL or could provide a project that did not come before the Committee. SENATOR PEARCE stated that as Senator Donley had explained it to her, there were funds that could be used to do the project, however, there is a grant from the federal government for $250 thousand dollars. He had intended for the Department to get the grant for this project and keep the original allocation in AMATS for contingency projects. He understood that there were two different pots of money. SENATOR HALFORD asked if there was a net increase of $250 thousand dollars would be available with the approval of the RPL. He suggested that could create new federal money. SENATOR PEARCE commented that the Department of Transportation and Public Facilities was going to use $250 thousand dollars that they already had rather than taking the federal money. SENATOR HALFORD pointed out that given the contingency, the Department would then have a net increase of $250 thousand dollars. DAVID TEAL referenced the letter, noting that no LBA meeting had been scheduled at that time before the money needed to be obligated. The Department wanted to proceed with the project and felt the only way to proceed was to use existing authority. He recommended that the Department respond to the questions of the Committee. CHAIR PHILLIPS reiterated that the request came directly from Senator Donley. SENATOR PEARCE advised that was because the Department wanted to use the money they already had; they did not want to put $250 thousand dollars more to the project. DAVID TEAL informed members that he could not address the "internal" thinking of the Department. REPRESENTATIVE MULDER clarified that the request would be $250 thousand additional dollars to AMATS. He asked if the RPL was authorized, would that funding would be replacing existing authorized funding. SENATOR ADAMS expounded that the Anchorage community has applied for a federal grant. The State is only a "pass through" vehicle to give the money to that community. He emphasized that Anchorage should have local control over their needs. NANCY SLAGLE stated that the request was a pass through grant which AMATS applied for. It must go through the State because of U.S. Department of Transportation and Public Facilities requirements. There is a deadline on the RPL and the Department has been working with Anchorage to make sure that the money is available to them. Originally, the Department did plan to use the appropriation in the Capital Budget, an AMATS appropriation, for contingency and cost overruns. It would fit within that appropriation. It was Senator Donley's concern that prompted the Department to bring the request forward to the LBA Committee to receive additional authority. He believed that the Department would then continue to have authority on the books for the contingency. SENATOR HALFORD asked if the Department supported the concept. NANCY SLAGLE replied that the Department could go either way. She suggested that it would be "cleaner" if the Committee provided the additional authority. CAROL TAYLOR indicated that everything needed to be in place for the grant to be received by the 1st of October, 1999. CHAIR PHILLIPS stated that the RPL would be HELD for further discussion. EXECUTIVE SESSION SENATOR PHILLIPS made a motion, in accordance with Title 24 and 44, to move to Executive Session for the purpose of discussing audit reports, which are held confidential by law. There being NO OBJECTION, the Committee went into Executive Session at 9:20 A.M. CHAIR PHILLIPS requested that Pat Davidson (Legislative Auditor), Merle Jensen, (Deputy Legislative Auditor), David Teal (Director of Legislative Finance Division) and Tom Maher (Legislative Budget and Audit Committee Aide) attend the Executive Session. The Committee resumed open session at 9:35 A.M. (TAPE MALFUNCTION) AUDIT REPORTS SENATOR ADAMS MOVED that the final audits on the agenda be released to the public: * State of Alaska/Single Audit for FY 1998 * DOA/DCED/ASMI/AIDEA * DOA/Office of Public Advocacy/Public Guardian Program * DOC/Review of Select Internal Controls There being NO OBJECTION, the final audits were released for public view. SENATOR ADAMS MOVED to release the preliminary audit report: * DOA/Alaska Commission on Aging There being NO OBJECTION, the preliminary audit was released for agency response. OTHER COMMITTEE BUSINESS CHAIR PHILLIPS acknowledged that this might be the last Budget and Audit Committee meeting before Merle Jensen, Deputy Legislative Auditor, retires. Therefore, she took the opportunity to present a plaque to Mr. Jensen. Chair Phillips noted that Mr. Jensen had used his position to actively promote better government and that he had been a strong advocate of the principle that State agencies be accountable to the public. She stated that Mr. Jensen had well served the citizens of the State, the Legislature and the LBA Committee. He had been deputy to five of the past six auditors and that his services will be missed. CHAIR PHILLIPS recommended that the Committee address the Department of Law briefing on Superior Court order, Kasayulie versus the State of Alaska, 9/1/99 at the scheduled Legislative Council meeting for October 1, 1999. SENATOR PHILLIPS pointed out that there was a representative from the Department of Law attending the LBA meeting. BARBARA RITCHIE advised that the Department is working on the case. At this point in time, no final decision has been made, however, the clock continues to tick. She explained that there were two portions of the case, both a facility and trust section and to date, there has been no final judgement. SENATOR PARNELL asked why reconsideration had not yet been filed. TOM DAHL replied that there had not been a motion made for reconsideration. He acknowledged that there is a better approach. SENATOR ADAMS spoke to the emotional impact of the issue. He recommended that the State begin by trying to solve some of the inequities that already exist. REPRESENTATIVE BUNDE advised that anytime the Courts find that something is unconstitutional, there is usually an appeal. BARBARA RITCHIE stated that the findings were not taken seriously. She reiterated that there has not yet been a final decision. REPRESENTATIVE MULDER supported the idea of addressing this issue through a joint meeting scheduled with Legislative Counsel. He acknowledged that the argument of the plaintiff could establish the time frame. BARBARA RITCHIE stated that the Court did have information regarding the case for the past ten years. She recommended that it would be better to focus on the issues rather than the length of time involved. Senator Pearce asked to revisit RPL #25-0-6200. RPL Number: 25-0-6200 Department of Transportation and Public Facilities AMATS Community Transportation Cooperative Program (CTCP) $250,000 Federal Receipts - Capital SENATOR DAVE DONLEY stated that the funding source is the Anchorage Area contingency for Planning/Construction shortfalls and Road/Intersection Improvement. He noted that he supported additional federal authorization to fund the grant, however, acknowledged the possibility of finding STIP or TIP monies. (TAPE RECOVERY) REPRESENTATIVE MULDER asked if the money would "go away" if the RPL were not awarded. SENATOR DONLEY understood from reading the Department's back up that there is a time limit in which the money would need to be locked in. He believed that date was September 30th. NANCY SLAGLE stated that the grant monies would not be available if not obligated by the end of the month. She pointed out that if the Department does not receive approval for additional receipt and expenditure authority or approval to use the contingency appropriation for this purpose, there is a possibility of loosing that money. CHAIR PHILLIPS questioned what the recourse would have been if a LBA Committee meeting had not been scheduled at this time. NANCY SLAGLE replied that the Department would have used the contingency funding. REPRESENTATIVE MULDER asked if the $250 thousand dollars would then "go away". NANCY SLAGLE understood that the grant money had to be obligated. CHAIR PHILLIPS believed that the approval had already been granted to the Department in last year's budget. She reiterated her concern with bringing this RPL before the Committee for action. SENATOR PEARCE asked how the Department could use contingency money that was approved as part of AMATS for a project that was not listed on the STIP or the TIP. NANCY SLAGLE replied that if the Department could not receive specific authority, they would have to rely on this money. It is a fairly broad appropriation, the contingency appropriation, in that it was not an appropriation that was requested by the Department but rather included by the Legislature. The Department had not received specific back- up to indicate the breadth of the size and the appropriation. She reiterated that it is a very broad appropriation. The Department felt that with the information that they had, it could be accommodated. SENATOR PEARCE asked if the Department had been given specific direction before the Governor vetoed the Intent Language. NANCY SLAGLE stated that she did not believe that there was Intent Language that was written specifically to that appropriation. REPRESENTATIVE THERRIAULT noted that this project had not been approved. He warned that the Department was attempting to "slide" the project in under a broad interpretation. He reiterated that it was not approved and that this money was new. Representative Therriault believed that it was appropriate that the LBA Committee make the decision at this time whether to approve these funds. A roll call vote was taken on the motion to approve RPL #25- 0-6200. IN FAVOR: Representatives Croft, G. Davis Mulder (alternate) Senators Parnell, Wilken, Adams, Halford OPPOSED: Representatives Phillips, Therriault, Bunde Senators Phillips The MOTION PASSED (6-4). ADJOURNMENT The meeting adjourned at 10:05 A.M.