JOINT COMMITTEE ON LEGISLATIVE BUDGET AND AUDIT January 14, 2000 8:07 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 Gary Wilken Senator Drue Pearce (Alternate) MEMBERS ABSENT Senator Sean Parnell COMMITTEE CALENDAR APPROVAL OF MINUTES CONSIDERATION OF RPLs EXECUTIVE SESSION AUDIT REPORTS REPORT FROM THE DENALI COMMISSION OTHER COMMITTEE BUSINESS ADJOURNMENT WITNESS REGISTER DAVID TEAL, Legislative Fiscal Analyst Legislative Finance Division Alaska State Legislature P.O. Box 113200 Juneau, Alaska 99811 POSITION STATEMENT: Provided an explaination of the two RPLs up for consideration. TOM LAWSON, Director, Division of Administrative Services, Department of Community and Economic Development (DCED) P.O. Box 110803 Juneau, Alaska 99811 POSITION STATEMENT: Provided information on the RPL 08-0-0101. JANET CLARK, Director Division of Administrative Services Department of Health and Social Services (DHSS) P.O. Box 110650 Juneau, Alaska 99811 POSITION STATEMENT: Provided information on the RPL 06-0-0180. MATT ANDERSON, Unit Manager Community Health and Emergency Medical Services (EMS) Department of Health and Social Services P.O. Box 110650 Juneau, Alaska 99811 POSITION STATEMENT: Provided information on the RPL 06-0-0180. KRAG JOHNSON, Legislative Coordinator Denali Commission 510 L Street, Number 410 Anchorage, Alaska 99501 POSITION STATEMENT: Presentation on the Denali Commission. JEFF STASER, Co-Chairman Denali Commission 510 L Street, Number 410 Anchorage, Alaska 99501 POSITION STATEMENT: Presentation on the Denali Commission. ACTION NARRATIVE TAPE 00-1, SIDE A Number 0001 CHAIR GAIL PHILLIPS called the Joint Committee on Legislative Budget and Audit meeting to order at 8:07 a.m. Members present at the call to order were Representatives Phillips, Bunde, Croft, Davis and Therriault, and Senators Phillips and Wilken. Representative Mulder and Senators Adams, Halford and Pearce arrived after the call to order. CHAIR PHILLIPS introduced her new committee staff, Pat Hartley from Homer. The following staff members from the Legislative Finance Division introduced themselves: Ginger Blaisdell, Fiscal Analyst, who is responsible for the Department of Health and Social Services (DHSS) and the statewide operating budget; Rob Carpenter, Fiscal Analyst, who is responsible for the Department of Law, the Department of Public Safety, the Department of Corrections and the Alaska Court System; Michael Crabb, Fiscal Analyst, who is responsible for the University of Alaska, the Department of Environmental Conservation (DEC) and the Department of Natural Resources (DNR); Tracy Carpenter, Fiscal Analyst, who is responsible for the capital budget and the Department of Transportation (DOT); Amanda Ryder, Fiscal Analyst, who is responsible for the Department of Community and Economic Development (DCED), the Department of Military and Veterans Affairs (DMVA), the Department of Fish and Game (ADF&G) and the Department of Revenue (DOR); Diana Forbes (ph), not present, who is responsible for the Department of Administration and the Department of Labor and Workforce Development. APPROVAL OF MINUTES CHAIR PHILLIPS indicated that the first order of business is the approval of the minutes from the Legislative Budget and Audit meeting held on December 16, 1999. Number 0250 SENATOR PHILLIPS made a motion to approve the minutes from the December 16, 1999, meeting. CHAIR PHILLIPS asked whether there was any objections. There being none, the minutes from the December 16, 1999, meeting were approved as read. CONSIDERATION OF RPLS (REVISED PROGRAM - LEGISLATIVE) Number 0268 CHAIR PHILLIPS indicated that the next order of business is the consideration of the RPLs. The first RPL under consideration is 08-0-0101/DCED Industry Network Corporation Grant. Number 0312 DAVID TEAL, Legislative Fiscal Analyst, Legislative Finance Division, Alaska State Legislature, explained that the RPL, 08-0-0101, is a grant for $145,000 and contains two parts; one part is for the forest products development specialist and the second is a grant intended to help match Alaska companies with overseas buyers. He indicated that there are a number of subparts; it will fund some salaries and space that are currently obligations of the agency; it will also fund an Alaska products catalogue and provide some assistance to Alaska companies. He summarized by saying that it pays to do some things that the DCED is already doing, because it will free up money to pay for the forest products development specialist, which is in the first part of the grant. He pointed out that the Legislative Budget and Audit Committee took up the RPL, 08-0-0101, in the last meeting on December 16, 1999. He indicated that some concerns were expressed; one was that cuts were made in these areas during the last legislative session and the Legislative Budget and Audit Committee was not sure of the subcommittee's approval of those cuts. Second, there was a formal memo written by the subcommittee chair objecting to those cuts, but the objection has been withdrawn. Third, there was a concern with future funding. In the DCED's December 16, 1999 presentation, it appeared tha the funding was speculative beyond this fiscal year and the Legislative Finance Division spoke with the Industry Network Corporation (INC) and it indicated that there was a good chance of receiving some continued funding, but there are no promises. TOM LAWSON, Director, Division of Administrative Services, Department of Community and Economic Development (DCED), indicated that there were some concerns expressed at the last Legislative Budget and Audit meeting by Representative Austerman, who submitted a letter to the committee. Representative Austerman's concerns were addressed and he has withdrawn his objection to the RPL, 08-0-0101. He explained that at the last meeting it appeared that perhaps the scope of work for the forest products effort is a bit ambitious considering the time frame that remains in the fiscal year. He pointed out that what wasn't made clear during the meeting on December 16, 1999, was that most, if not all, the projects are at an advanced stage of completion and the DCED is seeking to have someone in place for the remainder of this fiscal year in order to complete those projects, which would enable the DCED to recoup the time and money already invested in the projects and bring those projects to fruition. One of those projects is a directory of Alaska sawmills; there are approximately 100 sawmills in Alaska and more than 60 of those companies have already provided information to be included in the directory to be distributed to buyers of Alaska forest products and development of the web site. The other project is the promotion of Alaska's value added products in Japan, Korea and Taiwan; one of those main projects is the production and distribution of an Alaska products catalogue in the language of the customer, which would be distributed at trade shows and one-on-one meetings with potential buyers. CHAIR PHILLIPS asked, "For clarification, the department [DCED] has been doing these projects, they've been doing these things -- this money will pay the department [DCED] back?" MR. LAWSON responded that in terms of the marketing of Alaska's value added products in Asia those were projects that were already budgeted for and with the Industry Network Corporation Grant, RPL 08-0-0101, providing funds to do that those funds can be allocated toward the forest products specialist position for the remainder of this fiscal year. Number 0602 REPRESENTATIVE BUNDE wondered if it would involve hiring an employee and paying his or her salary. He referred to the expression "soft money," which gives verbal assurance that the grant will continue. He asked, "If the money goes away does the employee go away?" MR TEAL indicated that the DCED assured them that the grant would continue. REPRESENTATIVE BUNDE noted that one of the other reasons the RPL, 08-0-0101, was turned down at the December 16, 1999, meeting was that the legislative session's start was very near. SENATOR PHILLIPS made a motion to approve the RPL, 08-0-0101/DCED Industry Network Corporation Grant. CHAIR PHILLIPS asked for unanimous consent. There being no objection the RPL, 08-0-0101/DCED Industry Network Corporation Grant was approved. She indicated that the next order of business is the RPL, 06-0-0180/HSS Public Preparedness for Bioterrorism. Number 0717 MR. TEAL explained that (indisc. -- paper shuffling) $700,000 in federal receipts from the Center for Disease Control bioterrorism preparedness and response program. The intent is to detect and respond to outbreaks of bioterrorism, increase the state's biological laboratory capacity and improve public health electronic communication, and up front equipment purchases. He indicated that the RPL, 06-0-0180, was discussed at the December 16, 1999, meeting and the concerns expressed were the sense of urgency, how soon does it need to be approved and that it was a new initiative; RPLs are intended to fund existing programs and a new initiative should really have full legislative review. The third concern was with the six positions, which the new write-up has as three new positions and three filling-vacancy positions. Number 0804 JANET CLARK, Director, Division of Administrative Services, Department of Health and Social Services (DHSS), indicated that Mr. Teal adequately described the RPL, 06-0-0180, $700,000 and there is no state match required; it is a four year grant. The grant was awarded on August 30, 1999 and there is a letter from the federal agency basically saying that there are some time sensitive actions that the DHSS needs to take in the first grant year or it will jeopardize getting the second, third and fourth year grants. She noted that the DHSS has a requirement to spend the equipment dollars in the first year, because waiting until the start of the new fiscal year, July 1, 2000, will not allow time to purchase the equipment and have it in place as required by the grant. She said that in January, after the Legislative Budget and Audit meeting in December, the DHSS received a noticed from the Center for Disease Control (CDC) about an anthrax threat to planned parenthood agencies in many states. The DHSS wanted to include this information to help the committee understand that it is a real threat that is becoming more common. She added that there was no threat in Alaska. MS. CLARK further stated that they view this as a way to build the infrastructure for Alaska using federal money. As opposed to the DCED's RPL these activities are not part of their regular work plan. This is a new activity for them and they think it will help strengthen Alaska's program. It was a competitively awarded grant; Alaska was one of 20 states to receive it. The federal government does see Alaska as strategically located. There is a lot of support from the military and Federal Bureau of Investigation (FBI), because of the military presence in Alaska and the pipeline. She added that Alaska was almost a sure in when they went for the competitive proposal. CHAIR PHILLIPS mentioned that in the House Finance Committee meeting the previous day in conversations with the military there seemed to be much more emphasis on bioterrorism. She noted that bioterrorism is a concern for Alaska. SENATOR PHILLIPS stressed that from this point forward he would like the agencies to refrain from saying that this is only federal funds. He stated, "We just went through a vote September 14. People in Alaska obviously think we spend too much money; they think the budget is $6 to $7 billion and they frankly don't care whether it's federal or state or whatever. It's spending in the state and the message we got last September is we are spending too much money and they really don't give a rip whether it's state general dollars or federal dollars, so I wish the agencies would refrain from saying it's only federal funds. Therefore, ... we should be concerned about it, because we just had a vote; 84 percent of them said, 'you spend too much money,' or at least that's the interpretation, so be conscious of what you say on how much money we're spending in the state of Alaska, whether its state funds, receipts, or whatever." MS. CLARKE said that she would take that into account. REPRESENTATIVE CROFT stated, "Well, I'd urge you not to take it into account. I think it makes a great deal of difference and you should tell us whether it's federal money or program receipts or general fund money; there's a lot of different interpretations and it's, to some extent, our job and our job in the next election to explain what we thought they meant in the vote, but yours is to tell us the source of funds and the source of funds here is all federal." He asked, "What were the criteria that were in the grant that allowed us to receive it; strategic importance was one, I guess, what were some of the others do you recall?" MATT ANDERSON, Unit Manager, Community Health and Emergency Medical Services (EMS), Department of Health and Social Services (DHSS), indicated that there is indeed a heightened national concern about bioterrorism and as a consequence federal money is being made available to build public health infrastructures specifically for the purpose of identifying and responding to bioterrorist threats. The application actually allowed the DHSS to apply for funding in several different categories including laboratory capacity, epidemiology capacity, health alert network and a few others. REPRESENTATIVE CROFT wondered, "Would the military necessarily tell us if there'd been a threat to military institutions, might they keep that secret?" MR. ANDERSON said that he did not know the answer. He informed the committee, "I know that we have an outstanding rapport with the military and involve them in all of our planning. I would suspect that they would make us aware of anything that threatened the civilian population and I do know that the FBI [and] the military are always concerned about the safety of the citizenry and I would suspect that they would make any threats known if they thought we could do something about it." CHAIR PHILLIPS explained that the legislature was informed that there will be a 20-member team of bioterrorism specialists that will be assigned to Alaska and they will be able to work with any local government entity that has a threat against them, like a fire department or a police department. She added that Alaska is one of the few states that has been assigned this specialized team. Number 1141 REPRESENTATIVE BUNDE indicated, "I share Senator Phillip's concern that for those, not admittedly, not everyone views it that way, but for those who take $6 billion plus and divide it by their residents of the state and say we are outrageous in our spending, this adds fuel to their frustration and again their frustration doesn't matter. The money comes from the people whether it's federal dollars or it's -- more of it, a greater percentage of it comes from, if it's federal dollars, from you and I than if it's state dollars, because we don't pay any state income tax; we most certainly pay federal income taxes." He asked, "You said this was granted on a competitive basis, 1 of 20 states, is that because Alaska has a higher threat of bioterrorism ...? MR. ANDERSON stated, "Alaska was seen as having strategic importance partly because of its remoteness. Calling for the calvary means quite a lag in response and we needed to develop -- they understood that we needed to develop some self-sufficiency up here. One of the consequences of that was that Anchorage was named as one of 127 cities to be designated as a metropolitan medical strike team to build their infrastructure within their community, but more importantly the federal government, I think, wanted to prime the pump to get enhanced capabilities to detect both, particularly covert bioterrorist events and have responses that protect not only the citizens but the rescuers. An interesting note regarding the raid team that's being assigned to Alaska and an interesting irony is the fact that all of these teams that are being built in Anchorage ... are somewhat dependent, I think in varying degrees, but some largely dependent on the ability of the Department of Health and Social Services to rapidly identify that an event has occurred and identify or rule out a particular agent. And I think if history is any indication it's only a matter of time before the anthrax threats march across the country and -- so far they're in Wisconsin, but I think it's probably a matter of time before they're here and I think we need to be prepared for that and I think this gives us a great opportunity to get our house in order with respect to bioterrorism at the same time significantly improving our basic public health infrastructure." Number 1283 REPRESENTATIVE CROFT asked, "This allows us to detect so that then we can call this swat team or the military swat team -- how does this augment the military response capability that Representative Phillips talked about?" MR. ANDERSON said that he has not been entirely briefed on the capabilities of the raid team and they have yet to be trained. He pointed out that Alaska was named as a recipient of the raid team only that morning. REPRESENTATIVE CROFT wondered, in general terms, how they are informed of an outbreak. MR. ANDERSON said that there would be two different kind of events; an overt event where you receive a letter that says, 'you've just been exposed to anthrax,' or a covert event where you have one very sick person going to one hospital and another very sick person going to a different hospital and the inability to put those together. REPRESENTATIVE CROFT clarified that by using the term 'covert' Mr. Anderson means that there is no announcement and people just start getting sick and how quickly they can figure out that it isn't just the flu. Number 1357 MS. CLARKE indicated that the funds were not earmarked in any appropriation bill by Senator Ted Stevens at the federal level. It was from the federal agency itself and in that sense it was certainly competitive. SENATOR WILKEN stated that he too would like to know the source of the funds. He pointed out that he draws a very bright line between his money and the federal government's money. If he is presented with a project that he feels is good for the people of Alaska then he is willing to spend his money and if he can get some help from tax dollars from Arkansas or New York he would do that as well. He informed the committee that he is not in the camp that is worried about spending $6 billion. He wondered how the 20-person contingency is going to interface with the money that is being spent, because he can see that as time marches on they will be linked up. CHAIR PHILLIPS indicated that when the military has the team in place the Legislative Budget and Audit committee could request a report from them and hold another meeting later in the session also with those people from the DHSS. REPRESENTATIVE THERRIAULT wondered about the personnel request. He clarified that their intention is to fill three vacant positions and add three new ones instead of the original proposal, which was to add six new positions. MS. CLARKE said, "That's correct." REPRESENTATIVE THERRIAULT clarified that there is $800,000 with $200,000 to be spent on equipment and $100,000 a piece for each position. MS. CLARKE stated, "One of the issues with the information on the RPL is that we were considering contracting for the microcomputer technicians and so the money is in contractual for those positions, however, this is one area that it's actually cheaper to hire state employees than to go out on an hourly basis and contract, so we do have to move that money into personal services so that's why the dollars don't quite look right." REPRESENTATIVE THERRIAULT asked Ms. Clarke to describe the positions, because they will need to be looked at in the next budget. MS. CLARKE stated, "We're asking for three positions; a microbiologist trained especially for biological agents to work in the lab, a distance learning coordinator to ensure the communication system is fully utilized for training and a public health specialist to work with health and medical providers on recording unusual disease events in some of these hospitals or other positions. REPRESENTATIVE THERRIAULT wondered if the DHSS has any of that capability now as far as disease outbreaks or if someone is monitoring disease outbreaks. MS. CLARKE responded that they do have disease specialists, but anthrax is a different biological agent and different skills are needed. Number 1535 MR. ANDERSON indicated that there are individuals who identify the bugs and surveil for disease outbreaks; try to find the causes and recommend treatment. Those resources are stretched very thin right now, plus those individuals lack the training and capabilities to deal specifically with biological agents. The individuals that will be hired under the grant will be doing things that are much different from their traditional calling. One of the things that this grant does do is promote "dual use" where in times of stress on those traditional resources these people can be used to assist with a normal disease outbreak. REPRESENTATIVE THERRIAULT wondered if these individuals hired under the grant just equip-up and wait for the call to come or can they assist in normal disease outbreaks. MR. ANDERSON indicated that they have the individuals under a very ambitious work plan; they will be developing capabilities over the next four years in a very coherent manner to identify and respond to bioterrorist events. When they are not engaged in those activities or when a need comes for them to migrate to an emergic response they have the capability to do so. Number 1645 SENATOR PEARCE wondered how many private labs there are in the state. MR. ANDERSON said that he did not know the answer to that, but that there are more and more each year; none of which have the capability of doing the kinds of tests that are being done by the public health lab. SENATOR PEARCE wondered if the microbiologists would be working as a training resource to the private labs. MR. ANDERSON explained that part of the project is to ensure that training takes place throughout the state, not only to state personnel involved in surveillance, protection and response, but also the private medical community so, to the extent that their resources permit them, they can identify the organism or rule out the organism. Therefore, even when that does occur the public health laboratory will have significantly more resources than any private lab in the state. SENATOR PEARCE asked, "Are there federal labs in the state?" MR. ANDERSON responded that there are federal labs in the state; none of which have the capabilities for identifying these particular organisms. Most of the organisms are sent out to the Center for Disease Control surveillance. Number 1704 SENATOR PEARCE stated, "So, we're planning as a state to develop the expertise and the lab that will be responsible for training up and down; up to the federal laboratory personnel, be they military or civilian, and down to the private -- I don't mean up and down pejoratively -- but, down to the private labs in the state. Just in reading the description of the whole program it sounds like we're using -- it sounds to me, reading between the lines, that we're using the threat of a bioterrorist attack, which I take seriously, as a way to fill in some positions that the department would like to have that aren't necessarily all that ... specifically centered on the bioterrorism; like a distance learning coordinator. I know that Senator Stevens did get $30 million for distance delivery in the state and I can't imagine we need another distance learning coordinator, so I'm a little confused by all -- by some of the descriptions. So, one microbiologist in the state, in the state lab, is suddenly going to be the person for the whole state who sets up the system by which labs will be able to do the work and catch and then find any sort of an attack statewide." MR. ANDERSON responded that one microbiologist and one epidemiologist will be responsible for building the capabilities within those two sections. This is a multi-disciplinary and multi-organizational project involving partners from the military, from the municipality of Anchorage and from law enforcement to ensure that their needs are being met and without efforts being duplicated. Within those organizations, such as laboratories and the section of epidemiology, a great deal of dialogue has taken place to ensure that the entire organization is enhanced by this and not simply relying on one person to do all the work, even though that person will be primarily responsible for writing plans, for identifying training opportunities and for ensuring that the correct equipment is purchased. Number 1814 SENATOR PEARCE wondered where the description of the other three employees was listed. MS. CLARKE indicated that on page 2 of the write up where it reads, "existing vacant PCNs will be for microcomputer technicians." SENATOR PEARCE said, "So, three microcomputer technicians." MS. CLARKE responded, "Right. To keep the new communication system up." SENATOR PEARCE wondered who is keeping the system up now. Number 1835 MR. ANDERSON explained that this particular communication system does not exist. A major thrust of the federal initiative was a health alert network, which would allow two things to occur; one is very rapid alerting to health care providers that an event has taken place and the second is the ability to conduct distance learning in recognition of the fact that most of public health throughout the country is inadequately trained, at this point, to deal with terrorist events. SENATOR PEARCE emphasized that there is an entire distance delivery system of medical services in place and being built. She indicated that $171,000 is not going to statewide system and certainly not enough microcomputers to have three technicians. MR. ANDERSON explained that the major initiative he knows of in Alaska is called the AFHCAN (Alaska Federal Health Care Access Network) project and it has the potential to really improve telecommunication and distance education in Alaska; however, it is mostly destined for federal facilities and community health aides. What is not linked right now is our public health nursing network and the distance learning project. The offerings available from public health personnel, all of their specialties, is enormous. He believes that the distance learning coordinator will be very busy identifying and distributing the training. SENATOR PEARCE stated, "The distance learning coordinator and the three microcomputer technicians are going to be working on something that's entirely ... outside of this particular grant and just bioterrorism and computers that are -- a system that's being built with money somewhere else that you don't talk about in here." Number 1920 MS. CLARKE indicated, "Public health nurses are one of the last groups to come into the networking age and we do not have our public health nursing centers networked, and so this will allow us to do that for public health nursing, as well as, putting the support to keep that network going. So, you are correct. We are able to use this federal grant to do something that we believe we need to do anyway. So, that's where we say that the health alert network doesn't exist; this will help connect this network with other networks that clearly, as you point out, do exist." Number 1956 REPRESENTATIVE BUNDE expressed concern, similar to the previous RPL, about the fact that this grant will cause the state workforce to grow by three people. He asked if this will be "soft money" and is there any assurance from the DHSS that in the third or fourth year if the grant is not forthcoming that the individuals will go away. MS. CLARKE responded, "Absolutely." She explained that the Division of Public Health has significant "soft money" and they've had to lose specialists when a federal grant has gone away. It is a typical way that they've funded public health. She expressed concern with having the full legislature review the new proposal, which she feels is a good one. The grant was awarded in August and there are some requirements to spend the dollars in a timely manner; therefore, if they wait until July 1 they could not spend the money as the federal agency has required and it might jeopardize the second, third and fourth year. That is why the RPL is being re-submitted to the committee. REPRESENTATIVE BUNDE indicated that he understands the time crunch, but that there does seem to be some duplication between the federal agencies and the state. He wants to be sure this grant is something that is absolutely necessary and it isn't just that the state wants the same toys as the federal government. He asked if bioterrorism is referring to domestic terrorism or foreign terrorism, because foreign terrorism seems to be a federal responsibility. MR. ANDERSON stated that the threats were carefully considered during the grant writing process. Unfortunately in most of these events the source is uncertain, whether it's domestic or foreign. During a response that information is not critical, because either way the response is conducted in the same way. He explained that one of the things they took great pains to do was survey the resources that currently exist in Alaska. At the time of the grant the raid team did not exist. He indicated that the DHSS is scheduled to meet with representatives from that team next week. He said that he could assure the committee to date that the process that has been used was entirely geared toward insuring the support and enhancement of existing capabilities and not duplicate, although there may be minor overlap between federal agencies and the state, but that may be healthy. REPRESENTATIVE BUNDE stated, "I to would add my voice to hearing about how this will be coordinated with what is really another state agency, the National Guard, and I appreciate you having an awareness and concern about duplication." CHAIR PHILLIPS indicated that a meeting would be scheduled. REPRESENTATIVE CROFT said, "It seems to me you're facing the criticism that this is a whole new program or it's not really a whole new program, and if it's a whole new program people have concerns that they don't want to start a whole new program and if it's not than it's just a subterfuge to do what you were doing before. I don't think it's all of one or the other. I mean I think it is a new initiative that's going to leverage some existing things. It's been interesting watching you getting grilled on both ends that, 'this is entirely new, isn't it,' and, 'this isn't entirely new, isn't it,' but I do hope you will coordinate -- leverage whatever we have in terms of communication equipment or networks and coordinate with whatever the federal government has." Number 2165 REPRESENTATIVE THERRIAULT stated, "Just looking at the backup here it says, 'it is expected that the general funds to maintain this effort at the end of the grant period,' which is ... four or five [years], 'will not be needed since the majority of the funding is for development and equipment purchase, which will be completed by the end of the grant period,' but if you've got specially trained personnel is that a realistic statement that there won't be some kind of ongoing need now. It maybe four years from now, but there's going to have to be some personnel kept on." MS. CLARKE indicated, "We'll have to assess that at the time and it maybe that if we have some occurrences that this certainly becomes more important than something else we're doing with state general funds, but right now this is 'soft money' and that's how we're approaching it." Number 2210 CHAIR PHILLIPS asked if there was any opposition to the approval of RPL 06-0-0180/HSS/HSS Public Preparedness for Bioterrorism. There being none the RPL was approved. EXECUTIVE SESSION Number 2216 SENATOR PHILLIPS made a motion to move to executive session for the purpose of discussing the audits. There being no objection, the committee went into executive session at 9:10 a.m. [Chair Phillips asked the Legislative Finance Division staff, Legislative Audit Division staff, Tom Maher and Pat Hartley (Legislative Budget and Audit Committee aide) to attend the executive session] CHAIR PHILLIPS made a motion to resume open session. There being no objection, the committee resumed open session at 9:40 a.m. AUDIT REPORTS Number 2235 SENATOR PHILLIPS made a motion to release the following audits: the Department of Administration, Alaska Oil and Gas Conservation Commission, and Department of Community and Economic Development, Regulatory Commission of Alaska; the Department of Administration, Division of Alaska Longevity Programs, Alaska Pioneer's Home; the Department of Transportation and Public Facilities, Central Region, Homer Gravel Roads Project. There being no objection, those three audits were released to the public. He noted that the Alaska Housing Finance Audit is not up for release and reminded members that it is still a preliminary audit at this time. SENATOR PHILLIPS made a motion to release the preliminary audits for departmental review ... . There being no objection, those audits were released to the agencies for review. TAPE 00-1, SIDE B [Tape malfunction -- was not recording until 0055] Number 0055 PAT DAVIDSON, Legislative Auditor, Legislative Audit Division, Alaska State Legislature, "-- need to follow up as needed on any of the issues and concerns raised in the consultants report on a broad based outside just the Mat-Su [Matanuska - Susitna] Youth Facility. Alternatively, the committee may wish to hold any action and wait for the consultants report, which may be out within the next month, month and a half, take a look at what those findings and concerns are and than develop or any individual member develop an audit request as it relates to DOT." Number 0148 SENATOR PHILLIPS made a motion to approve the recommendation by Pat Davidson, "I believe that the Division of Legislative Audit should review the costs and benefits utilizing DOT's staff managed facilities construction projects compared to the private construction management. Additionally, the division should follow up as needed on any issues and concerns raised by the consultants of review of the Matsu-Su Youth Facility Project." There being no objection, the recommendation was approved. REPORT FROM THE DENALI COMMISSION Number 0238 KRAG JOHNSON, Legislative Coordinator for the Denali Commission, stated, The commission was introduced by Senator Stevens and approved by Congress in 1998. It's an innovative federal/state partnership to solve critical problems in Alaska. The many reports and stories that come out about the Denali Commission's funding, and so to review the facts, the original FY [Fiscal Year] 99 appropriation for the commission was $20 million and the funding for the current fiscal year, fiscal year 2000, is at $20 million and the commission has submitted a work plan to the Secretary of Commerce for next years budget that is requesting $45 million for fiscal year '01. To recap, real quickly, the FY99 funded project's list is included in the packet. Primarily the commission followed the adopted theme of rural energy. Over three-quarters of the budget was funded for bulk fuel storage facilities and energy upgrades. And the commission's intent is to start with basic infrastructure, like the bulk fuel storage facilities and energy upgrades, and then expand from this point. So, the selection of the projects for FY99 followed the Department of Community and Regional Affairs, Division of Energy's listing, which is now the Alaska Energy Authority and that was the priority listing for selection of communities. It's estimated the need for bulk fuel storage facilities in Alaska is approximately $450 million and list is included. Moving onto the current fiscal year, the commission will be deciding funding allocations for the fiscal year 2000 at a January 21 meeting here in Juneau next Friday, and the commission has decided to continue with the rural energy theme, which means approximately 75 percent of this year's budget will go to further bulk fuel storage facilities and energy upgrades. And once again the commission will follow the bulk fuel storage facility and energy upgrade listing from the Alaska Energy Authority. I can mention the commission's requesting $45 million for Congress for FY01. A copy of the actual work plan that was submitted to the Secretary of Commerce is in the packet and the commission will continue once again with the rural energy theme, but also is discussing adopting additional themes for FY01 and a few of those that are being discussed are rural health clinics and multi-use facilities. A complete copy of that work is in the packet. Also, recent news about the Trans-Alaska Pipeline liability funds and so to kind-of briefly go over that the state, and presumably DEC, would be receiving $18 million from this Trans-Alaska Pipeline liability fund settlement for bulk fuel tank remediation in Alaska. And the $6.2 million was designated to the permanent fund by law and the Denali Commission will, in the future, be receiving an annual appropriation from the interest of the this account that's estimated to be $8.5 million and this will be a continuous annual appropriation. So, to give you an idea of the economic engine that could -- the economic engine the commission could become if we had this funding source from the Trans-Alaska Pipeline account and the end of next year and the beginning of the next fiscal year and the request of $45 million for FY01, it's possible the commission would have approximately $62 million available in FY01. We also included, in your packets, a copy of the first draft of a statewide energy plan. The commission partnered with the USDA [United States Department of Agriculture] rural development and AIDEA [Alaska Industrial Development and Export Authority] to put together a statewide energy plan. The goal is to provide some consistent policies and coordinated efforts with the agencies that are funding Alaska enery projects and a copy of the first phase of this plan is included in the packet. And phase two of the plan is slated to be completed by the October 2000. Work force development and economic development are two areas the commission also has been charged with. It could be the most important work of the commission, but is also the most difficult to make an impact. At the upcoming meeting next week a training strategy and an economic development strategy will be before the commission for further discussion and both copies of those strategies are in the January 21 backup material. Number 0625 JEFF STASER, Co-Chairman, Denali Commission, indicated that they are not before the committee to ask for money; they are there to explain who they are, what they are doing and how they do it. They think of themselves as a partnership between the federal government and the people of the state; the federal government is the venture capitalist willing to invest in the state and the people of the state make the decisions on how to spend the money. He said that the co-chair on the commission is the Governor and there are five statewide organizations. He sees the legislators as stock-holders and investors. He urged that the commission cannot succeed without the partnership of everbody in Alaska. As a federal agency the U.S. Congress is basically acting like the board of directors; they are investing state elected federal tax dollars from around the country in Alaska and every state has the right to ask the commission how and why they are spending their money in Alaska. The commission's message is to demonstrate to them that they are not doing things that could otherwise be done by anybody else in the state; that these are appropriate things for the federal government to be participating in. Alaska, with 600,000 people, has a disproportionate share of influence over federal spending. He said that Alaskans should be proud of what they can do and have been doing with the help from the federal government. The start of the commission, back in April, when they established themselves as a federal agency was with their own budgeting. They formed interagency staff with highly skilled professionals that were being detailed from other organizations to their staff. The federal agencies recognize this as an avenue to go around some of their problems and to participate in creative solutions for all of Alaska. He pointed out that they have three years worth of federal budgeting done in the last nine months. They not only did their part in presenting to the federal community their needs and the justification of what they are doing, but they have been persuasive as a team. They have persuaded the President of the United States to budget for the Denali Commission. Number 0868 REPRESENTATIVE BUNDE wondered what is involved in state funds. MR. STASER indicated that the Denali Commission is to go where there are gaps; where the state cannot get to a problem. They look, as part of their criteria, for cost-sharing. They figure that if local communities in the state are not willing to invest in a project, why should the commission invest. He noted that currently they do not require matching funds from the state. If it is a project that is being cost-shared then it should be given higher priority. REPRESENTATIVE MULDER wondered how many general funds are in the commission's budget and if there are federal requirements for how much money can be spent on staffing. MR. STASER responded, "Absolutely." He said that in the law there is a 5 percent cap of what can be spent on overhead. With all of the start-up costs and staffing issues over the last year with the first $20 million overhead was less than 3 percent. REPRESENTATIVE BUNDE wondered what was meant by "multi-use facilities." MR. STASER explained that there are some great examples of how the federal government designs a program based on national assessments of need that leave gaps. The federal government doesn't understand the uniqueness of Alaska, so they ask if the commission needs bulk fuel tanks or multi-use facilities, which the commission is thankful of, even though the commission hasn't carved out a place for them yet. He pointed out that if they can get economies of scale and efficiencies by consolidating programs then let's do it. He indicated that they have federal agencies coming to them saying, "let's enter into an MOU (memorandum of understanding), extend your authorities to our program and we can get more bang for the federal buck." REPRESENTATIVE BUNDE wondered if the money is a federal appropriation or money that gets filtered through the state budget. Number 1152 MR. STASER explained that the commission put in a work plan, which contained the requests they thought they needed and why. The Congress puts together a budget, which is signed into law by the President. The money goes to the OMB (Office of Management and Budget) at the federal level and they allocate it out to the agencies. REPRESENTATIVE BUNDE clarified that the money does not expand Alaska's total budget. REPRESENTATIVE DAVIS wondered who is responsible for the multi-purpose building five years from now when it needs to be repaired. MR. STASER indicated that at this point it is difficult to comment on how the multi-purpose area will be structure. This is an issue that the commission is wrestling with. The principles that they have outlined in their criteria are what are the long-term operations in maintenance and how can it be a self-sufficient enabling type of utility. The priority will go where the needs are, but there also needs to be flexibility. The issues of operations and maintenance are critical to the selection process. The commission is being instructed by the communities on what they need and how they are going to maintain it. Number 1394 REPRESENTATIVE THERRIAULT described his experience with visiting a facility in a community that was well maintained; somebody in the community was responsible for maintaining the facility and there was no vandalism. He also described a different scenario where the facility had holes punched through the walls and the machinery was in disrepair; there was no one in the community that wanted to take on the responsibility of the facility. He pointed out that there is a level of sophistication that makes all the difference. MR. STASER stated that sovereignty is something that is within us. He indicated that he has a high level of confidence in the people of Alaska. There has been an explosion in the population in rural parts of the Alaska and it puts a strain on the utilities and infrastructure, but there is also a generation that has learned how to use the federal government effectively. REPRESENTATIVE BUNDE said that he hopes the commission sticks to that, because he has seen too many times people waiting for someone to write a grant rather than picking up a shovel and starting the project. MR. STASER explained that they need to be guided by the Alaska legislature and other members of the state to fill the gaps and to get the federal government to do the right thing. It takes team work. Number 1628 SENATOR HALFORD pointed out that Alaska has a history in some communities where the pipe from the sewer and water system that failed from the 1980s is sitting next to the pipe that failed from the 1990s. In these communities the highest ground is between three and four feet above sea level; therefore, the sewer system, which is water born and gravity-based is never going to work in some of those locations. He hopes some money gets put into alternative methods of dealing with sewer systems in those areas. MR. STASER indicated that the commission is working with the Alaska Science Technology Foundation. He said that the commission is not interested in doing a lot of research, but if some good ideas are generated by the Alaska Science Technology Foundation and the Alaska legislature, then the commission would be willing to get them out to the communities. SENATOR PHILLIPS wondered if the commission is doing the same things in the area of alternative energy. MR. STASER replied, "Yes." He indicated that as the commission grows and expands they are going to look at all the alternative ways. OTHER COMMITTEE BUSINESS There was no other business discussed at the meeting. ADJOURNMENT Number 1824 CHAIR PHILLIPS adjourned the Joint Committee on Legislative Budget and Audit at 10:20 a.m.