HOUSE FINANCE COMMITTEE February 19, 1993 1:30 P.M. TAPE HFC 93 - 27, Side 1, #000 - end. TAPE HFC 93 - 27, Side 2, #000 - end. TAPE HFC 93 - 28, Side 1, #000 - #237. CALL TO ORDER Co-Chair Ron Larson called the meeting of the House Finance Committee to order at 1:30 P.M. PRESENT Co-Chair Larson Representative Brown Vice-Chair Hanley Representative Grussendorf Representative Therriault Representative Martin Representative Navarre Representative Parnell Representatives MacLean, Hoffman and Foster were not present for the meeting. ALSO PRESENT Glen Olds, Commissioner, Department of Natural Resources; Nico Bus, Chief, Financial Services, Department of Natural Resources; Dianne Lyles, Chief, Land Records Information, Office of the Commissioner, Department of Natural Resources; Rod Mourant, Special Assistant to the Commissioner, Department of Revenue; Representative Pat Carney; Representative Bill Williams. SUMMARY INFORMATION HB 60 An Act making appropriations for capital projects; and providing for an effective date. OVERVIEWS: Department of Natural Resources HB 60 was held in Committee for further discussion. HB 144 An Act relating to fees for certain costs of administering the permanent fund dividend program. HB 144 was held in Committee. 1 HOUSE BILL 60 "An Act making appropriations for capital projects; and providing for an effective date." GLENN OLDS, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES (DNR), provided the Committee with handouts addressing DNR's Capital Improvement Projects (CIP) requests. [Attachment #1 - #5]. Commissioner Olds introduced the Governor's priorities for Alaska. 1. Implement responsibilities of an Owners' State. 2. Stimulate sustainable economic development. 3. Implement efficiencies. 4. Deliver essential services. 5. Stimulate local initiative and personal responsibility. Commissioner Olds discussed the Department's strategic missions. As Alaska moves into the 21st century, it is facing a time of serious economic stress. In response to the Governor's priorities, the missions of the DNR are: 1. To vigorously fulfill and implement the Statehood compact and pioneer effective leadership of an Owners' State through the integration of State and federal interests, cooperation, and protect State interests. 2. To stimulate resource-based economic activity while conserving Alaska's wild, scenic and cultural values as a major player in an evolving world. 3. To simplify and accelerate regulatory processes and organizational structures to allow rapid, sustained economic growth. 4. To raise public awareness of Alaska's natural resource asset base, its market potential within Alaska and the world, how it effects our daily lives, and how to implement its promise for our common future. Commissioner Olds listed DNR's priority ranking of Capitol Improvement Projects contained in HB 60. 2 1. Owner State Assertions and Land Selection request for $2,265.0 million dollars. a. Land Selection Audit request for $1,800.0 million dollars. The deliverables are clear title to the last twenty million acres of land from the federal government and updates to the State's Land Records. Representative Hanley asked if this request would be the last amount requested by DNR in order to finish these projects. Commissioner Olds stated the requested allocation would finish the selection process. He added there would be a second stage to go to patent. Representative Hanley asked if the requested amount would address all of this years needs. Commissioner Olds stated it would. Representative Hanley questioned if any land would be lost if all criteria was not met. DIANNE LYLES, CHIEF, LANDS RECORDS INFORMATION, OFFICE OF THE COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES, responded that the Congressional deadline for the selection is 1/4/94. Past that date, the State of Alaska can not select any new lands. Currently, there are 140 million acres of which 86 million are patented or tentatively approved. Once it is patented, it can be developed. The total entitlement is 105 million acres. The State of Alaska is allowed to over- select the entitlement by twenty five percent. The requested allocation will allow DNR to review an additional 45 million acres currently in selection status, then decide which has the highest value, moving them into an expedited process with the Bureau of Land Management. Commissioner Olds listed additional CIP requests: b. Navigability determinations request for $290 thousand dollars. Many of the state's rivers and streams and subsequent securing of ownership and management of submerged lands have not yet been evaluated regarding their navigability. c. The state needs to settle many of the right of ways for their value to the public for transportation and resource development request for $175 thousand dollars. 2. Seismic Data Acquisition/Evaluation request for $580 thousand dollars. The purchase of seismic data is important for the pre-evaluation of areas proposed for leasing in the State's five year oil 3 and gas lease schedule. Representative Grussendorf questioned the request for a student intern position. NICO BUS, CHIEF, FINANCIAL SERVICES, OFFICE OF THE COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES, replied that position would enter most of the required data into the system and then manipulate that information. 3. Basin Analysis packets requests for $330 thousand dollars. This project funds the preparation under contract of a series of promotional packets consisting of non-proprietary geological and geophysical maps of selected under explored areas of the State having oil and gas potential. 4. Geological/Geophysical Inventory request for $1.5 million dollars. The State's most prospective mineral lands must be delineated and their potential clearly understood by sources of investment capital. This is the second year funding of a multi-year project. Representative Brown asked if the above request would be for mineral inventory rather than oil and gas. Commissioner Olds replied that the Oil and Gas Division and the Geophysical Division would converge on the selectivity for all resources including oil, gas and other minerals. Representative Brown asked if non petroleum areas would be selected for mineral focus. Commissioner Olds stated this was not an accurate assessment. The component addresses all aspects of which oil and gas are included. Representative Brown asked if the Department expected to discover new oil and gas basins in the State. Commissioner Olds replied that the Department has surface information about the basins, however, the real potential is not known until an analysis has been completed. 5. Land Status GIS request for $330 thousand dollars. The conversion of the State's ownership maps to digital format has been accelerated in the last two years. The plan was to complete this conversion in the next three years. At this request level the project can not be expedited as originally intended. 6. Parks-Water, Toilets, Dump-stations request for $750 thousand dollars. Many of the State's parks units do not meet the new water quality standards. 4 7. Rehabilitation of Existing Parks/Tourist Facilities request for $750 thousand dollars. Many of the State park areas and facilities have deteriorated due to years of deferred maintenance. 8. OGRA system software upgrade request for $25 thousand dollars. The Royalty Accounting section computer's annual hardware and software upgrades. 9. Land Settlement Projects request for $175 thousand dollars. The Land Settlement project removes obstacles to the sale, lease, and development of lands by providing funds for the survey of those lands, or providing access to land ready for disposal. 10. Forest Inventory request for $350 thousand dollars. This project will fund the first phase inventory of the Valdez/Copper River and Tanana Valley. 11. Forest Health Initiatives request for $450 thousand dollars. This request continues the Forest Health Initiative by expanding into Valdez/Copper River, Mat-su and Tanana Valley providing for public involvement in forest from insects and disease, determining alternatives for forest health restoration and finally providing for decisions which could range from no action to prescribed burning, harvest, reforestation and so forth. 12. Tanana Valley Resources Development request for $405 thousand dollars. This project pays for the work to have timber sales in the Tanana Valley. It is a scaled down version of the total need. 13. Reforestation request for $250 thousand dollars - GF/$200 thousand dollars Reforestation Fund. This project funds the reforestation of some parts of the Tanana Valley, Tyonek, and Kenai Peninsula, and the South West area. 14. Recorder's Office - Records Preservation request for $200 thousand dollars. The State Ombudsman has recommended that the State refilm and preserve itsrecords as they have deteriorated to a point where they are no longer usable. 5 (Tape Change, HFC 93-27, Side 2). Representative Hanley asked if any of the land being developed belongs to the Mental Health Trust. Commissioner Olds replied that the disputed land has tied up over seven million acres. Representative Hanley asked that further details be provided to the Committee. Commissioner Olds continued discussing the department's CIP requests. 15. Fire Radio Communications equipment request for $150 thousand dollars. The fire fighters depend on good communication equipment. BLM wants their equipment back and the State needs to buy equipment. 16. Information Systems Efficiencies downsizing for $100 thousand dollars has been deleted from the budget request. 17. New Recreational Tourist Facilities Construction request for $250 thousand dollars. Eagle River Green Belt access construction on Chugach State Park. 18. Coal-bed Methane Programs request for $300 thousand dollars. Alaska's high coal resources, distributed across many areas of the State, could top 5.5 trillion tons--1/3 to 1/2 of the U.S. total. Indirect evidence indicates Alaska could have an in-place coal bed methane resource of two thousand trillion cubic feet. This project is designed to assess the potential of this resource. 19. Commercial Recreational Offerings request for $150 thousand dollars. In order to have recreational developments of State land money is needed to upgrade roads and to market projects for Northeast Denali. 20. Hydrologic Network Evaluation request for $275 thousand dollars. A State/Federal cooperative effort to carefully review Alaska's water stream gaging network and determine the best location for gages. This is the most fundamental of water quantitative evaluation tools. These State funds will trigger an equal amount of matching federal funds. Commissioner Olds commented on the DNR-USGS stream gaging 6 coop program. Stream flows will be measured for community and public water systems, highway/bridge design and construction, water permitting and water rights applications, public health and safety. This is also a State/Federal cooperative effort and it will trigger an equal amount of matching funds. 21. Completion of the STORET System request for $125 thousand dollars. This project will significantly enhance permit application processes and eliminate much manual effort. 22. Agricultural Land Disposal request for $100 thousand dollars. This funds the disposal of agricultural parcels per the Governor's Agricultural Task Force. Providing economic opportunities to new agricultural producers was a major focus of the task force. REPRESENTATIVE PAT CARNEY recommended that the Department reconsider involvement with long term development loans for farmers. He noted this would be a disservice to the farmers. Representative Brown questioned placing item #22 in the capital budget rather than the operating budget. Mr. Bus stated these positions were all new surveys and noted there is not enough money in the operating budget from CIP receipts. Representative Brown asked if these services would be contracted out. Mr. Bus stated they would be contractual monies. 23. Plant Material Center equipment replacement request for $80 thousand dollars. Much of the PMC equipment is in very bad shape or no longer functional. This results in much wasted time fixing or maintaining equipment. 24. Wetlands Investigation & Classification request for $60 thousand dollars. The objective of this project is to define the differences between Alaskan wetlands and those of other regions of the USA. Representative Brown asked why the mining project was placed in the capital budget rather than the operating budget. Commissioner Olds stated that mining projects were not a development and wetland investigation will affect the outcome of land development. Ms. Lyles added, that currently there is a project in the State to examine the wetlands classification methodology. The State of Alaska is asking that a hydromorphic methodology be used which would allow more lands to be appropriately developed. The 7 Division of Water presented this as a one time job, to gain the approval and to establish that methodology. After the methodology is adopted, then it becomes an inventory function. 25. Mining Projects request for $50 thousand dollars. This is a pilot program to demonstrate that the mining industry has very high revenue potential for the State. Funds will be used to purchase a smelter study and video production. These funds will be matched by private industry. Commissioner Olds added options not involved with CIP requests. * UST Testing, Eval., Removal - $654 thousand dollars "470" fund. * Mental Health Trust Reconstitution - $3.773 MH Trust Fund Commissioner Olds provided the Committee with Attachment #5 describing the Mental Health Trust Project. * Land & Water Conservation Fund * Historic Preservation Fund Representative Therriault asked if the $654 thousand dollars of the 470 funds were due to a prioritization. Commissioner Olds explained those are different categories and do not originate from general fund dollars. Representative Therriault questioned the determination process used in the decision and asked if the sites presented a threat to human health and public safety. Commissioner Olds stated that Commissioner Sandor has the main responsibility for the conservation analysis and believes those items listed to be critical to health factors. Representative Therriault understood that the State uses the threat of using the 470 fund to keep private land owners in line to clean up projects. He felt that the State should use general funds for clean up rather than 470 funds. Representative Brown stated that cost recovery should be sought from the responsible parties. Representative Therriault stated that in many cases those parties are now bankrupt. Commissioner Olds stated that the Department of Law is involved in all the above mentioned cases and will maximize recovery of all costs. Representative Brown questioned spending the proposed budget to assess unknown resources. Commissioner Olds stated he 8 was willing to revisit cost projections, but noted, it is his responsibility to maximize all resources. Representative Brown emphasized her concern with the determination process used by the Department. Representative Brown referenced the GIS System Project for $330 thousand dollars. She stated that the Capital/Operational Status Report shows that DNR still has an unexpended balance of $753 thousand dollars. Mr. Bus replied that the 1991 appropriation has been fully spent. The 1992 appropriation will be fully spent by the end of the fiscal year. The documentation indicates that there is anticipated carry forward of $175 thousand dollars. The original request of the Department was for $660 thousand dollars and because of the carry forward it was reduced. HOUSE BILL 144 "An Act relating to fees for certain costs of administering the permanent fund dividend program." Representative Martin stated that HB 144 is designed to transfer the costs of administering permanent fund dividend assignments and attachments back to the person whose financial obligations are the cause of assignment or attachment. The amount of every Alaskan's permanent fund dividend is affected by the cost of operating the Permanent Fund Dividend Division. The Division processed over fifty-one thousand assignments in 1992. If HB 144 is passed, the cost of processing the attachment or assignment will be paid by the obligor instead of being absorbed by the Division as a cost of doing business. The effect of the bill would be that every Alaskan's dividend would be increased, albeit by a small amount; and those Alaskans whose financial practices cause their dividends to be assigned will pay a fee for the cost of the extra handling and processing. Representative Navarre commented that he thought the cost would be closer to $.10 per check. He felt this was a minor charge. Representative Hanley agreed with Representative Navarre although he thought that if someone were at fault they should pay the administrative costs. Representative Navarre questioned the assignments from denied felons and the probability that those costs would be paid. (Tape Change, HFC 93-28, Side 1). ROD MOURANT, SPECIAL ASSISTANT TO THE COMMISSIONER, DEPARTMENT OF REVENUE, clarified that the charge would be 9 $1.18 per assignment which is processed by the Division. Administrative Settlement Act Representative Brown asked when the accounting would be available from the Department of Revenue regarding the Administrative Settlement Account. Mr. Mourant stated the final version of that information is nearly ready. Representative Brown understood that the amount of the settlements would total $279 million dollars. Mr. Mourant stated that he did know the numbers but would provide the Committee that information as soon as it was available. Representative Brown pointed out that there are large amounts of money being moved around and she wanted to have the information made available as soon as possible. Mr. Mourant replied, that the review and auditing process relating to assessment payments is not a simple process. HOUSE BILL 144 Representative Navarre asked if more than one entity attached to the dividends would their administrative costs be added. Mr. Mourant replied, that if there was sufficient balance to satisfy all services, they would be charged each time. Representative Navarre asked who would have priority in an account. Mr. Mourant stated that either the IRS or the CSED would have priority and noted that each service does cost the Department of Revenue an average of $1.18 average. Representative Martin MOVED to report HB 144 out of Committee with individual recommendations. Representative Navarre OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Martin, Parnell, Therriault, Hanley, Larson. OPPOSED: Navarre, Brown, Grussendorf. Representatives Hoffman, Foster and MacLean were not present for the vote. The MOTION FAILED, 5-3. Representative Martin requested HB 144 be reconsidered at a later date. HB 144 was HELD in Committee for further discussion. ADJOURNMENT 10 The meeting adjourned at 3:10 P.M. 11