HOUSE FINANCE COMMITTEE January 27, 1995 1:30 P.M. TAPE HFC 95-9, Side 1, #000 - end. TAPE HFC 95-9, Side 2, #000 - end. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:30 p.m. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Mulder Representative Navarre Representative Brown Representatives Parnell, Grussendorf, Therriault and Kelly were absent from the meeting. ALSO PRESENT John Shively, Commissioner, Department of Natural Resources; Natural Resources; Nico Bus, Director, Support Services Division, Department of Natural Resources; Wilson Condon, Commissioner, Department of Revenue; Bob Baratko, Director, Division of Administrative Services, Department of Revenue; Tom Boutin, Division of Forestry, Department of Natural Resources; Ken Boyd, Deputy Director, Division of Mining and Water Management, Department of Natural Resources; Jerry Brossia, Director, State Pipeline Coordinator's Office/Joint Pipeline Office; John Cramer, Director, Division of Agriculture; Marty Rutherford, Acting Commissioner, Department of Natural Resources; Jules Tileston, Division of Mining and Water Management, Department of Natural Resources; Ron Swanson, Director, Division of Land, Department of Natural Resources; Deborah Vogt, Deputy Commissioner, Department of Revenue. SUMMARY AGENCY OVERVIEWS: Department of Natural Resources Department of Revenue (Copies of meeting tapes and handouts are on file with the Legislative Finance Division. Contact #465-3795). 1 DEPARTMENT OF NATURAL RESOURCES Log # Discussion 005 NICO BUS, ACTING DIRECTOR, SUPPORT SERVICES DIVISION, DEPARTMENT OF NATURAL RESOURCES noted that the Acting Commissioner and other staff members would testify via the teleconference network from Anchorage. 079 MARTY RUTHERFORD, ACTING COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES testified via the teleconference network from Anchorage. She introduced staff. 098 Acting Commissioner Rutherford briefly reviewed functions of the Department. She commented on the responsibility of each of the department's divisions. 103 Acting Commissioner Rutherford noted that the Division of Oil and Gas develops and manages the State's oil and gas leasing programs. The Division identifies prospective lease areas. The Division also performs geologic, economic, environmental and social analysis and develops and conducts hearings on proposed five year leasing schedules and sales. 120 Acting Commissioner Rutherford observed that the Division of Lands is the primary manager of the State's land holdings. The Division issues and maintains land sales and contracts, and leases state land for recreational, commercial and industrial use. The Division is also responsible for stewardship of land retained in state ownership for legislatively designated public use. 135 Acting Commissioner Rutherford reviewed the State Pipeline Coordinator - Joint Pipeline Office. She noted that this office monitors pipeline activities for compliance with the right-of-way grant, permit terms and conditions. The Office also monitors compliance with applicable regulations for other agencies. 144 Acting Commissioner Rutherford observed that the Division of Forestry provides wildland fire management and suppression; enforces the Forest Resources and Practices Act; and manages forest land. She noted that the Division employs 73 2 emergency fire fighter crews of 16 persons each. 161 Acting Commissioner Rutherford stated that the Division of Parks and Outdoor Recreation develops and manages the state park system, which is the nation's largest. It operates more than 133 parks which receive nearly 6 million visits annually. She noted visitor programs operated by the Department. 173 Acting Commissioner Rutherford reviewed the Division of Geological and Geophysical Surveys. She observed that the Division is primarily housed in Fairbanks. The Division disseminates geologic data and information pertaining to Alaska's subsurface estate of minerals, coal, oil and gas, construction materials, and geothermal energy. The Division also publishes its findings in technical reports and maps. She noted that educators, the government, and public and private industry use information compiled by the Division. 197 Acting Commissioner Rutherford noted that the Division of Mining and Water Management is in the process of combining management of mining and water resources. She added that the Division maintains mining and coal leases; and manages state water resources. She further reviewed the Division's functions. She noted that the Division attempts to lessen litigation associated with state navigable waters. 230 Acting Commissioner Rutherford discussed the responsibilities of the Division of Agriculture. She noted that the Division supports the Alaska agricultural community through marketing, technical assistance, education, inspection and financing. 259 Acting Commissioner Rutherford stated that the Support Services Division includes the Director's Office, Recorder's Office, Land Record Information System and the Department's Information Resource Management System. 270 Acting Commissioner Rutherford added that the Department provides staff support for the Citizen's Advisory Commission on Federal Areas. She observed that staff also supports the Exxon Valdez Trustee Council. The Department has two positions associated with the Mental Health Land 3 Trust Office. 292 Acting Commissioner Rutherford emphasized that the Department has completed the statehood land entitlement selection process. She noted that the mental health trust issue has been resolved. She stressed the role the Department of Natural Resources has played in these issues. 301 Acting Commissioner Rutherford stated that the Department hopes to stimulate revenue generation and jobs by working with industry. The Department will submit a five year oil and gas lease plan. 341 Acting Commissioner Rutherford observed that the Department has made progress in addressing the adjudication backlog. 349 Acting Commissioner Rutherford discussed municipal entitlements. She noted that the Department has not been able to meet all the demands by municipalities. Municipalities have requested approximately 650,000 acres. She noted that the Department will continue to prioritize the effort to address municipal entitlements. 353 Acting Commissioner Rutherford suggested that the institution of day park fees has been successful. 360 Acting Commissioner Rutherford stressed that the Department will be looking at opportunities to consolidate government and privatize functions. 372 Co-Chair Hanley asked if there is duplication or overlap with the Department of Revenue, in the Department of Natural Resources royalty function. 380 KEN BOYD, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES testified via the teleconference network from Anchorage. He replied that there is some duplication. He emphasized that the overlap provides checks and balances. The emphasis of the Department of Natural Resources is royalty, while the Department of Revenue addresses tax issues. 390 Co-Chair Foster noted complaints by constituents in regards to bureaucratic requirements of regulations for small scale miners. 4 419 JULES TILESTON, DIVISION OF MINING AND WATER MANAGEMENT, DEPARTMENT OF NATURAL RESOURCES testified via the teleconference network from Anchorage. He stressed that the Department is working on a multi-year permit to lessen the paper work burden placed on miners. 428 Representative Martin questioned the increase in funding for the Division of Agriculture. 431 JOHN CRAMER, DIRECTOR, DIVISION OF AGRICULTURE, DEPARTMENT OF NATURAL RESOURCES testified via the teleconference network from Anchorage. He explained that the Division is facilitating the needs of private citizens for farmland. 468 Mr. Bus explained, in response to a question by Representative Martin, that the Department receives reimbursement of 470 Fund dollars from the Department of Environmental Conservation. 480 Representative Kelly referred to the Department's role as a petroleum advocate. He questioned if there is a duplication of effort with the Department of Commerce and Economic Development. 491 Mr. Boyd emphasized that the Department of Natural Resources functions as a technical advocate. 525 Representative Kelly inquired into the possibility of housing the Division of Geological and Geophysical Survey with the Geophysical Institute at the University of Alaska. 549 Acting Commissioner Rutherford replied that the possibility will be researched. 567 Representative Mulder referred to SB 308 which was passed in the previous legislative session. Acting Commissioner Rutherford reviewed implementation of SB 308. 574 Representative Mulder asked what the Administration is doing to help the timber industry in Southeast Alaska. 581 TOM BOUTIN, DEPUTY DIRECTOR, DIVISION OF FORESTRY, DEPARTMENT OF NATURAL RESOURCES testified via the teleconference network from Anchorage. He noted that discussion has taken place in regards to the effects of Habitat Conservation Areas on long term timber contracts. 5 590 Representative Kohring questioned the feasibility of land disposal as a revenue source. 609 RON SWANSON, DIRECTOR, DIVISION OF LANDS, DEPARTMENT OF NATURAL RESOURCES testified via the teleconference network from Anchorage. He noted that the state's land disposal program was active in the 1980's. He observed that some programs were successful and some were disastrous. 619 Mr. Swanson noted that the State plans to offer approximately 500 parcels of land for sale in the summer of 1995. 622 Co-Chair Foster noted that the oldest Recording Office is located in Nome. He expressed the desire to keep the Nome Recording Office operating. 639 Representative Brown pointed out that much of the land available for sale by the Department of Natural Resources is not located in settled areas and would require additional state services. Acting Commissioner Rutherford agreed with comments by Representative Brown. She emphasized that the majority of parcels will be for sale in existing subdivisions. (Tape Change, HFC 95-9, Side 2) DEPARTMENT OF REVENUE 020 WILSON CONDON, COMMISSIONER DESIGNATE, DEPARTMENT OF REVENUE summarized the Department's functions. He noted that the Department contains seven divisions and serves several boards, commissions and corporations. He noted that the Department's divisions raise and collect revenue, manage the state's financial assets, provide services to citizens, and regulate conduct. 128 Commissioner Designate Condon provided members with a handout detailing the Department's Divisions (copy on file). He briefly reviewed the divisions within the Department. 172 Commissioner Designate Condon noted that the Department contains a Administrative Services Division which provides services to the other divisions, corporations and agencies. 6 202 Commissioner Designate Condon observed that the Permanent Fund Corporation has a staff of twenty- seven. The Alcoholic Beverage Control Board has a staff of nine. The Municipal Bond Bank has a staff of two. The Alaska Housing Finance Corporation has three hundred and nineteen positions. The Mental Health Trust Authority has eleven staff positions. 219 Representative Foster noted the lack of inspectors for the Alcoholic Beverage Control Board. Commissioner Designate Condon noted that there is only one inspector for the State of Alaska. Co- Chair Foster confirmed that there is only one inspector to review 1,800 establishments. 321 Co-Chair Foster noted the high amount of uncollected child support. Commissioner Designate Condon estimated the uncollected amount at $302 million dollars. 257 Representative Martin referred to the Department of Revenue's Resource Book. He accentuated combining oversight functions. 263 Representative Martin detailed increases proposed in Governor Hickel's FY 95 proposed budget. 280 Representative Martin expressed concern that the gaming industry is out of control. 302 Commissioner Designate Condon assured Representative Martin that the Department would do the best job possible in implementing the legislature's policies and directives. 337 Co-Chair Hanley observed that the Child Support Enforcement Division has received federal funds for additional positions. 341 BOB BARATKO, DIRECTOR, DIVISION OD ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE stated that the Department issued a request for proposals for industry to prepare a five year plan for the Child Support Enforcement Division. He noted that there were no respondents. 346 Co-Chair Hanley pointed out that welfare reform is a legislative priority. He emphasized the need to increase collection on child support. 372 Co-Chair Foster noted the cost of alcohol related services. 7 381 Co-Chair Hanley observed that the Department of Law and the Department of Revenue are currently acting under a Memorandum of Understanding in regards to negotiations. He asked if Commissioner Designate Condon anticipated a shift of responsibilities in regards to negotiations. Commissioner Designate Condon stated that the division of responsibilities will be examined. 401 Commissioner Designate Condon stressed that duplication of effort in regards to royalty and severance tax collection is minimal. He did not believe the two should be combined. He discussed differences between taxing and the imposition of royalty obligations. 443 Co-Chair Hanley expressed concern that department's not be placed in a position to fight over their areas of responsibility. 451 Representative Brown noted that the Department of Revenue audits royalty collections. Commissioner Designate Condon observed that the Department of Natural Resources makes the policy and sets the standards. Auditing is down by the Department of Natural Resources. Accounting is done by the Department of Natural Resources. Commissioner Designate Condon and Representative Brown agreed that the division of responsibilities should remain the same. 469 Representative Martin expressed concern with the cost of litigation. 483 Co-Chair Hanley noted that Representative Martin will head the House Finance Subcommittee for the Department of Revenue. ADJOURNMENT The meeting adjourned at 2:15 p.m. 8