HOUSE FINANCE COMMITTEE March 4, 1997 1:43 P.M. TAPE HFC 97-44, Side 1, #000 - end. TAPE HFC 97-44, Side 2, #000 - end. TAPE HFC 97-45, Side 1, #000 - end. TAPE HFC 97-45, Side 2, #000 - #120. CALL TO ORDER Co-Chair Hanley called the House Finance Committee meeting to order at 1:43 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Foster Representative Martin Representatives Davis, Davies, Grussendorf, Moses and Mulder were absent from the meeting. ALSO PRESENT Representative Ivan Ivan; Dan Spenser, Senior Analyst, Office of Management and Budget, Office of the Governor; Nico Bus, Acting Director, Support Services Division, Department of Natural Resources; Janet Clarke, Director, Division of Administrative Services, Department of Health and Social Services; Jeff Sisson, Anchorage; Joe Reeves, Deputy Director, Division of Administrative Services, Department of Corrections; Remond Henderson, Director, Division of Administrative Service, Department of Community and Regional Affairs; Arthur H. Snowden, II, Administrative Director, Alaska Court System; Percy Frisby, Director, Division of Energy, Department of Community and Regional Affairs; Jim Harpring, Division of Emergency Services, Department of Military and Veterans Affairs; Roger Foisy, Internal Auditor, Department of Community and Regional Affairs; Donis Moris, McLaughlin Youth Center; Bob Footte, UNAK; Walter Sampson, Kotzebue Electric Association; Brent Petrie, Iliamna, Newhalen, Nondalton Electric Cooperative; Gary Kessinger, MKEC; Brad Reeve, Kotzebue Electric Association; Mark Johnson, Chief, Community Health and Emergency Services; Department of Health & Social Services; Scott Corstange, McLaughlin Youth Center; Gregg Thompson, Fairbanks Youth Correctional Facility. SUMMARY 1 HB 113 "An Act extending lapse dates for certain prior year appropriations; making supplemental, capital, and special appropriations; and providing for an effective date." HB 113 was HELD in Committee for further consideration. HOUSE BILL NO. 113 "An Act extending lapse dates for certain prior year appropriations; making supplemental, capital, and special appropriations; and providing for an effective date." ALASKA COURT SYSTEM Section 14 $32. thousand dollars - Trial Courts ARTHUR H. SNOWDEN, II, ADMINISTRATIVE DIRECTOR, ALASKA COURT SYSTEM observed that the Nineteenth Alaska State Legislature passed SB 98. Senate Bill 98 allows the Child Support Enforcement Division (CSED) to revoke driver's licenses. After receiving a finding from CSED, the obligor has 30 days to request judicial review. The Court must hold a hearing within 20 days after the opposing party has been served. He estimated that this provision will have a major effect on the court system. He stressed that hearings will be centralized in Anchorage to allow a reduction of costs. Telephone hearings will be used for areas outside of Anchorage. Part-time employees will also be utilized. He observed that positions will be hired within the next two weeks. He added that these positions will be the Alaska Court System's number one priority for the coming year. In response to a question by Representative Martin, Mr. Snowden observed that the CSED provisions in SB 98 are having an effect on collections. He stated that professional obligors are making arrangements with CSED. He noted that CSED just started revoking driver's licenses. He stressed that there will be a major impact to the Alaska Court System from the revocation of driver's licenses. Co-Chair Hanley referred to a similar program in Maine. He noted that only 5 licenses were actually revoked. He emphasized that obligors were able to reach agreement with child enforcement agencies in Maine. Mr. Snowden noted that there are 43,000 active cases, in Alaska. He estimated that 50 percent of these cases involve arrearage. He assumed that 15,000 of those in arrearage would want a hearing. He 2 maintained that the Court is approaching the issue in a conservative manner. In response to a comments by Representative Martin, Mr. Snowden noted that obligors have to pay under a schedule promulgated by Rule 90.3. He observed that the schedule is very specific. Alaska's requirements for child support payments are in the national average. Schedules set by CSED can be modified. Court schedules cannot be modified. He maintained that the Alaska Court System would welcome the Legislature to address the issue by statute. The Court feels that the issue should be addressed by the Legislature. He asserted that if the Legislature passes a statute the Court will sunset the Rule. He stressed that a simple majority could change the Rule. He emphasized that the Rule should be addressed in whole. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Section 9(b) $330.0 thousand dollars - Veterans Land Discount NICO BUS, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES observed that the request would pay for the recalculation of the Veteran's Land Discount, authorized in 1991. The Department of Natural Resources' interpretation of the statute was challenged. An Ombudsman investigation recommended that the discount be recalculated. There are 36 veteran contracts involved. He explained that interest payments are not included. All 36 contracts have not been recalculated. He referred to Mr. Glenn Sisson's contract. The original contract was for $26.5 thousand dollars. Under the recalculation he would receive an additional $14.4 thousand dollar payment. If interest were include the he would receive an additional $3.3 thousand dollars. He gave a brief history of the discount. He noted that the discount was found to be unconstitutional, but that interpretation was later overturned. Co-Chair Hanley asked how the Department calculated the estimated amount needed. Mr. Bus stated that the Department looked at the principle and averaged the amount due. He stressed that the Department no longer has all the contracts. He stated that any surplus would be lapsed to the General Fund. He noted that the money would be in its own account. The legislation specified that interest would not be paid. The ombudsman agreed that interest would not be paid. In response to a question by Co-Chair Therriault, Mr. Bus 3 noted that the recalculation process will be complicated. The Department has included $20 thousand dollars for administrative costs. Estimates are based on three days per contract. JEFF SISSON, ANCHORAGE testified via the teleconference network in support of the request. He discussed the overpayment made by his brother, Glenn Sisson. Co-Chair Hanley observed that there are several ways that interest can be calculated. Mr. Bus stressed that the request would pay the principle amount agree to by both parties. Interest payments can be debated separately. Co-Chair Hanley asked for the Department's analysis of how the $300 thousand dollar request was calculated. Co-Chair Therriault noted that the Department originally estimated that they would need $6.4 thousand dollars for research of the contracts. Mr. Bus explained that this is the amount to research contracts held by the Department of Natural Resources. Some contracts were sold or transferred to the University of Alaska and First National Bank of Alaska. Researching these contracts will be more expensive. Co-Chair Therriault agreed that repayment should be made. He quested further justification for the appropriation request permitting to research and recalculations. Mr. Bus observed that the Department's estimate was based on the number of contracts multiplied by three employee days per contract. He reiterated that any excess will be lapsed. Co-Chair Hanley stressed that the principal will be paid. He emphasized the need to consider interest payments and administrative costs. Co-Chair Therriault asked if plaintiffs would agree that no further legal action will be taken after repayments are made. Mr. Bus stated that the Department would like to reach an agreement that there will be no further legal action. DEPARTMENT OF CORRECTIONS Section 2 $2.3 million dollars - Cleary Fines DAN SPENSER, SENIOR ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR stated that the Department would like to appropriate this amount for capital project in lieu of paying the fines to the General Fund. The Administration hopes that this agreement would satisfy the 4 Court and plaintiffs. Co-Chair Hanley noted that fines that have been paid have been redeposited into the General Fund. The Legislature has chosen not to pay the fines in the past two session. He observed that there are two issues. The Court has assessed $2.3 million dollars in fines through June, 1997. The first issue is whether the fine will be paid. If the fine is paid it can be deposited into the General Fund. The second issue would be to partially fund a women's correctional facility. JOE REEVES, DEPUTY DIRECTOR, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF CORRECTIONS noted that there is a $2.3 million dollar federal capital request to build additional beds for violent offenders. This request could encompass additional beds for female offenders. Co-Chair Hanley asked for the Department's priority listing of new projects for the Department of Corrections. He noted that the funding to pay the fines could be placed into the General Fund and projects paid for out of the capital budget. He asked if an additional women's correctional facility would be built if the Department does not receive the fines. Mr. Reeves emphasized that the Department is reviewing every option available to expand facilities. He noted that the only funds currently available to the Department are federal. He clarified that the supplemental request would not be sufficient to construct a new building. He explained that the funding would allow male population to be shifted in order to free beds for female inmates. The request would provide the Department with flexibility. The request will be used to start the expansion system. A portion of the funding would be used to enter into an agreement with the Department of Transportation and Public Facilities for engineering review and expansion plans. The balance would wait for the construction phase of the project. Co-Chair Therriault summarized that the request is for a capital project in lieu of paying the fines. He questioned if a capital expenditure would meet the order of the Court. Mr. Reeves noted that the Department of Law will argue in support of the capital expenditure in lieu of fines. He acknowledged that there is no guarantee that the agreement will be acceptable. Co-Chair Hanley spoke in support of paying the fine separately from the capital project. He suggested that this request should be prioritized with other projects on the Department's list. 5 DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Section 3 $1 million dollars - Disaster Relief Fund NICO BUS, COORDINATOR, DEPARTMENT OF MILITARY AND VETERANS AFFAIRS observed that no money was appropriated for disasters in FY 97. Disaster funding was carried forward into FY 97. There is $50 thousand dollars remaining in the Disaster Relief Fund. The request would cover disasters between February 1997 and June 1997. Co-Chair Hanley observed that the FY 97 supplemental request contains $585 thousand dollars in operating funds for FY 98. Mr. Bus explained that this amount covers core FY 98 administrative functions. There is no carry-forward to fund this function. The Division of Emergency Services operating budget is charged against the Disaster Relief Fund. Co- Chair Hanley pointed out that the FY 98 request is $3,377.5 million dollars. Mr. Bus clarified that this contains $1.2 million dollars from the Oil and Hazardous Response Fund, and $1.1 million dollars in federal receipts. The balance is from the General Fund, general fund match or the Disaster Relief Fund. (Tape Change, HFC 97-44, Side 2) Mr. Bus agreed that the supplemental request for this component could be reduced by $585 thousand dollars. The FY 98 operating budget would be short by $585 thousand dollars if the supplemental request is reduced. Co-Chair Hanley noted that it is hard to ascertain actual expenditures. He observed that the Legislature's intent is to not provide funding in one fiscal year to be spent in another fiscal year. He spoke in support of reducing the request by $585 thousand dollars and adding this amount into the FY 98 operating budget base. Discussion ensued regarding funding for Division of Emergency Services. He clarified that there is no request for FY 98 funding to the Disaster Relief Fund. Co-Chair Hanley summarized that if the request is reduced that a general fund appropriation to the Disaster Relief Fund would be needed to cover the inter-agency receipt. Mr. Bus added that no funding is available from old appropriations. DEPARTMENT OF CORRECTIONS Section 4(a) $632 thousand dollars - Fairbanks Correctional 6 Center Mr. Reeves explained that this request would fund a replacement boiler at the Fairbanks Correctional Center. He read a memorandum from Ted Kinney, Facilities Manager II to Commissioner Pugh, dated 1/28/97 (copy on file). The memorandum gives a brief history of the boiler. Mr. Reeves clarified that the boiler cannot be maintained through further welding. The boiler will be condemned if it breaks again. Phase one would replace the boiler that heats the domestic hot water system. Phase two would replace the two boilers that provide heat for the system. Phase one was funded by a consolidated repair and maintenance capital request in FY 95. This would complete the project. Co-Chair Therriault asked if the project had been submitted as part of the Department's capital request. Mr. Reeves noted that it is in the FY 98 capital request. The Institution felt that boiler would not last that long. It would have been on the Governors' FY 98 capital request. DEPARTMENT OF HEALTH AND SOCIAL SERVICES Section 4(b) $1,247.4 million dollars - McLaughlin/ Fairbanks Youth Centers JANET CLARK, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES explained that this is a capital request that was included in the supplemental due to its urgent nature. She noted that the McLaughlin Youth Center was opened in Anchorage in 1968. It is the State's largest youth center, with a capacity of 150 beds. It is currently at over 190. It peaked at 199 in February. The Fairbanks Youth Center was built in 1981. It has a capacity of 40 beds. Approximately $860 thousand dollars would be spent for McLaughlin and $390 thousand dollars for Fairbanks. She showed aerial photographs of the facilities noting the lack of security measures. Ms. Clark recounted attempts to break inmates out of the facilities and drive-by-shootings. She reiterated that both facilities are over capacity. Ms. Clark stated that a security consultant performed a complete analysis of security problems at both facilities. The Department has a confidential report that is available to legislators. She observed that if the supplemental request is approved the Department will begin exterior work this summer. 7 In response to a question by Co-Chair Hanley, Ms. Clark noted that the request is a capital project. In response to a question by Co-Chair Therriault, Ms. Clark stated that the consultant's report has been paid. The cost to the Department was $10.0 thousand dollars. She acknowledged that a small amount of design work will be needed from the Department of Transportation and Public Facilities. The report recommended fencing material, close circuit television, gates, and locating barriers between the roadway and facility. SCOTT CORSTNAGE, MCLAUGHLIN YOUTH CENTER testified via the teleconference network. He echoed remarks by Ms. Clark. GREGG THOMPSON, FAIRBANKS YOUTH CENTER testified via the teleconference network. He underscored that there is a new level of teenage violence. The facility is at 150 percent capacity. He maintained that the security measures recommended are needed. Staff has their hands full paying attention to overcrowded conditions. Section 4(c) $200 thousand dollars - Emergency Communication Equipment Ms. Clark noted that the request is based on a crisis that has developed for emergency communication equipment on rural highways. In many areas there is no radio coverage. In other areas there are breakdowns occurring. MARK JOHNSON, CHIEF, COMMUNITY HEALTH AND EMERGENCY MEDICAL SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES noted that the problem has been increasing. The Department supports voluntary ambulance services in rural Alaska. There are a number of areas were the systems are 15 to 20 years old and breaking down with increasing frequency. He maintained that a life-threatening situation is occurring with increased volume of traffic and ambulance responses. The Department works with the Division of Emergency Services, Department of Administration, and the Emergency Communications Subcommittee of the State Telecommunications Information Council. He observed that it would be more costly to fix all existing problems. He stressed that the request would provide a good start to address the most urgent priorities. In response to a question by Co-Chair Hanley, Mr. Johnson clarified that $3 million dollars is request over 6 years to replace the entire system and expand coverage to areas not 8 already covered. The Federal Communications Commission requires that all 2-way radios in the UHF and VHF bands must migrate to narrow band frequencies, by January 1, 2005. Most of the State's radio systems are in these bands. He assumed it would be easier for urban areas to replace these systems. He stressed that volunteers will not be able to afford the conversion. He added that the backbone system will also have to be replaced to meet these requirements. All new equipment has to meet the new standard. There is equipment available that can interface with the old and new standards simultaneously, to allow a phase-in of the new equipment. The most urgent problems would be addressed by the $200 thousand dollars request. Mr. Johnson discussed alternative solutions. He noted that mobile satellite technology was effective in 3 out of 5 pilot tests. He recounted a crash in Eagle, Alaska that suffered from the lack of communication. Section 4(b) $1,247.4 million dollars - McLaughlin/ Fairbanks Youth Centers In response to a question by Representative Kohring, Ms. Clark noted that the Department would go to competitive bid for any purchases. Representative Kelly questioned how much of Fairbanks's excess capacity is due to the Nome facility closure. Ms. Clark clarified that the youth facilities have a detention unit and a long-term unit. The detention unit is where the overcrowding is occurring. She explained that all the beds at the Nome Youth Facility were treatment beds. She stated that overcrowding is caused, in part, by a statewide lack of treatment beds. She observed that the Johnson Youth Center has an eight bed capacity. There are currently 26 kids at the Johnson Youth Center. The Nome Youth Facility costs $1 million dollars to operate annually. DONIS MORIS, MCLAUGHLIN YOUTH CENTER testified via the teleconference network. She observed that the Nome Youth Facility is still being used as a short-term detention facility. Ms. Clark noted that the Nome Youth Facility has nine beds. It is currently being used for emergency detention. It costs approximately $350 - $400 thousand dollars to run the facility for short-term emergency detention. Representative Kelly ascertained that there are kids in detention beds that belong in treatment beds. Section 5(a) 9 $939 thousand dollars - Adult Public Assistance Ms. Clark noted that section 5, subsections (a) - (d) are supplemental operating requests. Ms. Clark noted that Adult Public Assistance (APA) provides financial assistance to approximately 11,500 people per month. There are approximately 4,300 elderly, 7,100 disabled, and 100 blind individuals receiving assistance. The program is closely linked to the federal Supplemental Security Income (SSI) program. She observed that the caseload has remained stable. There has been a caseload growth of 7 to 9.1 percent, since 1992. The Department requested a 6 percent growth in caseload for the program. The Legislature approved a 2 percent growth rate, and challenged the Department to reduce costs. The payment schedule is set in statute. The cost of the program is driven by caseload. She noted that there have been federal changes to the SSI program. Approximately 300 persons diagnosed with drug and alcohol abuse have been eliminated from the program. Of these, those that qualify for Medicaid and APA were given an extra 120 days to receive their redetermination. Therefore, reductions from the elimination of these recipients will not occur until May or June 1997. Taking this into account, the Department is at its projected amount. She stated that the request reflects the high range projection. The mid range projection estimates that $800 thousand dollars will be needed. The low range projection shows that less than $500 thousand dollars would be needed. A new projection for Aid to Families with Dependent Children (AFDC) shows that there may be excess funds in this program that can be used to offset the request. In response to a question by Co-Chair Hanley, Ms. Clark noted that the Governor's request includes a $1.2 million dollar reduction for the elimination of the 300 recipients diagnosed with alcohol and drug abuse problems. The Governor's FY 98 request equals the FY 97 authorized amount with the addition of the supplemental request and the reduction for the 300 persons that were eliminated. Section 5(b) $10 million dollars - Indian Health Service Ms. Clark noted that this component is 100 percent federally funded. The component pays for Medicaid recipients that use Indian Health Service facilities. In FY 96, the federal payment rate was doubled. The Department did not budget enough to cover the rate increase. There has also been increased utilization of this component. She noted that the Department's strategy for long-term cost containment is to 10 look at better utilization of Indian Health Service facilities. Co-Chair Hanley asked how much of the request is due to increased utilization and how much is due to the rate increase. He questioned the reduction to state Medicaid costs due to utilization of this component. Ms. Clark clarified that persons paid from this component must be Medicaid eligible. Section 5(c) $1 million dollars - Foster Care Ms. Clark noted that statutes require the Department to arrange for the care of every child committed to its custody, and to pay for the cost necessary to insure the adequate care of children. "Foster care is not the program for kids that have committed crimes, but for kids who are victims, and have suffered abuse or neglect." She pointed out the relationship of the program to subsidized adoptions. She explained that the Governor's FY 97 request was reduced by $200 thousand dollars. She observed that the Department has been providing care for high cost children at private psychiatric hospitals in Anchorage. Most of the money goes to foster care parents. The component also funds the Alaska Youth Initiative Program, contracts, and kids in the custody of the Division of Family and Youth Services who have suffered abuse and neglect. (Tape Change, HFC 97-45, Side 1) Ms. Clark detailed a typical high cost case under the Department's care. "Frank" is currently residing in a private psychiatric hospital. Costs at private psychiatric hospitals can be $1 thousand dollars a day. The Department has negotiated a rate of $350 dollars a day. Foster care runs between $30 and $40 dollars a day. A facility in Montana has been located to care for children like "Frank". She observed that there has been an increase in high cost kids. Co-Chair Hanley asked for a break down of foster care and residential care costs. Representative Kelly referred to the Fahrenkamp Center. He noted that many of the children in foster care have mental health problems. He asked why kids with mental health diagnosis are not treated at the Fahrenkamp Center. Ms. Clark noted that many children that are not determined to be mentally ill have severe behavior problems. She stated that the system, of residential diagnosis and treatment centers 11 for youth, envisioned centers throughout the state. The Department is looking for alternatives to high cost psychiatric care. Representative Kelly noted that some delinquent children are in foster care. Ms. Clark referred to the federal Title IV- E program. She observed that the State receives approximately $700 thousand dollars for delinquent children from this program. The State receives approximately $7 million dollars for child abuse and neglect cases. She noted that foster care costs approximately $10.8 million dollars. There are approximately $1.3 million dollars in federal funds. She clarified that the $7 million dollars from the Title IV-E program is spread throughout the Division of Family and Youth Services. Co-Chair Hanley summarized that approval of the supplemental request would result in $168 thousand dollars over the Governor's FY 98 request for Foster Care. Ms. Clark explained that the Department had anticipated that there would be alternatives in place for care of high cost kids. She anticipated that the Department can live within the FY 98 request for Foster Care. She emphasized that other programs will take the pressure off of Foster Care. Section 5(d) $685 thousand dollars - McLaughlin Youth Center Ms. Clark observed that staff needs have risen due to increased occupancy. She emphasized that overtime costs have been reduced. On call staff have filled vacant positions. Some of the request is for increased commodities. Co-Chair Hanley noted that the FY 97 authorized amount is $8.865 million dollars. The Governor's FY 98 request is $8.899 million dollars. He observed that FY 98 will be $650 thousand dollars short of the FY 97 total, with the addition of the supplemental. Ms. Clark noted that the Governor's FY 98 request contains some diversion programs to try to limit overcrowding of youth facilities. A budget amendment has been requested. Power Cost Equalization (PCE) REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS stated that the Administration is requesting an amendment of $1.5 million dollars for PCE. The Power Cost Equalization program will be at 85 percent of full funding. The current PCE funding level is at $17 million dollars. If the request 12 is not funded, PCE will be prorated at a rate of 67 percent of full funding. He added that an amendment has been submitted to the Office of Management and Budget for a $2 million dollar increment in the FY 98 operating budget. Representative Foster questioned why the request was submitted with the Department's original request. He emphasized that it is more difficult to add an amendment than to retain funding. Mr. Henderson assured him that the request was submitted as soon as the Division of Energy received the information. He noted that there was an increase in fuel rates. Co-Chair Hanley asked if the power consumption rates have changed. PERCY FRISBY, DIRECTOR, DIVISION OF ENERGY, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS explained that the Department discovered when they performed their mid year analysis that problems with low water, late fuel deliveries, and storms had increased fuel costs. He observed that consumption has increases by approximately 2 percent per year. Co-Chair Hanley asked why the funding source is the General Fund, instead of the Power Cost Equalization Fund. Mr. Henderson observed that the Power Cost Equalization Fund is estimated to run out in the year 2000. Representative Foster reiterated his disappointment that the request was not submitted in the original legislation. Representative Kohring emphasized that alternative energy sources need to be explored. Co-Chair Hanley summarized that the FY 98 request with the addition of a $2 million dollar amendment would be $500 thousand dollars more than the FY 97 authorized and supplemental request. He noted that the price of oil is dropping. He asked if the estimate is based on current prices. Mr. Henderson clarified that estimates are based on Alaska Public Utilities Commission (APUC) rates. The request is at 85 percent of the full funding level. BOB FOOTE, UNALAKLETT testified in support of the request. He maintained that rural residents should not have to plead their case for PCE funding every year. He emphasized that the program is a tremendous help for the elderly. He maintained that the reduction of state support to rural areas threatens the existence of small villages. WALTER SAMPSON, ALASKA VILLAGE ELECTRIC COOPERATIVE (AVEC) testified in support of the request. He noted that AVEC 13 represents 50 communities. He emphasized that AVEC is attempting to provide and improve service. He observed that rural residents will be hurt by welfare reform. He stressed that AVEC will be forced to reduce service if funding is not provided. He observed that oil delivered by barge costs $1.08 dollars a gallon. Oil delivered by air costs $2.14 dollars a gallon. He maintained that Power Cost Equalization is not a subsidy program, but an equalization program. He observed that AVEC is considering connecting communities through interties to reduce costs. BRENT PETRIE, ILIAMNA, NEWHALEN, NONDALTON ELECTRIC COOPERATIVE spoke in support of the request. He observed that fuel delivered in September 1995, cost $1.09 dollars per gallon. The same fuel, delivered today, costs $1.77 dollars per gallon. GARY KESSINGER, MIDDLE KUSKOWIN ELECTRIC noted that their cooperative has the highest PCE rate, the lowest income and the highest use. His users will have a 7.3 cent increase per kilowatt if the amendment is not approved. He emphasized that the rural economic environment is fragile. BRAD REEVE, GENERAL MANAGER, KOTZEBUE ELECTRIC COOPERATIVE spoke in support of the amendment. He pointed out that some of the small villages do not have the economy to keep water and sewage systems going. He emphasized that they are putting up the first utility grade wind turbine in the State. They are working with AVEC to provide waste heat and wind power that will allow a reduction of diesel use. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Section 4(d) $100 thousand dollars - Radio Equipment, DMVA Mr. Bus explained that the request will allow the purchase of emergency radio equipment. He pointed to problems that occurred during the Miller's Reach Fire. He noted that the request will fund the purchase of a point to point portable radio. Co-Chair Hanley noted that a whole new system would cost $35 million dollars. JIM HARPRING, DIVISION OF EMERGENCY SERVICES spoke in support of the request. The request will allow coordination of responding agencies. He observed that a plan is being developed to address the overall problems. 14 (Tape Change, HFC 97-45, Side 2) Mr. Harpring clarified that the request will assure that there is 800 MHz capability with the Municipality of Anchorage's trunking base station and the federal government's 400 MHz system. In response to a question by Co-Chair Therriault, Mr. Harpring noted that there is a federal mandate for conversion by the year 2006. Section 7 $220 thousand dollars - Emergency Alert System Mr. Bus explained that this request would provide funding for the Emergency Alert System (EAS). The EAS system is a federally mandated system to alert every community. Mr. Bus clarified that this item was not in the original FY 97 capital budget request. The Office of Management and Budget tried to added the request as an amendment. Mr. Harpring stated that the request is a "turn-key" operation. The program was federally mandated to be implemented by January 1, 1997. He explained that EAS will replace the old Emergency Broadcast System. Currently, there is no system that would allow a statewide alert. ADJOURNMENT The meeting adjourned at 4:07 p.m. 15