HOUSE FINANCE COMMITTEE March 12, 1997 1:37 P.M. TAPE HFC 97-56, Side 1, #000 - end. TAPE HFC 97-56, Side 2, #000 - end. TAPE HFC 97-57, Side 1, #000 - end. TAPE HFC 97-57, Side 2, #000 - #219. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:37 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Dan Spencer, Senior Analyst, Office of Management and Budget, Office of the Governor; Kim Ross, Alaska Air Carriers Association, Anchorage; Guy Bell, Director of Administrative Services, Department of Commerce and Economic Development; Nancy Slagle, Director, Division of Administrative Services, Department of Transportation and Public Facilities; Kenneth E. Bischoff, Director, Division of Administrative Services, Department of Public Safety; Ross Kinney, Deputy Commissioner, Department of Revenue; Jamie Kennewick, Alaska Science and Technology Foundation ; Annalee McConnell, Director, Office of Management and Budget, Office of the Governor; Nico Bus, Acting Director, Support Services Division, Department of Natural Resources; Craig Tillery, Assistant Attorney General, Department of Law, Anchorage; Brenda Markey, Section Chief, Marine Highway System, Department of Transportation and Public Facilities; Bill Schoephoester, Alaska State Chamber of Commerce. SUMMARY HCR 4 Relating to records generated and maintained by the Department of Health and Social Services. HCR 4 was HELD in Committee for further consideration. 1 HB 6 "An Act amending laws relating to the disclosure of information relating to certain minors." HB 6 was HELD in Committee for further consideration. HB 63 "An Act extending the motor fuel tax exemption for fuel sold for use in jet propulsion aircraft to fuel used in those aircraft for flights that continue from a foreign country; and providing for an effective date." HB 63 was HELD in Committee for further consideration. 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. 6 "An Act amending laws relating to the disclosure of information relating to certain minors." Co-Chair Therriault provided members with Amendment 4 - 6 (copies on file). He explained that the legislation would be rescheduled. Representative Davies explained that Amendment 5 incorporates Amendment 4 by Representative Kelly. Representative Davies explained that Amendment 5 would provide that disclosure occurs if a formal petition is filed. Disclosure would not occur for minors undergoing informal adjudication. The legislation would identify offenses that mandate a petition. HB 6 was HELD in Committee for further consideration. HOUSE BILL NO. 63 "An Act extending the motor fuel tax exemption for fuel sold for use in jet propulsion aircraft to fuel used in those aircraft for flights that continue from a foreign country; and providing for an effective date." KIM ROSS, EXECUTIVE DIRECTOR, ALASKA AIR CARRIERS ASSOCIATION, ANCHORAGE testified via the teleconference 2 network. She read from written testimony (copy on file). She maintained that HB 63 would provide a tax exemption for a few select air carriers. She stated that the legislation could be unfair and encourage misuse and manipulation of the Anchorage Foreign Trade Zone. Ms. Ross expressed concerned that HB 63 would adversely impact Alaska's local domestic airline industry. She noted that the domestic industry is made up of a wide range of companies, based in Alaska, that provide service to bush communities and larger cities. Ms. Ross asserted that if HB 63 goes into effect, the State of Alaska would lose approximately $4 - $5 million dollars in annual revenues. She maintained that this revenue is earmarked for rural airport maintenance and operations costs. She alleged that this would amount to a 25 percent loss of Alaska's annual budget for operation and maintenance at rural airports. Ms. Ross acknowledged that Alaska does not have dedicated funding, but asserted that "earmarking funds" is a reality. She maintained that a $4 - $5 million dollar a year shortfall would result in increased "user fees", such as airport land lease rates and landing fees. She stated that increased costs cannot be absorbed by the domestic industry. She asserted that local Alaskan operators would be forced to pass on increased costs to the flying public and shippers. Ms. Ross acknowledged that: "Our State is facing a monstrous fiscal gap." She questioned how the general public would respond if they knew that the Legislature was considering elimination of an existing tax base. She stated that, "In essence, our State would be giving away $4 - $5 million dollars in revenue, funds that are critical to continued airport operations in rural Alaska." Ms. Ross maintained that Kurt Parkan, Deputy Commissioner, Department of Transportation and Public Facilities stated, before the House Transportation Committee, that $4 - $5 million dollars would come out of the General Fund. She acknowledged that Mr. Parkan added that there is, "no tie, no link", between fuel tax revenues and the Department of Transportation and Public Facilities' budget for rural airport maintenance and operations. She pointed out that AS 43.40.010(e) states: "... proceeds of the taxes on aviation fuel shall be paid into a special aviation fuel tax account in the state general fund. The legislature may appropriate funds from this account for 3 aviation facilities." Ms. Ross observed that CSHB 256 (TRAN), passed in 1994, added a .07 cent aviation fuel tax. She added that the legislation's preamble stated that: "The purpose of this Act is to increase the tax on aviation gasoline in an amount substantially comparable to the amount that would be derived from the Department of Transportation and Public Facilities reimposition of landing fees at rural state operated airports, and to leave this increased tax in place only so long as the commissioner of Department of Transportation and Public Facilities does not, before January 1, 2000, impose landing fees at those airports at a higher rate than was in effect on January 1, 1994." Ms. Ross asserted that the legislative intent of CSHB 256 (TRAN) was to provide a funding source for "shortfalls" in rural airports maintenance and operations budgets. She noted that the 1994 fuel tax increase was in lieu of a proposed landing fee program, which would have cost approximately 40 cents on the dollar to administer. Ms. Ross provided members with "Projected Revenue Flow" charts, used by the Department of Transportation and Public Facilities to justify the 1994 tax hike (copy on file). She maintained that the charts further depict the "tie" between aviation fuel taxes and rural airport maintenance and operations budgets. Ms. Ross observed arguments that HB 63 will create a "level playing field". She questioned if the playing field needs to be leveled. She asserted that the cost to ship foreign fuel to Anchorage offsets any tax advantage. She noted that fuel weighs 6-7 pounds per gallon. Ms. Ross asked: "What happens if a refinery in Saudi Arabia develops a new process that enables it to refine fuel 5 per gallon cheaper than MAPCO can? How do we again re-level the playing field for MAPCO?" Ms. Ross quoted a MAPCO press release to demonstrate the company's soundness: "MAPCO Reports All-Time Record Fourth Quarter and Annual EPS From Continuing Operations." She observed that MAPCO reported a record year, increased sales volumes at both the Memphis and Alaska refineries, and an annual operating profit of $63.9 million dollars for 1996. Ms. Ross disputed statements by Deputy Commissioner Parkan that competition from Vancouver, Seattle, Portland and the Russian Far East make it necessary for Alaska to develop 4 incentives to retain and attract international cargo carriers. She observed that each additional air mile adds to the fuel and operating costs of the airplane and displaces cargo at 20 to $1 per pound. She stated that "compared to these additional costs, a 3.2 per gallon tax giveaway is insignificant." Co-Chair Therriault responded to comments made by Ms. Ross. He observed that the legislation would not impact attempts by the Majority to reduce the budget by $60 million dollars. He observed that there will be a $60 million dollar reduction in spending. The legislation impacts revenues not spending. Co-Chair Therriault observed that the fiscal impact is approximately $2.8 million dollars. Ms. Ross estimated the impact at $4 - $5 million dollars. He observed that legislation has not been introduced to raise landing fees. He did not anticipate that legislation would be introduced to raise landing fees. In response to comments by Ms. Ross, Co-Chair Therriault stated that it is not appropriate for the State to "level" the playing field when the playing field is in the private sector. He maintained that it is appropriate for the State to level the playing field when there is a state governmental imposed tax, that is only imposed on in-state refineries. Co-Chair Therriault referred to Ms. Ross' testimony before the House Transportation Committee on 1/24/97: "We sympathize with Alaska's oil refineries and understand that they are struggling to compete with fuel suppliers that take advantage of loopholes written into the Foreign Trade Zone (FTZ) rule book. But let's fix the problem, not massage the symptoms." Co-Chair Therriault observed that Ms. Ross felt that the Department of Revenue should be more aggressive in collecting the tax and indicated that consumers should sue the State if they thought the tax was incorrectly collected. He quoted from a letter to Co-Chair Hanley from Deborah Vogt, Department of Revenue: "I'm confident that the conclusions reached by our staff are correct, and that we must continue to exempt fuel used in foreign commerce that is run through the FTZ." Co-Chair Therriault added that Jack Chenoweth, Alaska Legal Services stated that: 5 "I conclude that it is more probable than not, that the Federal Court, using preemption analysis, would not hesitate to invalidate a state tax, such as that excise tax on jet fuel. For that reason, I would conclude that the Department of Revenue presents the position, that more likely than not, would be sustained by the Court, if the questions were eventually litigated." Co-Chair Therriault summarized that the State would not be able to collect the tax. He pointed out that MAPCO had a good year based on strong margins in the mid South. He observed that MAPCO's press release did not say anything about strong margins for the refinery in Fairbanks. He maintained that the jet fuel market is pretty competitive. He stated that the solution of collecting the tax and litigating appears to be a "legal looser" for the State. He noted that the tax was collected, deposited in the General Fund and spent on rural airports. Representative Martin noted that there are no guarantees that a bill will not be introduced to increase landing fees. Co-Chair Therriault reiterated that tax collection as a solution has been exhausted. He observed that every unit of production, jet fuel or gasoline, has a certain amount of fixed cost. He maintained that if the increase production of jet fuel is discouraged then the fixed cost will be shifted to gasoline over heating oil. In response to a question by Representative Martin, Representative Davies clarified that the Alaska Railroad charges for hauling fuel. Representative Grussendorf asked if the Department of Transportation and Public Facilities can demonstrate that no linkage exists. KURT PARKAN, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES stated that the proof that there is no functional linkage between fuel tax and the Department's budget is contained in the proposed FY 98 operation budget short-form. He observed that there is no reference to the tax as a fund source. He acknowledged that there is a perceived connection based on the fact that the money goes into the General Fund and the legislature may expend money from that for airports. In response to a question by Representative Davies, Mr. Parkan estimated that approximately $20 million dollars was spent on rural airports. 6 Co-Chair Therriault pointed out that the tax impact has dropped. BILL SCHOEPHOESTER, DIRECTOR, ALASKA STATE CHAMBER OF COMMERCE testified in support of HB 63. He maintained that the legislation will fix a problem that gives foreign businesses an advantage over Alaskan businesses. He observed that Foreign Trade Zones (FTZ) have been established to encourage value-added processing in Alaska for items bound for foreign destinations. There are several FTZ locations in Alaska, including Anchorage. During 1996, several loads of foreign refined jet fuel came into the Anchorage Airport fueling system for use under the FTZ. Because of its foreign status, this fuel was exempt from state fuel taxes, allowing it to be sold at a lower price. He maintained that in-state refiners are at a disadvantage. Tax-free foreign jet fuel can be sold in any FTZ. He asserted that the objective in promoting international flights in Alaska is to promote Alaskan business. Representative Martin noted that refineries receive a credit for gasohol. He observed that Anchorage is the only community that uses gasohol year-around. Mr. Schoephoester stated that the State Chamber of Commerce looks at HB 63 as a fix to unequal taxation of businesses competing in the same market. Representative Martin responded that MAPCO receives a lot of state subsidizes. Mr. Schoephoester stressed that he supports FTZ's when they are used for value-added products. He maintained that there is no value-added product. He asserted that a loophole in the FTZ provision is being used to gain a tax advantage. In response to comments by Representative Martin, Mr. Schoephoester observed that the State of Alaska does not produce enough jet fuel to fill its needs. He reiterated that there are two different groups competing in the same market, selling the same product to the same customer, one is taxed and one is not taxed. Co-Chair Therriault observed that the motoring public in the State of Alaska, except for those in Anchorage, pays a tax to help support the road network. He emphasized that Anchorage is not being asked to pay a new tax. Anchorage is only being asked to pay the same tax that the rest of the state pays, "not a penny more and not a penny less, just the same tax." HB 63 was HELD in Committee for further consideration. HOUSE BILL NO. 113 7 "An Act extending lapse dates for certain prior year appropriations; making supplemental, capital, and special appropriations; and providing for an effective date." ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR provided members with a summary of proposed changes (copy on file). She referred to the RPL process. She observed that the legislative and administrative branches have initiated reforms to reduce federal and program receipts in an attempt to match authorization to actual expenditures. She cautioned that as authorization for program and federal receipts are tightened; that agencies will have less flexibility to go forward with new items during the year. She noted that the Administration is holding federal funds for distribution to school districts. The funds cannot be distributed until authority is granted. She stressed that the Administration is willing to come to some comfortable accommodation on how to handle mid-year adjustments. Ms. McConnell referred to appropriations for the Office of Public Advocacy, the Public Defender Agency and leasing. She observed that the Legislature indicated that these items should not receive the full year's funding. Shortfalls would be augmented through the supplemental. Accordingly, the full amount projected for these budgets was not included in the proposed FY 98 operating budget. She observed that FY 98 supplemental estimates reflect this approach. She cautioned that, if the FY 97 supplemental is only approved at the proposed FY 98 operating budget level, that there will be a shortfall. Ms. McConnell observed that the supplemental contains requests for several capital projects that the Administration feels are urgent. She stressed that if these projects are not included in the supplemental they need to be included in the FY 98 capital budget. Ms. McConnell noted that there is a supplemental request reflecting increased applicants for the Permanent Fund Dividend program. She observed that the Public Safety Training Academy facility has been a high priority of the Department's. Sitka will be involved in financing the project. She observed that the project will be funded with Alaska Housing Finance Corporation (AHFC) receipts ($2.1 million dollars) that were not used in FY 97. DEPARTMENT OF PUBLIC SAFETY Section 10 8 Lapse dates for Village Public Safety Officers (VPSO) contracts KENNETH BISCHOFF, DIRECTOR, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF PUBLIC SAFETY explained that this request would provide a management tool, to manage contracts with Native non-profits. Funds would be used in the following fiscal year to fill vacant VPSO positions. The goal of the Administration is to fill as many positions as necessary. The carry-forward is estimated at $200 - $250 thousand dollars. Co-Chair Therriault questioned why the funds were not used in the previous fiscal year. Mr. Bischoff observed that the Department does not generally lapse very much money. He stressed that, toward the end of the year, position turnover and the inability to fill positions result in carry-forward. He clarified that the $300 thousand dollar increment in the Governor's proposed FY 98 budget would fill 7 - 8 vacancies. The carry-forward would allow 10 vacancies to be filled. Co-Chair Therriault expressed frustration with the public perception that the Legislature is not adequately funding public safety. He noted that there is an excess in the VSPO program. He observed that the Legislature authorized extra troopers in FY 97. He pointed out that some of the troopers authorized by the Legislature have not been hired. MISCELLANEOUS Section 12 AKSAS Cleanup DAN SPENCER, SENIOR ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR explained that Section 12 is a technical request that does not require an expenditure. He reviewed some of the transactions. Co-Chair Hanley noted that the Governor has submitted an amended request for this section. DEPARTMENT OF REVENUE Section 12 $31 thousand dollars - Treasury Management ROSS KINNEY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE observed that the request would be utilized to pay management fees on equity investments for the Constitutional Budget Reserve Fund (CBR). He observed that the Legislature 9 approved legislation directing the Department to look at the asset allocation of the Constitutional Budget Reserve Fund in order to increase the expected rate of return. The legislation also gave the Commissioner the opportunity to determine if the asset allocation should be transferred to the Permanent Fund for investment. No money was appropriated to pay equity management fees. He noted that 26 percent of the total portfolio would be invested. The equity investment management fees would be one basis point of the total portfolio under management. This equates to one one-hundredths of a percent. He maintained that this is a reasonable fee. He noted that the cost of the management fee could be reduced by $6 thousand dollars per month while "we wait". He added that: "If the Legislature is willing to approve the funds to meet that asset allocation, invest a portion of equities in FY 97, we will be coming back to the Legislature with a request to our FY 98 budget, in the amount of $100 thousand dollars to continue those management fees for a full fiscal year." In response to a question by Co-Chair Hanley, Mr. Kinney clarified that the Administration would like to see a long- range plan. He asked the Legislature to agree to the concept of long-term investment and put a portion of this money into equities. Co-Chair Hanley stated that he would have expected the Administration to include this money in its FY 98 budget. Mr. Kinney noted that other legislation has been introduced that would allocate a portion of the Constitutional Budget Reserve Fund for other purposes. Should one of these bills pass it would have an impact on the proposed asset allocation. Representative Davies questioned how much money could be earned based on the change. Mr. Kinney estimated that the expected rate of return, on the total CBR, would be 7.19 percent over-time. The current rate of return is 6.26. He observed that the Constitutional Budget Reserve Fund is expected to be over $3 billion dollars by the end of the year. Representative Davies asked why the management fee is not taken out of the Constitutional Budget Reserve Fund. Mr. Kinney explained that the management fee was taken out of the CBR prior to FY 97. Since FY 97, fees have been taken out of the General Fund. Co-Chair Hanley observed that a three-quarter vote is needed to appropriate management fees from the Fund. He explained that there was concern that a transfer of expenses, off budget, to the Constitutional 10 Budget Reserve Fund, would create the illusion that spending was reduced. Representative Davies asserted that there is no appropriation from the Fund that would be more appropriate than management of the Fund. Co-Chair Hanley emphasized that the request will not displace anything. Co-Chair Therriault pointed out that the management fee would have to be repaid if the sweep provision is implemented. DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES Section 13 $391.4 thousand dollars - Alaska Marine Highway System NANCY SLAGLE, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES explained that the request would pay for increased fuel costs. She observed that the Alaska Marine Highway System is dependent on fuel costs. She stated that Southeast ferry operations require 7 million gallons annually. The FY 97 budget was based on a .74 cents per gallon fuel cost. The current price is .85 cents per gallon. Co-Chair Therriault asked if money appropriated for fuel is ever lapsed. Ms. Slagle stated that authority is lapsed. BRENDA MARKEY, SECTION CHIEF, ALASKA MARINE HIGHWAY SYSTEM, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES agreed that authorization is lapsed. She discussed factors that create unforeseen expenses. She noted that fuel prices fluctuate within fueling locations. Fuel bought in Sitka is twice as expensive as fuel bought in Bellingham. Co-Chair Hanley noted that fall revenues were $800 thousand dollars over what was estimated for FY 97. He questioned why this money does not offset the increased fuel cost. Ms. Markey observed that, in FY 96, there was a significant loss in revenues due to the threatened strike. She observed that the threat of a strike has begun to affect FY 97 revenues. Some reservations have been cancelled. Co-Chair Hanley emphasized that the supplemental is not intended to offset budget reductions. Ms. Slagle noted that "Fund" needed to be added on line 5. 11 (Tape Change, HFC 97-57, Side 1) GOVERNOR'S AMENDMENTS The Office of the Governor provided members with amendment requests to be included in HB 113. Requests for amendment were contained in memorandums from the Office of Management and Budget to the House Finance Committee Co-Chairs, dated 2/27/97, 3/5/97, 3/7/97 and 3/11/97 (copies on file). AMENDMENT REQUESTS IN THE FEBRUARY 27, 1997, MEMORANDUM DEPARTMENT OF FISH AND GAME Mr. Spencer observed that the Governor's amendment would appropriate $115 thousand dollars to the Department of Fish and Game for representation by the Department of Law. Section 8 Mr. Spencer noted miscellaneous claims in section 8 were up-dated. Section 11 Mr. Spencer observed that ratifications in section 11 were amended. AMENDMENT REQUESTS IN THE MARCH 5, 1997, MEMORANDUM DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT GUY BELL, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT observed that a request for a new section was contained in the memorandum, dated 3/5/97. This request would add $60 thousand dollars to coordinate response to the Southeast Alaska pulp mill closures. He observed that one person would be hired as a point person in Ketchikan. The request would cover personnel cost through the end of the year and basic office expenses and travel costs. There is $15 thousand dollars to contract for targeted technical assistance to small timber businesses in the impacted communities. Co-Chair Hanley noted that the Legislative Budget and Audit Committee granted a RPL for $55 thousand dollars to fund a community involvement plan. He asked for more information on the RPL. Mr. Bell did not know how the RPL was used. DEPARTMENT OF LAW 12 Co-Chair Hanley noted that there is a request to delete section 6(a), which informs the Legislature that funds to the Department of Law were encumbered. He stated that he would prefer to leave section 6(a) in HB 113. Mr. Spencer noted that most of the encumbered funds had been spent. Co-Chair Hanley observed that the Governor has requested three additional subsections in section 6. Mr. Spencer explained that 6(c) - (e) would shift general fund program receipts to general fund match in the Medicaid/Provider Fraud appropriation. Co-Chair Hanley observed that there was an anticipation that funding spent on fraud investigation would result in an offset of payments. Mr. Spencer emphasized that the request would leverage federal receipts. Co-Chair Hanley asked if anticipated savings materialized. DEPARTMENT OF MILITARY AND VETERANS AFFAIRS Section 7 Mr. Spencer noted that the request would provide receipt authority for $17.2 thousand dollars in flood insurance premiums. Co-Chair Hanley noted that the premium has to be administered through the Department. Representative Martin noted that the Legislature approved a $2.5 million dollar appropriation to assist in fire relief. NICO BUS, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES observed that premiums are good for three years. There are 86 persons applying for the coverage. DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES Section 13 NANCY SLAGLE, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES observed that the Governor has requested an amendment to add $444.5 thousand dollars to the Department of Transportation and Public Facilities for implementation of the Copper River Highway Consent Decree. She observed that $40 thousand dollars was included in the FY 96 supplemental request to pay attorney fees. She explained that if the Consent Decree is not complied with, the State can be fined $1,000 thousand dollars a day. She observed that the request would fund: * Restoration plan development - $43.5 thousand 13 dollars * Restoration project - $170 thousand dollars * Historic issues - $201 thousand dollars * Training - $30 thousand dollars In response to a question by Co-Chair Hanley, Ms. Slagle observed that the request was not funded in FY 97. She noted that the Department has implemented public service announcements at little cost. She stressed that the request is needed to stay within the requirements of the Consent Decree. She added that $400 thousand dollars for environmental issues was not included in this request. This amount will be requested prior to September, 1998. CRAIG TILLERY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW testified via the teleconference network. He explained that the Legislature did not fund the request in FY 97 because restoration requirements did not need to be complied with until fall 1997. He added that the cost has been reduced. Some of the items that were to be restored do not exist anymore, due to movement of the Copper River. Mr. Tillery clarified that the Administration entered the Consent Decree because it felt that the litigation exposure was in excess of the amount that the State would be required to pay under the Consent Decree. He observed that negotiations eliminated requirements for restoration of projects on the southern end of the road. He explained that the issue began in 1991 when the rail bed was converted into a road. Mr. Tillery observed that the State would go back to court if the Legislature fails to provide funding to carry out the Consent Decree. The State could be forced to pay a substantially greater amount. He added that under the Consent Decree funding would remain in the State of Alaska. If the issue is settled in court the State would pay the federal government and funding would not remain in the State. Mr. Tillery noted that $450 thousand dollars will be required for future projects. These are in addition to this request. He discussed other projects that the money will cover. The Trustees for Alaska introduced the initial lawsuit. The state lawsuit was dismissed. GOVERNOR'S AMENDMENTS CONTAINED IN THE MARCH 7, 1997, MEMORANDUM 14 DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT Mr. Bell noted that the Governor has requested that $5 million dollars be appropriated to the Alaska Aerospace Development Corporation for the Kodiak Launch project. This request was originally contained in the FY 98 capital request. The transfer was requested to allow construction to begin, summer 1997. The request would also approve $18 million dollars in federal receipt authority and $5 million dollars in corporate receipts. He added that the request would make authorization retroactive to July 1, 1996. This would prevent the grant from having to be reissued. In response to comments by Representative Martin, Co-Chair Hanley explained that the original intent was that there would be $5 million dollars from the Alaska Science and Technology Foundation and up to $15 million dollars from the Alaska Industrial Development and Export Authority (AIDEA) as a loan. He observed that AIDEA is no longer involved. Senator Stevens was able to include federal funding to replace the AIDEA portion. Funding from the Alaska Science and Technology Foundation is contingent on federal funding. Mr. Bell noted that there are federal commitments from the federal government and NASA. There is also interest from private industry. JAMIE KENNEWICK, ALASKA SCIENCE AND TECHNOLOGY FOUNDATION testified via the teleconference network. She spoke in support of the request. RPL'S The 3/7/97 memorandum listed RPL's for approval in the supplemental. Co-Chair Hanley sent at letter to Annalee McConnell, Director, Office of Management and Budget, Office of the Governor discussing RPL's which occur during the legislative session. He observed that unless there is a timing issue, that RPL's should be considered through the committee process during the legislative session. In response to a question by Co-Chair Hanley, Mr. Spencer noted that federal funds are available to be distributed to the Department of Education. He emphasized that there needs to be more discussion regarding what constitutes the need for immediate action. Co-Chair Hanley requested more information to determine when action must take place on available federal funds. Mr. Spencer noted that costs will increase for the Council of Domestic Violence if their RPL 15 is not approved. Co-Chair Hanley noted that RPL requests include program receipt authorization. Mr. Spencer observed that the Alaska State Museum received $30 thousand dollars in unanticipated program receipts. He reviewed RPL requests for authorization of program receipts. (Tape Change, HFC 97-57, Side 2) GOVERNOR'S AMENDMENTS CONTAINED IN THE MARCH 7, 1997, MEMORANDUM DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT Co-Chair Hanley reviewed the Governor's amendment request as contained in a memorandum, dated 3/11/97. He noted that the amendment contains a funding request for $1.5 million dollars to fund the Power Cost Equalization program. DEPARTMENT OF REVENUE The amendment also included a request of $3.35 million dollars to be appropriated from the Earnings Reserve Account to cover additional permanent fund dividend payments. There is a backlog of 700 cases in informal conferences. DEPARTMENT OF PUBLIC SAFETY Co-Chair Hanley observed that the Governor is requesting $2.104 million dollars in Alaska Housing Finance Corporation (AHFC) corporate receipts for construction of a Public Safety Training Academy in Sitka. Mr. Spencer observed that the corporate receipts are available from the FY 97 AHFC earnings. He explained that $60 thousand dollars would be reappropriated for the project. Co-Chair Hanley thought that all of the AHFC corporate receipts were appropriated. Representative Davis pointed out that this item was not considered in the Department of Public Safety Subcommittee. Mr. Bischoff stressed that the project has been on the Department's six-year plan for several years. He observed this was not the Department's top priority. He emphasized that official agency approval was needed before the project could be brought to the Legislature. He stated that the project just received agency approval. He observed that the project originated in the last Administration. Co-Chair Hanley questioned if the $2.1 million dollars in 16 AHFC corporate receipts would lapse. He stated that if the money does not lapse that it would be more appropriate for the project to be contained in the capital request. Mr. Spencer stressed that Sitka is one of the Southeast communities that experienced adverse affects from mill closures. Representative Grussendorf pointed out that the Sitka Academy building is 21 years old. He emphasized that there are more women that would like to apply at the academy. Only six to ten women can attend the academy at any given time. HB 113 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:06 p.m. 17