HOUSE FINANCE COMMITTEE January 15, 2002 1:56 PM TAPE HFC 02 - 1, Side A TAPE HFC 02 - 1, Side B TAPE HFC 02 - 2, Side A TAPE HFC 02 - 2, Side B CALL TO ORDER Co-Chair Mulder called the House Finance Committee meeting to order at 1:56 PM. MEMBERS PRESENT Representative Eldon Mulder, Co-Chair Representative Bill Williams, Co-Chair Representative Con Bunde, Vice-Chair Representative Eric Croft Representative John Davies Representative Richard Foster Representative John Harris Representative Bill Hudson Representative Ken Lancaster Representative Jim Whitaker MEMBERS ABSENT Representative Carl Moses ALSO PRESENT Representative John Coghill; Adjutant General BG Phil Oates, Commissioner, Department of Military and Veterans Affairs; Jim Duncan, Commissioner, Department of Administration; Pat Pourchot, Commissioner, Department of Natural Resources; Alison Elgee, Deputy Commissioner, Department of Administration; Dan Spencer, Director, Division of Administrative Services, Department of Administration; Mark Myers, Director, Division of Oil and Gas, Department of Natural Resources. PRESENT VIA TELECONFERENCE There were no teleconference participants. GENERAL SUBJECT(S): Mission and Measures reports: Military and Veterans Affairs Department of Natural Resources Department of Natural Resources The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 22nd Legislative Session, contact 465- 2156. After the 22nd Legislative Session they will be available through the Legislative Library at 465-3808.  LOG SPEAKER DISCUSSION  TAPE HFC 02 - 1 MILITARY AND VETERANS AFFAIRS  SIDE A  000 CO-CHAIR MULDER Welcomed members and observed that the purpose of the meeting was to review the performance of the agencies over the past year and to see how state resources appropriated by the Legislature were used.  178 ADJUTANT GENERAL BG Thanked the Committee and Co-Chair Mulder PHIL OATES, for their support of the 24-hour a day COMMISSIONER, State Emergency Coordination Center. The DEPARTMENT OF resources into the facility helped to MILITARY AND protect the lives, health and safety of VETERANS AFFAIRS Alaskans.  268 Commissioner Oates He reviewed the department's mission statement. He noted that the mission is to respond to emergencies, provide homeland security, be prepared for war, and work with disadvantage youth through the youth challenge program. The state has built a successful model for the nation.  397 Commissioner Oates Provided members with a summary of the Military and Veterans Affairs' performance measures (copy on file). He reviewed the National Guard's military efficiency and readiness. Discussed the efforts of the National Guard on 9/11/01. He concluded that they were efficient and ready for the emergency. All missions and deployments were accomplished with no loss of life.  618 Commissioner Oates Reviewed the second measure: adequacy of response time for each emergency. Concluded that the response time has been good and lives have been saved. Short response is 30 minutes, the medium response is 1 hour and 45 minutes and the long response is 3 hours and 30 minutes from notification. There were 51 search and research missions. They performed 289 rescues and saved 100 lives.  670 Commissioner Oates Discussed measure 3: number of persons assisted during actual events. He noted that the National Guard assists all  Alaskans in terms of: air sovereignty and defense, counter drug operation, and the Youth Corps.  Commissioner Oates Recruitment and retention goals were meet and exceeded. There is renewed interest in joining the Guard. They are trying to restore membership in rural Alaska. Nome and Kotzebue are on the list to receive Junior Army ROTC.  775 Commissioner Oates Gave examples of new missions. Discussed space surveillance and security at the Clear Air Station and the Alaska North American Aerospace Defense Command. The strategic airlift mission is questionable. Discussion is occurring regarding whether it would be active guard.  958 Commissioner Oates He noted that there were no days lost due to facility related injuries at the Alaska National Guard. The facility cost per square foot dropped from $3.21 to $2.31 dollars. The cost per person also dropped from $5.87 to $3.83 dollars. There was a savings of 18 percent in fuel costs.  1014 Commissioner Oates Discussed educational benefits. He noted that 132 guard and naval militia received tuition assistance from the state. Over the past two years 324 guard members have attended the university.  1028 Commissioner Oates Discussed the Alaska Military Youth Academy. He noted that the cadets are doing well and their achievements are better than the national average.  1143 Commissioner Oates Discussed veterans' benefits. He noted that the state's contribution of $540 thousand dollars resulted in $29.8 million dollars in increased benefits to Alaskan veterans. He observed that veterans are contacting the Veterans' Services and are being served in rural areas.  1225 Commissioner Oates Discussed disaster planning and control. He noted that every incident resulted in an after action report which improved their ability to communicate and operate. All the existing disasters will be closed out in the current fiscal year unless something unforeseen occurs.  1265 Commissioner Oates Reviewed the number of persons assisted during national events. There were 64,348 Alaskans directly assisted. He noted that 1,103,338 other Alaskans were assisted  during non-disaster events.  1292 Commissioner Oates He reviewed updates to the state emergency plan. The plan is consistent with Federal Emergency Management Agency (FEMA) requirements.  1315 REPRESENTATIVE CROFT Questioned if the intent is to have frequent updates.  1332 Commissioner Oates Responded that the plan needs to be updated to respond to the changing climate after 9/11/01.  1353Commissioner Oates Discussed reporting requirements and the ` costs per department. Total expenditures were $2,795,720 million dollars excluding disaster relief. No late penalties were assessed and the average vendor time was 20 days. There were no audit exceptions.  1399 Commissioner Oates Discussed deferred maintenance. There was a net reduction of 2.6 percent. However, there is a backlog of $21.8 million dollars. Without additional funding there will not be a 5 percent reduction in the backlog.  1436 Commissioner Oates Concluded that the department has done a good job.  1447 Representative Complimented the Commissioner and asked Hudson for him to repeat the number of persons assisted.  1501 Commissioner Oates Explained that the number of persons assisted during actual events were 64,348. He noted that assistance was also provided during 9 significant events including the Special Olympics and the mock preparation of weapons of mass destruction attacks. The total number of persons that participated during these events was 1,103,438.  1514 Vice-Chair Bunde Noted that approximately 10 percent of the population was assisted directly by the National Guard. He questioned how this compared to other states.  1583 Commissioner Oates Noted that Alaska is prone to emergency situations. He observed that the 24-hour a day emergency coordination center was vital to the department's ability to get out of the blocks.  1658 Vice-Chair Bunde Acknowledged that Alaskan lifestyle and geography offer lots of opportunities for their expertise. He noted that this accounts for some of the difference in the per capita state between Alaska and other states. He questioned the coverage available to the state.  1724 Commissioner Oates Acknowledged that it is stretched with resources that have been deployed in response to 9/11/01. He observed that the National Guard has become more professional, but emphasized that they are doing more.  1805 Commissioner Oates Noted that new full time jobs are being created. The National Guard has taken up more duties, which has freed active duty forces.  1846 Vice-Chair Bunde Questioned if rescued missions can be covered with the current call up.  1867 Commissioner Oates Affirmed that emergency search and rescue missions can be covered under the current call up.  1888 Vice-Chair Bunde Asked for information regarding where the work is being focused.  1908 Commissioner Oates Noted that increased security has resulted in an increase in drug seizures at airports. The National Guard provides resources for agencies working with drug enforcement. He stated that he would provide geographical background.  1957 Representative Questioned if the Guard is having Foster difficulty filling their recruitment.  1985 Commissioner Oates Responded that they have not had difficulty filling spots. They try to locate guardsmen in their home areas.  2016 Commissioner Oates Discussed housing for guardsmen.  2036 Commissioner Oates Noted that the federal government is currently paying guardsmen as a result of 9/11/01 call-ups. He observed that additional training has been necessary for work in public buildings.  2110 Commissioner Oates Discussed the scout group. They are a model for homeland security. He recommended that federal funding be available for future national concerns with identification of areas of coverage.  2201 Representative John Questioned what are the key elements of Davies homeland security.  2213 Commissioner Oates Stressed the need for systems to be in place for reaction such as better intelligence apparatus and linkage with FBI and federal entities. He noted the importance of the ability to communicate. It is important to have strong public health and safety coverage, which are the first responders. Police and firemen are often the first on site.  2300 Commissioner Oates Referred to the Office of Homeland Security and stressed that they must have  the ability to work with federal government for funding.  2321 Commissioner Oates Noted that they are working for changes that will make them more capable of responding. He noted that there is not much time to react to a terrorist attack. The biggest shortfall is in public health   TAPE HFC 02 - 1, Side B  030 Commissioner Oates He asked the Committee to imagine an emergency situation where there were not sufficient resources to treat all of the injured.  085 Representative John Asked what other kinds of threats are Davies waiting and if we are ready.  121 Commissioner Oates Emphasized that the Guard is the best place for homeland security. He stressed that the Guard needs to move away from a cold war formation of large armored actions to lighter, smaller units. The Guard's mission to protect critical sites. The State needs to look over key utilities and assets such as the Valdez terminal to determine responsibility for response and determine availability for assistance. Contingency plans have been developed in relation to the Trans Alaska Pipeline and the terminal at Valdez, but there needs to be an operation plan for all key assets, which identifies the threat level and response.  410 Commissioner Oates Observed that the challenge is to protect resources. Most of the legislation introduced by the Governor deals with the ability to respond to increased threats and to provide penalties for hoaxes or other things that require response.  559 Representative Asked if there is overlap or duplication Lancaster of services.  611 Commissioner Oates Responded that duplication is needed in terms of communication. He felt that the department is on target. He pointed out that the department brings in funds.  685 Representative Noted that he worked with search and Hudson rescue. He questioned if the missions and measures need to be reviewed in response to changes toward homeland security. He noted that the boating safety legislation envisioned that the National Guard would work with the Coast Guard.  767 Commissioner Oates Stressed that he is a champion of increases in Coast Guard budget. He pointed out that homeland security needs to operate on an interagency fashion.  DEPARTMENT OF ADMINISTRATION  904 JIM DUNCAN, Reviewed the department's mission. He COMMISSIONER, noted that the department touches all DEPARTMENT OF Alaskans through its four divisions.  ADMINISTRATION 1026 Commissioner Duncan HB 250 contains 59 measurements for the Department of Administration. He highlighted their performance measures and noted that the department is working to improve their performance measures.  1109 Commissioner Duncan Reviewed successes and stressed that the intent is to provide better services. He noted that the Information Technology Group (ITG) downtime for the mainframe computer system was less than 1 percent. He explained that downtime for telecommunications is harder to measure since there are many different telecommunication systems.  1171 Commissioner Duncan Discussed state partnership with the private sector. The state signed a five- year partnership with Alaska Communications Services Group (ACS). ACS will invest $29 million dollars at no additional cost to the state. He pointed out that Alaska is the only state in a partnership agreement with a private vendor. He thought that ACS would develop innovative ways to reduce downtime for communities that rely on public television and radio services.  1414 Commissioner Duncan Reviewed measures for the Division of Personnel. He noted that disputes are inherent in any large organization. Their goal is to reduce grievances to 50 percent.  1637 Commissioner Duncan Discussed measured for the Division of Finance. The Division's mission is to provide accountability. The department implemented the "One Card Alaska" program. The state entered into a long- term contract with the First National Bank of Alaska to provide credit card services to consolidate purchasing of state agencies.  1717 Commissioner Duncan There are separate contracts for purchasing cards and travel cards. Those are not with Alaska institutions. The program provides flexibility for agency needs. Conversion begins in March. It has served the agencies well.  1755 Representative Asked if the state would receive the Hudson mileage.  1767 Commissioner Duncan Replied that the state does not receive mileage and pointed out that it was not part of the requirement for that proposal.  1793 Co-Chair Mulder Thought it would be a competitive interest rate.  1804 Commissioner Duncan Stated that there was no cost to the state and emphasized that it would employ Alaskans.  1820 Commissioner Duncan Discussed measures for the Division of Motor Vehicles and concluded that the Division is doing a good job. The first two performance measures are the number of complaints versus the wait lines. Web- cams have helped with these measures and lines have been decreased.  1879 Commissioner Duncan He noted that there were 80,000 hits on the website. Many people have complimented the Division on the use of the web cam. They also have an active email site. Web mark site and personal license sites are available. Wait time has been reduced.  1927 Commissioner Duncan Observed that customers have positively received the new Benson Office. There are no lines in the Benson office. People can sit down and wait for their numbers to be called and the office is well staffed.  2003 Representative John Referred to the joint trainings in the Davies Division of Personnel. He stressed that training is an on-going requirement.  2041 Commissioner Duncan Recognized the need to continue training. There will be annual training.  2060 Mr. Spencer Explained that the training is a joint interaction between state and union employees.  2082 Commissioner Duncan Discussed the Procurement Certification Program. More than 1,000 state employees have attended procurement training over the past year. He stressed that the training would address violations of the Procurement Code.  2136 Commissioner Duncan Noted that legislation was passed in the previous session to establish the Public Building Fund. The Division took over the operation and maintenance of 8 state- owned office buildings.  2160 Commissioner Duncan Explained that the Department of Administration can charge building costs to the appropriated department. He pointed out that it is important to do the day-to-day maintenance. There  continues to be a large backlog of deferred maintenance.  2224 Commissioner Duncan There is only one agency charged with helping state programs to find building space. He noted that all tenants pay leasing costs. This allows the state to charge non-general fund programs to their share of building maintenance costs.  2236 Commissioner Duncan Discussed performance measures for the Pioneers' Home. He emphasized that the homes provide direct public services. He referred to a New York times articles (copy on file) noting how Alaska protects its elderly through its pioneer homes.  2292 Commissioner Duncan He observed that the medication error rates are much lower than national average. There are 85 - 88 vacancies in the homes. The average age resident is over 87.  2324 Commissioner Duncan He observed that there is a proposal to recognize veterans and to give them preference in the homes.  2351 Representative Croft Referred to the 2 - 6 percent injury rate.  TAPE HFC 02 - 2, Side A  012 DAN SPENCER, Explained that the rate is in DIRECTOR, DIVISION relationship to injuries in facilities. OF ADMINISTRATIVE It is on the high end of an acceptable SERVICES, DEPARTMENT rate.  OF ADMINISTRATION 082 Representative Referred to Alaska hire. He questioned if Hudson the Department of Administration is the agency to address Alaska hire.  131 ALISON ELGEE, DEPUTY Pointed out that the Department of COMMISSIONER, Community and Economic Development DEPARTMENT OF administers the Buy Alaska Program and ADMINISTRATION noted that the Department of Labor and Workforce Development monitors Alaska hire.  270 Commissioner Duncan Pointed out that Workplace Alaska specifies which jobs are open to non- residents.  311 Ms. Elgee Observed that state rules are clear that there is an in-state hiring preference. There is no ability to influence Alaska hire in the private sector.  417 Commissioner Duncan In response to a question by Representative Lancaster, discussed efficiencies in the telecommunications partnership with the private sector.  518 Co-Chair Mulder Questioned how ACS would affect public radio.  568 Commissioner Duncan Explained that ACS will be responsible for maintaining the 270 earth stations around the state.  593 Mr. Spencer Clarified that most rural areas do not have other radio contact.  DEPARTMENT OF NATURAL RESOURCES  648 PAT POURCHOT, Reviewed the mission for the Department COMMISSIONER, of Natural Resources and concluded that DEPARTMENT OF they have meet targets for most of their NATURAL RESOURCES 44 measures.  768 Commissioner Noted that the department has continued Pourchot to expand the use of technology.  818 Commissioner Observed that the department still has Pourchot some challenges in meeting some of the measures, especially in attracting and retaining personnel. They are undertaking classification studies. He noted that some successes have become challenges. Increased oil and gas activities have led to new backlogs in processing and regulating of the high volume of leases and permits. Increased park visitations has created management and deferred maintenance problems.  953 Commissioner Discussed the average time to respond to Pourchot appeals and reconsiderations. He noted that the average time was 29.2 days.  1015 Commissioner Reviewed the measure of compliance with Pourchot area wide licensing. The department met the measure with four area wide lease sales. In addition, the department is in final considerations of 2 exploration licenses. There were 104 shallow gas leases awarded.  1070 Commissioner Discussed the North Slope Foot Hills Pourchot sale. It was the largest acreage sale leased to date. There has been a dramatic increase in lease sales.  1118 Commissioner Reviewed seismic Data status. There has Pourchot been dramatic progress in acquiring 2D line miles and 3D square miles.  1194 Commissioner Title work delays have been problematic. Pourchot The department has a target of four months for title work.  1249 Co-Chair Mulder Asked if there is a measurement on the time.  1282 Commissioner Responded that there is currently no Pourchot legislative measure.  1288 Co-Chair Mulder Pointed out that lease transfers are time consuming. He stressed that they anticipate that the increased licensing and title workload will continue.  1328 Commissioner In response to a question by Pourchot Representative Whitaker, explained that title delays result in a loss to the state in deferment of bonus bids and rental fees. There was a $10 million dollar loss in potential resulting from delayed titles. The state only operates on state lands and the work is done in house.  1411 Co-Chair Mulder Questioned what can be done to address the delay.  1466 Commissioner Last year the department had a backlog on Pourchot title assignments. The new backlog is in response to a renewed interest in leasing.  1494 Commissioner Oil and gas revenues were increased by 10 Pourchot percent. He acknowledged that the price of oil accounted for much of the increase but noted that skilled staff assisted in this increase. A TAPS difference of .05 cents could result in a $4 million dollar increase.  1585 Commissioner Discussed new and assigned gas rights. Pourchot There were 1,356 assignments processed in FY01. He noted that there is increasing satellite development, meeting declines in other fields. An expanded Point Thompson unit was approved. The state's royalty share was increased and the gas field is on tract for development. He explained that Exxon has a 30 percent share.  1714 Representative Croft Questioned benchmarks to indicate exploration is proceeding.  1764 Mark Myers, Explained that exploration drilling will Director, Division take place in the Point Thompson unit; an of Oil and Gas, exploratory well must take place in one Department of year. They must initiate drilling by 2006 Natural Resources and have 8 wells by 2008. There is an aggressive one-year plan for development. There are penalties if they do not proceed. The royalty percentage was increased from 16 to 20 percent.  1880 Representative Noted that there are significant specific Whitaker penalties if benchmarks are not met.  1915 Mr. Myers Explained that there is a $27.5 million dollar penalty if the development drilling is not done. The work commitment was given a high value. The intent was to have firm commitments in order to avoid litigation if the work commitment is not met.  1953 Representative Felt that the Division did a good job in  Whitaker its negotiations.  1966 Representative John Referred to BP's declining role in the Davies North Slope. He questioned if there are things to be done to encourage explorations by others.  2008 Commissioner Expressed the hope that tracts that are Pourchot not being explored would come back to the state or be leased to other players. He observed that there are commercially viable tracts that are not being developed.  2094 Representative John Questioned if there are sufficient Davies incentives to attract exploration.  2107 Mr. Myers Responded that the tremendous potential of Alaska is the first key. The increase of 3D sizing has helped. Reasonable access is needed. Access will also be a huge issue with a potential gas line. The department has strived to work with new companies to educate them in how to obtain leases, etc. He cautioned that in regards to financial incentives that good wells get drilled and bad wells get subsidies.  2269 Commissioner Noted that there is a tie in with federal Pourchot programs. Tariff structures can be in trust. He did not have any specific legislative recommendations to encourage development.  2342 Mr. Myers In response to a question by Representative John Davies, stressed that infrastructure facilities are not regulated. Facilities can be made into a profit center in relation to competition with competitors.  TAPE HFC 02 - 2, Side B  013 Commissioner Discussed page 20 of summary: conveyance Pourchot of land to municipalities. He noted that the department transferred 16,677 acres. The annual target is 12,000 acres. There are 600,000 acres of municipal entitlement remaining.  174 Representative John Noted that municipalities are not always Davies in a hurry to receive their entitlements.  246 Commissioner Observed that communities that have the Pourchot majority of their entitlements may want to proceed slowly in order to assess their needs and opportunities.  351 Representative Questioned if municipal entitlements Lancaster would exacerbate the title difficulties.  397 Commissioner Acknowledged that there would be some Pourchot affect on title work, though it rests  with land and water.  439 Commissioner Reviewed the number of acres sold and Pourchot revenue generated. There will be 25,000 subdivision tracts offered in FY02 and 300 remote cabin sites. This is a 1,000 percent increase from FY01. There has been a significant increase in acres of land available for sale. The state will have "run the course" for a lot of the re-offers of older tracts defaulted to the state or not sold by FY03.  563 Co-Chair Mulder Felt that it was a good program.  615 Commissioner The current land disposal program Pourchot generated $2.8 million dollars back into the land disposal income account. The fund balance exceeds the prediction of two years ago.  640 Commissioner Discussed the number of water right Pourchot applications processed. He noted that this item was a problem in the previous fiscal year. He noted that a court decision threaten the viability of the temporary water permits. The department offered suggestions for improvements, which were adopted by the previous legislature. Statutory changes to clarify the temporary water permit authority and to authorize a fee system were adopted with a one-year sunset. Regulations for streamlining are out for public review. They hope to meet the target of 60 days for water rights and 20 days for temporary water rights.  822 Commissioner Reviewed visits to the park system. He Pourchot concluded that visits are up and the department resources are stretched.  878 Representative Croft Questioned if park visits will continue to increase in the light of 9/11/01.  900 Commissioner Pointed out that 80 percent of the visits Pourchot are from in state residents. He noted that national parks visitation is up after 9/11/01.  962 Representative Questioned if a head tax should be Hudson implemented.  988 Commissioner Clarified that there are several fees in Pourchot place.  1141 Commissioner In response to a question by Co-Chair Pourchot Williams, Commissioner Pourchot observed that the state tries not to compete with the private sector.  1244 Commissioner Reviewed the level of deferred Pourchot maintenance in park sites. He noted that  the state is falling behind in addressing deferred maintenance needs. Deferred maintenance needs are currently at $42 million dollars. The existing personnel are thin and unable to keep up with maintenance.  1349 Commissioner Noted that the funding system was changed Pourchot on the Recorder's Office, which has been successful. The documentation is coming in at record rates. They are still having problems in Anchorage, which has high volume.  1413 Commissioner Referred to their web site. He noted that Pourchot there is more website usage.  1437 Commissioner Reviewed missions for the Airborne Pourchot Geophysical Surveys program. The department missed the FY01 cycle for lack of funding. They attempted to do two years worth of work but costs have increased. They were unable to achieve as much as they hoped. He noted that 630 miles of coverage were completed. The lack of progress is purely a result of funding. They have targeted high potential areas.   ADJOURNMENT The meeting was adjourned at 4:42 p.m.