MINUTES SENATE FINANCE COMMITTEE February 9, 1993 9:00 a.m. TAPES SFC-93, #25, Side 1 (288-end) SFC-93, #25, Side 2 (559-360) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:00 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Kelly, Kerttula, Rieger, and Sharp were present. Senator Jacko did not attend. ALSO ATTENDING: Jerome Komisar, President, University of Alaska; Wendy Redman, Vice President for University Relations, University of Alaska; Marsha Hubbard, University of Alaska; Mike Greany, Director, Legislative Finance Division; Nancy Slagle, fiscal analyst, Legislative Finance Division; and aides to committee members and other members of the legislature. SUMMARY INFORMATION CAMBRIDGE ENERGY RESEARCH ASSOCIATES Co-chair Pearce requested committee approval of a contract with Cambridge Energy Research Associates for oil price analysis and forecast. A contract, not to exceed $17.5, was APPROVED. SB 50 - Act making appropriations for capital projects; and providing for an effective date. Capital Budget Overview was conducted for: UNIVERSITY OF ALASKA Cross reference - The FY 94 capital budget was ultimately incorporated within HCS CSSB 183 (Fin). HCS CSSB183(FIN) - Act making special appropriations for restoration projects relating to the Exxon Valdez oil spill and for oil spill response projects; making appropriations for capital project matching grant funds; making appropriations for capital projects; making an appropriation to pay judgment, interest, and attorney fees for Frontier Flying Service v. Turpin; and providing for an effective date. CAMBRIDGE ENERGY RESEARCH ASSOCIATES Co-chair Pearce directed attention to a proposed contract with Cambridge Energy Research Associates and called for a motion for approval. Senator Kelly MOVED to authorize the director of Legislative Finance Division to enter into a sole source contract, not to exceed $17.5, with Cambridge Energy Research Associates for oil price forecasting services on behalf of the House and Senate Finance Committees. Co-chair Pearce advised that the House had agreed to share the cost. She further noted that the legislature would request a 10% reduction in the contract price. Senator Kerttula inquired concerning what Cambridge would be doing on behalf of the committee. Co-chair Pearce explained that the committee would receive the quarterly "World Oil Watch," oil reports and fax alerts, two seats at the conferences, and regular phone access to the yearly conference call. Cambridge will be on retainer for a year, but representatives will not be coming to Juneau. Senator Kerttula spoke to past concerns with and benefits derived from Cambridge information. He questioned the value to be obtained from sending a legislative representative to Cambridge conferences in Houston, Texas. Co-chairman Pearce concurred, advising that while the committee would have access to the conferences and would review any requests to attend, a request was not likely to be favorably considered. Co-chair Pearce called for further discussion on the motion. None was forthcoming. The Co-chairman called for a show of hands for approval. The motion CARRIED on a vote of six to zero, and Legislative Finance Division was directed to go forward with the Cambridge contract. UNIVERSITY OF ALASKA DR. JEROME KOMISAR, President, University of Alaska, came before committee. He explained that the capital budget for the University is divided into a number of parts. The first two respond to legal requirements. Repairs to bring buildings and structures to code compliance are of primary importance. A number of older buildings need repair for life safety reasons. All of them are located on the Fairbanks campus. The University originally requested over $6 million for code compliance. A further element of this need responds to federal American Disabilities compliance. The current request represents approximately half of what will ultimately be needed to meet federal legislation. The $34 million request for deferred maintenance, the second item in the budget, is part of a five-year plan to bring the physical plant up to acceptable standards. The third element relates to building completions. A number of University buildings are under construction or incomplete in terms of total use. The $24 million responds to this problem and includes space in Anchorage, MatSu, the system office at Fairbanks, and Southeast. It also includes completion of the natural science building and greenhouse in Fairbanks. The fourth item is need to bring equipment for both teaching and research up to discipline standards. That has become of greater and greater priority within the University since the gap has not been filled for a number of years. Dr. Komisar spoke specifically to need for phase I of a fiber optics project at the Anchorage campus. He explained that it is slated to develop computer communications across the campus to tie in both faculty and students and provide a level of communication that is standard at most universities and colleges. The fifth item would provide construction for growth. Projects included within the $25.8 million request are the most immediate in terms of meeting growing demands upon the University. The first priority is completion of an aviation technology building. It entails an addition to an existing structure. This involves a matching arrangement. The University has received close to $7 million in federal funds through the FAA. The program will be vocational and technical. It has great appeal to Alaskan students. There is a waiting list for entry to the program, and an immediate and very large job market is available to graduates. Dr. Komisar further spoke to the proposed upgrade of the Anchorage science building, land acquisition, and an addition to the Bristol Bay campus at Dillingham. The final area of capital requests relates to planning for growth. It covers projects the University has identified as a need, for which detailed study should begin immediately. Capital budget needs total $107 million, considerably more than the $19 million allowed by the Governor. Part of the difference is that the deferred maintenance request is being considered for bonding rather than direct appropriation. The $33 million for deferred maintenance has thus been removed from the list. In response to a question from Senator Kelly, Dr. Komisar said that bonds would be issued through AHFC. Authority to issue such bonds would have to be authorized by act of the legislature. Senator Kerttula asked if annual payments would then be made on the bonds. Dr. Komisar advised of alternatives. The legislature could appropriate needed payments each year, or AHFC could utilize some of its income for bond payments. Senator Kerttula requested backup evidencing AHFC's ability to make the payments. Dr. Komisar explained that as a self-help approach to capital needs, the University purchased a building in Anchorage to ease the demand for space. It is also looking at creative ways of obtaining physical structures for campuses. The University hopes to construct a research facility at Fairbanks that would be paid for through indirect cost recovery (federal contracts). The facility will also house some federal agencies. In dealing with need for additional dormitory space, the University has considered attempting to tie in with the hotel industry to construct something that could be used by tourists in the summer and available to students for the academic year. Senator Kerttula spoke to utilization of campus facilities during weekends and urged that the University meet the needs of students who pattern their time toward weekend educational opportunities. Dr. Komisar concurred in need for greater utilization of space. He stressed, however, that new space sought by the University is "specialized space." Anchorage campus needs relate to library and scientific space. Once scientific needs are met at Fairbanks, there will be additional need for research areas. Senator Rieger inquired concerning what led to the June 17, 1991, fire marshal inspection which gave rise to requested funding to meet code upgrades. Dr. Komisar attested to routine inspection of state facilities by the fire marshal. He further advised that code compliance questions had been raised prior to the inspection. Senator Rieger raised questions regarding whether failure to achieve code compliance put administrators, faculty, and students in danger. Dr. Komisar observed that when he arrived at the University, negotiations with the fire marshal had been ongoing. Following fire marshal review, the initial dollar figure was much higher than the requested $6 million. That amount reflects negotiations and focus upon the most critical aspects. Senator Rieger questioned the critical nature of $617.0 for fencing around the large animal research station. Dr. Komisar responded that a strong fence is needed for musk ox and caribou. Co-chair Frank concurred in concern that the state always seems to be reacting to orders from the state fire marshal. He acknowledged that the legislature presumably passes laws adopting updated building and fire codes. The Dept. of Public Safety then attempts enforcement. He suggested it would be helpful to hold a hearing with the fire marshal for a better understanding of why buildings later need to be brought to code when they were built to code in the first place. He further suggested there may be a means of altering the fire code, within responsible bounds, so the state would not expend moneys for upgrades that do not relate to life-threatening or dangerous situations. Senator Rieger concurred. Senator Kerttula suggested that the committee also investigate minimum requirements for meeting American disability compliance, suggesting that some attempts to do so have been greatly overdone. Co-chair Pearce inquired regarding the technical process involved in developing dollar figures for capital requests. Dr. Komisar advised that the University construction office prices all requests. End, SFC-93, #25, Side 1 Begin, SFC-93, #25, Side 2 Co-chair Pearce asked if University facilities would be included within the executive order placing maintenance of state buildings under the division of facilities management within the Dept. of Transportation and Public Facilities. Dr. Komisar said that the University was invited to participate in discussions. He then voiced his belief that it would be important for the University to continue to build and maintain its own facilities. Speaking to code compliance, Dr. Komisar observed that foregoing questions raised by committee were also raised by the board of regents. He concurred in the suggestion that the committee meet with the fire marshal. In response to a question from Senator Frank, concerning funding for the nature conservancy, MARSHA HUBBARD, explained that the project was added by the Governor. Funding for contaminated site cleanup at the University of Alaska, Fairbanks, reflects submission of a capital request to the Dept. of Environmental Conservation. DEC then budgets the effort. In this instance, the Governor elected to place the funding in the University budget rather than under DEC. The 470 funds would be utilized for cleanup of the University equipment yard and physical plant. Funding would provide for an assessment. DEC indicates that actual cleanup would cost approximately $2 million. Discussion followed between Senators Kelly and Frank and Ms. Hubbard regarding benzene contamination. Pointing to the request for classroom improvements and remodeling at UAA, Co-chair Pearce noted that the original $2.2 million request was reduced to $1.2 by the Governor. She then asked what would not be done because of the decrease. Dr. Komisar said that the University would be unable to transform all vacated space. It would spread the money as far as it can in increasing classroom space. The Co-chair requested a list of projects to be undertaken with the reduced funding. Senator Rieger inquired concerning University policy for small computer purchases. Marsha Hubbard indicated that a general bid is issued. Responding to an additional question, Dr. Komisar explained that the type of computer varies. There is standardization within the administrative function. Variation occurs on the academic side where different types of computers better fill specific needs. Co-chair Pearce noted reduction of the fiber optic request from $1.3 million to $530.0. She then asked for information on what would be accomplished under the reduced sum. Marsha Hubbard answered that three central hubs would be built. She also agreed to provide additional information. Responding to an inquiry from Senator Sharp, Dr. Komisar explained that the $600.0 in general funds for the aviation technology center relates to planning for completion of the facility rather than to construction. The $10.1 million match with the $6.7 million federal grant would have provided both planning and construction funds. Federal moneys will not be available until the University has the needed matching funds. The proposed addition is estimated to cost approximately $17 million. In reply to a question from Co-chair Pearce, Ms. Hubbard advised that the University received $300.0 last year. With that funding, the current $600.0 request, and authority for the federal funds, the University could be bid-ready for next year should the state match be forthcoming. The match is approximately $10.00 of state funds for $7.00 federal. The Co-chair then asked if it would make sense to expend state moneys to replace current lease space. Dr. Komisar answered that funding would not only replace lease space, it would also enable the University to enlarge the program. The fact that the program would be at one location would also be more efficient. Senator Frank voiced his understanding that the Governor was intent upon finishing unfinished buildings. He then questioned the proposed expansion for the aviation program. Dr. Komisar noted that the Governor did not allow construction moneys. He merely provided for planning. Dr. Komisar stressed the importance of the aeronautical program. Alaska is one of two or three locations nationwide where air traffic controllers are trained and can immediately commence on-the-job training in airports. That is quite an achievement. Dr. Komisar stressed the importance of the industry in Alaska. Co-chair Pearce requested an expanded project description with associated justification. She further asked for information on lease space cost effectiveness versus adding on to the present building. Senator Rieger raised a question regarding the $6.8 million for completion of the Butrovich Building. Dr. Komisar said that the building was originally constructed in 1985. Thereafter, various constructions at the facility "dribbled along." The Butrovich Building provides a good case history of "how not to put up a building." Last year $3 million was provided for redesign and construction of the basement to house the super computer. Senator Kerttula noted that the issue of the super computer has led to a serious problem of distribution of significant federal funding. He voiced support for the computer and stressed its value to both the state and Alaskan students. Federal funding will, unfortunately, be distributed to other universities. AGENCY-WIDE COMPUTER REQUESTS Co-chair Pearce advised that a compilation of computer system requests totals $19.5 million. She suggested that a subcommittee work with the Office of Management and Budget on the issue and asked that Senator Rieger head the effort. STATE FIRE MARSHAL Co-chair Pearce asked that Senator Rieger, chairman of the subcommittee for the Dept. of Public Safety budget, schedule an appearance of the state fire marshal before the subcommittee and notify the full Finance Committee membership of that scheduling. Members wishing to pose questions to the fire marshal may then do so at that time. ADJOURNMENT The meeting was adjourned at approximately 9:55 a.m.