MINUTES SENATE FINANCE COMMITTEE March 19, 1993 8:40 a.m. TAPES SFC-93, #36, Side 2 (250-end) SFC-93, #38, Side 1 (000-end) SFC-93, #38, Side 2 (end-000) SFC-93, #40, Side 1 (000-150) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 8:40 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Kelly, Kerttula, Rieger, and Sharp were present. Senator Jacko arrived while the meeting was in progress. ALSO ATTENDING: Senator Robin Taylor; Jonathan Widdis, Chief of Planning, Northern Region, DOT/PF; John Horn, Regional Director, Northern Region, DOT/PF; Ron Lind, Director, Plans, Programs & Budget, DOT/PF; John Tolley, Chief, Planning & Admin. Services, DOT/PF; Lowell Humphrey, Regional Director, Central Region, DOT/PF; Keith Morberg, Chief of Design, DOT/PF; Frank Turpin, Commissioner, DOT/PF; Keith Gerken, Deputy Commissioner, DOT/PF; James Ayers, System Director, Alaska Marine Highway System, DOT/PF; Mike Greany, Director, Jeff Hoover and Karen Rehfeld, Fiscal Analysts, Legislative Finance Division; and aides to committee members. SUMMARY INFORMATION SB 50 - An Act making appropriations for capital projects; and providing for an effective date. Budget Overviews were conducted for the following department: Dept. of Transportation & Public Facilities (DOT/PF)- Northern Region: A presentation for the Northern Region was given by Jonathan Widdis, Chief of Planning, Northern Region, DOT/PF; and John Horn, Regional Director, Northern Region, DOT/PF. Ron Lind, Director, Plans, Programs & Budget, DOT/PF, was asked to provide clarification on allocations for FY93 and FY94. Central Region: A presentation for the Central Region was given by John Tolley, Chief, Planning & Admin. Services, DOT/PF; and Lowell Humphrey, Regional Director, Central Region, DOT/PF. Keith Morberg, Chief of Design, and Ron Lind, Director, Plans, Programs & Budget, DOT/PF, contributed information to the presentation. Frank Turpin, Commissioner, and Keith Gerken, Deputy Commissioner, DOT/PF, came before the committee and answered capital budget questions. Alaska Marine Highway System: James Ayers, System Director, Alaska Marine Highway System, DOT/PF, continued a presentation from March 15, 1993. He answered general budget and personnel questions. He also gave a presentation on the new oil response ferry that is in planning stages. He was asked to return in the early part of next week with additional information. CO-CHAIR DRUE PEARCE announced that three bills (SB 71 - Emergency Medical Services System; SB 82 - Opening the Dalton Highway; and SB 84 - Revoke Driver's License If Use False I.D.) would be HELD and heard on Monday, March 22, 1993. SENATE BILL NO. 50: An Act making appropriations for capital projects; and providing for an effective date. Department of Transportation & Public Facilities (DOT/PF) Northern Region Co-chair Pearce invited John Horn, Regional Director, Northern Region, DOT/PF, and Jonathan Widdis, Chief of Planning, Northern Region, DOT/PF, to join members at the committee table and proceed with the department presentation. JONATHAN WIDDIS directed attention to a handout entitled "Department of Transportation and Public Facilities, Northern Region, FY94 Capital Budget Request" which outlined capital requests for the Northern Region (copy on file). He explained that the handout listed HB 60 but applied also to SB 50. He said the Northern Region Core Program preliminary engineering was in the original bill at $2,085.0. Amendments expected from OM&B increased preliminary engineering to $5,100.0. The individual projects were originally requested at $41,633.0, and amendments increased it to $43,633.0. He stated the total amended Northern FHWA core program is $48,733.0. Mr. Widdis went on to outline the Northern FHWA borough program. Preliminary engineering had been amended from 0 to $1,600.0. Total individual projects requested were $9,025.0, and were amended to $11,525.0. Those individual projects (Fairbanks North Star Borough, Unorganized Borough, Northwest Arctic Borough and the Safety Program) were itemized in the handout. The total Northern FHWA borough program, as amended, is $13,125.0. Mr. Widdis then directed attention to the Northern FAA Program with an amended preliminary engineering request of $3,050.0 and amended individual projects request to $25,965.0 for a total of $28,965.0. Northern general fund deferred maintenance amended request is $3,500.0, and Northern general fund facilities at $230.0. The next two pages of the handout were the Northern Region's section of HB 60 as submitted. He explained that corrections had been made to reflect amendments. The changes are as follows: Northern Region Safety Program from $3,600.0 t o $3,900.0 Northern Region Preliminary Eng'g, R-O-W & Utilities from $2,085.0 t o $5,100.0 Northern Region FAA Program Circle City A/P Improvements from $ 300.0 to $ 700.0 Kotzebue Runway Resurfacing & Sand Storage Bld'g Constr. from $ 700.0 t o $1,025.0 Mr. Widdis explained that the fourth page of the handout outlined additional projects added by amendments (see copy of handout). Co-chair Pearce called for specific questions on these additional projects. In answer to Senator Sharp, Mr. Widdis said that the request for Deadhorse was not an additional project but continuation of the same paving project for the airport. SENATOR JAY KERTTULA asked if maintaining cabins was included in the Northwest Arctic Borough trail staking as had been done in the past. Mr. Widdis said that previously general fund money had been used for some cabin maintenance and was still being considered. However, at this time, only trail staking was being considered. Mr. Widdis explained that the cabin maintenance was a federal project and would be addressed. Co-chair Pearce asked about the May Creek Airport improvements on line 12, page 19. She said that all other airport improvement requests had significant population bases associated with them, and questioned the population base around May Creek and asked who uses this airport. Mr. Widdis said that people utilizing the park, park service employees, miners who have claims in the park, and small communities like McCarthy use the airport. In answer to Co- chair Pearce, Mr. Widdis said that the runway would be resurfaced. Senator Kerttula added that quite a bit of tourism was centered in this area. Mr. Widdis said that May Creek was the park service headquarters for most of the work done in that area. Co-chair Pearce asked how DOT/PF northern region planned to allocate ISTEA funds for the unorganized borough. Mr. Widdis said that an agreement had been made between DC&RA and DOT/PF, and those departments are developing a strategy and meeting with the representatives of the unorganized areas in order to allocate the funds fairly. In answer to Co-chair Pearce, Mr. Widdis said those projects would be line items brought before the legislature in the next session. In the meantime, preliminary engineering would anticipate those programs so the project design could begin. SENATOR STEVE RIEGER asked if the $2,275.0 request to the unorganized borough on the first page of the handout was just a general appropriation to DOT/PF. Mr. Widdis answered negatively and explained that it represented a specific road project out of Delta that was already in work. Senator Rieger asked about the Safety program amendment that requested an additional $1,100.0. Mr. Widdis said that it represented University College intersection improvements preliminary engineering for $400.0; road upgrade in Fairbanks for $435.0; and additional non-specific engineering starts at $265.0 in the borough. Senator Rieger asked if the safety program money relied on the helmet bill passing. Mr. Widdis said that he did not think there was any connection to the helmet bill and safety funding. Co-chair Pearce asked what projects could take advantage of safety dollars. Mr. Widdis said that safety money could be used for engineering and construction for such things as guardrail, new traffic safety lights, extra turn lanes, etc. There is a formula that ranks projects which takes into account accident history, geometrics of the area, etc. Discussion followed between Co-chair Pearce and Mr. Widdis regarding state projects that are safety eligible. Mr. Widdis stated that federal highways made the final decision on what percent of a project was safety eligible. Senator Kerttula encouraged the committee to communicate with DOT/PF on what it proposes for unorganized borough roads. He then asked Mr. Horn to speak to the Copper River Highway funding. JOHN HORN, Regional Director, Northern Region, DOT/PF, said that additional federal money would be needed to complete the Copper River Highway project. Senator Kerttula asked if line 8 and 10 were both alternate allocations. Mr. Widdis said that line 8, preliminary engineering is projected for 1994, and line 10, construction phase, is an alternate in 1994, and was expected in 1995. Both of these allocations are contingent on a location study and an EIS that should be completed this fall. Mr. Widdis explained that if the study came back as a "no-build", both projects would not go forward. Senator Kerttula voiced his concern over the legislature not being involved in the final decision of certain road projects. End SFC-93 #36, Side 2 Begin SFC-93 #38, Side 1 Co-chair Pearce asked if Kotzebue Third Avenue paving was approved, would it be the first paving north of the Arctic Circle. She pointed out that it was hard enough to keep pavement on the runways. Mr. Horn said he was aware of at least one paved road in Point Hope which is north of Kotzebue. Co-chair Pearce asked why this road was going to be paved when it was evident that there are problems with maintenance because of permafrost. She cited the cost of $1,550.0 for paving Deadhorse runway. Mr. Horn said the department has experienced problems with permafrost anywhere north of the Arctic range. He said that since the runway in Kotzebue was going to be resurfaced, the department decided to pave Third Avenue because of a dust problem. He said that it had been a high priority in Kotzebue for some time. He felt the maintenance for this road would not be any worse than the one in Nome. Co-chair Pearce questioned the wisdom of paving roads where maintenance is such a problem, and stated research has pointed out other ways to solve dust problems. SENATOR BERT SHARP asked the distance of the proposed paving of Third Avenue. Mr. Horn said it was approximately a mile. Co-chair Pearce remarked that would amount to $1M a mile. CO-CHAIR STEVE FRANK pointed out that 62 percent of the roads were in the northern region and it was a big area to maintain. The new ISTEA allocations do not do much to maintain our ability to handle the responsibility. He said that there had been a historical downward shift of funds for the northern region from 45 percent to 38 percent. He felt under the new ISTEA, it may be reduced further. Department of Transportation & Public Facilities (DOT/PF) Central Region There being no further questions for the northern region, Co-chair Pearce asked John Tolley, Chief, Planning & Admin. Services, DOT/PF; Lowell Humphrey, Regional Director, Central Region, DOT/PF; and Keith Morberg, Chief of Design, DOT/PF, to come before the committee to speak to the central region. JOHN TOLLEY directed attention to a handout titled "Department of Transportation and Public Facilities, Central Region, FY94 Capital Budget Request" (copy on file). He explained that the first column represents funding totals in SB 50, and the second column shows the totals after amendments. Mr. Tolley stated that the FHWA core program for central region totaled $50,648.0 and of that preliminary engineering is $1,412.0 and individual projects, $49,235.0. Mr. Tolley then outlined the FHWA borough program that totaled $68,416.0. He said of that total, $14,148.5 was for preliminary engineering, and $54,267.6 for individual projects that have been requested by the local boroughs. The aviation program totals $25,743.1 of which $843.9 is for continuing preliminary engineering, and $24,899.2 for actual projects. He pointed out that the central region general fund request of $2M is for deferred maintenance activities for airports, highways and buildings. Another general fund request in the amount of $490.0 is the cost for site cleanup at about five locations. In answer to Senator Kelly, Mr. Tolley said that the preliminary engineering phase was underway in the Whittier Tunnel project. He said that the construction phase is in the 1998 spending plan. He said that the EIS would take approximately 2 years to complete and the design, several years. SENATOR TIM KELLY expressed disappointment that the project was not on a faster track. Senator Kerttula voiced his disapproval that only 2 percent of the funding was for Mat-su Borough. Mr. Tolley answered that the amount shown for the Mat-su Borough in the amount of $1,289.6 is just for specific projects and the majority of Mat-su projects are contained in the preliminary engineering request which he believed to be about $7M. Mr. Tolley agreed to provide Senator Kerttula with a list of those Mat-su Borough's projects in the preliminary engineering request. Senator Sharp asked for clarification on how allocations are passed from ISTEA to the boroughs. He said that he understood population and car registration were going to be used to justify funds. He felt that the requests on this handout did not follow that allocation. Mr. Tolley said that he would provide the breakdown of projects by borough that were in preliminary engineering. He stated that DOT/PF had agreed to share about 35 percent of the ISTEA funds with the boroughs. Besides the allocation by population and car registration, some of the funds had been set aside by competition on a statewide basis. The Mill Bay Road project in Kodiak had competed favorably for funding and $4M had been brought into the Kodiak borough by that process. Discussion followed between Senator Sharp, Co-chair Pearce, and Mr. Tolley regarding funding and prioritization of DOT/PF projects. FRANK TURPIN, Commissioner, DOT/PF, stressed that allocations are watched very carefully by all fifteen boroughs. He pointed out that projects in this year's Fairbanks program were previously approved. He said that Fairbanks project average was not considerably lower than in years past. Co-chair Pearce asked how far ahead authorizations are requested (in terms of dollars) compared to the actual expenditure of the money. RON LIND, Director, Plans, Programs and Budget, DOT/PF, answered that the department did not ask for more dollars than needed. He said that a program was put together for a two year cycle. After subtracting the projects already authorized, the balance is requested, and that becomes a "best guess" budget request. In answer to Senator Rieger, Mr. Tolley said that preliminary engineering was accomplished in-house, by private consultants, or the borough could consult DOT/PF for help. Commissioner Turpin said that additional engineering staff would not be added to the department. Discussion followed between Senator Rieger and DOT/PF staff regarding Kodiak projects including the Mill Bay Road project. Senator Rieger then asked for clarification about central region safety and transportation enhancement programs. Mr. Tolley said that the safety programs were treated the same as in the northern region. Projects throughout the region are ranked in relation to safety problems, accidents, etc. for the highway safety improvement program. Mr. Tolley said that the transportation enhancement program authorizes funds that take advantage of the new flexibility in ISTEA funds such as pedestrian enhancement trails, landscaping, historic preservation, etc. Legislation has required DOT/PF to spend 10 percent of the surface transportation money each year on enhancement projects. He said that view pullouts and other amenities for major interstate highways are being considered for this federal funding. Senator Kerttula stated that a second class borough may have very limited responsibility, but, by the vote of the people can take on many other responsibilities. He pointed out that legislators in these second class boroughs are the authorizing agency, and should be brought into the borough discussion at all times because the borough may not have the authorization to make certain decisions. He reaffirmed that the legislature is the appropriate authorizing agent for second class boroughs. He voiced his opinion that there has been a gradual overstepping of authority by the boroughs. Discussion was held between Co-chair Pearce, Senators Rieger and Kerttula regarding borough authorizations, and Mr. Tolley agreed to provide information to the committee on this subject. Co-chair Pearce spoke to the amendments coming from OM&B that would increase total federal dollars, and asked what the increase for the state general fund match would be. Mr. Lind said the department's match request was based on the assumption of how many dollars the federal agency would let the department use throughout FY94. Mr. Lind explained that the money is not project specific so there would not be any change in the request because of these items. He said that the initial budget had not requested funding for some projects. If an alternate project is requested, the department would not be asking for matching funds. Co-chair Pearce asked why SB 50 was being amended. Mr. Lind explained that when the original budget was prepared, the boroughs had not had time to identify projects that would have used the "35 percent funding program" set aside for boroughs for legislative authorization. Also, some of the projects that were identified for one reason or another are not going to proceed, so the request from each borough is for its next range of priorities. Since there may be a delay in one project or another, authorization is needed for FY94 and FY95 programs in order to take advantage of the "35 percent program." Co-chair Pearce asked why the core programs changed. Mr. Tolley said that a better estimate was received on the Kenai Spur road. Discussion followed between Mr. Lind, Mr. Tolley, and Senator Rieger regarding authorizations, changes, and federal dollars tied to them. Mr. Lind explained that what is actually constructed by the federal highway administration is related to the real federal highway dollars given to the department. What is shown in SB 50 is the authorization for construction. He said the department could provide more authorization in the bill but the if the federal highway dollars are not there, the project will not happen. Senator Rieger asked if all the projects in the central region were bid ready and if all the federal allocated dollars were being used. Mr. Lind affirmed that all federal dollars were being used. A list of alternate projects was ready in case a project could not move forward. Co-chair Frank reiterated that there was not any tie between authorization and the expenditure of funds. The commissioner allocates the funds where needed. Commissioner Turpin wanted the committee to know that the department had to deal with many uncertainties. He explained that the department is unsure of legislative funding until October. Last year, instead of $210M, the department received $178M. If Congress should pass the supplemental funding bill, the difference - $37M could be received between now and October, and the department must be ready to spend it. Then in October, a new cycle is started and the department must be flexible depending on the new figure for that cycle. Discussion followed between Co-chair Pearce, Commissioner Turpin, and Ron Lind regarding the projects that were authorized or changed from last year's authorization. End SFC-93 #38, Side 1 Begin SFC-93 #38, Side 2 Senator Rieger pointed out that DOT/PF came before the last LB&A meeting and ask for authorization on several other projects. Senator Rieger again voiced his confusion that so many projects are authorized, others are then put in place of those already authorized, and the prioritization is constantly shuffled. Mr. Lind said that the department does not deal with programs on a first-come, first-serve basis. The department does try to respect regional allocations, even though it is never as high as people quote. The situation with federal funding is that the department must use it or lose it. Co-chair Frank asked the Commissioner to address the fact that allocations are substantially diminished for the northern region. Mr. Lind said that a letter had been written to the Fairbanks chamber on this issue with specific numbers, and he would supply the committee with a copy of the letter. Mr. Lind remembered that the total dollars in the northern region were up before and after ISTEA, and even after the 35 percent borough adjustments and core applications. He said he did not know how the rest of the breakdown ranked the northern region. In regard to the core system, the department would like to move towards the process of selecting projects based on statewide need and priority which could take some time to accomplish. In the interim, the department has given out base allocations and with the addition of any incremental money, has tried to look at statewide priorities across the six year plan. Mr. Widdis said that between the core program and the expansion of roads in the northern region, the norther region is really not below its level. Co-chair Frank said his concern was how realistic the proposed expansion projects are in light of some of the opposition to them. Discussion followed between Co-chairs Frank and Pearce, Mr. Lind, Mr. Widdis, regarding the Nome Council Road, other projects previously approved, and what projects DOT/PF had brought to LB&A. Recess 10:01am Reconvene 10:05am Department of Transportation & Public Facilities (DOT/PF) Alaska Marine Highway System Co-chair Pearce invited James Ayers, System Director, Alaska Marine Highway System, DOT/PF, to join the committee at the table. Mr. Ayers reminded the committee that the questions left unanswered were: how many individuals the Marine Highway System employs, how many of those are permanent employees, and how many employees were Alaska residents. In FY94, he said that the Marine Highway System has 715 permanent employees, and 174 permanent-parttime employees, which does fluctuate with the summer season. He said that there are 127 full-time and 30 parttime shoreside employees. He said this number is the same as in FY86. The difference since FY86 is that there has been a reduction of 10 full- time employees on the shore, but permanent-parttime has increased to 12. He explained that it had proved more efficient to have permanent parttime employees, especially on the shore. He said the number of permanent, full-time, ship positions is basically the same as in FY86 when there were 581 positions - now there are 588. There are 144 permanent parttime on the ships - the same number for the last ten years. Mr. Ayers went on to explain that permanent-parttime referred to individuals that have not reached full time status or what is referred to as a bid-job. They are not in a regularly assigned position, and only work when called out--when someone is sick or on vacation. Discussion followed between Co-chair Frank and Jim Ayers regarding the actual number of positions, the actual number of individuals that fill those positions, and vacation and leave accrued by employees. Mr. Ayers explained that lay off notices now are being sent out to junior employees instead of leaving them on the system. He said the biggest challenge for the department is the fact that the work force is consuming 25- 30 percent of its operating budget in leave status (when vacation and sick leave are combined). He said the bargaining units have been reasonable during the last negotiations. He believed that people hired after 1985 would receive a reasonable package even though a couple of items are still undecided. Co-chair Frank asked what percentage of the work force had been hired since 1985. Mr. Ayers said that he would provide that information as soon as he could. More discussion followed between Senators Sharp and Kelly, and Mr. Ayers regarding employee leave, benefits, and negotiations with bargaining units. Mr. Ayers then spoke to the new ferry vessel. He said that it was not just a southeast vessel, and gave three reasons why it would impact the whole state. First, the vessel would be ocean-going and could serve any of the 32 ports that are currently served by AMHS, including Prince William Sound, Kenai, Kodiak, the Aleutian chain areas, and is already scheduled to service Yakutat. Secondly, although this vessel is serving southeast, 40-50 percent of its traffic continues on to Anchorage, Fairbanks, and the interior. Thirdly, this vessel would finance itself. He went on to explain that the vessel was at the 100 percent conceptual level and provided a video showing the vessel to scale. The vessel would be capable of assisting in case of an oil spill, provide a command center capability, house personnel and service vessels, have a crane and pontoon, provide an area for a helipad, and have the ability to track a spill. Even if the vessel was in Bellingham when a spill occurred, it would take a maximum of 96 hours to reach the it. The Malispina would be hot berthed in Ketchikan, and in such an emergency, could take over the new vessel's schedule. End SFC-93 #38, Side 2 Begin SFC-93 #40, Side 1 Mr. Ayers felt the vessel was a statewide project and would provide major benefits. Since the operating budget has been declining and the department cannot afford any more expenses, the new vessel has been projected to be self supporting in its operation and overhaul. It would carry about 80,000 people a year (same as the existing traffic today). He said that also reflected a huge amount of independent travelers, the kind of traveler the state needs to keeps dollars here. He pointed out that the Alaska Marine Highway System, in comparison by number of employees, is the same size as the Department of Fish and Game, and larger than the Departments of Natural Resources, Environmental Conservation, and Commerce & Economic Development, with less than $30M in its operating budget. Eighty to ninety percent of AMHS' employees are Alaskan residents, more than any other department in comparison to the amount of general funds invested. By 1996, Mr. Ayers projected that the AMHS front section of the budget would be $28M, with a total budget of about $75M. The 1996 projection is that AMHS's receipts will be about $46M to maintain existing services. Co-chair Pearce asked Mr. Ayers to return to the committee to speak to the final design concept. She also asked for a breakdown of all dollars expended that were appropriated to the new ferry last year ($7.5M), a breakdown of the $66,400.0 that is in the capital request, and the additional money coming from the "470" fund requested in the Governor's budget. She asked for an outline of the design, engineering and construction phase. In answer to Senator Kelly, Mr. Ayers said that the new vessel, which will replace the Malaspina, is 388 feet long (larger than the Taku but smaller than the Malaspina). Discussion followed between Mr. Ayers and Senator Kelly regarding how parts would be held in storage from the Taku for the Malaspina. Mr. Ayers explained that a crew would not be held on the system for the Malaspina after it was moth-balled. The transition to the new vessel would cause an approximate overall reduction of 20 positions, 10 to 12 parttime winter time positions, and about 6 summertime positions. In answer to Senator Jacko, Mr. Ayers said that the proforma for the new vessel was based on the existing traffic of the Malaspina. SENATOR GEORGE JACKO spoke in support of AMHS building an ocean-going vessel. Discussion was held between Senator Frank and Mr. Ayers regarding the cost of moth- balling the Malaspina. Co-chair Pearce voiced her concern about the cost for design and construction of the new vessel. She asked Mr. Ayers to provide the committee with some kind of assurance that it would not go over budget. SENATOR ROBIN TAYLOR asked Mr. Ayers if the new vessel would give southeast an increase or decrease in service. Senator Taylor wanted Mr. Ayers to speak to the economy of southeast in relation to AMHS. ADJOURNMENT The meeting was adjourned at approximately 11:25 a.m.