MINUTES SENATE FINANCE COMMITTEE March 29, 1994 8:10 a.m. TAPES SFC-94, #42, Side 1 (000-end) SFC-94, #42, Side 2 (575-end) SFC-94, #44, Side 1 (000-563) CALL TO ORDER Co-chair Drue Pearce convened the meeting at approximately 8:10 a.m. PRESENT In addition to Co-chair Pearce, Senators Kelly, Rieger, and Sharp were present. Co-chair Frank and Senator Kerttula arrived soon after the meeting began. Senator Jacko arrived as it was in progress. ALSO ATTENDING: Nancy Usera, Commissioner, Dept. of Administration; Shelby Stastny, Director, Office of Management and Budget; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Cheri Jacobus, Chief Assistant Attorney General, Dept. of Law; Peter Bushre, Chief Financial Officer, Alaska Permanent Fund Corporation, Dept. of Revenue; Thomas C. Williams, Director, Permanent Fund Dividend Division, Dept. of Revenue; Karen Crane, Director, Libraries, Archives and Museums, Dept. of Education; Doug Hanon, Finance Officer, Alaska Postsecondary Education Commission, Dept. of Education; David Teal, Director, Division of Administrative Services, Dept. of Labor; Fred Fischer and Kathryn Daughhetee, fiscal analysts, Legislative Finance Division; and aides to committee members and other members of the legislature. ALSO PARTICIPATING VIA TELECONFERENCE FROM ANCHORAGE: Mary Gay, Director, Child Support Enforcement Division, Dept. of Revenue; Phil Petrie, Operations Manager, Child Support Enforcement, Dept. of Revenue; Will Gay, CEO/Executive Director, Alaska Housing Finance Corporation; Judith DeSpain, Deputy Executive Director, AHFC; Will Abbott, Public Housing Section, AHFC; and Ray Utter, AHFC. SUMMARY INFORMATION SB 363 - APPROP: FY 95 CAPITAL PROJECTS AND GRANTS A general overview of the governor's capital budget was presented by Shelby Stastny. Individual overviews were then presented for the following departments: Dept. of Administration Dept. of Education Dept. of Labor Dept. of Law Dept. of Revenue Upon convening the meeting, Co-chair Pearce directed that SB 363 be brought on for discussion. SHELBY STASTNY, Director, Office of Management and Budget, and NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, came before committee. In his introductory statement, Mr. Stastny explained that the thrust of the capital budget was inclusion of bare essentials. The first emphasis was placed upon state dollars needed to match federal moneys in water, sewer, and highway programs. The next emphasis was on areas where attention was absolutely necessary. He acknowledged that arguments could be made that some of the projects in this area should be in the operating budget (the ferry overhaul was cited as an example). Remaining funding within the $100 million cap was then left for agencies and the capital matching grants program. Mr. Stastny referenced agency funding within the Office of the Governor and specifically noted $2 million for Americans with Disabilities Act upgrades on state-owned facilities. Many millions of dollars are need to comply with the federal act. Last year, $4.6 million was appropriated for development of a strategy for ensuring that priority repairs are made first. A comprehensive survey of all facilities scored state buildings in terms of need, and funding from last year was applied to the highest priorities. A methodology is in place to systematically take care of the problem over time. The $2 million will be applied to buildings that are next in priority. In response to requests from members, Mr. Stastny agreed to provide a list of state buildings with associated survey scores. [Co-chair Frank and Senator Kerttula arrived at the meeting at this time.] DEPARTMENT OF ADMINISTRATION NANCY USERA, Commissioner, Dept. of Administration, came before committee. She explained that the department's capital request, as approved by the Governor, totals $500.0. Commissioner Usera stressed need for "the tools to become more efficient." A primary mission of the Dept. of Administration is to provide policy direction and centralized development of systems that can be applied statewide for greater productivity and efficiency for all agencies. Of continued concern is department inability to help agencies become more efficient because of lack of manuals and training in key areas such as finance, personnel, and procurement. Approximately $120.0 of the capital request will finish the applicant tracking system-- the personnel system. This project alone will save the state $86.0 a month in chargeback costs. Most sections of the statewide administrative manuals have not been updated for five years. This is the code book for state policy and procedures. The balance of the request will be devoted to user manuals for AKSAS and AKPAY. These programs are now inefficiently and superficially utilized. Manual development projects are the first phase. No training is included. This is critical to ongoing operation of government. Co-chair Frank questioned whether the AKSAS and AKPAY programs came with manuals. Commissioner Usera explained that the programs were developed on an ongoing basis. Some of the software was purchased, but much of the programming was developed in house. All agencies use these systems. The division of finance is the receptacle for all agency use of AKSAS and AKPAY--the state accounting system. In further discussion with Co-chair Frank, Commissioner Usera advised of cut backs in the division of personnel budget resulting in inability to perform day-to-day functions. There are 214 backlogged arbitrations presently costing the state $166.0 a month "on things like administrative leave." The department does not have the funding to provide the requested applicant tracking system or the necessary computer program manuals. DEPARTMENT OF LAW CHERI JACOBUS, Assistant Attorney General, Dept. of Law, and DICK PEGUES, Director, Administrative Services, Dept. of Law, came before committee. Ms. Jacobus explained that the capital request is a continuation of an appropriation begun two years ago to fund state operations dealing with federal/state issues. The main thrust of the request is protection of Alaska's fisheries. She referenced ongoing treaty negotiations with Canada, involvement with the Pacific Salmon Commission, involvement in protection of state management of Alaska's fisheries, and commencement of litigation to protect the Southeast fishery from effects of the Columbia River power system. The CIP will also fund protection of Alaska's access to its resources. Ms. Jacobus pointed to assertion of title to state navigable waters. At the time the CIP was begun, fewer than 50 had been identified. The department has now identified more than 200, and 4 are in litigation in federal court. The department is also involved in protection of in-holder access in conservation system units as well as protection of in-holders from applicable regulations within CSUs. The state is the largest in-holder. The second largest landholders within conservation units are Native corporations. The department is also active in protection of state access to its resources under RS2477. The identification project begun by the legislature is being coordinated with the Dept. of Natural Resources. Alaska has also filed a compact lawsuit. It is important to the state to ensure that Congress lives up to agreements made to the Alaska at statehood. The most notable is the 90/10 split. In response to a question from Senator Sharp, Ms. Jacobus advised that approximately 20% of the requested funding would be devoted to navigable waters. The compact case involves 10 to 15%, the RS2477 project 10 to 15%, and the majority of the request relates to protection of fisheries. Senator Rieger asked if litigation seeks reimbursement of legal costs. Ms. Jacobus explained that the state is unable to ask for reimbursement in some of the cases. She cited the claims court case as an example. Reimbursement is sought for cases in Alaska. Senator Kerttula asked if the department has sufficient funds to continue the submerged lands case. Ms. Jacobus responded affirmatively. Co-chair Pearce referenced last year's CIP appropriation to the Dept. of Fish and Game for use and reauthorization of endangered species legislation. She then asked how work done by staff in Washington, D.C. interrelates with efforts of the department. Ms. Jacobus explained that, under the current CIP, the department is funding some Dept. of Fish and Game activities. In particular, staff time for one and a half people is devoted to preparation of documentation and other aspects of the litigation. They are also helping identify issues where Alaska's interests should be protected. As an example, she cited instances where CSUs have issued rules and regulations in violation of ANILCA and which limit individual and state access to areas within the CSUs. If it had not been for efforts of the Dept. of Fish and Game, the department would not have been able to identify the violations. This effort is vigorously pursued. It appears that the state will be able to resolve some of the issues without litigation. Senator Kerttula noted that the agency request was $2,064 million, and the Governor provided $1,032 million. He again inquired concerning the adequacy of funding. Ms. Jacobus explained that the original request was for two years. The Governor provided funding for a single year. DEPARTMENT OF REVENUE PETER BUSHRE, Chief Financial Officer, Alaska Permanent Fund Corporation, came before committee. He explained that the $251.5 capital budget request will fund an electronic imaging project. The corporation is becoming choked with paper documents (dealer and broker confirmations were cited). It is important that these documents be on site at all times, because as a stockholder in major corporations throughout the nation, the corporation is party to class action lawsuits. When plaintiffs win, the corporation shares in proceeds of the settlement. However, the permanent fund must be able to prove ownership of the stock. Copies of dealer confirmations provide that proof. Electronic imaging would convert thousands of documents to computer images for storage on discs. That will allow the corporation to index, retrieve, and copy documents from the computer system. The cost savings in staff time and storage will be substantial. The estimated maintenance cost of the program is approximately $10.0. The CIP request covers hardware, software, and the cost of retaining an independent contractor to sort through 95 archive boxes of corporate history and reduce it to computer discs. Responding to a question from Senator Rieger, Mr. Bushre advised that the cost of hardware totals $50.0. The greatest share of the request is devoted to contractual arrangements for imaging documents dating back to 1977. TOM WILLIAMS, Director, Permanent Fund Dividend Division, Dept. of Revenue, next came before committee to speak to the $359.0 request for microfilm work on auxiliary permanent fund dividend applicant files. The division routinely microfilms applications as they are received. Auxiliary files containing requested missing information and responses from applicants have not been microfilmed. In 1991, the division commenced a project to catch up on this effort. The division can maintain microfilm efforts for all incoming documents. However, the CIP is needed to microfilm approximately 3 million documents in historical files. In addition, current microfilm equipment is beginning to wear out. Requested funding would allow for replacement and addition of four temporary positions to accomplish the microfilming task. Senator Rieger asked why the division is using microfilm rather than an optical scanner similar to that to be used by the Alaska Permanent Fund Corporation. Mr. Williams explained that cost analysis indicated optical scanning and retrieval through the computer system would be much more expensive, given the volume of paperwork involved. The division processes two to three million documents each year. Discussion followed between Mr. Williams and Senator Rieger regarding current storage and retrieval of permanent fund dividend information. Further discussion followed between Senator Kelly and Mr. Williams concerning the temporary positions. Mr. Williams further commented on cost differentials between imaging and microfilming. DEPARTMENT OF EDUCATION KAREN CRANE, Director, Libraries, Archives and Museums, Dept. of Education, came before committee. She explained that for the last ten years, the materials budget has been funded primarily by capital moneys. All books, magazines, newspapers, etc. are purchased through the capital request. The request for the upcoming fiscal year is $200.0. The second request is for acceptance of $140.0 in federal funds for public library construction through LSEA Title II. These are pass through moneys. There are no state funds involved; the match is local. In response to a question from Co-chair Pearce concerning the number of grants involved, Ms. Crane acknowledged that $140.0 does not go very far. However, the department is allowed to carry funding forward from year to year and "bundle" two or three years' worth of funding together. Over the past year, the division spent $130.0 on rewiring the Loussac Library in Anchorage in preparation for the new automated system. The department also provided a grant to the Seward Library for ADA remodeling. Approximately $175.0 was spend over the past year. That funding was accumulated over a two-year period. DOUG HANON, Finance Officer, Alaska Postsecondary Education Commission, Dept. of Education, came before committee, noting that the commission has requested three capital items. The first relates to an intelligent dialing system to deal with skip tracing and debt collection. The system will interact with the data processing system and extract accounts approaching 120 days past due. This technology is used by most other student loan systems nationwide. End: SFC-94, #42, Side 1 Begin: SFC-94, #42, Side 2 The other two requests relate to data processing enhancements and ongoing data processing system efforts. Included is network expansion. During FY 93 and 94, Postsecondary implemented a personal computer network. That allows the commission to integrate systems and bring mainframe data to local loan servicing people at their stations. The intelligent dialing system and the p.c. network are interrelated in that they will reside locally at Postsecondary and will exchange data across the land network. One does not work efficiently without the other. The third request is for microfiche equipment. Current equipment is old, the failure rate is high, and images are not good. Need for replacement is desperate. Funding for all projects is from corporate receipts. No general funds are involved. In response to a question from Senator Rieger, Mr. Hanon explained that the microfilm system is Postsecondary's record system. It is both the interactive record source for loan servicing as well as the method of archiving records. Postsecondary handles tens of thousands of documents each month. Responding to an additional question from Senator Rieger, Mr. Hanon advised that Postsecondary is participating in the state study on optical imaging. Costs are unknown at this time. Optical imaging is a possibility for the future. Postsecondary must deal with its paper problem now and replace equipment that is failing and costing $15.0 to $20.0 in maintenance and upkeep. DEPARTMENT OF REVENUE MARY GAY, Director, Child Support Enforcement Division, Dept. of Revenue, spoke via teleconference from Anchorage. She told members that, as a result of the Family Support Act of 1988, the child support enforcement division is required to have an automated system that meets specific requirements. The system must be complete by October of 1995. The division has been working on enhancements to its current system. A recent audit highlighted need for further enhancement. The most expedient means of achieving required automation is via a contractor rather than through continued utilization of in-house staff. All additions to the system were outlined in a planning document submitted to the federal government. The federal government has given conceptual approval to the plan and has further advised that 90% funding will be available when final approval is provided. Ms. Gay explained that a portion of the capital request relating to hardware will receive only 66% funding. She stressed that the upgrades are federally mandated and must be completed by October, 1995, or sanctions will be applied in the form of penalties levied upon the AFDC budget. Senator Rieger inquired concerning contractors who might not only provide enhancement but operations as well. PHIL PETRIE, Operations Manager, Child Support Enforcement, Dept. of Revenue, responded via teleconference from Anchorage. He acknowledged that several national contractors have commenced operations. Mississippi and several counties in California have contracted out this type of work. Contractual arrangements for child support collection are, at this early stage of development, both risky and costly. A study would have to be done comparing existing costs with privatization. There is not sufficient time between now and the October, 1995 deadline, to explore that option. The requested CIP would put the division in a good position to consider it for the future in that a viable system would be in place for "someone to come in and take over." Senator Kerttula voiced opposition to privatization of "these types of systems." Mr. Petrie remarked that he was not recommending that option; he was merely responding to Senator Rieger's question. JUDITH DeSPAIN, Deputy Executive Director, Alaska Housing Finance Corporation, Dept. of Revenue, next testified via teleconference from Anchorage. She explained that the capital budget request for the corporation focuses on three areas: special needs housing, energy efficiency, and public housing. The corporation seeks $79.4 million. Of that, $34.6 million is federal, and $44.9 is agency corporate receipts. The special needs housing program provides housing for lower income Alaskans and special needs groups-- seniors, the mentally ill, disabled, or homeless. The Home fund and Hope fund are federally funded. Energy efficiency programs came to AHFC through merger with the housing assistance division in the Dept. of Community and Regional Affairs. General funds have been used in the past for low income weatherization and energy rated homes of Alaska. These programs incluse home energy loans and rebates. Also included is the supplemental housing development program--a match program bringing in federal moneys. Public housing projects are new to the capital budget process. They support activities aimed at maintaining, improving, and adding to public housing facilities. WILL ABBOTT, Public Housing Program, AHFC, next spoke via teleconference from Anchorage. In explaining the $1 million request for environmental abatement, he advised that when ASHA merged with AHFC, the corporation assumed all duties associated with the merger. An assessment of former ASHA projects uncovered a significant number of problems. Old underground storage tanks and need for asbestos removal were cited as examples. The major portion of the request relates to replacement and cleanup associated with storage tanks. Mr. Abbott advised of an average cost of $15.0 to $18.0 if "it . . . comes out of the ground fairly clear and there is not a lot of environmental damage . . . ." He cited a cost of $60.0 for a recent removal and cleanup at a project in Wrangell. A total of 85 tanks have been identified at various locations. Phase I environmental studies are ongoing on some projects. Co-chair Pearce asked that Mr. Abbott fax a priority list to committee. Senator Rieger requested an itemization of proposed expenditure of the $1 million. He observed that backup information speaks to lead-based paint, asbestos removal, water purification systems, risk assessments, etc. Mr. Abbott next spoke to the $1 million request relating to the energy conservation retrofit. He explained that utility costs for public housing are extremely high ($4 million for FY 95). This retrofit will attempt to improve weatherization. The corporation has conducted an energy audit in order to determine best use of the funding. Every project undertaken will show a cost savings in energy utilization. Co-chair Pearce stressed need for a list of projects evidencing use of the $1 million. Mr. Abbott said he would fax a list of projects based on energy audits to date. Mr. Abbott next spoke to the $2 million request for senior housing deferred maintenance. He again advised that he would provide a list of projects. They include alarm systems, window replacement, sidewalk repair, etc. Ms. DeSpain stressed dire need for public housing maintenance deferred over past years. Much must be done to maintain safe housing for residents. Co-chair Frank said that when ASHA was merged with AHFC, it was not the legislature's intent to "burn up $44 million worth of AHFC's equity in the total program." He expressed surprise over deferred maintenance on ASHA buildings that were previously outside of legislative purview. He said he would have thought the federal government would require maintenance and protection of "this federal investment." Senator Kerttula noted that maintenance should have been covered by rental receipts. Co-chair Frank concurred. Ms. DeSpain explained that federal funding was not always provided for maintenance. ASHA consistently supplemented inadequate federal moneys. The legislature has not previously seen this funding because the ASHA budget did not fall under the executive budget act and was thus not submitted to the legislature for review. HUD moneys were supplemented with ASHA funds. Ms. DeSpain advised that she did not know the source of the ASHA dollars. Co-chair Frank said he was unaware an ongoing deferred maintenance deficit was not being addressed. Mr. Abbott explained that when the ASHA/AHFC merger occurred, all ASHA reserves and general funds flowed to AFHC. Expenditure from reserves must now be brought before the legislature for approval. Co-chair Frank attested to need to understand what prior reserves consisted of as well as need to ensure that maintenance moneys derive from sources other than other AHFC resources. Senator Sharp requested information on balances at the time of merger, accrual from rent receipts, and use of funds since the transfer. Discussion of the $4 million request for Etolin Heights and the setting of fair market rents followed. Mr. Abbott described the process used to establish public housing rental rates, explaining that the agency reviews the span of rental costs, takes the 45th percentile, and subsidizes to that amount. Reserve requirements for Etolin Heights were $1.0 per month. The account totals $70.0. That is not sufficient. Aside from a $200.0 expenditure six or seven years ago, no major work has been done on the twenty-five year old project. It must now be completely renovated and brought up to reasonable standard. A recent increase in the rent subsidy from HUD will allow only a small accumulation of reserves. In the course of continued discussion of rental rates and subsidies, Mr. Abbott said that renters pay 30% of their adjusted gross income. HUD subsidizes the difference between that and fair market rent. WILL GAY, Executive Director, Alaska Housing Finance Corporation, stressed that AHFC has assumed responsibility for buildings that have been allowed to deteriorate because proper moneys were not expended at the appropriate time. In some instances, buildings have been condemned. The capital budget request recognizes major problems that must be addressed. Senator Sharp noted that requested funding for the 32 units equates to expenditure of $125.0 per unit. Discussion followed regarding AHFC assumption of ongoing debt service on the property at the time of merger. Senator Kerttula requested information on remaining debt service. [Senator Jacko arrived at this time.] Discussion followed regarding removal of lead-based paint and need for paving of the parking area. Co-chair Pearce asked that staff speak to the $220.0 request for statewide renewal and replacement at Anchorage, Fairbanks, Seward, and Cordova. Mr. Abbott explained that it relates to senior citizen facilities and would fund medical alarms and other immediate needs. Recent wiring and installation of an alarm system entailed an expenditure of approximately $100.0. Mr. Gay next spoke to the Cedar Park project in Juneau. He attested to condemnation resulting from rotting studs and floor joists. Major replacement and repair consists of "blowing the units down and rebuilding them." This must be done systematically so that residents are not "put out on the street." The project is complicated by the low vacancy rate in Juneau. Discussion of construction and square footage costs followed. Members expressed great concern over the $180.0 cost per unit. End: SFC-94, #42, Side 2 Begin: SFC-94, #44, Side 1 Co-chair Frank requested information on income from the existing Cedar Park project. Mr. Gay agreed to provide numbers. Co-chair Pearce asked that staff speak to the $1 million request for public housing support for Juneau and Nome. Mr. Gay explained that funding would provide on-site maintenance facilities and equipment at both locations. Co-chair Pearce suggested that the facility in Juneau could be provided from the $9 million proposed for Cedar Park. In response to a question from Co-chair Frank, Mr. Gay advised of 33 units at Nome to be serviced by the $500.0 maintenance facility. Co- chair Pearce requested information on the size of both of the proposed facilities. Co-chair Frank questioned need for a $500.0 facility at Nome in light of the number of units to be serviced and existing maintenance staff consisting of one full-time and one part-time position. Mr. Gay stressed that the cost reflects both construction and equipment. Speaking to the $9.5 million in federal funding for a comprehensive grant, Mr. Gay explained that the state receives $3.3 to $3.5 million from HUD each year for larger maintenance items. The $9.5 million request picks up funding from older grants for capital budget funding. Much of the funding has been received. AHFC is now seeking authority for expenditure. Co-chair Frank noted need for a description of the work to be performed. Mr. Gay next spoke to the $5.2 request for HUD funding of major renovation of obsolete buildings at Bethel Heights. Fifty units are presently under contract, a subsequent batch has been funded, and the current request would fund the last 30 houses. Work involves lifting existing units from foundations, demolishing the structures, and building new energy efficient units on the foundations. Senator Sharp noted that the cost amounts to $168.0 per unit. Senator Kerttula observed that the cost for replacing individual homes in Bethel is cheaper than replacement of multifamily units at Cedar Park. Mr. Gay explained that the agency was able to rotate residents within units at Bethel and did not incur relocation costs associated with the project in Juneau. AHFC applied to HUD for a grant for the 33-unit Beringview project at Nome and has recently learned that this particular form of grant funding has been withheld "for everybody in the country." Mr. Gay asked that authorization for the project remain in place in the event the grant is subsequently forthcoming. Renovation at Nome is similar to that at Bethel. Co-chair Frank inquired concerning the age of units at both Bethel and Nome, and Mr. Gay advised he would provide that information. Co-chair Pearce next directed attention to the requested $18 million federal grant for special needs housing. RAY UTTER, Alaska Housing Finance Corporation, explained that a similar request was included in last year's capital budget. The planning section of AHFC is attempting to capture available federal moneys. The request reflects a "catch all" of a number of small amounts. A number of the programs require a match, hence the need for corporate dollars. Co-chair Pearce acknowledged past funding of the effort and requested information on what was captured and expended in the last appropriation. Senator Sharp requested a description of proposed projects (location, number of units, size, etc.) Senator Sharp inquired concerning who is responsible for maintenance on 100% federally funded projects. Mr. Gay acknowledged state responsibility for maintenance of public housing. Co-chair Pearce voiced concern that additional construction would only increase the disparity between deferred maintenance needs and available funding for that purpose. Mr. Gay explained that the federal government periodically provides notice of available funding. The objective is to utilize that funding for units that have deteriorated because of lack of maintenance. That is why the agency has applied for federal grants for Nome and Cedar Park. That type of grant is also the source of funding for Bethel. Senator Sharp stressed need for feasibility information indicating that income will adequately address maintenance or estimating the amount of subsidy required. Mr. Gay said AHFC has no control over that. The state is "strictly at the mercy of HUD as far as our subsidy is concerned with our low rent housing." Comments regarding fair market rent and need to cover depreciation followed. Co-chair Pearce questioned the wisdom of accepting federal moneys to construct facilities for which the state will have to use corporate receipts for maintenance. Mr. Gay cited the 50 units at Cedar Park as an example of need for housing in an area where very little low rent housing is available. Co-chair Pearce asked for an itemization of projects covered by the $22 million request for affordable housing and energy efficiency. Mr. Utter explained that most of the projects were transferred from the Dept. of Community and Regional Affairs. Approximately $7 million in corporate receipts will be utilized for low income weatherization, primarily in rural Alaska. The warm homes of Alaska program supports subprograms such as the Alaska craftsman home program, energy rated homes of Alaska, etc. It assists contractors in construction of energy efficient housing. The supplemental housing program (a HUD program) helps match and leverage in excess of $41 million in federal moneys. Co- chair Frank voiced his understanding that $8.7 million for low income weatherization, resulting from Exxon overcharge moneys, has largely diminished. Mr. Utter concurred that settlement amounts specifically set aside for low income weatherization have been exhausted. The Co-chair emphasized that, in light of depletion of Exxon moneys, AHFC is now expending corporate receipts. Mr. Utter concurred, attesting to progression from general funds to Exxon moneys to corporate receipts. He further advised of ongoing need and submission of a five-year plan for low income weatherization in the amount of $7 million annually. Co- chair Frank requested historical information on annual appropriations and the source of funding. Co-chair Frank next voiced his understanding that HUD funds for supplemental housing contain minimums which do not allow for enhancers needed for arctic environments. The state thus supplemented HUD funds from general fund capital moneys up to the time of the merger. Mr. Utter concurred that state moneys provided the 20% match. Discussion followed regarding the $1 million match for senior citizen housing development. Senator Rieger voiced his understanding that HUD funding would pass through to regional housing authorities in a manner similar to supplemental housing development grants. Additional discussion ensued concerning public housing energy efficiency funding. Mr. Utter explained that it relates to audits of facilities to determine what needs to be done. Co-chair Frank asked for information on the number of units that have been weatherized. Discussion followed regarding costs associated with achieving a five star energy rating. Mr. Abbott said that the agency conducted a cost benefit evaluation. He acknowledged that securing the rating is not as important in areas where energy is relatively inexpensive as it is in locations where energy is extremely costly. The first phase of the Birch Park project in Fairbanks was built to "four star plus." That will provide a comparison of utility costs between new construction and units in "old Birch Park." Units will be built to the most cost effective standard. Mr. Abbott attested to need for five star construction at Bethel and Nome. Senator Sharp requested information on recoupment of the extra investment between four and five star construction. He suggested that it sometimes takes the entire life of a project to recover the investment. Co-chair Pearce directed that the meeting be briefly recessed. RECESS - 10:20 A.M. RECONVENE - 10:30 A.M. DEPARTMENT OF LABOR When the meeting reconvened, DAVID TEAL, Director of Administrative Services, Dept. of Labor, came before committee. He explained that two of the department's three capital projects involve "straight federal funds." One relates to client access of employment services (registration and search for work) and the other involves a $499.0 expansion of the voice response system for unemployment insurance. The client registration project would place 200 personal computers in local offices. The public will utilize these terminals to input registration data and match individual skills with skills required for job openings. The intent is to make operations "better and faster for employers and employees" and reduce demand for counselor time. Approximately half of the states have similar systems with some form of public access. Mr. Teal explained that at the present time Alaska allows recipients to write in or deposit a card to file for unemployment insurance benefits. Recipients frequently call inquiring about their checks, etc. The voice response system will allow recipients to call and determine if their checks have been issued, when they are expected to arrive, and indicate whether or not they are still unemployed and additional checks should issue. The current system consists of 16 lines. The requested expansion would add 32. Senator Sharp asked if the agency accepts out-of-state calls, and Mr. Teal responded negatively. The third request relates to need to replace the eleven- year-old worker's compensation claims processing system. Three years ago, the department commenced movement toward a common data base in which each employer and employee is listed in the system only once, and information is shared among all divisions. The division received $450.0 for the project two years ago. Last week staff met with the contractor, Texas Instruments, over problems with the contract. It is clear the project was underbid by as much as $1 million. Mr. Teal advised that negotiations "were pretty much that they were going to eat the cost." Unfortunately, this is not a turnkey system. The department is required, by contract, to work with the contractor. If the state does not do so, the contractor can legitimately walk away because the state has not held up its end of the bargain. If Texas Instruments walks, little will be shown for the money or effort devoted to the project up to this time. It appears that the contract will take "another two years to complete." The department requested two analyst/programmers for two years plus data conversion costs. The Office of Management and Budget authorized $100.0. Co-chair Pearce called for questions. None were forthcoming. Due to the impending Senate floor session, the Co-chair announced that discussion of capital budget requests would be continued at 6:30 p.m. RECESS The meeting was recessed at approximately 10:40 a.m.