MINUTES SENATE FINANCE COMMITTEE April 9, 1994 10:15 a.m. TAPES SFC-94, #56, Side 1 (000-end) SFC-94, #56, Side 2 (000-end) SFC-94, #58, Side 1 (000-263) CALL TO ORDER Co-chairman Steve Frank convened the meeting at approximately 10:15 a.m. PRESENT In addition to Co-chair Pearce, Senators Jacko, Kelly, and Rieger were present. Senators Sharp and Kerttula arrived soon after the meeting began. Co-chair Frank did not attend. ALSO ATTENDING: Senator Little; Representative Moses; Representative James; C.E. Swackhammer, Deputy Commissioner, Dept. of Public Safety; Keith Kelton, Director, Division of Facility Construction and Operation, Dept. of Environmental Conservation; Greg Capito, Village Safe Water Section; Dept. of Environmental Conservation; Doug Redburn, Chief, Water Quality Management Section, Dept. of Environmental Conservation; Mike Conway, Director, Division of Spill Prevention and Response, Dept. of Environmental Conservation; Remond Henderson, Director, Division of Administrative Services, Dept. of Community and Regional Affairs; Shirley Minnich, Director, Division of Administrative Services, Dept. of Corrections; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Traci Cramer, budget analyst, Office of Management and Budget; Fred Fisher, fiscal analyst, Legislative Finance Division; and aides to committee members and other members of the legislature. ALSO PARTICIPATING VIA TELECONFERENCE FROM ANCHORAGE: Tony Nakazawa, Director, Community and Rural Development Division, Dept. of Community and Regional Affairs; Herv Hensley, Director, Division of Energy, Dept. of Community and Regional Affairs, Eric Marchegiani, Civil Engineer, Division of Energy, Dept. of Community and Regional Affairs; Gloria Manni, Division of Energy, Dept. of Community and Regional Affairs. SUMMARY INFORMATION SB 363 - APPROP: FY 95 CAPITAL PROJECTS AND GRANTS Capital Budget Overviews were conducted for the following budget areas: Department of Public Safety Department of Environmental Conservation Department of Community and Regional Affairs Department of Corrections University of Alaska Municipal Grants, etc. (see spreadsheet) DEPARTMENT OF PUBLIC SAFETY C.W. SWACKHAMMER, Deputy Commissioner, Dept. of Public Safety, came before committee. He noted that the department request of $312.3 for license plates and driver manuals was funded in the capital budget at $350.0. The $568.5 request for aircraft equipment overhaul and repairs was reduced to $400.0. Co-chair Pearce asked how the department would handle the reduction. Mr. Swackhammer explained that the bulk of the funding would provide for overhaul and repairs, primarily contractual work. Remaining moneys would then be spread over equipment needs. Most department aircraft is very old, and equipment is dated and has outlived its life cycle. The $675.0 request for vessel repair (reduced to $500.0) would be applied to general overhaul and maintenance of the department's sixteen vessels that are thirteen feet or larger. The reduction of funding for replacement of trooper equipment from $491.0 to $200.0 would fund radios, small computers, fax machines, etc. Reduction will fund only the highest priority needs. Reduction of fish and wildlife protection equipment replacement from $370.2 to $125.0 will cause priority to be given to communication equipment. Senator Kelly inquired concerning purchase of new cars by the department. Mr. Swackhammer explained that they are purchased through the highway working capital fund within the Dept. of Transportation and Public Facilities. The Senator then asked if the department budget includes requests for new cars. Mr. Swackhammer said that in order to expand the life of patrol cars and reduce costs, the department extended the historical turn over time by an additional year. Senator Kelly asked if cars are purchased or leased. Mr. Swackhammer advised of his understanding that both arrangements are used. He added that he was not familiar with the working of the highway capital fund. The Senator voiced concern that under lease arrangements, the legislature would have no knowledge of the numbers of automobiles or costs involved. Co-chair Pearce suggested that questions relating to fleet replacement be addressed when the Dept. of Transportation and Public Facilities capital budget is reviewed. [Senator Sharp arrived at the meeting at this time.] Senator Rieger requested additional information relating to funding for driver manuals. Mr. Swackhammer agreed to provide additional materials. Discussion followed between Senator Rieger and Mr. Swackhammer concerning airplane wheels, skiis, and floats. DEPARTMENT OF ENVIRONMENTAL CONSERVATION KEITH KELTON, Director, Division of Facility Construction and Operation, Dept. of Environmental Conservation, came before committee. Speaking to municipal matching grants and village safe water programs, he explained that both benefit communities for water and sewer and solid waste programs. Applications are submitted to communities in July with a request that they return completed questionnaires to the department. Returns are then prioritized on the basis of environmental and health concerns as well as other criteria relating to project timing and ability to provide operation and maintenance assistance. The prioritized list is much longer than the capital budget submittal. Based on the department submission to the Office of Management and Budget, the Governor then decides where the funding line should be drawn. Two projects are proposed for the 50% municipal matching grant program. One is $50.0 for upgrade of water transmission lines from Moonlight Springs to Nome. The department has worked with the city over a number of years to replace segments of the old line. The current request is the third phase of the project. The second project seeks $2,750.0 for development of a water project for the city of King Cove to get around problems associated with the EPA requirement that all surface water must be filtered. A new water supply will be developed from an underground aquifer and transported to town. The upgrade will boost ability to furnish adequate water for the canneries. The project rectifies both an environmental and developmental problem. Canneries are providing half the cost. The municipal King Cove match will include both private cannery moneys and funding from the federal farmers home administration. [Senator Kerttula arrived at the meeting at this time.] In response to a question from Senator Rieger relating to the item entitled DEC capital improvement project receipts, $80.7, Mr. Kelton explained that DEC does not charge administrative costs against individual projects. Requested funding supports an engineer in Anchorage who will administer and oversee the work. Mr. Kelton acknowledged that the cost would be high if only two projects are funded for the coming year, but he attested to a $15 to $16 million backlog of projects over the past several years. The position will be used to continue work on completion of those projects. Once the backlog is caught up and if the next municipal matching grants program is no larger than this year, there will be no need for the position. Mr. Kelton noted that the list for village safe water projects is significantly longer than that for municipal matching grants. That is due in part to last year's passage of SJR 25 requesting that the federal government participate in solving rural sanitation problems. Senator Stevens used the resolution as leverage to obtain a $15 million matching grants appropriation through the rural development administration. It requires that either state or local funds be used to match the $15 million in federal moneys. In preparing the list of village safe water grants, the department used the normal prioritization process and then conferred with farmers home administration to determine which projects would be eligible for 50% federal participation. The list submitted to the Office of Management and Budget evidenced the dollar-for-dollar match on eligible projects. Unfortunately, projects that were high on the DEC priority list were not eligible for federal moneys because of income requirements. The $20.7 million general fund request is needed to utilize all federal moneys and receive the full $15 million benefit. Farmers home moneys will flow directly to communities, but DEC will administer the projects on behalf of the federal government. Receipt and expenditure of federal dollars is thus not shown in the department budget. Mr. Kelton noted that the budget shows $2.5 million in federal EPA moneys since, under federal funding formulas, that amount is receipted and expended by the department. In response to questions from Senator Kerttula concerning the $2.5 million, Mr. Kelton explained that the federal clean water act contains a revolving loan fund that receives a $1.5 to $2.0 billion appropriation each year. EPA sets aside "half of one percent" of that amount ($10 to $20 million) for a national priority list. Alaska has competed favorably and received over 40% of the national funding in the last five years. Those projects are not in the same priority ranking process as the state system. Federal projects do not fall within the state funding sequence. Since the department does not know exactly when it will receive the federal dollars for match with state appropriations, the department has compiled a list of projects for which it "thinks" federal EPA moneys will be forthcoming this year. Three of the projects are on the department priority list, the other two are not. EPA funds only apply to sewage projects. Alternative funding must thus be found for water supplies. Senator Kerttula referenced a past situation at Bethel and acknowledged need for safe water for rural communities. He then noted that many areas are not well adapted to sewer systems and inquired concerning how the department makes judgement calls so that moneys are not wasted in areas where conventional systems are not possible. Mr Kelton commented on alternatives to piped water and sewer systems. He said that available technology defeats obstacles posed by permafrost and poor soil conditions. However, advanced technology may also entail ongoing operation and maintenance costs that preclude installation. A feasibility study is conducted in conjunction with the community and the costs of viable options are presented. The community then determines what level of operation and maintenance is most comfortable. The department then constructs that system. In further discussion with Senator Kerttula, Mr. Kelton advised that disposal of waste through incineration is "terribly expensive" and could probably not be managed in urban areas much less rural Alaska. Senator Sharp referenced the state priority list and asked how many sites have previously had water and sewer systems installed by the department. Mr. Kelton advised that he would have to research the question. As a general statement, he advised that many of the projects are in the second or third phase. The department normally commences with a small project that defines the scope of the work and develops a water source prior to development of the full scale project. Senator Sharp attested to visits to interior villages (Noatak was mentioned) that have as many as three water systems, two of which were abandoned by the department when the third was constructed. He then spoke to need to know where and when the department has constructed systems that failed and the justification for additional funding. Mr. Kelton advised that he would review department records. Senator Rieger inquired concerning the number of positions to be funded. Mr. Kelton said that the CIP request was increased by 5.5 positions. The increase relates to additional federal dollars from the farmers home administration. The $15 million in federal moneys would entail a 60% increase in the department's engineering workload. Federal dollars cannot be used to support project management. The department has therefore asked for state general fund CIP receipts to support the workload. Senator Rieger asked for an explanation of activities to be undertaken by each position, and Mr. Kelton provided a brief review. In response to a question from Senator Kerttula, Mr. Kelton said that the department utilizes 99% local labor. Discussion followed between Senator Jacko and Mr. Kelton regarding lack of a request and funding for an environmental specialist at Bethel. Senator Sharp asked why federal funding is provided for phase one of many projects but not for subsequent phases. Mr. Kelton stressed that the proposed budget represents the first time the state has had an opportunity to "tap into federal funds for the village safe water program." He reiterated that several projects on the current list are not eligible for federal dollars because of income criteria. Farmers home will only fund up to 110% of the median family income for a community. For some projects, sufficient funding has already been secured. It is thus not necessary to use farmers home money. In response to a question from Co-chair Pearce, Mr. Kelton explained that Anaktuvuk was deleted because a North Slope Borough bond issue of $330 million is already in place. GREG CAPITO, Village Safe Water Section, Dept. of Environmental Conservation, came before committee in response to questions from Senator Kerttula. He explained that criteria used to score projects relates to health and environmental needs. Unprotected water sources resulting in sick residents are given preference. Health hazards in communities take precedence over the length of time the community has existed. End: SFC-94, #56, Side 1 Begin: SFC-94, #56, Side 2 DOUG REDBURN, Chief, Water Quality Management Section, Dept. of Environmental Conservation, next came before committee. He explained that the $200.0 request for the polluted waterbody assessment represents a continuation of efforts from last year. The department has been assessing a subset of surface waters polluted over the last several years. Work is being done subsequent to a negotiated agreement with EPA to address the matter under a court order issued to EPA in 1992. Assessment relates to the most seriously polluted waters in need of either new controls or improved enforcement of existing controls. The agreement with EPA splits assessment responsibilities between EPA and the state. EPA took on water bodies impacted by point sources-- Ward Bay, Silver Bay, Unalaska, etc. DEC assumed a leadership role with respect to placer mining, urban runoff, and agricultural areas. Assessment has resulting in ability to convince EPA that new controls are not the answer to dealing with placer mining on the upper Birch Creek drainage. Improved attention to existing controls will solve current problems. Had the $30.0 for assessment not been provided, increased controls on the mining community would have been much more expensive. A total of 39 waters are on the present list. The department has completed assessment of 7. The requested $200.0 will allow for assessment of 7 more. Mr. Redburn next spoke to the sequence of steps utilized in department assessments. Further discussion followed regarding use of settling ponds in mining operations. In response to a question from Senator Jacko concerning how the department finds out about polluted waters. Mr. Redburn explained that under the Clean Water Act, every two years the department is required to solicit information from both the public and agencies collecting water quality data. This inquiry seeks definitive information and documented evidence of pollution before a water body is placed on a list. Definitive information is also needed for an area to "get off the list." Hard data more typically comes from structured entities--municipalities, federal and state resource agencies, etc. Photographic evidence is also accepted from citizens. Senator Kerttula asked if the department has the power to close down septic systems that are flowing into and polluting water bodies. Mr. Redburn acknowledged problems such as Lake Lucille. He noted need to address such problems through future zoning, lot size, and proper system design. The department is working with both the city of Wasilla and the Dept. of Transportation and Public Facilities to address both failed septic systems and storm water drainage directed into the lake. MIKE CONWAY, Director, Division of Spill Prevention and Response, Dept. of Environmental Conservation, next came before committee to speak to the $400.0 request for local response agreements. He explained that agreements would establish a relationship with communities to coordinate spill response. They also allow for reimbursement of community expenses from the 470 fund, through the state on- scene coordinator. The proposed request would fund small, first-aid response packages consisting of sorbent booms, pads, small pumps, etc. These packages would allow for initial response before arrival of more intensive efforts. Requested funds would flow directly to communities through local response agreements. The $150.0 request for radio repeater installation and maintenance relates to the strategic plan for communications developed with division of telecommunications concurrence and review. Funding would provide for installation of a repeater system at Mt. Susitna to provide spill response coverage for upper Cook Inlet, Anchorage, Wasilla, and the Drift River loading terminal. A repeater at Hope would cover Turnagain Arm and "the defense fuels pipeline quarter." Installation at Ninilchik would cover the lower Kenai Peninsula. And a repeater at Ester Dome would cover the Fairbanks area. There is presently a lack of communication capability in these areas of high priority. Co-chair Pearce attested to the fact that one of the problems encountered after the EXXON VALDEZ spill was lack of communication systems that could interact. She then asked if that problem would be addressed through the proposed repeater system. Mr. Conway advised that that issue was addressed in development of the proposed system. The division of telecommunications has ensured that interactive communication will be provided. In response to a question from Senator Sharp, Mr. Conway advised that funding for both projects would flow from the prevention side of the response fund. Senator Sharp suggested that commercial cellular link arrangements would be adequate to cover proposed areas instead of installation of repeater sites. Mr. Conway pointed to the numerous systems that must go together for proper response. The present strategy includes cellular communication. Co-chair Pearce directed that the meeting be briefly recessed prior to consideration of requests from the Division of Energy. RECESS - 11:20 A.M. RECONVENE - 11:35 A.M. DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS Upon reconvening the meeting, Co-chair Pearce noted the teleconference availability of staff from the Division of Energy, Dept. of Community and Regional Affairs. TONY NAKAZAWA, Director, Community and Rural Development Division, Dept. of Community and Regional Affairs, first spoke to the department request to increase federal receipt authority for community block grants an additional $1 million from last year. Increased authority will require no additional staff or administrative funding. Requested additional authority anticipates increases in federal funding for the coming year. ERIC MARCHEGIANI, Staff Engineer, Division of Energy, Dept. of Community and Regional Affairs, next addressed the $730.0 for electrical system, life, health and safety improvements. The rural technical assistance and circuit rider programs have identified areas of certain communities with electrical life, health, and safety threats. Senator Sharp asked if funding would flow from the 20% spilt established last year within four-dam-pool moneys. Mr. Marchegiani voiced his understanding that the $730.0 would flow from the general fund. HERV HENSLEY, Director, Division of Energy, Dept. of Community and Regional Affairs, and GLORIA MANNI, Division of Energy, participated in a discussion of the source of past funding for safety improvements and the 40/40/20 spilt within four-dam-pool moneys. Co-chair Pearce voiced her understanding that small utility improvements were to flow from the 20%. REMOND HENDERSON, Director, Division of Administrative Services, Dept. of Community and Regional Affairs, briefly spoke from Juneau in an attempt to clarify the issue. Ms. Manni spoke to differences between the $730.0 request and a subsequent $2 million request to be funded from four-dam-pool moneys. She stressed that the $2 million request represents matching grants. The division did not believe utilities included within the $730.0 request would be able to provide a match. The match is the major difference between the two requests. Senator Kerttula expressed a lack of confidence in the division of energy and questioned proposed expenditures without specific projects. Discussion of use of power cost equalization moneys also followed. Senator Sharp voiced his understanding that PCE moneys were to ensure the $17 million funding level rather than to provide for construction and modification. Senator Jacko concurred in that understanding. Remond Henderson noted that a small portion of the fund allows for 3% grants. That is the source of the $2 million request from the original $66 million. Ms. Manni further explained that under legislation from last year, 40% of the funding flows to power cost equalization and rural electrification. Another 40% flows to the Southeast transfer fund and the remaining 20% to the power project fund for loans. Funding utilizing $2 million from the 20% split is in the loans budget. Moneys expected to be received in the four-dam-pool transfer fund total $10.6 million. Of the 40% flowing to the power cost equalization fund, 3% is requested for small utility improvements. That funding must, by law, have a 25% match. Co-chair Pearce requested a list of projects to be funded from the $2 million request for bulk fuel system emergency repairs and upgrades. Mr. Marchegiani explained that a list had been developed covering three areas: 1. Emergency services that must be done as soon as possible. 2. Areas where matching funds are available. 3. Areas where seed moneys are needed for upgrade projects. He then said that emergency repairs would be done for Ambler, Brevig Mission, Elim, Grayling, Holy Cross, Kiana, Koliganek, Nulato, and White Mountain. Areas involving matching funds include Gambell, Kivalina, Savoonga, and Shishmaref. Co-chair Pearce asked that the complete list be faxed to members. She also asked for lists of probable grantees for small utility improvements and Southeast energy fund grants. Ms. Manni explained that communities must apply for the grants, and a list has not yet been compiled. Co-chair Pearce voiced her understanding that the requested $100.0 for an organization grant relates to Yakutat. Mr. Henderson explained that the requests reflects the final payment required by statute. Areas which organize into boroughs receive $300.0 the first year, $200.0 the second, and $100.0 the third. End: SFC-94, #56, Side 2 Begin: SFC-94, #58, Side 1 DEPARTMENT OF CORRECTIONS SHIRLEY MINNICH, Director, Division of Administrative Services, Dept. of Corrections, came before committee to speak to the $1.0 million for statewide facilities renewal and replacement. She noted that six of the state's facilities are over 20 years old. Reduction of funding from the requested $3,075.0 to $1.0 million will place the department in the position of deferring essential projects while providing only emergency repairs and replacements. Co-chair Pearce asked how the department would prioritize projects. Ms. Minnich explained that the list of needed repairs, compiled last October, was not in priority order. Prior to establishing priorities, the department will have to assess needs at individual facilities and set priorities according to what is most critical. Senator Rieger asked if listed projects result from code compliance inspections. Ms. Minnich acknowledged that many of the repairs would bring facilities into code compliance. She advised that she could not specifically identify projects that would do so nor affix a dollar amount to the cost. UNIVERSITY OF ALASKA Co-chair Pearce directed attention to the $120.0 request for the University of Alaska, Fairbanks, for virus free seed potato research and referenced the substantial amount of accompanying backup information. GRANTS TO MUNICIPALITIES Co-chair Pearce directed attention to the list of municipal grants and advised that the committee would not review each grant individually. She specifically noted, however, the $1 million direct grant to the City of Haines, Port Chilkoot Dock expansion. Senator Kelly advised that he had no questions concerning the grant to Haines, but he voiced his understanding that many amendments for capital matching grants were being proposed by the Governor's office. He then asked if the amendments had been cleared through local communities. NANCY SLAGLE, Director, Division of Budget Review, Office of Management and Budget, came before committee. She explained that all changes contained within amendments were based on information provided by the communities. In some instances, communities had not yet submitted requests when the Office of Management and Budget constructed the original capital budget, or specific changes, reprioritization, or changes in dollar amounts were requested by the communities. Senator Rieger inquired concerning the method of prioritizing grant projects. Nancy Slagle explained that communities are asked to provide a listing of capital projects. The projects must be greater than $10.0, and communities must provide an in-kind or cash match. Once the Office of Management and Budget identifies the amount of available funding, it then proceeds through each priority list and funds as much as possible. In response to a further question from Senator Rieger concerning community block grant funding, Ms. Slagle advised that the administration does not review municipal grant requests to determine if they might fit within other funding. Communities have been advised that projects for planning or the conduct of a specific study do not qualify under the capital matching grant program. Senator Rieger voiced concern that there appears to be no coordination between the two community grant programs. Speaking to capital matching grants, Ms. Slagle advised of a formula for determining what each community will receive. Dollar amounts are based on population multiplied by a certain factor that depends upon the size of the community. The minimum is $25.0. In response to a question from Senator Jacko, Ms. Slagle explained that unincorporated communities receive $25.0. Senator Jacko voiced his understanding that in some instances the $25.0 flowed to the borough for distribution, and communities within the borough did not receive the minimum. Co-chair Pearce advised that capital matching grant statutes would have to be amended to provide the minimum to approximately 70 communities that fall into the situation described by Senator Jacko. Senator Sharp voiced his understanding that if moneys are to flow to communities within boroughs, then the borough population count would have to be reduced. Discussion followed regarding situations where population numbers from unincorporated communities are including in borough population totals, the borough receives capital matching grant funding based on that population, and less than the minimum $25.0 subsequently accrues to the communities. Senator Rieger voiced concern that stand-alone communities with as few are 24 people might be entitled to the $25.0 grant. He then asked that the Dept. of Community and Regional Affairs provide population figures for unincorporated communities. Co-chair Pearce also requested a list of unincorporated communities within boroughs and the populations of those communities. Senator Jacko advised that Representative Moses has introduced legislation to correct the existing formula. RECESS Co-chair Pearce directed that the meeting be recessed for approximately half an hour prior to commencement of discussion of capital projects for the Dept. of Transportation and Public Facilities. The meeting was recessed at approximately 12:15 p.m.