MINUTES SENATE FINANCE COMMITTEE February 23, 1995 8:40 a.m. TAPES SFC-95, #5, Side 1 (403-end) SFC-95, #5, Side 2 (575-000) SFC-95, #7, Side 1 (000-end) SFC-95, #7, Side 2 (575-032) CALL TO ORDER Senator Steve Frank, Co-chairman, convened the meeting at approximately 8:40 a.m. PRESENT Co-chairman Frank and Senator Donley were in attendance when the meeting convened. Senators Phillips, Sharp, and Zharoff arrived soon after it began. Co-chairman Halford and Senator Rieger arrived as it was in progress. ALSO ATTENDING: Senator Green; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Karen Rehfeld, Director of Administrative Services, Dept. of Education; Duane Guiley, Director, School Finance, Dept. of Education; Janet Clarke, Director, Division of Administrative Services, Dept. of Health and Social Services; Peter Nakumura, Director, Division of Public Health, Dept. of Health and Social Services; Bob Dindinger, Vice Chairman, Alaska Tourism Marketing Council; Jeff Morrison, Director, Administrative & Support Services Division; Dept. of Military and Veterans' Affairs; Bill Andrews, Finance Services, Division of Support Services, Dept. of Natural Resources; Ken Bischoff, Director, Division of Administrative Services, Dept. of Public Safety; Ron Lind, Director, Division of Administrative Services, Dept. of Transportation and Public Facilities; Gary Hayden, Director, Marine Highway System, Dept. of Transportation and Public Facilities; Art Snowden, Administrative Director, Alaska Court System; Fred Fisher, fiscal analyst, Legislative Finance Division; and aides to committee members and other members of the legislature. SUMMARY INFORMATION SB 47 - APUC EXTENSION AND REGULATORY COST CHARGE Amendments 1 and 2 were offered by Senator Donley. Both failed on a show of hands. SB 47 was REPORTED OUT of committee with zero fiscal notes from the Dept. of Administration and Dept. of Revenue (Audits) as well as a note from the Dept. of Revenue (APUC) showing $3,789.7 (the amount set forth in the FY 96 operating budget plus an additional $60.7 in contractual funds). HB 178 - APPROP: SUPPLEMENTAL AND SPECIAL - FY 95 Review of Secs. 18 through 70 was conducted with Nancy Slagle and representatives from the various departments listed above. HOUSE BILL NO. 178 An Act making supplemental and special appropriations for the expenses of state government; making and amending capital and operating appropriations; and providing for an effective date. Upon convening the meeting, Co-chairman Frank directed that review of FY 95 supplemental funding continue. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, came before committee and commenced the following review, beginning with Section 18: Dept. of Education Sec. 18 contains $2 million for foundation funding based on Fall student counts. The number is expected to change once February counts from districts are tabulated, in the next week or two. It is hoped the amount will be reduced. Sec. 19 funding of $615.7 for vocational education relates to questioned allocation of federal grants. KAREN REHFELD, Director of Administrative Services, Dept. of Education, advised that the request is based on a determination by the U.S. Department of Education regarding allocations of federal vocational education grants in FY 90 and 91. The department has appealed the determination, has filed a motion for dismissal, and expects a ruling in the near future. As a further explanation, Mrs. Rehfeld said federal funds are allocated for specific programs. The state is required to operate under an approved plan for allocation of these moneys. In reviewing expenditures for FY 90 and 91, the federal government questioned allocations within categories of grant programs. The department believes that once questions concerning how the money was spent are answered, there will be no need for this cost. The requested supplemental is based on the partial determination notice. The department remains optimistic since the state has not had problems with this program before. Discussion followed regarding possible administrative action should the motion to dismiss fail. Sec. 20 funding of $22.2 through the Alaska Commission on Postsecondary Education would assist in the cost of the contract for students in the WAMI program at the University of Washington. Underfunding for FY 95 totaled $55.0. Funding from WICHE was transferred, but it did not completely cover the amount needed to meet contractual obligations. As further background information, Mrs. Slagle said that the Governor's budget was underfunded with the intent that the University of Washington would collect the funds directly from participants. The University subsequently declined to do that. In response to a question concerning what would happen should the supplemental not be funded, Mrs. Slagle said that moneys would have to be taken from "the other general fund program where the moneys have already been committed to individual participants," or the cost would have to be carried forward into next year. Responding to comments that the legislature attempted to phase out the WAMI program, Mrs. Slagle acknowledged discussion at conference committee but further noted that moneys for first-year students were added back in the reappropriation bill. Sec. 21 funding of $2,197.0 relates to settlement stemming from the Toksook Bay fuel spill. (See Attachment A to these minutes.) Payments to plaintiffs total $1,800.0. The remaining $397.0 is for cleanup. The department is working with DEC to determine whether that portion could come from the prevention account in the oil and hazardous response fund. DUANE GUILEY, Director, School Finance, Dept. of Education, described the circumstances leading up to the spill. In 1990, a rupture occurred in the oil line transferring fuel from large bulk tanks to small day tanks at the generator facility. Oil leached through the ground and contaminated an aquifer. Oil was then pumped through a well into the water system in the community. That brought oil into individual homes and disrupted the water supply. Suit was brought on behalf of 500 residents, the municipality, and village council. A settlement was negotiated between the state and all parties in exchange for a release. End: SFC-95, #5, Side 1 Begin: SFC-95, #5, Side 2 In further discussions, Mr. Guiley advised that the city was notified of the leak and possible contamination of the water supply. The main water supply was frozen, and the city chose to operate the backup well, after notification of potential contamination. Mr. Guiley advised of plans to clean up the spill during the coming summer. The requested $397.0 will not clean up all the oil, but the proposed cleanup plan meets DEC requirements. Dept. of Health and Social Services Sec. 22 funding of $871.7 in new general fund program receipts relates to underestimation of the amount needed to match federal participation in the pharmaceutical drug rebate program. JANET CLARKE, Director, Division of Administrative Services, Dept. of Health & Social Services, explained that the department entered the program approximately three years ago. Congress earlier determined that pharmaceutical companies were charging higher prices to Medicaid programs, nationwide. An invoice based on state expenditure for pharmaceuticals is sent to drug companies, and a rebate is paid to the state. The FY 96 budget contains an estimate of approximately $2 million from the rebate to offset Medicaid expenditures. This revenue has been identified as a source of funding for an error in the EPSDT program which was budgeted at 75%. A federal auditor reviewed the program and allowed only a 50% match. The program thus has a shortfall of $871.1. In response to a question from Co-chairman Halford, Ms. Clarke acknowledged that there is no relationship between the shortfunded program and the potential source of program receipt revenues. Sec. 23 funding of $4 million in federal receipts for Indian Health Services reflects an increase in Medicaid activity. Ms. Clarke noted that the $20 million program is 100% federally funded. As a further explanation, she voiced her understanding that as Indian Health Service and BIA funds are constrained and capped, regional health corporations have actively pursued Medicaid eligibility for their clients. Sec. 24 funding of $966.0 (half general funds and half federal receipts) is for restoration of seven options previously cut by the legislature. Janet Clarke acknowledged that the request reflects a policy shift by Governor Knowles to restore options eliminated during the current fiscal year. Services include: chiropractic, advance nurse practitioners, adult dental, emergency hospital, speech, hearing, and language, optometrists, etc. Senator Rieger asked if the department made use of the statutory change which allows case managers to override the priority list. Ms. Clarke said that the division of medical assistance has actively reviewed case management efforts and is particularly interested in mental health case management. However, a program has not been developed to administratively reorder priorities in the option list. Senator Zharoff referenced backup material indicating that loss of services impacted over 16,000 adult Medicaid recipients. He then inquired concerning the age of the recipients. Ms. Clarke replied that the age group varies. Service is mandatory for those under 21. Senator Zharoff referenced concern from senior citizens. Mrs. Slagle advised that the Governor feels strongly about the importance of services to that group. Senator Sharp inquired regarding offsets to other senior programs such as the longevity bonus. Mrs. Slagle noted that the longevity bonus is in the phase-out process. The FY 96 budget shows reductions based on reduced amounts for which individuals qualify and a decrease in the roll. Senator Sharp voiced his belief that "a large majority of these 16,000 people are eligible and receiving the longevity bonus . . . ." Sec. 25 funding of $392.9 to the division of family and youth services for child protection in high priority cases includes $310.6 in federal receipts. Mrs. Slagle voiced her understanding that funding reflects a one-time federal receipt for back payment of claims. Funding will be used to support social workers. As a further explanation, Ms. Clarke said that funding represents carryover moneys. The normal share is approximately 15%. Co-chairman Halford asked if the federal moneys would be available without the general funds. Ms. Clarke responded, "$300.0 are the one- time funds, and, yes, they would be available without the general fund, that's correct." The Co-chairman voiced his understanding that the department could go to the Legislative Budget and Audit Committee and "put the $300.0 in without the supplemental." Ms. Clarke concurred. Sec. 26 funding of $580.0 to the division of family and youth services is to maintain staffing levels at McLaughlin Youth Center. The center has been over capacity most of the year. In order to provide a safe environment, much overtime has been incurred. In response to a question from Co- chairman Frank, Ms. Clarke advised of 124 authorized positions at McLaughlin. She further referenced the department's attempt to make overall changes in youth correctional services to avoid need for a supplemental. However, population increases, particularly at McLaughlin, are over 16%. Most of the request relates to overtime costs. Discussion followed between Ms. Clarke and Senator Phillips regarding common "threads" involved in the population increase. Ms. Clarke attested to the fact that the violent nature of juvenile crime has increased. Senator Donley acknowledged that, because of over crowding, there is often no where for police to take juveniles arrested for crime in Anchorage. Ms. Clarke advised that moneys derived from reduction of services at Nome were transferred to four facilities in Anchorage, Fairbanks, Bethel, and Juneau. The problem is statewide. Sec. 27 funding of $342.0 reflects public health funding needed to control an outbreak of TB. In response to questions from Senator Phillips, DR. PETER NAKUMURA, Director, Division of Public Health, Dept. of Health and Social Services, came before committee. He explained that at one time TB infected 650 people out of 100,000 in Alaska, and the death rate was up to 50%. In 1969 the rate was 50 per 100,000. At one time, it was as low as 9 per 100,000, but it has now increased to 12. The national average is 10. In 1986, the Center for Disease Control evaluated Alaska and found that, due to success of the program, the state could begin to downsize. At one point, Alaska expended approximately $850.0 for TB alone. The total epidemiology budget five years ago was $2.7 million. That has now decreased to $1.7 million. The amount expended for TB ranges from $600.0 in 1991 to $404.0 this year. Federal support in the early years through Indian Health Service hospitals, experts, and budgets has disappeared. Three years ago the state received $60.0 in federal funds to assist in this effort. This year it will receive $138.0. Available resources for TB control total $540.0. Dr. Nakumura next described efforts involved in annual skin testing for children in rural areas. He attested to recent efforts in Savoonga and Gambell and support efforts involved in delivering services to people. The cost of treatment and surveillance is approximately $123.0 for the 1,200 population in the above-noted communities. The minimal cost of treating a single case of resistent TB, should it occur, would be approximately $180.0. Ms. Clarke further explained that the epidemiology team has visited eight villages and serviced 5,400 people. She then cited statistics for various tests and medical services provided. The department has absorbed some of the cost for these services. In response to a question from Co-chairman Halford, Dr. Nakumura explained that the primary focus of tribal corporation health service is treatment. The state performs the initial work. While positive testing shows up throughout Alaska, the highest concentration is along western coastal areas and southeast. Alaska has historically experienced high levels of TB. Once an individual has the infection, the organism may remain for years, even after treatment. As the body weakens, the infection may be reactivated. The state has a high-risk population. Senator Rieger inquired concerning the $123.0 grant. Dr. Nakumura explained that the highest outbreak was in the Norton Sound area. Health services there have no capacity for "staying on top of the problem, much less the ability to intercede and take care of the problem." Responding to a question from Senator Phillips concerning transmission of the disease from Russia, Dr. Nakumura explained that a study of the organism indicates that it is internal within the state. Co-chairman Halford questioned need for funding within the supplemental as opposed to inclusion within the FY 96 budget. Dr. Nakumura attested to need for a sustained effort to "get on top of" the problem. Sec. 28 (a) funding of $164.9 in general funds for API reflects a fund source change relating to downsizing of the hospital and loss of third-party receipts and policy changes by groups reimbursing API. In response to questions from members asking how downsizing could increase costs, Ms. Slagle pointed to need to cover fixed costs regardless of the size of the population. Loss of third-party recovery and Medicaid payments have reduced revenues. When revenues are down, the state must cover more of the fixed costs from general funds. Ms. Clarke added that, in response to budget reductions, API was downsized to 80 beds. The adolescent unit was reduced from 22 to 12 beds in order to restrict staffing needs. That is a prime population for Medicaid eligibility. Restriction of adolescent care reduces ability to collect third-party revenue. Downsizing eliminated 47 positions. Admissions have remained stable, but the length of stay has been reduced. That is how the facility has lived within its bed allotment. Further, the veterans' administration previously provided over $1 million per year. Policy changes have reduced collections to an estimated $100.0 this fiscal year. That is a drastic decline in program receipts. Senator Rieger suggested that a 20% decline in population should reduce rather than increase costs. In response to further comments, Ms. Clarke said that the FY 94 actual for API was $16.9 million. Current year authorized is $16.2 million. The facility is attempting to deal with the overall reduction. Senator Rieger asked if the facility received supplemental funding last year, and Ms. Clarke responded affirmatively. Sec. 28 (b) funding of $164.9 covers a similar fund source need at Harborview. The facility is also showing a decrease in overall dollars as a result of release of individuals into the community. The release was so successful "that more people wanted to leave," and an additional six individuals were released. In response to a question from Senator Rieger, Ms. Clarke advised that the current population is 44. Four of the additional six who wish to leave remain at the facility but are expected to be discharged before the end of June. Discharge has led to a reduction of Medicaid revenues. That has caused a funding problem. The FY 95 budget for Harborview is over $6.8 million, including $3.3 million in general funds. In response to a question from Co-chairman Halford, Ms. Clarke explained that last year the department requested $400.0 to establish a correctional unit. That increment was not approved by conference committee, but the legislature took funds from the base and moved them into a separate component. When those who could move into the facility were analyzed, it was determined that a "very small percentage" were Medicaid eligible (2 out of 50). The department subsequently determined that it did not have sufficient resources to staff another unit, and there was not a sufficient number of Medicaid eligible prisoners to fill the unit. The department was thus not able to expand Harborview. Funding for the new unit was then moved back into the base budget. Discussion of legislative intent and department action followed between Ms. Clarke and Co- chairman Halford. Responding to a question from Senator Zharoff, Ms. Clarke explained that when a person becomes Medicaid eligible, the state can claim 50% of the cost of care from the federal government. Sec. 29 funding of $410.2 would pay judgments and claims in Greenfield v. State, a discrimination case. Ms. Clarke advised that a $160.0 punitive damage award is under appeal at this time. The case relates to a filing under the "whistle blower act" and claims of sexual harassment. End: SFC-95, #5, Side 2 Begin: SFC-95, #7, Side 1 Dept. of Labor Sec. 30 funding of $55.6 to the Dept. of Labor would reestablish the state data center. Alaska is currently the only state without a program that acquires, analyzes, and disseminates census information used by state agencies to determine population-based federal grants and local government planning. Co-chairman Frank voiced his understanding that the program was cut by the legislature. Ms. Slagle concurred. The decision to reinstate the program was made by Governor Knowles. Dept. of Commerce and Economic Development Sec. 31 funding of $2,500.0 to the Dept. of Commerce & Economic Development for the Alaska Tourism Marketing Council consists of $1,875.0 in general funds and industry contributions of $625.0. Funding would be used for national advertising. BOB DINDINGER, Vice Chairman, Alaska Tourism Marketing Council, came before committee and distributed an informational "white paper" (Attachment B). He said that the issue is Alaska jobs. Requested funding was cut in the Hickel budget a year ago, reinstated by the legislature, and then a portion of the reinstatement was vetoed by the Governor. The Alaska tourism program contains a small television program--approximately $81 million impressions. The intent is to increase that to a billion impressions. Approximately 15% of those who see these commercials come to Alaska in the next year, and 25% come over a three-year period. The marketing effort consists of two programs: The print media attempts to reach those interested in traveling to Alaska while television generates new interest in those not previously interested in Alaska travel. Budget cuts eliminated ability to generate new interest. The $2.5 million will enhance that ability. The 1990 budget contained approximately $8 million in general funds. With addition of the proposed request, only $5 million in general funds will flow to the marketing council this year. In response to a question concerning timing, Mr. Dindinger advised that the commercials "are in the can." Requested funding would provide air time. He advised that of those traveling to Alaska during the coming year, 40% will make that decision between March and May. Approximately 64% will make bookings and reservations during that period. This is the time of year when people are thinking about vacations to "the North Country." Mr. Dindinger stressed that television advertising has a long life. Sometimes it takes a number of years before individuals commit to Alaska travel. Dept. of Military and Veterans' Affairs Sec. 32 funding of $900.0 for the Dept. of Military & Veterans Affairs is based on a five-year average of disaster relief needs for spring flood activity. The present balance of the disaster relief fund is $400.0. Co-chairman Halford inquired regarding timing of the request in relation to when flooding occurs. JEFF MORRISON, Director, Administrative & Support Services, Dept. of Military and Veterans Affairs, advised of flooding in May and receipt of billings that come in over the summer. He stressed the importance of timely response. Co-chairman Halford voiced need to budget for expenditures in the year in which they occur. Senator Sharp referenced backup information indicating that flood activity over the last two years has been zero. The request is based on a five-year average with a high year in 1992. Mr. Morrison attested to need to respond to disasters other than floods. Co-chairman Halford asked if the department would fail to respond because of a lack of disaster relief funding. Mr. Morrison answered negatively, citing legislative policy that "money will always be there for disasters." The Alaska Disaster Act has specific procedures if there are insufficient funds for the Governor to obtain the moneys he needs to respond to a disaster. Dept. of Natural Resources Sec. 33 funding of $1,660.0 to the Dept. of Natural Resources would cover the cost of FY 94 fire fighting activity. The supplemental request for FY 94 was reduced. The current request reflects the shortage that occurred as a result. BILL ANDREWS, Finance Services, Division of Support Services, Dept. of Natural Resources, explained that the fires occurred within areas to which the department responds. He cited a fire in the Delta area as an example. He added that the state experiences an average of $2.7 million in spring fire activity. Sec. 34 funding of $7,195.0 covers fire suppression activity for FY 95, fixed costs, increased fire fighting activity last summer, and projected costs of fighting spring fires this year. Mr. Andrews said that activity for the past two summers averaged $9.2 million. For '91 the total was "around $20 million." In response to questions from Co- chairman Halford, Mr. Andrews explained that fixed costs amount to approximately $4 million. The Co-chairman suggested that the state is spending $4 million "to be ready." Mr. Andrews said that fixed costs include aircraft contracts, contracts with BLM for smoke jumpers, weather detection, aircraft pilots, mess hall staff, accounting positions, etc. Those activities are financed from the department's general fund appropriation. Senator Zharoff inquired concerning federal dollars. Mr. Andrews advised of $5 million in reimbursement for fires fought on federal lands. The state also reimburses the federal government for use of BLM personnel called upon to fight fires on state lands. Sec. 35 contains a lapse date extension for FY 95 Exxon Valdez Trustee Council restoration projects approved through the RPL process by the Legislative Budget and Audit Committee. Dept. of Public Safety Sec. 36 funding of $682.4 to the Dept. of Public Safety would cover increased costs for community jails to bring them in line with standards recommended by the Governor's task force. Sec. 37 funding of $200.0 to the Dept. of Public Safety covers an arbitrator's award relating to the state trooper termination settlement. KEN BISCHOFF, Director, Division of Administrative Services, Dept. of Public Safety, explained that the substance of the case is confidential. The troopers dismissed an employee for misconduct. The union and employee filed a grievance, and the arbitrator found in their favor. Co-chairman Halford inquired concerning the effect of not paying the award. Co-chairman Frank voiced need to seek an opinion from an attorney. He also asked that the department provide all available materials as well as information on what material is confidential and why. Senator Rieger questioned why documents would be considered confidential and asked if a change of policy was involved. Mr. Bischoff said there was no intent to change policy. He then apologized for the lack of backup information and advised that he would provide greater detail. Sec. 38 funding of $156.0 for operating costs of the civil air patrol covers FY 95 underfunding. Ms. Slagle attested to increased maintenance, operating, insurance, and audit costs. Co-chairman Halford voiced his understanding that the requested supplemental would become part of the base for next year. Mr. Bischoff said, "I believe the expectation of the civil air patrol would be to carry forward the supplemental." Mrs. Slagle advised that she would provide information on historical funding. Sec. 39 funding of $186.5 to the Dept. of Public Safety represents a funding source change for costs relating to implementation of concealed weapon legislation. The amount of anticipated program receipts was not generated due to a lesser number of people requesting permits. To a statement from Co-chairman Frank suggesting that the cost of permits should cover the cost of the program, Mr. Bischoff noted that of the $122 fee, the state troopers receive $59 for processing. The fingerprinting check costs $35, and $24 flows to the FBI. The supplemental request is based on 40 applications a day. The last two weeks have averaged less than 30. The troopers hired six of an estimated twelve positions, and records and identification hired two of five. The program is new and has no basis for more accurate estimates. The original fiscal note for the bill was based on experience in the state of Washington. Co-chairman Frank reiterated that permit fees should cover the cost of the program. Mr. Bischoff attested to start-up costs as well as those associated with development of regulations, computer time, public notices and meetings, etc. Discussion of the fiscal note followed. Mr. Bischoff advised of an original request for $1 million and subsequent funding of $676.0 (all program receipts). Co-chairman Frank voiced need to further research the issue to determine if general funds were involved. Sec. 40 funding of $115.0 to the Dept. of Public Safety reflects a funding source change for the narcotics task force from program receipts to general fund as a result of uncollectibility of seized assets. Co-chairman Frank asked if program receipt authority was increased in last year's budget. Mr. Bischoff explained that program receipts are "drying up," primarily as a result of a court decision that "precludes us from using the same process." One of the sources was providing the general fund match for the 75% federal contribution for the task force. Dept. of Transportation and Public Facilities Secs. 41, 42, and 43, provide funding to the Dept. of Transportation and Public Facilities for snow removal. Mrs. Slagle advised of need for the following changes in amounts: Sec. 41 - Highways and Aviation - Snow Removal change $2,340.0 to $2,170.0 Sec. 42 - Statewide Facilities M & O - Snow Removal change $60.0 to $49.8 Sec. 43 - Anchorage Int. Airport - Snow Removal change $250.0 to $350.0. Co-chairman Halford inquired concerning projections for snow removal for the remainder of the winter. Mrs. Slagle said that the foregoing changes reflect recalculation of need. The department continues to monitor this situation. Senator Phillips stressed the importance of highway maintenance and asked if the department was shortchanging the effort. RON LIND, Director, Division of Administrative Services, Dept. of Transportation and Public Facilities, explained that the above adjustments result from lowered assumptions in Southcentral, Interior, and Southeast, offset by the fact that assumptions for the Central region were not sufficient. Co-chairman Franks asked what percentage of the budget generally remains and is utilized for spring maintenance. Mr. Lind said he would provide the information. Secs. 44, 45, 46, and 47 deal with emergency repairs. The department was not provided adequate funding for these types of problems and was asked to return to the legislature and make specific requests. Ron Lind explained that the department typically received $1 to $1.5 million, for emergency repairs, in the capital budget. Last year, the decision was made not to fund these capital items in advance. The department was then to bring forward individual maintenance requests. Discussion of need for culvert replacement at Birchwood Loop and Rabbit Creek roads followed. Mr. Lind said that basic salary and equipment costs for the first 37.5 hours of crew work on emergency repair projects listed in Secs. 44, 46, and 47 are not included in the requests. Supplemental funding relates to overtime, special contracts, and special equipment rental. The department actually spent approximately $600.0 on Dalton Highway repairs, $300.0 of which came from the maintenance budget. Sec. 46 funding of $750.0 to the Dept. of Transportation and Public Facilities would cover spring upkeep and repairs to maintain safety on road systems. Mr. Lind acknowledged that the department does not normally receive a supplemental for this purpose. When Governor Knowles took office, he queried departments concerning budgetary problem areas. DOTPF identified approximately $150.0 for each of the five districts. Discussion followed regarding meetings with the Canadian government regarding the Skagway Road. Secs. 49 and 50 deal with payments to Dept. of Law for services relating to Copper River Highway litigation and right-of-way activity on Native allotments. Speaking to the $230.0 for the Copper River Highway, Mr. Lind advised that while the majority covers attorney fees, it also includes specialized engineering expert witnesses. Co-chairman Frank voiced his understanding that need for the funding relates to prior budget years. Mr. Lind concurred. He noted that bills for the Copper River Highway date from 1994. He mentioned that bills received from the Dept. of Law for the present year date only through September. Work on the matter continues. Sec. 51 funding of $145.0 from the Anchorage International Airport fund would cover court-ordered personnel costs. Mr. Lind explained that the request relates to claims by two security guards who worked at the Anchorage airport for approximately 12 years. In 1989, when the legislature changed the law and placed guards under the police standards council, the individuals could not distinguish colors well enough to pass the visual acuity test and meet certification requirements. They were subsequently laid off. A suit was filed, the guards won, and they have since been rehired. End: SFC-95, #7, Side 1 Begin: SFC-95, #7, Side 2 Sec. 52 funding of $739.8 would respond to prior policy decisions regarding expansion of existing schedules. GARY HAYDEN, Director, Alaska Marine Highway System, Dept. of Transportation and Public Facilities, explained that review of the system budget, seven months into the present fiscal year, indicates that the division would deficit spend $1.6 million. Reasons for the projected deficit result from decisions made by the previous administration and those made since the current administration commenced. Revenues are down approximately $400.0 from last year due to additional service provided by the LaCONTI in November and December, a 19% decrease in passenger traffic, and an 11% decrease in vehicles. Policy decisions made by the present administration to prevent the system from going "further in the hole" were to lay up the COLUMBIA and shift vessels around to cover the Bellingham run. The COLUMBIA was scheduled to come on line March 31, 1995. That has been moved back to May 5. Mr. Hayden said he had also taken steps to generate additional winter revenues through March and April promotions. He advised that he was also working with system managers to reduce spending. In response to a question from Senator Phillips concerning decreased traffic, Mr. Hayden said that some results from discontinuance of the senior citizen discount, revision of the age limit for youth fares, elimination of the driver- rides-free program, and the 10% rate increase. Any one of those measures would have been acceptable, but the accumulation of a number of policy changes at one time was difficult. The department also failed to reduce higher summer rates and provide lower rates for winter travel by resident Alaskans. That, in combination with low air fares, took a toll on ferry traffic. Mr. Hayden said he originally requested that the supplemental include interest earned by the Alaska Marine Highway System fund. At this point, the fund has earned in excess of $1 million in interest which has been deposited in the general fund. In response to a question from Senator Rieger, Mr. Hayden explained that in light of a reduced number of riders and rate increases, revenue collections remain about the same as last year. Earnings last year were down by approximately $400.0. That amount was not collected this year either. Co-chairman Frank asked if anyone was laid off due to a 20% reduction in riders. Mr. Hayden said the only way the system could respond to the reduction was by "laying a ship up, which I've done." To a suggestion that ferry personnel could be adjusted to coincide with the number of riders, Mr. Hayden explained that manning levels are set forth in contracts with various unions. Staffing is not based upon how many people the vessel carries on a particular sailing. Mr. Hayden further attested to need to meet Coast Guard crew requirements. Discussion followed among committee members and Mr. Hayden regarding system operating plans and strategies. Mr. Hayden said that if the system does not receive the requested supplemental, he would have to "drastically cut back on the number of weeks of operation next year." Senator Rieger inquired regarding short notice pricing flexibility. Mr. Hayden said he would be happy to discuss rates, interest in the system, and ridership in the course of transportation subcommittee meetings. Discussion followed between Senator Zharoff and Mr. Hayden concerning operation of the TUSTUMENA. Mr. Hayden advised that it is scheduled for a new engine next year and would be off line for five winter months. Senator Zharoff attested to complaints by constituents in Southeast the they are unable to get vehicles on ferries through the end of the summer. Mr. Hayden explained that the system takes in approximately 72% of its revenues during the summer season. Those revenues allow the system to provide service during the winter. Winter travelers are thus the ones who will most feel the impact of reduced service. SENATE BILL NO. 47 Act relating to the extent to which the Alaska Public Utilities Commission may exercise its powers when regulating utilities; establishing a regulatory cost charge on public utilities and pipeline carriers; relating to the allocation of costs in hearings before the Alaska Public Utilities Commission; relating to the method by which utilities are exempted from and made subject to regulation by the Alaska Public Utilities Commission; relating to the monetary threshold for regulation of certain kinds of utilities by the Alaska Public Utilities Commission; extending the Alaska Public Utilities Commission; relating to staggered terms for members of the Alaska Public Utilities Commission; and providing for an effective date." At this point in the meeting, Co-chairman Frank directed that review of supplemental funding be interrupted for consideration of SB 47. Co-chairman Halford acknowledged proposed amendments by Senator Donley. Senator Donley explained that Amendment No. 1 would "turn the bill into . . . a one-year extension of the existing status quo." Amendment No. 2 would change the extension portion of the existing bill to a one-year extension. The Senator then MOVED for adoption of Amendment No. 1 (90LS0340\C.2, Cramer, 2/22/95). Senator Zharoff asked if the effect would be a two-year extension--an extension of one-year with a one-year wind down. Co-chairman Halford concurred in that understanding. Senator Phillips inquired concerning the rationale behind the amendment. Senator Donley voiced need to first solve the threat of dissolution of the APUC. The legislature could then review technical changes in the bill with greater deliberation. Co-chairman Halford called for a show of hands on adoption of Amendment No. 1. The motion FAILED on a vote of 2 to 5. (Senators Donley and Zharoff voted in support. All other members were opposed.) Senator Donley next MOVED for adoption of Amendment No. 2, which he explained would retain all existing provisions of the bill with the exception of extension of sunset to 1996 rather than 1999. Senator Sharp quoted from a legislative audit report recommending a ten-year extension to June 30, 2003. The proposed bill provides extension for five years, a partial compromise. Co-chairman Halford noted that original sunset law provided a four-year cycle. Senator Zharoff voiced concern over extension to the year 2000 because of serious changes within the legislation that could impact larger municipalities. He suggested that those changes be reviewed over the next year or two. Senator Rieger advised that he would be more comfortable with a two rather than five-year extension. He referenced substantial technological changes within public utilities. Co-chairman Halford called for a show of hands on adoption of Amendment No. 2. The motion FAILED on a vote of 3 to 4. (Senators Donley, Rieger, and Zharoff were in support. All other members were opposed.) Senator Sharp renewed his earlier MOTION for passage of SB 47 with individual recommendations and accompanying fiscal notes. No objection having been raised, SB 47 was REPORTED OUT of committee with zero fiscal notes from the Dept. of Revenue and Dept. of Administration and an informational note from the Dept. of Commerce and Economic Development showing funding for APUC contained within the Governor's FY 96 budget plus an additional $60.7 in contractual. Co- chairmen Frank and Halford and Senators Phillips and Sharp signed the committee report with a "do pass" recommendation. Senator Rieger signed "no recommendation." Senator Zharoff signed "no recommendation (too long), and Senator Donley indicated need for amendment. HOUSE BILL NO. 178 An Act making supplemental and special appropriations for the expenses of state government; making and amending capital and operating appropriations; and providing for an effective date At this point in the meeting, Co-chairman Frank directed that the committee revert to continued review of FY 95 supplemental funding. Dept. of Community and Regional Affairs Sec. 53 seeks the traditional lapse date extension on rural development grants. Nancy Slagle explained that these are construction-type projects. Due to delays in award and problems associated with the construction season, they often extend beyond the end of the fiscal year. Sec. 54 funding of $50.0 would provide the statutory first- year organizational grant for the City of Egegik. It is anticipated the second-year, $25.0 grant, will also be requested. Co-chairman Frank asked that Ms. Slagle advised of the date of organization. Dept. of Corrections Sec. 55 seeks a funding source change from $200.0 in program receipts to general funds. This change relates to the Cook Inlet Correctional Center. When the budget was originally passed, it anticipated installation of a new phone system to allow for the billing of phone calls for prisoners. That system has not yet been established. The change covers the shortfall in receipts. Sec. 56 contains a $39.3 request to assist the Dept. of Corrections in implementation of transfer of the community jails program from the Dept. of Public Safety. Sec. 57 seeks $1,611.5 in contempt of court fines imposed upon the Dept. of Corrections in September. The administration is "still in the process of trying to find out where those moneys are going to go" in terms of whether they will flow to the general fund or a prisoner trust. Ms. Slagle acknowledged that court fines generally accrue to the general fund. In this instance, however, because of the nature of the fines, a question has been raised. Co- chairman Halford asked if the question would be settled prior to dealing with the court system budget for next year. Ms. Slagle responded that she was unsure of the timing. The issue is being handled by the office of the attorney general. Senator Sharp voiced need to know how the money will be used prior to taking action on the appropriation. Sec. 58 seeks $457.0 for pending personnel actions. This portion was removed from the $550.0 in the fast-track supplemental and inserted here because exact amounts have not yet been settled. Mrs. Slagle acknowledged that numbers are not final. The administration will be providing additional information as it becomes available. University of Alaska Sec. 59 would provide $130.1 to the University of Alaska for snow and ice removal at Anchorage and Prince William Sound campuses. Alaska Court System Sec. 60 provides $106.9 to the Court System for the pending North Slope royalty case coming to trial in April. The request relates to the actual cost of holding a trial. These costs were not anticipated in the FY 95 budget. Co- chairman Frank asked why costs were unanticipated. ART SNOWDEN, Administrative Director, Alaska Court System, explained that in November, the attorney general notified the court system that the case would not settle and would go to trial. The court system has historically requested supplementals when dealing with large, complex cases. Funding will be segregated, and if there is no trial, the moneys will return to the legislature. The case will entail removing a judge from his normal duties for six months. A temporary judge will thus be hired to cover the ongoing caseload. Sec. 61 contains $51.7 for retroactive magistrate pay for prior years. Mr. Snowden explained that the supreme court froze magistrate salaries. As of July 1, the new salary schedule will not fluctuate based on caseload. These moneys are due and owing to magistrates. The court system does not presently have the legal right to make the needed payment. If not appropriated, a lawsuit will likely be filed and easily won, plus attorney fees. All Departments Sec. 62 deals with miscellaneous claims and stale dated warrants. All are over two years old. The state has a statutory obligation to pay these costs. Capital Requests Secs. 63 and 64 reflect capital requests from the Dept. of Revenue for AHFC. The first seeks $258.8 for low income weatherization following Kobuk River flooding. Some of the cost will be covered by the Dept. of Military and Veterans Affairs. Funding will be covered 100% by the federal government. Mrs. Slagle further advised, "They've asked to reduce this to at least $149.0." OMB continues to talk with AHFC to determine if it can be eliminated entirely. The $1.8 million requested for matching funds for the supplemental housing program for ongoing construction represents corporate receipts. Senator Rieger asked if the AHFC percentage is fixed. Mrs. Slagle said she did not know. She added that the level provided in the FY 95 budget was inadequate to meet the match for federal dollars. Senator Sharp inquired concerning which projects would be covered by the funding. Mrs. Slagle advised that she would provide a list of specific projects. Sec. 65 seeks $41.6 to the Dept. of Public Safety for roof repairs at the Civil Air Patrol hangar at Merrill Field. Sec. 66 provides $41.6 for code upgrades at the Homer jail. Sec. 67 funding of $100.0 would improve access at the North Slope Borough jail. Secs. 68 and 69 provide respective funding of $153.0 and $1,326.0 for the Butrovich Building at the University of Alaska at Fairbanks. Funding relates to structural problems associated with panel removal and replacement. It cost $153.0 to remove the eroding panels. The University has received approximately $1 million in settlements from contractors and hopes for additional settlement receipts. The cost of replacement is $2,326.0. The issue is expected to go to trial next fall. Brief discussion followed regarding use of the Butrovich Building. ADJOURNMENT The meeting was adjourned at approximately 11:07 a.m.