MINUTES SENATE FINANCE COMMITTEE 22 March 1997 10:10 a.m. TAPES SFC-97, #67, Side 1, (000 - 587) Side 2, (587 - 000) Side 2, (598 - 000) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 10:10 a.m. PRESENT In addition to Co-chair Pearce, Senators Phillips, Donley, Torgerson and Adams were present when the meeting convened. Co-chair Sharp arrived shortly thereafter and Senator Parnell was excused. ALSO ATTENDING: Karen Rehfeld, Director, Education Support Services, Department of Education; Michael A. Morgan, Manager, Facilities Section, Education Support Services, Department of Education; Annalee McConnell, Director, Office of Management & Budget; Ken Bischoff, Director, Division of Administrative Services, Department of Public Safety; Robert Cole, Director, Division of Administrative Services, Department of Corrections; Keith Kelton, Director, Division of Facility Construction & Operation, Department of Environmental Conservation; Kurt Fredriksson, Director, Division of Spill Prevention & Response, Department of Environmental Conservation; Jim Hayden, Program Manager, Storage Tank Program, Division of Spill Prevention & Response, Department of Environmental Conservation; Traci Cramer, Administrative Officer, Exxon Valdez Oil Spill Trustee Council; Susan Taylor, Fiscal Analyst, Division of Legislative Finance; and aides to committee members and other members of the legislature. SUMMARY INFORMATION SENATE BILL NO. 83 "An Act making an appropriation for management fees for the constitutional budget reserve fund (art. IX, sec. 17, Constitution of the State of Alaska); and providing for an effective date." Co-chair Pearce convened the meeting. She noted that first on the agenda supplemental and RPL's would be taken up. Any new items would also be taken up. OMB was also present and would be going through some priorities of theirs' and three specific requests from Legislators. Karen Rehfeld, Director, Education Support Services, Department of Education was invited to join the committee. She reviewed Department of Education RPL's and noted the requests have been included in the FY '98 budget. In FY '96 the concern was with the federal shut down. The division was very conservative with it's use of federal dollars. It involved not only cuts to the U.S. Department of Education but also Rehabilitation Services. It was also noted that the Mt. Edgecombe boarding school would like to host summer activities. Program receipts would come from Alaska Arts Southeast and the Sitka Skipper's Organization. The final request for general fund program receipts for the State museum. The entrance fee to the museums was increased last year from $2 to $3/person. This generated approximately $80,000. Senator Donley referred to a particular line item and wanted to know where the computers were physically located for the museums. Ms. Rehfeld said it was her understanding that the intention was to connect the Sheldon Jackson museum with the State museum in Juneau. They were also intending to complete a project automating the collections on the internet. In response to a question from Senator Donley she said this did not relate to library services. Co-chair Pearce referred to a 20 March letter from Dan Spencer with the Department of Law involving two additional items; Cook vs. Bothelo which was discussed Thursday. Annalee McConnell, Director, Office of Management and Budget was invited to join the committee. She felt that perhaps updated spread sheets would be more informative than each time submitting a letter. Judgments and claims were brought forward individually so that the Department did not incur late payments. Senator Phillips felt there should be a cut off date and whatever remained be dealt with next year. Senator Adams suggested the easiest way might be to get the house bill and then have one big spread sheet. Ms. McConnell continued regarding contractual obligations with property owners. There was concern because this item had not been fully funded. A list of leases was provided to House Finance with options of prorating payments for the last couple months of the year, not paying anything on some leases and etc. She suggested an update of the projections of the longevity bonus; estimating that there would probably be a $1.5 million not necessary to fund the longevity bonus program in FY '97 and it could be done as a delete/add. That could be done to cover the lease obligation. The second item was disaster relief. She wanted noted that if the $585,000 was not part of the FY '97 supplemental it will need to be added to the budget in FY '98 creating more pressure there. The third item was increased fuel costs for the Marine Highway. Nancy Slagle explained the average price would have to drop to $0.65/gallon if the House recommendation were to be followed. The average price was $0.82/gallon and if that trend continued Marine Highway would still have to absorb because that would result in a $471,000 increase for the full year in fuel. Marine Highway was not asking to increase their supplemental; they will absorb it. However, they have already absorbed $1.7 million throughout FY '97 and it was getting to a real pressure point. In talking to Nancy Slagle the recommendation, about fuel provided the house committee suggesting it could be reduced to $130,000, was done on a straight-lined projection. DOT has a much more precise, sophisticated projection process including actual weeks of service, mileage and so forth. The next item referred to was the McLaughlin and Fairbanks Youth Facilities security fences. She referred to a conversation with Senator Sharp for a less expensive way to do the Fairbanks security. She will discuss the matter further with H&SS and advise Senator Sharp whether a gate instead of a full perimeter fence would be an acceptable alternative. She did, however, encourage the committee to include these items due to the pressure on the '98 budget (where it will have to be moved if it is not done in the supplemental) and further because they would like to commence the procurement process as soon as possible. In response to a comment from Senator Phillips she said Co-chair Hanley felt this could be funded with a portion of the '97 AHFC monies that were not already appropriated. There were $53 million that could have been appropriated in '97; the Legislature did not fully utilize that amount and co-chair Hanley left that open as a possible source. She advised that they had suggested the police training academy be funded with that source of money. Senator Donley asked if this was an electronic fence or some special surveillance system. Ms. McConnell said neither of the facilities had full fences around them. As Janet Clarke indicated the facilities were built as an open campus. Now we are seeing violent offenders put there. Senator Donley still felt the cost for the fence system was too expensive at $1.2 million. Senator Torgerson said one would have to figure out what kind of fence was needed. Ms. McConnell said she would ask H&SS to provide further information regarding the cost break down. She continued on to Alaska Psychiatric Institute RPL. They would be receiving more in third party payments than expected and it was necessary to make a funding source change. The last item was the training academy at Sitka. They needed a new shooting range and women's dorm. Senator Phillips asked if other communities used the Academy. Ms. McConnell indicated that the northern folks were trained in Anchorage and folks from Southeast and other areas were trained in Sitka. He further asked if Anchorage Police Department used the Sitka facility. Ms. McConnell indicated they did not. Ken Bischoff, Director, Administrative Services, Department of Public Safety was invited to join the committee. He said the Sitka academy trained statewide except Anchorage. The communities did pay travel and expenses of officers as they could. Funds also came from the Police Standards Training fund. However, some municipalities do not have the resources to meet necessary standards of the Alaska Police Standards Council. Traditionally there had been some level of state subsidy to other municipalities. Senator Sharp asked the percentage of the total operating cost of the facility that is program receipts from the users. Mr. Bischoff said he believed the percentage is approximately one-third. Senator Donley asked if there was State subsidy for room and board and Mr. Bischoff acknowledged to some degree they did. The Senator further inquired if there had ever been any women recruits turned away from the academy. Mr. Bischoff indicated there had been. He said there were not enough spaces to accommodate female recruits. Senator Phillips asked about training in other States. Mr. Bischoff said a 12-week training in Alaska cost $5,600, whereas the same session in the State of Utah cost $2,000. There was a set of fixed and variable costs. The full variable cost for instructors to be brought in, turning on the lights, providing room and board, were typically paid for through the Police Standards Council or the municipality. Senator Torgerson asked of the one-third in program receipts how much was a $10 surcharge. Mr. Bischoff said the surcharge came from the Police Standards Training fund. Senator Donley asked what percentage of all traffic tickets in alaska come from the Anchorage area. Mr. Bischoff said approximately 45%. Senator Donley noted all that money went for subsidizing the academy however Anchorage did not use the academy. Co-chair Pearce advised that any further supplemental requests from committee members or other members it must be in her office by Monday along with any back-up material. It would then be made available to all committee members and she would continue this hearing until next Wednesday, 26 March. (There was a brief recess to change co-chair.) SENATE BILL NO. 107 "An Act making and amending capital and other appropriations and to capitalize funds; and providing for an effective date." Co-chair Sharp reconvened the meeting at 10:50 a.m. on SB 107. He said he would allow questions from the members upon completion of each project rather than each department. Annalee McConnell was invited to join the committee. She referred to section 10, Department of Community and Regional Affairs. They requested the balance in the rural electrification revolving loan fund be appropriated to DC&RA for electrical emergencies programs. There had been some serious situations where in the middle of winter power systems were going down and this fund would allow the department to deal with these emergencies. It would not require new funds but appropriate the lapse over. Bob Cole, Director, Administrative Services, Department of Corrections was invited to joint the committee. He noted in answer to a previous question that the Department of Corrections did share it's Anchorage Training Academy with the Anchorage Police Department and the cost sharing arrangement is the Department of Corrections pays about $75,000/year and they in turn contribute several hundred thousand dollars. The local police department, State Department of Corrections, Federal Probation and Parole Officers, military police and those from local communities in the Western and Interior of Alaska use the facility. With respect to the capital budget he referred to a request for $900,000 for deferred maintenance, renewal, replacement, renovation and repairs. He noted the department had over 112 buildings, a majority of them over 20 years old. He reviewed quickly a list or priorities saying that these facilities were used 365 days a year. Most of them are overcrowded. In response to Senator Phillips he said they were looking forward to deferred maintenance during the interim. Senator Phillips further asked how old the oldest facility in Alaska was. Mr. Cole indicated that it was probably Wildwood, which had been purchased from the military in the mid-70's having been built in the 1950's. Mr. Cole said he would provide requested information on age and conditions of buildings for Senator Phillips. Mr. Cole continued on to the next request which was $2.383 million to use federal crime bill money under the violent offender incarceration incentive grant already awarded. He noted there was no agreement on how to solve Correction's overcrowding problems nor was there policy agreement on how to use the funds. The basic purpose of the funds was to create a new capacity for the confinement of violent offenders. A proposal of $500,000 to build 20 new beds at Pt. McKenzie would alleviate some overcrowding in some of the Anchorage facilities. It was also proposed to add 25 new beds to the FY '98 Arizona out-of-state contract. The department proposed to put about 20 more people out this year, build the FY '98 operating general fund budget so that the continuation of the cost for those 20 people would be financed out of general fund money; then 1 July send about 25 more people out and pay for them out of the Federal Crime Bill funds. It was also proposed to use $400,000 to help reconstruct the Harborview facility in Valdez for a substance abuse center. OMB would be coordinating the project. (Tape SFC-97 #67 switch to side 2 at log #587.) Mr. Cole referred to the Palmer project which included last year in the general obligation bond plan it was proposed to add 176 new beds at Palmer Correctional Center. About 324 acres would need to be refenced for a total cost of $2.5 million to house a greater number of medium security prisoners. Co-chair Sharp recalled that last year it was decided to get rid of Harborview and quit pumping money into it. Annalee McConnell responded stating that Harborview was being phased out as a facility for the disabled which would be completed by the end of December this year or early January. However, as it was looked at to get additional bed space with relatively small capital investment Harborview was a good facility for the purposes of drug and alcohol treatment program. Drug and alcohol offenders account for the large rate of recidivism and there is no treatment facility as part of the Corrections program. They are trying to cooperate with the City of Valdez to get a package deal. In this way the facility would be used for a need in the State and it would also be a cost effective way of getting extra beds. Co-chair Sharp asked what the anticipated annual operating cost would be. Ms. McConnell said that they were working with the City of Valdez presently and waiting final confirmation of the shares to be absorbed by them. Mr. Cole said the next item was a continuation of use of federal funds to support the staff that manage the department's network with respect to criminal aliens. These are criminal alien funds that Departments of Corrections throughout the country are paid by the federal government for housing criminal aliens picked up by the INS. Our estimated share is $303,000 and the department would like to continue support for the network technicians. The next request was for $300,000 for equipment replacement. The department has approximately $16,500 state-owned equipment. The department basically operates thirteen mini-cities and thirteen secured mental health programs. He noted specifically the range of equipment necessary to operate these facilities around the State. Senator Phillips asked if there was a direct purchase of the equipment or if some was leased or contracted. Mr. Cole said some was lease/purchase and others were purchased outright. Mr. Cole referred to the last item on the request and said it was for this coming fiscal year, $600,000 to continue the process of cooperating with Law, Courts and Public Safety in building a new management information system for the department. The department has been automated, has the technical backbone for a new information system to ride on. He referred to a report done in 1990 by Pete Marwick, interim reports by Legislative Finance and reports done by the judicial council which basically conclude the Department of Corrections cannot be managed nor can it properly respond to its authorizing environment without automation and a brand new information system. There are funds left in the capital budget, appropriated by the finance committees over the past year in the amount of $1.6 million and is being used for the new design of a new management information system. He noted this was a complex problem and related unfortunate incidents with the present CJIS. He said the persons involved would be prosecuted according to law and personnel rules. Co-chair Sharp asked if development of this system was contractual for programming, was there hardware involved, personnel for programming or what was the majority of the request for. Mr. Cole indicated said the majority of the funds would be used for the purchase of consulting services to either buy or build software applications. Co-chair Sharp continued on to the Department of Education. Karen Rehfeld, Director, Education Support Services, Department of Education was invited to join the committee. She further introduced Michael A. Morgan, Manager, Facilities Section, Education Support Services, Department of Education. She briefly reviewed the projects included in the Governor's capital budget for the department. The first project was Village Safe Water grants, a reappropriation request. This would be in conjunction with the school districts to develope spill prevention control and counter measures plan in event of an oil spill. These plans are required by the U.S. Environmental Protection Agency and the U.S. Coast Guard relating to oil spills and protection of navigable waterways. The schools, at their own expense, would develope the plan specific to their location. Estimated cost of the project was $25,000. The next project was $250,000 for the Alaska Vocational and Technical Center in Seward. It has been there for some time and roof repairs are needed for the student services and food services facilities. This would be an AHFC receipt funding source. The Alaska Commission on Post Secondary Education was the next request. This was for computer replacement in the amount of $90,000. The agency has converted to a new data processing system which replaces most of the highly manual administrative processes. This will allow for improved delivery of services to their clients. Senator Phillips asked how much money was spent so far for the computer upgrade during the last three - four years. Ms. Rehfeld said the capital request for the entire development of the new system was a little over $1 million. That conversion has been completed. Co-chair Sharp referred to the next request for vocational and rehabilitational modifications. Ms. Rehfeld said this was a request for $150,000 and it would also be AHFC receipt. This would provide funds to allow home modifications for individuals with disabilities to make their home environment safer and allow them to remain independent. Most of the modifications are very inexpensive. These would be provided as grants to non- profit organizations that help provide independent living services throughout the State. She said this was a new funding source. Funding had been requested last year but they were not successful in receiving any money in the Governor's capital budget. Service providers that currently deal with independent living services statewide would be used. Ms. McConnell pointed out that this was one of the ways of reducing the overall costs of providing services. Many of these folks might need just a ramp in their home; otherwise would necessitate them being placed in an institution at a much higher cost to the State. The Mental Health Trust Authority has worked on as part of its program to reduce costs and improve the services so individuals may remain in their homes instead of institutions. Ms. Rehfeld said this would be an enhancement to services. In response to a question from Senator Torgerson she advised that vocational rehabilitation was under Department of Education and not the Department of Health and Social Services. Co-chair Sharp in discussion with Senator Torgerson said this was only a new program to the Department of Education and there were also federal funds available for this program. Ms. Rehfeld continued on to Mt. Edgecombe High School repairs, renovations and equipment. $50,000 of the request is general funds; $250,000 is AHFC receipts. She noted that bathrooms, shower rooms, window replacements were just a few of the repairs needed as the facility at Mt. Edgecombe was quite old. Carpeting and furniture needed to be replaced in the two older dorms. Equipment in the food service area needed replacing as it is now also over 30 years old. Senator Phillips asked how different school districts were put on the list for repairs as he had two schools in his district in the same condition as Mt. Edgecombe. Ms. Rehfeld noted that Mt. Edgecombe High School was a state agency and was not eligible for the "1411" process. Because of this the Department of Education puts together requests for Mt. Edgcombe and AVTECH and includes them every year. Annually the capital project requests are gone through and review ranking and developing for the school construction list and the major maintenance list. Co-chair Sharp noted that the school systems send in their data on what is needed, they are rated by the department according to health and safety, however, if a school does not submit a request they do not get rated. The next project referred to was the Statewide Library Electronic Doorway, aka SLED for $100,000 in general funds. Co-chair Sharp asked if the department got any of their operating costs covered under the grants and Ms. Rehfeld informed the committee that the majority of the SLED funds were passed through to the University of Alaska Fairbanks and for the telecommunications costs providing Internet access statewide including approximately 43 communities. Ms. Rehfeld introduced the next project which was the Regional Vocational Charter School, $250,000, AIDEA funding, to be used for a dormitory facility, student/house parent residences including ceilings, heating system, carpeting and replacement of doors and other renovation of rooms for the student/house parent living quarters. She noted the building was an old air force facility. In response to Senator Donley she said the Regional Vocational Charter School was a school operated by the Galena School District called "Project Education". It provided a technical school training facility outside the regular school district program. Co-chair Sharp asked how the operating part was funded. Ms. McConnell responded saying this was a cooperation among several school districts to provide vocational training, including a heavy emphasis on computer technology. It functions much like Mt. Edgecombe, drawing students from around the State. It worked on special kinds of job training that would be a part of welfare reform. They are looking forward to receiving federal grants and also innovative partnerships with industry groups looking to train students for specific kinds of jobs. Senator Donley wanted to know if any of the money was being used for computers. Ms. Rehfeld said she did not think any of the money would be used for computers; the request was for renovation. Ms. McConnell further advised that monies through federal grants and the industrial groups would be used for equipment needed for training in the computer area. Senator Torgerson asked how many students could be enrolled and were these high school age students. Ms. Rehfeld indicated they were high school students but does not have the exact count. She further said "Project Education" was a charter school approved by the State Board last fall. Co-chair Sharp asked about the $85,000 to be used for "house parents" and if that was like dorm supervisors. Ms. Rehfeld said it was the same as a live-in dorm advisor. Ms. Rehfeld introduced the next project which was the Juneau School District, Mendenhall River School. Senator Phillips indicated he had a problem with this system. Michael A. Morgan, Manager, Facilities Section, Education Support Services, Department of Education was invited to join the committee. In response to Senator Phillips he said all appeal hearings were held in Anchorage. Senator Phillips asked how old the Mendenhall River School was and Mr. Morgan advised it was about 12 years old. He said there were design problems with the roof and it was essentially failing. The contractor and roof manufacturer were out of business and the architect was no longer in state. Senator Phillips further reiterated that he had a problem with the way this system was working and referred to the list of projects. Mr. Morgan said that when the projects were ranked they did not know how they would come up. They are written independently. Senator Donley said they wrote up the criteria and it was very manipulative for years. Mr. Morgan said the criteria was fairly new within the last three years based on statute and developed by a committee of members from around the state. The criteria was not developed within the department. Senator Phillips referred to Creek Side Elementary School which was built in the late 1950's. There are two telephones in the building; one to call Eagle River and the other for long distance. Senator Donley said he regretted having done HB 37 and that it was a gigantic mistake. The legislative constitutional duties were turned over to the Department of Education to develope criteria that stacked the deck against her own schools. Hundreds of thousands of dollars were funded for schools other than the urban ones because they were further down the list and it had been assured that these schools would then move up the list. He said HB 37 should be repealed. Ms. McConnell said there could well be some improvements made to the system, however, she pointed out that urban schools also benefited from the reimbursement process. A list could be provided of what had been given to the urban schools over the past several years. Ms. Rehfeld also noted that the current process the department is tasked to follow passed in 1994, SB 7 which replaced the HB 37 process. Great improvements have been made to the evaluation process. Senator Phillips asked what percentage of urban Alaskans are on the bond review committee. Mr. Morgan indicated there were nine members; six or seven of them being from Anchorage or Fairbanks. Ms. Rehfeld said the next item on the list was the Fairbanks School District, Hunter School for planning, design and renovation/addition in the amount of $2,012,900. This included correction of fire code deficiencies, replacing the gym, providing handicapped access and upgrading the mechanical and electrical systems. The third project on the major maintenance list was the North Slope School District, bulk fuel systems upgrade. This was a portion of a borough wide upgrade of existing bulk fuel storage facilities. Senator Phillips asked if this could not have been afforded within their own budget. Mr. Morgan explained the reason some projects end up on this list was because they were eligible to apply and districts have a three year window in which to actually ask for reimbursement even if they have totally paid for the project. The North Slope has done almost all of the work by now, if not all, and they would have paid for it, but due to the window option available by statute, they have the opportunity to ask for state aid. Senator Sharp wanted to know how bulk fuel storage could get so high up on the list as a critical education factor. Ms. McConnell said that a school could not be operated if there was no heating system and the heating system required bulk fuel. (change to tape number 68, Side 1 at 11:50 a.m.) Mr. Morgan continued noting that these included total renovations where tanks were replaced, all piping was replaced, bermming was put in place, liners on the bermming and then the monitoring equipment now required for those facilities was also installed. Ms. Rehfeld continued to the next project, the Bering Strait School District, Diomede structural remediation phase II and III. That was in the amount of $336,720 to correct critical structural and foundation failures. It involved mainly the elementary school and a very small portion of the high school. The next project was the Fairbanks School District, Denali School, planning, design and renovation/addition in the amount of $261,508 which would correct a number of structural, building code, site and program deficiencies. Co-chair Sharp noted for the record that the Hunter School and Denali School were the first two schools built in Fairbanks that expanded the one school town. Mr. Morgan noted the school were both in excess of thirty years old. Ms. Rehfeld said the last project for the department was the Northwest Arctic School District, Kiana High School renovation in the amount of $2,296,414. This was an old BIA facility and the funding will provide for redesigning the educational space and expanding it to meet the needs of the community. She did not have the number of students attending the facility but indicated she would provide that information. Senator Phillips again reiterated his frustration with this system. He felt as the years went on the ability to educate children was diminishing. Ms. Rehfeld offered Mr. Morgan could walk through the Anchorage school district projects or perhaps a separate meeting could be set up to discuss the matter. He expressed his concern over spending more money on a 12-year old school just because it was in the capital city. Co-chair Sharp and members discussed continuing through Environmental Conservation. Keith Kelton, Director, Division of Facility Construction and Operation, Department of Environmental Conservation was invited to join the committee. He noted there were three general funding columns: first, an EPA funding source available for rural waste water projects; second, an EPA funding source, federal, available for drinking water projects; and third, a funding source identified as state general funds. The accumulated total of those three columns by project source represents approximately $16.5 million. He explained a complex funding relationship using a chart. August of last year Congress passed reauthorization of safe drinking water act. This was the first time federal funds were made available for safe drinking water projects. This program, called the state revolving loan program, mirrors a program in place for waste water for several years. The state share of the federal appropriation that goes with the reauthorization was nearly $27 million which required a 20% state match. This bill would also provide the state authority to take up to 30% of the federal capitalization as grants. He referred to the EPA drinking water funding source. (see the Budget Analysis chart) He noted thirty percent of the federal cap, representing a little over $8 million, was available for direct grants not requiring a match by the federal government for drinking water projects. He said there were ten projects identified just under $8 million. After the grants were subtracted out there was still $24,363 million available for various set asides as required by the federal act plus loans. The department projected available loans in the amount of $20 million which could go on a revolving basis to different communities to continue the process. In summary, for $5 million, identified in section 2, front end of the budget, $8 million in federal grants could be gotten and another $24 million in loans and set aside dollars. In comparing this request with last year's, it was noted the priority under the general fund accumulative total was $7.5 million. Co-chair Sharp referred to the federal grants and loan programs. Mr. Kelton explained these for the committee using his chart. Ms. McConnell noted that in the front section general funds were changed in their amendments to AHFC. In the original version of the bill sent they still did not have confirmation as to whether the AHFC bond insurance could be used, which they had believed could be liquidated. The general fund in section 2, however, is now proposed to be AHFC corporate receipts and that was defined in their amendment letter. Co-chair Sharp asked if the AHFC capital budget did not have $14 million. Ms. McConnell said the original amount in the capital budget included $53 million of AHFC. Subsequent to the release of the capital budget the department learned they would be able to liquidate the bond insurance fund which would free up another $28 million. They proposed using $5.3 million of that to replace the GF. They could not announce it until now because they just received final confirmation. Co-chair Sharp asked the definition of a "disadvantaged community". Mr. Kelton explained that any community under 10,000 population qualifies under "disadvantaged community". Two other criteria which only one has to be met are: first, community's cost of providing the user fees for a utility service exceed 1% of the per capita income; second, a major economic set back in the community. Presently Anchorage, Fairbanks and Juneau were excluded. Ketchikan may be included as a "disadvantaged community". Senator Torgerson asked about a previous ranking system. Mr. Kelton said there still is a ranking system. All projects were submitted to the State in response to a questionnaire sent out on an annual basis, based on environmental needs, health needs, ability of the community to proceed with the project and provide the match and timing of the project in relation to other projects that are being built that may have funding related. Senator Torgerson asked if all the projects were being matched and Mr. Kelton said that all the communities were required to provide a match for the requested projects. One exception he noted was Yakutat, for the waste water treatment plant, had already provided their match. Senator Torgerson asked about "disadvantaged communities". Mr. Kelton indicated they must provide a match. Senator Torgerson said he would like to see the matches. In a last comment he said he would like to see "disadvantaged communities" be changed. Mr. Kelton said this was a federally defined term. The State was free to interpret this term. Mr. Kelton said through public process the public was being encouraged to make comment on the definition as well as the communities that were being selected. Co-chair Sharp referred to the first program being talked about was the municipal matching grant on the priority list for a total of $1.150 million EPA funds; $7.821 EPA drinking water funds; and $7.576 general funds. Mr. Kelton advised these were all grants. The loan program was identified as a funding source. Recipients of those loans will be identified in the intended use plan out for public hearing, depending on the projects that come in. Co-chair Sharp asked for an explanation in the difference in qualifying for this program and the village safe water program. Mr. Kelton said there were no projects on this list and also on the village safe water program even though there were communities eligible to be funded on both lists. He further referred to section 1 of the loan program of the capital budget stating this was operated to fund waste water treatment plants. The fund currently has about $80 million and about $60 million has been loaned. The remaining corpus of that account was being used as a collateral for revenue bond sales. In response to co-chair Sharp he further said there was a request for a portion of the federal receipts of the clean water fund that appear both in the operating budget and in the capital budget. This year the federal government provided a little over $13 million, a federal capped grant, to the State of Alaska. It was his understanding to keep the budget the same as last year a portion of it was shown in the operating budget and the balance was in the capital budget. Ms. McConnell advised the committee that when the budget was prepared they knew the new federal money was most likely going to be available but they wanted to reserve judgement about whether the water-sewer-land fill component of the budget would be expanded. Therefore, the prior year level's amount was put in the operating budget in order to get the federal match. Co-chair Sharp asked if the current anticipated federal funding of $13 million less $5.7 million was in the operating budget. Mr. Kelton advised $13 million was in the Alaska clean water fund, split between the capital and the operating budgets. In addition, there was $5 million for the drinking water which is only in the capital budget. Co- chair Sharp asked what the funds were used for in the operating budget. Mr. Kelton said they were loans for waste water treatment facilities in the larger urban communities. Last year there was a bill that allowed revenue bonds to be sold for the same program. Funds generated by this match would allow expansion the corpus of that fund and increase the ability to leverage the funds by selling the revenue bonds. Co-chair Sharp asked Mr. Kelton to continue on to section 2. Mr. Kelton said that it was tied into his presentation from the charts, found also in the back-up. He concluded explaining the process for the municipal matching grants and loan projects. He referred to the priority list found in the packet as opposed to the short forms. He said it would show the relationship of the matching funds between state and federal. This program was designed to aid the smaller communities in the state, primarily rural communities, even though there are some communities such as Whittier and other second class cities that do participate in this program. Basically, it was designed to aid smaller communities with under 600 population. The funding mainly had been obtained in large part from federal appropriations over the last three years and that was in response to SJR 25 that was passed in 1993. That resolution challenged the Federal government through agencies and Senator Stevens to fund up to $25 million per year to be used to support rural sanitation efforts under the condition the state would provide dollar for dollar match. He reviewed page 2 of the village safe water CIP priority list noting the total for the program would be approximately $43.7 million. $7.5 million shown for the rural development administration was not totalled in the short form package because those funds were not received and expended by the State. In order for the projects to be funded by the federal government a match is required. He explained the eligibility difference between the federal funding sources. EPA funding could only be used to fund water and waste water projects. Solid waste projects had to be funded under rural development administration funding source. A further limitation under rural development administration was that there could be no per family average income that exceeded $42,000 per year. He explained the land fill project in Denali had too high a per capita income, was not eligible for EPA funding and therefore was funded under GF. All other projects had a dollar for dollar match. Senator Donley asked if there were some matching federal funds for the first section and then after that AHFC funds. Mr. Kelton advised that AHFC would start funding projects at about Kotlik. This would be partial State GF and partial AHFC funding. He referred to the village safe water CIP priority list, noting that any project after Kotlik was proposed for funding from AHFC. Senator Donley referred to Akiak Native Community and said there were no longer any federal funds showing up. Mr. Kelton responded that the remainder were submitted but not proposed for state funding. Ms. McConnell said the full list was always submitted and then it was shown to the legislature how far they could go with what was proposed in the budget. The whole list was submitted as an information piece. Co-chair Sharp asked if there was any way to indicate the population of the last census on the list and Mr. Kelton said he could provide that information. He said back-up provided earlier would show that information. Senator Donley referred to the Denali Regional Land Fill, the only one that does not have any federal matching funds. If it did not qualify for matching federal funds why was it listed. Mr. Kelton said the program did not have any limitations statutorily on the source of the funding provided. Many projects in the last four or five years had this level of federal participation. Senator Donley asked the Denali project be described. Mr. Kelton said it was in Senator Miller's district at Clear Air Force Base in the Cantwell area. It was a regional land fill that would be put in at part of the Usibelli Coal Mine property. Since it was a village safe water project there would be little local participation. Information would be in the back-up book. Senator Torgerson asked if they would be accepting garbage from Nenana. Mr. Kelton said that Nenana had proposed a regional land fill but have since dropped that proposal, now proposing to pay for the use of the Denali land fill. In response to co-chair Sharp he said that a dollar for dollar match was required. Federal regulations establish the eligibility requirements. Co-chair Sharp commented on the match requirements and Mr. Kelton explained that the CIP project administration request which serves as a funding source for the operating budget at $1.139 million was a fund source for the operating budget. No administrative costs would be taken from the projects. At the request of the Legislature it has always been identified up front. The other item not having a match was an EPA demonstration project funded through the Alaska Native Health Board. For the Health Board to receive EPA monies EPA has dictated to the State there would be a $500,000 match requirement. (Tape #68 switched to side 2 at log # 598) Mr. Kelton continued saying federal totals were not included in the cumulative total. Co-chair Sharp asked if it was a requirement of the studies of the developmental costs to be 50/50 funded and Mr. Kelton indicated that was correct. In response to a question from Co-chair Sharp he said there was very little local participation for village safe water program. Some monies were put in through the Governor's matching grants program, some materials and equipment are provided, but primary financing was through the above process. Senator Donley asked if there was a statutory provision regarding this and Mr. Kelton said the statute limited the State asking for participation. The communities are not required to put anything in, but most of them do provide some in kind support. Senator Donley stated that he did think the statute said they were prohibited for asking for any contribution. Co-chair Sharp asked if it was known how many of the water systems were the second or third systems installed in particular locations. Mr. Kelton indicated he did not know off hand. The normal evolution of the programs in rural Alaska begins with a simple watering point, then a central washateria; ultimately two or three years down the road, there may be a pipe distribution system installed. The water system would be developed only once, but the distribution system would expand over a period of ten or twelve years. Co-chair Sharp explained a tour he took five years ago through Northwest Alaska. He said some of the villages were on their second or third water systems in the last fifteen years. In particular, one village had abandoned two of their systems due to freeze-ups, break-ups, etc. He wanted to know how many of these were replacement systems due to lack of maintenance, technicians to maintain circulating systems or improper design. Mr. Kelton responded that he would not want to minimize the projects in rural Alaska, however improvements had been made through a remote maintenance manager. During the last eight years there had been no failure of a system that required it to be rebuilt due to either poor operation or freeze-ups. Co- chair Sharp also referred to Birch Creek, noting many times systems had been shipped in but always disappeared before they could be made functional. Mr. Kelton said in reference to Birch Creek that it was a public health service project. There had been a lead base solder used in some of the piping that caused a health hazard. It was discovered by a school teacher and without any village authorization dismantled the system. That did require it to be rebuilt. Ms. McConnell said the department had been trying to upgrade operations and maintenance of all utilities. (There was a short pause on record.) Kurt Fredriksson, Director, Spill Prevention and Response, Department of Environmental Conservation was invited to join the committee. He said the next eight projects in the bill were his concern. He referred to page 13, line 20 and briefly described each. Statewide Hazardous Material Response was a new capital request, however a project that had been being worked on for a number of years under State statute. His division was specifically directed to respond to the release of hazardous substances. High population areas were of major concern; Anchorage, Fairbanks and the North Slope. The primary chemicals of concern were ammonia and chlorine, associated with most of the seafood processors; drinking water facilities and sewage treatment plants. He referred to several chemical releases, the most recent being a freon release at Diamond Center. They were extremely hazardous releases and require a response capability even above that for an oil spill. These individuals must be highly trained and equipped with personal protective gear. There was no federal capability within the State for what was termed a level "A" or "B" "haz-mat" response capability. Clear Air Force Base does have some individuals trained, but not to any specific degree to be able to come to the aid of a local community. The State also had no level "a" or "B" "haz-mat" response capability. He further noted a poor response capability within the Anchorage and Fairbanks fire departments. There was some response capability in the industry section, i.e. Unical, in Kenai. They have proposed training and equipment assistance at least for Anchorage and Fairbanks fire departments. The teams could go to the aid of other communities. Co-chair Sharp asked about supplementary response agreements or drafts with Anchorage and Fairbanks. Mr. Fredriksson indicated that the agreements in place with Fairbanks, which had been signed by the borough Mayor. There was an agreement with Anchorage in the process. Potential capability had previously been coordinated with the Ketchikan Pulp Mill. However, that capability eroded with the closing down of the mill. Southeast Alaska is not a high risk area and primarily most are diffused risks, those associated with canneries, seafood processing facilities. They would ask the teams to come and visit with southeast Alaska in order to develop a more defensive posture, protection in place, and how to secure local residents so they minimize the exposure risk. Senator Donley asked about the fund source. Mr. Fredriksson indicated the prevention account of the response fund under the 470 fund. The response account, once it reaches the $50 million cap that it has, then the $0.02 surcharge stops. The next item was a request to purchase equipment for the state chemical lab in Juneau. This was to purchase an "inductively coupled plasma mass specto-photo meter" or ICPMS for short. The specific piece of equipment could provide analysis for trace metals within soils, water and tissues. The equipment presently in place in the lab was a spectro-photo meter. It was purchased in 1970 and is no longer operable. The equipment would primarily be used for the drinking water program; to assess lead, mercury and cadmium within drinking water samples. As well, it can test soils and tissue samples. The next items briefly discussed were Consolidated Upgrade or Closure and Replacement of State-Owned Underground Storage Tanks and the Trans-Alaska Pipeline Corridor Communications System. This system was built due to Exxon Valdez disaster with repeater systems in Prince William Sound, Upper and Lower Cook Inlet Regions, Fairbanks, North Slope and Southeast regions and was a good partnership with Aleyeska. Aleyeska had also recently built a fiber optic system and with the appropriation the State would be able to work with them to build a State Emergency Response capability. Co-chair Sharp asked Mr. Fredriksson to point out if any of the projects were under other than the 470 funding and Mr. Fredriksson indicated as far as he knew they were all 470 prevention account. He continued on the next item, Upgrade, Closure or Clean-Up of Privately Owned Underground Storage Tanks. He explained underground owner/operator pay a registration fee and the cost of clean- up and closure or upgrade of their tanks. Financial assistance provides some monies to that, however does not pay the full cost of clean-up and closure or upgrade. In the capital request there was a listing of owner/operator projects broken into the clean-up and closure upgrade. Senator Donley asked if anyone received one hundred percent to clean up their tanks. Mr. Fredriksson indicated that as far as he knew, no. Jim Hayden, Program Manager, Storage Tank Program, Department of Environmental Conservation was invited to join the committee. He described the clean-up program. The match for the owner was $25,000 or ten percent. Once the $25,000 was reached, the grant took over, according to statute. Senator Donley asked how many more years the State had to do this before being completed. Mr. Fredriksson said 234 clean-up applications for a total of $29 million. There were 184 up-grade applications for a total of $7.5 million. There were 331 closure applications for a total of $4.2 million. Co-chair Sharp asked if there was a federal statutory deadline and Mr. Fredriksson indicated the deadline was December 1998 which is for closure or up-grade. Co-chair Sharp asked if this was a "drop dead" deadline and what happened to those who did not qualify by that deadline. Mr. Fredriksson said at this point the application period has closed. There are no more opportunities to get on the list. Whether or not one is one the list does not relieve them of complying with the federal requirements. It would include up to six months of FY '99. Senator Donley asked who would shut down the remaining individuals. Mr. Fredriksson said it was a federal requirement they come into compliance. There was the option of either closing out the tanks and going out of business or upgrading independent of any state financial assistance. They would have the option, since they had applications on file, of maintaining those files and seeking future reimbursement, dependent upon appropriations. It would primarily be out of their pocket. Senator Donley asked specifically if the State would shut down owners who were not in compliance. Mr. Fredriksson indicated the State would not shut them down but they would be subject to federal fines. EPA would impose fines. The State however, would seek to enter into some compliance agreement with them so they could get on a schedule for compliance and they could make clear what their intent was. They would not be allowed to operate out of compliance. If intent were shown to close out the tanks and there was not access to close-out monies by the deadline, perhaps the State would be able to negotiate an arrangement whereby at least removing fuel from those tanks and work between the individual and EPA for some leniency in the relief from the federal penalties. Co-chair Sharp said he thought Alaska would not be alone in this matter and there would be some kind of procedure for registration of good intent. Mr. Fredriksson said the intent would be over a three-year period and the State would assist in removing fuel from the tanks in order to get them closed and properly taken out of service. Senator Donley indicated he just has a problem with this program from day one. Individuals were allowed to put the tanks in the ground, got a commercial venture, made money, withdraw profits for twenty years, they do not plan to recycle or replace the tanks, and now that there is a problem the State subsidizes them and helps them fix it. Co-chair Sharp concurs, however, there were many instances where individual have purchased property and the one who made all the money is long gone. Then the Federal government came in and made all the new laws for clean-up requirements. But he did note that those still owning specific property have made a profit off the utilization of those facilities. Senator Donley said Alaska was the only state in the union that did not have a funding mechanism that relates to those who get the benefits. Other states that have the program those receiving the benefits are paying, and here the State is just taxing the oil companies. The consumer pays, not the one who made the profit. Co-chair Sharp continued the review and asked Mr. Fredriksson to explain the Local Response Agreements - Equipment, Training and Preparedness. He said there were a number of agreements with local communities which allowed the State to reimburse them for response activities associated with a spill. The capital request would provide training and equipment (small, initial, first response equipment). They have found that those on the local level arriving on scene first need assistance. Senator Donley asked the source of funds and Mr. Fredriksson indicated it was the 470 prevention account. (There was a brief pause on record.) Senator Pearce asked if the storage tank program had a sunset. Mr. Fredriksson indicated that the board of storage tank assistance did have a sunset. He said HB 138 has been filed to extend the life of the board. The board allowed owners and operators to file disagreements appeals. They heard appeals and made rulings on what were primarily funding issues, whether allocations were appropriate or other specific problems an owner/operator may have with respect to reimbursement of their grant. Senator Pearce asked if it was the program or the board that was sunsetting and Mr. Fredriksson said it was the board. The next item Mr. Fredriksson explained was Consolidated Upgrade of State-Owned Aboveground Storage Tanks and Technical Outreach Program. The State owned and operated aboveground storage tanks needing repair and upgrade. The request would provide funds to take care of problems with state-owned facilities. The agencies they have worked with having the majority of tanks were Department of Education, Department of Transportation and Public Facilities and the Department of Fish and Game. The Department of Military and Veterans' Affairs and a few others also had tanks. Ms. McConnell pointed out they felt it was necessary to bring them all in one place because otherwise there was no way of evaluating whether project number three in the Department of Transportation was more or less important in terms of urgency from project number two in the Department of Fish and Game. By bringing all the projects together they could now be ranked by degree of urgency under one consolidated plan. Mr. Fredriksson indicated the last item was the Aboveground Storage Tank Upgrades in Rural Alaska. It complemented the presentation regarding all the fuel tanks, both below and above ground, publicly or privately owned. It would take care of approximately ten rural facilities with funding received through the rural bulk fuel program, administered by Department of Community and Regional Affairs. They work closely with the Department of Community and Regional Affairs to develope and prioritize the list. The intent was to provide the Legislature with a clear picture of the full fuel tank needs whether state or privately owned. Traci Kramer, Administrative Officer, Exxon Valdez Oil Spill Trustee Council was invited to join the committee. She said the last project for the Department of Environmental Conservation was Kodiak Island Borough Waste Management Implementation. The applicable funds were the civil funds obtained through the settlement with Exxon. In the current year, LB&A approved $267,000 for development of a plan in the Kodiak Island area. The goal of the plan is to identify problems with marine pollution and to develope cost- effective solutions to reducing those problems. The authority in the budget represents implementation of the final plan being developed in the current year. It was based on a similar program which the trustee council is funding in the Sound right now, referred to as the Sound Waste Management Plan. The trustees have not approved the capital budget but it is anticipated they will take action this fall. In response to a question from Co-chair Sharp she said it would approve the authority of DEC to receive and expend the joint funds. It would require the unanimous consent of the trustee council. Co-chair Sharp asked Annalee McConnell to review the ADA compliance so the Office of the Governor could be finished up. She concurred. She said the State was under some serious requirements to meet ADA compliance for access to facilities. The total need for all state owned facilities is estimated to be approximately $44 million. Five hundred thousand dollars was requested here however clearly that was not going to be enough to get the state in compliance on the schedule the federal government has established. Agencies have made alternative arrangements for access to programs, but this deals with access to facilities themselves. Last year the request of $500,000 was reduced to $250,000. She noted there were a number of lawsuits pending in several states and Alaska was not alone in non-compliance. Projects were ranked several years ago based on criteria including the volume of public access in particular facility, the degree of problems of access and whether they could be accommodating in other ways. The list gets updated as there are new circumstances, included in the back-up. Most of the work is done through the Department of Transportation. (There was a brief pause on record while members studied their back-up.) Ms. McConnell continued by saying they do try to stick to the priority list pending any drastic changes in the use of a facility. Another factor affecting the timing of a project would be if there was a reason to do other work on the facility or a deferred maintenance. These would be consolidated to provide cost-effective upgrades. Co-chair Sharp said they would reconvene after Easter break commencing with the Department of Fish and Game. ADJOURNMENT Co-chair Sharp adjourned the meeting at 1:23 p.m.